WITNESS STATEMENTS THAT HARM RATHER THAN HELP AND A FAILURE TO PROVE DAMAGES: A HIGH COURT CASE EXAMINED

In Re-Use Collections Limited -v- Sendall &  May Glass Recycling Ltd [2014] EWHC 3852 (QB) H.H. Judge Davies made some important observations about drafting witness statements. It is positively unwise to “cross-reference” witness statements to the evidence of other witnesses in vague and general terms.   There are also important issues relating to the assessment of the credibility of witnesses.

Equally significant are the judges comments in relation to the paucity of the evidence in relation to damages. This emphasises the neeed to give detailed, and early, consideration to the need to prove damages at trial.

THE CASE

The case was an action against a former employee who had set up a competing business. The claimant succeeded in establishing breach of contract by the defendant but not breach of fiduciary duty.

THE WITNESS EVIDENCE

Two of the witnesses were not called.  Part of their statements, at least, were drafted in an unusual manner. The “confirmed the truth and accuracy” of the statements of other witnesses.  The judge found this practice unhelpful, to say the least.

(iii) Two witnesses made available to be called by the claimant but not required for cross-examination

  1. Anthony Johnston had made a very short witness statement which was limited to confirming the truth and accuracy of those issues addressed in the statements of Mark Owen and Mark Wilson to which he was privy. That was not the most helpful of approaches to take, since it left unexplained which particular issues he was referring to, and the basis on which he could confirm them from his own knowledge. Nonetheless it was reasonably clear from the evidence of those witnesses that his only direct involvement was in the visit to Dagenham on 18 April 13. Mr Choudhury, having cross-examined Mark Wilson in some detail about that visit was not minded, for reasons of timing, to re-run the whole process with Anthony Johnston, even though he was able to be called. Mr Keen, whilst not challenging my indication that it was not necessary for the defendants’ case about that visit to be put again to Anthony Johnston, observed that in such circumstances it would be difficult for this court to make any adverse assessment of Anthony Johnston’s reliability as a witness without seeing him being cross-examined.
  2. Whilst I accept Mr Keen’s approach as being generally correct, I consider that two reasons justify Mr Choudhury’s stance in this case, namely: (1) the delay caused to this trial on day 1, by the claimant’s unsuccessful attempt to adduce late quasi-expert evidence, and on day 2, by the claimant’s belated supplemental disclosure, collectively making it thoroughly undesirable that time should be spent on repetitious cross-examination; (2) Anthony Johnston’s failure to identify in clear terms in his witness statement precisely what his evidence was in relation to this visit. If for whatever reason Anthony Johnston was unable or unwilling to take the time or trouble to provide a witness statement stating what his evidence was about this visit, it is not in my view incumbent on cross-examining counsel to have to begin cross-examination by embarking on a voyage of discovery to ascertain what his evidence actually is, before proceeding to challenge him upon it. In such circumstances I consider that I am entitled to place little or no weight on Anthony Johnston’s evidence.
  3. Julie Knight, the managing director of a HR consultancy which provided services to the claimant, provided a short witness statement which simply confirmed her advice to the claimant as to the correct procedure to follow in dealing with Keith Sendall after the visit of 18 April 13. It was not contentious, and Mr Choudhury did not need to cross-examine her on its contents. My only criticism is that it also ended with the same general statement that she confirmed the truth and accuracy of those issues addressed in the statements of Mark Owen and Mark Wilson to which she was privy, which again seemed to me to be unhelpful especially since it was not immediately obvious from the rest of the witness statement precisely what evidence she was seeking, let alone able, to support in this regard.

IS THERE ANY WISDOM IN CROSS-REFERENCING WITNESS STATEMENTS IN THIS WAY?

The blunt answer is no.

  • As the judge observed it served no useful purpose.
  • The advocate faced with a statement like this is unlikely to be obliged to  “embark on a voyage of discovery” to see what the witness actually knows before then cross-examining them.
  • Such statements are unlikely to be given any weight.

Further it is not difficult to envisage circumstances in which such practices are positively unhelpful to the party who conducts this practice.

  • If one witness is established to be wrong, or discredited, on a particular issue the witness who has given a general signature of agreement is also discredited by implication.
  • The impression given to the judge is likely to be, as it was in this case, that the witness is “unable or unwilling to take the time or trouble to provide a witness statement stating what his evidence was”. This is hardly likely to impress.

THE JUDGE’S ASSESSMENT OF THE  CLAIMANT’S WITNESSES

This is a case where the claimant succeeded.  However it is difficult to avoid the impression that this was despite, not because, of the witness evidence. For instance

  1. Mr Owen is a chartered accountant by qualification, with considerable experience in finance, HR and IT. He had no previous experience of the glass recycling business when he joined Reuse in April 12. He left the claimant’s employment in March 14 for personal reasons, but remains on good terms with Reuse.
  2. His first significant involvement in this case appears to have been on 20 April 13, when Mark Wilson asked him to review in detail the contents of Keith Sendall’s journals in connection with Reuse’s investigation into Keith Sendall’s alleged conduct. He did so, and also reviewed Keith Sendall’s work e-mail account for the same purpose.
  3. It is apparent that as a result of that investigation he formed the very clear view that Keith Sendall had been actively involved in planning to set up in competition with Reuse since 2011, and his witness statement contained a very detailed account of the information he had obtained from his analysis of the journal entries and the conclusions he had drawn from those entries.
  4. He was subjected to close cross-examination on this aspect of his evidence. As regards a number of entries he was forced to accept that his expressed conclusions, entirely unfavourable to Keith Sendall, were incorrect. As regards many more he stood doggedly by his conclusions, seeking on a number of occasions to fortify them by reference to evidence which was not in his witness statement.
  5. In his favour, it can be said that he was prepared to withdraw his previously expressed adverse conclusions when presented with evidence which clearly showed that he was mistaken. Against him is the fact that he was originally prepared to draw so many adverse conclusions, including some involving very serious imputations against Keith Sendall, on what was in many cases very slender evidence, and in circumstances where a more careful analysis of the entries, coupled in some cases with a consideration of the e-mails which he had also reviewed, should have caused him to express himself in far more qualified terms.”
  1. Another example was that in his witness statement Mark Owen had made reference to an entry in the journal relating to Keith Sendall’s arrangements for drinks to be provided as a Christmas gift to valued suppliers. A reasonable reader of Mark Owen’s witness statement would have assumed that it was intended to convey the impression that there was something sinister or underhand about this, not least because otherwise there was no reason to include it at all, but in cross-examination he appeared quite willing to accept that this was standard practice and that there was nothing at all sinister or underhand about this. Indeed e-mail communications disclosed by Reuse on day 2 of the trial showed that Keith Sendall was actively seeking, as he was required to do, Mark Owen’s sanction for these purchases, so that there was nothing remotely underhand about them.
  2. It is also apparent that Mark Owen had little if any first hand knowledge of the nature of Keith Sendall’s role or activities, or the operation of the Dagenham site more generally, so that his speculation as to the nature of Keith Sendall’s activities was based on little direct knowledge.
  3. In short, I do not think that I can place very much reliance on his evidence, insofar as it forms the basis for making findings adverse to Keith Sendall, which go beyond the entries in the journals themselves. It seems to me that he took upon himself the role of advocate for Reuse’s case, seeking to build up a case against Keith Sendall from the journals, and ignoring anything which did not fit with his adverse view of Keith Sendall’s activities, rather than undertaking the proper role of a witness of fact, seeking to give evidence of fact confined to those matters of which he could personally speak.
  4. In my view substantially the same criticisms apply to his evidence in relation to the details of the damages claim against the defendants, which he had been responsible for producing. It became clear in cross-examination that in certain respects his assessment was flawed, that his witness statement did not include much of the detail which underpinned his assessment, and that in further respects his assessment depended on assumptions as to which he did not have detailed knowledge.

(ii) Mr Mark Wilson

  1. Mark Wilson was involved in the process of signing Keith Sendall up to a new contract, and he gave evidence about that. He was also involved in the investigation into Keith Sendall’s alleged breaches in relation to May Glass, and gave evidence about that.
  2. Whilst it seemed to me that he had a reasonably clear recollection of events, I also conclude that his reliability was seriously damaged by his partisan view of the case. Thus, as with Mark Owen, I consider that his evidence was coloured by his firm belief [102-113] that Keith Sendall had been conspiring with Mick Keogh ever since the latter left Reuse in Nov. 11 to set up a competing business and to damage Reuse’s business in preparation for that event. Again, it seems to me that this is derived from a partisan reconstruction of events, relying on a selective misreading of the journal entries and, for reasons I shall give later, I do not accept that view. Further, there were occasions where his evidence was undoubtedly wrong, and skewed against the defendants. In particular, his evidence in relation to the circumstances in which the meeting of 18 April 13 had been arranged was unsatisfactory, in that he had suggested in his witness statement that it had been set up as a reconvened grievance meeting, when that was plainly not the case, and in that he also initially denied in cross-examination that private investigators had been instructed to attend Dagenham to observe Keith Sendall, when they plainly had. It is also the case that he appears to have been less than careful in his approach to confirming that Reuse had complied with its disclosure obligations, although I consider that this was due to a failure to conduct a thorough search and review, as opposed to a positive intention to conceal relevant documents. Nonetheless it follows from the totality of the above that I am unable to accept his evidence uncritically, and without close consideration of whether it is reliable in relation to specific issues.

THE JUDGE’S ASSESSMENT OF THE  DEFENDANTS’ WITNESSES

(iv) Mr Keith Sendall

  1. Whilst on a personal level Keith Sendall came across as likeable and engaging, I am afraid that detailed cross-examination revealed him to be a wholly unreliable witness. My principal reasons for reaching this conclusion are as follows:
  2. Disclosure.

As I have stated, the adequacy of the defendants’ disclosure has been a running sore in this case. I am satisfied that the claimant’s complaints have been substantially made out as against Keith Sendall, and also that the reason for this is not ignorance or negligence, but his positive intention to conceal, both from Reuse and the court, damaging documentation. In particular:

(1) In [2] of his witness statement made 12 Jan. 14 and again in [3] of his affidavit made 3 Feb. 14 he stated in terms that he had no mobile phone records available, yet when pressed he was able to obtain copies of statements showing his use of his personal I-Phone, without any apparent difficulty, which proved to contain much material adverse to him. Even then, however, he failed to provide a full copy of his records for Mar. 13 or to provide any records for Apr. 13 or subsequently, and had to be ordered to do during the first week of trial. Even at that late stage he initially failed to provide records post 17 Apr. 13. There was no explanation as to how, if such be the case, he had come to believe that he was entitled to limit disclosure in the way he had sought to do. In my view he was deliberately seeking to avoid providing these records because he knew full well that they contained damaging details about the true nature and extent of his involvement with May Glass and his contacts with Reuse’s suppliers.

(2) He claimed he had tried, but had been unable, to retrieve personal e-mails on his Microsoft Hotmail email account. However when pressed he was vague about what he had done, eventually saying that Fred Sendall had “probably” done it for him. Furthermore, the documentary evidence he produced [pp.864-867] raised far more questions than it answered. Thus: (i) the inbox printout appeared to contain only 2 items, both of which appeared to be e-mails received that day, as opposed to all e-mails in the inbox; (ii) it was clear from the list of folders that Keith Sendall was in the habit of making dedicated folders, yet the printout did not disclose all of the folders, nor did he provide a screenshot of folders which might contain relevant e-mails (for example “Barclays” and “Fred”); (iii) the deleted printout contained only 17 items, but including items dating back to 28 Oct. 13, so that it was clear that he was not in the habit of deleting e-mails and then permanently emptying the deleted folder. This was inconsistent with his evidence that he regularly deleted, both initially and then on a permanent basis, his e-mails. In my view he has deliberately avoided providing full disclosure of his emails for the same reason as above.

(3) He repeatedly sought to excuse his inability to provide relevant documents by claiming that he had no involvement in certain matters. Particularly damning was his clear evidence on affidavit that he had no involvement in arranging payment in relation to INGS for the purchase of skip vehicles and an operator’s licence, when his own bank statements showed – as he must have known – that the payments for these items had come from his personal bank account. He claimed in cross-examination when this was put to him that this was just “a mistake”. I am afraid that in my judgment it was far worse than that, and amounted to deliberate concealment. I am also satisfied that he was also involved in the decision to redact the bank statements of May Glass, so as to conceal the extent of the financial dealings between INGS and May Glass, and which were only revealed during the course of the trial, once it had become clear to the defendants that they were unable to advance any coherent objection to producing the unredacted bank statements.

  1. Wiping company property.

Keith Sendall also admitted that before returning his laptop and his Blackberry phone, both provided to him by Reuse for company purposes, he removed data from them. When asked why, he was unable to provide any explanation, and when pressed accepted that he had no particular reason to do so. He claimed to have done this at some time between his resignation letter of 27 March 13 and the meeting on 18 April 13, prior to the date when Reuse sent its fellow employee, Ron Green, to collect these items from him. Keith Sendall claimed that he was given no notice of this visit, and decided to wipe them clean there and then. I found this account completely unconvincing, not least given Keith Sendall’s professed ignorance of how to use computers or access e-mails. In my judgment the most likely explanation is that there was data on those sources which Keith Sendall did not want Reuse to be able to access and that he wiped them, probably with the assistance of Fred Sendall, either before or shortly after he wrote his letter of resignation.

  1. Minimisation.

In my judgment Keith Sendall’s evidence was replete with attempts to minimise his involvement in matters which might be held against him. He claimed not to have discussed INGS or its business with Mick Keogh after the latter had resigned from Reuse and set it up as a competing business in circumstances where, as he admitted and as is evident from the phone records, he had a close relationship and regular contact with his cousin. He claimed to have made no investigations into setting up a competing business from Nov. 11 onwards, when it was evident that he had done so albeit, as I find, he had not actually made a firm decision to do so at that time. The fact however that he was prepared to deny even investigating the possibility of doing so was damaging to his credibility.

He also sought to minimise the nature and extent of his involvement on behalf of May Glass with Barclays Bank. Thus when asked what May Glass’ overdraft facility with Barclays was, he claimed not to know. That seems to me to be another example of his seeking to minimise his knowledge and involvement for tactical reasons. If May Glass genuinely had been set up by his sons entirely independently of him, but in a field in which he had considerable experience, operating from his home, and into which he had invested a significant amount, it would be very surprising if he had not – at least prior to the injunction – been aware what overdraft facility it had arranged. That is particularly so given: (a) the clear evidence of his direct involvement in arranging matters with the bank; (b) in summer 13 he had transferred a further £60,000 to May Glass, which had the effect of maintaining the credit balance on the account. It also appeared to be inconsistent with his unguarded answer minutes later when, on being asked in connection with his recorded dealings with Saint Gobain whether that was May Glass’ largest customer, he immediately replied “No, Ardagh is the main one”. In short, it seemed to me that he knew far more about May Glass’ business than he was prepared to admit when asked in terms about it.

  1. Altering evidence

He attempted to row back from his evidence, clearly given in his witness statement and confirmed in oral evidence, about his contact with a company known as Smiths of Gloucester on behalf of May Glass, once he realised how potentially damaging to his defence that evidence was. I was not remotely satisfied with his explanation that his original evidence was simply a mistake.

THE CLAIMANT’S EVIDENCE AS TO DAMAGES

In the light of the judge’s assessment of the defendant and the defendant’s other witness it is hardly surprising that the claimant succeeded in establishing liability for some of the alleged breaches.  However the claimant’s claim for damages was reduced substantially because of its own failures to produce evidence and prove its claim.

The largest part of the claim was for loss of revenue “in the approximate sum of £747,609.89”

A LATE ATTEMPT TO ADDUCE “THINLY DISGUISED” EXPERT EVIDENCE

The claimant had asked that the damages be assessed at a later date.

  1. Mr Keen’s opening skeleton did not address the quantification of the claim, because he invited the court to adjourn what he referred to as the remedy hearing until after liability had been determined. The reason for this unconventional approach was that on the first day of the trial Reuse had applied for permission to rely on a very late served witness statement from a Mr Alsop. Mr Alsop is a forensic accountant with the firm which audits Reuse’s accounts, but he personally had no previous dealings with Reuse. It was abundantly clear from reading his witness statement that it was in fact a thinly disguised expert report which sought to consider the claim for loss of profit and, having revised it in a number of respects, to endorse it. Its admission was strenuously opposed by the defendants. Having heard argument, I ruled that Reuse should not be permitted to rely on it, in circumstances where it had been served so late that it was impossible for the defendants to be able to respond to it at trial, and unjust to them to accede to Reuse’s invitation to order a split trial so as to give them the opportunity of doing so if liability was found as against them. In the circumstances Reuse was left in the difficult position, albeit entirely through its own fault, of having to proceed with a claim for damages for loss of profit based on a claim which it had tacitly recognised needed to be revised, and evidence which it had tacitly recognised needed to be supplemented by independent evidence from someone with appropriate expertise.

HOW DAMAGES WERE ASSESSED

The judge held that any claim for damages was limited to a three month period. This was the time it would have taken the defendant to set up a business in competition had he acted lawfully.

There were a number of criticisms made of the way in which the claim for damages was presented.

  • The claimant failed, even refused, to give disclosure of primary documentation in support of its claim for quantum.
  • Audited accounts had not been provided.
  • The schedules put forward were “woefully lacking in detail” in circumstances when the lack of detail was flagged up in the Defence.
  • Part of the alleged losses were incurred by a parent company. There was no inter-company cross-invoicing.
  • The claimant attempted to adduce a supplemental witness statement to deal with losses of the parent company. The judge refused permission.
  • The claimant had to fall back on a submission that its own key witness as to damages was “confused” and “mistaken” about key issues relating to loss.

The judge considered the argument that the loss by the parent company “Reuse Glass” could somehow be claimed.

in order for Reuse to recover that loss against the defendants in this action there would have to be evidence that this is what had been, or would be, done and evidence as to what the true value would be. I do not accept Mr Keen’s argument that the loss can be recovered on the basis that it is a loss of opportunity and the commercial value can be recovered by Reuse notwithstanding the arrangements it entered into with Reuse Glass. It seems to me that what he is effectively seeking to do is to introduce a restitutionary gain-based claim into his claim for compensatory damages in order to overcome an inconvenient difficulty, entirely caused by Reuse’s own failure properly to prepare its claim on quantum for this trial.

  1. In the circumstances it seems to me that as a minimum the claim for mixed glass would have to be reduced by 60%. However, given that Reuse had deliberately chosen not to allow any discount for saved processing costs, and had completely failed to provide any evidence as to what those costs would be if it was wrong on that point, it does not seem to me that I am in any position to speculate when that would be, in effect, to pluck a figure from the air. That difficulty is compounded by Reuse’s failure to provide evidence in relation to wastage, in circumstances where Mark Owen was driven to accept that in relation to mixed plate it could be as much as 20% and where I consider it could be as high as 25%. It is further compounded by Reuse’s failure to offer any credit in relation to saved purchasing costs, in circumstances where on Mark Owen’s best estimate it was a considerable amount (see below). Finally, there is the point about Mark Owen’s failure to provide acceptable evidence about the true cost of transport to Doncaster – see par. 37 ante.
  2. In my judgment, where there are such significant potential uncertainties, entirely the fault of the claiming party, the end result is that the court should not seek to speculate but should simply disallow the whole of the claim in relation to mixed plate glass.

A CLAIM FOR COSTS TO RETAIN OTHER SUPPLIERS

6(e) Costs to retain other suppliers

  1. Reuse contends that in order to prevent 10 identified other suppliers from switching to May Glass it had to: (a) offer a reduction in the charges it was levying to collect their waste plate glass, at a cost of £22,480 pa, details being found attached to Mark Owen’s witness statement at p.1491; (b) offer an increase in the payments made to 6 identified other suppliers, at cost of £55,246.95pa.
  2. Reuse has produced no direct evidence to support this element of their claim. Mark Owen’s evidence was that Reuse had instructed 2 employees, David Barlow and Ron Green, to visit suppliers to ensure that their custom was retained, but Reuse had not provided witness statements from those employees or called them to give evidence, or explained why they had not done so. There was no evidence from any of the suppliers either, whether in the form of witness statements or even letters. Mark Owen also accepted that these suppliers had not been signed up to new contracts, and that there was no documentary evidence to record these visits or agreements, so that the information he had provided came only from the information entered into Reuse’s IT system from the information provided by these employees. In short, there was no hard evidence put before the court from Reuse to confirm that these individual suppliers had been approached by Keith Sendall (or anyone else from May Glass) and that these increased payments had been negotiated solely in order to prevent the suppliers from transferring their custom to May Glass as a result of those approaches.
  3. In my judgment it is unacceptable for Reuse to advance this claim with such a paucity of evidence, in circumstances where it could and should at the very least have provided witness statements from Mr Barlow and Mr Green, or explained why not. For all the court knows Reuse chose to adopt a strategy of offering these discounts to all suppliers which it perceived were vulnerable to being poached by May Glass without any enquiry as to whether or not they had actually been approached or were considering transferring

AN ATTEMPT TO CLAIM DAMAGES ON A DIFFERENT BASIS

There was an alternative claim for gain based damages and an account of profits.

6(g) Reuse’s alternative claim for gain based damages and/or an account

  1. Finally I return to Mr Keen’s alternative claim for gain based damages and/or an account of profits. The immediate difficulty which Reuse faces is that on the case as pleaded and in the light of the current circumstances and the findings neither remedy is open to it. That is because the claim for breach of fiduciary duty has failed, and because in the absence of any basis for a final injunction it is not open to Reuse to claim damages in lieu of such an injunction. Moreover, and even if it was open to Reuse to advance such a claim, there is no basis for acceding to Reuse’s invitation to defer the quantification of such a claim, because that would be to allow it to secure by the back door what I refused to do on day 1, namely to obtain a deferment of the trial of the issue of quantum. Insofar as both claims depend on my being able to make findings as to the profits which May Glass has made through dealing with Reuse’s suppliers, that is not a case which was advanced in opening or the subject of evidence from Reuse, nor were the defendants cross-examined on this point. Whilst Mr Keen would doubtless object that Reuse should not be prejudiced by the defendants’ failure to make proper disclosure in relation to May Glass’ business with these suppliers, and whilst in principle I have some sympathy with that complaint, the difficulty Reuse has is that if it had ever been serious about advancing this alternative claim it could and should have sought and obtained an unless order for specific disclosure of this specific class of document, and I am reasonably confident that if it had done so it would have been successful in obtaining such an order. In circumstances where Reuse has pursued and obtained an award of compensatory damages, and insofar as it has not recovered all that it hoped for that is entirely its own fault, it would be wrong in my judgment to allow it a second bite of the cherry.

THE RESULT

As a result the claimant, which was claiming £747,609.89 in loss of revenue alone obtained a judgment for £51,822.20

IMPORTANT POINTS

  • There are clearly important points relating to the drafting of witness statements.  “Cross-referencing” witness statements by merely stating that one witness agrees with another is unlikely to be helpful. It is more likely to be harmful.
  • Care must be taken if the witnesses have strong feelings about the case. Again a witness statement that is partisan is more likely to be harmful than helpful.
  • It appears that insufficient consideration was given to the need for the claimant to prove the losses it was claiming. It was not until the first day of the trial that the claimant attempted to adduce accountancy evidence. It is no surprise that this was refused.

RELATED POSTS: PROVING LOSSES

RELATED POSTS: WITNESS CREDIBILITY

This issue is also discussed in a number of other posts.

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 decision on credibility

7 Evidence, Experts & Arson: Analysing the evidence when serious allegations are made

8. “Witness training” does it do any good? The role of the solicitor in drafting witness statements.

 

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