I have written before about the decision in relation to the the decision in the liquidation in the Robin Hood Centre. In the judgment at first instance the Registrar held that the claim against former directors had been vastly over-stated and made no order for costs. Both sides appealed and the directors were successful on appeal, the liquidators were not. The appeal judge holding that there was not sufficient evidence to justify the directors making any contribution at all. The appeal judgment (David Foxton QC sitting as a Deputy High Court Judge) is particularly telling on the failure to prove causation. A copy of the judgment is available here. appeal-judgment-1
“The suggestion that a defendant to a claim for compensation must mediate in order to find out the claimant’s case as to causation and quantum is plainly misconceived”
- The liquidators had failed to adduce a coherent case in relation to causation and loss in their claims against directors.
- The order that the directors pay £35,000 was set aside. The Registrar made findings on a basis that was not put by the liquidators and which was unfair to the respondents.
This was a case where the liquidators were claiming £1.1 million in costs. It failed on the basic point that of a failure to prove things. The Registrar noted:-
“If an Applicant presents a largely misconceived claim with an unattainable quantum, it can be unfair to criticise the Respondent for failing to settle and for adopting an intransigent approach.”
“A wholly different approach might have been adopted if the claim had originally been drawn to its proper scale with regard to the bases for the amount claimed, the quantum and the costs involved. It is to be borne in mind when considering conduct that the Respondents were facing a claim with costs on a conditional fee basis which would be potentially ruinous”
The applicant liquidators bought an application that the directors of a company in liquidation make a contribution of £701,000. At the hearing the Registrar ordered the directors pay £35,000 and made no order for costs. Both sides appealed. The liquidators’ appeal was rejected the respondents’ appeal succeeded.
The judge set out the appropriate approach to an appeal of this type.
“The proper approach to be adopted
23. A number of the grounds of appeal seek to challenge findings of fact made by the Registrar who had the benefit of seeing the witnesses give evidence during a substantial trial. The correct approach for an appellate court asked to interfere with factual findings has been set out in a number of cases. There is a good summary of the relevant principles (which I do not believe to be in dispute) in Lewison LJ’s judgment in Fage UK Ltd v. Chobani UK Ltd  EWCA Civ 5 at : “Appellate courts have been repeatedly warned, by recent cases at the highest level, not to interfere with findings of fact by trial judges, unless compelled to do so. This applies not only to findings of primary fact, but also to the evaluation of those facts and to inferences to be drawn from them. The best known of these cases are: Biogen Inc v Medeva plc  RPC 1 ; Piglowska v Piglowski  1 WLR 1360 ; Datec Electronics Holdings Ltd v United Parcels Service Ltd  UKHL 23  1 WLR 1325 ; Re B (A Child) (Care Proceedings: Threshold Criteria)  UKSC 33  1 WLR 1911 and most recently and comprehensively McGraddie v McGraddie  UKSC 58  1 WLR 2477 . These are all decisions either of the House of Lords or of the Supreme Court. The reasons for this approach are many.
i) The expertise of a trial judge is in determining what facts are relevant to the legal issues to be decided, and what those facts are if they are disputed.
ii) The trial is not a dress rehearsal. It is the first and last night of the show.
iii) Duplication of the trial judge’s role on appeal is a disproportionate use of the limited resources of an appellate court, and will seldom lead to a different outcome in an individual case.
iv) In making his decisions the trial judge will have regard to the whole of the sea of evidence presented to him, whereas an appellate court will only be island hopping.
v) The atmosphere of the courtroom cannot, in any event, be recreated by reference to documents (including transcripts of evidence).
vi) Thus even if it were possible to duplicate the role of the trial judge, it cannot in practice be done”.
24. There are other aspects of the appeal which seek to challenge exercises of discretion by the Registrar. Once again the principles which apply on the hearing of an appeal against the exercise of a discretion are also clear. A useful summary was provided by Stuart Smith LJ in Roache v News Group Newspapers Ltd  EMLR 161 at 172:
“Before the court can interfere it must be shown that the judge has either erred in principle in his approach, or has left out of account, or taken into account, some feature that he should, or should not, have considered, or that his decision is wholly wrong because the court is forced to the conclusion that he has not balanced the various factors fairly in the scale.”
THE LIQUIDATOR’S CASE ON CAUSATION AND DAMAGES
The judgment is clear, if not cutting, on the liquidators’ failures to set out and clarify their case on causation and loss.
“99. In a witness statement filed on 31 March 2014, Mr Brooks responded to the complaints in the Directors’ witness statements that no case as to the amount of compensation had ever been set out by stating: “I am advised that these issues will be matters for submission at trial. I would just point out that my solicitors have proposed that a mediation should take place on numerous occasions … which would have provided the ideal form to discuss issues such as causation and quantum” (witness statement of 31 March 2014 para. 16). The suggestion that a defendant to a claim for compensation must mediate in order to find out the claimant’s case as to causation and quantum is plainly misconceived. Mr Walker filed a further statement on the same day, in which he once again complained about the Liquidators’ failure to address the issues of causation and loss “to any meaningful extent”. The witness statement clearly articulated the Directors’ position that the last opportunity for the Liquidators to remedy this deficiency in their case had now passed.”
“106. The Liquidators served their skeleton argument on 28 June 2015. Paragraph 34 of that skeleton stated:
“The JL’s case on causation and quantum is set out in paragraphs 43 to 45 of the Points of Claim …. As will be understood, the actual figures will only be arrived at once the relevant dates are fixed”.
The Directors’ skeleton argument, served on 26 June 2015 described the Liquidators’ case on causation and loss as “confused and incoherent” and complained that
“the Applicants have not made any attempt to calculate the increase in net deficiency in relation to their chosen dates as a starting position”.
Mr Nersessian submitted: “The authorities do not endorse a `wait and see’ approach on causation and quantum. The Applicants were obliged to set out their case on these aspects of the claim in the Points of Claim. They have not done so and should not now be permitted to modify their position”.
107. On the first day of the hearing, the Schedules previously served under cover of a “without prejudice save as to costs” letter were served, with cross-references to the bundles to explain the source of the figures where available. Unfortunately neither the oral openings, nor Mr Nersessian’s oral closing (the Directors did not produce a written closing argument) are available to me on this appeal. I asked Mr Nersessian what the Directors’ response had been to these documents. He said that the Directors’ position was that the documents were not evidence in the case and were objected to as “evidence”. However, once produced, there had been no determination of their status and the parties had simply got on with the hearing. While the schedules are not mentioned in Mr Couser’s written closing argument, it is not possible to discern from the materials before me how far (if at all) the parties actually engaged with them in the course of the hearing before the Registrar. I was told that Mr Brooks had been cross-examined by reference to them”
OVERTURNING THE FINDING OF THE REGISTRAR
114. I have concluded that the approach taken by the Liquidators to setting out and particularising their case as to the amount of compensation which the Directors should be ordered to pay was fundamentally deficient throughout. The importance of one party setting out the parameters of the case it is advancing so that the other party may prepare for the case it has to meet, both in its evidence and its argument, is obvious. If authority is needed for this proposition notwithstanding its obviousness, it can be found in any number of authorities, including McPhilemy v. Times Newspapers Ltd  3 All ER 75 at 792-793, Guild v. Eskander  FSR 23 and Jones v Environcom Ltd  EWCA Civ 1152. It is obviously the best course, and in some cases the required course, for those parameters to appear from statements of case and particulars of statements of case. However, the authorities make it clear that where the details of a party’s case emerges sufficiently from the material it has served, including witness statements, the Court will want to decide the real points in issue between the parties, where this can be done without unfairness to the other party, rather than allowing one party to take a stand on a “pleading point” in respect of a point of which it has had fair notice and a fair opportunity to address.
115. However the deficiencies in the Liquidators’ case here, so far as concerns causation and quantum, go far beyond a failure to keep the terms of pleadings up to speed with the pitch of their arguments as they fairly appeared from the other documents they had served. Despite persistent warnings from the Directors, with highly pertinent references to the relevant authorities, there was no attempt to set out the “increase in net deficiency” case being advanced until the schedules served on a “without prejudice” basis on 8 June 2015, and, in open correspondence, only on the first day of the hearing. Those schedules raised a number of issues of controversy, and were deficient in numerous respects. Had the Registrar adopted or relied upon them for the purposes of his judgment, the Directors would have had legitimate grounds to complain that they had been brought forward at far too late a stage of this longrunning trial, despite numerous warnings from the Directors about the need for these issues to be grappled with at a much earlier stage, and of the consequences of not doing so.
116. In the event, the Registrar did not rely on those schedules, and therefore this issue does not arise. What he did do was arrive at his own conclusions based on the materials before him, but following an analysis which had not (so far as I am able to ascertain) been advanced by either party at the hearing, and which had not been the subject of submissions at the hearing. I have every sympathy for the position in which the Registrar found himself. The Liquidators had neither properly set out a case on 34 these issues, nor grappled with many of the issues which the claim raised and which the Registrar himself identified. Given the very substantial nature of the hearing before him, and the natural desire to resolve this long-standing dispute on the merits rather than on procedural or burden of proof grounds, I can well understand why the Registrar wanted to identify and resolve the relevant issues himself.
117. However it seems to me that unless I am satisfied that the analysis adopted by the Registrar is one to which the Directors could have raised no legitimate objection had it been raised at the hearing, either as to their ability to address the analysis on the existing evidence, or by way of objections to its inherent soundness, then the Directors are entitled to succeed on their first ground of cross-appeal.
118. I have reluctantly concluded that, had the analysis ultimately adopted by the Registrar been considered at the hearing, the Directors would have been able to raise legitimate objections to it, either on the basis that there was insufficient evidence on relevant issues, or because, if the analysis was followed through to a proper conclusion, the Registrar should have concluded on the facts he found that no compensation was payable.”
THE PROVING THINGS SERIES
- Proving things 1: Civil Evidence Act notices will not cut it
- Proving things 2: evidence to support a claim for damages must be pitch perfect.
- Proving things 3: the complete absence of evidence means the court will not speculate
- Proving things 4: Witnesses who just aren’t there.
- Proving things 5: witness statements and failing on causation.
- Proving things 6: “That’s what I always do” & proving causation.
- Proving things 7: If you don’t prove a loss you don’t get an order.
- Proving things 8: a defendant must prove that a failure to wear a seatbelt made a difference.
- Proving things 9: the role of experts
- Proving things 10: “He said, she said”: the difficulties of recollection.
- Proving things 11: Lies, damn lies and…
- Proving things 12: That oral contract is not worth the paper its written on.
- Proving things 13: Loss, there was no loss.
- Proving things 14: proving mitigation of loss
- Proving things 15: damages and evidence: going back to College
- Proving things 16: if you don’t prove it you don’t get it.
- Proving things 17: Heads of damage that were “entirely bogus”
- Proving things 18: Damages; Car hire; Proof & Summary Judgment
- Proving things 19: prove service or you could be caught out.
- Proving things 20: allegations of improper conduct have to be prove
- Proving things 21: when the whole process of investigation is flawed
- Proving things 22: damages, mitigation part 36 (and bundles).
- Proving things 23: serving important evidence late
- Proving things 24: Damages & the “But for test”: when it gets really complexProving things 24: Damages & the “But for test”: when it gets really complex
- Proving things 25: Attempts to smuggle in witness statements do not help (and carry no weight).
- Proving things 26: distinguishing between what you can remember and what you now think you did.
- Proving things 27: Burdens of proof, hearsay evidence and… attempted murder.
- Proving things 28: make unwarranted personal attacks and use a “mud-slinging” expert: that always ends well.
- Proving things 29: Make sure the witness evidence deals with the relevant issues
- Proving things 30: Office Gossip Proves Nothing: The importance of the source of information and belief.
- Proving things 31: witnesses tend to remember what they want to remember.
- Proving things 32: Damages claim struck out as unsustainable: application to amend refused.
- Proving things 33: causation and the burden of proof in claims against solicitors.
- Proving things 34: There is no primer for scuttlers: when your ship doesn’t come in.
- Proving things 35: Reconstruction, documents & memory.
- Proving things 36: credibility and contemporaneous documents.