Case No: 2001/0005
Neutral Citation Number: [2001] EWCA Civ 1798
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CENTRAL LONDON COUNTY COURT
(His Honour Judge Hallgarten QC)
							Royal Courts of Justice
							Strand
							London WC2

							Wednesday, 10th October 2001

B e f o r e:

THE VICE-CHANCELLOR
LORD JUSTICE BUXTON
LADY JUSTICE ARDEN

- - - - - -

PETER NORMAN BOWN
Claimant/Respondent
- v -

LAS DIRECT LIMITED
Defendant/Appellant

- - - - - -

(Computer Aided Transcript of the Palantype Notes of
Smith Bernal Reporting Limited, 190 Fleet Street,
London EC4A 2AG
Tel: 0171 421 4040
Official Shorthand Writers to the Court)

- - - - - -

MR J GOUDIE QC and MR W PAWLACK (Instructed by Fraser Brown, 84 Friar Lane, Nottingham, NG1 6ED) appeared on behalf of the Appellant.

MR P RALLS QC and MR D HOLLAND (Instructed by Cripps Harries Hall, Semour House, 11-13 Mount Ephraim Road, Tunbridge Wells, Kent, TN1 1EN) appeared on behalf of the Respondent.
- - - - - -

J U D G M E N T
Wednesday, 10th October 2001 
1.	THE VICE CHANCELLOR: I will ask Lord Justice Buxton to give the first judgment. 
2.	LORD JUSTICE BUXTON: This appeal and cross‑appeal arise from a judgment delivered by His Honour Judge Hallgarten QC in proceedings in the Central London County Court in which the claimant was Mr Peter Norman Bown (“Mr Bown”) and the defendant was LAS Direct (“LAS”). Mr Bown was employed by LAS between June 1990 and November 1991 as manager of their branch at Northampton. His employment was terminated on 25th November 1991. The claim that is renewed before us is a claim for damages consequent upon allegedly negligent references given by LAS to prospective future employers of Mr Bown; in particular, but not exclusively, a reference given to a firm called Canterbury Life Insurance Company Ltd (“Canterbury Life”). The total originally claimed was in excess of £600,000. 
3.	The background to the case and the relevant contractual arrangements were as follows. Mr Bown had made his previous career in life insurance, the field of activity with which LAS was concerned. In May 1990 he had a meeting with a Mr Hoye, a senior representative of LAS, and was offered the post, which in due course he took up, as manager of the defendant's prospective or intended branch at Northampton. He was sent a letter that set out the principal terms of the offer that had been made to him and which, by signing, he accepted. That letter was dated 21st May 1990. The terms of the letter are set out at page 38 of the judge's judgment. The relevant terms were as follows: 
“1.Your primary duties will be:-
(a)To recruit, train to standards required under the Financial Services Act and supervise Financial Advisors to sell the products of the LAS Marketing Group in accordance with the Financial Advisers' respective contracts.
(b)To ensure production by your branch of a quantity and quality of new business in accordance with the Group's requirements as notified to you from time to time.
2.Your income will be based upon the results of your branch as follows:- 
(a)Override payments of 18% will be made on the Net Sales Credit of all Financial Adviser who report to you directly. 
(b)Override payments of 9% will be made on the Net Sales Credit of all Financial Advisers who report to a Sales Manager who in turn reports to you. 
3.The Company agrees to pay you an amount of £3750.00 per month, payable in arrears, for the first 12 months of your contract.
This payment will be a charge against all management earnings and will continue at the discretion of the Company, subject to satisfactory performance.” 
4.	There were other terms in this letter which it is not necessary to set out at this stage. 
5.	The judge was required to construe the meaning of “the contract”, and in particular clauses 2 and 3, a meaning that, I venture to say, does not immediately leap from the written document. However, he concluded that the correct construction was as follows: 
“... during the first 12 months of the contract, the Claimant was to receive a guaranteed minimum monthly payment of £3,750.00, regardless of how the branch was performing. 
What did the letter contemplate would be the position after the first 12 months had expired? In my view, the second paragraph under Clause 3 served to show that any continuance of such guaranteed payment thereafter was to be at the discretion of the Defendants. ... at the end of 12 months, Clause 3 gave to the Defendants the unqualified entitlement to stop or to reduce the then monthly payments or to qualify them by rendering them subject to a `clawback', a concept familiar to those operating in the industry.” 
6.	It will be necessary to revert in due course to what the judge said about clawback. 
7.	In April 1991 a more formal contract, backdated in its effect, was sent to Mr Bown for him to sign, followed by various notices purporting to vary that agreement, the agreement being known as the “branch manager's agreement”. Mr Bown did not agree with the terms of that branch manager's agreement, in particular in one respect that I shall have to come back to later in this judgment. He never signed the branch manager's agreement, and it was in due course agreed that he was therefore not bound by it. That was not the view that was originally taken by LAS. 
8.	While Mr Bown and LAS were in the course of not reaching agreement about the branch manager's agreement, Mr Hoye, who had managerial responsibility for Mr Bown's performance, had formed the view that he was not performing satisfactorily, in the sense that he was not developing at the Northampton Branch a level of performance and income, in terms of life insurance clients obtained by those working in the branch, that LAS required. At the end of May 1991 a meeting took place between Mr Hoye and the claimant at which these complaints were ventilated. The nature of what passed at that meeting was not wholly remembered at the trial, unsurprisingly because the trial took place some ten years after the meeting had occurred. Nonetheless, the nature of Mr Hoye's concerns and the steps that he decided to take about them are to be found set out in a letter that he wrote to Mr Bown on 6th June 1991. That is set out in full at pages 45-46 of the judge's judgment. The first part of the letter set out Mr Hoye's disappointment at the level of business that was being generated at Northampton, whilst acknowledging that there had been difficulties about the premises that LAS had identified for use by the Northampton branch and also difficulties in regard to IT matters which (Mr Hoye recognised) Mr Bown had acted helpfully in assisting him to correct. Mr Hoye then went on in these terms: 
“6.I believe you have recognised that your eye has not been on the ball and now is the time to put it together. 
7. I am prepared to write off the debts in your first year as indicated when you joined. I cannot however continue to cover your debts and in agreeing a new finance package with you, it must be realised that it is your responsibility make good any shortfall against your management earnings as well as covering the debts of any terminating financial advisers.” 
9.	In paragraph 8 Mr Hoye indicated the revised business plan he looked for from Mr Bown and the income that emerged from it. He then continued: 
“9.... This will generate just in excess of £17,000 management earnings. As you are currently earning at the rate of £3,750 per month, I will maintain the level and will write off a maximum of £4,500 in the next six month period at the rate of £750 per month.” 
10.	That letter again requires some explication, which the judge attached to it at page 60 of his judgment. He referred to an argument that was repeated to some extent in the cross-appeal before us, and from that argument proceeded to indicate his view of the force of this letter. It will be convenient to set out the passage in which he dealt with that matter: 
“... it was submitted that the letter had no force since it represented no more than a proposal, which it was for the Claimant to accept or reject. In my view, this is too simplistic an analysis. Insofar as the Defendants sought to introduce something new - as eg the debts of terminating financial advisers - plainly the letter could not bind the Claimant until he indicated that he accepted what was proposed. But in so far as the letter, as a matter of analysis, reflected the exercise of powers already vested in the Defendants, I do not think that any answer was required from the Claimant. ... Looked at in commercial terms, one would indeed have expected some response; but it does not follow that, absent an affirmative response, the letter had no impact on relations in point of law. As I see it, in respect of monthly payments which fell to be made in arrears and were made in July, August, September and October 1991, the Claimant was exposed to the possibility that there would indeed be an attempt at recovery of up to £3,000 per month. The Claimant's remedy lay in persuasion: reminding Mr Hoye of his earlier assurances that nothing would change until 24 months had expired, but if such persuasion failed to achieve results, tendering 30 days' notice of termination.” 
11.	At this stage only two comments, for clarity, need to be made on that analysis. The first is the reference to the “debts of terminating financial advisers”. That was a responsibility that was sought to be included in the branch manager's agreement and, as the judge held, therefore did not bind Mr Bown absent any specific agreement on his part to the branch manager's agreement. This point is of some importance because a claim was made, but withdrawn shortly before the trial, that Mr Bown indeed owed LAS money in respect of debts of terminating financial advisers. Secondly, there is the reference at the end of the judge's statement to assurances given by Mr Hoye. It was sought to be argued before the judge that these statements by Mr Hoye had not merely been words of comfort or exhortation, that is to say he had sought to give Mr Bown comfort with regard to whether the payment without recovery of £3,750 a month would continue after the first 12 months; but it was argued that, despite the terms of the letter of May 1991 already cited, Mr Hoye had made a separate or collateral agreement with Mr Bown that the payment would continue without condition for 24 months and not merely for 12 months assured in that letter. A great deal of evidence was adduced at trial on that point, but the judge found that there had been no collateral variation agreed by Mr Hoye with Mr Bown. That matter is not the subject of appeal before us, although reference is made on a point of argument to the assurances, as the judge called them, or comfort words as he called them in another part of his judgment, that Mr Hoye had adopted when negotiating with Mr Bown. 
12.	Things continued to go badly at Northampton, and in November 1991 Mr Hoye arranged a meeting with Mr Bown. Mr Bown suspected, rightly, that the purpose of this meeting was to terminate his engagement. He therefore prepared himself letters of resignation and also took the precaution of registering with a number of recruitment consultants. At the meeting Mr Hoye did say, as Mr Bown had expected, that Mr Bown's engagement was being terminated for under performance, and Mr Bown riposted by saying that he was in fact resigning. At that stage LAS alleged that Mr Bown owed them some £17,000. That figure is of importance in the dispute between the parties and I shall have to return to it. 
13.	Mr Bown started to look for other opportunities all within the financial services sector, the sector with which he was familiar. In particular, he received a conditional offer of employment with Canterbury Life, who wrote to LAS asking for a reference. On the strength of the comments made by LAS in the reference, Canterbury Life withdrew their offer. Offers were similarly made but then withdrawn by three other well‑known organisations from the financial services area. It was assumed to be the case, and there is no reason to think it was not so, that they also had received references in broadly the same terms as those that were sent to Canterbury Life. It is this reference that is the source of Mr Bown's complaint; and the terms of the reference are those which are complained of as having been negligent. 
14.	The reference was in the form of answers to a questionnaire sent by Canterbury Life to LAS. That questionnaire was completed on behalf of LAS by a gentleman, in their Central Compliance Department, a Mr Logan, acting on the basis of figures and other information obtained from the administration department. There were a number of matters of which complaint was made, dealt with by the judge at page 51 of his judgment. Firstly, there was an agreed and admitted error in the questionnaire in that a question was asked as to whether any references which LAS themselves had taken up had been unsatisfactory. Mr Logan in answering that question set out three institutions covering, effectively, the whole of Mr Bown's history within the industry. That was plainly an error. The judge held (and there is no question about this) that if that had been the only thing wrong, it would have been so evidently a mistake that the recipient of the questionnaire would have queried it and the mistake would have been put right. What had happened was that Mr Logan appeared to have read the word “unsatisfactory” as “satisfactory”. 
15.	The judge, however, went on as follows at page 51: 
“There were, however, three other aspects of the reference whereof the Claimant now complains as follows: 
(1)When asked to give an opinion of the Claimant's ability, honesty, reliability and health the only answer provided was `Not known personally'.
(2)When asked to give the full reasons for the Claimant leaving the Defendants it was said that the Claimant's `contract' was terminated due to his failure to meet recruitment and business written targets together with the rising debts of sales persons within the branch. 
(3)Most important there were certain questions contained in a `Supplementary Reference Questionnaire', reading as follows: 
`7)If there is a debt outstanding with your company please comment on the following:
i)how is this made up.
(a)financing business development loan
(b)indemnity commission advanced on policies not yet out of the earning period. 
(c)commission due to be paid on lapses 
ii)what arrangements have been made to repay the outstanding debt?
iii)are the arrangements being complied with?
8)If you are aware of any other indebtedness please give full details.” 
16.	The answers that LAS gave to those questions were as follows. In response to 7(i)(a): 
“Is there a debt outstanding with your company in respect financing business development loan?” 
17.	The answer was given: “£16,678.50.” In answer to question (ii) about arrangements made to repay the debt, the answer was:
“None. [Mr Bown] is currently in dispute with ourselves concerning the debt.” 
18.	In respect of other indebtedness the answer was: “No”. 
19.	It is therefore important now to look at the sum of £16,678.50 which LAS alleged was owed to them by Mr Bown. This is of significant importance because both Canterbury Life, and no doubt their other companies, would have been interested in the debt level for two reasons: (1) because of its own importance and (2) because, as we shall see, under provisions introduced by LAUTRO, which was the controlling body regulating the life insurance industry, limitations were placed upon the permissibility of a company operating in the life insurance industry employing a person who had outstanding debt towards another member of the industry. I shall return to those provisions is due course. 
20.	The judge made the following findings with regard to the actual level of debt properly owed by Mr Bown to the employer. The sum was divided into two parts. First of all, a claim for £7,078 and, secondly, a claim for £9,600. The first part of that claim, that is to say the £7,078, was in respect of the matter that I have already referred to, that is to say “debts of terminating financial advisers”. LAS had wrongly thought that Mr Bown was responsible to them for such a sum because they had wrongly assumed that he was bound by the terms of the branch manager's agreement: which, as we know, he was not. Shortly before the trial, but not before then, it was conceded on the part of LAS that Mr Bown did not owe them that sum. 
21.	The judge then passed to the sum of £9,600. He said that it was not wholly clear in detail how it had been made up, but taking into account certain monies that LAS owed to Mr Bown, to which I will refer in a moment, it was clear that the basis of this amount was the claim to clawback or recover the sums of £2,750 originally referred to in the letter of May 1990 and then subjected to the particular arrangements introduced by Mr Hoye in the letter of 6th June 1991. The judge found that Mr Hoye's intention was that Mr Bown should only be entitled to retain £750 of the £3,750 paid to him in advance in respect of months after the first 12 months service. Therefore in respect of those payments he owed £3,000 per month. The judge qualified that finding by saying that he would imply into the arrangements envisaged by the May 1990 letter, a requirement that reasonable notice should be given to Mr Bown before the monthly payments were withdrawn or altered after the twelve month period. He concluded, looking at the circumstances of the June letter and the date when it had been sent, that no sufficient notice had been given for the alteration of the arrangement in respect of the first of those months. He therefore effectively considered that Mr Bown was required by the arrangements introduced by Mr Hoye to repay to LAS, all other things being equal, a sum of £3,000 in respect of the three months. There also had to be taken into account such small amount of commission as Mr Bown had properly earned, but also certain amounts owed to Mr Bown by LAS. The upshot, as the judge put it, was that the net amount that was in fact owed at the time when the reference was written had been £5,115.73 or, alternatively, a sum of less than that, £4,611, depending upon a matter that the judge found himself unable to resolve, that is to say whether monies were owed from LAS to the previous claim under a separate agreement that he had with them with regard to his activities, if any, as a financial adviser. 
22.	That was what the judge found about the contractual relationship between the parties. Where did that leave the negligence claim? The judge dealt with that at pages 73 and 74 of his judgment under the heading “Causation of Loss”. Since much of the argument in this case turns on this passage in the judgment, it will be easiest if I set it out in full: 
“The conclusion which I have reached is that the Claimant fails to establish that the Defendants were negligent in indicating that he was indebted to them; but he has established that the Defendants were negligent in stating that such indebtedness was as high as £16,678.50 instead of about £4,500-£5,500. Does this mean that the Claimant's case must fail on the ground of causation, ie that he cannot show that with an alleged indebtedness of this reduced size, his employment situation would not have been just as dire as it was with the indebtedness which the Defendants in fact asserted? I do not think so.
On the Claimant's case as put by [his counsel] in his final submissions: `Even if the figure had been something like £5,500 ... it would have made a real difference to a prospective employer.'“ 
23.	The judge continued: 
“As I see it, the relevant principles are based on the loss of a chance, and what I have to assess first is whether the chance of procuring employment in the financial services industry with alleged indebtedness of £4,500-£5,500, rather than £16,678.50 was merely speculative or whether there was a real and substantial chance that the assertion of a smaller figure by way of indebtedness would have made a difference. I have to say that in my view the chance was indeed more than speculative. I believe that with an alleged indebtedness of only one third of that which might legitimately have been asserted there would have been a real and substantial chance of the Claimant being able to resolve the position of the Defendants or of the Claimant being able in some way to secure the amount in question in such a way as to have enabled him in due course once more to obtain a position in the financial services industry.” 
24.	He concluded in paragraph 10 of his judgment at page 77: 
“My conclusion is, therefore, that the Claimant is entitled to recover in respect of loss of prospect of employment in the financial services industry between about May 1992 and April 2003 (reduced by two‑thirds to take into account my assessment of the loss of a chance).” 
25.	I have to say that it is difficult to see, and the judge did not explain, how he reached the particular figure of two‑thirds by which he reduced the amount of damages to which the claimant would otherwise have been entitled. He says that is because of his assessment of the loss of a chance. But it has to be borne in mind that in his previous passage he had said that he found that the chance was real and substantial. This difficulty, if difficulty it is, was not however ventilated in the appeal before us. I do not think it appropriate therefore to pursue the point further. I will proceed, as the parties proceeded, on the basis that the judge had made the finding that indeed he did make that there had been a “real and substantial chance” of the claimant being able to deal with the debt in such a way as to enable him to maintain a position in the financial services industry. 
26.	That was the finding that the judge made as to liability. This trial was a trial both of liability and of quantum. The judge then had to turn, and did so comparatively briefly, to how the quantum should be assessed. As I understand it, the approach was to be that the total loss, the provable loss, from the failure to gain employment was to be reduced by a figure of two‑thirds to take into account the judge's assessment of the chance. Since that process has not been worked out it is possible that I have misunderstood what the judge intended, but that, I think, is what he envisaged happening. 
27.	The difficulty then faced by the court was that, for reasons that I shall deal with in more detail when dealing in substance with the appeal, the basis upon which Mr Bown had formulated his claim for quantum was held by the judge not to be warranted. There has been no appeal against the judge's finding. It is therefore now contended by LAS that Mr Bown had not in fact proved the nature and quantum of his loss, and this case must fail. The judge did not accept any such approach. Apparently without seeking further submissions at that stage from counsel, he determined that the proper course would be not to dismiss the claim but to adjourn the matter for what he described as a disposal hearing, with a view to further evidence being called on both sides, but more particularly by Mr Bown, of a nature that in the judge's view might satisfactorily establish the quantum in damages claim. Complaint is made of that step on the judge's part in the appeal, the terms of which I shall in due course come to. 
28.	With that, I regret somewhat lengthy, introduction, I now turn to the matters in dispute before us. It will be convenient to start with the matters that were sought to be raised by Mr Bown by way of cross‑appeal. He needed the permission of this court to pursue a cross‑appeal; and that was the application for permission that was moved before us by Mr Goudie QC on his behalf. We have already indicated that we would not grant permission for any part of the cross‑appeal. I will now shortly indicate the reasons for that view in respect of the four heads of cross‑appeal that were asserted. 
29.	The first ground complained of the judge's analysis of the letter of 6th June, the circumstances of which I have set out. The three complaints were, first, that insofar as the judge had found that the letter was an exercise of a discretionary power granted to LAS by the original contract in respect of the continuation of the £3,750 a month payments after the first 12 months, the letter did not serve that function. It had been merely a proposal letter, that is to say an effort to vary the terms of the original contract, which had not been accepted. Second, there was in fact in the contract no sufficient provision for the exercise of discretion that Mr Hoye had purported to operate in his letter of 6th June. Third, if both those points were wrong, there had, in any event, not been a valid exercise of discretion on Mr Hoye's part because in relations between employer and employee the employer is obliged to exercise a discretion in a rational fashion and Mr Hoye, or LAS acting through Mr Hoye, had not done so in this case. 
30.	I deal with those points in turn. First, as to what Mr Hoye was intending to do in the letter of 6th June, I have already set out the terms of what he said. I would simply say, with the judge, that the letter does not read as if it were a proposal or suggestion; that it is quite clear from its terms, and indeed in the context of the relationship between Mr Hoye and Mr Bown and Mr Hoye's responsibility for his work, that Mr Hoye is not likely to have been putting a suggestion that Mr Bown was able to reject. He was quite consciously exercising a power that he perceived that he was given under clause 3 of paragraph 3 of the letter of 21st May 1990, Mr Bown's contractual document. 
31.	Second, as to the terms of the letter of 21st May 1990, it seems to me entirely clear that what is provided is that there will be monthly payment for the first 12 months (and no‑one disputes that) and that that would continue but continue at the discretion of the company. In my judgement, the judge was entirely justified in concluding that after 12 months, in respect of the monthly lump sum as opposed to Mr Bown's rights to commission, the employer was at liberty to make such arrangements as he thought fit. Mr Hoye could have stopped the payment entirely, he could have simply made it a £750 payment a month or he could have done what he did do, which was to continue to pay £3,750 (if I may use a colloquial expression) `up front', but with an obligation on Mr Bown to account for most of it according to the branch's performance. That was what Mr Hoye chose to do. That was one of the many things that the contract gave him power to do; and it is perhaps relevant to note that Mr Bown did not in any way suggest at the time that the arrangement was not one that LAS was at liberty to make. Nor, in my judgement, can he have thought that he was entitled to keep the whole of the continuing £3,750 payments unless there had been an agreement with Mr Hoye either to that effect or originally to the effect that the payments would continue in any event for 24 months. As we have seen, the judge found that there was no such agreement. I am therefore clear, as was the judge, that this was a correct exercise of the contractual power of LAS. 
32.	The matter of irrationality was not taken below. We were shown various passages where it is suggested that this point arose. I am quite satisfied that it was never raised in any terms resembling those that are sought to be ventilated in this court. This is not merely a technical objection, but one of substance; because if it were to be suggested, as it now is, that Mr Hoye simply did something that no responsible employer could have done, it would be necessary for a good deal of evidence to be brought about the circumstances of this business, and Mr Hoye to be cross‑examined on what he did and why he did it. None of that happened because irrationality was not relied on. I would therefore, for that reason alone, without hesitation reject this point. In so doing it should not be thought that I wish to suggest that there is any substance in its content. 
33.	The second complaint was in respect of one of the items that Mr Bown had claimed should be set‑off as a debt owed to him. Paragraph 7 of his contract letter of 21st May 1990 said: 
“You will be entitled to 25 days' holiday in addition to standard public holidays of any one kind a year.” 
34.	When he was dismissed Mr Bown had not taken the whole of his holiday. He said that he was entitled to holiday pay in respect of such days of holiday as he had not yet taken. That claim rests upon claiming that the contractual provision was not merely for holidays but for paid holidays. This, I have to say, is a hopeless application for the short reason that Mr Bown's principal source of remuneration was supposed to be commission on branch business. It is impossible to conceive how holiday pay could be calculated on such a basis. Quite apart from that, the fact that the contract says that there should be holidays does not obviously, or indeed necessarily, entail that those holidays should be paid ones. That is no doubt why recent legislation not affecting this case has made provision for workers to be given paid holidays. None of that applies in this case; and the circumstances are very strongly against the fact that there was any contractual intention to pay Mr Bown during the holiday period. 
35.	The third point of cross‑appeal concerns a question of “relevant debt”. I will shortly explain how this arises. I said at an earlier stage of this judgment that matters of debt would be important to a prospective employer in the financial services industry for two reasons. One was the nature of the debt itself and what it did or did not tell the claimant about the employee. The second is the requirement of LAUTRO rules that prevented the employer employing somebody already in the industry unless the debts from his current employer had been disposed of either by payment by himself, or by a prospective employer paying them off on the employee's behalf. 
36.	“Relevant debt”, in the terms employed for the purposes of this case, is debt that would be covered by the LAUTRO requirements, that is to say, as Mr Goudie put it, debt that would be a complete bar or a serious barrier to employment with another LAUTRO company. The contention in this case was that the debts that Mr Bown owed to LAS were not debts that were incurred as a salesmen or commission agent. They were debts that were incurred in the management of the branch, and therefore in LAS's contention they were not relevant debts in LAUTRO terms. If that was right, it then follows that on receiving the Canterbury Life questionnaire LAS should either have realised that Canterbury Life were not asking about, or should not have been asking about, Mr Bown's debts; or, alternatively, in replying to the questionnaire should have distinguished between his debts as a commission salesman and his debts as a manager. 
37.	I cannot agree with any of those contentions. Firstly, the question, as we can see, was in perfectly general terms. Although I accept that at the time of this questionnaire the question of LAUTRO relevant debt was in everybody's mind because the LAUTRO rules had comparatively recently been introduced making these provisions, nonetheless there was no reason to think that Canterbury Life or anybody else were interested in LAUTRO relevant debt and in nothing else. Secondly, looking at the LAUTRO rules, I cannot accept that Mr Bown's debt was not included within them. The relevant paragraphs are rule 3.5A(4), (5) and (7)(a), which read as follows: 
“(5) A Member shall not appoint any person as a company representative unless the Member is satisfied on reasonable grounds that the person is not ... indebted to any other Member or to an associate of any other Member, to any other authorised person, to any exempted person, to Lautro or any other recognised self-regulating organisation or a recognised professional body, to the Securities and Investments Board or to the Investors Compensation Scheme Ltd. 
...
(7) Paragraph (5) does not apply-
(a)where the indebtedness has arisen in the course of a business carried on by the creditor which is not investment business and otherwise than wholly or partly on account of one person (whether or not the person appointed) being the appointed representative or company representative of another (whether or not the creditor)”
	and various other exemptions are listed which do not cover this case. 
38.	It seems to me plain beyond argument that rule (5) does apply to this case: “indebtedness to another member.” Mr Bown was indebted to another member. The exemption refers to the business carried on by the claimant, not to the role played within that business by the particular employee; and in any event, in my view, it would be wholly artificial to make the division that is sought to be made in this case between Mr Bown and Mr Cassidy as manager and Mr Bown and Mr Cassidy as salesmen. 
39.	The only point put against this is a statement in guidelines published by LAUTRO accompanying the rules, which refers to the rules that have just been mentioned and says that the effect was that the new rules do not apply to 
“indebtedness which is incurred otherwise than in the context of an appointed representative or company representative relationship”. 
40.	Reference to this statement, in my judgement, reinforces the unwisdom of seeking to use explanatory statements to construe the meaning of regulations that on their face are perfectly clear. I am, however, satisfied, insofar as the bulletin is relevant, that the author is saying no more than what I perceive to be said in paragraph (7)(a), that is to say that the indebtedness must arise in the context of a business which is concerned with representation to the public. If I may say so, with great respect, he expressed himself somewhat less clearly than the rules themselves did, but in any case I am satisfied that no case can be made out here for saying that Mr Bown's debt does not amount to a relevant debt. In any event, even if I am wrong about all that, I accept the submission made by Mr Ralls QC on behalf of LAS that it could not possibly be said to be negligent on the part of LAS to include this debt when there is, putting it at its lowest, such substantial doubt as to whether the debt is covered by the LAUTRO rules, significant doubt about what Canterbury Life was in fact asking and, further, the obligation which LAS must have been aware of, made clear in the House of Lords case of Spring v Guardian Assurance, to give a full and frank reference in respect of any request. Such an obligation was indeed included in the obligations of LAUTRO members within the LAUTRO rules. For all those reasons, this point of cross-appeal fails. 
41.	The fourth complaint was that when Mr Bown was advanced the £3,750 that sum was advanced net, that is to say net of tax and national insurance. When the claim was made to recover that money the claim was made for an ordinary, gross, sum. That, in my judgement, is simply the effect of the contract that was eventually made by Mr Hoye. Any other arrangement, that is to say any sum adjusted to take account of tax or national insurance, would leave Mr Bown with, as it seems to me, a windfall. It was open to him to make such arrangements as he was able. We were told that that might be difficult. That may be so. I am not going to comment on that because it could only be relevant to a question of construction, and even then dubiously so, if it was impossible for Mr Hoye to recoup his position having originally been paid £3,750 net. That is not, and clearly not, this case. There is therefore nothing in that point either. For those reasons that is the end of the cross‑appeal. 
42.	I now turn to the appeal. The first ground of appeal concerns the causation issue, that is to say the finding that there was “a real and substantial chance” of Mr Bown being able to resolve the matter of £4,000 or £5,000 debt, which resolution would lead to his being able to take up a position in a new financial services industry. On that basis, even on the facts as they properly were, he had suffered a loss by reason of the terms of the reference. 
43.	There is no doubt, and authority that was shown to us reinforces that and it is not in issue, that the judge applied the correct test: was there a real and substantial chance of the claimant dealing with the matter so as to open the way to future employment? The complaint in this case is that the judge had no evidence on which he could properly reach that conclusion. In order to explicate that argument it is important to note that the judge should have asked himself two questions. First of all, what was the chance of either Mr Bown or, alternatively, a prospective employer settling his outstanding debt? That was, as I understand it, a sine qua non for an employer under the LAUTRO requirements. Secondly, even if that question was clear, would in any event an employer employ Mr Bown, he being a person who had incurred debt with his previous employer? 
44.	First of all, then, was there any evidence that Mr Bown could settle his debt? He was criticised in the pleadings for not having mitigated his loss by taking steps to address his debt. That was a time when the debt was alleged to be £16,000. Mr Bown replied to that in paragraph 92 of his witness statement by saying: 
“It has also been suggested ... that ... the disputed sum could have been lodged by me either with LAS or with a stakeholder pending resolution of the dispute. I did not have funds available to enable me to do this. The bank were also not prepared to lend the money to me at this time to enable me to make such a payment.” 
45.	There was no other evidence about Mr Bown's ability to pay. That was despite the fact that, as we have seen, by the start of the trial the debt alleged by LAS had reduced from £16,000 to £9,000 by reason of the acknowledgment that they had made a mistake about his obligation with respect to terminating representatives. Mr Bown clearly had available to him, or to his memory, knowledge of the state of his finances at the time of the reference because he was able to swear that he did not have funds available to enable him to meet and deal with the £16,000 debt. It was therefore open to him, if he were able to do so, to give evidence in respect of the £9,000 or any smaller sum. That he did not do. There is therefore no evidence upon which the judge could assume that Mr Bown could have resolved the position with the defendants. The judge should not, in my judgement, have found that there was a real and substantial chance of the claimant, Mr Bown, being able in some way to secure the amount in question. There was no evidence to that effect. 
46.	Second, would an employer have been prepared to settle the matter on Mr Bown's behalf? There are a number of questions relevant to this issue. First of all, would Canterbury Life, or a hypothetical company within the industry, take on someone who had had any debt at all? That is to say, would the existence of a debt to a previous employer be in their view a complete bar? Secondly, if they were prepared to employ in principle, would they have been prepared in the case of Mr Bown to pay on his behalf the £5,000 (as it turned out to be) that they would be obliged to pay before they were able to employ him at all? That is to say, would they have been prepared to have effectively paid on Mr Bown's behalf a joining fee of £5,000? That would involve a calculation or assessment of Mr Bown's desirability as an employee and whether he was so much sought after that that payment was justified. 
47.	Some evidence was given by experts at the trial about the general position with respect to company debt, which was relied on in this court to say that there was indeed sufficient evidence from which the judge could have reached the conclusion that he did that Mr Bown would be able to resolve in some way or other the position of his debt with LAS. A Mr Innes-Chaytor gave evidence for Mr Bown. His evidence in relevant part can be found at page 301‑2 of his witness statement. He drew attention to the chilling effect, if I can use that expression, of the introduction of the indebtedness rule, that is to say the LAUTRO rules I have just referred to, shortly before the events with which we are concerned in regard to debts owed to previous companies. Mr Chaytor said this: 
“(e)... 
Debts that were owed to previous Companies were identified to a prospective new Employer for the first time and gaining Companies were forced to ensure that these debts were cleared before appointing a new representative. One consequence was that Companies became less willing to provide initial financing to prospective appointees.
The relative attractiveness to the market of those representatives who had existing industry indebtedness was therefore diminished. Prospective Employers took the amount of any financing required to extinguish existing debts into account when carrying out a cost/benefit analysis on whether to employ a particular applicant.
(f)The prospect of having to provide finance to extinguish a sizeable existing debt, coupled with the statement that the Claimant's appointment with the Defendant had been terminated and the reasons given for that termination, and the failure to comment on key aspects in relation to character, made it highly unlikely, in my opinion, that another Company would appoint him.”
48.	When he was examined by counsel in court Mr Chaytor said this at page 530 of the bundle. He was asked whether the fact that the indebtedness had been reduced £9,600 would have affected the position of Mr Bown insofar as his prospects were concerned. Mr Chaytor replied: 
“... I would have thought it would have done because it would clearly have been less onerous for a potential employer to have taken over a debt of less than £10,000 than it would have been for that employer to have taken over a debt in excess of 16,000, so it is possible that the employer, who inevitably would have done effectively a cost benefit exercise as to whether or not to take him on, would have made a different decision.” 
49.	Mrs Allcock gave evidence for LAS. She said that the indebtedness rules had made a difference. She said this: 
“It was previously quite common for companies to take on the outstanding debts of an individual in order to be able to appoint them, especially where the debts related to development loans. This practice has reduced in recent years and the financial standing of representatives needs closer scrutiny.” 
50.	When she was cross‑examined it was pointed out to her that the relevant indebtedness had been alleged to be £16,000, and she was asked this question: 
“Q. If it was 7,600 it might be a different proposition, might it not? - A. The level of debt would obviously affect their decision.
Q.Right and there is, would you agree, in your opinion that there is a very significant and substantial chance that an employer faced with a debt as low as £7,600 would go on but one faced with £16,000 would not? - A. I am unable to comment on that. It is beyond my expertise.” 
51.	I mention in passing that counsel there put to Mrs Allcock the very question that needed to be answered, the very question upon which the judge considered himself able to decide the outcome; and she no doubt properly said she could give no evidence on that point. 
52.	The upshot of all that evidence, in my judgement, goes no further than this. It is a matter perhaps that is obvious. The lower the debt the higher the prospect of an employer taking the debt on. But the general burden of the evidence not only of Mrs Allcock but also of Mr Chaytor was that any debt over and above the minimum figure set by LAUTRO of £1,000 raised significant questions as to employability and, in the market as it was altering at the time at which we are concerned, significant doubt as to whether an employer would be prepared to pay the debt off. 
53.	As to the two questions that I formulated earlier, it seems to me that there is simply no evidence at all upon which the judge could reach the conclusion that he did. There is only speculation as to what would have happened and what view the employer would have taken. I quite agree that it cannot be said as a general rule that in order to resolve this sort of question, that is to say future employment prospects, it is necessary for there to be evidence of actual prospective employers or of current market practice. But in the circumstances of this case and of the problem that the judge had faced, such evidence in my judgement was indeed required and was not given. 
54.	The same is to be said in respect of the point that Mr Goudie relied on that Mr Bown indeed had four offers, all of which were withdrawn. We do not know why the offers were withdrawn. They may have been withdrawn on the basis that he had any debt at all and that the employers were not prepared to deal with a person of Mr Bown's stature who had any debt whatsoever. In my judgement therefore on the evidence the judge's conclusion that he could find a real and substantial chance of the claimant being able to proceed on that final point was not open to him. I would allow the appeal on that ground. 
55.	The second complaint was with regard to the approach that the judge took to the assessment of quantum. The quantum claim as set out in a schedule of loss that was served in March 2000, that is to say comparatively shortly before the trial, was put on the basis of what Mr Bown had been earning or would in the future earn with LAS. That approach was specifically challenged by LAS in the trial. They said in terms in paragraph 52 of their written opening: 
“The figures set out in the schedule of loss are figures upon which the claimant says he would have earned had he continued to work with the defendants. This is inappropriate. The claimant was not going to work with the defendant. He was determined to leave the claimant's employment. The damages claimed must be based upon the third party for whom he was going to work. That is not the case.”
56.	LAS went on to say that there was no evidence given as to what Mr Bown would have earned had he got employment elsewhere. This challenge persisted during the trial. 
57.	The judge dealt with the matter as follows at page 76 of his judgment: 
“In my view there was no warrant in basing the Claimant's claim on his own previous purported earnings from the Defendants. What matters is what the Claimant stood to gain from alternative employment elsewhere in the financial services industry over the years, as to which there was no direct evidence from Canterbury Life or from anyone else able to present an overview.” 
58.	The judge therefore rejected out of hand the basis upon which the damages had been claimed, and there is no appeal from that determination. The judge continued as follows: 
“The Courts are frequently disparaging about the use of employment consultants, but in my opinion this was a case in which a report from an employment consultant familiarising himself with the profile of the financial services industry over the last nine to ten years would have been of considerable assistance.” 
59.	He then went on to advert to various matters that might be illuminated by such evidence, said that he could not act at all on the figures put forward by Mr Bown, and then decided the matter in this way: 
“With some reluctance I have decided that the right thing to do is to adjourn the matter for a disposal hearing so that the parties have the opportunity of adducing further evidence including, hopefully, evidence from an employment consultant jointly instructed. As at present advised, I think that the costs of any such disposal hearing must be borne by the Claimant in any event, to be set off against such damages as may in due course be available to him.” 
60.	Neither party could ask the judge to take that course. Both of them wanted him to decide the case on the damages claim as pleaded. 
61.	The trial is a trial about liability and quantum. Mr Bown had nailed his colours to the mast of his schedule of loss, despite its being criticised before the trial and in the course of the trial on the grounds that the judge accepted in full in the passage that I have just set out. The inquiry that the judge now would seek to put in hand involves a fresh inquiry, ten years on, to the extent that there is available matter on which such inquiries can be made. All such matter would, of course, have been available at the date of the trial. This is not in fact an application for an amendment to the pleadings but an introduction of a completely new basis of the case at the initiative of the judge himself. It is, however, relevant to look briefly at the authorities on late amendment. In particular, I would draw attention to the observations of Lord Griffiths' in Ketteman v Hansel Properties Ltd [1987] AC 189 page 220. Lord Griffiths having first set out how justice cannot necessarily be measured in terms of money, bearing in mind the possibility of costs, then said this: 
“Furthermore to allow an amendment before a trial begins is quite different from allowing it at the end of the trial to give an apparently unsuccessful defendant an opportunity to renew the fight on an entirely different defence.” 
62.	That, as it seems to me, is exactly what has been permitted to occur in this case. I have to say, with respect, that if the judge had invited specific submissions on this point and had (as I think he would have had) Lord Griffiths' observations put before him, he would have come to a different conclusion. 
63.	This approach is also to be found also in the judgment in this court in the case of Stuart v Haywood [2000] 3 All ER 518. I do not set out that case in detail, but I am content to refer to the head note to it, which emphasises that while a judge has power to reconsider a conclusion he has reached but before giving judgment, he should be extremely cautious in exercising that power; and various limitations are set out. Exceptional circumstances are required for a jurisdiction that envisages a case being decided on a basis quite different from that originally formulated, after there has been a full trial on that original basis. 
64.	In these circumstances I have doubt as to whether the judge had discretion at all to take the course that he did in respect of assessment of damages. What was effectively being allowed to be pleaded was an entirely new case. But I have to say that if he did have a discretion, he was plainly wrong to permit a totally new basis to be introduced into this case after there had been a full trial, in particular where that alternative basis had been deliberately not adopted in the course of the trial despite there having been pointed out the fragility and the inappropriateness of the basis upon which the matter had been pleaded. On that ground, therefore, the judge should not have taken the course that he did. He should have dismissed the claim on the basis that an essential element of the claim had not been proved. On that ground also I would allow the appeal, quite apart from the question of causation. 
65.	I have said that judge did not receive submissions on this last point at the time when he made this decision. True it is that he did receive further submissions after he had made that decision. His reasons for adhering to his view were principally that it would be unjust to the claimant to deprive him of an opportunity of putting the case in a way that was in the judge's view was appropriate. He did not think it right to deprive the claimant of any remedy whatsoever. Whilst one can understand the judge's sympathy for the claimant in the position in which he found himself, in my judgement those considerations cannot possibly be allowed to outweigh the importance of the case being fought within the parameters of the original trial and the inappropriateness of allowing a completely new case to be introduced. I should have mentioned that earlier in the judgment, but I am quite satisfied that the reasons the judge gave were inappropriate in the circumstances of this case and he should not have adopted those reasons. 
66.	LADY JUSTICE ARDEN: I agree that this appeal should be allowed and that permission to cross‑appeal should be refused for the reasons given by Buxton LJ. It is unnecessary for me to cover the ground again. 
67.	On the causation issue, I would emphasise the distinction between what has to be shown that the claimant would have done and what has to be shown that the employers would have done. Accordingly if the claimant's case had been that he would have discharged any debt due to his employers himself, he would have to have shown that he would have done this on the balance of probabilities. On the other hand if the claimant's case is that the prospective employers would have taken over the debt, he would have had to show that there was a real and substantial chance of that occurring. The authority for these propositions is Allied Maples Group Ltd v Simmons & Simmons [1995] 1WLR 1602. In that case, the question was what the plaintiff had to show in order to recover damages for negligence from its solicitors who had failed to advise it to seek a particular warranty from the vendor of certain assets. At page 1610, Stuart-Smith LJ held that where causation depends on the answer to the hypothetical question, what would the plaintiff have done if the advice had been given:
“... it is well-established that the plaintiff must prove on a balance of probability that the would have taken action to obtain the benefit or avoid the risk.”
68.	With respect to the situation where the hypothetical question is what would a third party have done if the defendant had not been negligent, Stuart-Smith expressed his agreement with the well‑known passage from the speech of Lord Lowry in Spring v Guardian Assurance Plc where Lord Lowry said: 
“Once the duty of care is held to exist and the defendants' negligence is proved, the plaintiff only has to show that by reason of that negligence he has lost a reasonable chance of employment (which would have to be evaluated) and has thereby sustained loss.” 
69.	Stuart-Smith LJ accordingly held that:
“... the plaintiff must prove as a matter of causation that he has a real or substantial chance as opposed to a speculative one.” (at page 1614)
70.	Millett LJ agreed with the analysis of the law by Stuart-Smith LJ (at page 1622), although he reached a different conclusion on the facts. Hobhouse LJ agreed with the judgment of Stuart-Smith LJ (at page 1618).
71.	In this case the claimant failed to show on the balance of probabilities that he would have discharged the debt himself. So far as the actions of prospective employers were concerned, the evidence on which he relied could not support the inference that there was a real or substantial chance that the employers would have taken over the debt for the reasons given by Buxton LJ. Accordingly, the judge's conclusion that: 
“...with an alleged indebtedness of only one third of that which might legitimately have been asserted there would have been a real and substantial chance of the Claimant being able to resolve the position with the Defendants or of the Claimant being able in some way to secure the amount in question in such a way as to have enabled him in due course once more to obtain a position in the financial services industry”,
	was not supported by the evidence adduced in this case. 
72.	On the adjournment issue, it requires very strong grounds to interfere with the discretion of the judge in any case, and even more so when it is a matter of case management under the CPR. Moreover, in reviewing the exercise of his discretion, I am conscious that the judge had a knowledge of these proceedings which is vastly superior to my own. He had heard interim proceedings for striking out, and giving case management directions. However, I am satisfied for the reasons given by Buxton LJ that the exercise of discretion in this case was plainly wrong. In my judgment the right course for him to have taken was not to have taken the decision to adjourn, but to invite submissions as to whether he should determine damages forthwith and to give directions concerning further evidence and adjourn the issue of damages to a disposal hearing. It is well‑known that there is a public interest in the finality in litigation. Mr Bown had had more than an adequate opportunity to get his evidence in order. 
73.	Accordingly, for all these reasons in addition to those given by Buxton LJ, I consider that this appeal should be allowed and permission to cross‑appeal refused. 
74.	THE VICE CHANCELLOR: I also agree that for the reasons given by the other members of the court Mr Bown's application for permission to cross‑appeal should be dismissed and LAS Direct Ltd's appeal should be allowed on both the grounds put forward in its Notice of Appeal. 
Order: Appeal allowed; cross‑appeal dismissed. We make an order for the payment out of interest as asked. Costs of the trial are remitted to the trial judge. As regards the costs of the appeal and application for permission to cross‑appeal, there will be an order in the usual form against the Legal Services Commission, or Mr Bown, down to the time when the certificate was actually discharged and an order against Mr Bown in person personally thereafter. Detailed assessment of the Applicant's costs.