Neutral Citation Number: [1998] EWHC Admin 456
Case No. CO 766‑98
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
(DIVISIONAL COURT)

Royal Courts of Justice
Strand
London WC2

Date: Tuesday, 28th April 1998

B e f o r e:

LORD JUSTICE KENNEDY
(VICE PRESIDENT OF THE QUEENS BENCH DIVISION)

‑and‑

MR JUSTICE BLOFELD

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DIRECT HOLIDAYS PLC

‑v‑

WIRRAL METROPOLITAN BOROUGH COUNCIL

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(Computer‑aided Transcript of the Stenograph Notes of
Smith Bernal Reporting Limited
180 Fleet Street, London EC4A 2HD
Telephone No: 0171‑421 4040/0171‑404 1400
Fax No: 0171‑831 8838
Official Shorthand Writers to the Court)

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MR C SALTER (instructed by Heath & Co, Marylebone, London)     appeared on behalf of the Applicants.

MR T MITCHELL (instructed by Metropolitan Borough of Wirral, Town Hall, Brighton Street, Wallasey, Wirral L44 8ED) appeared on behalf of the Respondent.
J U D G M E N T

LORD JUSTICE KENNEDY: Blofeld J will give the first judgment.
 
MR JUSTICE BLOFELD: The Appellants are in the leisure business.  Among other things they sell package holidays. This case concerns a package holiday to Tenerife.  In Tenerife there are two hotels that we are concerned with, the first is called Las Piramedes Hotel Complex.  Close by, and possibly actually attached to the grounds, are the Rebecca Apartments.  The Rebecca Apartments have their own swimming pool and are self‑catering but they are entitled to use the facilities of Las Piramedes.
     Sometime between 27th November and 5th December 1995
Mr Edwards booked a summer holiday at the Rebecca Apartments through the Appellants.  He used their 1996 summer brochure, by that I mean, he used a brochure that had been prepared for holidays for the summer of 1996.  A description was given of the Rebecca Apartments in that brochure describing them as a recently refurbished set of good quality apartments in a central location and also saying:
"for extra convenience and an extended choice of amenities all our clients can use the facilities of the Las Piramedes Aparthotel next door." 
     The brochure further included the information that the official category of the Rebecca Apartments was 3 keys.
 
      Whilst dealing with that document, it is worth noting that the Oro Blanco Apartments were also described on the same page and there again, the Appellants chose to set out their official category which was 2 keys.
     Mr Edwards duly went to Tenerife in the summer of 1996.  He was dissatisfied with the accommodation at the Rebecca Apartments.  On his return he contacted the appellants who had no record of receiving his complaint.  He also contacted the local Trading Standards Office listing his complaints.  Those complaints included the fact that the Rebecca Apartments had a 1 key official rating as opposed to 3 keys.
     The Trading Standards Office at Wirral wrote to the Appellants on 28th November 1996 stating that they were currently investigating complaints made by persons in the Wirral area and then detailed Mr Edwards' complaint and stated that:
"Mr Edwards informs me that on arrival, he found that the apartments had not been refurbished, that the official classification of the hotel was one key and that a number of facilities were not available at the complex, but at an adjacent complex." 
That letter ended by drawing the attention of the appellants to the Police and Criminal Evidence Act 1984 caution, which was set out in full, and it also reminded the Appellants that they may wish to seek legal advice.
     The appellants, though Mr Boyle the Managing Director, answered on 8th January 1997.  They replied to a certain number of specific questions that had been attached to the  letter sent by the Trading Standards Office at Wirral.  It is relevant that in those questions, the Appellants were asked who supplied the information for the brochures and they received the answer "the Direct Holidays Contracts Manager".  Mr Gray held that position and he gave evidence at this trial.
     The eleventh question was "any further comments?" To that question, Mr Boyle for the Appellants stated:
"All clients who were booked to the Rebecca Apartments were written to prior to the departure informing them that the Rebecca block was a 1 key unit.  They were all offered a change of accommodation or alternatively full refunds." 
     Subsequently, the respondents proffered two informations against the appellant company.  These were in the alternative.  As in due course the justices for the Metropolitan Borough of Wirral convicted the appellants on the first information, it is now unnecessary to deal with the alternative information.
     The first information is set out in the first paragraph of the Case Stated and states that the Appellants:
"...did on a date between 27th day of November 1995 and 5th day of December 1995... in the course of a trade or business namely as a Tour Operator, recklessly made a statement to William Ieuan Edwards by means of the 'Direct Holidays Summer Sun 1996' April to October edition brochure, namely  'official category three key' in relation to the Rebecca Apartments, Playa de las America, Tenerife, which was false in that the official category of the Rebecca Apartments was actually 'one key'."
  
     That information was under section 14(1)(b) of the Trade Descriptions Act 1968.  The relevant parts read as  follows:
"It shall be an offence for any person in the course of any trade or business,
(a) to make a statement which he knows to be false or
(b) recklessly to make a statement which is false." 
     Subsection (2) reads:
"For the purposes of this section anything (whether or not a statement as to any of the matters specified in the proceeding subsection) likely to be taken for such a statement as to any of those matters as would be false shall be deemed to be a false statement as to that matter and
(b) a statement made regardless of whether it is true or false shall be deemed to be made recklessly whether or not the person making it had reasons for believing that it may be false." 
Finally subsection (4) reads:
"In this section 'false' means to a material degree."
     It can be seen, therefore, that in order to prove this information, three matters have to be proved by the prosecutors; first that the Appellants made a statement to William Ieuan Edwards.  This has never been in dispute. Secondly, that the statement was false in that the official category of the Rebecca Apartments was actually 1 key, whereas the brochure said it was official category 3 key. That is in dispute.  Finally, that that statement was made recklessly, that also is in dispute.
     The Justices have prepared a Case Stated.  It is, if I may say so, with respect to them, not the easiest Case Stated to follow.  I recognise that it is difficult and time consuming to prepare a detailed Case Stated and I recognise the burden frequently falls on the clerk or on someone who is instructed on the Justices' behalf, but I would have been  helped by further findings of fact in the case stated.  In the end, on analysis, I have found, for my part, that there is sufficient information for me to come to a firm conclusion about the matters that are raised in this court.
     It is, however, relevant at this stage to say that at the end of the Case Stated the Justices pose two questions.
In the course of submissions by counsel it became clear that this court is in reality being asked to answer three questions.  The first question that the Justices pose is:
"Were we justified on the facts as we found them in deciding there was admissible evidence as to the official category of the Rebecca Apartments?" 
     It would have been better if they had phrased that question by adding the words, "were we justified at the close of the prosecution case, on the facts as we found them, in deciding there was evidence as to the official category of the Rebecca Apartments?" And then added a second question, "were we justified at the conclusion of the evidence in deciding there was admissible evidence as to the official category of the Rebecca Apartments?"
     It has been submitted by Mr Salter and, for my part I am greatly indebted to him for the care and trouble he has taken in presenting these submissions, that these two questions are implied.  I have some doubts as to whether that is the case, but I am prepared to accede to that submission and answer both those questions at the end of my judgment.
     The Magistrates in the Case Stated found the following  facts.  For the sake of completeness I set out the facts they found at paragraph 3:
(a) Between 27th day of November 1995 and the 5th day of December 1995 Mr William Ieuan Edwards booked a holiday at the Rebecca Apartments... using the Appellant's summer 1996 brochure.....
 
(b) the Appellant Company's Summer 1996 brochure classified the said Rebecca Apartments with an official three key accommodation rating.
 
(c) Accommodation in Spain is classified by the Tourist Board by reference to key ratings. (The higher the number, the better the rating).
 
(d) The original Spanish Tourist Board classified for the Rebecca Apartments was 'one key' at the relevant time.
 
(e) The official 'three key' classification... as described in the said Company's brochure were relevant factors taken into account by Mr Edwards when deciding to book the Rebecca Apartments.
 
(f) The Appellant did not notify Mr Edwards as to the error stated in their brochure relating to the official key category of the Rebecca Apartments before the commencement of his holiday.  Invoices and letters were sent to other holiday makers pointing out the error in classification (an example of which appears at page 4 in the annexed bundle of documents).
 
(g) During his holiday Mr Edwards filled in a complaint form and on his return from Tenerife in Summer 1996 wrote to the Appellate Company and Wirral Trading Standards Office listing his complaints.
 
(h) The Rebecca Apartments could be regarded as a separate accommodation block to the Las Piramedes Hotel next door. Both were owned and managed by the same company and there was some sharing of facilities and a single check‑in area. The Rebecca Apartments were clearly portrayed in the brochure as a separate unit with their own facilities and not merely apartments within the Las Piramedes complex.  The Appellant Company contracted for accommodation at the Rebecca Apartments separately to any contractual arrangements with the Las Piramedes Hotel.
 
(i) The contract to include the Rebecca Apartments in the Summer 1996 brochure was negotiated and signed on behalf of the Appellant Company by
Mr Nicholas Gray... That contract did not specify or confirm the official key accommodation classification for the  apartments.
 
(j) The Appellant did not, either through
Mr Gray or their Overseas Agents, Via Korona, check the official key rating for the Rebecca Apartments with the Spanish Tourist Board.
 
(k) The Appellant Company did not issue firm instructions or lay down set procedures for
Mr Gray or other employees or agents to follow, to verify the official key accommodation ratings before this information went into the brochure." 
I now turn to deal with the submissions made by Mr Salter. Mr Salter's first submission was that there was no admissible evidence at the close of the prosecution case; that the allegation in the brochure that the Rebecca Apartments was an official category 3 key was false and, further, that there was no admissible evidence that they were actually 1 key.
     At the conclusion of the Respondent's case before the Justices, there was one document that had been put in which related to this particular matter, and that is the letter from the Appellants dated 8th January 1997.  There was, also, evidence before the Magistrates that the Respondents had written to the appropriate body in Spain asking their views about the appropriate standard of the Rebecca Apartments, but the reply was not put in evidence, as it was clearly hearsay evidence.
     When considering what weight to give the appellants letter of 8 January 1997, Mr Salter has drawn this Court to certain cases; in particular the case of Surujpaul v R 42 Cr App R 266.  That was a Privy Council case with very  different facts relating to a man who was charged with being an accessory to murder.  Lord Tucker gave the judgment of the Board and at page 273, gave this well‑known statement of principle.  He said:
"A voluntary statement made by an accused person is admissible as a 'confession'.  He can confess as to his own acts, knowledge or intentions, but he cannot 'confess' as to the acts of other persons which he has not seen and which he can only have knowledge by hearsay.  A failure by the prosecution to prove an essential element in the offence cannot be cured by all 'admission' of this nature." 
     Mr Salter makes two submissions: he submits that there was no evidence at the conclusion of the prosecution case to show that the contents of paragraph 11 of the letter were within the company's knowledge.  Mr Salter expressly accepted that the knowledge of any of the officers of the company would be knowledge of the company itself.
     He further submits, that there is no evidence that at the time that Mr Edwards booked the holiday that the Rebecca Apartments were 1 key.  As far as the admissibility point is concerned, I have considered the business that the Appellants are in.  They are tour operators as was found by the Justices.  They prepare these brochures.  They clearly have to make inquiries from a large number of sources.  In my view, bearing those background matters and weighing them carefully, the magistrates were fully entitled to come to the conclusion that when Mr Boyle, as Managing Director, signed the letter stating that the Rebecca Apartment block was a 1 key unit, they were entitled to infer that he was giving that information of the company's own knowledge,  either his own knowledge or indeed, more likely, from the answer to the earlier question of knowledge emanating from the Direct Holidays Contracts Manager, Mr Gray, because, as I have already said, he in fact had given the information that led to the contents of the brochure being drawn up. Consequently, I would find that that statement by Mr Boyle was admissible, as it refers expressly to a 1 key unit and I would also find that that was evidence on which the Magistrates could rely.  That needs a little more analysis. That letter was in fact written to the trading standards in January 1997.  The crucial time at which there had to be admissible evidence that the Rebecca Apartments were a 1 key apartment was November/December 1995.  This was not a letter that had been written without care.  First of all, it answered the questions that were put to it by the Trading Standards Office and their letter of 28th November reminded the Appellants of the caution and suggested they seek legal advice.
     Further, the information that the Rebecca Apartment block was a 1 key unit was coupled with the information that customers were all offered change of accommodation or alternatively a full refund.  That must have taken place before the Trading Standards Office was in touch with the Appellants so, clearly, the Appellants had some information from some source.  It was open to the Magistrates to come to the conclusion not only that it was within their knowledge, but that it was accurate and that it in fact referred back  to November/December 1995.  If there had been a change in the key ratings, one would have expected a different phraseology, such as, it has recently come to our attention that the Rebecca Apartment block had been changed to a 1 key unit or, is now a 1 key unit or something of that sort.
     Consequently, for my part, I would come to the conclusion that there was evidence on which the Magistrates could properly come to the conclusion, at the end of the prosecution case, that there was admissible evidence of falsity.
     At the conclusion of the prosecution case Mr Boyle gave evidence.  In the course of his evidence, he put in an invoice dated 23 July 1996 that had been sent to one of the customers who had booked at the Rebecca Apartments.  That invoice at page 4 of our bundle (relating to a Mr Wilson) has printed on it at the bottom "official rating is 1 key and not 3 key" and it can be seen from the body of the document that it refers to accommodation at Rebecca Apartments.
     By the end of the defence case, both Mr Boyle and Mr Gray had given evidence.  Neither had given any evidence to indicate that they knew in November/December 1995 that the Rebecca Apartments was a 1 key apartment, but this document at page 4 had been put in and, to that extent, the evidence before the Justices had become stronger.
     The Justices made the following finding at paragraph 8:
"We were of the opinion that:‑
 
 There was admissible evidence that at the relevant time the Rebecca Apartments were classified by the Spanish Tourist Board with a one key rating.  We believed the admission by Mr Boyle in the letter under caution of 8th January 1997 established the Rebecca Apartments as 'one key' rated accommodation.  This was further supported by the change the Appellant Company made to invoices sent to other holiday makers in 1996, which informed their clients of the change of rating.  Mr Boyle also admitted in his evidence that letters as well as amended invoices were sent to clients in 1996, notifying them of the change to the Rebecca Apartments classification." 
     In my view, despite Mr Salter's submissions to the contrary, there was evidence on which the Justices could properly come to this conclusion.
     Mr Salter next submits that even if that information was false, it was not false to a material degree.  He points to the evidence called on behalf of the defence that in their view, the key ratings by the Spanish Authorities are of little or no value.  He submits that the prosecution did not point out the significance of key ratings to indicate they were in fact material.  Against that it must be remembered that the key ratings were included in the brochure, as I set out earlier, not only in relation to the Rebecca Apartments but certainly in relation to the other hotel on the same page.
     Further, when Mr Boyle wrote the letter of 8th January, he emphasised that customers were all offered a change of accommodation or, alternatively, a full refund because the Rebecca Apartment block was a 1 key unit.
     For my part, I find it very difficult to accept that a full refund would have been offered if the company had not  considered the key rating to be a material matter.  So I reject that submission.
     The final submission is that there was insufficient evidence of recklessness.  The Magistrates made two findings about recklessness, I read from paragraph 8(c)(i):
"We were satisfied the statement was made recklessly:
 
(i) No final or thorough check was made on the official key rating for the Rebecca Apartment by or on behalf of the Appellant Company with an independent source.  It was not a matter for Mr Nazeer the Commercial Manager for the Company, who owned the Rebecca Apartments, to disclose a difference in the key categories between the Rebecca Apartments and the Las Piramedes Hotel, during contractual negotiations.  Neither was it sufficient for the Appellant Company to rely on a plaque/certificate in the reception area of the Las Piramedes Hotel giving the key category for that property, when it contained no specific mention of the Rebecca Apartments.
 
(ii) No final or thorough checks were made by the Appellant Company with the appropriate Tourist Board.  Neither did they have a set procedure within the company, for employees or agents to follow, to verify this type of information before it was placed in the brochure." 
     The Magistrates then went on to consider whether or not the Appellant Company had failed to prove the statutory defence of due diligence, and found that the Appellant Company had failed to prove that.  Mr Salter does not raise that in this hearing, but the magistrates' findings on that matter throw a little light on their finding of recklessness, because they found, and I quote from paragraph 8(d)(i):
"Mr Gray made assumptions about the key rating of the Rebecca Apartments based on his discussions with Mr Nazeer the Commercial Manager [in fact he was the owner].  He also, we believed, placed too much reliance on the plaque/certificate in the reception area of the Las Piramedes Hotel, giving it a three key rating.  Especially  as this plaque/certificate did not specifically mention the Rebecca Apartments." 
     Mr Salter submits that the Appellants' conduct could not be described as reckless.  He has drawn our attention to the case of MFI Warehouses v Nattrass [1973] 1 all ER 762. The facts of that case are a long way from this case and it is not necessary to recite them.  That case was a prosecution under section 14(1) of the Trades Description Act 1968.
     At page 768(c) Lord Widgery CJ said:
"I have accordingly come to the conclusion that 'recklessly' in the context of the 1968 Act does not involve dishonestly.  Accordingly it is not necessary to prove that the statement was made with that degree of irresponsibility which is implied in the phase 'careless whether it be true or false'. I think it suffices for present purposes if the prosecution can show that the advertiser did not have regard to the truth or falsity of this advertisement even though it cannot be shown that he was deliberately closing his eyes to the truth, or that he had any kind of dishonest mind." 
In the course of submissions Kennedy LJ queried whether there was in the end a real difference between Lord Widgery's analysis of 'recklessly' and the phrase 'careless whether it be true or false'.  The distinction seems, with respect, to be slight.  I would prefer to decide this case on the basis of the well known phrase 'careless whether it be true or false'.  It has never been the Respondent's case that the Appellants were acting dishonestly.
 
The submission made by Mr Salter for the Appellants is that they had seen a plaque in the Las Piramedes complex stating  that it was three key and that consequently it was reasonable for them to assume that as the complex included the Rebecca Apartments the Rebecca Apartments were also three key.  He therefore submitted that there was no sufficient evidence of recklessness.
     There was evidence, however, that Mr Gray was in contact with a Mr Nazeer and negotiated contracts through him for the hire of some of the Rebecca Apartments for 1993 and for succeeding years.  Mr Gray did not state that Mr Nazeer had ever told him that the Rebecca Apartments were three key.  Consequently the magistrates were entitled to make the finding that he made assumptions about key rating of the Rebecca Apartments based on his discussions with Mr Nazeer.  They were also entitled to make the finding that he placed too much reliance on the plaque in the reception area of the Las Piramedes Hotel.
     I return to the finding of fact by the magistrates at paragraph 3(j).  This seems to be a reference to Miss Karen Kirkwood who Mr Gray stated that he contacted as a result of meeting Mr Nazeer.  This would entitle the magistrates to decide that there was no final or thorough check made on the official key rating for the Rebecca Apartments when there should have been.  It is common ground that the Appellants did not make any checks with the appropriate tourist board. It is also common ground that they did not have a set procedure with the company to verify key ratings before placing them in the brochure. 
     I should confess straightaway that I have thought carefully about recklessness.  It might be that another forum of fact might have come to a different conclusion about whether or not the Appellants were reckless, but I have reminded myself that I have to look at the facts as found and disclosed on the Case Stated and ask myself, was it open to the Justices to make a finding of recklessness on the facts as they found them, and I have come to the conclusion that it was.
     It may be that it was a somewhat harsh finding, but it was open to the Magistrates to make it.  The Appellants, for reasons that have not been canvassed, have chosen to come to this Court rather than to appeal to the Crown Court where the facts could have been reopened.  So for better or worse they are bound to put forward their submissions within the facts as found by the Magistrates.
     Consequently, I reject the Appellants' submission on recklessness.
     I turn therefore to the three questions certified for the opinion of the High Court as I have altered them for the sake of simplicity:
"Were we justified at the close of the prosecution case on the facts as we found them in deciding there was admissible evidence as to the official category of the Rebecca Apartments?" 
Answer "yes".  The second question, but implied in that first question at the end of the case, answer "yes" and finally, 
"On the facts as we found them, could we reasonably have come to the conclusion that the Appellant Company recklessly made the material false statement at the relevant time in respect of the key accommodation category of the Rebecca Apartments?" 
Answer "yes".
 
LORD JUSTICE KENNEDY: I agree.
 
MR MITCHELL: Your Lordships, in those circumstances, could I make an order for costs in the respondent's favour against the Appellant.  I can quantify the sum if necessary.
 
MR SLATER: That is not resisted.
LORD JUSTICE KENNEDY: Thank you very much for your submissions.  I will make that order accordingly.