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Case No: CCRTF/1999/0825/
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CARDIFF COUNTY COURT
Mr. Assistant Recorder Thomas
Royal Courts of Justice
Strand, London, WC2A 2LL
Tuesday 18 April 2000
B e f o r e :
LORD JUSTICE PETER GIBSON
LORD JUSTICE HENRY
and
LORD JUSTICE MANCE
|
DAVEY
|
Appellant
|
|
-
and -
|
|
|
WILLIAMS
& ANR.
|
Respondent
|
__________________________________
(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 180 Fleet Street
London EC4A 2HD
Tel No: 0171 421 4040, Fax No: 0171 831 8838
Official Shorthand Writers to the Court)
__________________________________
Mr. Milwyn Jarman (instructed by Messrs. Malloy and Barry of Canton for
the Appellant)
Mr. Andrew Green (instructed by Messrs. O'Brien, Lewis and James of
Cardiff for the Respondents)
__________________________________
Judgment
As Approved by the Court
Crown Copyright ©
LORD JUSTICE MANCE:
1. The claimant appeals from the dismissal of his claim by Mr Assistant
Recorder K.G. Thomas, sitting in the Cardiff County Court on 26th
March 1999. The respondents, Mr and Mrs Williams are husband and wife, each
owning 50 of the total of 100 £1 shares (evidently issued at par) in
Cardiff Shooting Centre Limited (the company), which runs an indoor shooting
club in Cardiff. The claimant's claim as pleaded is that in or about July 1992
he agreed to purchase Mrs Williams' shareholding for £30,000, and to
become a director of the company in her place; that at or shortly after that
date £25,000 was accordingly paid by him in two instalments of
£15,000 and £10,000 to Mr Williams as his wife's agent, that it was
agreed that the remaining £5000 would remain outstanding since at the time
the claimant lacked the means to pay it, that the respondents repudiated the
agreement, by amongst other things failing to complete the sale and in August
1993 insisting that the claimant had resigned and should not return to the
company's premises, and that the £25,000 paid is recoverable accordingly
as money received and/or paid for a consideration which has wholly failed.
2. The trial took place over three days. The Assistant Recorder heard evidence,
on the one side, from the claimant, Mr Davey, and his wife and a Mr Young
(whose evidence was of no real assistance) and, on the other, from the
respondents. He gave judgment, without reserving except over a mid-day
adjournment, on the third day of trial. Mr Davey, who was born in 1949, had for
some years been a plumber, earning some £12,000 in 1989, nearly
£15,000 in 1990, and in the region of £11,000 per annum in 1991 and
the first half of 1992. He was also a keen shot, and had been for years a
member of the club run by the company. He had known Mr Williams for some 27
years, they were very good friends and he trusted him. In winter 1990 the
plumbing trade was not going well, and he had made a passing comment to Mr
Williams about the downturn and to the effect that he could not see himself
continuing as a plumber beyond 50. Mr Williams had then, he said, raised the
possibility of Mr Davey joining him as an equal partner in the company, with a
particular view to the extending its activities by acquiring land developing an
outdoor range, and he had expressed his interest then and in discussions over
the next two years which included visiting the Williamses' house with his wife.
That he said eventually led to his investment of £25,000, with a further
£5000 to be paid later. At some point before investing he said that he saw
unsigned accounts showing a healthy picture which he also showed to his then
accountant, Mr Weeks, who advised him to obtain up to date accounts before
investing.
3. On Mr Davey's account he raised the money to make his investment by
remortgaging his and his wife's house to Nationwide Anglia B.S. for
£58,000 pursuant to an application dated 12th June 1991.
Nationwide Anglia offered a corresponding advance on 3rd October
1991. The monies were received in December 1991 and were in part used to pay
off the existing mortgage and as to the balance of some £30,000 paid by Mr
and Mrs Davey into their Principality B.S. account (in which as a result the
balance increased to nearly £31,475). Over the next six months, this
balance was (despite additions of interest and five or so payments in, the
largest being of £761) reduced by numerous withdrawals (the largest being
a cheque for £964) to £25,130. This sum was effectively withdrawn
under three building society cheques for £15,000, £5000 and
£5000 on or about 16th, 21st and 27th
July 1992. Those cheques were paid into Mr and Mrs Davey's Barclays Bank
current account on those dates. Their equivalent was then withdrawn in cash in
two instalments, £15,000 on 23rd July and £10,000 on
3rd August 1992. Mr Davey's case was that this cash was paid over to
Mr and Mrs Williams, and that this was done informally without any receipt
because he trusted Mr Williams and because Mr Williams said: "What is the point
of giving it to [me] in cash if [I] have got to pay tax on it". At about the
same date, Mr Davey completed winding down his trade as an independent plumber,
and went to work at the club at a salary of £100 a week, the same as Mr
Williams was paid. Unfortunately the vendor of the 16 acres on which it was
proposed to develop an outdoor range later withdrew. Following arguments in
July/August 1993, Mr Williams also asserted that Mr Davey had resigned and
should not bother to return. In the meantime Mr Davey said that he had not
pressed for any share transfer, being conscious that he still owed £5000.
His evidence was that, after being banned from the club premises by Mr
Williams, he went almost immediately to see one firm of solicitors, who told
him to camp outside the club, he did not like that advice and so on
17th August 1993 (as they confirmed) went to the firm now acting for
him, Peter Mallia & Company. Nonetheless, no letter was written to the
respondents by that firm until 15th November 1994. The letter they
then wrote referred to an advance of £30,000, and said that Mr Davey had
been given two years accounts, namely 1990 and 1991, showing a net profit in
excess of £20,000 each year and a net balance in directors' account of
£14,000, in the light of which the company "seemed an attractive
proposition". It attributed Mr Davey's leaving the club to "the deterioration
of the relationship between you". Mr Williams responded on 18th
November 1994 expressing amazement at Peter Mallia's letter "the contents of
which bear no resemblance to reality", denying that any advance of £30,000
had been made, saying that "the figures you quote regarding net profit and
Directors net balance are absurd and do not exist". It added: "Also regarding
deterioration of "relationships", Mr Davey requested a meeting on 2/8/93,
during which he resigned of his own accord. This was amicable and we shook
hands as he left." Further correspondence ensued, leading eventually to the
commencement of these proceedings on 24th November 1995.
4. The respondents' case is that no investment was ever agreed or made. Mr
Williams acknowledged in his evidence that there had been discussions about his
going into business with Mr Davey (which he dated from the end of 1991), that
he had been thinking seriously about this, that Mr Davey had said that he could
raise £30,000 from sale of timeshares and that Mr and Mrs Davey had made
two visits to his house in February and late May or early June 1992. Mr
Williams said however that the proposal was to invest in the proposed new
outdoor range in return for a stake in that business, that it could not be
finalised because the acquisition of the land had not been finalised, and that
Mr Davey went to work in the club to learn the business, get to know the
members and in the hope that matters would develop favourably so that he could
invest in the outdoor range in the future. Mr Williams acknowledged that he had
shown Mr Davey audited accounts: "I showed him accounts `89, '91. I think it
was two sets, but accounts 1990 would have shown `89". The audit certificates
on the accounts for the periods ended 30th April 1989, 1990 and 1991
are in fact dated, respectively, 3rd August 1990, 25th
May 1992 and 26th June 1992. These accounts show profits of
£3100 in 1989, £5233 in 1990, £668 in 1990 and £2650 in
1991, and sums outstanding on directors' account ranging of nearly £20,000
in 1988, nearly £16,000 in 1989, £13,000 in 1990 and £8463 in
1991. Mr Davey said that the accounts were shown to Mr Davey during their
second meeting at his home, and his purpose was to make clear to Mr Davey the
need to increase the company's turnover and membership to support his wages. He
acknowledged that he had not shown accounts to any other company employee.
5. The essential issue which the Assistant Recorder had to determine was
whether Mr Davey had paid £25,000 to Mr Williams. If he had, then he was
no doubt entitled to recover it. On that issue, one side or the other must have
been lying. The onus of proof rested of course on Mr Davey to establish on the
balance of probability that he was telling the truth. And counsel for the
Williamses in his final speech attached considerable significance to the onus
of proof. However, in most circumstances one would envisage that it would be
possible to come to a conclusion one way or the other on such an issue, rather
than fall back upon the onus of proof. Any judgment on such an issue would be
expected to take into account not merely the judge's assessment of the
witnesses called before him, but all the evidence before him as to the parties'
words and conduct and the inherent probabilities. The proper approach in the
context of an issue of fraud was described by Robert Goff L.J. as he then was
in The "Ocean Frost" [1985] 1 Ll.R. 1, 57 as follows:
"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 witnesss 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."
6. Although that passage is directed to fraud cases specifically, it has
relevance also to an issue such as the present. Here, it is clear from the
transcripts that the claimant was a witness whose evidence was in parts
characterised by very considerable confusion and inconsistency. But confusion
and inconsistency are not necessarily to be equated with or explained by
untruthfulness. Indeed, someone who sets out to construct a lying account, with
a view to pretending that he had paid money to another when he had not, might
often be expected to be more coherent in his account of the basic course of
events than a confused and naïve innocent. Further, Mr and Mrs Williams'
testimony itself presented some problems. For example, they could not explain
certain payments into their personal account, and, it would seem, from Mrs
Williams' evidence had not taken any advantage of an opportunity given them
during the trial to try to do so. We were also shown passages from Mr Williams'
evidence relating to the Cardiff Shooting Club (a partnership evidently
established in 1992 to take over certain administrative functions), and
relating to the circumstances of Mr Davey's departure from the club in 1993
which appear on their face to be capable of attracting adverse comment. In his
judgment, the Assistant Recorder did not in fact attempt any direct assessment
of the witnesses' credibility on either side in the light of these or other
points. His approach was to try to resolve the central issue was through
identifying and resolving certain subsidiary issues.
7. First, he discarded as of no assistance the fact that the £25,000 was
moved by "an internal transaction between the plaintiff and his wife" in three
tranches from the Principality B.S. to their Barclays Bank account. He was I
think correct to do so. The reason for the three tranches may well have been
internal to the building society or related to the sums involved, although this
was an instant access account. This aspect was evidently not investigated on
either side before trial.
8. Then the Assistant Recorder turned to Mr Davey's evidence about the sequence
of events leading up to, first, the remortgage of his home and, later, the
alleged investment. Mr Davey had said in his witness statement dated
8th June 1996 that he had the accounts for three years prior to 1992
(i.e. to 30th April 1991) and had seen his accountant, Mr Weeks, in
June/July 1992 and that Mr Weeks had seen that it was a profitable business but
said that he could not assess it without having accounts for (i.e. to
30th April) 1992. That, as the Assistant Recorder said, tied in with
a letter dated 5th October 1994 (which was all that was adduced from
Mr Weeks). In a later statement dated 4th January 1997, Mr Davey
said however that he had been shown accounts for two years, and "we were
awaiting the present accounts for 1993", and that the accounts he had been
shown were different accounts from those subsequently audited and disclosed by
the respondents in this litigation.
9. In his first witness statement, Mr Davey also went on to say that he
discussed the matter with his wife and they arranged for a remortgage together.
According to the sequence of events apparently represented by this statement,
the remortgage was therefore in or after June 1992, whereas in fact it was in
1991.
10. Under cross-examination Mr Davey gave fluctuating and unsatisfactory
evidence, to the effect that, since the remortgage was in 1991, the (one)
occasion on which he had seen Mr Weeks must have been in 1989 or 1990 or
thereabouts. Even this does not follow, since there would be no reason why it
should not have been in the first half of 1991. The Assistant Recorder found
that "Mr Davey took the accounts which he was shown for the years ended 1989,
1990 and 1991 to his accountant, Mr Weeks, at the earliest in the latter half
of 1991". Prior to May/June 1992 there were no audited accounts for the years
ended 30th April 1990 and 1991. The Assistant Recorder's finding
leaves open a possibility that Mr Davey was shown unaudited accounts, rather
than the audited accounts which Mr Williams said that he supplied to Mr Davey
in June 1992, although Mr William's evidence was that he never had draft
accounts The Assistant Recorder dealt, however, with Mr Davey's evidence that
the accounts he had seen presented a different and rosier picture than the
subsequent audited accounts as follows:
"So, if he is right, it must follow that the Williamses, as long ago as 1989 or
1990, had been dishonestly plotting the theft of the money from Mr Davey by
forging accounts which no doubt painted a rosier picture of their business than
was the reality, and were sufficiently convincing forgeries to pass the
scrutiny of a professional accountant, Mr Weeks."
11. I think that this overstates the position. First, the dates "1989 or 1990"
appear to derive from Mr Davey's own hopelessly inaccurate dating at trial of
his meeting with Mr Weeks. The meeting with Mr Weeks was, as the Assistant
Recorder found, not before the second half of 1991. Second, if Mr Davey was
right that he had seen different accounts from those subsequently audited and
produced in court, such accounts were (on his case) no doubt produced to induce
him to invest in the company, and there would be no reason to think that Mr and
Mrs Williams intended when producing them to do anything more than induce him
to invest. Mr Davey's case was not that, when he was induced to invest
£25,000, the Williamses then intended to refuse him the promised
shareholding or to deny its receipt. What happened in 1993, a year after the
investment, or in 1994 when he first pursued his claim, may well have been, and
on his case would seem likely to have been, opportunistic dishonesty. As to the
Assistant Recorder's reference to "sufficiently convincing forgeries to pass
the scrutiny of a professional accountant, Mr Weeks", that depends whether the
accounts shown to Mr Weeks were or were not audited, which they could not have
been unless shown in late June 1992 ,which the Assistant Recorder did not find.
Even if one does, however, substitute, in place of the Assistant Recorder's
finding that the earliest date when accounts could have been shown to Mr Weeks
was in the latter half of 1991, a positive finding that the audited accounts
were shown to Mr Weeks in late June 1992, the possibility remains that Mr Davey
has convinced himself with hindsight that the accounts he saw presented a
rosier picture than the actual audited accounts which he saw. The profit
figures (set out above) are certainly not spectacular, but it does not seem to
me impossible to conceive of a naïve, inexperienced and optimistic
investor, with both a personal and business interest in the company, investing
the £25,000 in the way Mr Davey claims on the faith of such accounts. The
Assistant Recorder said: "I have to say, with no disrespect intended, they are
not the sort of accounts perhaps which would encourage an investment of
£25,000". That is a legitimate general observation, but experience also
indicates that some individuals do from time to time part with large sums of
money in over-optimistic hope or speculation.
12. The Assistant Recorder said that it followed from his finding that Mr Davey
saw Mr Weeks at earliest in the latter half of 1991 that "I do not accept that
the purpose of the remortgage was to obtain capital to invest in this
business". That too is open to the comment that, merely because Mr Davey had
not yet seen Mr Weeks, it does not follow that he had not decided to raise
money in anticipation and in the hope of a joint venture with Mr Williams. The
Assistant Recorder did go on, correctly, to observe that, even if the capital
was obtained for another purpose, it may have been in fact used for an
investment in the company. As a matter of fact, no alternative purpose for
which the money may have been raised or used was identified in evidence before
the Assistant Recorder.
13. The next point which the Assistant Recorder made was one which he had
himself first raised by a question to Mrs Davey (who gave evidence after her
husband). It was why the £25,000 was paid to Mr Williams in two tranches,
on 23rd July and 3rd August 1992. Mr Davey had,
characteristically, got in a muddle in his evidence about which sized payment
came first. It is however clear that the £15,000 was taken out of the bank
first, and that his and his wife's evidence was that his wife took that sum to
Mr Williams' house, while he himself took the £10,000 later drawn out to
Mr Williams at the club. When asked by the Assistant Recorder, Mrs Davey simply
could not remember why two tranches of cash were withdrawn, not one. The
Assistant Recorder said
"There can have been no purpose in that, if the agreement was to pay a sum of
£25,000. Why pay £15,000 in one week and £10,000 the next, when
the entire sum was available throughout? No-one suggests there was any urgency
about the payment or any difficulty in obtaining the payment".
14. It does not seem to me surprising that Mrs Davey, confronted for the first
time with the Assistant Recorder's question some seven years after the event,
could not give any explanation. There must, at the relevant time in 1992, have
been some explanation for the money being taken out in two tranches. Any
significance in the fact that there were two tranches must rest upon an
inference that it shows or suggests that the Daveys were engaging not merely -
as Mr Williams admitted - in discussions with Mr Williams to invest
£30,000, but at the same time in two other, separate - though unknown -
transactions into which they sank separate sums of £15,000 and
£10,000. With persons with means and financial experience so obviously
limited as the Daveys, that strikes one as a somewhat extraordinary
proposition. It is far more likely, as it appears to me, that two tranches
were withdrawn for administrative reasons, and that the fact of two tranches
sheds no light on the issue whether they were paid to the Williamses. The
Assistant Recorder rightly concluded that no significance could attach to the
fact that the £25,000 was moved from the building society to the bank in
three tranches. The first cash withdrawal out of the bank was on
23rd July 1992 in the sum of £15,000, equating with the first
tranche which had been paid into the bank. The second of the three tranches
paid into the bank involved a cheque which appeared on the bank statement as a
counter-credit for £5000 on 21st July 1992. Since cheques take
three days to clear, cash could not have been drawn against this cheque on
23rd July 1992, the date when the first cash withdrawal of
£15,000 was made out of the bank. The Assistant Recorder was therefore
wrong on the face of it to say that "the entire sum was available throughout".
Further, any agreement between Mr Davey and Mr Williams was, on Mr Davey's
case, evidently reached only shortly before he started work at the club.
Although Mrs Davey could not recall this, it would not seem in the slightest
surprising on Mr Davey's case, if he having just reached agreement to invest in
and join the company should have made a first immediate down-payment, taking
the rest with him, as he said, when he actually started work on 3rd
August 1992. In my view, on the evidence before the Assistant Recorder, no
significance could properly have been attached to the fact that the money was
withdrawn from the bank in two tranches.
15. The Assistant Recorder then moved to more general considerations. He said
that he could not conceive of the claimant, who on his own evidence had
consulted an accountant and solicitor at the relevant time, handing over
£25,000 in cash, even to a man he trusted implicitly, without ever
receiving a receipt or any document or agreement, and went on:
"there was no need for that money to have been paid in cash if it was a
legitimate business transaction, and I am driven to the conclusion that it was
not used for that purpose. In other words it was not given to the
Williamses."
16. The reference to a solicitor is presumably to Mr Rough of Gordon Williams
who had acted for Mr and Mrs Davey in relation to the remortgage in 1991. But
that was the year before the alleged agreement with Mr Williams was actually
reached and implemented. The Assistant Recorder's further statement that there
was no need for payment in cash does not address Mr Davey's evidence that Mr
Williams said he wanted cash for tax reasons. A sale of half the company's
shares for £30,000 would appear very likely to have attracted capital
gains tax, bearing in mind that they had been issued and stood in the balance
sheet at par. The qualification "if it was a legitimate business transaction"
ignores the same evidence. On Mr Davey's evidence, Mr Williams entered into a
transaction with Mr Davey under which he wanted to have cash, because, as Mr
Davey indicated, he would, legitimately or illegitimately, be able to use this
to his benefit tax-wise.
17. The Assistant Recorder turned to the question why Mr Davey should give up a
sound business as a plumber (earning in excess of £200 a week) to become a
mere employee earning £100 a week net. The answer he believed lay in Mr
Davey's first witness statement, paragraphs 6 and 7:
"The plumbing trade in which he was engaged was not going well at that time,
and that, coupled with the fact that he would derive, as he put it himself, the
pleasure of pursuing his sporting interest as his occupation, was a great
attraction to him."
18. But paragraphs 6 and 7 of Mr Davey's first witness statement were simply
addressing the position in December 1990 at the time of the very original
conversation, which, according to Mr Davey, initiated the discussions about his
going into business with Mr Williams. His actual income (set out earlier in
this judgment) does not indicate any major long-term decline. The figure of
£11,000 p.a. in 1991 and a like rate of earnings during the first half of
1992 also reflected, he said, his winding down of his trade. A reduction to an
employee's pay of £100 per week without anything more than the hope of
becoming a partner in the company's business seems on its face to merit more
weight as a factor than the Assistant Recorder allowed it.
19. The Assistant Recorder recognised certain oddities in the Williamses' case:
particularly, the fact that Mr Davey was called a director and the fact that Mr
Williams showed him audited accounts. As to the first, he accepted the
Williamses' explanations that this was just to flatter Mr Davey or to bolster
his standing among club members. But the use of the title "director" (which Mr
Davey accepted that he probably initiated when Mr Davey started work with the
club) went far beyond public flattery. Mr Davey was not just presented to the
press as, and allowed to address them as, a co-director alongside Mr Williams
as "managing director", but Mrs Williams, in completing the company's PAYE
forms, entered Mr Davey as a director. As to the accounts, Mr Williams'
explanation that he just decided to show Mr Davey the accounts to encourage him
to drum up business, when no other employee was ever shown such accounts, reads
somewhat thinly.
20. That was the sum of the Assistant Recorder's reasoning. There were matters
which had been the subject of submissions before him, which this reasoning did
not address at all:
(i) He did not deal with the fact that the £30,000 was left on deposit at
the building society from December 1991 at a lower rate of interest than the
Daveys were having to pay under their remortgage. Mr Davey's explanation was
that he was expecting to pay the monies to Mr Williams earlier under the
proposed joint venture between them, but there were delays on Mr Williams'
side.
(ii) More importantly, the Assistant Recorder did not deal with the coincidence
between the sum of £30,000 which Mr Davey said it was agreed that he
should pay and the £30,000 that Mr Williams agreed was discussed in
negotiations for what Mr Williams asserted was no more than a possible joint
venture in relation to an outdoor range. Allowing for a timeshare interest, the
Daveys were still, evidently, a couple without identifiable cash to spare other
than that in their Principality B.S. account and transferred from that account
to their bank. Yet, on the Williamses' case the Daveys must at the same time in
mid-1992 have been preparing for at least two transactions, one with the
Williamses and the other still unknown, either of which would by itself exhaust
their cash resources. Nor was it as if the proposed joint venture with Mr
Williams fell through in mid-1992, on either side's case. On Mr Williams' case,
Mr Davey joined the club, to get to know the business in the anticipation of
the acquisition of land and the establishment of an outdoor range. Yet on the
Williamses' case, Mr Davey must at the very same time have been at the least
imperilling and in all probability falsifying any conceivable prospect of ever
raising £30,000 by expending his spare £25,000 on some other
(unknown) transaction which the Daveys are now refusing to disclose, because
they have later decided to portray the disbursement under it as an investment
in the Williamses' company.
(iii) If the Daveys were lying in this way, then, as a matter of common-sense,
their lying account is most unlikely to have been made up before 1993 when Mr
Davey left the club. The only motive that may be suggested - for what must have
been (on the Williamses' case) a remarkably bold attempt at dishonestly
abstracting money by the present proceedings - must be disappointment and
resentment.
(iv) If the £25,000 was not paid to the Williamses in July/early August
1993, it must be regarded as a most remarkable coincidence that it was paid
under the other unknown transaction (which the Daveys must be concealing) in a
way which could - well afterwards, in 1993-4 and subsequently - be portrayed as
tying in so well with the discussions which (it is common ground) were
occurring in mid-1992 for an investment of £30,000, and with Mr Davey's
commencement of work at the club in early August 1992.
(v) On 24th July 1992, the day after the Daveys say that the first
tranche of £15,000 was paid to the Williamses, there was a "CC" (cash
and/or cheques) payment of £1000 into the Williamses personal current bank
account. Later in April/May 1993 further CC payments in were made,
inferentially to reduce the overdraft to below the credit zone limit of
£1000. The source of these payments in was not satisfactorily explained by
Mr or Mrs Williams. The latter had the opportunity to do so, but failed even to
ask her solicitor to consider the position although she said he had all the
relevant documents. No paying in book or slips were apparently disclosed.
21. There were also some factors which the Assistant Recorder might have
mentioned in the Williamses' favour - in particular Mr Davey's unsatisfactorily
explained failure to pursue any written claim until November 1994 (although he
went to solicitors in August 1993), and his failure to call to give evidence Mr
Weeks or, less significantly perhaps, Mr Rough or Mr Pugsley, respectively, the
solicitor and financial adviser acting in relation to the remortgage. The
latter two might be expected to know the purpose of the remortgage, although
that does not it seems appear on the application form, of which however the
copy before us is missing its second page.
22. As I have stated, the Assistant Recorder did not make, or base himself
on, any direct assessment of the primary witnesses' evidence, but dealt with
the essential issue by identifying and seeking to resolve a number of secondary
points. We are in the circumstances better placed than would often be the case
to undertake a review of his reasoning and the conclusion at which he
arrived.
23. In Benmax v. Austin [1955] 1 AER 326, 327 Visc. Simonds explained
the significance of the fact that appeals to the Court of Appeal are by way of
re-hearing, and of the Court of Appeal's power to draw inferences of fact and
to give any judgment and make any order which ought to have been made, in these
terms:
"This does not mean that an appellate court should lightly differ from the
finding of a trial judge on a question of fact, and I would say that it would
be difficult for it to do so where the finding turned solely on the credibility
of a witness. But I cannot help thinking that some confusion may have arisen
from failure to distinguish between the finding of a specific fact and a
finding of fact which is really an inference from facts specifically found, or,
as it has sometimes been said, between the perception and evaluation of facts.
An example of this distinction may be seen in any case in which a plaintiff
alleges negligence on the part of the defendant. Here, it must first be
determined what the defendant, in fact, did, and secondly, whether what he did
amounted in the circumstances (which must also, so far as relevant, be found as
specific facts) to negligence. A jury finds that the defendant has been
negligent and that is an end of the matter unless its verdict can be upset
according to well-established rules. A judge sitting without a jury would fall
short of his duty if he did not first find the facts and then draw from them
the inference of fact whether or not the defendant had been negligent.
This is a simple illustration of a process in which it may often be difficult
to say what is simple fact and what is inference from fact, or, to repeat what
I have said, what is perception, what evaluation. Nor is it of any importance
to do so except to explain why, as I think, different views have been expressed
as to the duty of an appellate tribunal in relation to a finding by a trial
judge. For I have found on the one hand universal reluctance to reject a
finding of specific fact, particularly where the finding could be founded on
the credibility or bearing of a witness, and, on the other hand, no less a
willingness to form an independent opinion about the proper inference of fact,
subject only to the weight which should, as a matter of course, be given to the
opinion of the learned judge. But the statement of the proper function of the
appellate court will be influenced by the extent to which the mind of the
speaker is directed to the one or the other of the two aspects of the
problem."
In Watt v. Thomas [1947] AC 484, Visc. Simonds said at p.486:
"It not infrequently happens that a preference for A's evidence over the
contrasted evidence of B is due to inferences from other conclusions reached in
the judge's mind, rather than from an unfavourable view of B's veracity as
such: in such cases it is legitimate for an appellate court to examine the
grounds of these other conclusions and the inferences to be drawn from them, if
the materials admit of it; and if the appellate court is convinced that these
inferences are erroneous, andthat the rejection of B's evidence was due to the
error, it will be justified in taking a different view of value of B's
evidence."
At pp.487, Lord Thankerton identified various possible situations in which an
appellate court may find itself, the third being:
"III. The appellate court, either because the reasons given by the 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 be at large for the appellate
court."
24. Applying this guidance, the Assistant Recorder's approach in the present
case makes it one where it is not only open to this Court, but incumbent upon
it, to consider the force of his reasoning and of inferences which he has
drawn, together with the extent to which the matters on which he has relied are
adequately comprehensive. The reasons on which the Assistant Recorder based his
conclusion are not, in my judgment, either satisfactory or complete. His
approach to the question of credibility may to some extent have been influenced
by counsel's submission that the case could be resolved on the onus of proof.
But, whether it was or not, I consider that the flaws in his reasoning and in
its completeness mean that his judgment cannot be allowed to stand. Looking at
the material as it stands before us, I would say only that I have very
considerable doubt about the correctness of his conclusion that Mr Davey had
failed to establish on the balance of probability that the sum of £25,000
was paid to the Williamses. Ultimately, however, I have come to the conclusion
that this is not a case where this court should seek to substitute, for the
Assistant Recorder's flawed approach, its own assessment of the merits of the
parties' respective cases. The parties are, in my view, entitled to a proper
assessment of the credibility of each side's account on the essential issue
against a background of full consideration of the subsidiary points which bear
on that issue and of the overall probabilities. I therefore consider that
there must be a re-hearing of the proceedings before a different judge. I would
set aside the judgment given in favour of the respondents and order a re-trial
accordingly.
LORD JUSTICE HENRY:
25. For the reasons given by Lord Justice Mance and Lord Justice Peter Gibson
I too would allow this appeal..
LORD JUSTICE PETER GIBSON:
26. I agree that this appeal should be allowed, but because we are
differing from the Assistant Recorder, I add a few words of my own.
27. This is an appeal on fact. Such appeals rarely succeed, particularly in
cases where the trial judge heard oral evidence, because of the proper
recognition by appellate courts that the judge, having seen and heard
witnesses, was in the best position to arrive at findings of fact based on that
evidence. But that is subject to two qualifications. The first is where the
judge appears to the appellate court not to have taken proper advantage of his
having seen and heard the witnesses. The judge may have given unsatisfactory
reasons for his conclusions or the evidence which was before the judge may not
support those conclusions. The second is where the judge's conclusions are not
findings of primary fact but are inferences drawn from primary facts. In such
a case an appellate court may be in as good a position as the judge to evaluate
the primary facts in order to see what inferences may properly be drawn from
them. Of course the appellate court will give due weight to the trial judge's
conclusions in that type of case.
28. From the outset of the trial counsel made clear to the Assistant Recorder
that the central issue was one of veracity: either Mr. and Mrs. Davey were
lying in claiming the payment to Mr. and Mrs. Williams of £25,000 in cash
or Mr. and Mrs. Williams were lying in denying the receipt of any money. They
could not have forgotten or made an innocent mistake on this point. The
Assistant Recorder could properly be assisted on that central issue by other
matters of detail, but it is hard to see how in this case a decision on whether
one side or the other was to be believed could properly be avoided. And yet
the Assistant Recorder made no express finding that Mr. and Mrs. Davey were not
to be accepted as witnesses of truth nor that Mr. and Mrs. Williams were to be
so accepted. The evidence given by Mr. Davey, when read in transcript,
indicates that he was a very poor witness, hopelessly confused on dates and
showing an unattractive disregard of the importance of accuracy in what was
contained in his own affidavit evidence. But there were parts of Mr. and Mrs.
Williams' oral evidence, which, to the objective reader of the transcript,
appear unsatisfactory as well.
29. The reasoning of the Assistant Recorder in the judgment seems to me to be
a good deal less than convincing. He appears to give three reasons why he does
not accept the Daveys' version of events. First is the lack of any reason for
two separate withdrawals and two separate payments. True it is that Mr. and
Mrs. Davey could not explain why there were two payment instalments. But
undoubtedly £25,000 was withdrawn from Mr. and Mrs. Davey's bank account
between 16 and 27 July 1992 and, for the reasons given by Mance L.J., on the
evidence no significance should be given to this point. Second is the absence
of a receipt. This point can be taken together the third, that so large a sum
should have been paid in cash. Again undoubtedly the £25,000 was
withdrawn in cash. The Assistant Recorder says that there was no need for that
to have been in cash "if this was a legitimate business transaction". Of
course, the purchase of shares is a legitimate business transaction and there
can be no purpose from the purchaser's viewpoint in paying in cash. But it was
Mr. Davey's evidence that the payment was in cash because Mr. Williams had told
him that it suited him to have the money in cash. It appears, on Mr. Williams'
evidence, to have been a tax reason why Mr. Davey wanted the payment in cash.
If Mr. Williams did say that, it is possible that he had in mind the
possibility of avoiding capital gains tax on the sale by Mrs. Williams of her
shares. If some sort of tax evasion was in Mr. Williams' mind, it is not
surprising that no receipt evidencing the payment of cash was given. Further,
Mr. Davey said that the relations between him and Mr. Williams were such that
Mr. Davey found Mr. Williams a very good friend at the time and trusted him
implicitly. Mr. Williams in cross-examination accepted that Mr. Davey trusted
him.
30. The Assistant Recorder referred to the points taken against Mr. and Mrs.
Williams, but dismissed them for reasons which again I find unsatisfactory.
The first point was the fact that Mr. Davey gave up his plumbing business to
become a mere employee at £100 per week. The Assistant Recorder found
this explicable because the plumbing trade was not going well and Mr. Davey
would be combining business with pleasure. But for a man not yet 50, as Mr.
Davey then was, it would be extraordinary to give up earnings more than double
the weekly wage which he would be receiving from Mr. Williams without some
further financial incentive. The second was that Mr. and Mrs. Williams called
Mr. Davey a "director", the Assistant Recorder accepting that the title was to
flatter Mr. Davey. The evidence of Mr. and Mrs. Williams was that the title
was for the benefit of the other club members and to give him respect among
them. I have to say that this is implausible, given that he was held out to be
a director to the press (and so to the general public) and to the Revenue in
official tax returns. The third was that Mr. Davey was shown accounts for
1989, 1990 and 1991. The Assistant Recorder accepted the explanation by Mr.
Williams that this was to make clear to Mr. Davey why new members were
required. Again it appears to me an implausible reason for letting Mr. Davey
have accounts for three years if he were a mere employee, when no other
employee was shown the accounts. All three points seem to me to lend strong
support to Mr. Davey's case that he was purchasing shares in the company owned
by Mr. and Mrs. Williams.
31. It is also unsatisfactory that the Assistant Recorder has not dealt with
a number of other points raised before him, in particular the coincidence that
the £30,000 proceeds of the mortgage were paid into the building society
and withdrawn shortly before Mr. Davey started working at the club and that
£30,000 was the sum which, Mr. Williams accepted, was discussed as a
possible investment by Mr. Davey. The failure by Mr. and Mrs. Williams to
explain the payment of £1,000 into their bank account the day after
£15,000 was paid in cash, on the Daveys' version of events, is also a
significant point not mentioned by the Assistant Recorder.
32. In all the circumstances this court is in my judgment entitled to
interfere with the decision of the Assistant Recorder. However I do not feel
able to accept the submission of Mr. Jarman for Mr. Davey that we should not
merely set aside the order of the Assistant Recorder but give judgment for Mr.
Davey. It is still necessary, in my judgment, for there to be a determination
by a judge after a trial of the question which side is telling the truth, and
that should be done in the light of the oral evidence which that judge should
hear. For these as well as the reasons given by Mance L.J. I would allow the
appeal and concur in the order which he proposes.
Order: Appeal Allowed with costs. Costs of trial reserved to trial
judge. Determination of costs of the appeal will be postponed.
(Order does not form part of the approved judgment)
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