OVERTURNING FINDING OF FACTS ON APPEAL: FINDINGS OF ABSENCE OF DISHONESTY OVERTURNED BY THE PRIVY COUNCIL

July 16, 2015 · by · in Appeals, Civil evidence, Witness statements

The judgment of the Privy Council in Central Bank of Ecuador and others v Conticorp SA and others [2015] UKPC 11;  [2015] WLR (D)  150 is quite extraordinary. It involved the Privy Council overturning a finding of  fact of the judge at first instance that there was no fraud on the part of the defendants.  Here we look at the case on the important issue of when an appeal court will overturn findings of fact.

THE CASE

The claimant bank brought an action against a number of parties alleging they wrongly assisted breaches of fiduciary duty when loans had been transferred in return for global depository receipts and shares in other companies.  The judge at first instance, and the Court of Appeal of the Bahamas, had accepted that these transactions had been entered into as part of a genuine structural reorganisation plan. The claimant appealed to the Privy Council.

THE CIRCUMSTANCES IN WHICH AN APPELLATE COURT WILL OVERTURN FINDINGS MADE BY THE TRIAL JUDGE
  1. In the light of the rejection of IAMF’s case in both courts below, IAMF faces a heavy onus in seeking to persuade the Board to reach a conclusion that the respondents were guilty of a lack of probity. First, the Board will as a matter of settled practice decline to interfere with concurrent findings of pure fact, save in very limited circumstances. The well-established position remains as stated in Devi v Roy[1946] AC 508, where the Board said:
“(4.) That, in order to obviate the practice, there must be some miscarriage of justice or violation of some principle of law or procedure. That miscarriage of justice means such a departure from the rules which permeate all judicial procedure as to make that which happened not in the proper sense of the word judicial procedure at all. That the violation of some principle of law or procedure must be such an erroneous proposition of law that if that proposition be corrected the finding cannot stand; or it may be the neglect of some principle of law or procedure, whose application will have the same effect. The question whether there is evidence on which the courts could arrive at their finding is such a question of law.
(5.) That the question of admissibility of evidence is a proposition of law, but it must be such as to affect materially the finding. The question of the value of evidence is not a sufficient reason for departure from the practice.
(6.) That the practice is not a cast-iron one, and the foregoing statement as to reasons which will justify departure is illustrative only, and there may occur cases of such an unusual nature as will constrain the Board to depart from the practice.”
  1. Second, quite apart from the settled rule relating to concurrent findings, any appeal court must be extremely cautious about upsetting a conclusion of primary fact. Very careful consideration must be given to the weight to be attached to the judge’s findings and position, and in particular the extent to which, he or she had, as the trial judge, an advantage over any appellate court. The greater that advantage, the more reluctant the appellate court should be to interfere. Some conclusions of fact are, however, not conclusions of primary fact, but involve an assessment of a number of different factors which have to be weighed against each other. This is sometimes called an evaluation of the facts and is often a matter of degree upon which different judges can legitimately differ: see Assicurazioni Generali SpA v Arab Insurance Group (Practice Note) [2003] 1 WLR 577, paras 15-17, per Clarke LJ, cited with approval in Datec Electronics Holdings Ltd v United Parcels Service Ltd [2007] UKHL 23, [2007] 1 WLR 1325, para 46.
  2. The Supreme Court of the United Kingdom recently re-emphasised the force of the second point in McGraddie v McGraddie (AP)[2013] UKSC 58, citing a well-known passage from Lord Thankerton’s speech in Thomas v Thomas [1947] AC 484, 487-488:
“(1) Where a question of fact has been tried by a judge without a jury, and there is no question of misdirection of himself by the judge, an appellate court which is disposed to come to a different conclusion on the printed evidence should not do so unless it is satisfied that any advantage enjoyed by the trial judge by reason of having seen and heard the witnesses, could not be sufficient to explain or justify the trial judge’s conclusion; (2) The appellate court may take the view that, without having seen or heard the witnesses, it is not in a position to come to any satisfactory conclusion on the printed evidence; (3) The appellate court, either because the reasons given by the trial judge are not satisfactory, or because it unmistakably so appears from the evidence, may be satisfied that he has not taken proper advantage of his having seen and heard the witnesses, and the matter will then become at large for the appellate court.”
As the Supreme Court pointed out, the reasons justifying this approach are not limited to the fact that the trial judge is in a privileged position to assess the credibility of witnesses’ evidence. As mentioned by the United States Supreme Court in Anderson v City of Bessemer 470 US 564 (1985), 574-575, they include the considerations that
“Duplication of the trial judge’s efforts in the court of appeals would very likely contribute only negligibly to the accuracy of fact determination at a huge cost in diversion of judicial resources. In addition, the parties to a case on appeal have already been forced to concentrate their energies and resources on persuading the trial judge that their account of the facts is the correct one; requiring them to persuade three more judges at the appellate level is requiring too much. As the court has stated in a different context, the trial on the merits should be ‘the “main event” … rather than a “try-out on the road.”
The considerations mentioned in this passage are of course of particular importance when considering whether permission to appeal should be given, in a context where that does not exist as of right. But, even when an appeal is before the Board, they serve as a reminder that the Board cannot be expected to devote unlimited resources to re-examining every aspect of the trial process.
  1. Third, the need for caution is yet further heightened when an appellate court is invited to upset the decision of a trial judge exonerating a party of a want of probity. Such a decision “should not be displaced on appeal except on the clearest grounds”: Akerhielm v de Mare[1959] AC 789, 806. The Board recently restated this point in Mutual Holdings (Bermuda) Ltd v Diane Hendricks [2013] UKPC 13, when it said:
“28. An appellate court is rarely justified in overturning a finding of fact by a trial judge which turns on the credibility of a witness. There are particular reasons for caution in a case like this. The allegation was one of fraud, which fell to be proved to the high standard on which the courts have always insisted, even in civil cases. The critical issues were (i) what was said at an informal and undocumented meeting eight years before the trial, and (ii) what the four personal defendants believed to be the exposure of the Hendricks and AMPAT to losses that penetrated through the stop loss layer. Any findings about these matters necessarily had to be based on the oral evidence of those defendants and of Mr Bossard and Mr Agnew. The judge had to assess their character, the honesty and candour of their evidence, and the quality of their recollection. As Lord Hoffmann observed in Biogen Inc v Medeva plc [1997] RPC 1, 45,
“The need for appellate caution in reversing the judge’s evaluation of the facts is based upon much more solid grounds than professional courtesy. It is because specific findings of fact, even by the most meticulous judge, are inherently an incomplete statement of the impression which was made upon him by the primary evidence. His expressed findings are always surrounded by a penumbra of imprecision as to emphasis, relative weight, minor qualification and nuance (as Renan said, la vérité est dans une nuance), of which time and language do not permit exact expression, but which may play an important part in the judge’s overall evaluation.”
  1. Fourth, these principles do not mean that an appellate court is never justified, indeed required, to intervene. They only concern appeals on fact, not issues of law. But they also assume that the judge has taken proper advantage of having heard and seen the witnesses, and has in that connection tested their evidence by reference to a correct understanding of the issues against the background of the material available and the inherent probabilities. In this connection, a valuable coda to the above statements of principle is found in a passage from the judgment of Robert Goff LJ in Armagas Ltd v Mundogas SA (The “Ocean Frost”) [1985] 1 Lloyd’s Rep 1, 56-57. Robert Goff LJ noted that Lord Thankerton had said in Thomas v Thomas that:
“It is obvious that the value and importance of having seen and heard the witnesses will vary according to the class of case, and, it may be, according to the individual case in question.”
Robert Goff LJ then added this important practical note:
“Furthermore it is implicit in the statement of Lord MacMillan in Powell v Streatham Manor Nursing Home at p 256 that the probabilities and possibilities of the case may be such as to impel an appellate court to depart from the opinion of the trial judge formed upon his assessment of witnesses whom he has seen and heard in the witness box. Speaking from my own experience I have found it essential in cases of fraud, when considering the credibility of witnesses, always to test their veracity by reference to the objective facts proved independently of their testimony, in particular by reference to the documents in the case, and also to pay particular regard to their motives and to the overall probabilities. It is frequently very difficult to tell whether a witness is telling the truth or not; and where there is a conflict of evidence such as there was in the present case, 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.”
The Board considers that these points may have particular relevance where evidence is being given through an interpreter, especially if it appears that the interpretation is imperfect. As the respondents’ own closing submissions before the judge said: “However good an interpreter …., meanings and subtleties are bound to be lost or misunderstood”. In The Ocean Frost itself, Robert Goff LJ continued:
“I have been driven to the conclusion that the judge did not pay sufficient regard to these matters in making his findings of fact in the present case.”
On this basis, the Court of Appeal in The Ocean Frost took a different view from the trial judge. It found not only that a three-year charter was so extraordinary as to put one party (Armagas) on notice of the want of authority of Mr Magelssen, Mundogas’s chartering manager, to enter into it, but more importantly it also held that various documents had been forged after the event to make it appear that Mundogas had known all along about the charter, and that the judge’s acceptance of the evidence of Mr Johannesen, Armagas’s agent, that Mundogas had been sent such documents and known about the charter could not stand in the light of the objective facts and probabilities. It relied in this connection on the extraordinary nature of the transaction itself, the inherent improbabilities of Mr Johannesen’s evidence and the difficulties of explaining his reactions after a dispute about the three-year charter had arisen.”

THE RESULT

The Privy Council examined the facts in detail and concluded:-

Conclusions on liability
162.         The Board regards this as an exceptional case, falling outside the scope of the general principles, stated in paras 4-7 above, that it will not interfere with concurrent findings on issues of fact, will be very cautious about over-turning any finding of fact by the trial judge and especially so when the finding exonerates a person from a finding of dishonesty. The circumstances of the present case are, in the Board’s view, not dissimilar to those which the Court of Appeal addressed in the case of The Ocean Frost which the Board has addressed in para 8 above. Further, the Board repeats that what it is concerned with on this appeal has, ultimately, an important objective element, stated in para 9 above: the ultimate question is whether a lawyer-businessman, who was party to the same actions as these respondents instructed and had the same state of knowledge as they had when they instructed such actions, could honestly have believed that such actions were in the interests of IAMF.

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