England and Wales High Court (Administrative Court) Decisions

RONALD AND JOHN POPELY AND MICHAEL HARRIS v. D G SCOTT (KENT COUNTY COUNCIL) [2000] EWHC Admin 441 (21st December, 2000)

Case No: CO 1094/2000

IN THE SUPREME COURT OF JUDICIARY

QUEEN'S BENCH DIVISION

(DIVISIONAL COURT)

Royal Courts of Justice

Strand, London, WC2A 2LL

Thursday 21st December 2000

MRS JUSTICE RAFFERTY:

1. This is an appeal by way of case stated from a decision of the Sevenoaks and Tunbridge Wells Magistrates. On the 20th May 1999 the Respondent laid informations against each appellant that

a. "The 23rd May 1998 at Hever did (sic) in the course of a business

Hever Worldwide Properties plc, as offeror, entered into a timeshare

agreement with Mr and Mrs Jonathon Hamilton Marshall as offerees,

without Mr and Mrs Marshall having received, together with the document

setting out the terms of the timeshare agreement or the substance of it,

notice of their right to cancel. Contrary to sections 2.3 and 9.2 of the

Timeshare Act 1992, as amended by the Timeshare Regulations 1997."

b. "On the 10th June 1998 at Hever did (sic) in the course of a business

Hever Worldwide Properties plc as offeror entered into a timeshare

agreement with Mr Edward John Worth and Ms Emma Jane Leach as

offerees, without Mr Worth and Ms Leach having received, together

with the document setting out the terms of the timeshare agreement or

the substance of it, notice of their right to cancel. Contrary to 2.3 and

9.2 of the Timeshare Act 1992, as amended by the Timeshare

Regulations 1997."

On the 3rd June 1999 informations were similarly laid that

a. "On the 3rd November 1998 at Hever did (sic) in the course of a business Hever Worldwide Properties plc, as offeror, entered into a timeshare agreement called a Hever Worldwide Properties plc Share application with Mr and Mrs John and Anna Nelson-Roberts as offerees, without Mr and Mrs Nelson-Roberts having received, together with the document setting out the terms of the timeshare agreement or the substance of it, notice of their right to cancel and that offence was in respect of an act or default committed with your consent or connivance whereby you, being a Director of the company, are guilt of an offence. Contrary to sections 2.3 and 9.2 of the Timeshare Act 1992, as amended by the Timeshare Regulations 1997."

b. "On the 3rd March 1999 at Hever did (sic) in the course of a business

Hever Worldwide Properties plc, as offeror, entered into a timeshare

agreement called a Hever Worldwide Properties plc share application

with Mr and Mrs Frank and Marion Finnemore as offerees, without

Mr and Mrs Finnemore having received, together with the document

setting out the terms of the timeshare agreement or the substance of it,

notice of their right to cancel and that offence was in respect of an act

or default committed with you consent or connivance whereby you,

being a Director of the company, are guilty of an offence. Contrary to

sections 2.3 and 9.2 of the Timeshare Act 1992, as amended by the

Timeshare Regulations 1997."

2. On each of those dates, similar informations were laid by the respondent against Hever Worldwide Properties plc ("the company"). The appointment on the 5th October 1999 of a provisional liquidator led to the informations against the company being adjourned to the 15th February 2000. On 15th November 1999, the first day of the trial, the first two informations against each of the Appellants were amended to include the additional wording which appears in the second informations as to their vote as directors. The issues subject to complaint are as follows:

a. The hearing of the case in the absence of Mr Harris.

b. The finding that the agreements were timeshare agreements, not share agreements.

c. The finding that there existed, against these individual directors, a case to answer.

d. The finding that, if the agreements were timeshare agreements, the defendants had not exercised due diligence.

Proceeding in the absence of Mr Harris.

3. Counsel appearing on his behalf sought to persuade the magistrates, as evidenced by letters from doctors, that Mr Harris was insufficiently well to attend court, and that it would be unfair to try the case in his absence under the provisions of S.11 of the Magistrates Courts Act 1980 which gives a discretion to proceed to hear a case in the absence of a defendant. The Justices were referred to the leading authority of R v Bolton Justices ex parte Merna [1991] 155 JP 612. Setting out the proper approach to the exercise of discretion, the court remarked that it is rare to hear a case in the absence of a defendant if he be shown by medical evidence as unfit to attend. Should a court suspect that medical grounds put forward are spurious or believe them inadequate, ordinarily it should express its doubts and allow an opportunity for resolution. It may call for better evidence, require further inquiries, or adopt any other expedient fair to both parties. Those propositions are followed in R v Chippenham Justices ex parte Harris (Divisional Court, unreported, 28th January 1994) and R v Birmingham City Magistrates Court ex parte Booth (Divisional Court, unreported, 12th May 1999).

4. Mr Harris was at the time 69 years old. On the 8th October 1999 Dr Lucas, his general practitioner, wrote to Mr Harris's solicitors. The Justices saw that letter, which made clear that Mr Harris was in the doctor's view unfit to attend the Magistrates Court on Wednesday the 13th October "to face charges of conspiracy". Dr Lucas expressed himself prepared to attend court and give evidence if necessary. He made plain that his opinion was based on his clinical judgment and his knowledge of his patient over many years. He felt that such an appearance could prove seriously detrimental to Mr Harris's health. It is fair to remark, as did the Justices, that within it Dr Lucas does not refer to the last occasion upon which he saw his patient before composition of that letter. On the 12th November 1999 Dr Anthony Rickards, consultant cardiologist at the Royal Brompton and Harefield Hospitals, wrote as follows:

"Mr Michael Harris has been my patient since 1986 when coronary artery disease was first diagnosed. He last consulted me on the 20th October 1999 when he was very short of breath and with quite severe postural hypertension causing severe dizziness on minimal exertion. On seeing him walk up one flight of stairs he was clearly unwell. He is also suffering from Parkinson's disease..... If his attendance in court was to be a brief formality without the need for full understanding of proceedings then I think he would be able to attend but in my opinion I think he is unable to focus on questions for any length of time and therefore it is my current perception that he is not fit enough to stand trial."

5. By letter of the same day Dr Lucas wrote again. He explained that his patient had endured one coronary bypass surgery (1986); atrial fibrillation (1997); pacemaker fitted, hypertension; spinal arthritis (1991); diabetes mellitus (1994); appendectomy and peritonitis (1995); transient ischaemic attack, with vertigo, gait problems and speech difficulty (1996); Parkinson's Disease, with tremor and speech problems (1996); vertigo (1998); exacerbation of Parkinson's Disease and extreme shortness of breath, with recent severe stress associated with legal proceedings (1999). He points out that Mr Harris's health remains a constant cause for concern and is being monitored regularly by a team of physicians. His opinion was that the added stress produced by a court hearing would be seriously deleterious to his already precarious state of health. Each of those documents, the letter from Doctor Rickards and the second from Doctor Lucas, was before the Justices.

6. On the 12th November 1999, Mr Harris, it would appear, had attended a conference with counsel. This fact was conveyed to the Justices. Counsel argued that Mr Harris's attendance at his trial would be appropriate and useful, in that he could give evidence about a number of matters germane, particularly as to due diligence. Addressing the Bench on the topic of medical evidence, counsel pointed out that it was of such quality that it should be accepted. Doubtless he emphasised the eminence of the consultant cardiologist Dr Rickards, and the period of 15 years over which Dr Lucas had known his patient. On the basis of the medical evidence, counsel urged the Justices to adjourn or to stay proceedings. Were medical evidence to be questioned or thought unclear, Merna showed the need for an adjournment so as to allow the attendance of doctors.

7. The respondent argued that the evidence as to Mr Harris's condition lacked specificity. If Mr Harris could in his condition be a director of the company, instruct counsel, and attend a conference on the working day prior to the hearing, he was clearly well enough to attend court. He criticised Mr Harris's non-attendance at the hearing on the 15th November 1999, described as formal in nature and as to which his own medical evidence certified him fit to attend. He suggested that if the magistrates adjourned to the next day, Mr Harris could either attend or could present to the court further medical evidence.

8. The Justices found that the fact of Mr Harris's having attended a conference with counsel the working day before the hearing indicated he was sufficiently well not only to attend their court but to follow the proceedings. They found no evidence before them to indicate a rapid deterioration of his condition since then. The personal strain of the proceedings upon him would be reduced, since they would comprise mainly legal argument as opposed to lengthy cross examination of him. In any event, as a solicitor, he would be able to follow the legal complexities. They adjourned the case to the following morning so as to allow him the opportunity to attend his trial. They announced that if he should not attend, the trial would proceed in his absence pursuant to S.11. He did not attend on the 16th November 1999, the justices went on to hear the case in his absence, and convicted him.

9. In their statement of case when considering the medical evidence before them, they are silent as to, for example, his coronary artery disease, and his pacemaker. They rely upon his attendance at the conference with counsel shortly before his scheduled trial. They had before them a skeleton argument prepared by Mr Hibbert of counsel, which made it plain that Mr Harris had at that conference been unwell. In my judgment the Justices misdirected themselves. The question for them was not whether Mr Harris, a solicitor, could cope. The fact of the matter evidentially before them was that he was an unfit solicitor. They had before them medical evidence of impeccable quality. If they were minded to adjourn, then the reason for their adjournment should have been expressed as, once their doubts were ventilated, allowing the opportunity for better medical evidence to be brought before them, and possibly to be tested. Their given reason for an adjournment was quite to the contrary. The purpose, as I have already rehearsed, was to allow Mr Harris the opportunity to attend and stand his trial.

10. The contention additionally advanced by counsel, that Mr Harris was the likely exclusive giver of evidential information as to company affairs, I do not accept. There existed other avenues for establishing what was thought necessary in the defence of these directors.

11. However, that aspect of his submissions need not trouble this court. In my view, the magistrates, given the medical evidence before them, should have stayed or adjourned proceedings against Mr Harris, and for my part I should say that he succeeds on that ground.

The finding that the agreements were timeshare agreements

12. I turn now to whether the contracts the subject of the informations were timeshare agreements or, as the Appellants contend, share purchase agreements in the company, taking the form of an irrevocable application for shares forming part of the prospectus. Mr Treacy QC argues that the Appellants deliberately endeavoured to formulate a lawful scheme which successfully took the agreements outside the Timeshare Act 1992 (as amended by the Timeshare Regulations 1997)

"TSA". If he is wrong on that, his next submission is that the Appellants exercised due diligence.

13. The prospectus invited an irrevocable application for shares in the company, which allowed the interested party then to join the Hever Vacation Club, an unincorporated association. He or she would have had to pay a membership fee and membership was annual. It was not obligatory. There existed other benefits, for example the use of the golf course, the fact that the shares were themselves an investment, and so forth. It was the belief of Mr Ronald Popely that approximately 35% of those beginning this procedure did not go on to join the Club. The object of the Club was the organisation of holidays for its members, who were bound by its rules, which themselves provided for the terms of the membership. They, the rules, changed over time and therefore different rules applied as respects different complainants in this case. Significant features within the rules included:

a. Annual membership

b. A booking system for holidays operated by points, so that the more

points a member had, the greater his choice of resort and time of occupation

c. The points held depended on the size of share-holding, but could

also be purchased.

Ownership of points did not give a member a right of occupation of any particular property at any particular time of year. The properties available were not restricted to those belonging to the company, but included other properties available through a worldwide exchange company, Exchange International.

14. The rules, the Appellants contend, were extended in September 1998 so as even further to distance the Club from the TSA. There existed a deliberately achieved dichotomy, between on the one hand the application for shares and on the other the option for membership of the Club.

The offence is created by S.2 TSA which reads where relevant as follows:

"2. Obligation to give notice of right to cancel timeshare agreement

(1) A person must not in the course of a business enter into a timeshare

agreement to which this Act applies as offeror unless the offeree has

received, together with a document setting out the terms of the

agreement or the substance of those terms, notice of his right to cancel

the agreement.

(2) A notice under this section must state -

(a) that the offeree is entitled to give notice of cancellation of the agreement to the offeror at any time on or before the date

specified in the notice, being a day falling not less than 14 days

after the day on which the agreement is entered into, and

(b) that if the offeree gives such a notice to the offeror on or

before that date he will have no further rights or obligations

under the agreement, but will have the right to recover any

sums paid under or in contemplation of the agreement."

Subsection (3) sets out the penalties, which are, on summary conviction, a fine.

15. A timeshare agreement is defined in S.1 which reads where relevant as follows:

"1. Application of Act

(1) In this Act -

(a) "timeshare accommodation" means any living accommodation,

in the United Kingdom or elsewhere, used or intended to be used,

wholly or partly, for leisure purposes by a class of persons

(referred to below in this section as "timeshare users") all of whom

have rights to use, or participate in arrangements under which

they may use, that accommodation, or accommodation within a

pool of accommodation to which that accommodation belongs, for

a specified or ascertainable period of the year, and

(b) "timeshare rights" means rights by virtue of which a person

becomes or will become a timeshare user, being rights exercisable

during a period of not less than 3 years.

(4) In this Act "timeshare agreement" means an agreement under which timeshare rights are conferred or purport to be conferred on any person and in this Act, in relation to a timeshare agreement -

(a) references to the offeree are to the person on whom timeshare

rights are conferred, or purport to be conferred, and

(b) references to the offeror are to the other party to the

agreement,

and, in relation to any time before the agreement is entered into, references in this Act to the offeree or the offeror are to the persons who become the offeree or offeror when it is entered into."

16. The Applicants argue that in S.4 the words "under which" are crucial. If, they contend, rights are conferred at all, then they come by way of membership of the club and therefore by way of rules affecting the club. Further, there is nothing in the share agreement which equates to timeshare rights, as defined n S.1(b). None of the persons named in these summonses could be defined as a "timeshare user" because, first, accommodation provided to them was not specific nor in a pool of specified accommodation, and, second, use of that accommodation was not for a specified or ascertainable period of the year. Further, they contend that S.1(b) is not satisfied because the rights exercisable under club membership, which is only annual and renewable on the payment of a fee, mean that the right exists only for a year, (for example "the month of June") or be ascertainable, (for example "within a two week period following Easter each year"). Unless accommodation is identified or identifiable, then the distinguishing feature of timeshare disappears, and the entity concerned takes on the role simply of a travel agent. Mr Treacy QC points to the existence of a DTI consultation document of April 2000, "Timeshare Sales", which clearly contemplates the existence of a number of schemes which are similar to this and which the author would not categorise as timeshare agreements.

17. S.1(7A) of the Act reads as follows:

This Act also applies to any timeshare agreement if -

(a) the relevant accommodation is situated in the United Kingdom, or

(b) when the agreement is entered into, the offeree is ordinarily

resident in the United Kingdom and the relevant accommodation

is situated in another EEAS State.

S.1(7B) for the purposes of S1(7A) above, "the relevant accommodation" means -

(a) the accommodation which is the subject of the agreement, or

(b) some or all of the accommodation in the pool of accommodation which is the subject of the agreement,......

Schedule 1 of the TSA supports the implication that property must be in existence and capable of identification, he contends.

18. The Appellants point to the absence of identified accommodation within prospectus No 1; there is no list attached to it. As to prospectus 2, there is mention of accommodation, but in the two relevant passages within the prospectus the references are as follows:

"The company has purchased properties at Hever Golf and Country Club, Vera Beach Club, Harbour Beach Club, Passage House Hotel, Club Pueblo Canerio and Devoncourt Hotel. A schedule of properties can be found on page 9. In addition the company has secured an option to purchase property at the historic and elegant Les Bonshommes Chateau and Golf Course at Compienge (sic) in France, which is currently under refurbishment. The properties are available for use throughout the year and consist of studio apartments, one and two bedroom apartments and bungalows at exclusive luxury vacation resorts. The resorts have various sporting and leisure activities in great locations. .......

The company has given an irrevocable undertaking to allow the properties owned by the company to be used by Hever Vacation Club in consideration of the club paying the maintenance costs of the properties.""

19. Second, on page 9 of the prospectus, there appears under the heading Appendix III Property Inventory as at 25 May 1998, a list of named properties. Under each name, for example Hever Golf and Country Club Hotel, there appear three columns: one headed "Unit"; one headed "Type" and one headed "Weeks". Under the heading "Weeks", the numerical figures would appear as a matter of common sense to indicate for which week of the year that particular property is available.

20. Mr Treacy criticises the finding of the Justices, which was that this list was of available accommodation, whereas it is, he argues, simply an inventory of properties and part of the statement of assets for a company which primarily invested in property. He refers to page 3 of the prospectus where under the heading "Hever Vacation Club", there appears "the Club is a vacation club whose objectives are to ensure that members have the opportunity to enjoy luxury accommodation at the resorts listed in the Hever Vacation Club Members Guide. All fully paid ordinary point shareholders in the company will be entitled to membership of the club. Each member will receive one point in the club for each ordinary point share held in the company every year, subject to the payment of the annual club fee. Members are able to exchange points every year for occupation of studios, apartments and villas at the resorts shown in the Hever Vacation Club Members Guide, or for accommodation with Interval International." Therefore, the argument runs, the accommodation provided under the applicants' devised scheme is that featured in this paragraph, not that listed under the heading "Property Inventory". There exists also a document headed "Vacation Club Members Guide". This, contends Mr Treacy, does give a list of accommodation owned by the company and available to members of the scheme. This cannot come within S.1(1)(a), he argues, because it cannot satisfy the test of "identified or identifiable" property. He accepts that some of the properties may be identified, but submits that the totality is not.

21. The list of properties under the heading "Vacation Club Members Guide" also shows a points table. This would appear to indicate the number of points it would "cost" a member to use it. The Appellants argue that this system militates against their scheme coming within the provisions of S.1(1A), in that the points table cannot bring it within the expressed "specified or ascertainable period of the year". There is lack of certainty and lack of specificity of location.

22. If he is wrong about that, then Mr Treacy submits that, if there are timeshare rights conferred, they are not conferred under the share purchase agreement but by virtue of membership of the club. S.1(1)(b) of the TSA identifies as "timeshare rights" rights by virtue of which a person becomes or will become a timeshare user, being rights exercisable during a period of not less than 3 years. The Appellants contend that because membership of the club is annual, the scheme escapes this provision. Purchase of shares is an indefinite right, but one restricted to the right to buy shares in the club.

23. The Justices found that the separation of company from club was illusory, and that the club was effectively controlled by the directors of the company; the primary purpose of the share agreement was to confer on shareholders the right to use accommodation provided by the club and/or Interval Holdings Ltd. The benefits of purchasing ordinary point shares without making use of the accommodation offered were ill-defined and targeted at persons who agreed to buy shares on their first visit. Mr Treacy labels this conclusion simply wrong. There was he says a legal framework separate from the company, that is the club and the club rules. The distinction drawn is legitimate, and recognised in the DTI consultation paper.

24. The Justices found that the rights were exercisable during a period of not less than 3 years because, prior to September 1998, each shareholder had timeshare rights indefinitely. That, the Appellants contend is incorrect. Each shareholder simply had shares and the right to apply. The Justices, it is argued, have conflated the company and the club, and failed adequately to analyse the provisions of the TSA.

25. The Respondent submits that the share application form was attached to the prospectus. Until September 1998 an application brought with it the unfettered right to join the club. Once a member, the number of shares was equated with points valued for rental purposes. The relevant accommodation, he contends is to be found in the list headed Property Inventory within prospectus No 2. Within that prospectus, there appears this comment "the company has given an irrevocable undertaking to allow the properties owned by the company to be used by Hever Vacation Club in consideration of the club paying the maintenance costs of the properties", and later "all fully paid ordinary point shareholders in the company will be entitled to membership to the club." Therefore, argues the Respondent, the share purchase agreement raises rights for buyers to participate in arrangements under S.1(1)(a) TSA. "Participation" is important. It is a net widely cast to reduce avoidance of the statutory requirements.

26. On these facts, he argues that the arrangements are the club arrangements, advertised in the prospectus. Putting it another way, at least until September 1998 (when the rules changed), share purchase gave unfettered rights to join an arrangement to use accommodation or a pool of accommodation. The fact that club membership was not obligatory, he argues, is irrelevant. A membership fee is interposed between share purchasers and club members because the rights of the buyer are to participate in arrangements which include "pay £145 and join the club". No-one could stop a buyer who wished to do that, and timeshare rights are thus conferred under the scheme. S.1(1)(a) makes clear that participation need only be in arrangements under which the interested party may use accommodation. Therefore use of a golf club or the like, are irrelevant. Accommodation, within the terms of S.1(1)(a), is living accommodation applicable to a class (purchasers of shares) and fixed or ascertainable. He points to the inventory to which I have already referred, arguing that these clearly identified properties (or properties in identifiable form) are a pool of accommodation. The fact that that pool may enlarge through addition does not stop it being a pool within the terms of S.1(1)(a).

27. He contends that the share purchase agreement does extend to "not less than 3 years". When the rights conferred kick in, the consumer's rights are unlimited. The right to participate in the arrangements is crucial, and this does not end if the interested party fails to pay his club fee. Even if he did not pay, he could still retain his rights.

28. As to specified or ascertainable periods of availability, he points once again to the document headed "inventory" where he identifies weeks designated. That document probably passes the "specified" test, and definitely passes the "ascertainable" test. Unsurprisingly, he relies upon the points table which I have already rehearsed to sustain his argument. To at least 50%, it tallies with those properties on the inventory document. Thus, he maintains, from the prospectus one could ascertain what one's share points would allow one to buy.

29. From September 1998 onwards, following the change of rules, (affecting the last of the four sets of summonses) there is no difference, he contends. Though the wording of the rules of the club has changed and a membership committee is imposed, this is an irrelevance. The share would still entitle someone to apply, which would entitle him to be part of the "arrangements". The Respondent's stance is that it is essential to look at the whole scheme.

30. In my judgment the Respondent is right in supporting the conclusion of the Justices on this topic. There exists sufficient particularity within the documents in prospectus 2, when read in conjunction with the irrevocability expressed in the same document, and the undying rights conferred upon share application, to render unimpeachable the conclusion that the agreements for the sale of shares in the company were timeshare agreements within the meaning of the Act.

The finding there was no case to answer

31. I turn now to S.9 of the TSA. It reads where relevant, as follows:

"9. Liability of persons other than principle offender

(1) Where the commission by a person of an offence under Section... 2(3).... of this Act is due to the act or default of some other person, that other person is guilty of the offence and may be proceeded against and punished by virtue of this section whether or not proceedings are taken against the first-mentioned person.

(2) Where a body corporate is guilty of an offence under section ...... 2(3).... of this Act (including where it is so guilty by virtue of subsection (1) above) in respect of an act or default which is shown to have been committed with the consent or connivance of, or to be attributable to neglect on the part of, a director, manager, secretary or other similar officer of the body corporate or a person who was purporting to act in such a capacity, he (as well as the body corporate) is guilty of the offence and liable to be proceeded against and punished accordingly."

32. This had been the topic of a submission of no case to answer. These so-called by-pass provisions, Mr Treacy argued, meant that the prosecution must prove to the criminal standard that the company was "guilty" of the offence. He contrasts the words "guilty of an offence" in S.9(2) with the words in S.9(1), "the commission by a person of an offence". He argues that S.9(1) creates a liability where the offence by the primary offender is due to the act or default of another. In statutes such as these, the words "commission by a person of an offence" do not mean that the prosecution has to prosecute, let alone obtain a conviction of, the primary offender, nor do they mean that the prosecution must rebut any defence of due diligence on the part of the primary offender in order to establish a case against the secondary offender: Coupe v Guyett [1973] 1 WLR 669. That was a case turning upon S.14(1) the Trade Description Act 1968 which for all practical purposes is identical to S.9(1). Therefore, the argument continues, in S.9(1) the words "where the commission by a person of an offence" mean the prosecution must show breach of the statute but the statutory defence can be ignored for the purposes of that section. The prosecution would have proved a prima facie case under S.9(1) by showing that the company had failed to serve a cancellation notice. However, these proceedings are brought under S.9(2). "Guilty" must mean something different from "commission". He thus contends that the company must have been shown to have done the acts constituting the offence (that is, coming within the TSA and failing to serve a cancellation notice) and the prosecution must have ruled out the company's defence of due diligence, prima facie, by the close of their case. They are not entitled to ignore the statutory defence under S.9(2), raised by Mr Ronald Popely's words in interview, that the company proceeded on the basis of counsel's advice. The company was not a party to the proceedings, there was no evidence or material before the Justices as to the potential defence available to it, and "Guilty" can only contemplate the elimination of the company's due diligence defence.

33. This he argues must be dealt with at the close of the prosecution case, since before the defendants could be called upon to answer it, the guilt of the company should have been proved. He conceded that these appellants were the only directors, save for the addition in August 1998 of Mr Mark Agombar (this would affect the 3rd and 4th of the informations laid.)

34. The Respondent argues that S.9(2) is concerned with the two different ways in which the company could be guilty. First, it could itself commit the offence, and second it could be guilty of the offence because it is the "other person" within section 9(1). Technically, the S9(1) "guilty" person does not commit the offence. The person "responsible for its commission" may merely, for example, have supplied the documents upon which a defendant acts, thus going on himself to commit the offence. The respondent contends that "guilty" must be used within S9(2) to encompass both those prospective manners of commission of an offence canvassed within section 9(1).

35. For my part, I am persuaded that this is the better argument. I do not accept that a submission of no case to answer should, on this basis, have succeeded, and I should be against the applicants on this ground.

Due Diligence

36. The final issue before this court was one of due diligence. S.8 of the TSA where relevant reads as follows:

"8. Defence of due diligence

(1) In proceedings against a person for an offence under section .... 2(3).... of this Act it shall be a defence for that person to show that he took all

reasonable steps and exercised all due diligence to avoid committing the

offence."

The precautions required to be taken are reasonable ones, the diligence required is due diligence (Tesco Supermarkets Limited v Natrass [1992] AC153).

37. The appellants contend that in the light of Coventry City Council v Lazarus (1996) 160JP188 and Carrick District Council v Taunton Vale Meat Traders Ltd (1994) 158JP347, the Justices were correct to conclude that the taking of advice can amount to the defence of due diligence. The Justices rejected the defence in this case, finding that legal advice in counsel's Opinion was not something upon which it was reasonable for the applicants to rely. They felt that only the courts can determine the law, and that the Opinions were not unequivocal. Mr Treacy criticises that conclusion, submitting that all that can be expected of counsel in an Opinion is an expression of precisely that - his professional opinion. Similarly, all that commercial men can do is seek an Opinion, and, in turning to Leading Counsel, these Applicants were exercising due diligence.

38. The Respondent contends that, as the legal advice sought was for the purposes of avoiding the statute altogether, it could not afford the applicants a defence of due diligence. If the devised scheme failed in its object, then it is the applicants who would bear that risk. He contends that advice upon the cancellation notice itself would be capable of amounting to a defence of due diligence, because the Appellants would then have been seeking to comply with the Act. He describes as "crucial" the risk they took in their desire to avoid the scheme altogether.

39. It is accepted on behalf of the Appellants that the purpose of taking advice was to avoid committing an offence by ensuring that the transaction was outside the TSA. Only because they received such advice did they enter into contracts without serving cancellation notices. The scheme's being designed to avoid the Act demonstrates, they submit, that their intention was explicitly not to conduct themselves so as to contravene it, and does not justify a finding of lack of due diligence . [I would reject the contention advanced by the Respondent] In my judgment since the Act affords a due diligence defence in respect of a scheme caught by its provisions, a fortiori scheme devised so as to remain outside it must attract a similar defence.

40. The Justices in their findings were concerned that the instructions to counsel were not before them. That is nothing to the point. The instructions which counsel must have had are perfectly plain on the face of the Opinions.

41. Catherine Newman QC wrote the first Opinion, which was not before the Justices and need not concern us. By her addendum thereto, dated December 1997, which the Justices had, she opined that the TSA was not applicable to the scheme she was currently considering. At paragraph 6 she writes "it would not be possible to maintain an argument that share ownership does not confer the right to vacations or vacation ownership (and thus escapes regulation under the Timeshare Act) if the prospectus gives a contrary impression. A contrary impression is given by the Introduction. More balanced information needs to be given about club membership and its relationship to and distinction from share ownership."

42. On the 23rd April 1998, Mr Michael Ashe QC, with Miss Lynne Counsell, advised. They concluded that the Timeshare Act did not catch the scheme. Subsequently, Miss Counsell took the view that it did apply. On the 10th July 1998, Mr Ashe QC advised again. At paragraph 10 of his Opinion he wrote "on this basis it is hard to see how the ordinary point shares can give "timeshare rights" under section 1b of the 1992 Act. There are, as I have said, no rights by virtue of which that shareholder becomes or will become a timeshare user. Those rights only arise on joining the club." The court was told that that advice was taken particularly to address the deficiencies in the scheme already identified following a letter from the Respondent. Consequent upon it came the change in the rules of September 1998 to which I have already referred.

43. In my judgment, the Justices did not address the sequence of counsel's Opinions, and its relevance to the defence of due diligence. Not only was Miss Newman's first advice that the scheme was likely to avoid the Act, but also, in March 1998, the local authority itself communicated its view that the scheme was unlikely to be caught. In July 1998 it changed its mind and communicated to the Applicants that view. I am at a loss to understand why, in their findings, the Justices remark that "the advice obtained from counsel did not state unequivocally that the scheme was lawful. The further opinion of Catherine Newman QC indicated that her advice was unlikely to be accepted by the relevant authority." It is not the business of counsel to state unequivocally that a scheme is lawful or unlawful. It is the business of counsel to give an opinion based upon his or her professional expertise as to likelihood, and nothing more. Comments of Miss Newman as to the unlikelihood of the local authority accepting her view are part of the job she was paid to do. Her clients are entitled to her guidance on the likely progress of their activities.

44. The Justices remark later as follows:

"The Appellants knew from the number of opinions sought, and from the content of two of those opinions, that this was a very contentious area of the law....."

The opinions do not describe this area of the law as "very contentious" nor do they say, as the Justices further found, that "devising a scheme to deliberately (sic) avoid the provisions of the Act would be very difficult."

45. In my judgment, the Justices were entitled to conclude as they did that this was a strategy to stop the TSA biting. They were not entitled to conclude absent the full content of three Opinions and instructions to counsel, the effect of legal advice was in some way diluted. In my view they ignored the historical framework of the advice and placed undue emphasis on the approval of the local authority. The imprimatur of the local authority is not a pre-requisite for the legality of a scheme. For my part, therefore, I would allow these appeals on the basis that the Justices were not entitled to find, as to due diligence, as they did. I would quash the convictions of all the Appellants.

46. LORD JUSTICE ROSE: I agree.