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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> J J Harrison (Properties) Ltd v Harrison [2001] EWCA Civ 1295 (16 July 2001) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2001/1295.html Cite as: [2001] EWCA Civ 1295

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IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
APPLICATION FOR PERMISSION TO APPEAL

		Royal Courts of Justice Strand London WC2 Monday, 16th July 2001

1. LORD JUSTICE MUMMERY: There are three inter-related applications before the court: (1) an application for permission to appeal, (2) an application for permission to adduce fresh evidence on the appeal, and (3) an application for an extension of time in which to appeal. Mr Robin Hollington QC appears for the applicant, Mr Peter Harrison, and Mr Parker appears for the respondent to the applications, J J Harrison Properties Ltd, ("the company"). We heard detailed oral argument on the applications and no less than four skeleton arguments were provided for the court's assistance. On 7th December 2000, pursuant to an order made for a split trial, a decision on liability was made by Mr Kevin Garnett QC, sitting as a Deputy High Court Judge. He made an order that there should be an account of profits by the defendant, Mr Harrison, to the claimant company, the company having elected for that remedy following the handing down of a judgment on 27th November 2000. The order for an account was made in respect of a transaction on 12th February 1986 under which Mr Harrison bought for the price of £8,400 a piece of land in Yorkshire on which there were derelict buildings. He had bought the land from the company, a substantial family property company of which he was a director at that time and remained a director until his resignation on 27th March 1992. The judge reserved the costs of the liability issue to await the outcome of the account to see whether Mr Harrison had made any profit out of the transaction. He refused permission to appeal. The time for appealing to this court expired on 21st December 2000.
2. The application for permission was not issued until 27th March 2001. On 2nd May 2001 the single Lord Justice adjourned the application to an oral hearing on notice in order to debate, inter partes, the significance of a letter of 23rd February 2001 to the three applications. I should mention that in the meantime the taking of the account was proceeding.
3. On 6th February 2001 Mr Justice Blackburne had ordered Mr Harrison to make payment of £5,000 by 6th March 2001. It was not paid until 20th March. On 15th March directions were given for the conduct of the taking of the account. The hearing, which is estimated to last as long as five days, is due to take place in October. The grant of permission to appeal will probably have the effect of delaying those proceedings pending the determination of the appeal.
4. I need to examine the background of the dispute in order to deal with the applications. The sale to Mr Harrison on 12th February 1986 had been approved by the board of the company two days earlier. Peter Harrison was a director at that time and so remained until his resignation in 1992. On 3rd April 1986 planning permission for the land he purchased was granted subject to conditions. In December 1988 he sold part of that land for £110,000. In April 1992 he sold the remainder for £122,500. On 8th July 1998 proceedings were started against him in respect of the sale over 12 years previously, alleging that he acted in breach of duty. The particular breach of duty is that he failed to disclose to the board (1) that the valuer, Mr Johnson, whose valuation had been put before the board, had stated that he had not taken into account development potential of the barn conversion on the site; (2) he had failed to disclose that there was an application for planning permission submitted shortly before the board meeting; (3) he had failed to disclose that he had been advised that the application was likely to be successful, as it was.
5. In his judgment the deputy judge held that the sale was liable to be set aside for breach of the "self-dealing" rule by failure to make adequate disclosure to the board meeting on 10th February 1988. As the rescission was no longer possible, the judge held that the company could elect between account of profits or equitable compensation. As already indicated, the company elected for the former at a hearing which took place on 7th December. The deputy judge rejected the company's claim that Mr Harrison was a constructive trustee of the property. He also rejected Mr Harrison's defences of acquiescence and limitation. I refer, in particular, to the judge's conclusions on laches. He found as a fact that the company knew of some of the relevant facts as early as 1992 and had the means of finding them out. But he concluded that the fact the non-disclosure was a serious one, coupled with the fact the company did not discover what really happened until 1997, tipped the balance in the company's favour. He expressed the view that it would not be unconscionable for the company to assert its claim despite the passage of time.
6. I should also mention some further background material relating to disputes within this family. J J Harrison (Investments) Ltd was the holding company; it was the subject of a Section 459 petition in early 1992. The petition was compromised on 27th March 1992. It was pursuant to that agreement that Mr Peter Harrison resigned as a director. In that petition allegations were made against Mr Harrison. The petition was presented by his brothers. Mr Harrison also has three sisters, who were involved in disputes with him.
7. The company was owned by a trust under which the sisters and their families are the beneficiaries. Since 1992 Miss Terry Harrison has been chairman of the company and a director, and her sister Gwen Fuller, the general manager until recently. Mr Giles, a solicitor, has been a director of the company. It is relevant to mention Mr Giles' position because he was the author of the letter of 23rd February 2001, which has been a central feature of the applications. The letter was sent by Mr Giles. He has been involved in the affairs of the Harrison family since 1986. He was an executive director of the holding company. I should refer immediately to the letter. It was written to Peter Harrison on 23rd February. It is headed:

"Dear Peter,

Re: J J Harrison Estates Ltd.

Thank you for sending me what you call a `personal copy' of the letters that you sent to your sister Terry on 20th and 21st February. I am sure you will understand that for reasons of professional etiquette I cannot comment on these matters where your solicitor, Mr Simpson, is instructed. However, as you have written to me personally, I think there can be no objection to me writing to you personally about the general family situation. When you left the company in what might best be described as ignominious circumstances Terry was most concerned that your reputation should not be tarnished and there should be no muck-raking about your stewardship of the company. It was hoped you would be able to enjoy a dignified retirement with your reputation intact and with a comfortable standard of living."

8. The letter is said by Mr Hollington to constitute fresh evidence which should be admitted on appeal under Civil Procedure Rule 52.11 (2) (b), as it satisfies the principles of Ladd v Marshall, which remains relevant to the exercise of the court's discretion to admit evidence on an appeal under the Civil Procedure Rules.
9. In the light of that, as well as apart from that, Mr Hollington contends that the appeal has a real prospect of success on the laches issue. The letter is also relevant to the question of delay in applying for permission to appeal. Mr Hollington said that the letter threw fresh light on the case. It is contended that it is evidence that, on Mr Harrison's departure from the company in March 1992, a deliberate decision was made by the other members of the family that the company would not investigate possible wrongdoing by him. Theh initiation of these proceedings in July 1998 and the evidence given on behalf of the company at the trial were inconsistent with a decision of the kind indicated in Mr Giles' letter.
10. The grounds on which permission to appeal is sought are two: first, that the judge ought to have held that the claim was barred by the equitable doctrine of laches, as a matter of law and fact. The letter of 23rd February is relied upon as relevant to that ground. Secondly, the judge ought to have held that the claim is statute barred under Section 21 (3) and or Section 23 of the Limitation Act 1980. That is a pure point of law.
11. The conclusions which I have reached on the three applications in these circumstances are as follows. I deal first with the application for permission to adduce fresh evidence. Mr Hollington submitted that the letter of 23rd February 2000 was an admission by Mr Giles, a person fully conversant with the affairs of the company and the Harrison family, that on Mr Harrison's departure from the company there would be no muck-raking about his stewardship of the company. This item of information was not available to Mr Peter Harrison's advisers at the time of the trial. It could not have been obtained by him or them by the use of reasonable efforts for use at the trial. This was evidence solely within the knowledge of the directors of the company and their advisers. Mr Hollington submitted that it is material and apparently credible evidence on the issue of laches. The judge emphasised the fact that there was no general reason to be suspicious about Mr Harrison. This letter was evidence of a deliberate decision, on his leaving the company, not to investigate further any wrongdoing by him. This cast a fresh light on the claimant's lack of curiosity about the transaction at the time when they began to know something about the facts relating to it, the profits he had made and what the judge referred to as their means of finding out more facts. This evidence, if available to the judge, would probably have had an important influence on his consideration of the laches issue and on the outcome of the case. Mr Hollington submits that the judge would have come to a different conclusion on the laches issue, if he had known what Mr Giles asserted in the letter.
12. I agree with Mr Hollington that this is new evidence which ought to be admitted by the court in the exercise of its discretion. It satisfies the principles of Ladd v Marshall. It appears from the judgment that at the trial there was evidence from Mr Harrison's sister, Terry Harrison, and Mrs Gwen Fuller, who had been general manager of the company between 1992 and 1999, as well as having been personal assistant to him prior to 1992. There was evidence from them that they had discussed the transaction of February 1986 around April 1992 following discovery by Mrs Fuller that Mr Harrison made a substantial profit out of his dealings with the land less than two months after he bought it in 1986. There is evidence from them, accepted by the judge, that they had no reason to be generally suspicious about him at that time. The judge found that Miss Harrison and Mrs Fuller did not discover the most significant facts or appreciate the significance of what they did know until the second half of 1997.
13. In my view, the letter of 23rd February 2001 is apparently credible evidence of a decision not to investigate possible further wrongdoing by him in 1992. If it is admitted, the company would be given an opportunity to respond to it. This, coupled with the knowledge they had, is relevant to the laches issue. I have already indicated they had knowledge at the time of Mr Harrison's departure that he had made substantial profit out of the land purchased by him. I should add that Mr Harrison also wishes to contend that, even apart from that letter, the judge should have found that there was laches.
14. Mr Hollington submitted that the judge erred in principle in failing to address the crucial question whether, having regard to what was known by the company, it failed, either recklessly or megligently, to make reasonable inquiries into the 1986 sale. Mrs Fuller had read the application for planning permission, which showed on the face of it that it had been made before the approval given at the board meeting. Also, Mr Peter Harrison had ceased to have any influence in the affairs of the company after his resignation as a director.
15. For the above reasons I would exercise the court's discretion to admit the letter of 23rd February as fresh evidence on the appeal.
16. I turn to the question of extension of time which was applied for under Civil Procedure Rule 52.6. Mr Hollington points out as a preliminary observation that, if permission to appeal had been granted, it is probable that the time for appealing would, in any event, have been extended until after the taking of the account. According to evidence put before the court, Mr Harrison said that his initial view was that, although he was disappointed at the order the judge made against him, he was relieved to be acquitted of the allegations of dishonesty. He was confident that he could show that he had not made a profit. There was therefore no point in him pursuing an appeal on the issue of liability. Evidence from him also referes to other events, which have occurred since the judgment, that led him to re-assess his decision not to appeal. He refers to certain other potential claims against him for breach of duty, as well as to the receipt of the letter of 23rd February 2001.
17. On this part of the case Mr Parker, for the company, relies on various matters doubting the candour of Mr Harrison in his explanations of his apparent change of mind on an appeal against liability. Mr Parker's contention is that this is not a case of delayed appealing at all; it is a case of a conscious, deliberate decision not to appeal, followed by a change of mind for which there is no satisfactory explanation. He suggested that it was more likely that Mr Harrison's change of mind related to evidence emerging on the taking of the account that he had made a substantial profit, contrary to his assertion to demonstrate that he had not made a profit. This was more likely to be the correct interpretation of his change of mind. An appeal against liability would help Mr Harrison to delay the taking of the account.
18. He submmitted that the letter of 23rd February had little or nothing to do with this case. The circumstances were referred to by Mr Giles in his letter related not to the 1986 transaction, but to allegations made in the 1992 winding up petition as to such matters as alleged interest-free loans taken by Mr Harrison from the company for his personal benefit.
19. Looking at the matter objectively, I conclude that the letter of 23rd February could reasonably lead, as Mr Hollington submits, to a more favourable re-assessment by Mr Harrison and his advisers of the prospect of appealing to this court on the laches point. The language of the letter is capable, in my view, of referring to the circumstances generally including the 1986 transaction as one of the other ignominious circumstances affecting his reputation and arising out of his stewardship of the company. I do not read the letter as referring solely to the 1992 winding up petition. The statement made by Mr Giles in the letter is relevant to evidence given at the trial that there was no general or other reason for being suspicious about Mr Harrison. It is apparently inconsistent with the evidence given at the trial by Miss Terry Harrison and Mrs Fuller, on which the judge based his decision relating to laches. I have referred already to what they discovered in 1992 relating to development of the land, to the making of the profit on it and to the fact that an application for planning permission had been successful shortly after he had purchased the property. As already mentioned, the company and any witnesses on which it wishes to rely will have an opportunity to respond to what Mr Giles has said in the letter.
20. For those reasons I am of the view that there is a satisfactory explanation for the delay in making this application for permission to appeal. I would, if I were prepared to grant permission to appeal, extend the time for doing so. As regards the application for permission to appeal, relying on the matters already dealt with on the application to adduce fresh evidence and to extend the time for appealing, I would conclude that this is a case in which there is a real prospect of the appeal succeeding on the question of laches. The letter of 23rd February 2001 is clearly relevant to the question whether it would be unconscionable of the company to make the claim it did in proceedings started in July 1998, over 12 years after the relevant events. The evidence from Mr Giles comes from a witness whom there is no reason to disbelieve and who was, for the reasons already mentioned, in a good position to give credible and reliable evidence about the affairs of the Harrison family and the company. That evidence seems to be, prima facie, inconsistent with evidence given at the trial by those involved in the affairs of the company.
21. For those reasons I would give permission to appeal.
22. There are clearly grounds for expediting the hearing of the appeal, so as to avoid delay in the taking of the account, should the appeal be unsuccessful. I would be willing to hear an application for expedition.
23. I should mention finally the question of the second ground of appeal under Sections 21 and 23 of the Limitation Act 1980. Mr Hollington's case is that the claim is, quite apart from laches, unmaintainable, because it is statute barred under those sections of the 1980 Act. He says this defence was raised at the trial, but the deputy judge did not deal with it in his judgment. There is some disagreement between Mr Hollington and Mr Parker as to the extent with which this was dealt in the final speeches to the judge. This is a claim for an account of profits, not a claim to recover from a trust property or the proceeds of trust property within Section 21 (1) (b) of the 1980 Act. It would appear that provision does not apply. It is arguable that this case is not within Section 21 (1) (b), not being a breach of trust. I would not regard Mr Hollington's arguments on the Limitation Act 1980 as fanciful. They are ones on which Mr Harrison should be allowed to appeal for which I would grant permission.
24. In those circumstances I would make an order on Mr Harrison's application granting permission to appeal, both on the laches points and the Limitation Act point, granting permission to adduce fresh evidence in the form of a letter of 23rd February 2001 and extending the time in which to appeal. I would be prepared to hear an application by whichever side wishes to make it that, if possible, this appeal should be expedited.
25. MR JUSTICE WILSON: I agree.
Order: Application allowed with the costs reserved to outcome of appeal. Expedition recommended