ASSESSING WITNESS CREDIBILITY: EX-FOOTBALL CLUB DIRECTORS’ EVIDENCE: ITS ALL A LOAD OF COBBLERS

This blog has looked at issues of witness credibility many times.  There is a useful summary in the judgment of HHJ Simon Barker QC in Northampton Borough Council v Cardoza & Ors [2019] EWHC 26 (Ch) contains a review of the law relating to the judicial assessment of witness credibility. It also considers the inferences to be drawn from absent witnesses. The judge did not have difficulty in making robust findings.

“After being caught out in lies, D1 accepted that his approach to giving evidence was that he would make a statement or give an answer that he thought suited his position irrespective of the truth and, if it was not accepted, he would attempt to try something different if given the opportunity. This admission suffices to undermine any reliance on D1’s word when not supported by an independent reliable document or other independent reliable evidence”

THE CASE

The claimant was the assignee of rights of Northampton Town Football Club (“the Cobblers”). It brought an action against former directors of the club (and a wife of one of the directors) for inquiries and accounts relating to the defendant’s period of control of the club.  Witness credibility was a central issue in the case.

THE JUDGE’S REVIEW OF THE LAW RELATING TO WITNESS CREDIBILITY

The judge reviewed the guidance in relation to assessing the credibility of witnesses.

Approach to evaluating the evidence and findings as to reliability of the witnesses

    1. Mr Morgan QC for NBC, Mr Zaman QC for D1, and Ms Edhem for D2 and D3 each submitted that the court was in a position to and would form its views of all of the witnesses. In the event there were only five witnesses who gave oral evidence, FF and GH for NBC and each of D1, D2 and D3.
    2. In addition, Mr Tony Sawdon, the son of a now deceased long standing friend of D1, made a very short witness statement referring to loans totalling £125K made by his father to NTFC or D1 in respect of NTFC, and to a loan which he made in 2015, all of which were unsecured because Mr Sawdon and his father trusted D1, and all of which were repaid. Unsurprisingly that evidence was unchallenged. In my view that evidence does not have any significant bearing on the issues in this case and it does not carry weight in the evaluation of D1’s reliability as a witness.
    3. As to the considerations applicable to evaluating evidence, a useful starting point is Goff J’s (as he then was) observation as to resolving conflicts of evidence in Armagas Ltd v Mundogas SA (The Ocean Frost) [1985] 1 LL Rep 1 at p.57
” … Where there is a conflict of evidence … reference to the objective facts and documents, to the witnesses’ motives, and to the overall probabilities, can be of very great assistance to a judge in ascertaining the truth”.
    1. Factors relevant to the evaluation of a witness’s evidence were identified by Lewison J (as he then was) in Painter v Hutchinson [2007] EWHC 758 (Ch) at [3] when addressing the unsatisfactory nature of the defendant’s approach to giving evidence. These included : evasive and argumentative answers, tangential speeches avoiding the question, blaming legal advisers for pleading, disclosure and evidence shortcomings, self-contradiction, internal inconsistency, shifting case, new evidence, and selective disclosure. This was not intended to be an exhaustive list, but it is important and very helpful.
    2. A useful recent reminder or guidance on the approach to the evidence of factual witnesses, and expanding on the guidance given by Goff J in The Ocean Frost, was given by Leggatt J (as he then was) in Gestmin SGPS SA v Credit Suisse (UK) Limited [2013] EWHC 3560 (Comm). After noting that human memory is fallible and that the process of litigation and preparing for trial tends to interfere further with the reliability of human memory, particularly where a lawyer has had a hand in drafting a witness’s evidence and the witness’s memory has been refreshed by reading documents, Leggatt J concluded that the best approach for a judge to adopt at the trial of a commercial case is to base factual findings on documentary evidence and known or probable facts and the inferences to be drawn therefrom. Witness evidence, written and oral, is not without purpose; but, its principal uses are to subject the documentary record to scrutiny and to evaluate the witness’s motivations, personality and working practices.
    3. In similar vein, in the recent case of Freemont (Denbigh) Ltd v Knight Frank LLP [2014] EWHC 3347 (Ch) reference was made to an article written by Bingham J (as he then was) entitled “The Judge as Juror : The Judicial Determination of Factual Issues” published in Current Legal Problems 38 in 1985. Bingham J considered the approach to deciding upon the reliability of a witness’s evidence and regarded the following to be helpful indicators of where the truth lies : the consistency of the witness’s evidence with what is agreed, or clearly shown by other evidence, to have occurred; the internal consistency of a witness’s evidence; and, the consistency of a witness’s evidence with what (s)he has said or deposed on other occasions. Bingham J considered that the credit of a witness in matters not germane to the litigation was of less assistance, and that the demeanour of a witness was on the whole not a reliable pointer to a witness’s honesty.
    4. Mr Zaman QC in particular, and Mr Morgan QC to a lesser extent, referred to persons who could have been but were not called as witnesses. Both counsel acknowledged that JW was a person likely to be in a position to give material evidence. Mr Zaman also referred to a number of political figures at NBC, to local MPs at the relevant times, and to NTFC’s auditors on the basis that they should have been called by NBC.
    5. On the question of absent or silent witnesses, Mr Zaman referred to Wisniewski v Central Manchester Health Authority [1988] PIQR 324 and the substantive judgment of the Court of Appeal given by Brooke LJ at pp.339-340 to the effect that : (1) in certain circumstances a court may draw adverse inferences from the absence or silence of a witness who might be expected to have material evidence to give on an issue in the action; (2) if a court is willing to draw such inferences, they may strengthen the evidence on that issue of the other party or weaken the evidence on that issue of the party who might be expected to call the witness; but, (3) there must be some evidence adduced by the other party, i.e. there must be a case to answer on the issue, before inferences may be drawn; and, (4) if there is a reason for the absence or silence of the witness which satisfies the court, no such adverse inference may be drawn.
    6. As to JW as a potential witness and his absence as such, Mr Morgan did not dispute that JW might have been a useful witness from the court’s point of view, but submitted that to focus on why JW was not a witness and what, if anything, flows from that is to take a wrong turn. Mr Morgan submitted that the correct approach is to focus on what evidence Ds have adduced by way of explanation for any payments shown by NBC to have been made to them. Mr Morgan cited a passage in the judgment of Newey J (as he then was) in GHLM Trading Limited v Maroo & Ors [2012] EWHC 61 (Ch) at [143] – [149]. Newey J there reviewed a number of authorities addressing the question of whether directors who are shown to have received company money are under an evidential burden to show that the payment was proper, including Ultraframe (UK) Ltd v Northstar Systems Ltd & Ors [2005] EWHC 1638 (Ch) at [1513], Gilllman & Soame Ltd v Young [2007] EWHC 1245 (Ch) at [82], Re Mumtaz Properties Ltd, Wetton v Ahmed [2011] EWCA Civ 610 at [16] – [17] and [57], and Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd [2011] EWCA Civ 347 at [34], and concluded that :
” …. Once it is shown that a company director has received company money, it is for him to show that the payment was proper. In a similar way, it seems to me that, where debit entries have correctly been made to a director’s loan account, it must be incumbent on the director to justify credit entries on the account. That conclusion makes the more sense when it is remembered that the director (a) will have been (one of those) responsible for the management of the company’s business and (b) will have had a responsibility for ensuring that proper accounting records were kept”.
Debit entries on a director’s loan account relate to the director as a debtor to the company and justification of the settlement of that debt must be shown by the director. However, Newey J was illustrating the more general point that it is for a director to justify entitlement to company money.
  1. Mr Morgan submitted that it was open to Ds to have called JW and/or any other witness to address the propriety of the payments put in issue and, having chosen not to do so, they cannot properly complain that it was for NBC to call JW or anyone else.
  2. Mr Zaman submitted that NBC could and should have called JW because at the material times he was NTFC’s company secretary and finance controller and since 25.11.15 he has remained at NTFC in a senior management role, namely CEO and company secretary, albeit not as a director. Mr Zaman drew attention to the references to JW in NBC’s pleaded case at [15] in relation to NTFC’s financial difficulties in 2014-15 and at [18] in relation to D2’s instructions as to the accounting treatment of £2.05million paid to and claimed from D1. Mr Zaman further submitted that in such circumstances it would be wholly inappropriate for the court to take the view that there is no property in a witness.
  3. The evidence shows that there is a significant body of email correspondence to which JW was privy, both as a correspondent and on a copied-in basis, in addition it is apparent that he was relied on by D2 as an executive manager at NTFC. JW was responsible for implementing the directors’ instructions and referred to D2 throughout as ‘chairman’. From November 2015, or possibly earlier, he appears to have become a whistle-blower and to have passed information to NBC.
  4. I recognise that JW may well have been a useful witness from the court’s point of view. It is the case that there is no property in a witness. Either side might have sought to call JW as a witness. I consider that each side must have had reasons for not calling JW which weighed sufficiently against the advantage to them of calling him. Left in that position by the parties, the course I should adopt is to consider Ds’ explanation for receiving the monies shown by NBC to have been paid to them without drawing adverse inferences against NBC by reason of JW not being a witness, while at the same time being open to the possibility that information provided by JW from November 2015 onwards might, at least in part, have been provided with an element of self-interest. Further, JW’s schedule, showing movements on D1’s and D2’s loan accounts over the three accounting years from 1.7.13 to 25.11.15 (when their loan accounts were waived and written off), was referred to both in the course of cross-examination and submissions.
  5. My view of JW’s position at NTFC during the period that NTFC was controlled by D1 and D2, based on the evidence to which I have been referred and have heard, is that JW, as an employee of NTFC, was a manager and was subservient, answerable to and did the bidding of D2. In terms of authority he was not on a par with D1 or D2 and recognised that he was not in a position to make decisions about the management and affairs of NTFC.
  6. To look primarily to D1 and D2 to explain the receipts admitted by or shown by NBC to have been paid to them is consistent with the course identified by Newey J in GHLM Trading and the cases referred to by him. This seems to me to be all the more appropriate where, as in this case, receipts put in issue by NBC were not entered in NTFC’s books, including not recorded in the director’s loan account, contemporaneously and possibly not at all, at least not permanently.
  7. As to the absence of evidence from NBC’s councillors and local MPs at the material times and NTFC’s auditors, NBC’s case includes that the relevant agreements and the necessary planning permission were matters for NBC’s cabinet and its permanent officers, not for individual councillors or local MPs and, further, that Ds knew that. Accordingly, those witnesses could not have added anything of substance by way of relevant evidence. Moreover, the critical events were documented and there is a formidable body of contemporaneous documentation, including email traffic. In my view there is force in these points.
  8. As to the auditors, their evidence could have addressed transactions and balances on directors’ loan accounts, the deferred creditors in NTFC’s balance sheets, and their reasons for expressing uncertainty as to NTFC’s ability to continue as a going concern. However, the audited accounts are in evidence and as neutral officers of NTFC it was equally open to either side to call the auditors.

THE JUDGE’S ASSESSMENT OF THE DEFENDANT DIRECTORS AS WITNESSES

The judge had little difficulty in making robust assessments of two of the witnesses.

Anthony Cardoza (D1)

    1. In his closing submissions Mr Morgan identified examples of (1) serious unreliability in D1’s evidence, (2) important omissions from D1’s evidence, (3) D1’s lack of understanding of his duties as a company director, (4) D1’s general propensity to tell lies and mislead, and (5) significant concessions drawn from D1 by persistence in cross-examination.
    2. It is not necessary to recite more than a few of the examples : (1) D1 was unable to explain why he asserted in his written evidence that NTFC was able to pay its debts as they fell due and was therefore not insolvent until he withdrew his support in October 2015 beyond saying that he did not understand what insolvency was and his statement, or that passage, had been written by his solicitors; (2) D1 failed to address the £2.65million “Exclusivity Fee”[5] agreed with County Group in June 2013; (3) D1 regarded himself and D2 and their interests as indistinguishable from NTFC and NTFC’s interests and, as he acknowledged, he gave no thought to NTFC’s creditors; (4) D1 accepted the proposition that in business dealings, including with NBC, HG, and others he would suppress material information to create a false picture; (5) D1 also accepted that he had no answer to the proposition that in business he would lie to suit his own purposes, indeed he openly averred that that was how he conducted business; and, (6) eventually D1 was driven to concede that even on his best case not all of the £2.05million received by him from draw downs as part of the Exclusivity Fee or key money paid by Oundle and 1st Land for County Group or HG for the opportunity to participate in the joint venture through CDNL was surplus to NTFC’s requirements.
    3. On the last point, the payment of £2.05million to D1, D1’s evidence that these payments were treated as repayment of his director’s loan and increased NTFC’s net assets is false on both points. The £2.05million was accounted for through D1’s director’s loan account as shown in specially prepared management accounts in connection with a litigious dispute with County Group and a statutory demand by 1st Land against D1, but management accounts are no part of a company’s books and records and there is no evidence that the payments were formally entered and retained in NTFC’s books and records as loan repayment to D1. Moreover, they are not entered on JW’s schedule.
    4. D1’s evidence included all the features of unsatisfactory evidence identified in Painter v Hutchinson. After being caught out in lies, D1 accepted that his approach to giving evidence was that he would make a statement or give an answer that he thought suited his position irrespective of the truth and, if it was not accepted, he would attempt to try something different if given the opportunity. This admission suffices to undermine any reliance on D1’s word when not supported by an independent reliable document or other independent reliable evidence. D1’s responses to Mr Morgan’s cross-examination more than justify my conclusion that, unless consistent with undisputed facts or supported by independent documents, D1’s evidence was, and is to be treated by me as, unreliable.
    5. D1’s demeanour as a witness was urbane and engaging. However, his demeanour is a front for a person who, at least in business and in litigation, is thoroughly untrustworthy and unreliable.

David Cardoza (D2)

  1. D2 is proud to be viewed as a man in his father’s image. He readily admitted that, like his father, he believes that lying and suppressing the truth is part and parcel of doing business. In his evidence, he too ticked all the Painter v Hutchinson boxes.