DELAY OF 18 MONTHS IN GIVING JUDGMENT DID NOT UNDERMINE THE JUDGE’S VIEW AS TO CREDIBILITY

In Nuttal & Anor v Kerr & Anor [2019] EWHC 1977 (QB) Mr Justice Freedman rejected an argument that an excessive delay in giving judgment meant that the trial judge’s conclusions were innately unreliable.  (The judgment also reviews the authorities relating to the stance taken by the appellate court in relation to appeals where there has been inordinate delay in the delivery of a judgment).

 

“The reason why Ms Kerr’s evidence prevailed over the Defendants was because, despite the reservations which the Judge entertained, it was largely supported by contemporaneous documentary evidence and was consistent with them”

 

THE CASE

The claimant brought an action alleging fraudulent misrepresentations were made to induce them to purchase a share in a company.  The trial took place in 2016 with the final submissions being received in September 2016. The trial judge did not give judgment until 14th March 2018. The trial judge found in favour of the claimants. The defendant appealed.   The judgment also contains interesting observations about the judicial approach to credibility.

DEFENDANT’S ARGUMENTS

The defendant argued that the claimant’s demeanour was important to all findings of fact.   The judge did not assess the claimant’s credibility properly and this undermined the findings of fact at trial.  The delay of giving judgment led to a “failure of recollection” by the trial judge.

THE FINDINGS ON APPEAL

Mr Justice Freedman rejected the defendants’ appeal. Although there had been inordinate delay the key findings in relation to the credibility of witnesses were based on an assessment of the documentary evidence.

    1. I have concluded that the delay was indeed inordinate and very regrettable. In this case, the delay is due to no fault at all of either party. The period of delay of 18 months is not appreciably shorter than in cases where there was judicial disapproval about the delay e.g. Bond v Dunster Properties Ltd (22 months) and Gardiner Fire Ltd v Jones (also 22 months). Whilst the reasons for the delay may mitigate the extent to which it is an affront to justice, the precise reasons do not affect the function of the Court on hearing the appeal. In that regard, I must apply paragraph 7 of the judgment of the Court in Bond v Dunster Properties referred to above. The Court must be uninfluenced by submissions about the difficulties facing one or other of the parties if there is to be a retrial about justice and cost. The Court will order a retrial if it cannot be satisfied that the Judge came to the right conclusion.
    2. Whilst the availability of a transcript might have alleviated the situation, this was not such a case. Whilst the Judge had his notebooks, the Court has not seen the notebooks. It must approach the matter on the basis that they would have assisted in jogging recollection, but it is not the same as a consideration within a conventional period of the conclusion of the trial. Whilst the Judge did some of his writing within 6 months of the conclusion of the trial, and that is more than beneficial than writing for the first time 18 months after the conclusion of the trial, it does not substantially alleviate the matter because the fact is that the judgment was not ready to be sent out until 18 months after receipt of the closing arguments. Further, the Court has not seen the contents of the drafts. In view of the dangers inherent in delay, the approach of the Court is to assume that large parts of the judgment were not written until many months after the receipt of the closings.
    3. For the purpose of this appeal, I shall approach the matter on the basis that this was a very serious delay which calls for special care when reviewing evidence which was before the Judge and the finding of facts which he made. The fact that Mr Trafford QC has honed in one ground does not detract from the need for special care, since if he establishes that ground, he is able to move on to seek a retrial. If he pinpoints a particular finding of fact which may in the light of the review be open to question by reason of the delay (see Tex above), the questions which arise are as per paragraph 7 of Bond above. The question is whether there has been identified (i) a material point where the Judge’s recollection was at fault (unless the error was not due to the delay in the delivery of the judgment), and (ii) if so, whether the Court can still be satisfied that the Judge came to the right conclusion in the case.
    4. In my judgment, the ground of challenge about the characterisation of the evidence of Ms Kerr is not an error. My primary reason for reaching this conclusion is that the characterisation of the exaggerated nature of the evidence of Ms Kerr was a finding available to the Judge. There is an imprecision in the term “exaggerated” or “exaggeration”, but assume at this stage that it falls somewhere short of dishonest lying. Nonetheless, it affected the Judge’s view of the witness. It made her evidence unattractive because it affected her reliability. The Judge clearly had that in mind and was critical of her evidence at (J/107) quoted in full above. However, there was a kernel of truth about the evidence because the Judge found on the basis of the evidence contained in Ms Kerr’s second witness statement that she had the resources to raise the necessary money (J/187). If this is how the Judge regarded the evidence, then it cannot to be faulted.
    5. Another possibility is that the Judge used these expressions as a way of saying that Ms Kerr was lying: on this basis, there is no distinction between the kind of exaggeration referred to and a lie about the bank accounts. This falsity was an important matter to take into account about the reliability or otherwise of the evidence of Ms Kerr. The Judge took that into account. However, it was not decisive as regards being able to raise the money required to make the investment, because in fact Ms Kerr was able to satisfy the Court about her ability to do that by reference to her other assets. As regards matters of credibility generally, if the Judge regarded exaggeration as the same as lying, then he did take it into account generally as is apparent from the references in paragraph 38 above.
    6. Whether it was a lie or an exaggeration falling short of a lie, this was a matter which affected significantly the weight which the Judge was able to give to the evidence of Ms Kerr. It was to her discredit (J/107). Further, even if there is a distinction between a lie and an exaggeration in the sense intended by the Judge, the distinction is not so sharp as to have made a tangible difference in the circumstances of this case.
    7. Further, it does not even follow from one lie that the rest of the evidence of a witness must be rejected, particularly in circumstances here where the existence of representations was corroborated by contemporaneous documents, and where inducement was logically to be inferred from the nature of the representation. .
    8. The reason why Ms Kerr’s evidence prevailed over the Applicants was because it was largely supported by contemporaneous documentary evidence and in part because her case did not depend on her oral evidence at all. For example, the fraudulent representation as to the value of the business and the 10% share which two institutions had offered to acquire for £1 million. The Defence statement at paragraph 5 effectively repeated the alleged misrepresentation, saying that “SMG had many offers/proposals that the Defendants were privy to where institutions, financial and otherwise, wished to have privileged access to the Celebrity Clients contacts of SMG. There were proposals which included valuations of £10 million and therefore equity positions in SMG of 10% for £1 million…£10 million was proposed to the Claimants and they accepted the price based on their 3 months of due diligence and working in the offices of SMG.” This was heavily diluted in the Amended Defence and Counterclaim at paragraph 5(a) to “discussions with a financial institution in January/February 2012 as to a possible payment of £1m for 10% of SMG (implying a company valuation of £10m) and also separate discussions with another potential merger partner with a valuation of £10m was raised.”
    9. In the Judgment at (J/155-160), the Judge treated the evidence of the Applicants as “riddled with inconsistency” starting with the initial pleadings and ending with the oral evidence. They said there that no actual offers had been received which was at odds not only with the original defence, but with a recorded conversation at a meeting on 15 June 2012 in which Mr Nuttall answered a suggestion that a valuation was plucked out of the air, by referring to “An offer of £1 million for 10 per cent which we had already received”, and at a meeting on 9 July 2012, Mr Nuttall said “We said we had been offered a million for 10 per cent.” The Judge contrasted this with such documents as were disclosed which showed at best a valuation of £2.25 million and no offers of the kind described. More generally, the Judge commented on the absence of what would be a precursor of any such valuation, namely documents evidencing requests for financial information and generated documentary material. In the circumstances, this critical fraudulent misrepresentation did not depend upon the evidence of the Claimants. None of this analysis is the subject of specific criticism on the part of the Applicants.
    10. This then leaves the Applicants to have to resort to the argument that since the Judge should have rejected in its entirety the evidence of Ms Kerr, that the evidence on inducement should have been rejected. This is utterly unrealistic bearing in mind the following. I raised in the course of argument the case of Dadourian Group International Ltd v Simms and others [2009] EWCA Civ 157 in which the Arden LJ referred to the directions of the Judge below (Warren J) which did not contain any errors of law, namely:
“99 …the judge directed himself in law, at J(1) 543 – 546, as follows: (1) it is a question of fact whether a representee has been induced to enter into a transaction by a material misrepresentation intended by the representor to be relied upon by the representee; (2) if the misrepresentation is of such a nature that it would be likely to play a part in the decision of a reasonable person to enter into a transaction it will be presumed that it did so unless the representor satisfies the court to the contrary (see Morritt LJ in  Barton v County NatWest Limited [1999] Lloyd’s Rep Banking 408 at 421, paragraph 58); (3) the misrepresentation does not have to be the sole inducement for the representee to be able to rely on it: it is enough if the misrepresentation plays a real and substantial part, albeit not a decisive part, in inducing the representee to act; (4) the presumption of inducement is rebutted by the representor showing that the misrepresentation did not play a real and substantial part in the representee’s decision to enter into the transaction; the representor does not have to go so far as to show that the misrepresentation played no part at all; and (5) the issue is to be decided by the court on a balance of probabilities on the whole of the evidence before it.

….

101. We are unable to detect any error of law on the part of the judge in the way in which he approached this issue and did not understand the appellants to suggest otherwise.”

    1. This statement of the law is entirely consistent with the law as referred to by the Judge: see paragraph 13 above. As in Dadourian, there was no error of law on the part of the judge, and the Applicants do not suggest otherwise.
    2. A representation of the above kind as to valuation would be likely to play a part in inducing a reasonable person to purchase a 10% interest, and so on the basis of the finding of fraud, the presumption of inducement must apply. In order to rebut it, it would be necessary for the Applicants to show that the representation did not even play any real or substantial part in the decision of the Claimants to proceed. One only has to state the propositions to see how fanciful the proposition would be. Even a person who lied about resources would be likely to have placed some weight on the representations. The highest that it is put is that the Claimants became carried away with the access to celebrities, but even if that were true, it would not negate the operation of the representations on them to a real and substantial degree.
    3. The Judge regarded the impact of this representation and indeed others as obvious. I shall cite from his judgment insofar as concerned the valuation of the business at (J/188-J/189):
“188. But I regard it as obvious that some statements were likely to have induced the Claimants to sign the Agreement….they signed the Agreement because they believed that two financial institutions had been prepared to invest £1 million pounds on the basis that SMG should be valued at £10 million pounds, the true value lying in its business contacts and connections, most, if not all, of which depended on the first Defendant….

189. But more importantly the statement gave the Claimants confidence to believe that they could safely enter into the Agreement in that SMG was a successful enterprise highly prized by respectable commercial entities, who had put a value on it much greater than that arrived at by conventional accounting. Nothing I have heard from the Defendants establishes that the Claimants were not induced by the statements to enter into the Agreement. Both of these were not only false but also fraudulent misrepresentations which, in my judgment were not only likely to have induced the Claimants to enter into the Agreement but also obviously did so. In any event, because I have found them to be fraudulent the Claimants only needed to prove that they were actively present in their minds at the time they signed the Agreement and I have no hesitation in finding that to be the case.”

    1. In the circumstances, the representation relating to the valuation was made out, and so was reliance. It is important to note that (J/188), the Judge reminded himself as to the dangers of looking at the representations cumulatively, and hence has found about two of the alleged misrepresentations that the relevant statements were not made. The Judge was applying correctly in (J/188-J/190) the law as set out in the Dadourian case above. By itself, and without the other representations, it entitled the Claimants to claim rescission. Thus, on the basis of this representation alone (even without the other representations), the Court is entirely satisfied that the Judge came to the right conclusion.
    2. At (J/188), the Judge found equally obvious the notion that the Claimants must have relied on the representations relating to the size of the liabilities of SMG generally and to HMRC. It is unnecessary to rehearse the findings here, but they can be seen at (J/149-154J/180-J/182 and at J/188-190). As regards the representations relating to liabilities, in (J/188), the Judge stated that it was unthinkable that the Claimants would have made the investment if in fact they had known that SMG had greater debts than those represented.
    3. It is not necessary to prolong this judgment by rehearsing how he came to the conclusions which he did in respect of the other representations. In the course of preparation for the hearing, and the hearing itself and in the review for the purpose of writing this judgment, each of the findings have been considered including the reasoning of the Judge on which they are based. In particular, in the hearing, I sought and obtained assistance by being addressed by both Counsel as to the findings underlying each representation. The review has been carried out with especial care in view of the serious delay.
    4. The following points are to be noted. This is not a case where there is any specific criticism or challenge regarding any of the findings about such of the representations which were found to have been made and reliance on them. The reason why Ms Kerr’s evidence prevailed over the Defendants was because, despite the reservations which the Judge entertained, it was largely supported by contemporaneous documentary evidence and was consistent with them. This contrasted with the inconsistencies of the Defendants’ evidence and the casual approach of the Defendants to disclosure which undermined the Judge’s confidence in them (J/108). These are not demeanour points, but the heavy emphasis on documents and testing the evidence against documents makes the impact less serious than in the case of a Judge who is deciding cases more on demeanour of witnesses and the like.
    5. In the end, not only has the ambit of the challenge been very narrow, and this has been rejected, there is an overall feel about the judgment which perhaps explains the confined nature of the appeal. It is that without detracting from the serious concerns about the delay, the judgment is thorough and well-reasoned. This is evidenced particularly by the way in which the evidence relating to each of the alleged representations was set out and then the subject of detailed analysis. That analysis led in part to accepting that there had been fraudulent misrepresentations, but in respect of some misrepresentations rejecting the allegations of fraud and in some not accepting that there had been a misrepresentation at all: see paragraph 9 above. The Judge set out the facts clearly. He applied the advice of Robert Goff LJ in the Ocean Frost and of other judges about the approach to evidence, particularly testing the evidence against the documents, the motives of the parties and the overall probabilities. The Judge stated and applied the law well in respect of the law of fraudulent misrepresentation and generally. This is important as part of the assessment as to whether the judgment can stand following the delay in question.
VII Conclusion
    1. It is very regrettable that there was such serious delay. For this reason alone, permission is granted for the appeal because it seems to me to be have necessary for the appellate court to have subjected the case to scrutiny. It is to be noted in Bond at (J/118) that permission was granted to appeal and the Court of Appeal doubted whether permission would have been given without the delay.
    2. I am entirely satisfied from all of the above that despite the very serious delay and the especial care and scrutiny to which I have subjected the Judge’s findings that
(1) There is no evidence of fault of the Judge at any or any material point other than the delay itself;
(2) The Applicant has been unable to pinpoint any particular findings of fact which may be open to question whether by reason of the delay or at all;
(3) There is no reason to believe that the Judge did not reach the right conclusion on all of the findings and in the decision that the Claimants were entitled to rescind the Agreement and the relief which he ordered.
  1. For all these reasons, there is no reason for a retrial. In all the circumstances, I am entirely satisfied that the Court came to the right conclusion. Accordingly, the appeal is dismissed.