Hudson & Ors v H. M. Treasury & Anor Rev 1

The eleven appellants, the claimants in the action, are former members of the armed services whose periods of service ended between 1949 and 1975. They were all members of the Armed Forces Pension Scheme (“the Scheme”).

The Scheme is and has at all material times been unfunded, in the sense that there is no specific fund out of which pensions and other benefits under the Scheme are paid; rather, such pensions and benefits are funded out of general taxation by way of annual allocations made by Parliament. The Scheme is a defined-benefit occupational scheme, pensions payable under the Scheme being based on the representative pay for the final rank attained by the retiring member, taking account of his or her length of service.

Under the rules of the Scheme as they stood prior to 1975, in order to qualify for a pension a member had to serve a minimum period of 22 years of ‘reckonable service’ after attaining the age of 18. None of the appellants served for that minimum period, and accordingly on termination of their periods of service none of them qualified for a pension under the Scheme.

In 1975 the rules of the Scheme were changed, with the result that had the appellants left the services after 1975 having completed less than 22 years ‘reckonable service’ they would have been entitled to a deferred pension, payable at the age of 60. These changes in the rules were not retrospective in effect.

The appellants bring the action on their own behalf and on behalf of a large number of former service personnel in (for present purposes) the same position as the appellants, who have, together with the appellants, formed themselves into an association called the Armed Forces Pension Group (“the Group”). The appellants and the other members of the Group harbour a strong sense of grievance that they have effectively been deprived of the deferred pension to which they ought to have been entitled, and to which they would have been entitled had the rule changes made in 1975 been retrospective in effect.

In the action, the appellants allege that, although as a matter of form the Scheme is non-contributory, in substance it is and has at all material times been a contributory scheme, to which they duly made monetary contributions. On that footing, they claim relief of a restitutionary nature in respect of their alleged contributions. The primary relief claimed is a declaration that the two defendants in the action, Her Majesty’s Treasury and The Ministry of Defence, the respondents to this appeal, are liable to account to the appellants for all sums by which they (the respondents) have been unjustly enriched at the appellants’ expense, together with consequential relief in the form of an inquiry and an order for payment of the sums due. They also claim damages. I shall refer to this claim hereafter as “the restitutionary claim”.

The appellants also seek the same relief based upon alleged breach of trust and/or breach of fiduciary duty. I shall refer to this claim hereafter as “the trust claim”.

For their part, the respondents contend that the Scheme is and has at all material times been non-contributory both in form and in substance, and that the appellants made no contributions to it. They accordingly applied to strike out the action on the ground (in effect) that it was bound to fail.

By his order dated 14 March 2003 the judge, Stanley Burnton J, upheld the respondents’ contention and struck out the action. With the permission of the judge, the appellants now appeal.

The appellants’ Particulars of Claim, signed by Mr Paul McCormick of counsel, was served on 27 September 2002. In the course of the hearing before the judge, leading counsel then appearing for the appellants (Miss Cherie Booth QC), placed before the court a draft amended Particulars of Claim in which a large number of paragraphs of the original Particulars of Claim were deleted. The overall effect of the draft amendments was to abandon the trust claim.

Before us, Mr McCormick (appearing in place of Miss Booth QC for the appellants) indicated that he did not wish to be bound by the draft amendments, and that were the action to continue he might wish to resurrect the trust claim. We made it clear that we did not regard him as in any way bound by the draft amendments. In any event, the draft amendments do not affect any of the allegations of primary fact made in the Particulars of Claim.

I turn, then, to the Particulars of Claim as served. I begin with the restitutionary claim.

In paragraphs 28 to 31 of the Particulars of Claim the appellants plead the various regulations governing pay in the armed forces at the material time. In paragraph 34 they plead the material aspects of Scheme, which I have already summarised. Paragraph 35 of the Particulars of Claim is in the following terms:

“35.

The Scheme as operated by the Defendants at all material times was ostensibly non-contributory and not funded by a standing fund. It was funded out of current general taxation from money allocated to the Defence Vote on an annual basis.” (emphasis supplied)

The use of the word “ostensibly” anticipates a later allegation that the Scheme was contributory.

Paragraph 41 pleads that more than 90 per cent of those who left the services prior to 1975 (including the appellants) failed to qualify for any pension or other benefit under the Scheme.

Paragraph 42 pleads that the respondents at all material times operated a system of calculating and fixing pay scales for service personnel which was dependent (among other things) on selected comparators drawn from the Civil Service, whose pay scales were in turn fixed by reference to selected comparators drawn from private industry and business.

Paragraph 45 pleads that a key feature of this system was the effecting of an ‘abatement’. The paragraph continues:

“This was an invisible offset or secret or covert deduction from pay. It was a deduction in real terms because in its absence the armed serviceman’s or servicewoman’s gross wages would be correspondingly higher. It was an invisible, secret or covert deduction because it was not apparent on the face of the pay-slip or any other record or statement of the gross wages.” (emphasis supplied)

The references to ‘gross’ wages in paragraph 45 make it clear that the pleaded deduction was made as part of the process of fixing the levels of gross pay: that is to say before, not after, the figure for gross pay had been determined. This is confirmed by the next paragraph (paragraph 46) which pleads as follows:

“46.

There were two kinds of abatement. The primary abatement was the amount deducted from pay before the gross pay of an individual serviceman or servicewoman was calculated by reference to a deemed or notional contribution that he/she was taken to be making towards funding his/her own pension. The secondary abatement was the further amount by which the individual’s pay was reduced by being fixed on the assumption that s/he would receive a pension and that the Defendants would have in future years to fund it by a corresponding deemed contribution of their own.” (emphasis supplied)

Paragraph 47 pleads the extent of the alleged ‘abatements’. Paragraphs 48 and 49 plead as follows:

“48.

Each of the Claimants and each and all of the members of the Group suffered abatements for each and every year of their armed services service yet derived no corresponding benefit therefrom. Such abatements amounted to and constituted deemed monetary contributions.

49.

The Defendants have wrongfully retained and kept or wrongly disposed of the monetary sums constituting or equivalent to the same for their own use and benefit.”

In paragraph 52 the appellants plead that the respondents have been unjustly enriched in various respects, but primarily by virtue of their retention of the moneys represented by the alleged abatements, such moneys being there described as “deemed contributions”; alternatively by their “exploitation of trust property namely the trust funds constituted by the abatements”.

The trust claim is pleaded in paragraphs 24 to 27 and 53 and 54 of the Particulars of Claim.

In paragraph 24 the appellants allege (among other things) that the regime to which they were subjected during their periods of service was hierarchical and non-consensual; that it involved exceptional stress and loss of civil rights; that it required absolute obedience to, and absolute trust in, those placed in authority; that it was paternalist; and that it provided for a considerably shorter career than in civilian life. In paragraph 25 it is alleged that the respondents represented to the appellants and to the other members of the Group that the service which they had joined would “look after” them comprehensively, providing for their needs and livelihoods during their periods of service. Paragraph 26 alleges that the appellants and all other members of the Group were required to sign undertakings pursuant to the Official Secrets Act 1911 and were not allowed to participate in any pay bargaining process, whether collectively or individually.

Paragraph 27 is in the following terms:

“27.

In the premises the arrangements dealings or relations between the Defendants and the Claimants were based on trust and confidence reposed by the Claimants and all members of the Group in the Defendants whereby the Defendants became trustees and/or fiduciaries and owed duties of good faith alternatively the utmost good faith to the Claimants or each of them and to all members of the Group and each of them in or about all matters concerning their respective service engagements including but not limited to matters of wages, allowances, pensions, contributions, and all matters pertaining thereto.”

Paragraph 53 pleads breach of fiduciary duty by the respondents in (a) making the ‘abatements’, and/or (b) failing to disclose to the appellants (or to other members of the Group) that they had done so, and/or (c) “failing to disgorge the receipts of benefits of the deemed contributions” on the termination of the periods of service of the appellants and of the other members of the Group.

Paragraph 54 pleads a tracing claim, on the footing that in breach of fiduciary duty and/or in breach of trust the respondents have received traceable assets representing “the Claimants’ assets equivalent to the abatements”; alternatively that the respondents are in knowing receipt of such sums.

Paragraph 54 pleads, further or alternatively, that the respondents have incurred liability as fiduciaries acting in breach of fiduciary duty by making a profit out of their trust by retaining the ‘abatements’, and/or by acting for their own benefit without the informed consent of the appellants or of the other members of the Group, and/or:

“.... by acting in breach of the duties of loyalty and fidelity owed by them as fiduciaries, or by way of accessory liability, or howsoever otherwise in breach of duty as a constructive or resulting trustee or in respect of a remedial constructive trust or in respect of accessory liability or other liability falling below the standard of dealing which would be observed by an honest person in the circumstances set out herein having regard to the resources, experience, knowledge, and calibre of the Defendants.”

It is to be noted that the Particulars of Claim does not in terms allege that the respondents have applied the appellants’ ‘deemed contributions’ in funding pensions and other benefits payable under the Scheme. However, since this is an allegation which is an essential foundation for the appellants’ contention that the Scheme was in substance a contributory scheme, I am content to proceed, as the judge proceeded, as if the Particulars of Claim included such an allegation.

In the course of his judgment, the judge rightly observed that the respondents’ application to strike out the action fell to be determined on the basis that the facts alleged by the appellants were capable of proof at trial; and that the facts were to be taken as they would most beneficially affect the appellants’ case (see paragraphs 2 and 13 of the judgment).

Mr Jonathan Crow (appearing, with Mr Jonathan Brettler, for the respondents) was content that we should adopt the same approach as the judge. At the same time, he made it clear that it was the respondents’ firm belief that no ‘abatements’ of any kind were in fact made or applied in fixing the levels of the appellants’ gross pay under the relevant regulations.

Accordingly on this appeal I shall adopt the same approach to the facts as that which the judge adopted.

In this connection, Mr McCormick submitted that we should treat as an allegation of fact for this purpose the appellants’ central allegation that in suffering the alleged ‘abatements’ they made ‘deemed contributions’ to the Scheme. I have no hesitation in rejecting that submission. Such an allegation is not an allegation of fact; it is an assertion of a conclusion which is said to flow from, or an inference which is said to arise inevitably out of, the primary facts alleged. It is, in other words, an assertion as to the true interpretation of the alleged primary facts; and it is an assertion the correctness of which is central to the dispute between the parties. In my judgment, the appellants plainly cannot defeat a strike out application merely by pleading an assertion of that kind in the guise of an allegation of fact and then inviting the court to assume it to be correct.

Similar considerations apply to the allegations made in support of the trust claim. For example, it is a matter of legal analysis whether, on the primary facts pleaded, the Crown owed fiduciary duties to the appellants; or whether the alleged ‘abatements’ constitute, or are to be treated as, trust property in the hands of the respondents.

On that footing, the relevant allegations of primary fact which are, for present purposes, to be treated as proved are, in my judgment, as follows.

The restitutionary claim

At all material times, the percentage of members of the Scheme who in fact became entitled to pensions or other benefits thereunder (i.e. who completed 22 years of ‘reckonable service’ after attaining the age of 18) was less than 10 per cent.

The appellants were duly paid sums equal to their gross pay from time to time as fixed under the relevant regulations.

The trust claim

The alleged facts relevant to the restitutionary claim (as set out in A above). And

The alleged nature of the regime to which the appellants were subjected (as pleaded in paragraphs 24 to 26 of the Particulars of Claim, summarised above).

The judge began by noting that it was common ground that the action was not to be struck out unless it was clearly doomed to failure, and that the court should avoid making a decision at the interlocutory stage if there was a reasonable possibility that the action might be saved by evidence yet to appear, or which might result from an investigation during the course of the disclosure of documents. He then summarised the facts as pleaded, noting that (as is the case) it is not alleged that the appellants did not receive their pay in accordance with the relevant regulations, nor is it alleged that they had any contractual entitlement to any additional sum.

In paragraph 10 of his judgment the judge said this:

“They [i.e. the appellants] believed their pensions to be non-contributory. They have subsequently learned that in the calculation of the gross sum payable to them under the relevant regulations relating to their pay, what has been referred to as an ‘abatement’ was applied. An abatement was a deduction from the pay that otherwise might have been payable, which reflected the need to provide for pensions."

Then, having observed that it was not entirely clear what form the alleged ‘abatements’ might in fact have taken, the judge continued (in paragraph 13 of the judgment):

“13.

But for present purposes, the facts are to be taken as they would most beneficially affect the Claimant’s case. That is to say that the deduction was made in order to fund other persons’ pensions payable at the time and the deductions were so applied. That interpretation of the facts is one which is not pleaded, and certainly not clearly pleaded, in the present Particulars of Claim. I was told by Miss Booth during her application for an adjournment this morning that it was sought to amend the Particulars of Claim in order to allege those facts. It seemed to me possible to determine the question of law raised by the Defendants’ application on the assumption that those facts might be proved, and Mr Crow, on behalf of the Defendants, was willing so to argue the case. It therefore proceeded on that basis.”

The judge then proceeded to consider the restitutionary claim. He did not consider the trust claim, since, as noted earlier, in the draft amended Particulars of Claim placed before him by Miss Booth QC the trust claim was abandoned.

In paragraph 14 of his judgment, the judge summarised the restitutionary claim as being a claim:

“.... that by making the deduction to which I have referred, that is to say the so-called abatement, the Defendants received the benefit of monies that would otherwise have been paid to the Claimants.”

In paragraph 15 of his judgment, the judge recorded the respondents’ answer to the restitutionary claim as follows:

“[The Claimants] gave up nothing relevant, and the Defendants received nothing relevant. There was therefore no unjust enrichment, no conferring of benefit, no expense to the Claimants and no cause of action.”

In paragraphs 16 to 21 of his judgment, the judge said this:

“16.

In order to examine the relevant contentions it is necessary to analyse with a certain amount of precision what is alleged to have taken place. It is common ground that the Claimants had no contractual right to the amount of the abatement. It is common ground that they had no fiduciary or equitable claim to the abatement. It is similarly common ground that they had no fiduciary or other claim to any funding created out of the abatement. The abatement was applied at the expense of the Claimants only in the sense that a notional deduction was made before arriving at the gross figure of pay due to them under the regulations applicable to their pay. In those circumstances the Claimants never had any contractual or equitable or other right to the amount of the abatement.

17.

In my judgment, the cause of action of unjust enrichment does require a Claimant to have given up some property or other right, which may not be a legal right, it may only be an equitable right, as part of the conferring of the benefit on the Defendant. Conversely, the Defendant must have received something which would not otherwise have been his to keep.

18.

In the course of argument, I gave the example of employees in a partnership whose pay had been discussed between the partners, who had decided to reduce the pay initially thought of because of the need to fund pensions. They therefore presented their employees with a figure for their gross pay which had been reduced by the amount calculated as necessary to fund pensions payable to others wholly or in part. And the employees in that example continued to work for their employers on the basis of the gross pay so stated.

19.

In my judgment, in such circumstances the employees would have no claim by way of unjust enrichment or otherwise in relation to the deduction discussed between the partners, notwithstanding that because they failed to do so the employees did not qualify in due course for payment of a pension.

20.

Members of the Armed Forces are, in a number of respects, in a very different position from employees in the private sector. But in relevant respects I see no material distinction between that example and the position of the Claimants. The basic facts are that the Claimants had no contractual or other right to any different pay or different pension from those provided in the regulations and the relevant pension arrangements.

21.

In coming to the conclusion I have arrived at, I take into account that restitution is very much a developing field of law and that it is dangerous to be categoric in this area. The present claim does not fit in to any of the quasi-contractual causes of action, as they were known, before the law of restitution was developed. The law of restitution has taken such claims into new areas, such as claims for the repayment of monies paid to the State on the basis of a mistake of law. But no case has been cited in which a quasi-contractual or restitutionary claim was held to arise in circumstances where the Claimant gave up no legal, contractual or other enforceable right.”

Accordingly, whilst expressing sympathy with the appellants’ sense of grievance, the judge held (in paragraph 22 of the judgment) that he had no alternative but to strike out the claim. He then went on to address directly the submission that the Scheme is in substance a contributory Scheme, saying this (in paragraph 23 of his judgment):

“23.

I should say something about the fact that their pensions were described as non-contributory since they consider that that was a misleading description. No claim has been made for misrepresentation or the like as to the provisions of any of the pension schemes in question. No doubt the long passage of time since the Claimants ceased to be members of the Armed Forces makes it extremely difficult to plead or to prove such a claim. But there is no such claim. A pension is a contributory pension so far as the employee is concerned when a deduction is made from his contractual gross pay in order to fund his pension. No such deductions were made in the present case. The pensions were, in fact, non-contributory. Much as I understand that the Claimant may feel that they were misled, in my judgment that characterisation of the pension schemes adds nothing to their Claim.”

The judge concluded his judgment by saying this (in paragraph 24 of the judgment):

“24.

In those circumstances, even on the basis of the facts that might be pleaded as envisaged by Miss Booth, it seems to me that this Claim is bound to fail. The point before me is essentially one of law which does not depend on particular facts or matters which may be revealed by any investigation. The point of law depends entirely on facts which are common ground, that is to say the lack of any contractual, or property or other right in relation to the abatement.”

In the course of a discursive argument, Mr McCormick made the following submissions.

He submits that whilst in form the Scheme is non-contributory, it is in substance contributory. He urges us to adopt the approach adopted by the courts in other contexts (as an example, he mentioned Street v. Mountford [1985] AC 809) in not allowing form to prevail over substance. He submits that the reality of the situation in the instant case (on the basis of the pleaded facts) is that in calculating the appellants’ gross pay deductions were made which were then applied in funding the Schemes. In substance, he submits, it matters not whether such deductions are made in the course of fixing the level of the appellants’ gross pay or by way of deduction from gross pay. In each case, he submits, the end result is exactly the same: money which would otherwise have been paid to the appellants has been paid into the Scheme. Hence, he submits, in reality the money so paid constituted contributions by the appellants to the Scheme and should be treated by the courts as such. He referred us in this connection to a passage in Hansard (thought to relate to a Parliamentary debate which took place in 1990 or 1991) where Mr Archie Hamilton MP (the then Minister of State for the Armed Forces) described the ‘abatement’ process as “an invisible offset” (a description which is to be found repeated in paragraph 45 of the Particulars of Claim).

Mr McCormick also referred us to a number of further documents in which reference is made to the ‘abatement’ process. However, these documents do not take the matter any further, since they merely make it clear that, as averred in the Particulars of Claim, the ‘abatement’ was applied as part of the process of fixing levels of gross pay. Thus, for example, Mr McCormick referred us to an extract from a document entitled ‘The Armed Forces Pension Scheme Review: A Consultation Document’, published in March 2001, which reads as follows:

“The current AFPS [a reference to the Scheme] is an unfunded scheme, paid for from taxation, with pension benefits related to a representative rate of salary based on final rank. It pays a full suite of pension benefits, including pensions for retirement on health grounds, death in service benefits, and dependants’ benefits. Scheme members do not pay contributions, but the Armed Forces Pay Review Body take into account the value of the pension scheme compared to pension schemes in comparator occupations when setting the level of Service pay.” (emphasis supplied)

Mr McCormick also seeks to pray in aid the allegation that at the material time the appellants were unaware of the existence of the ‘abatement’ process (which he describes as an oblique and covert process, to select only two out of a number of epithets which he employed in this context). However, he expressly disavows any present intention of alleging misrepresentation by the respondents or either of them.

Turning to the law, Mr McCormick submits that it is not appropriate to analyse the legal position in the instant case by reference to the appellants’ contractual entitlements. He referred us in this connection to a passage in Chitty on Contracts, 28th edn vol 1 p.546 para 10-011 where the nature of the legal relationship between a member of the armed forces and the Crown is discussed. He also referred us to the well-known case of Reading v. A-G [1951] AC 507, where the House of Lords held that a soldier was accountable to the Crown for profits made from corrupt transactions involving use of his military uniform. However, I confess to being wholly unable to discern any link between that case and this.

Mr McCormick submits that in the instant case the appropriate legal tool, to use his expression, is not the law of contract but the law of restitution. In this connection, he referred us to Goff and Jones’ The Law of Restitution 6th edn at p.17, para 1-016, where the learned editors say this about the principle of unjust enrichment:

“As might be expected a close study of the English decisions, and those of other common law jurisdictions, reveals a reasonably developed and systematic complex of rules. It shows that the principle of unjust enrichment is capable of elaboration and refinement. It presupposes three things. First, the defendant must have been enriched by the receipt of a benefit. Secondly, that benefit must have been gained at the plaintiff’s expense. Thirdly, it would be unjust to allow the defendant to retain that benefit. These three subordinate principles are closely interrelated, and cannot be analysed in complete isolation from each other. Examination of each of them throws much light on the nature of restitutionary claims and the principle of unjust enrichment.”

Mr McCormick submits that each of those three elements is present in the instant case. As to ‘benefit’, he submits that surplus money has been received by the Government and applied in meeting its liabilities under the Scheme. It is, he submits, just as if a trustee had expended trust money on himself. As to the second element, he submits, harking back to his form/substance argument, that the benefit in question was gained by the Government at the appellants’ expense in that the money from which the Government benefited was in reality deducted from the appellants’ pay. As to the third element, he submits that the injustice in the instant case is clear.

He further submits that the law of restitution is a rapidly developing area of the law, citing A-G v. Blake [2000] 4 All ER 385 (HL) and the Canadian case of Sorochan v. Sorochan (1998) 29 DLR (4th) 1 as examples of this. Thus, he submits, even if under the law as it stands today the appellants would not be entitled to a remedy, it does not follow that the claim may not succeed at trial. Accordingly, he submits, it would be wrong in any event to strike the claim out at this stage. In support of this last submission he relies heavily on a dictum of Potter LJ in Partco Group Ltd & Anor. v. Wragg and Scott [2002] 2 Lloyds Reports 343 (in paragraph 48 of his judgment) as authority for the proposition that it is not appropriate to strike out a claim in an area of developing jurisprudence (I shall return to this).

Turning to the trust claim, Mr McCormick referred us to Part 2 of Chapter 9 of Snell’s Equity 30th edn. Chapter 9 is entitled ‘Resulting, Implied or Constructive Trusts’; Part 2 of the Chapter is entitled ‘Trusts Imposed by Law’. Mr McCormick submits that in so far as it is necessary for them to do so, the appellants are in a position to establish a property right in the ‘abatements’, sufficient to entitle them to proprietary relief on the basis of constructive trust; alternatively they have an arguable case based on breach of fiduciary duty.

Mr McCormick makes a number of submissions as to the scope of the court’s power under CPR 3.4 to strike out claims, and as to the exercise of that power in the instant case. Thus he submits (among other things) that in order to succeed in striking out the appellants’ claims the respondents must satisfy the court (a) that the claim discloses no reasonable cause of action in law, as the law stands today; (b) that there is no possibility of further facts throwing up a cause of action which may be, as he put it, lurking under the surface (he gave as an example the possibility that at some later stage the appellants might wish to allege misrepresentation); (c) that there is no possibility of a cause of action emerging in the foreseeable future through further development of the law; (d) that it is inappropriate in all the circumstances of the instant case for the court to exercise the Draconian jurisdiction to strike out; and (e) that, on the assumption that the appellants have no prospect of establishing a cause of action at trial, they have no reasonable grounds for bringing or continuing with the action.

Elaborating on the last of the above submissions, Mr McCormick submits that even if the appellants have no cause of action in law as the law stands today, and no prospect of establishing a cause of action at trial as a result of some future development of the law, nevertheless they are entitled to have their genuine grievances aired in court. The court, he asserts, has a duty to allow litigants who feel a palpable sense of injustice to have their day in court, notwithstanding that the claims are bad in law and bound to fail.

Mr Crow submits that on the pleaded facts the appellants’ claims are, as the judge held, doomed to failure.

He points out that, as pleaded, the alleged ‘abatements’ were part of the process of arriving at the level of gross pay; and that the appellants do not claim an entitlement to any sums additional to their gross pay. Accordingly, he submits, no question of any restitutionary remedy can possibly arise. No benefit of any kind was conferred by the appellants on the respondents; nor can it be said that the respondents enjoyed a gain which was attributable in any way to the appellants.

As to the injustice which it is suggested the appellants have suffered, and their sense of grievance at having been (as they see it) unfairly treated, he warns us against judging the fairness or otherwise of the Scheme as it stood pre-1975 by reference to contemporary norms. In any event, he submits, this is a court of law and not a court of grievances; and the plain fact is that the appellants have no claim.

If and in so far as the trust claim raises issues which are to be regarded as distinct from the issues raised by the restitutionary claim, Mr Crow submits that scope for granting relief on the basis of constructive trust or breach of fiduciary duty can be no greater, and is if anything narrower, than the scope for granting restitutionary relief. Hence, he submits, if the restitutionary claim is bound to fail (as he submits it is), then the same must apply to the trust claim.

I should record at this point that, in addition to hearing argument from Mr McCormick and Mr Crow, we also received written submissions from a Mr D. G. Robson. Mr Robson is not a member of the Group, nor is he one of the appellants. Nevertheless we are grateful for Mr Robson’s submissions, which we have considered with care. I take them into account in reaching my conclusions.

I begin by considering the extent of the court’s power to strike out a claim under CPR 3.4, with particular reference to Mr McCormick’s reliance on the proposition, taken from Potter LJ’s judgment in Partco, that it is not appropriate to strike out a claim in an area of developing jurisprudence.

In paragraphs 45 to 48 of his judgment in Partco, Potter LJ discusses the test for striking out a claim under CPR 3.4(2)(a), saying this:

“45.

The test for striking out under [CPR] 3.4(2)(a) is, in the words of the rule itself, that the statement of case discloses “no reasonable grounds for bringing or defending the claim”.

46.

The notes to CPR 3.4 ..... indicate that this ground applies amongst others to (i) statements of case “which raise an unwinnable case where continuance of the proceedings is without any possible benefit to the respondent and would waste resources on both sides ....”; (ii) a claim or defence which is not “a valid claim or defence as a matter of law” ....

47.

Case (i) refers to a case which is unwinnable on the merits, whereas case (ii) refers to the failure of a claim which is misconceived or, upon the facts or matters pleaded is bound to fail as a matter of law ....

48.

However, both are methods by which a claim or part of a claim may be disposed of summarily, and without regard to all available evidence as to the matters of contest, and are therefore broadly subject to the considerations which I have earlier summarised .... It is no doubt because of those considerations that the notes to CPR 3.4 advert to the principle that it is not appropriate to strike out a claim in an area of developing jurisprudence, in which a decision as to a novel point of law should be based on actual findings of fact, and that a statement of case is not suitable for striking out if it raises a serious live issue of fact which can only properly be determined by hearing oral evidence.”

The notes to CPR 3.4 to which Potter LJ was there referring (which remain unchanged in the 2003 edition of Civil Procedure) cite Farah v. British Airways plc The Times 26 January 2000, as authority for the proposition that “it is not appropriate to strike out a claim in an area of developing jurisprudence, since, in such areas, decisions as to novel points of law should be based on actual findings of fact”.

In Farah it was alleged by the claimant that the defendant airline owed him a common law duty of care, on the application of the principles established by the House of Lords in Caparo plc v. Dickman [1990] 2 AC 605. In particular, it was alleged that the airline was liable to the claimant for the negligence of a Government liaison officer in giving the airline incorrect advice on which it had relied. The question therefore arose whether there was a sufficient degree of ‘proximity’, in the sense in which Lord Bridge used that term in Caparo, to justify the imposition of a duty of care. The Court of Appeal (Lord Woolf MR and Chadwick LJ), reversing the judge at first instance, held that it could not be concluded on a striking out application that the claimant’s case had no realistic prospect of success. Agreeing with the judgment of Lord Woolf MR, Chadwick LJ said (at paragraphs 42 and 43):

“42.

As Lord Browne-Wilkinson observed in Barrett v. [Enfield BC] [1999] 3 WLR [79], unless it is possible to give a certain and affirmative answer to the question whether the claim would be bound to fail, the case is not one in which it was appropriate to strike out the claim in advance of trial. Lord Browne-Wilkinson went on to point out that in an area of the law which was uncertain and developing, it could not normally be appropriate to strike out. He emphasised the importance of the principle that the development of the law should be on the basis of actual facts found at trial, and not on the basis of hypothetical facts assumed (possibly wrongly) to be true on the hearing of the application to strike out. There are observations to the like effect in Lord Browne-Wilkinson’s speech [in] X (minors) v. Bedfordshire CC [1995] 2 AC 633 at p.741; and in the judgment of Sir Thomas Bingham MR in E (a minor) v. Dorset CC at p.694 in the same report.

43.

In my view it is plain that the legal issue in this case can fairly be regarded as within an area of the law which is developing and as its boundaries become drawn through experience in the cases which come before the courts.”

In Barrett, the plaintiff, who had been placed in the care of the defendant local authority, claimed damages against the local authority for negligence. The local authority applied to strike out the claim as disclosing no reasonable cause of action. The Court of Appeal, reversing the judge at first instance, held that it was not appropriate to strike out the claim since (among other things) the question whether it was fair, just and reasonable to impose a duty of care was not to be decided in the abstract, on the basis of assumed hypothetical facts, but on the basis of what was proved at trial. At p.83C of the report of Barrett, Lord Browne-Wilkinson said this:

“In my speech in the Bedfordshire case .... I pointed out that unless it was possible to give a certain answer to the question whether the plaintiff’s claim would succeed, the case was inappropriate for striking out. I further said that in an area of the law which was uncertain and developing (such as the circumstances in which a person can be held liable in negligence for the exercise of a statutory duty or power) it is not normally appropriate to strike out. In my judgment it is of great importance that such development should be on the basis of actual facts found at trial [and] not on hypothetical facts assumed (possibly wrongly) to be true for the purpose of the strike out.” (emphasis supplied)

In E (a minor), in which the claim was for damages for breach of statutory duty, Sir Thomas Bingham MR said (at p.693E):

“It is clear that a statement of claim should not be struck out under [the then rules] as disclosing no reasonable cause of action save in clear and obvious cases, where the legal basis for the claim is unarguable or almost incontestably bad.”

Later in his judgment, after referring to the plaintiff’s argument that it was undesirable for the courts to formulate legal rules against a background of hypothetical facts, Sir Thomas Bingham MR said this (at p.693H):

“I share the unease many judges have expressed at deciding questions of legal principle without knowing the full facts. But applications of this kind are usually fought on ground of a plaintiff’s choosing, since he may generally be assumed to plead his best case, and there should be no risk of injustice to plaintiffs if orders to strike out are indeed made only in plain and obvious cases. This must mean that where the legal viability of a cause of action is unclear (perhaps because the law is in a state of transition), or in any way sensitive to the facts, an order to strike out should not be made. But if after argument the court can be properly persuaded that no matter what (within the reasonable bounds of the pleading) the actual facts the claim is bound to fail for want of a cause of action, I can see no reason why the parties should be required to prolong the proceedings before that decision is reached.”

As I read these authorities, they do not in any way erode the well-established principle that claims which are plainly and obviously bad should generally be struck out. Indeed, in E (a minor) Sir Thomas Bingham in terms endorses and asserts that principle. It follows that the proposition that it is not appropriate to strike out a claim in an area of developing jurisprudence cannot be an absolute one: indeed, in saying that it would not “normally” be appropriate to strike out such a claim Lord Browne-Wilkinson expressly acknowledged that there might be cases, even in an area of developing jurisprudence, which were so plainly and obviously bad that they should be struck out. If it were otherwise, the court’s jurisdiction to strike out hopeless claims would be unexercisable in any case where the hopeless claim purports to invoke an area of developing jurisprudence.

In my judgment, therefore, where an application to strike out a claim is resisted on the ground that, notwithstanding that the claimant may currently have no cause of action, nevertheless by the time the action comes to trial the relevant area of jurisprudence may have developed sufficiently to enable the claim to succeed, the court will require to be satisfied that there is at the very least some real prospect of that occurring. If there is such a prospect, then by definition the claim is not (on that ground) hopeless: if there is not, it is.

In the instant case the strike out application has (as Sir Thomas Bingham put it in E (a minor), see above) been fought on grounds of the appellants’ choosing. They have pleaded the primary facts on which they rely as giving rise to their alleged causes of action, and (as noted earlier) those facts are for present purposes to be taken as true.

Against that assumed factual background, therefore, I turn first to the restitutionary claim.

In my judgment the restitutionary claim is, as the judge rightly concluded, plainly and obviously doomed to failure. The appellants were not entitled to any sums in addition to their gross pay. In particular, they had no entitlement of any kind to sums notionally ‘deducted’ by the respondents in deciding the appropriate level for their gross pay. The fact that an employer who sets the gross pay of his employees at levels lower than those which he might have decided upon had he not brought a particular factor or circumstance into account cannot possibly lead to the conclusion that the employees are entitled to the value of the ‘deduction’. Mr McCormick’s submission to the contrary seems to me, with respect, to be absurd.

Equally absurd, to my mind, is his submission that in ‘substance’ or ‘reality’ the Scheme is a contributory scheme, on the footing that there is no relevant difference in law between a situation in which a contribution is deducted from gross pay and a situation in which no such deduction is made but an ‘abating’ factor is brought into account in setting the level of the gross pay. The Scheme was plainly a non-contributory scheme, for the reasons given by the judge in paragraph 23 of his judgment.

I accordingly accept Mr Crow’s submission that none of the three basic elements of a restitutionary claim are present in the instant case. The alleged ‘abatements’ did not constitute benefits or gains to the respondents. The funds in question (assuming for this purpose that they can be identified) were the beneficial property of the respondents before the ‘abatements’ were made, and they remained so afterwards. The only relevant effect of the ‘abatements’ was that the respondents did not incur an obligation to pay higher levels of gross pay. Similarly, it seems to me impossible to argue that any benefit or gain to the respondents was at the expense of, or otherwise in some way attributable to, the appellants.

As to the alleged injustice which the appellants have suffered, it is important not to confuse their undoubted sense of grievance deriving from their perception of the way they have been treated by the respondents with injustice arising from some act or omission on the part of the respondents which entitles them to a remedy in law. The stark facts are that the appellants received their gross pay, and that they were entitled to nothing further, either by way of gross pay or under the then terms of the Scheme. They have, therefore, suffered no injustice entitling them to a remedy in law.

It occurred to me, listening to Mr McCormick’s argument, that the “injustice” of which the appellants complain might to some extent relate not so much to the alleged ‘abatements’ as to their perception that the terms of the Scheme prior to 1975 were unfair, and/or to the fact that the 1975 rule changes were not made retrospective in effect. But that is not how the claim is pleaded – nor, indeed, could it be pleaded in that way. Accordingly I say nothing whatever about those matters.

Nor can I accept Mr McCormick’s submission that the law of restitution is developing so rapidly that by the time the action comes to trial it may afford the appellants a remedy. In my judgment it would require something akin to an earthquake in the law of restitution to enable the appellants to succeed at trial on the restitutionary claim. I can see no prospect of such an event occurring.

As to the trust claim, once again I conclude without hesitation that it is bound to fail, for essentially the same reasons as in the case of the restitutionary claim. The ‘abatement’ process did not involve the transfer of anything from the appellants to the respondents. And even if it were possible for the appellants to establish that the respondents owed them fiduciary duties (a proposition which I would in any event regard as highly doubtful), I can see no possible scope on the facts pleaded for any claim that they somehow breached such duties.

Finally, as to Mr McCormick’s extravagant submissions as to the nature and scope of the court’s powers under CPR 3.4, suffice it to say that I could not disagree more strongly with the suggestion that the courts should countenance the continuation of hopeless litigation simply in order to allow the claimant his day in court. As the courts have made clear over and over again, and for very good reason, hopeless claims should generally be struck out. The resources both of the courts and of litigants are better spent on the resolution of genuine disputes.

I would accordingly dismiss this appeal.

In so doing, I very much hope that the appellants’ undoubted sense of grievance is not the product of any encouragement which they may have received from their legal advisers to pursue at their own expense claims which are, for the reasons I have given, manifestly hopeless.

I agree.

I also agree.