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“My Layer said it was Legal": Due Diligence?

A review of what may constitute due diligence and, in particular, whether this may include the taking of legal advice. First Published in the Justice of the Peace (2001) 165 JPN 416.

Due Diligence

Many consumer law statutes create strict liability offences in which the lack of necessity for the prosecution to prove mens rea is offset by a statutory defence.  Such defences typically contain at least two common elements which require the defendant to prove firstly that he took “all reasonable precautions” and, secondly, that he “exercised all due diligence”, in each case, to avoid the commission of the offence.  The two elements together are often referred to as “the due diligence defence”.  Some statutes refer to “all reasonable steps” rather than to “all reasonable precautions” but there is no authority suggesting that there is any difference in the meaning of these two terms.  The due diligence defence which has given rise to the most judicial consideration is that contained in s 24(1) of the Trade Descriptions Act 1968 where the defence also involves proving that the offence was due to a mistake, reliance on information supplied, the act or default of another person, an accident or some other cause beyond the defendant’s control.  The House of Lords had occasion to consider the meaning of s 24(1) in Tesco Supermarkets Ltd v Nattrass [1972] AC 153.  The particular defence raised in Tesco was that the offence by the company was due to the act or default of a store manager and that the company itself had taken all reasonable precautions and exercised all due diligence to avoid the commission of the offence.  Viscount Dilhorne said: “That an employer, whether a company or an individual, may reasonably appoint someone to secure that the obligations imposed by the Act are observed cannot be doubted. … He cannot excuse himself if the person appointed fails to do what he is supposed to do unless he can show that he himself has taken [all reasonable] precautions and exercised [all due] diligence.  Whether or not he has done so is a question of fact and while it may be that the appointment of a competent person amounts in the circumstances of a particular case to the taking of all reasonable precautions, if he does nothing after making the appointment to see that proper steps are in fact being taken to comply with the Act, it cannot be said that he has exercised all due diligence.”  Lord Diplock, similarly, said: “If … the principal is able to identify a person to whose act or default the offence was actually due, he still has to show that he himself exercised due diligence to devise an effective system to avoid such acts or defaults on the part of his servants and to satisfy himself that such system was being observed. ... If the principal has taken all reasonable precautions in the selection and training of servants to perform supervisory duties and has laid down an effective system of supervision and used due diligence to see that it is observed, he is entitled to rely on a default by a superior servant in his supervisory duties as a defence under s 24(1), as well as, or instead of, on an act or default of an inferior servant who has no supervisory duties under his contract of employment.”  The House of Lords thus made a distinction between “precautions” and “diligence” so that, in the context of an employer setting up an effective system to ensure compliance with the Act, the system is the precaution and the monitoring of it is the diligence.

A defendant need only show that he took all reasonable precautions and exercised all due diligence.  If there was nothing that could reasonably have been expected to be done then to do nothing could on rare occasions be reasonable.  In nearly all cases, however, there will be at least one reasonable thing which could have been done to avoid the commission of the offence.  Where there is reason to suspect that a trade description applied to goods may not be accurate, a trader must make enquiries to ascertain its reliability before supplying such goods and to do nothing is not reasonable diligence (Kinchin v Haines [1979] Crim LR 329, Stainthorpe v Bailey [1980] RTR 7 and Denard v Abbas (1987) 151 JP 421).  Equally, where having a system may have prevented the offence, having no system at all cannot amount to due diligence.  In Texas Homecare Ltd v Stockport MBC (1988), the defendant company had no system for checking that valves marked “BS” did in fact conform to the British Standard.  Lloyd LJ held that there should have been a system such as random sampling.  “That does not mean that the system had to be foolproof – no system could be that.  Nor did the [defendants] have to examine every article.  But they had to do something.  Here there is a finding that the defendants did nothing.  They had no system of any kind.”  If there are a number of reasonable things which could have been done to avoid the commission of the offence then the defendant will need to prove that he did all of them; a failure to take any reasonable precaution will mean that all reasonable precautions cannot have been taken.  In Sherratt v Gerald’s The American Jewellers Ltd (1970) 68 LGR 256, where the defendant sold a non-waterproof watch as being “waterproof”, Parker LCJ said that the due diligence defence had “to be proved on a balance of probabilities, the burden being on the defendants.  That they took no precautions at all is clear; they relied solely on their previous dealings with the wholesalers. ... To succeed here, they must show on a balance of probabilities that although no precautions were taken, there were no reasonable precautions that could be taken. … There is clearly an obligation to take reasonable precautions if there are any precautions which are reasonable that can be taken ... The elementary precaution which would have prevented this offence from being committed was to dip the watch in a bowl of water as the purchaser did.”  The more simple and/or obvious the possible precaution is, the less likely it will be that the defendant will be able to prove that the taking of such precaution would not have been reasonable.

In Wandsworth London Borough Council v Bentley [1980] RTR 429, the defendant had bought a car at auction with the name “Shell UK” given as the vendor.  Unknown to the defendant, the car’s odometer reading was false.  Without checking any details with Shell, he sold the car to one of his customers.  Lane LCJ said: “Quite plainly one precaution which he could have taken would have been to get into communication with Shell UK ... to enquire from them what the mileage reading of this motor car was when they got rid of it, and possibly also inquire from them whether they had sold the car to someone else or whether indeed they were the people who were putting the car up for auction on this occasion.  If that precaution had been taken, then there is no doubt that the defendant would have been alerted to what the true situation was in regard to the mileage travelled by this car. ... In the absence of that simple precaution it is quite impossible for any magistrate, considering the matter correctly, properly to come to the conclusion that the defendant had taken all reasonable precautions and had exercised all due diligence and that really is the end of the case.”  It was reasonable to count the number of bags of coal as each bag was delivered (Fayers v Gasson and Rayner (1975) 139 JP 546) and it was reasonable to apply an adhesive label to returned goods to ensure that they were not resold as “new” (Gale (Robert) v Dixon Stores Group Ltd (1993) 101 ITSA MR 20).

What is reasonable will vary from case to case and will depend in part on the proportionality of the costs involved and the size of the defendant’s organisation.  In the Tesco case, ante, Lord Diplock said: “What the employer or principal can reasonably be expected to do to prevent the commission of an offence will depend on the gravity of the injury which it is sought to prevent and the nature of the business in the course of which such offences are committed. … If considerations of cost and business practicability did not play a part in determining what employers carrying on such businesses could reasonably be expected to do to prevent the commission of an offence under the Act, the price to the public of the protection afforded to a minority of consumers might well be an increase in the cost of goods and services to customers generally.”  In Garrett v Boots The Chemists Ltd (1980) 88 ITSA MR 238, where Boots sold pencils with an excessive metallic lead and chromium content, Lane LCJ said: “What might be reasonable for a large retailer might not be reasonable for the village shop.  But here, dealing with a concern the size of Boots, it seems to me that one of the obvious precautions to be taken was a random sample, whether statistically controlled or not.  One does not know whether the random sample would have in fact produced detection of the errant pencils.  It might have, it might not have.  But to say that it was not a precaution which should reasonably have been taken does not seem to me to accord with good sense.”

Another factor, which will influence what is reasonable, is the size of the risk involved.  In Hurley v Martinez & Co Ltd (1990) 154 JP 821, the defendant was a small company which relied on the wine it bought from its German suppliers as having accurate alcoholic strengths marked on the labels.  Some of the wine was labelled 8% when in fact it was 7.2%.  Mustill LJ said: “I cannot read the authorities as demanding a decision in favour of the prosecution in every case where the defendant has taken no independent steps to verify the relevant information. … No such system is ever foolproof, but the regime of the English Act and the Regulations is not itself designed to be foolproof since the presence of s 24 ensures that in some cases a misdescribed product may slip through the net and yet still leave the supplier exempt from criminal responsibility. … One must ask oneself whether a risk [of error] was sufficiently large to demand that a quite small local dealer should carry out sampling which was liable to be very expensive from so many lines just to eliminate the risk altogether.  The magistrates thought not.  It rather appears as if the witness for the prosecution before the magistrates was driven to concede something very much to the same extent.  In my view the justices were fully entitled to reach this conclusion. ... I am not in any way creating a charter for retailers, whether on a large scale or otherwise, to sit back and do nothing in every case, leaving it to others to take care that the goods are what they purport to be.  The earliest cases … show very clearly that this is not so. ... In the present instance I say no more than that the decision of the justices was within the range of rational decisions.” 

Where diligence is exercised, it must be to avoid the commission of the offence or type of offence charged.  In Balding v Lew-Ways Limited (1995) 159 JP 541, it was held that it did not satisfy the due diligence defence to show that the defendant had complied with a standard less stringent than that required by the legislation under which the prosecution was brought.  Pill LJ: “The standard to be applied is that laid down by regulations made under the authority of Parliament. ... It is not taking [all reasonable] steps or exercising [all due] diligence to show that you have complied with some other standard, however reputable the organisation which has proclaimed that standard. ... The company were not entitled to assume that British Standards complied with the requirements laid down by Parliament.”  In Taylor v Lawrence Fraser (Bristol) Ltd (1977) 121 Sol Jo, Widgery LCJ said that there were very few cases in which reliance on certificates of compliance would be a sufficient precaution when there was a possibility of professional sampling. 

It is apparent that almost any action, depending on the size of the defendant’s operation, the degree of risk, the proportionate cost of possible steps and all the other circumstances of the case, might be regarded as reasonable.  On occasion, it may be reasonable to rely on others if they have demonstrated that they have the relevant qualifications and expertise.  In the absence of any cause to doubt their findings, it would be reasonable to rely, for example, on the opinion of an approved testing house.  However, is it reasonable to rely on the opinion of another person as to the law rather than as to fact?  In particular is it reasonable to rely on a legal opinion that what is being done, or is proposed to be done, complies with the law?

Popely and others v Scott

Messrs Popely, Popely and Harris were the directors of Hever Worldwide Properties plc.  The directors were each convicted of breaching the Timeshare Act 1992 (“TSA”). The company itself had gone into liquidation and the case against it was adjourned.  The directors appealed by way of case stated to the Divisional Court.  Their story is set out in the judgment of Rafferty J in Popely and others v Scott (Transcript CO/1094/2000).  They had issued a prospectus inviting irrevocable applications for shares in the company.  Such applicants were then eligible to join the Hever Vacation Club for which there was an annual membership fee.  The object of the Club was the organisation of holidays for its members.  This way of organising the company’s business was deliberately devised as a scheme to avoid it having to comply with the requirements of the TSA.  Before issuing the prospectus the company obtained legal advice from a QC who, in December 1997, “opined that the TSA was not applicable to the [company’s] scheme.”  In March 1998 the local authority, which subsequently brought the prosecution, itself gave the view that the scheme was unlikely to be caught by the TSA.  In April 1998, a second QC also advised that the TSA did not catch the scheme.  In July 1998, the local authority told the directors that it had changed its mind.  The local authority laid informations alleging offences in May, June and November 1998 and March 1999.  If it is right that, at the time of the first two alleged offences, the prosecuting authority itself thought that the scheme was not caught by the TSA, it is curious that they should have included those dates in their prosecution.

The Timeshare Act 1992

The three directors had been convicted by the magistrates under s 9 TSA on the basis that offences by the company, of entering into contracts without serving cancellation notices under s 2 TSA, were committed with the consent or connivance of each of them.  S 2, in effect, requires that the offeror of a timeshare agreement must give the offeree a document setting out the terms of the agreement and a notice of the offeree’s right to cancel it.  S 1 TSA defines a “timeshare agreement as an agreement conferring or purporting to confer timeshare rights.  “Timeshare rights” are rights to become a timeshare user during a period of not less than three years.  “Timeshare users” are those with the right to use or participate in arrangements for the use of “timeshare accommodation” namely living accommodation for use for intermittent periods of short duration.  The first question in the appeal, in relation to the TSA, was whether the magistrates were right in finding that the agreements made with individuals in May, June and November 1998 and March 1999 were timeshare agreements rather than simply share agreements.  The directors’ arguments included; a) that any rights conferred were from membership of the Club and that nothing in the share agreement equated to timeshare rights; b) that the rights exercisable under membership of the Club were renewable annually on payment of a fee and therefore existed for only one year and c) that unless accommodation could be identified then the distinguishing feature of timeshare was not there and the entity was no more than a travel agent.  The prosecuting authority’s response was; a) that the share purchase gave unfettered rights to join the Club and arrangements to use accommodation; b) that the agreement did extend to not less than three years since failing to pay the annual Club fee did not take away the right to “participate” in the arrangements and c) that the prospectus identified designated weeks of availability of accommodation.  Rafferty J found that “there exists sufficient particularity within the documents in [the prospectus], 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 second question, relating to the TSA, was whether the magistrates had been correct in finding that there was a case to answer.  S 9(1) TSA provides that where the “commission” of an offence by a person is due to the act or default of another person, that other is guilty of the offence.  S 9(2) provides that where a company is “guilty” of an offence (including where guilty by virtue of s 9(1)) by reason of an act or default which was committed with the consent or connivance of a director, then such director is guilty of the offence.  The directors argued that in view of the different wording in subsections (1) and (2) “guilty” must mean something different from “commission” so that under s 9(2), the prosecution must show not only that the directors had committed the offence but must also rule out the company’s due diligence defence.  On this point Rafferty J again found in favour of the prosecuting authority:  “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 s 9(1). … The respondent contends that ‘guilty’ must be used within s 9(2) to encompass both those prospective manners of commission of an offence canvassed within s 9(2). … I am persuaded that this is the better argument.”

The final question relating to the TSA was whether the directors had made out the statutory defence, in s 8 TSA, that they had taken all reasonable steps and exercised all due diligence to avoid committing the offence.

Legal advice as a defence – Popely diligence

In her judgment in Popely, Rafferty J applied Tesco Supermarkets Limited v Nattrass, ante, to the due diligence defence in s 8 TSA.  She expressed all she had to say about the 51-page law report in a mere 15 words: “The precautions required to be taken are reasonable ones, the diligence required is due diligence.”  The directors, relied on their scheme to avoid the TSA as “all reasonable precautions” and on their taking of legal advice as “all due diligence”.  They cited two authorities in support of their contention that the taking of advice can amount to a due diligence defence.  The first of these was Carrick District Council v Taunton Vale Meat Traders Ltd (1994) 158 JP 347.  In that case, the defendant faced a charge of consigning beef which was unfit for sale, contrary to the Food Safety Act 1990.  The defendant relied on the certificate of the local authority’s meat inspector which stated that the beef carcass was “fit to be conveyed”.  There was no reason for the defendant to doubt the reliability of the meat inspector who, on that occasion, had made an error of judgment.  Smith J said: “If, in the particular circumstances of a case, the court considers that it was reasonable for a defendant to place reliance upon a certificate of examination provided by another, I can see no reason, as a matter of law why the court should not be free to permit such reliance and declare itself satisfied, if it sees fit, that the defence of due diligence has been made out.  It may be that such cases will be rare.  Indeed it should not be thought that this case will amount to authority for the proposition that all that any slaughterer needs to do to comply with his duties under the Act is to rely on the meat inspector’s certificate.”  Rafferty J did not say, in her judgment, to what extent, if at all, she was influenced by the Carrick case.  It would seem to be of only marginal relevance in that it dealt with factual rather than legal advice.  It was an odd case to have been prosecuted and appealed by the prosecution, given that the defendant had relied upon the prosecution’s own certificate.

The second authority relied upon by the directors was Coventry City Council v Lazarus (1996) 160 JP 188.  In that case, the defendants, a partnership, had published advertisements which contravened the Consumer Credit Advertising Regulations 1989 and s 167(2) of the Consumer Credit Act 1974.  The only issue at their trial was whether they had made out the statutory defence in s 168 of the 1974 Act of proving that the publication of the unlawful advertisements was due to reliance on information provided by another person and that they had taken all reasonable precautions and exercised all due diligence to avoid the publication.  The defendants were convicted.  On appeal, Potts J said: “One simple precaution that [the defendants] could have taken would have been to consult the trading [standards] officer before publication.  They failed to do this.”  Butler-Sloss LJ said: “The difficulty that [the defendants] ... face ... is that they recognised themselves on December 9, 1992, that they should seek the assistance of the Fair Trading officials.  That they did by fax, but after the three advertisements had already been published in the press.  It stands out a mile when you look at this that once they had recognised they should seek the advice, they had done it at too late a stage, and by the time they did it they had already committed the offences under the Act.  Consequently, it becomes obvious that they should have taken the reasonable precautions and exercised the appropriate due diligence by making that inquiry, even at a date prior to November 22.  That is not to say they have to go through every single precaution.  What they have to take are all reasonable precautions and exercise all due diligence.  On the face of what they themselves did they did not ... exercise those precautions or that diligence.”  Here then was a case where the Divisional Court considered that the taking of advice, which might be described as quasi-legal advice, from the local authority would have been reasonable.  It does not follow, however, that seeking such advice would be reasonable in every case.  This case turned on its special facts that the defendants saw the need to consult, but did so too late.  The court was also, no doubt, influenced by previous apparent breaches in April 1990 and April 1992.  The defendants had been given advice by the trading standards authority and had received two letters concluding with “although the resources of this department to advise on the form or contents of individual advertisements are limited, we will attempt to assist you should you have a specific problem.”

Although the directors in Popely do not appear to have highlighted it in their defence, it is notable that the offences by the company and directors in May and June 1998 were committed not only after seeking advice from leading counsel but also, apparently, after consultation with the local authority which, at that time, was not saying that the scheme would offend against the TSA.  On those facts it is clear that the company and the directors had done all they reasonably could to keep their scheme within the law and it is difficult to see why the local authority chose to prosecute the first two offences at all.  By the time of the offences in November 1998 and March 1999 the local authority had informed the company that they now thought that the scheme was caught by the TSA.  Rafferty J’s judgment does not expressly say whether the local authority had volunteered why they had changed their minds or if the company had taken the step of asking them.  Neither does it expressly say whether any such reasoning as may have been given for the change of view had been put to either of the QCs who had advised the company.  What the judgment does say, however, is that the change of view was communicated “in July” 1998 and that on 10th July the second QC gave further advice which addressed deficiencies in the scheme identified by the local authority.  It does appear, therefore, as if the directors had acted on the local authority’s revised views and satisfied themselves, by taking and acting upon further legal advice, that their scheme, as amended before the November 1998 offence, fell outside the ambit of the TSA.  If indeed it was the case that the directors had modified their scheme so as to deal with all the deficiencies pointed out by the local authority, then the prosecution of the second two offences is almost as surprising as the prosecution of the first two.

The prosecution’s case was that had legal advice been sought on the cancellation notice itself then that could have amounted to a due diligence defence since the directors would have been seeking to comply with the Act.  The prosecution argued, however, that to seek legal advice in order to avoid the Act altogether could not amount to due diligence.  The magistrates had rejected the defence on the basis that legal advice contained in counsel’s opinion was not something upon which it was reasonable to rely.  “They felt that only the courts can determine the law”.  Rafferty J held that “since the Act affords a due diligence defence in respect of a scheme caught by its provisions, a fortiori a scheme devised so as to remain outside it must attract a similar defence. … 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. … 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. … I would allow these appeals on the basis that the justices were not entitled to find, as to due diligence, as they did.”  It follows that, whereas obtaining the advice of the local authority may be a reasonable precaution to take, it will not always be reasonable to follow that advice.

Was Popely correctly decided?

The prosecutions argument that advice sought for the purposes of avoiding legislation does not amount to due diligence and the magistrates finding that “only the courts can determine the law” have a measure of judicial support in an authority which appears not to have been cited in Popely, namely Concentrated Foods Ltd v Champ [1944] 1 KB 342.  In that case, the defendant was prosecuted under the Food & Drugs Act 1938 having labelled a drink as “Orangette - Concentrated Cordial Essence”.  The magistrates found that the drink was not a concentrated cordial essence and that the label was calculated to mislead as to its nature, substance and quality.  The defendant sought to rely on a statutory defence under s 6 of the 1938 Act that it did not know, and “could not with reasonable diligence have ascertained” that the label was calculated to mislead.  This was founded on the fact that the defendants had relied on the opinion of a public analyst.  Wrottesley J said: “Considerable argument was based on some evidence which, contrary to the usual practice, found its way into this case - the evidence of a public analyst, who is said to have been consulted by [the defendants], and to have told them that the contents of the label were unobjectionable. It was, therefore, argued that [the defendants] had exercised the ‘reasonable diligence’ referred to in s 6.  That evidence, having regard to the nature of this label, which used words with which we are all familiar, seems to be both irrelevant and inadmissible in any case in examination-in-chief.  The question whether the label offended against the Act was a matter, not for any expert witness, but for the court.  This kind of argument is ... founded on a misconception of the true scope and function of expert witnesses.  In these cases experts are there to inform the court of the composition of the subject matter of the charge.  In addition they are, like all expert witnesses, entitled, if asked, to give their opinion based on their examination of the subject matter, provided it is within the scope of their special knowledge.  The question whether a label is calculated to mislead means whether it is calculated to mislead the public, not the qualified chemist, and so it is a question, not for the chemist, but for the court. ... The test is: What does the ordinary man understand by the language?  Was he misled? … Nor is an inquiry of an analyst, such as took place in this case, an exercise of the kind of reasonable diligence referred to in s 6.  Such an inquiry savours too much of the question: ‘How close can I sail to the wind without being taken aback?’  That is not the sort of diligence Parliament had in mind in s 6 ... Different considerations would apply if the subject matter were a drug or some chemical compound the nature of which would not be known to the ordinary person in the street.”

If Concentrated Foods Ltd v Champ had been cited in Popely it would probably have been distinguished since the due diligence in question was in relation to whether the defendant could have ascertained that its label was misleading, that is, likely to mislead the ordinary man.  In Popely the due diligence was that reasonably required to “avoid committing the offence”.  Furthermore, the legal interpretation of the TSA is likely to come within Wrottesley J’s exception of a subject matter not known to the ordinary person in the street.

In Walkers Snack Foods Ltd v Coventry City Council [1998] 3 All ER 163, the prosecution had investigated a complaint by a consumer who had found a piece of plastic in a packet of the defendant’s crisps which, it transpired, was a broken off piece of conveyor belt from the defendant’s factory.  The prosecution visited the defendant’s premises and spoke to its manager who took advice from a consultant, a former trading standards officer employed by Law Laboratories Ltd.  The advice given was bad and led to the defendant being convicted under s 33 of the Food Safety Act 1990 of, without reasonable cause, failing to give reasonably required assistance or information to a person acting in the execution of that Act.  The company appealed contending that the advice they had obtained from the former trading standards officer was a “reasonable cause” to withhold the information requested of them.  Rose LJ did not agree: “Whether or not reasonable cause exists [for failing to give information] is essentially ... a matter of fact for the fact finding body which [can properly have regard to] the fact that advance notice ... was given, as was an indication of the purpose of the visit.  So too the size and resources of the defendants and their attitude, whether responsive or irresponsive to a legitimate investigation. ... So too, the availability of legal advice may be material.  In the present case, no legal advice appears to have been taken.”  It follows from what Rose LJ said that he did not regard what the former trading standards officer had advised as constituting “legal advice” but that had legal advice been taken it could have amounted to, or at least contributed to, a “reasonable cause”.

In the pure context of a reasonable diligence defence, there can be no doubt that Coventry City Council v Lazarus, ante, notwithstanding the special facts of that case, does effectively determine that the obtaining of advice from the trading standards department can be a diligent step.  It must follow that the taking of legal advice from leading counsel must also be an act of diligence.  Whether it will amount to the taking of all reasonable precautions and the exercise of all due diligence will depend on the circumstances of each case and, in particular, upon whether there was something additional which could have reasonably been done.

Implications of Popely diligence

It is possible that Popely will be distinguishable in those cases where the local authority has given advice which has simply been ignored by the defendant.  Those cases aside, a significant practical difficulty arises for prosecuting authorities as a result of Popely.  In cases where the prosecution authority believes that an offence (for which there is a due diligence defence) has been committed, but the prospective defendant acted on legal advice, how should the authority proceed?  If the prosecuting authority believes that the defence is inadequate then it will proceed as before.  There will, however, be cases where the prosecuting authority accepts that the taking of legal advice was all that could reasonably have been done.  In those circumstances, the authority may have to prosecute in order to establish that their view of the law is correct and that an offence has been committed.  They would do so knowing that even if they prove the offence, the defendant will be able to prove the statutory defence and hence will, in any event, be acquitted.  All that the prosecution might achieve is that, having established its point, the defendant cannot easily rely on the same defence again.  Because the decision of one magistrates’ court is not binding on another, it is always technically open for the defendant to stick to his guns, especially if he obtains further legal advice which addresses any new argument which may have arisen at the first trial.  In the event of a subsequent prosecution, the enforcement authority could at the least argue that, notwithstanding that there had been no conviction, due diligence by the defendant would have included appealing against the magistrates finding that an offence had been committed.

The directors’ due diligence defence in Popely was not simply that they had taken leading counsel’s advice, the defence was really one of “we devised a scheme and took leading counsel’s advice on it, what more could we have reasonably done?”  Although it was established in Amos v Melcon (Frozen Foods) Ltd (1985) 149 JP 712, per Neil LJ, that “it was not for the prosecution, either by means of anticipation or indeed by cross-examination, to counter [due diligence] defences which had not been properly formulated” the magistrates are more likely to be satisfied with a defence if they do not receive suggestions from the prosecution as to what reasonable precautions the defence have failed to take.  There is certainly no merit in a prosecutors’ appeal against a finding of due diligence if the prosecution cannot identify what they say should have been done.  In Lewin v Rothersthorpe Road Garage Ltd (1984) 148 JP 87, Goff LJ, in dismissing a prosecutor’s appeal, said “I find it difficult to understand precisely what were the other steps which could have been taken by the respondent company.”

The taking of legal advice will not necessarily be all that is required.  Even on those occasions when the sole issue is whether the legislation bites in particular circumstances it will be necessary for the defendant to show that he followed the advice diligently.  In relation to the seeking of advice, it will be reasonable for the defendant to have ensured that the legal adviser was given all the facts (including any advice of the local authority) and kept informed of any relevant changes.  The calibre of advice need not necessarily always be that of leading counsel but the Walkers Snack Foods case indicates that legal advice should come from a lawyer.  Seeking legal advice on “man in the street” issues should remain outside the scope of due diligence since such questions are not a matter for lawyers.  The obtaining of expert advice can only assist in establishing a due diligence defence if the opinion given is within the field of expertise of the adviser.  The situation should, never be reached, therefore, where it can be due diligence to obtain a lawyer’s opinion that something is not misleading.

It should be noted that there is nothing in Popely to enable the taking of legal advice to become relevant to the question of whether the offence (as opposed to the statutory defence) was committed.  The evidence of those who gave such advice would be inadmissible in defending the “offence” and in that respect the magistrate’s in Popely were correct in saying that “only the courts can determine the law.”  When it comes to the statutory defence, it is not the legal argument itself but the fact that it was obtained and acted upon that may amount to due diligence.

From the defence point of view Popely may not be as attractive as it seems.  If taking legal advice can amount to due diligence then failing to take legal advice (when it was reasonable to have done so) can mean that the due diligence defence is not made out.  For large companies, in particular, Popely may mean an increased need to obtain advice from leading counsel.  Although Rafferty J made it clear that it was not a pre-requisite to have the official approval of the local authority, what she said about the reasonableness of seeking counsel’s advice parallels what Butler-Sloss LJ said in the Lazarus case, ante, in relation to the reasonableness of seeking advice from the local authority.  It should be noted that the taking of advice means just that and a business cannot rely on any expectation that advice will come unsolicited.  Thus in Taylor v Lawrence Fraser (Bristol) Ltd, ante, Peter Pain J said that the defendant company “can hardly be heard to say that, simply because they have fair and proper relations with the enforcing authority, they can therefore in some way shuffle off on to the enforcing authority their responsibility for taking precautions.”  As always, whether or not it is reasonable to take advice will depend on all the circumstances.  In the Popely situation, where the company was unashamedly attempting to set up a scheme to avoid having to comply with the legislation, it was eminently reasonable that the company should have taken the highest of legal advice and considered the views of the relevant enforcement authority.

Abuse of process

It has already been noted that the prosecution of the first two offences in Popely came after the local authority had apparently approved the directors’ scheme and the prosecution of the second two offences appears to have come after the local authority had given advice upon which the directors had acted.  If, however, the local authority, had behaved in such an unfair way, it is surprising that the directors’ did not assert that the prosecutions were an abuse of process.  It may be, therefore, that the local authority, which is said to have not been saying that the scheme would offend against the TSA, were neither saying that it did not offend against the TSA.  If the directors had gone to the local authority and obtained approval for its scheme then a prosecution would have been a clear abuse of process.

The appellant company in Postermobile plc v Brent London Borough Council (1997) The Times December 8, wanted to display advertising posters during the Euro ’96 football tournament.  They had a meeting with officers of the local planning authority who represented that planning consent was not required for temporary advertisements of one month or less.  Relying on those representations the company proceeded to display advertisements.  The local authority, without ever asking the company to remove the advertisements, launched straight into a prosecution of the company for advertising without consent contrary to the Town and Country Planning (Control of Advertisements) Regulations 1992.  The company argued that they were entitled to rely upon what they had been told by the prosecuting local authority and that the prosecution was therefore an abuse of process.  The magistrates accepted the company’s evidence, that they had been told that planning consent was not required, but found that there was no abuse of process because the company should not have relied solely on the oral advice of inexperienced representatives of the local authority but, in view of their own experience in the field, should have verified the advice.  The company thereupon changed its plea to guilty, was convicted and appealed.  Schiemann LJ expressed his surprise that the prosecuting advocate had not been instructed that, in the event of the magistrates finding that the advice had been given, he should not proceed with the prosecution.  He said “I see no substantial public purpose being served in continuing to prosecute an individual who has come to the Council for advice as to whether something which he proposes to do is lawful, is advised that it is and then in reliance on that representation does that very thing.  The magistrates do not find explicitly nor were they asked to find by the prosecution that the officers concerned should have appeared to the company’s representatives as being manifestly inexperienced.  These were officers to whom they had been explicitly referred by the planning department. ... This is not a case where a person comes out of the blue and asked the Council’s gardener or porter for advice on planning law.”  Schiemann LJ went on to consider whether the case fell into one of the two bases under which a jurisdiction to stay proceedings as an abuse of process might be exercised.  Those categories, which were identified by Neill LJ in R v Beckford (1996) 1 Crim App R 94, were “1) Cases where the court concludes that the defendant cannot receive a fair trial; 2) Cases where the court concludes that it would be unfair for the defendant to be tried.”  Schiemann LJ concluded that the present case fell within the second category.  The prosecution was an abuse of process.  “In fields such as planning which affect neighbours and a segment of the public and have consequences which can last for years, the courts tend to emphasise the principle that these important public powers can only be exercised by a person genuinely clothed with authority to exercise them.  In the present case, however, all that is at stake is whether or no the appellants should be prosecuted for what they did in good faith. … The advertisements were only temporary.  There was no need to prosecute in order to preserve the integrity of the planning process.”

It is not possible to assess on the basis of what is contained in the judgment in Popely whether, assuming the directors had acted in good faith on the basis, inter alia, of what they had been told by the prosecuting authority, there was a need to prosecute.  If, however, it was the case that the directors had amended their scheme in accordance with the deficiencies pointed out by the prosecuting authority then a prosecution would seem to have been unfair.

Trial in defendant’s absence

Mr Harris, one of the directors in Popely also appealed on the additional grounds that he was wrongly tried in his absence notwithstanding that the magistrates were given evidence as to his illness.  On this point Rafferty J said: “S 11 of the Magistrates’ Courts Act 1980 (“MCA”)… 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 p Merna (1991) 155 JP 612, [where] 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 expedient fair to both parties. … The justices … rely upon [Mr Harris’] attendance at the conference with counsel shortly before his scheduled trial.  They had before them a skeleton argument prepared by … counsel, which made it plain that Mr Harris had at that conference been unwell. … 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.”  The case against Mr Harris should have been adjourned.

More than a year before Popely was decided, the Divisional Court, in the subsequently reported case of R v Ealing Magistrates’ Court ex p Burgess (2001) 165 JP 82, determined that giving a fair opportunity to the defendant to be present at his trial did not mean giving him an unlimited opportunity.  In that case, the defendant was charged with harassment contrary to s 2 of the Protection from Harassment Act 1997.  His case was adjourned on several occasions in response to letters from both himself and his GP who described him as suffering from “nervous exhaustion, stress and anxiety”.  The court became aware that he had started nine private prosecutions and was also engaged in civil litigation against the police and others.  The magistrates concluded that it was “inconsistent that a person could be so unwell as to be unable to attend one magistrates’ court as a defendant on any occasion over an eight month period, and yet be fit to attend another such court as prosecutor on three occasions within a two week period.”  The magistrates decided to hear the trial in the defendant’s absence, eleven months after it had been first listed.  They convicted him and later the same day he applied, in person, to have his case reheard under s 142 MCA.  The magistrates’ considered that if he was able to make that application he would have been able to have attended the trial that morning.  They consequently refused the defendant’s application and he sought judicial review.  Tuckey LJ took account of R v Bolton Magistrates’ Court ex p Merna, ante, but held that: “The court has a discretion … which has to be exercised with proper regard to the principle that the defendant is entitled to a fair trial.  That of course includes a fair opportunity to be present at his trial to hear and test the evidence against him and give evidence on his own behalf.  However, the words are ‘fair opportunity’ not ‘unlimited opportunity’, otherwise it would never be possible to proceed in a defendant’s absence and a defendant would be able to postpone trials indefinitely without the risk that the court would eventually be able to say ‘enough is enough, we will proceed in his absence’. … I can see nothing wrong with the way in which the court exercised its discretion to refuse to rehear the case.”

VICTOR SMITH

 

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