COURT OF APPEAL OVERTURNS FINDINGS OF FACT: THE STANDARD OF PROOF FOR DISHONESTY: ALSO DELAY OF 22 MONTHS IN GIVING JUDGMENT UNACCEPTABLE

In Bank St Petersburg PJSC & Anor v Arkhangelsky & Anor [2020] EWCA Civ 408 the Court of Appeal ordered a retrial because of doubts in relation to the trial judge’s findings of fact.  The judge had applied too high a standard in considering whether dishonesty had been established.

“The parties to civil, and particularly commercial, litigation are entitled to receive their judgments within a reasonably short period of time. That period should not be longer than 3 months. As has been repeatedly said, any other approach will lead to a loss of public and business confidence in our justice system.”

THE CASE

The claimant bank claimed £16.5 million from the defendants.  The defendants counterclaimed for an alleged conspiracy to unlawfully raid the assets of their businesses. The counterclaim amounted to US$467 million.   The claimant succeeded in proving its claim. The counterclaims, which made allegations of dishonesty against the claimant,  were dismissed.  The defendants appealed.

DELAY IN GIVING JUDGMENT

The trial took 46 sitting days. The judgment was given 22 months later.   The Court of Appeal indicated that it would not have allowed the appeal on the grounds of delay alone.

    1. The judge regretted his delay in preparing his judgment in this case. We were shown evidence that, when enquiries were made of the judge some 7 months after the trial, his clerk said that the delay had been caused by the need to write a judgment in a preceding case. Later enquiries were met with the answer that further delay had been caused by subsequent cases, and some medical problems.
    2. On any analysis, in my judgment, the delay in this case was inexcusable. The unwritten rule applicable to both the Business and Property Courts and the Court of Appeal is that judgments should be delivered within 3 months of the hearing. The question, however, is whether the delay is, in itself enough to require a retrial.
    3. The parties cited a line of cases on delayed judgments. In Rolled Steel Ltd v. British Steel Corporation [1986] Ch. 246 at page 310, and in Bishopsgate Investment Management Ltd. v. Maxwell [1993] BCC 120 at page 138, stringent criticisms were made of judgments delayed by some 8 and 5 months respectively. In Goose v. Wilson Sandford [1998] TLR 85 (“Goose“), the delay was some 20 months, although, as in this case, the judge had the benefit of transcripts of the evidence. The Court of Appeal ordered a retrial because some of the judge’s conclusions were held to be unsafe as a result of the delay. Peter Gibson LJ said this:-
“112. A judge’s tardiness in completing his judicial task after a trial is over denies justice to the winning party during the period of the delay. It also undermines the loser’s confidence in the correctness of the decision when it is eventually delivered. Litigation causes quite enough stress, as it is, for people to have to endure while a trial is going on. Compelling them to await judgment for an indefinitely extended period after the trial is over will only serve to prolong their anxiety, and may well increase it. Conduct like this weakens public confidence in the whole judicial process. Left unchecked it would be ultimately subversive of the rule of law. Delays on this scale cannot and will not be tolerated. A situation like this must never occur again.
113. Because of the delay in giving judgment, it has been incumbent on us to look with especial care at any finding of fact which is now challenged. In ordinary circumstances where there is a conflict of evidence a judge who has seen and heard the witnesses has an advantage, denied to an appellate court, which is likely to prove decisive on an appeal unless it can be shown that he failed to use, or misused, this advantage. We do not lose sight of the fact that the judge had transcripts of the evidence, as well as very extensive written submissions from counsel. But the very fact of the huge delay in itself weakened the judge’s advantage, and this consideration had to be taken into account when we reviewed the material which was before the judge. In a case as complex as this, it is not uncommon for a judge to form an initial impression of the likely result at the end of the evidence, but when he has come to study the evidence (both oral and written) and the submissions he has received with greater care, he will then go back to consider the effect the witnesses made on him when they gave evidence about the matters that are now troubling him. At a distance of 20 months, Harman J. denied himself the opportunity of making this further check in any meaningful way. …”
  1. Goose was rather different from the present case, but it shows that the delay is a factor to be taken into account when the appellate court is considering the judge’s findings and treatment of the evidence. Peter Gibson LJ’s approach was approved by Lord Woolf MR in Gardiner Fire Limited v. Jones [1998] 10 WLUK 319 at pages 2 and 3. Moreover, in Cobham v. Frett [2001] 1 WLR 1775 at page 1783, Lord Scott said that, if excessive delay is to be relied on in attacking a judgment, “a fair case must be shown for believing that the judgment contains errors that are probably, or even possibly, attributable to the delay. The appellate court must be satisfied that the judgment is not safe and that to allow it to stand would be unfair to the complainant”, but that “[i]t can be easily accepted that excessive delay in delivery of a judgment may require a very careful perusal of the judge’s findings of fact and of his reasons for his conclusions in order to ensure that the delay has not caused injustice to the losing party”.[2]
  2. In Bond v. Dunster Properties Ltd [2011] EWCA Civ 455, there was 22 months delay. Arden LJ emphasised at [7] that “[a]s in any appeal on fact, the court has to ask whether the judge was plainly wrong”, but said that, in the case of a seriously delayed judgment, if the reviewing court found that the judge’s recollection of the evidence was at fault on any material point, then (unless the error could not be due to the delay) it would order a retrial if it could not be satisfied that the judge came to the right conclusion. That approach has no application in this case, where the judge meticulously re-read all the transcripts. But Arden LJ’s judgment emphasises once again that delay, by itself, is not a ground for allowing an appeal.
  3. In my judgment, as I have already indicated, the delay in this case had a rather different effect from that suggested in the authorities. The judge mitigated the delay by reading the transcripts assiduously. He did not forget or omit consideration of any material parts of the evidence. Instead, he undertook a minute, indeed commendable, analysis of the evidence on each separate point. The delay may, however, I think, have meant that he was less able to deal with findings he made in the round, perhaps because the findings on one part of the case were made at such a remove in time from other findings.
  4. Nonetheless, I would not allow this appeal solely on the grounds of the delay, regrettable as that delay undoubtedly was.
  5. I should conclude on this point by reiterating that the “3-month” general rule should be adhered to even in long and complex cases. Justice delayed is justice denied. The parties to civil, and particularly commercial, litigation are entitled to receive their judgments within a reasonably short period of time. That period should not be longer than 3 months. As has been repeatedly said, any other approach will lead to a loss of public and business confidence in our justice system.”

FINDINGS OF FACT

The appeal was allowed on the basis of the judge’s  approach to findings of fact, in particular the burden of proof in establishing dishonesty.  Sir Geoffrey Vos, Chancellor of the High Court, sets out the issues in detail in his judgment. the position was summarised in the judgment of Lord Justice Males.  The trial judge applied too high a standard of proof in considering the defendant’s assertions of dishonesty.

THE JUDGMENT OF LORD JUSTICE MALES

“The standard of proof for dishonesty
    1. I agree with the Chancellor that, in addressing the question of dishonesty, the judge appears to have applied a heightened standard of proof. For example, at [1138], citing the speech of Lord Nicholls in Re H (Minors) [1996] AC 563, the judge said.
“Again, I take into account that the more serious the allegation and the more improbable the event sought to be established:

‘the stronger must be the evidence that it did occur before, on the balance of probabilities, its occurrence will be established’.”

  1. The test which the judge set himself was that proof of dishonesty “could only be discharged by showing the facts to be incapable of innocent explanation” (see [1634]). He described this at [1525(5)] as “the heavy onus of proof in the context of an assertion of dishonesty”.
  2. That this was not merely loose language is apparent from the many references to the burden and standard of proof contained in the judgment.
    1. In general it is legitimate and conventional, and a fair starting point, that fraud and dishonesty are inherently improbable, such that cogent evidence is required for their proof. But that is because, other things being equal, people do not usually act dishonestly, and it can be no more than a starting point. Ultimately, the only question is whether it has been proved that the occurrence of the fact in issue, in this case dishonesty in the realisation of the assets, was more probable than not.
    2. This is clear from the judgment of the House of Lords in In re B (Children) [2008] UKHL 35[2009] 1 AC 11. Lord Hoffmann said:
“13. … I think that the time has come to say, once and for all, that there is only one civil standard of proof and that is proof that the fact in issue more probably occurred than not. …
14. Finally, I should say something about the notion of inherent probabilities. Lord Nicholls said, in the passage I have already quoted, that –

‘the court will have in mind as a factor, to whatever extent is appropriate in the particular case, that the more serious the allegation the less likely it is that the event occurred and, hence, the stronger should be the evidence before the court concludes that the allegation is established on the balance of probability.’

15. I wish to lay some stress upon the words I have italicised. Lord Nicholls was not laying down any rule of law. There is only one rule of law, namely that the occurrence of the fact in issue must be proved to have been more probable than not. Common sense, not law, requires that in deciding this question, regard should be had, to whatever extent appropriate, to inherent probabilities. If a child alleges sexual abuse by a parent, it is common sense to start with the assumption that most parents do not abuse their children. But this assumption may be swiftly dispelled by other compelling evidence of the relationship between parent and child or parent and other children it would be absurd to suggest that the tribunal must in all cases assume that serious conduct is unlikely to have occurred. In many cases, the other evidence will show that it was all too likely. If, for example, it is clear that a child was assaulted by one or other of two people, it would make no sense to start one’s reasoning by saying that assaulting children is a serious matter and therefore neither of them is likely to have done so. The fact is that one of them did and the question for the tribunal is simply whether it is more probable that one rather than the other was the perpetrator.”
    1. Lady Hale said:
“70. … Neither the seriousness of the allegation or the seriousness of the consequences should make any difference to the standard of proof to be applied in determining the facts. The inherent probabilities are simply something to be taken into account, where relevant, in deciding where the truth lies. …
72. As to the seriousness of the allegation, there is no logical or necessary connection between seriousness and probability. Some seriously harmful behaviour, such as murder, is sufficiently rare to be inherently improbable in most circumstances. Even then there are circumstances, such as a body with its throat cut and no weapon to hand, where it is not at all improbable. Other seriously harmful behaviour, such as alcohol or drug abuse, is regrettably all too common and not at all improbable. Nor are serious allegations made in a vacuum …”
  1. The judgment of Bryan J in JSC BM Bank v Kekhman [2018] EWHC 791 (Comm) collects together at [46] to [66] a number of similar statements of principle and illustrates that, once other findings of dishonesty have been made against a party, or he is shown to have given dishonest evidence, the inherent improbability of his having acted dishonestly in the particular respect alleged may be much diminished and will need to be reassessed.
    1. In the present case the judge made a number of findings that the Bank had acted reprehensibly and even dishonestly, and that its witnesses had given dishonest evidence. He used strong words, such as “extraordinary”, “arresting” and “ruthless” to describe the Bank’s conduct. But he appears to have treated the maxim that “the more serious the allegation … the stronger must be the evidence that it did occur” which he took from Lord Nicholls’ speech in Re H (Minors) as if it were a rule of law, without regard to the qualification expressed by Lord Nicholls himself and explained more fully in In re B (Children). Nor, so far as I can see, did the judge ever ask himself whether, in the light of the facts which he found to be proved and the dishonest evidence which he had heard, the dishonesty alleged against the Bank in the realisation of the assets remained “inherently improbable”. If he had done so, he may well have concluded that it was not, and that it was more probable than not that the Bank had acted dishonestly in the realisation of the appellants’ assets.
  2. The concluding paragraphs of the judgment, in which the judge refused to make declarations in favour of the Bank and Mr Savelyev, underline this. His comment that “the very different conditions in Russia may mean that what seems improbable, or at least not probable, looked at through the lens of a different jurisdiction accustomed to different conditions, may yet have occurred” ([1634]) seems to recognise that he may have been viewing the evidence through the wrong lens. The list at [1635] of the features which had “encouraged and fomented” his misgivings gives the strong impression that despite his findings made (as he put it) “on the basis of the available evidence, having regard to the burden of proof”, the judge was in reality unconvinced by his own judgment.
  3. In my judgment, therefore, the judge has misdirected himself as to the standard of proof required to be satisfied in this case, with the consequence that his findings as to the absence of dishonesty on the part of the Bank in the realisation of the assets cannot stand.