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Case No: 2000/0484/B1
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM LEICESTER COUNTY COURT
(His Honour Judge O'Rorke)
Royal Courts of Justice
Strand, London, WC2A 2LL
Date: 26 October 2000
B e f o r e :
LORD JUSTICE NOURSE
and
LADY JUSTICE HALE
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BALDEV
SINGH MANN
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Appellant
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v -
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MESSRS
CHETTY & PATEL
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Respondent
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(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 0171 421 4040, Fax No: 0171 831 8838
Official Shorthand Writers to the Court)
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Mr Steven Gasztowicz (instructed by Messrs Johar & Company of
Leicester) for the Appellant
Mr Graham Reid (instructed by Messrs Browne Jacobson of Nottingham )
for the Respondent
---------------------------------------------
J U D G M E N T
(As Approved by the Court)
Crown Copyright
LADY JUSTICE HALE:
1. The appellant is suing his former solicitor in the Leicester county court,
alleging negligence in the conduct of his application for ancillary relief in
divorce proceedings concluded in 1993. On 22 November 1999, His Honour Judge
O'Rorke gave him permission to amend his particulars of claim to include
further allegations of negligence but refused permission to adduce expert
evidence on three points: valuation of the former matrimonial home, valuation
of a business in which he and his wife had formerly been partners, and the
handwriting upon a document relating to a share transfer in 1990. He appeals
against that refusal with the leave of Sir Anthony McCowan.
The divorce proceedings
2. The appellant and his wife married in 1971. They had three children, born in
1972, 1974 and 1976. They separated in March 1990. The husband left the former
matrimonial home and went to live in a much smaller house bought from savings
with a small mortgage. He also left the business trading as 'Mann's Carpets and
Rugs'. He alleged that the wife had kept valuable jewellery, as well as the
contents of the home, and various savings, including his shareholding in a
company then called Medirace Ltd.
3. The appellant instructed the defendant solicitor to act for him in relation
to his matrimonial affairs in May 1990. At some stage they must have obtained
legal aid. His wife began divorce proceedings in June 1990. Her case throughout
was that he was a violent alcoholic who had made no useful contribution either
to the home or to building up the business which she had started.
4. The appellant made an application for ancillary relief in December 1990. His
case was that he had made a contribution both to the home and to the business.
He sought an order that the home be sold so that he could be paid a lump sum in
recognition of this. He also alleged that the wife had forged his signature in
order to sell the Medirace shares.
5. One affidavit of means was filed by the appellant. The wife filed an
affidavit in response, exhibiting a report from the business accountants,
Gravestock Owen, to the effect that the net worth of the business at the end of
February 1991 was nil, and a valuation of the former matrimonial home, which
was in her name. Later she filed affidavits from the accountant and from
various other people, dealing with the parties' respective involvement in the
business and the appellant's drinking. She also filed a second affidavit,
business accounts for the years ending 28 February 1992 and 1993, and a second
valuation of the home. No further evidence was filed by the appellant.
6. The final hearing was fixed for 4 May 1993. By that time, the wife had sent
three 'Calderbank' letters making offers of settlement, the most recent for
£10,000. All were refused by the defendant solicitor. At the hearing on 4
May 1993, an application was made on behalf of the appellant for an adjournment
in order to seek medical evidence to rebut the allegations of drunkenness. This
was granted, but the appellant was ordered to pay the costs thrown away and the
defendant to show cause why he should not pay them personally.
7. The final hearing was relisted for 6 July 1993. There was no attendance by
or on behalf of the appellant. The district judge heard submissions and (it
would appear from her notes) evidence on behalf of the wife. The result was
that the appellant got nothing. His application was dismissed, the contents of
the home were declared to belong to the wife, and the usual clean break terms
included. The appellant was ordered to pay the wife's costs (apart from those
of the May hearing, which his solicitor had to pay) on the usual legal aid
terms.
These proceedings
8. The appellant instructed new solicitors in 1995. Legal aid was obtained and
these proceedings issued in March 1998. In the original Particulars of Claim,
it was alleged that the defendant was negligent and/or in breach of contract
for failing to prepare the case properly in relation to the appellant's alleged
drinking and the sale of the Medirace shares; causing the first adjournment;
failing to advise and respond appropriately to the wife's offers; failing to
inform the appellant of the adjourned hearing or to attend it or to inform him
of the outcome; failing to advise him to appeal or to apply for the order to be
set aside for non-attendance.
9. A defence was filed in April 1999, a case management conference took place
in July 1999, and the trial was fixed for 21 October 1999.
10. In August 1999, the appellant served a reply to the defendant's request for
further information, alleging that even on the information before the district
judge in 1993 he would have obtained a minimum lump sum of £17,500 (this
was based upon equalising the parties' shares in the net equity of their two
houses, taking the lower valuation of the former matrimonial home). He also
served a proposed amended Particulars of Claim, expanding the allegations of
failure to prepare his case properly in several respects. Those relevant to
this appeal were (1) failure to obtain his own valuation of the former
matrimonial home; (2) failure to obtain a valuation of Mann's Carpets and Rugs;
and (3) failure to obtain evidence in support of his allegation that the wife
had committed forgery in relation to the transfer of the Medirace shares.
11. A letter from the defendant's solicitors dated 10 September 1999 indicated
that they would not object to the proposed amendments, provided that the trial
date was vacated and a new timetable set, or to 'expert valuation, stockbroking
and accountancy evidence' and made proposals about this. That lack of objection
was withdrawn by a letter dated 16 September 1999. Hence the present
application was made, resulting in the order under appeal, granting permission
to amend the Particulars of Claim but not to adduce expert valuation and
handwriting evidence.
12. Since then, the appellant has served a schedule of loss. The total now
claimed amounts to just under £158,000. This is calculated on the basis
that had his case been properly prepared and presented to the district judge,
the appellant would have achieved a half share in all the assets which he
alleges existed at the time: the contents of the former matrimonial home, the
wife's savings, a van and a car, the combined equities in the two houses, the
value of the Medirace shares, and the value of the business.
The judgment below
13. The judge did not deal separately with each of the three proposed types of
expert evidence. He had three main reasons for refusing leave. First, it would
be of minimal value, considering the time that had passed, the paucity of
documents and the actual issues to be
decided. Secondly, how much more the appellant might achieve beyond the
£17,500 minimum claim would be a matter for careful assessment upon which
the evidence of the experts could not be conclusive. Thirdly, he had 'to some
extent at the back of my mind proportionality in as much as how much the
claimant is likely to gain if he succeeds on his best case scenario, as against
how much more might be added to that if there were experts.'
The appeal
14. This was a case management decision taken in the exercise of the judge's
discretion. This court will not intervene unless he has erred in principle or
the result of his balancing exercise is plainly wrong.
15. The overriding objective of the Civil Procedure Rules is to enable the
court to deal with cases justly (rule 1.1(1)). But this includes, so far as
practicable, saving expense, dealing with the case in ways which are
proportionate to the amount of money involved, the importance of the case, the
complexity of the issues and the financial position of each party, ensuring
that the case is dealt with expeditiously and fairly, and allotting it an
appropriate share of the court's own resources (rule 1.1(2)).
16. Controlling the issues and the evidence to be presented is an important
part of that process. Expert evidence is to be restricted to that which is
reasonably required to resolve the proceedings (rule 35.1). No party may call
expert evidence without the court's permission (rule 35.4(1)). The court may
direct that evidence be given by a single joint expert instructed by the
parties (rule 35.7) or appoint an assessor to assist the court (rule 35.15).
17. Clearly, therefore, the court has to make a judgment on at least three
matters: (a) how cogent the proposed expert evidence will be; (b) how helpful
it will be in resolving any of the issues in the case; and (c) how much it will
cost and the relationship of that cost to the sums at stake.
18. These are exactly the matters considered by the judge in this case.
Criticisms are made of his treatment of each of them. It is also argued that
the issues would have been much clearer to him had he dealt with each of the
three proposed items of expert evidence separately. This is certainly true,
particularly in relation to (a), the cogency of the proposed evidence. But
before dealing with each item in turn it is appropriate to make some general
observations about (b), usefulness, and (c), proportionality.
19. It is argued on behalf of the appellant that it was inconsistent to allow
the amendments to the Particulars of Claim but not the expert evidence required
to prove them. In my view, however, it is necessary to separate two different
issues.
20. The first is whether it was negligent not to obtain this evidence during
the original ancillary relief proceedings. The answer to that will depend
principally upon the application to the facts of this case of the practice
guidance current in 1990 to 1993. The leading case on the preparation of
ancillary relief claims was then Evans v Evans [1990] 1 FLR 319, in
which Booth J gave guidance, approved by the President of the Family Division,
with the aim of preventing the family's resources being consumed by the costs
of fighting about how they were to be shared out. The following points (at p
321) are relevant to this case:
'(1) Affidavit evidence should be confined to relevant facts and should not be
prolix or diffuse. Each party should normally file one substantive affidavit
dealing with the matters to which the court should have regard . . . If any
further affidavit is necessary it should be confined to such matters as
answering any serious allegation made by the other party, dealing with any
serious issue raised or setting out any material change of circumstances.
'(3) Wherever possible, valuations of properties should be obtained from a
valuer jointly instructed by both parties. Where each party instructs a valuer
then reports should be exchanged and the valuers should meet in an attempt to
resolve any differences between them or otherwise to narrow the issues.
'(4) While it may be necessary to obtain a broad assessment of the value of a
shareholding in a private company it is inappropriate to undertake an expensive
and meaningless exercise to achieve a precise valuation of a private company
which will not be sold: see P v P (Financial Provision) [1989] 2 FLR 241
[there are numerous other authorities on this point].
'(6) Care should be taken in deciding what evidence, other than professional
evidence, should be adduced and emotive issues which are not material to the
case should be avoided. . . . '
21. In this respect, it is important to bear in mind exactly what was in issue
in the ancillary relief proceedings. The appellant was not claiming that the
business should be sold (and it is not alleged that the defendant was negligent
in not making that claim on his behalf). He was claiming that the former
matrimonial home, which on the wife's valuations had an equity of between
£65,000 and £100,000, and in which his wife and three children (aged
around 21, 19 and 17 in 1993) still lived, should be sold in order to realise a
lump sum in addition to what he had already received before buying his own
house. In approaching that issue, the court would have had to take account of
the wife's own housing needs (together with those of any dependent children).
22. The second issue to which expert evidence might now be relevant is the
assessment of any loss that the appellant may have suffered, whether from the
failure to obtain this type of evidence at the time or, just as importantly,
from any of the other failures pleaded against the defendant. In my view, it is
in this respect that expert evidence is more likely to be useful to the court,
in helping to assess what a court might have done had the case been properly
fought in 1993.
23. As to proportionality, the only evidence before the judge of the costs of
the proposed expert evidence was contained in an affidavit filed very late in
the day by the defendant's solicitor. The appellant was then seeking leave to
instruct four experts, making eight in all if the defence instructed their own
experts in reply, at (it was said) a 'grand total' cost of £33,000 for
experts, with additional legal costs of around £30,000. Set against the
originally pleaded minimum loss of £17,500 this would indeed have been
disproportionate. However, the judge had clearly not appreciated that the
appellant was now putting his claim at more than £100,000 (still less the
sum that he now claims). Further, the appellant wishes to adduce evidence of
his own estimate of the costs of the three experts now proposed, which would be
of the order of £1,800. Joint experts could be appointed if the court
thought fit, and in any event court time saved by agreeing reports in advance.
24. It is no easy matter for a judge to assess proportionality without
prejudging the claimant's prospects of success. If the requirement in the Civil
Procedure Rules is to have any effect at all, however, it seems to me that he
cannot always take the claimant's claim at face value and simply ask how the
proposed costs relate to the claimant's best case. The judge is entitled to
take in account the broad ambit of the claimant's likely recovery in the event
that the claimant succeeds in his factual allegations. This is particularly so
in a case such as this, where the trial judge will have to ask himself what the
appellant would have been likely to achieve had his case been properly prepared
and presented.
25. With those general observations in mind, I turn to each of the proposed
items of expert evidence.
Valuation of the former matrimonial home
26. This was a substantial four bedroomed detached property, bought in 1988 in
the wife's sole name. The wife's evidence was that the price was £335,000,
of which £210,000 was raised on mortgage. It was valued in April 1992 at
between £300,000 and £310,000 and she put the higher value upon it in
her first affidavit dated July 1992. It was valued again in April 1993
(apparently by the same valuer) at between £275,000 and £285,000, on
the basis of national surveys indicating a further fall in values since 1992.
The appellant now wishes to commission a 'retrospective valuation and driving
past the exterior' which would cost around £200.
27. The cost of such a valuation is not high, and I see no reason why it should
not be done by a single joint expert. Its relevance in the context of the case
as a whole is considerable: the equity in the former matrimonial home in 1993
is an important element is estimating how likely it is that the court would
have ordered a sale, how much might have been realised by it whether from sale
or from further mortgage, and what share of the combined housing resources the
court might have thought it fair to allocate to the appellant. However, Mr
Gasztowicz very fairly accepts that the cogency of this evidence, at this
distance in time and with the inevitable limitations involved, will be limited.
The difficult issue will not be valuation: the court will be able to take a
view based upon what was available at the time. The difficult issue will be the
likelihood of an order for sale, given that the appellant was already
adequately housed with a very small mortgage, that the children remained with
the wife, but that the wife had a very large mortgage to service which may have
led (as will be seen) to excessive drawings from the business. I would not
interfere with the judge's refusal of permission to adduce this evidence.
Valuation of the business
28. The appellant had left from the business when the couple separated in 1990.
The wife's case was that she had started it up, having previously worked for a
carpet manufacturer, that the appellant had only joined her after being made
redundant from his job, and that because of his drinking he had made little if
any contribution to it. She was now carrying it on in her sole name. The net
profit for the year ended 28 February 1991 was £47,450, for the following
year £38,565.25, and for the year after that £36,123.72. We only have
the accounts for those last two years, in which the balance sheets show a
deficit, largely (it appears) because the wife's drawings exceeded the net
profits. The accountant's report on the 'net worth' of the business as at 28
February 1991 also makes the point that the wife's drawings exceed the profits,
predicts that (bearing in mind her heavy mortgage and pension policy premiums)
they would continue to do so, thus increasing the bank overdraft (already near
its ceiling). As there were no cash reserves, his view was that there were `no
apparent resources from which capital or revenue payments on any settlement
could be funded.' As to the saleability of the business, his view was that
'Whilst on profitability the business would have a goodwill value it is highly
unlikely in the current climate that the business could be sold. Even if the
business was sold and achieved a price in excess of its book value it is
unlikely that that excess would exceed the deficit on capital account plus tax
liabilities . . . '
29. The appellant now wishes to commission a retrospective valuation of the
business in 1992. Mr Rosenthal, the certified accountant approached, writes in
a letter dated 25 November 1999, that he would need accounts for the three
years immediately preceding the valuation date, accounts for the year
incorporating the valuation date, to obtain background information from the
then proprietors, and to research prevailing market forces. For this he would
charge some £1200.
30. Even this will be difficult to achieve, as the firm's accountants have not
kept any records from before 1991. It would not be possible (even if it were
desirable) to check the raw data from which those accounts were prepared, in
particular to verify the appellant's assertion that the stock was grossly
undervalued. Furthermore, it is not known whether Mrs Mann would be prepared to
assist in providing the background information (although it may perhaps be
surmised that she would be more prepared to do so if it were a single joint
report than if it were commissioned solely on behalf of the appellant). The
defendant argues that a joint instruction would not be appropriate as the
parties are not agreed upon the basis of such a valuation.
31. The relevance of such a report is not to work out exactly what the business
might have fetched had it been sold in 1993. No-one was suggesting that it
should be sold. It provided an income stream from which the wife might seek to
support herself and any dependent children, service a mortgage and pension
policies, or raise other money to make a lump sum payment to the appellant, and
as an indication of the possible worth of an asset to which the appellant
claimed to have made a contribution but which was left entirely in the wife's
hands.
32. Once again, however, the figures will not be the most difficult issue. The
wife's over-drawings are there to be seen, and may well be relevant to whether
or not the former matrimonial home should have been sold, so as to reduce that
burden and to release some of the equity. The most difficult issue will be to
estimate the comparative contributions of the spouses to the creation of the
asset and the extent to which a court in 1993 would have thought it appropriate
to make an order which gave immediate recognition to any contribution from the
appellant. The other assets which the appellant claims were then available
might be relevant to that, as was the money which he had already received, and
most important of all, the conflict about the extent of the appellant's
contribution to the family and to the business in the light of his alleged
drunkenness and violence.
33. However, it does seem to me that the 2000 court seeking to second guess
what a 1993 court would have done will not be able to carry out that task
properly without some independent advice to guide its interpretation of Mr
Gravestock's report and the three years' accounts which are available. There is
no need for, and it appears no possibility of, a detailed investigation or
partnership account. Subject to any further representations which may be made
on the details, it appears to me that the need now is for a commentary upon the
opinions expressed by Mr Gravestock in 1992. Such accounts as are available
should be scrutinised, and the wife interviewed if this is possible. It is
essential that this comparatively simple exercise is conducted by an accountant
experienced in the valuation of small businesses who is jointly instructed by
the parties. Given the limited value of this information in the context of the
case as a whole, it would be right for the court to set a limit to the time
spent upon it, of no more than that proposed in Mr Rosenthal's letter of 25
November 1999.
Handwriting expert
34. The appellant's case from the outset was that he had owned 5000 shares in
Medirace (then said to be worth £11,500) which he believed had been sold
by the wife after their separation. He believes that the wife obtained a
duplicate share certificate by forging his signature on a letter of indemnity
and sold the shares by forging it on a talisman form. The wife did not admit
that he had owned these shares, although she admitted that she had had dealings
with Medirace shares, purchased while the couple were living together, sold on
or shortly after their separation, and asserted that the (unstated) proceeds
were ploughed back into the business.
35. The appellant now wants a handwriting expert to examine the signatures and
give an opinion, at a cost of some £400. Mr Gasztowicz accepts that it
could be no more than an indication of the possibility that there was forgery
here.
36. The relevance of this evidence is rather different from that of the other
two. The existence of some such shares was not in dispute, nor was the wife's
disposal of them. The court in 1993 would have had to take some view on the
existence, value and relevance of this along with all the other alleged assets:
savings of £20,000 in a building society in the children's name,
unspecified stocks and shares, jewellery, and the two vehicles, as well as the
sums realised by the husband, which he said were £30,000 and she said were
£35,000. The point about the forgery would have been to discredit the wife
generally, casting doubt upon her evidence about the husband's contributions
and the other assets.
37. However, that would only be one small part of the jigsaw, which would have
included the evidence from the wife's witnesses, the evidence which it is
alleged should have been obtained from potential witnesses for the appellant,
and medical evidence relating to the appellant's alleged drinking. If the
appellant can prove that he did own the shares but did not dispose of them
himself, then that should be sufficient for present purposes, whatever might
have been the case in 1993. Again, I would not intefere with the judge's
refusal of permission to adduce handwriting evidence.
Conclusion
38. These cases are never easy to try, given the large amount of retrospective
speculation they involve. Case management decisions in the light of the Civil
Procedure Rules are correspondingly difficult. I doubt whether a decision to
allow expert evidence, at least up to a modest cost and jointly instructed, on
each of these points could have been successfully appealed. It is tempting to
reach the same conclusion the other way. But given the centrality of the
dispute about Mann's Carpets and Rugs in the context of what might have been
done in 1993, it will be difficult for a judge to reach sensible conclusions
without such further guidance as can reasonably be made available. Furthermore,
the judge was mistaken as to the full amount of the claim and had only limited
evidence as to the costs of what was proposed. He was entitled to be sceptical
about the extent of the claim, but not to deprive the court of the information
needed to make a fair assessment of it.
39. I would therefore allow the appeal to the extent of permitting the very
limited evidence about the business which is indicated above. The form of the
order can be discussed with counsel after judgment.
Lord Justice Nourse:
40. For the reasons given by Lady Justice Hale, I agree that this appeal should
be allowed to the extent proposed by her.
ORDER: appeal allowed in part; order made in terms of agreed minute of order.
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