COURT OF APPEAL ORDER RETRIAL FOLLOWING JUDGE’S FAILURE TO GIVE ADEQUATE REASONS: THE “BUILDING BLOCKS” OF FACT FINDING

Attempts to appeal findings of fact are extremely common, so common that I have stopped writing about them.  There is also a common theme – the judge should not have found that, says the appellant: it was a finding open to them say the Court of Appeal. The judgment in Simetra Global Assets Ltd & Anor v Ikon Finance Ltd & Ors [2019] EWCA Civ 1413 breaks this pattern. The Court of Appeal allowed an appeal by the claimants on the basis of inadequate findings of fact by the trial judge.

It is therefore particularly important that, in a case where there are contemporary documents which appear on their face to provide cogent evidence contrary to the conclusion which the judge proposes to reach, he should explain why they are not to be taken at face value or are outweighed by other compelling considerations. It is, however, striking that the judgment in this case contains virtually no analysis of the contemporary documents many of which appear to shed considerable light on the nature and purpose of the critical confirmations and the way in which they were understood.

THE CASE

The claimants brought an action claiming they had been the victims of a Ponzi scheme.   Seven months after a trial lasting 13 days the trial judge delivered a judgment, 13 pages long and dismissed the claimants’ action. The claimants appealed on the basis that the judge’s findings were inadequate.

THE COURT OF APPEAL JUDGMENT IN RELATION TO FINDINGS OF FACT

    1. The approach which an appellate court should take when asked to reverse the judge’s findings of fact has been addressed in a number of recent cases. These are conveniently summarised in Group Seven under the heading of “Appellate restraint” at [21] to [23]. I need not repeat that summary, which emphasises the advantages which the trial judge, immersed in all aspects of the case and able to test the evidence at first hand, has over this court where the focus is inevitably narrower, and emphasises also the principle that this court should not interfere unless satisfied that a finding of fact is plainly wrong. However, I would add a reference to Volcafe Ltd v Cia Sud Americana de Vapores SA [2018] UKSC 61[2018] 3 WLR 2087at [41] on which Mr Paul McGrath QC for Ikon particularly relied. Lord Sumption said:

“This court has on a number of occasions pointed out that while an appeal to the Court of Appeal is by way of rehearing, a trial judge’s findings of fact should not be overturned simply because the Court of Appeal would have found them differently. It must be shown that the trial judge was wrong, i.e. that he fundamentally misunderstood the issue or the evidence, or that he plainly failed to take the evidence into account, or that he arrived at a conclusion which the evidence could not on any view support. Within these broad limits, the weight of the evidence is a matter for the trial judge. There is a world of difference between the impression which evidence makes on a judge who has followed it as it was deployed and the impression that an appellate court derives from cold transcripts. …”

    1. At some points in his submissions Mr Stephen Hofmeyr QC for the appellants invited us to reverse the judge’s findings of fact. In particular he invited us to find that Mr Jagannath was dishonest, contrary to the judge’s finding that he was not, and to remit the case for a retrial with that issue already determined. That struck me as an unrealistic approach. Once it is acknowledged, as Mr Hofmeyr does acknowledge, that a retrial is necessary, I consider that we should not tie the hands of the judge who will retry the case. Accordingly I do not propose that we should reverse the judge’s findings, in the sense of replacing them with findings of our own. That being so, the approach described in Group Seven and in Volcafe is not directly applicable, although clearly it must be borne in mind as constituting the framework within which this court must operate. Rather the issue is whether the judge gave adequate reasons for his conclusions. In that regard it will be necessary to consider in particular whether, in Lord Sumption’s words, the judge “plainly failed to take the evidence into account”. To the same effect, Lord Reed referred in Henderson v Foxworth Investments Ltd[2014] UKSC 41[2014] 1 WLR 2600 at [67] to “a demonstrable failure to consider relevant evidence”.
Inadequacy of reasons
    1. Failure by a judge to give adequate reasons for his conclusions may itself be a ground of appealFlannery v Halifax Estate Agencies Ltd [2000] 1 WLR 377 was a case in which the judge dismissed the claim, saying that he preferred the expert evidence for the defendant to that of the plaintiff and that, as a result, it was not right to say that the property in question was affected by structural movement. It was accepted that this would have been a conclusion open to him on the evidence and that the defendant’s counsel had given in his closing submissions what would have been valid reasons for the view which the judge took. However, the Court of Appeal held that it could not speculate whether these were indeed the judge’s reasons and that the judgment as it stood was “entirely opaque”. It held that failure to give reasons for a conclusion essential to the judge’s decision was a good ground of appeal. Henry LJ said:

“We make the following general comments on the duty to give reasons.

1. The duty is a function of due process, and therefore of justice. Its rationale has two principal aspects. The first is that fairness surely requires that the parties especially the losing party should be left in no doubt why they have won or lost. This is especially so since without reasons the losing party will not know (as was said in Ex parte Dave) whether the court has misdirected itself, and thus whether he may have an available appeal on the substance of the case. The second is that a requirement to give reasons concentrates the mind; if it is fulfilled, the resulting decision is much more likely to be soundly based on the evidence than if it is not.

2. The first of these aspects implies that want of reasons may be a good self-standing ground of appeal. Where because no reasons are given it is impossible to tell whether the judge has gone wrong on the law or the facts, the losing party would be altogether deprived of his chance of an appeal unless the court entertains an appeal based on the lack of reasons itself.

3. The extent of the duty, or rather the reach of what is required to fulfil it, depends on the subject matter. Where there is a straightforward factual dispute whose resolution depends simply on which witness is telling the truth about events which he claims to recall, it is likely to be enough for the judge (having, no doubt, summarised the evidence) to indicate simply that he believes X rather than Y; indeed there may be nothing else to say. But where the dispute involves something in the nature of an intellectual exchange, with reasons and analysis advanced on either side, the judge must enter into the issues canvassed before him and explain why he prefers one case over the other. This is likely to apply particularly in litigation where as here there is disputed expert evidence; but it is not necessarily limited to such cases.

4. This is not to suggest that there is one rule for cases concerning the witnesses’ truthfulness or recall of events, and another for cases where the issue depends on reasoning or analysis (with experts or otherwise). The rule is the same: the judge must explain why he has reached his decision. The question is always, what is required of the judge to do so; and that will differ from case to case. Transparency should be the watchword.”

    1. This approach was affirmed in English v Emery Reimbold & Strick Ltd [2002] EWCA Civ 605[2002] 1 WLR 2409, where it was held that English common law on this issue was consistent with the requirements of Article 6 of the European Convention on Human Rights. Giving the judgment of this court, Lord Phillips MR explained that what was required must depend on the nature of the case, but a judgment needs to make clear not only to the parties but to an appellate court the judge’s reasons for his conclusions on the critical issues:

“19. It follows that, if the appellate process is to work satisfactorily, the judgment must enable the appellate court to understand why the judge reached his decision. This does not mean that every factor which weighed with the judge in his appraisal of the evidence has to be identified and explained. But the issues the resolution of which were vital to the judge’s conclusion should be identified and the manner in which he resolved them explained. It is not possible to provide a template for this process. It need not involve a lengthy judgment. It does require the judge to identify and record those matters which were critical to his decision. If the critical issue was one of fact, it may be enough to say that one witness was preferred to another because the one manifestly had a clearer recollection of the material facts or the other gave answers which demonstrated that his recollection could not be relied on.”

    1. In Glicksman v Redbridge Healthcare NHS Trust [2001] EWCA Civ 1097 the judge had made a series of findings which led to her conclusion that the claimant in a clinical negligence case was entitled to succeed, but had not explained why she rejected the evidence to the contrary. Henry LJ said:

“10. On the medical issues considered in this case, no reasoned rebuttal of any expert’s view was attempted by the judge: her conclusions alone were stated in circumstances which called out for definition of the issues, for marshalling of the evidence, and for reasons to be given.

11. Those matters go to make up the building blocks of the reasoned judicial process, and those safeguards were not present here. Each of us was concerned at the prospect of a finding of professional negligence being made in their absence. Accordingly, we allowed the trust’s appeal on liability.”

    1. These “building blocks of the reasoned judicial process” are if anything even more important when the judge’s conclusions amount to a finding, as they do in this case, that a claim has been brought in bad faith.
    2. Finally, I would refer to the decision of this court in Baird v Thurrock Borough Council [2005] EWCA Civ 1499, where the judge accepted the evidence of the claimant as to how an accident had happened, without dealing with evidence given by the defendant’s witnesses, who were accepted to be truthful witnesses. If correct, their evidence would have meant that the accident could not have happened as the claimant described. Gage LJ said:

“17. It is clear that a judge is entitled to express the reasons for his decision briefly. For my part, I would wish to say nothing which would discourage a judge from expressing the reasons for his decision briefly but it is equally clear that the reasons for his or her decision must be sufficient to explain why he reached that decision. The question therefore in this appeal is: do the judge’s reasons for his decision meet the test of adequacy? In my judgment, in this case they did not.”

    1. One reason for this was that:

“18. … having said that, in his opinion, neither of the two ladies were in any way trying to mislead the court, the judge did not explain on what basis their evidence was untruthful or inaccurate in respect of the position of the wheelie bin after the accident and after the vehicle drove off. In my judgment, it was necessary for him to explain that inconsistency if he was to say that he was accepting the claimant’s evidence in preference to the evidence of those two witnesses.”

    1. Ward LJ added:

“23. Short judgments are, of course, all fine and well and to be encouraged but only if they are careful judgments. Second, judges do not have to deal with each and every point in issue but where the dispute is as fundamental to the case as this one then it does deserve mention and an explanation being given for the apparent inconsistency between his appearing to believe the two ladies yet also finding that they could not have been correct in saying that the right-hand bin was still up in the air.”

    1. Without attempting to be comprehensive or prescriptive, not least because it has been said many times that what is required will depend on the nature of the case and that no universal template is possible, I would make four points which appear from the authorities and which are particularly relevant in this case. First, succinctness is as desirable in a judgment as it is in counsel’s submissions, but short judgments must be careful judgments. Second, it is not necessary to deal expressly with every point, but a judge must say enough to show that care has been taken and that the evidence as a whole has been properly considered. Which points need to be dealt with and which can be omitted itself requires an exercise of judgment. Third, the best way to demonstrate the exercise of the necessary care is to make use of “the building blocks of the reasoned judicial process” by identifying the issues which need to be decided, marshalling (however briefly and without needing to recite every point) the evidence which bears on those issues, and giving reasons why the principally relevant evidence is either accepted or rejected as unreliable. Fourth, and in particular, fairness requires that a judge should deal with apparently compelling evidence, where it exists, which is contrary to the conclusion which he proposes to reach and explain why he does not accept it.
    2. I would not go so far as to say that a judgment which fails to follow these requirements will necessarily be inadequately reasoned, but if these requirements are not followed the reasoning of the judgment will need to be particularly cogent if it is to satisfy the demands of justice. Otherwise there will be a risk that an appellate court will conclude that the judge has “plainly failed to take the evidence into account”.
The importance of contemporary documents
      1. In this regard I would say something about the importance of contemporary documents as a means of getting at the truth, not only of what was going on, but also as to the motivation and state of mind of those concerned. That applies to documents passing between the parties, but with even greater force to a party’s internal documents including emails and instant messaging. Those tend to be the documents where a witness’s guard is down and their true thoughts are plain to see. Indeed, it has become a commonplace of judgments in commercial cases where there is often extensive disclosure to emphasise the importance of the contemporary documents. Although this cannot be regarded as a rule of law, those documents are generally regarded as far more reliable than the oral evidence of witnesses, still less their demeanour while giving evidence. The classic statement of Robert Goff LJ in The Ocean Frost [1985] 1 Lloyd’s Rep 1 at p.57 is frequently, indeed routinely, cited:

“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. 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.”

  1. It is therefore particularly important that, in a case where there are contemporary documents which appear on their face to provide cogent evidence contrary to the conclusion which the judge proposes to reach, he should explain why they are not to be taken at face value or are outweighed by other compelling considerations. It is, however, striking that the judgment in this case contains virtually no analysis of the contemporary documents many of which appear to shed considerable light on the nature and purpose of the critical confirmations and the way in which they were understood.

OVERTURNING THE JUDGMENT IN THE CURRENT CASE

Because there needs to be a retrial the Court of Appeal were very careful in relation to findings of fact.  The decision was overturned on the basis of inadequate reasoning and explanation.

NO NEED FOR APPELLANTS TO MAKE A REQUEST IN ACCORDANCE WITH REIMBOLD

The Court of Appeal did not accept the respondent’s argument that the appellant should have sought further reasons from the judge.

Procedure

  1. Mr McGrath criticised the appellants for not pursuing more fully before the judge a request that he provide further reasons for his conclusions, in accordance with the procedure recommended in English v Emery Reimbold & Strick Ltd at [25]. In fact, however, the appellants did make this point to the judge, who had before him a draft notice of appeal with the appellants’ criticisms of the judgment, but nevertheless considered that his reasoning was sufficient. In any event this was not a case where the appellants were seeking additional reasons on specific points. Rather the thrust of their argument was that what was needed was a complete reconsideration of the judgment as a whole.
ORDER FOR A RETRIAL
    1. I am acutely conscious that for this court to order a retrial when there has already been a three-week trial in the Commercial Court at which the claim against Ikon failed comprehensively is a serious step which must be regarded as a last resort. Even if it were possible to put to one side the heavy burden of costs which will be involved in a retrial, the additional stress on the Ikon defendants, including individual defendants whose reputations are at stake as well as their assets, will inevitably be considerable. That is a factor which has caused me to think long and hard about whether a retrial is necessary.
    2. For the reasons which I have given, I have concluded that it is. Unfortunately this judgment plainly does not take into account the evidence which needed to be taken into account. Moreover, while it is undoubtedly a matter of regret that the Ikon defendants must be put to the expense and stress of a retrial, to allow this judgment to stand, making as it does serious and inadequately reasoned findings, apparently amounting to fraud, against Mr Litinas and Ms Kitromilidou, would in my view be the greater unfairness.
    3. This is not to imply that the result of the retrial is a foregone conclusion. Far from it. While there is apparently compelling evidence of dishonesty on the part of (at least) Mr Jagannath, and no room for doubt that Ikon will be responsible for the consequences of any dishonesty which is proved against him, there are also points to be made the other way. Mr McGrath, who has sought to uphold the judgment with real skill and charm, and who said everything which could be said to that end, made some powerful points, both in writing and orally. Not least of these was that it was inherently unlikely that, in circumstances where on the appellants’ own case the money had already been misappropriated by Mr Daskaleas without the collusion of Ikon well before October 2014, and where it would inevitably come to light sooner or later that Ikon was not holding hundreds of millions of dollars of the appellants’ money, Ikon as an FCA regulated entity would effectively commit commercial suicide by representing that it was.
    4. This or other points made by Mr McGrath may have weighed with the judge in leading him to dismiss the appellants’ claim. The problem is that, if they did, he did not say so, so we simply do not know and should not guess.
    5. Accordingly I would allow the appeal and would reluctantly remit the case to be tried before a different judge of the Commercial Court.