Lady Justice Arden
This is an appeal with the limited permission of Chadwick LJ against the order of Lloyd J dated 11 April 2003 in so far as the judge ordered that judgment be entered against the appellant for an account and repayment with interest of all sums paid to him by the respondents and their statutory predecessors since 22 November 1987, and that the judgment in default of a defence dated 14 February 2003 entered against the appellant should remain in force.
The appellant is the estate of Dr Rabindra-Anandh, whom I will call Dr Anandh. This appeal is brought by his executrix and widow, Dr K Rabindra-Anandh. The executrix is also the second defendant in this action but this appeal is not concerned with the claims against her and I need say no more about them. Prior to his death, Dr Anandh was a registered ophthalmic practitioner. He provided sight tests paid for by the respondents ("the Trusts") or their predecessors. However, it is common ground that Dr Anandh was registered as an ophthalmic practitioner in 1988 due to an error on the part of the statutory body responsible for registration, the Ophthalmic Qualifications Committee (the "OQC"). He was not qualified to be so registered. By law, he should only have been registered if he had a full registration as a doctor with the General Medical Council ("GMC"). Lack of entitlement to registration is one of the grounds on which the Trusts seek to recover the fees paid to Dr Anandh for sight tests over the twelve years in which he was in practice as a registered ophthalmic practitioner.
The circumstances were in more detail as follows. After obtaining his degree in medicine (MB BS) in Sri Lanka on 1 January 1978, Dr Anandh carried out a 12 month internship at Kandy General Hospital and continued working at that hospital for a further 3 months when the internship came to an end. From Kandy General Hospital he went to work at a Government Hospital, also in Sri Lanka. Thereafter Dr Anandh settled in the United Kingdom. In 1981 Dr Anandh applied to the GMC and was granted limited registration for five years (in aggregate). He then worked for over four years at three hospitals in the South East of England, as a senior house officer in ophthalmology. In 1985 Dr Anandh was granted a diploma in ophthalmology by the Royal College of Physicians and the Royal College of Surgeons in Ireland.
On or about 6 November 1987, Dr Anandh applied for full registration with the GMC. That application was refused, but not until 29 September 1988. Towards the end of November 1987, however, Dr Anandh had applied to the OQC to be admitted to the central list of medical practitioners having the qualifications prescribed for participating in general ophthalmic services ("the Central List"). The OQC is an organ of the British Medical Association operated on behalf of the Department of Health. Admission to the Central List enabled Dr Anandh to be admitted to the local lists maintained by the predecessors of the Trusts. Dr Anandh’s application to the OQC was supported by references given by consultant ophthalmic surgeons and consultant ophthalmologists with whom Dr Anandh had worked at hospitals in England. Dr Anandh disclosed that he held a limited registration from the GMC. In fact that limited registration was about to expire. It had thirteen days left before its expiry. Dr Anandh had in effect taken steps to suspend the further running of his limited registration by a process known as "voluntary erasure". He never reinstated the certificate. Nor did he seek a further limited registration.
Dr Anandh’s application to the OQC was granted in error, and he was admitted to the central list on 5 January 1988. Thereafter, until 2000, Dr Anandh practised as an ophthalmic practitioner at a number of different premises in and around Greater London. He remained on the central list. However, on 6 November 2000, Dr Anandh was arrested by the police. Dr Anandh ceased practising on his arrest. The investigation into his practice was lengthy. On 29 January 2002 Dr Anandh was charged with theft and similar offences including seeking payment for sight tests he had allegedly not carried out. Dr Anandh appeared in the magistrates’ court to answer the charges against him on 1 February 2002. The prosecution were granted a further four weeks for their investigations. The court was told that some 27,000 forms requesting payment had been studied by the prosecution. A further six week adjournment was granted on 1 March 2002, and at the end of that period the prosecution accepted that the schedules of analysis previously prepared were erroneous and were to be replaced, and a further four week adjournment was granted. Fresh papers were served on 14 May 2002, but the case was again adjourned. On 24 June 2002 Dr Anandh had a heart attack and died two days later on 26 June 2002. Following the death of Dr Anandh, the prosecution was withdrawn on 12 July 2002.
The Trusts’ claim against Dr Anandh’s estate
These proceedings were begun on 15 July 2002. The claim form includes, as the first remedy sought, a claim for damages for breach of contract. In the amended particulars of claim (to which I will refer as APOC) the primary claim is a claim for repayment of all the fees which the Trusts or their predecessors ever paid to Dr Anandh ("the repayments claim"). The Trusts allege that Dr Anandh’s inclusion in the ophthalmic lists maintained by the Trusts or their predecessors was unlawful, or ultra vires, or induced by a mistake of fact that he was registered with the GMC and entitled to act as an ophthalmic medical practitioner or that his qualifications had in fact been approved by the OQC (APOC, paragraph 21), and that in consequence the payments made to him were made under a mistake of fact or were ultra vires or were unlawful (APOC, paragraph 22). In the alternative, it is alleged that Dr Anandh’s estate is a constructive trustee of those payments (APOC, paragraph 23). It is to be noted that the unlawfulness alleged by the APOC was unlawfulness under the National Health Service (General Ophthalmic Services) Regulations 1986 ("the 1986 Regulations").
The subsidiary claim in the APOC ("the overpayments claim") is based on overpayments which the Trust allege that they or their predecessors made for sight tests and domiciliary visits that were not carried out and in respect of the fictitious issue of prescriptions (APOC, paragraph 25). The Trusts allege that the request by Dr Anandh for these overpayments was a breach of contract, for which they are entitled to damages. In the alternative, the Trusts allege that such overpayments were made under a mistake of fact that the relevant sight tests had taken place or were ultra vires, or were received by Dr Anandh as a constructive trustee. There is no dispute that the Trusts have a claim in law to these overpayments.
The statutory framework
The thrust of the Trusts’ pleaded case is that Dr Anandh was not entitled to be registered as an ophthalmic medical practitioner under the 1986 Regulations. In material part, the 1986 Regulations provide as follows:-
By virtue of schedule 2 to the Interpretation Act 1978 (as amended), the expression "registered medical practitioner" means a fully registered person within the meaning of the Medical Act 1983, that is, a doctor who has a full registration with the GMC. Since Dr Anandh was not therefore a "doctor" as defined in the 1986 Regulations, the OQC should not have approved his application to be an ophthalmic medical practitioner. The functions of "the Committee" (which, as defined in the Regulations, is not the OQC) under regulations 6 and 7 of the 1986 Regulations is now performed by the Trusts.
The 1986 Regulations do not impose any criminal sanction. However, section 24 of the Opticians Act 1989 provides:
At the time when the 1986 Regulations were enacted, section 20 of the Opticians Act 1958 was in force. This is in all material respects the same as section 24 of the 1989 Act.
Judgment of Lloyd J
The matter came before the judge on appeal from the order of Master Bowman dated 12 December 2002. Master Bowman had refused to extend time for the service by the defendants of their defences. By the time the matter was heard by the judge, the defendants had produced a draft defence and so effectively the judge sensibly dealt with the matter as if the application had been one for summary judgment against the defendants.
(a) The repayments claim
The judge held that the appellant’s liability to repay all the fees that had been paid to him since 1988 was clear. The sight testing carried out by Dr Anandh was unlawful under section 24 of the Opticians Act 1989:-
The judge further held that a defence based on limitation was not seriously arguable (judgment, paragraph 44). There is no appeal against this holding. The judge held that a further defence, namely a claim to a quantum meruit, would, if Dr Anandh had not contravened section 24, have constituted a defence to liability since it was not simply a matter of quantification. Accordingly, the Master, who had considered that a quantum meruit would lie, was in error in entering judgment against Dr Anandh’s estate. However, in the judge’s judgment, as a matter of law there could be no quantum meruit in this situation. There is no appeal on this point.
(b) The overpayments claim
As to the overpayments claim, the judge held that the defence of quantum meruit and limitation did not apply (judgment, paragraph 33). In the light of his conclusion on the repayments, he made no order for an account on the basis of the overpayments.
Permission to appeal
Chadwick LJ granted permission to appeal on the questions whether the contract between the Trusts and Dr Anandh was unlawful or ultra vires or void ab initio. The Trusts have cross-appealed on the basis that the judge should have entered judgment on the overpayments claim. In response the appellant seeks permission to appeal on a further point, which was refused by Chadwick LJ, namely that judgment should not have been entered for any overpayments.
(a) The repayments claim
Mr Stephen Smith QC, for the appellant, submits that there can be no claim to monies paid under a mistake because these payments were made pursuant to a contract which was lawfully made and has not been set aside. Dr Anandh was registered as an ophthalmic medical practitioner, and accordingly he was entitled to carry out sight tests. Section 24 of the Opticians Act 1989 did not make the contract between Dr Anandh and the Trusts’ predecessors unlawful. Moreover, there can be no claim on the basis that the payments were ultra vires.
Mr Smith relies on Tinsley v Milligan  1 AC 340. At page 370, Lord Browne-Wilkinson, with whom Lord Jauncey and Lord Lowry agreed, held:-
|From these authorities the following propositions
In support of the proposition that a claim in restitution will not lie where the contract has not been set aside, Mr Smith relies on Taylor v Bhail (1995) 50 Con LR 70 at 77 per Millett LJ, who held that: ".... the existence of a valid contract is a bar to the remedy [of, inter alia, an order for restitution to prevent unjust enrichment]." In Dimskal Shipping Co Ltd v International Transport Workers Federation  2 AC 152 at 165, Lord Goff assumed that the contract had to be set aside before there could be a claim for restitution. Likewise, on Mr Smith’s submission, there can be no claim in constructive trust because the contract is still in existence. By starting these proceedings the Trusts have ratified the contract between them and Dr Anandh. They cannot claim repayment of all the fees paid unless the contract is set aside. It cannot be set aside because counter-restitution by the Trusts is impossible.
Mr Smith accepts that section 24 of the Opticians Act 1989 imposes a criminal sanction for performing sight tests when not a registered ophthalmic optician. However, he submits that the fact that this criminal sanction was imposed did not mean that the contract was unlawful. In support of this proposition he relies on Hughes v Asset Managers plc  3 AER 669. This case concerned a contract which was made by an investment intermediary whose officer did not have a representative’s licence as required by section 1 of the Prevention of Frauds (Investments) Act 1958. Section 1 of the 1958 Act imposed a statutory prohibition on dealing in securities without the authority of a representative’s licence and created a criminal offence for persons acting in breach of the prohibition. However, it was silent as to the effect on any contract made between a client and an intermediary acting by a person acting without a representative’s licence. This court held that the statutory prohibition did not render such transactions unlawful. A major factor in the court’s reasoning was that if contracts were void that could produce a great hardship for innocent parties. The argument that contracts were rendered unlawful involved the proposition that (per Saville LJ at 674 and see also per Hirst LJ at 675):
Parliament has chosen to provide a defence against claims for breach of contract in favour of the very people who have ignored its licensing requirements.
Mr Smith also relies on the decision of this court in Phoenix General Insurance Co of Greece SA v Halvanon Insurance Co Ltd  1 QB 216 where it held that the fact that a contract was made by an unauthorised insurer contrary to the Insurance Act 1974, which was silent as to the effect of a breach of this statute, did not render the contracts made by the unauthorised insurer void. At pages 273 to 274 Kerr LJ, with whom Parker and Balcombe LJJ agreed, said this:-
Where a statute prohibits both parties from concluding or performing a contract when both or either of them have no authority to do so, the contract is impliedly prohibited .... But where a statute merely prohibits one party from entering into a contract without authority, and/or imposes a penalty upon him if he does so (i.e. a unilateral prohibition) it does not follow that the contract itself is impliedly prohibited so as to render it illegal and void. Whether or not the statute has this effect depends upon considerations of public policy in the light of the mischief which the statute is designed to prevent, its language, scope and purpose, the consequences for the innocent party, and any other relevant considerations. The statutes considered in Cope v Rowlands, 2 M & W 149 and Cornelius Phillips  AC 199 fell on one side of the line; the Food Acts 1984 would clearly fall on the other.
Mr Smith submits that the contracts between the Trusts and Dr Anandh should be maintained for the benefit of the customer. They were in any event not ultra vires. Since Parliament has intervened to render the giving of sight tests when unqualified a criminal offence, the court should not go further and hold that the contracts were unlawful. If there is a criminal sanction, there could be recovery of the proceeds of crime under the Proceeds of Crime Act 2002 or its predecessors. For the courts to create a civil remedy might lead to a clash of remedies. In this regard, Mr Smith relies on the dictum of Hoffmann J in Chief Constable of Leicester v M  1 WLR 20 to the effect that the readiness of Parliament to address a problem by legislation weakens the case for providing a solution by judicial creativity.
Mr Smith further submits that Dr Anandh would be entitled to the defence of change of position. He had incurred costs in providing sight tests. In addition, he had paid tax on the fees he had earned. Mr Smith, relying on Goff and Jones on The Law of Restitution (6th ed) (2002) paragraphs 40-003 to 40-008, submits that expenditure justifying a defence of change of position should be construed liberally. He submits that there could be a change of position if Dr Anandh changed his life style. Furthermore, as the defence of change of position could not be quantified, there should be no judgment on liability: see National Westminster Bank v Somer International Ltd  1 All ER 198.
Mr James Ramsden, for the Trusts, submits that Dr Anandh was not an ophthalmic medical practitioner because he was not entitled to registration as such. Moreover, because Dr Anandh was unqualified, the contract was ultra vires. It was irrelevant whether Dr Anandh had treated patients competently. There was no need to show a total failure of consideration. The Trusts did not enter into a free bargain with Dr Anandh. The regulations provided for a contract to come into being if a contractor performed a service for which the Trusts were liable. Because he was not fully registered with the GMC he was uninsured and unregulated. Dr Anandh was unlikely to have been mistaken as to his entitlement to registration.
Mr Ramsden further submits that the performance of sight tests by Dr Anandh was unlawful under section 24 of the Opticians Act 1989 because Dr Anandh was not appropriately qualified. Again, it is irrelevant whether the Trusts had suffered any loss. As a matter of policy he was prohibited from performing sight tests. It would be a bizarre result if the state could prosecute Dr Anandh but remained liable to pay his fees. Restitution ought to be ordered because prosecution is no longer possible and therefore there is no prospect of an order for the repayment by Dr Anandh of the proceeds of his crime.
Mr Ramsden submits that no defence of change of position is open to Dr Anandh if there was a misrepresentation by him to the OQC as to his entitlement as to registration. If, on the other hand, Dr Anandh was entitled to a defence of change of position, the Trusts accept that that would require a variation of the order for an account. The order should not itself be set aside. Moreover, Dr Anandh could not invoke a change of position if it would be difficult for the court to assess the net benefit to him.
Mr Ramsden submits that the same policy considerations as lead to the conclusion that there should be restitutionary relief also justify the conclusion that the contracts were ultra vires and that recovery ought to follow on that ground too. It is in the public interest. There is a very clear public policy reason why restitution might be ordered. If a person gets himself wrongly included in the central list, he should not be entitled to retain payment.
Mr Ramsden distinguishes the Phoenix case on the ground that, in the present case, innocent third parties would not be deprived of any right. Thus the difficulties mentioned in the Hughes case would not apply. On this basis the contract was void.
As to constructive trust, Mr Ramsden submits that the claim is within the second type of trust identified by Millett LJ in Paragon Finance v Thackarar & Co  1 AER 400 at 409.
(b) The overpayments claim
Mr Ramsden submits that, if the appeal is allowed on the repayments claim, there ought in any event to be an order for an account and enquiry on the overpayments claim. These claims are estimated to amount to £450,000 on the respondents’ case. If an account were ordered this would put pressure on the parties to reach a settlement. The appellant accepts that, if there have been overpayments, they must be repaid. However, Mr Smith submits that the overpayments claim raises a question of fact, and should not be the subject of a summary judgment.
(a) The repayments claim
The first issue is whether the appellant’s contention that the contracts between the Trusts (or their predecessors) and Dr Anandh or the payments thereunder were not unlawful discloses a real prospect of success. The Trusts accept that once Dr Anandh submitted the required forms to them stating that he had carried out sight tests or domiciliary visits, a contract came into being under which the Trusts were (or would, if Dr Anandh had been appropriately qualified or had actually carried out the tests in question, have been) obliged to pay him in accordance with the rates set by the Department of Health. The APOC rely on the 1986 Regulations for the contention that the contracts were unlawful because Dr Anandh was not a fully registered medical practitioner. The judge relied on section 24 of the Opticians Act 1989 for his conclusion that because Dr Anandh had acted unlawfully in performing sight tests the Trusts had an indisputable right to repayment of the fees paid to him.
In my judgment, there is a real prospect of successfully arguing that, once the OQC were satisfied that Dr Anandh possessed the qualifications set out in regulation 3, he was an ophthalmic medical practitioner by virtue of the operation of regulation 4 in the 1986 Regulations. The OQC were in error in being so satisfied because Dr Anandh was not, for the reasons given above, a "doctor" as required by regulation 3. However, the decision to approve was freely arrived at by the OQC and in my judgment there must be a real and not a fanciful or imaginary, prospect of success in arguing that the approval given by the OQC under regulation 4 was effective for the purposes of regulation 3 unless or until it was set aside.
Moreover, the 1986 Regulations on their face merely require a person seeking payment in respect of sight tests to be a "contractor" as defined in regulation 2. The definition of "contractor" (set out above) does not on the face of it impose any requirement that the person should be a doctor: indeed such a person could be an optician. What the definition requires is that he should have undertaken to provide ophthalmic services and that his name should be included in the ophthalmic list. By virtue of the approval of the OQC, Dr Anandh’s name did appear in the appropriate list. There is no dispute that he had undertaken to provide the necessary services. Therefore, the defence that the payments were not unlawful under the 1986 Regulations has a real prospect of success.
The APOC do not allege that Dr Anandh knew that he was not entitled to registration as an ophthalmic medical practitioner. Mr Ramsden submits that this is the proper inference to draw. In my judgment, Mr Smith is correct in his submission that, since that allegation involves disputed issues of fact, the court cannot determine it on a summary judgment application. The court must proceed on the basis that that allegation will be made but may or may not be proved.
On the other hand, in the respondents’ favour, it is clearly arguable that the approval given by the OQC was not a valid approval for the purposes of regulation 4(3) of the 1986 Regulations and that Dr Anandh would have known that that was the position. Among other matters, it may be argued that section 20 of the Opticians Act 1958 is relevant to the interpretation of the 1986 Regulations. It is further arguable that Dr Anandh should have disclosed to the OQC or the Trusts that his limited registration had expired. However, none of these points has been fully argued on this appeal, and in all the circumstances it would not be appropriate to resolve the points of interpretation of the 1986 Regulations raised by the appellant on this appeal.
It may have been because of the difficulties for the Trusts’ case under the 1986 Regulations that the judge turned to section 24 of the Opticians Act 1989, which formed the basis for his decision in their favour. However, it is not pleaded that section 24 rendered the formation of any contract between Dr Anandh and the Trusts unlawful. Nor is such an allegation implicit in the claim made. The claim form makes this clear by claiming damages for breach of contract. Moreover, in the light of the Phoenix case, and the express terms of section 24, I do not consider that this is a situation in which the court is bound of its own motion to take the point that the contracts were subject to some implied statutory prohibition even if the respondents do not allege it. Section 24 only expressly makes unlawful the activity of an unqualified person performing sight tests, and there is no suggestion that the Trusts knew that the contract was for an unlawful object. There is good reason for section 24 of the 1989 Act to criminalise the performance of eye tests by an unqualified person rather than the formation of contracts for the provision of sight tests while unqualified. If the performance of such tests is not criminalised, there would be no criminal sanction for the gratuitous provision of eye tests while unqualified, and this would be anomalous. If the making of contracts for eye tests to be provided by an unqualified person is also impliedly prohibited, neither a paying customer nor the public purse could recover the cost: see per Lord Browne-Wilkinson in Tinsley v Milligan, above. This result would be to the detriment of innocent parties, as in the Phoenix case. In conclusion, I do not consider that section 24 of the 1989 Act of itself makes contracts for the provision of eye tests by an unqualified person unlawful.
The judge records in paragraph 18 of his judgment (quoted above), the Trusts’ argument that the Trusts can recover the payments on three bases:
the Trusts made them under a mistake of fact as to Dr Anandh’s entitlement to registration;
the payments were ultra vires the Trusts; and
it was unlawful for Dr Anandh to receive them.
The first basis raises an issue of fact which must be tried as to whether the Trusts were concerned with the issue of entitlement to registration. The second basis starts from the proposition that the first basis is correct, alternatively, it is predicated on the basis that Dr Anandh was not a "contractor" for the purposes of the 1986 Regulations, and for the reasons already given the defence to this claim raises a real prospect of success. Alternatively, the second basis, and also the third basis, involve a consideration of the effect of the breach of section 24 of the Opticians Act 1989 on the Trusts’ claims for damages or repayment. The payments were for unlawful services. Clearly Dr Anandh could not sue for any payments that had not been paid to him for his services. However, for the reasons given above, section 24 does not render the contracts unlawful or void. In my judgment, there is a real prospect of success on the defence that the Trusts would have to avoid the contracts with Dr Anandh to raise a claim for the fees paid for the services required by those contracts, either in restitution or on the basis of constructive trust. They have not done this. If avoidance is necessary and it is too late for them to do this, their only claim will be for damages for breach of contract.
In addition, it is likely that (subject to the effect of such issues as his knowledge as to his lack of entitlement to payment) the appellant has a substantial argument on change of position. In all the circumstances, I conclude that there is a real prospect of success on the appellant’s defence to the third basis on which the Trusts put their claim. So far as the Trusts’ claim is not a claim for repayment, but for damages for breach of some implied term that he was duly registered, then given the limited terms of the 1986 Regulations on their face, and given that findings of fact have yet to be made, there is clearly a real prospect of success on the appellant’s argument that the terms of the contract required Dr Anandh only to be registered, as opposed to being entitled to be registered.
For all these reasons, I consider that the appeal should be allowed on the repayments claim, and that the appellant should have leave to serve a defence in respect of this claim.
(b) The overpayments claim
Liability to repay the overpayments (if any) is admitted. If the court makes an order allowing the appeal on the repayments claim, I consider that there should be judgment on liability for the overpayments claim. This will reduce the number of issues to be tried and enable the question of identifying the overpayments to be dealt with by the Master. There are likely to be numerous detailed issues of fact, and the Master will be well able to deal with these in accordance with the overriding objective in the CPR. On this point, I would allow the appellant’s application for permission to appeal but dismiss the appeal. I would allow the respondents’ cross-appeal on this point.
For the reasons given above, I would allow the appeal on the repayments claim and the cross-appeal on the overpayments claim. I would give the appellant permission to appeal on the overpayments claim but dismiss that appeal.
Lord Justice Latham
Lord Justice Potter
I also agree.
Stephen Smith QC and Lawrence Power (instructed by Si Jaffar & Co) for the Appellants.
James Ramsden (instructed by Capsticks) for the Respondents.
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