GIVING EVIDENCE CAN BE A GRIZZLY BUSINESS: HOW DO THE COURTS ASSESS WHOSE ACCOUNT IS CORRECT?

In Grizzly Business Ltd -v- Stena Drilling Ltd [2014] EWHC 1920 (Comm) a judge had to decide between two competing versions of what was said in a telephone call three years earlier in a case when $2.5 million was at stake. The case provides an example of how the courts assess oral evidence.

THE DISPUTE OF FACT

The case depended upon whether an agreement had been made in a telephone conversation.
Mr Justice Teare:
  1. This case is, in essence, about one short question of fact. That question is whether Mr. James Devine agreed with Mr. Tom Welo during a telephone conversation on 29 November 2011 that Mr. Devine (through his company Grizzly Business Limited) would be entitled, in the event that Stena chartered their drilling vessel to Shell, to a success fee equal to 0.25% of the gross revenue to be earned under the charter.
  1. Mr. Devine gave evidence that in that telephone call he had raised the question of the success fee and said that he would settle for 0.25% as he had done on previous deals and that Mr. Welo replied “all right”. Mr. Welo gave evidence that the subject of the success fee had not been raised in the telephone call.
  1. Miss Prevezer QC on behalf of the claimant, Grizzly Business Limited, submitted that when one has regard to the context in which the conversation took place the evidence of Mr. Devine is the more plausible and should be accepted. Mr. Hochhauser QC on behalf of the defendants, Stena Drilling Limited and Stena Drillmax I Limited, submitted that the evidence of Mr. Devine is implausible and that the evidence of Mr. Welo should be accepted.
  1. If the court determines this issue in favour of the claimant it is common ground that the sum to which the claimant is entitled (subject to a further argument that on 1 December 2011 the claimant repudiated the agreement) is $2.5m less an agreed deduction of £150,000.
THE WITNESSES
The judge made an assessment of the witnesses
The witnesses
  1. Mr. Devine had a tendency to give long and confusing answers rather than a simple answer to the question asked. He gave the impression, by setting out the context in which matters arose, that he was seeking to argue the case rather than answer the question asked. Further, on important questions (such as the reason why no confirmatory email had been sent after the relevant telephone call) his explanation both in his written statement and in his oral evidence was not a model of clarity. For these reasons Mr. Devine was not an impressive witness.
  1. Mr. Welo did not suffer from the defect of long and confusing answers. But his evidence did suffer from the defect of reconstruction, rather than recollection. Thus he said that he had a “crystal clear” recollection that the subject of Mr. Devine’s success fee had not been raised by Mr. Devine in the relevant telephone call on 29 November 2011. But when asked why it was that his recollection was crystal clear he said that Mr. Devine had not sent a confirmatory email after the call. There was also an indication that he was willing for words to be put in his mouth by those advising him. Thus he signed a statement of truth in respect to the defendants’ pleading which contained an allegation that Mr. Devine’s success fees had to be approved by Mr. Olsson. That allegation was later withdrawn. Also, when asked a question about a passage in his evidence where he said that he had “remonstrated” with Mr. Devine he asked what “remonstrate” meant, adding that he had a good legal team. I therefore considered that Mr. Welo was also not an impressive witness.
  1. However, the defects in the manner in which Mr. Devine gave his evidence did not persuade me that his evidence that his success fee had been agreed by telephone could not be accepted; for in that respect his evidence was clear and was said to be supported by the surrounding circumstances. Similarly, the defects in the manner in which Mr. Welo gave his evidence did not persuade me that his evidence that the question of a success fee had not even been raised in the telephone call must be rejected. He gave clear and consistent evidence that it had not been raised and his evidence was said to be supported by the surrounding circumstances.
  1. The burden lies on the claimant to prove on the balance of probabilities that Mr. Devine and Mr. Welo agreed a success fee of 0.25% in the telephone call in question (that which took place between 1825 and 1850 GMT on 29 November 2011, or between 5.25 and 5.50 am on 30 November in Australia). It is therefore necessary to consider whether, having regard to the context in which that call took place, to the surrounding circumstances and to the contemporaneous documents, it is more likely than not that Mr. Devine’s account of the call is correct. The context and circumstances in which the call took place, together with the contemporaneous documents, were therefore examined at the trial in considerable detail, notwithstanding that the essential dispute is whether a few words were spoken in a telephone call.
  1. The defendants called three other witnesses. Mr. Reinertsen was a colleague of Mr. Welo. He gave his answers concisely and clearly. Mr. Banks was another colleague of Mr. Welo and also gave his answers concisely and clearly. In that regard both were impressive witnesses. However, they were giving evidence of events which occurred over two and half years ago and it is possible that in those circumstances some of their answers were mistaken. It was therefore necessary to consider whether their evidence accorded with the probabilities. Allegations were made that they had conspired with Mr. Welo to give untrue evidence. I do not consider that such allegations were made good.
  1. Mr. Froystad was the managing director of a Norwegian broker who was instrumental in bringing Stena and Shell together. He gave his evidence concisely and clearly and was conspicuously fair. But his evidence was not of great significance and little of it was in dispute. On the one significant point in his evidence (Shell’s view of Mr. Devine during the negotiations between Shell and Stena) his evidence was supported by a note written shortly after the events in question.
RESOLUTION OF THE ISSUES
Mr Justice Teare carried out a review of the background facts and subsequent documentation and actions.  He had to come to a conclusion when not of the witnesses were impressive.  However this did not stop the claimant succeeding.
Conclusion
  1. The conversation on 29 November between Mr. Devine and Mr. Welo was not angry and uncivilised. There was no cause for it to be. But Mr. Welo must have expressed his concern at Shell’s response to Mr. Devine’s email asking Shell to underwrite Stena’s corporate tax in French Guyana. There must have been an urgent discussion about the prospects of getting the deal back on track following Mr. Welo’s brief telephone call with Mr. van den Broek. That would have been Mr. Welo’s prime concern and Mr. Devine must have spent some time dictating a holding response to Shell which Mr. Welo must have tapped onto his iPad during the call so that he could send it to Shell. In circumstances where Mr. Welo had spent 28 and 29 November in the Stena Sphere meeting it is likely that he made some reference to that meeting. Having regard to the importance of the contract to Stena it is likely that the proposed contract with Shell was discussed at the meeting and it is possible that such discussion was mentioned by Mr. Welo to Mr. Devine. But there is no evidence that other Stena managers sought to interfere with or criticise Mr. Welo’s conduct of the negotiations with Shell and it is unlikely that they did so. It is therefore unlikely that Mr. Welo indulged in a “diatribe” against fellow Stena managers. That would appear to be an exaggeration on Mr. Devine’s part.
  1. Mr. Devine gave clear evidence that he brought up the subject of his success fee, that he referred to the emails he had sent Mr. Welo regarding his success fee on earlier deals, that he would accept 0.25% and that Mr. Welo replied “all right”. Mr. Welo said the subject of a success fee was not discussed. The principal issue in this case is whether Mr. Devine’s evidence is more likely than not to be true.
  1. Mr. Devine was not an impressive witness for the reasons I have already summarised. Further, his recollection of the telephone call in question on 29 November was also defective. He had no recollection, until prompted, of having dictated Mr. Welo’s response to Shell and his recollection of what Mr. Welo told him about the other Stena managers at the Stena Sphere meeting was exaggerated. Mr. Welo was also not impressive as a witness and his evidence that he was angry with Mr. Devine in that telephone call on account of the gap and tax issues was mistaken. He probably confused the telephone call with that on 1 December in which he and Mr. Devine were angry with each other.
  1. However, Mr. Devine gave clear and consistent evidence that in the telephone call of 29 November he and Mr. Welo agreed a success fee of 0.25%. That evidence was supported by a number of matters. First, it was to be expected that on his return to Australia Mr. Devine would raise the subject of his success fee. Second, the telephone conversation took place at a time when Shell had called Stena’s bluff (with regard to the tax issue) and Mr. Welo, as he accepted, needed the services of Mr. Devine. Mr. Welo expected to have to pay a success fee and so it is more likely than not that he would have been willing to agree a success fee. Third, 0.25% was a percentage fee which had been agreed on other occasions. Fourth, Mr. Devine made reference to the agreed fee shortly after Mr. Welo had made clear that he had dispensed with Mr. Devine’s services.
  1. By contrast, the matters relied upon as supporting Mr. Welo’s evidence were not established. First, Shell had not walked away from the negotiating table. Shell’s email to Mr. Welo and Mr. Olsson and Mr. Welo’s conversation with Mr. van den Broek showed that Shell was willing to negotiate if Stena relented, essentially on the tax issue. Second, Mr. Welo was not angry in that telephone call on account of the gap and tax issues. It was therefore not established that he was unlikely to have been in the frame of mind to agree a success fee with Mr. Devine. Third, it had not been Mr. Devine’s invariable practice to confirm by email agreements to pay a success fee equal to a particular percentage of revenues. His failure to do so on this occasion was not, therefore, an indication that he made no such agreement.
  1. I have concluded that it is more likely than not that Mr. Devine’s evidence that he and Mr. Welo agreed a success fee of 0.25% is true.
  1. The explanation for Mr. Welo’s evidence that there was no such agreement is, in my judgment, that he was mistaken, having persuaded himself that there had been no such agreement. I do not accept Miss Prevezer’s submission that he gave evidence which he knew to be untrue. He was convinced that he had been angry with Mr. Devine in the relevant telephone call and had therefore concluded that he could not have agreed to a success fee in that call. But it is likely that he confused the telephone call with the later call on 1 December in which he was angry. Further, he had persuaded himself that the absence of a confirmatory email supported his case. Mr. Hochhauser submitted that Mr. Welo would have remembered agreeing to pay Mr. Devine, in effect, $2.5m. if he had done so. However, if Mr. Welo persuaded himself that he had not done so, as I consider he did, that explains why he had no recollection of having made such an agreement.

 THE FACT THAT THE CLAIMANT HAD WON DID NOT MEAN THAT THE DEFENDANT’S WITNESSES WERE LYING

The central point here (and the problematic area for the assessment of evidence for most litigators) is that the judge did not find that the witnesses for the defendant were deliberately lying. Rather they had convinced themselves that their account was the correct one.

This gives rise to one of the most difficult assessments in litigation. A client is insistent that they are not a liar and, yet, has to be given advice on the risks of litigation.   Here we have the central problem of someone believing that their recollection is true but it not being accepted by the judge.  This is one of the most difficult matters to advise on.  It is an extremely common finding in many civil cases.  Most witnesses are not dishonest but mistaken.

CREDIBILITY IS NOT THE SAME AS HONESTY

This point was discussed in a recent post on witness statements and credibility.  In particular the discussion in Gestmin -v- Credit Suisse [2013] EWHC 3560 (Comm) where Mr Justice Legatt was faced with a number of witnesses who gave evidence about a large number of issues over a considerable period of time. He observed:
“Evidence based on recollection
  1. An obvious difficulty which affects allegations and oral evidence based on recollection of events which occurred several years ago is the unreliability of human memory.
  1. While everyone knows that memory is fallible, I do not believe that the legal system has sufficiently absorbed the lessons of a century of psychological research into the nature of memory and the unreliability of eyewitness testimony. One of the most important lessons of such research is that in everyday life we are not aware of the extent to which our own and other people’s memories are unreliable and believe our memories to be more faithful than they are. Two common (and related) errors are to suppose: (1) that the stronger and more vivid is our feeling or experience of recollection, the more likely the recollection is to be accurate; and (2) that the more confident another person is in their recollection, the more likely their recollection is to be accurate.
  1. Underlying both these errors is a faulty model of memory as a mental record which is fixed at the time of experience of an event and then fades (more or less slowly) over time. In fact, psychological research has demonstrated that memories are fluid and malleable, being constantly rewritten whenever they are retrieved. This is true even of so-called ‘flashbulb’ memories, that is memories of experiencing or learning of a particularly shocking or traumatic event. (The very description ‘flashbulb’ memory is in fact misleading, reflecting as it does the misconception that memory operates like a camera or other device that makes a fixed record of an experience.) External information can intrude into a witness’s memory, as can his or her own thoughts and beliefs, and both can cause dramatic changes in recollection. Events can come to be recalled as memories which did not happen at all or which happened to someone else (referred to in the literature as a failure of source memory).
  1. Memory is especially unreliable when it comes to recalling past beliefs. Our memories of past beliefs are revised to make them more consistent with our present beliefs. Studies have also shown that memory is particularly vulnerable to interference and alteration when a person is presented with new information or suggestions about an event in circumstances where his or her memory of it is already weak due to the passage of time.
  1. The process of civil litigation itself subjects the memories of witnesses to powerful biases. The nature of litigation is such that witnesses often have a stake in a particular version of events. This is obvious where the witness is a party or has a tie of loyalty (such as an employment relationship) to a party to the proceedings. Other, more subtle influences include allegiances created by the process of preparing a witness statement and of coming to court to give evidence for one side in the dispute. A desire to assist, or at least not to prejudice, the party who has called the witness or that party’s lawyers, as well as a natural desire to give a good impression in a public forum, can be significant motivating forces.
  1. Considerable interference with memory is also introduced in civil litigation by the procedure of preparing for trial. A witness is asked to make a statement, often (as in the present case) when a long time has already elapsed since the relevant events. The statement is usually drafted for the witness by a lawyer who is inevitably conscious of the significance for the issues in the case of what the witness does nor does not say. The statement is made after the witness’s memory has been “refreshed” by reading documents. The documents considered often include statements of case and other argumentative material as well as documents which the witness did not see at the time or which came into existence after the events which he or she is being asked to recall. The statement may go through several iterations before it is finalised. Then, usually months later, the witness will be asked to re-read his or her statement and review documents again before giving evidence in court. The effect of this process is to establish in the mind of the witness the matters recorded in his or her own statement and other written material, whether they be true or false, and to cause the witness’s memory of events to be based increasingly on this material and later interpretations of it rather than on the original experience of the events.
  1. It is not uncommon (and the present case was no exception) for witnesses to be asked in cross-examination if they understand the difference between recollection and reconstruction or whether their evidence is a genuine recollection or a reconstruction of events. Such questions are misguided in at least two ways. First, they erroneously presuppose that there is a clear distinction between recollection and reconstruction, when all remembering of distant events involves reconstructive processes. Second, such questions disregard the fact that such processes are largely unconscious and that the strength, vividness and apparent authenticity of memories is not a reliable measure of their truth.
  1. In the light of these considerations, the best approach for a judge to adopt in the trial of a commercial case is, in my view, to place little if any reliance at all on witnesses’ recollections of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts. This does not mean that oral testimony serves no useful purpose – though its utility is often disproportionate to its length. But its value lies largely, as I see it, in the opportunity which cross-examination affords to subject the documentary record to critical scrutiny and to gauge the personality, motivations and working practices of a witness, rather than in testimony of what the witness recalls of particular conversations and events. Above all, it is important to avoid the fallacy of supposing that, because a witness has confidence in his or her recollection and is honest, evidence based on that recollection provides any reliable guide to the truth.”

RELATED POSTS ON WITNESS CREDIBILITY

1. Litigators must know about credibility.

2. Witness Statements and Witness Evidence: More about Credibility.

3. Which Witness will be believed?Is it all a lottery?

4. The witnesses say the other side is lying: What does the judge do?

5. Assessing the reliability of witnesses: How does the judge decide?

6.  Which witness is going to be believed? A High Court case.

7. The Mitchell case and witness evidence: credibility, strong views and reliability.

8. Witness statements and witness credibility: getting back to basics

9. Witness credibility: what factors does the Court look at?

10. That “difficult second statement”: its hardly ever going to be a hit.

11. Assessing the credibility of a witness: it is a matter of communication.

12. Evidence, costs and the credibility of witnesses. 

13. More on witness credibility: the dog that obtained a MBA

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