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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Dickinson (t/a John Dickinson Equipment Finance) v Rushmer (t/a F J Associates) [2000] EWCA Civ 42 (14 February 2000)
URL: http://www.bailii.org/ew/cases/EWCA/Civ/2000/42.html
Cite as: [2000] EWCA Civ 42
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Case No: PTA/1999/6591/B2
and CCRTF/1998/1541
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CENTRAL LONDON COUNTY COURT
His Honour Judge Hallgarten Q.C.
Royal Courts of Justice
Strand, London, WC2A 2LL
Monday, 14 February 2000
LORD JUSTICE PETER GIBSON
LORD JUSTICE SCHIEMANN
and
MR. JUSTICE WILSON
DICKINSON (T/A JOHN DICKINSON EQUIPMENT FINANCE) |
Respondent | |
- and - |
||
RUSHMER (T/A F J ASSOCIATES) |
Appellant |
Smith Bernal Reporting Limited, 180 Fleet Street
London EC4A 2HD
Tel No: 0171 421 4040, Fax No: 0171 831 8838
Official Shorthand Writers to the Court)
Mr. Paul Epstein (instructed by Messrs. Wakefields of Southwark for the Respondent)
Mr. Richard Salter Q.C. and Mr. James Ramsden (instructed by Messrs Downs of Dorking for the Appellant)
Judgment
As Approved by the Court
Crown Copyright ©
MR JUSTICE WILSON:
1. Mr Rushmer, the defendant in the court below, brings two matters before this court. The first is his appeal against an order made by His Honour Judge Hallgarten Q.C. in the Central London County Court on 11th November 1998. Permission to appeal was given by the judge on that date. The second is his adjourned application for permission to appeal against an order made by the same judge in the same proceedings on 1st March 1999 but enshrined in an order dated 7th June 1999. The Judge refused permission to appeal against that order. Inasmuch as we have received full argument from both sides on the point raised by the application, I would suggest that, for reasons of convenience, we should grant permission to appeal and proceed to address the point directly in the context of a second appeal. Following a global introduction, I will address the two appeals separately.
2. The background to the proceedings is that both the appellant and the respondent are brokers in the specialised area of arranging finance for television/video/film companies which aspire to acquire technological equipment. Classically there are four parties to a transaction of that sort. There is the company which aspires to acquire the equipment, i.e. "the customer". Second, there is the company which sells the equipment, i.e. "the supplier". Third, there is the company which provides the finance, i.e. "the finance-house". Fourth, there is the broker who obtains a fee from the customer ("an arrangement fee") and/or from the finance-house ("an introduction fee") and/or perhaps some other benefit from putting the transaction together.
3. There are a large number of variations in the type of these transactions. The judge helpfully identified three types in particular:
(a) in type A, which he described as the orthodox situation, the broker arranges for the equipment to be bought by the finance-house from the supplier (or from the customer itself) and then to be leased (or leased back) to the customer. In that event the broker might be paid an arrangement and/or an introduction fee but there is no opportunity for him to make further money out of the transaction.
(b) in type B it is the broker, not the finance-house, who initially buys the equipment from the supplier (or from the customer itself); the broker then sells the equipment to the finance-house which leases it (or leases it back) to the customer. In that situation, in addition to the prospect of a fee or fees, the broker can make money by charging the finance-house a higher price for the equipment than he has paid for it ("the uplift").
(c) in type C the broker takes the role of the finance-house in that, having bought the equipment from the supplier (or from the customer itself), he himself leases it (or leases it back) to the customer. In that situation, in addition to the possibility of an arrangement or analogous fee, the broker can generate profit reflective of the difference between the price which he will have paid and the rentals which he will receive. But, were the customer to go into liquidation prior to payment of all the rentals, the broker, absent insurance, is left with ownership of the equipment, whatever that might then be worth.
4. It is common ground between the parties that at a meeting at Kettner's Restaurant in Soho in January 1992 they orally entered into an agreement to combine with each other in brokering transactions; and that they made specific reference to the three types of transactions set out above. It is also agreed that during the following three or four years they combined to achieve 27 transactions. The first 22 of the transactions were negotiated by the appellant with input, in the form of the introduction of the customer, from the respondent; so, in respect of those transactions, it was - in principle - for the appellant, as the recipient of the proceeds of the transactions, to account to the respondent for whatever was payable under their agreement in respect of them. The last five of the transactions were negotiated by the respondent with input, in the form of the introduction of the customer, from the appellant; so in those cases it was for the respondent to account to the appellant for whatever was payable between them.
5. Of the 22 transactions negotiated by the appellant, most, on the judge's analysis were of type B and only a few were of type A; none was of type C and one transaction, namely the tenth transaction, fell outside all three types.
6. In 1995 the parties fell out and in 1996 the respondent launched the proceedings against the appellant in the lengthy course of which the two orders which he challenges were made. In the proceedings the respondent complained that the appellant had not paid to him all that was owing to him referable to a number of the first 22 transactions. His contention was and is that, under the oral agreement reached in 1992, all fees or other proceeds received by either of the parties referable to a joint transaction should be shared equally; and he sought a direction for an account so as to define what was allegedly due to him. By his defence the appellant denied that the agreement reached between them in 1992 was as alleged by the respondent. The appellant contended that the agreement had simply been that, at the end of each joint transaction, they would agree how to divide the fees; and that there had never been any question that, if from a joint transaction either party generated any proceeds other than fees, he would have to account to the other for any part of them. The appellant argued that, on such an analysis of their contractual obligations, he owed the respondent nothing. On the contrary, by his amended counterclaim, he alleged that the respondent owed him £6,400 referable to the final, the 27th, transaction. By defence to counterclaim the respondent countered that the final transaction had been subject to a special arrangement between them by virtue of which he owed the appellant nothing.
7. It was on 15th June 1998 that the action came on for hearing before His Honour Judge Hallgarten for substantive despatch. Since the claim was for the direction of an account, it was agreed at the outset that that hearing should be devoted to the determination of the terms of the agreement reached between the parties and that, if the respondent succeeded in establishing his entitlement to it, the account should be directed to be taken at a subsequent hearing.
8. The judge heard evidence and submissions for 3½ days between 15th and 18th June; and he reserved judgment. His written judgment, set on 21 pages, was sent to the parties on 6th October 1998. The judge found for the respondent on the issue as to the terms of the agreement of January 1992 and upheld the appellant's amended counterclaim as being consistent with those terms. On 11th November 1998 the court re-assembled and judgment was then given for the respondent for an account to be taken, and for payment by the appellant to him of such sum as should therein be found to be due, in the light of the judge's written judgment. Directions were given for the assembly of further evidence which would facilitate the taking of the account at a hearing to be fixed before the same judge in 1999. Judgment was given for the appellant on the amended counterclaim. Permission was given to the appellant to appeal in effect against the determination of the terms of the agreement upon which the judge had founded his judgment for the respondent. The appellant promptly filed his Notice of Appeal.
9. It can thus be seen that the first appeal before us represents a challenge to the finding of fact made by the judge that, to quote from his initial description of the respondent's case which he ultimately accepted, the parties had in 1992 agreed to "... share 50/50 all commissions, fees, profits or other benefits from any source in and about the setting up of finance in respect of the supply and leasing of equipment to concerns in the TV and Media industries generally where the [respondent] introduce[d] a customer to the [appellant] or vice versa".
10. Notwithstanding the filing of the Notice of Appeal, the taking of the account proceeded in the court below. Further evidence was filed; and the judge conducted the accounting exercise on 1st and 19th March 1999. He again reserved judgment and delivered it on 7th June 1999. The result was that judgment was entered for the respondent on his claim in the sum of £24,535 including interest and for the appellant on his amended counterclaim in the sum of £8,236 including interest. The latter was directed to be set off against the former with the result that the appellant was obliged to pay to the respondent £16,299. The judge also ordered the appellant to pay 85% of the respondent's costs.
11. It was on the first day of the second hearing, namely 1st March, that the appellant contended that he was entitled to bring into the account, or alternatively should be allowed to re-amend his counterclaim in order to do so, two further sums totalling £16,450 allegedly due to him from the respondent. On that day the judge ruled that the appellant was not entitled to bring these further sums into the account without re-amending his counterclaim and that his alternative application to be allowed to re-amend it should be refused. He refused permission to appeal. These orders were not drawn at the time and are contained within the final orders made on 7th June 1999.
12. The appellant's attempt to claim credit for two sums totalling £16,450 related to a transaction - the tenth transaction of the 27 transactions - which had been the subject of limited evidence and findings at the first stage of the hearing. The transaction is for convenience referred to as "Mag Masters (2)" being the second transaction brokered for that particular customer. This was a customer introduced by the respondent and the transaction was negotiated by the appellant. In fact he chose to structure the transaction in a way entirely different from any of the types employed in respect of the other transactions. In 1998 he had averred in evidence that on this occasion he had made a straightforward loan, apparently unsecured, to the customer for its purchase of equipment in the expectation that, by the contractual provisions for repayment and interest, he would make a substantial profit; but that the customer had defaulted, leaving him with a loss of about £30,000. He had added that, in expectation of profit, he had paid the respondent £1450 in accordance with what he said would have been the latter's entitlement were profit to be made from the deal. Indeed the fact of his payment of that sum to the respondent has never been in dispute. But, at the time of the hearing in June 1998 (and in due course I will revert to those words, which are carefully chosen), the appellant was not claiming or intimating any claim either that the respondent should share an equal or any part of the loss or that he should repay that sum of £1450.
13. With that introduction I turn to the first appeal. There has been some discussion before us as to the proper approach to be adopted by the Court of Appeal to an appeal against a determination of fact. But such is not seriously in issue. As it happens, the contention of Mr Salter Q.C. on behalf of the appellant is that the judge was "clearly wrong" to have reached the determination which he did. But the adverb is the product of Mr Salter's advocacy; and his client does not need to climb that high. If this court is satisfied that the judge's determination was wrong, it must allow this appeal. But, as Mr Salter recognises, the process of satisfying this court of an error in a finding of fact made in the court below is not easy. The handicap, relative to the position of the judge below, under which this court labours, confined as it is to reading the papers however meticulously and listening to the submissions however attentively, needs no elaboration. Contemporaneous documents can of course be a crucial handle for an appellant to grasp in arguing that a finding of fact is untenable. But in this case there is an extraordinary absence of written material bearing upon the agreement reached in 1992. Although it was reached between experienced businessmen in the course of a meal in a restaurant, neither party saw fit to reduce it to writing either at that table or at any subsequent stage during which the agreement was operative. The agreement was in operation for almost four years but, during that time, very few documents came into existence which even indirectly illumine its terms. When in November 1995 the parties fell out, the ensuing exchange of letters is of some, yet limited, significance.
14. It must be rare that the terms of a business agreement, which was to govern numerous transactions spread over a long period, should have to be collected so largely from the oral evidence and, indeed, notwithstanding that there were supporting witnesses called to give evidence on other specific issues, from the oral evidence merely of the two protagonists.
In his judgment the judge said:-
".......has the [respondent] made out his case that he was entitled to 50% of all profits generated pursuant to the joint brokerage? As I see it, the position is nicely balanced, each party being vulnerable to some degree on issues of reliability and credibility. Having regard to the exiguous evidence available, my mind has fluctuated considerably: in the end, however, I believe that the [respondent] has established a more plausible case for the following reasons..."
15. The judge then gave six reasons to some of which I will turn in due course. It seems to me - and I do not understand Mr Salter to argue to the contrary - that the fact that the judge found the determination nicely balanced and thus difficult does not substantially impact upon the fate of this appeal. It could be said that, by these comments, the judge showed, albeit of course in very general terms, an awareness of the potency of some of the appellant's points. To that limited extent, Mr Salter's path may be the steeper. In general, however, the difficulty of the decision, as the judge saw it, seems to me to be a neutral factor in this court.
16. Not surprisingly Mr Salter makes much of the fact that, in certain
areas, the respondent was found to be an unsatisfactory witness; and, of
course, he couples this part of his submission with a reference to the burden
of proof which lay squarely upon the respondent. When I observe that, to my
mind, one of the biggest challenges set for a judge is to pick out the
situation where an unreliable witness nevertheless establishes a good case, I
do not mean in any way to dismiss the seriousness - or downgrade the relevance
- of forensic dishonesty.
17. Mr Salter's best example is the respondent's bogus defence to the
counterclaim for £6,400. By virtue of the final joint transaction the
respondent had obtained a fee of £12,800. That transaction was proceeding
at just the time when the parties fell out and when the respondent was at last
beginning to complain that the appellant had not properly accounted to him in
respect of previous transactions. The appellant in effect refused to divulge
further details of the previous transactions and countered with a claim for one
half of the sum of £12,800. It seems clear that, just as the appellant
was not minded to concede his claims, the respondent himself was in no way
minded to concede the claim for £6,400, whatever its validity. So he
concocted a story that the finance-house involved in the transaction had
insisted that the appellant should play no part in its negotiation and that
accordingly no part of the fee obtained by him from the finance-house should be
payable to the appellant. At trial the appellant called an officer of that
finance-house, whose evidence showed that the respondent's assertions about the
stance taken by his company had been untrue. But, even had they been true,
such a stance would not have precluded a private accounting between the parties
of whatever was due in respect of a transaction negotiated by the respondent
on the introduction of the appellant. Mr Epstein, on behalf of the respondent,
makes, with respect to him, a thin attempt to argue that the judge's findings
on the amended counterclaim represent a conclusion that the respondent's
evidence was in error but not necessarily deliberately so. And, in reply, Mr
Salter jumps on the band-wagon and complains that the judge failed to
appreciate that the respondent's untruths in relation to the counterclaim were
deliberate. What the judge said was that the respondent's account was "not
credible". Speaking for myself, I see no room for honest mistake in relation
to the respondent's evidence in this respect; and nothing in the judgment gives
me the impression that the judge took any more benign a view of it.
18. A somewhat better point made by Mr Epstein is that the judge also to some
extent rejected the appellant's evidence referable to the counterclaim for
£6,400 inasmuch as he found that it was owing by virtue of the original
agreement to share equally made in 1992 and not, as the appellant had
contended, by virtue of a bespoke agreement reached much later in respect of
that particular transaction.
19. Mr Salter also relies heavily upon the fact that it was the respondent's
case, articulated by Mr Epstein in his opening before the judge in unqualified
terms, that, although the possibility of transactions of type B or C as well as
A had been canvassed at the meeting in January 1992, he always understood that,
for the 22 transactions negotiated by the appellant upon his introduction, the
appellant had adopted type A. It was clear from the respondent's own evidence
that he kept the appellant in the dark about the details of many of these
transactions. But two documents contemporaneous with two of the transactions,
together, in relation to a third transaction, with comments made in the
respondent's own witness statement, indicate quite clearly that, in relation to
those three transactions, he was or should have been aware that they were of
type B.
20. Another point adverse to the respondent's credibility is that, in an
application form for the grant of a tenancy of a new home, he had falsely
represented that he was an employee of the appellant and, even more
demonstrably untrue , had been such for upwards of five years. Mr Salter also
picks from the respondent's witness statement two other assertions which, when
explored at the hearing, turned out to be untrue; but, to my mind, they are of
much less significance.
21. At all events, these points, taken compendiously, embolden Mr Salter to
submit to us that only one of the parties, namely the respondent, was shown to
have lied in connection with the claim (and otherwise) and that the judge was
inappropriately even-handed in his criticism of the credibility of each party
before making his crucial determination.
22. It is here that, in my view, Mr Salter has become too bold. The judge
did indeed make considerable criticism of the appellant's veracity and
described his evidence as unsatisfactory to a degree equal in many ways to the
evidence of the respondent. In the course of the hearing of this appeal we
have been asked to survey in detail the basis for these remarks. The judge made
considerable criticism of the quality of the appellant's discovery at the date
of the hearing in June 1998. In order to reconstruct what the agreement in
1992 had been and to determine the consequences of any breach, it was necessary
for him to focus upon the subsequent transactions, upon what proceeds each had
generated in one way or another and upon what had been paid by the one party to
the other referable thereto. To that end, the judge needed to be provided by
the appellant with such documentation relating to the first 22 transactions as
would reveal the level of fees obtained from the customer and/or finance-house
and, in particular, in respect of the many transactions of type B, would reveal
the uplift. Indeed the court had ordered discovery to be given; and there had
been no suggestion, whether in the order or otherwise, that the appellant
should be spared the duty to disclose any category of documents until after the
first stage of the hearing. But the necessary documentation was largely
absent. The appellant said that the documents had been lost in the course of a
move of his offices. But the judge expressed himself not satisfied that the
appellant had given as much discovery as he was capable of giving; in other
words, not satisfied that the appellant had fully revealed the documents which
would have identified the figures integral to the claim.
23. Furthermore, thrown back by the absence of documents upon the need to
estimate uplift, the appellant, as the judge found, considerably understated
its size. Indeed the understatement, as found by the judge, was not just to
himself in evidence, but to the respondent during the period of the parties'
collaboration. In the judge's words:
"The [appellant's] case that he told the [respondent] of the amount of any
fee when one arose, but gave no other details, strikes me as
implausible. On balance, I consider it much more likely that in each case the
[appellant] presented the [respondent] with some figure said to represent
overall commission and withheld information as to the true profit which the
deal had generated."
24. The judge's point can be clearly illustrated by reference to the twelfth transaction named "Patrick Denny". Here the appellant negotiated a type B transaction which led to an uplift of £950 but in relation to which neither the customer nor the finance-house paid him a fee. Following a conversation with the appellant, the respondent had invoiced him for £350 and been paid that sum. The respondent's explanation was straightforward, namely that the appellant had represented to him that the commission had been £700; hence his claim, which by payment the appellant had accepted, for half. If, however, as the appellant contended, he never revealed uplift to the respondent because that was outside the parameter of their agreement and only revealed fees, what, as Mr Epstein asked him in cross examination, had he represented to the respondent which had resulted in the claim for £350? The appellant was unable to answer Mr Epstein's question. What, on the appellant's case, could he have said? All that Mr Salter could suggest to us was that his client might simply have said to the respondent: "I will pay you £350".
25. There was another, discrete area of the appellant's evidence which was
rejected by the judge. It related to an arrangement which he had reached with
a third broker, Mr Savage, in relation to the latter's contribution to the
22nd transaction, named "M2 Video Facilities". After the
transaction, which was of type B, had been duly brokered, Mr Savage and the
appellant entered into a dispute as to what Mr Savage's share of the profits
had been agreed between them to be. Indeed Mr Savage had sued the appellant in
separate proceedings which were ultimately compromised. The issue in those
separate proceedings, also raised in evidence given by both Mr Savage and the
appellant in the present proceedings, was whether the appellant's contractual
duty was, as he contended, to account to Mr Savage only for one half of any fee
generated by the transaction or, as Mr Savage contended, to account to him for
one half not only of any fee but also of any uplift generated in the course of
the transaction. The judge disbelieved the appellant's version of that
transaction.
26. My conclusion is that the judge was amply entitled to conclude that the
appellant's evidence was in many ways as unsatisfactory as the evidence of the
respondent and that, although their lack of credibility was exposed in
different respects, the obstructive dishonesty which the appellant was found to
have brought to a major part of the forensic exercise - which was to seek to
understand what the parties had agreed by reference in part to how they had
subsequently dealt with each other - was of especial seriousness.
27. By his next point Mr Salter contends that the respondent's case as to the
terms of the agreement was too uncertain for the law to entertain or, at least,
to entertain other than sceptically. He says that the respondent was clearly
asking for one half but never consistently identified the nature of the fund
which was to fall for division in that way. It is true that by his statement
of claim, by the further and better particulars of it which were subsequently
delivered, by his witness statement and again in his oral evidence, the
respondent described that part of his case in slightly different ways. But, to
my mind, his case was clear from the outset: he was contending that the
agreement entitled him to one half of everything that had come into the
appellant's hands by reason of a joint transaction; his slightly different
terminology represented only different attempts to specify what, in the
circumstances, "everything" meant. The judge's own formulation of the
respondent's claim, set out at the beginning of his judgment, was that the
parties would share 50/50 "all commissions, fees, profits or other benefits
from any source..." generated by any joint transaction. Mr Salter contends
that that was an erroneous summary of the respondent's case but I cannot accept
the contention. In my view it was entirely accurate and, perhaps not
surprisingly, represented a rather better formulation of what the respondent
had been seeking to convey than his own attempts at specificity.
28. Mr Salter proceeds to submit that an equal division of in effect
everything generated by a brokerage transaction was, and should by two
experienced brokers have been realised to be, unworkable, given the differences
in the type of transaction into which the appellant might, and indeed did,
enter. The judge's judgment upon taking the account in 1999 does not suggest
that he found substantial difficulty in applying to the individual transactions
the agreement which he had found to have been made. But, as the judge in
effect pointed out in his judgment in 1998, the fact, if it be the case, that
the application of a simple agreement to a set of facts becomes difficult, need
not mean that there was no simple agreement in the first place. He observed,
in my view reasonably, that, if a deal was cropping up in relation to which an
equal division of all proceeds would be likely to prove unworkably complex, the
appellant could have raised the problem with the respondent and sought revision
of the terms. Yet the appellant never did so. I do not follow Mr Salter's
argument that it would have been open to his client to seek to re-negotiate the
terms in relation to a proposed transaction only at a point after he was bound
to account for it to the respondent by reference to the original terms.
29. The first of the six reasons articulated by the judge for considering
that the respondent's case was more plausible than that of the appellant was
that there was a great deal of commercial sense in an equal split being at any
rate an appropriate starting point. Mr Salter attacks this conclusion. He
concedes that there would be a great deal of commercial sense in such an
arrangement for the introducer of the customer, i.e. mainly the respondent, but
submits that there would be far less commercial sense in it for the negotiator,
i.e. mainly his client. Mr Salter says that, in relation to the first 22
transactions, it was his client who did the work; who decided upon the shape of
the transaction; who put it all together; and who, in all but transactions of
type A, took the risks. He also relies upon the judge's finding that in the
negotiations the appellant was in the stronger bargaining position. The
evidence showed that the appellant had a much larger independent brokerage
business than did the respondent; and Mr Salter suggests that, in the
negotiations at the restaurant, it would be the interest of the appellant, a
man with a keen eye for profit, which would have prevailed.
30. The risks taken by the appellant, particularly in type B being the
predominant type of transaction entered into, were carefully considered by the
judge. In that type of transaction the appellant bought the equipment from the
supplier and sold it on to the finance-house. The appellant said that there
was considerable risk inherent in that sequence. But the judge found that the
two transactions were generally back to back; and the evidence showed that the
appellant seldom paid for the equipment until he had been paid for it. Mention
was also made of the appellant's liability to the finance house for any fault
in the equipment sold to it. But the judge considered that, being in a
contractual chain, the appellant could reasonably anticipate being able to pass
any liability back down.
31. In the last analysis there is the most obvious of points to be made in
favour of an equal split, namely that the appellant would never have had any
benefit from the transactions in the absence of the respondent's introduction
of no less than 20 different customers for the 22 transactions. And in my view
there were three other pieces of evidence which supported the judge's
conclusion about the commercial sense of an equal division.
32. The first was that, shortly before the parties had entered into their
agreement, Mr Palmer, an officer of another broking company in the field, had
proposed to both of them a tripartite combination under which the introducer of
the customer would receive 40% of the profits of the transaction, the procurer
of the finance a further 40% thereof and the processor of the transaction the
remaining 20%. The respondent pointed to that proposal, which in the event the
parties had declined to accept, as showing that it had been Mr Palmer's
approach at any rate to place the reward for the introducer of the customer and
the procurer of finance on a par. The appellant's response, which has some
force, was that, in the first 22 deals under consideration, he was both the
procurer of finance and the processor of the transaction and so, to the extent
that Mr Palmer's suggested allocations were of any significance, he would have
received 60% of the proceeds.
33. Second, and more important, the judge found, as I have explained, that
the appellant's own deal with Mr Savage was for an equal split of all the
proceeds of the 22nd transaction.
34. Finally, of course, there were the final five transactions in which the
roles of the parties were reversed. In the first four of them the respondent
had duly accounted to the appellant for one half of the overall proceeds and
indeed in one of them had punctiliously paid him rather more than he, the
appellant, was expecting in order strictly to account to him for one half. In
respect of the fifth, the subject of the amended counterclaim, the respondent
was adjudged liable to do likewise. If that was the arrangement reached -
whether in 1992 or later - in relation to those five transactions, it is hard
to see why commercial sense should have required otherwise when the roles had
been reversed.
35. In my view it is the appellant's version of the agreement which, on an
objective basis, more arguably lacks commercial sense. Of course, on his
version, there was no real agreement at all in that the task of reaching
agreement was stood over until after a particular transaction had been
completed; and, even then, according to the appellant, the negotiation would
have been only in relation to a fair division of fees generated by the
transaction and not of any uplift. It is clear that the appellant gave himself
a free hand as to how to structure transactions which been the subject of
introduction by the respondent. So in a number of cases it seems to have been
open to the appellant, for example, to choose type B rather than type A. A
transaction of type A would have generated greater fees, namely an arrangement
fee and/or an introduction fee. A transaction of type B, did not generate an
introduction fee, at any rate where there was an uplift, although it did often
still generate an arrangement fee. So, instead of an introduction fee from the
finance house, there was the uplift. Thus, as it seems to me, the appellant's
version of the agreement placed - and might reasonably have been anticipated to
place - the respondent in the commercially nonsensical situation of being
vulnerable to a choice by the appellant of a structure for the transaction
which would yield him little or sometimes even nothing. I have already
referred to the fact that the twelfth transaction was one in which no fee was
paid by anybody. If the agreement was as the appellant contended, the position
of the respondent, as introducer of the customer, was as secure as water in a
sieve.
36. There is another point about the appellant's case which did not figure in
the judge's six-fold summary but which, speaking for myself, has caused me
difficulty. I have already touched on it but only in relation to one
transaction, namely the twelfth. It was common ground that relatively small,
specific sums had been invoiced by the respondent to the appellant in respect
of the first 22 transactions and duly paid by him. For example, for the first
transaction the appellant paid the respondent £1,010; for the second,
£743.70; and so forth. The question is: how did the parties calculate the
sums which both at the time accepted were payable? The respondent's answer in
evidence was clear. It was that the appellant would inform him of the amount
of the profit generated by the transaction; that, until towards the end of
their relationship, he accepted the figures without question; that he duly
invoiced the appellant for one half of the figure which the latter had quoted;
and that he received payment accordingly. Thus, to take the second
transaction, he contended that the appellant had represented the commission to
have been £1,487.40. But what was the appellant's case as to how these
sums were arrived at? Speaking for myself, I find no explanation on his part.
His case is that, by virtue of the original agreement, there was supposed to be
a negotiation following the conclusion of the particular transaction. It is
clear that seldom if ever was there any negotiation in the accepted sense. But
the appellant must have said something to the respondent which prompted all the
invoices which the appellant found acceptable. And I feel forced, upon the
evidence presented to the judge, to the conclusion that the respondent's
version is correct in that the appellant gave him a figure which each expected
to be split and which was duly split. Why? Because the initial agreement had
been for an equal split. The fact that, as the judge found, the figures given
by the appellant to the respondent did not in many cases disclose the true
level of his profit does not detract from the force of this part of the
evidence in support of the respondent's case.
37. I have referred to the letters which ultimately passed between the
parties when they began the dispute. The sequence begins with a letter by the
respondent to the appellant dated 2nd November 1995 as follows:
"As you will recall, our relationship was originally based upon a simple
premise. All jointly proposed transactions would be subject to an equal
sharing of all proceeds, whether from the payment of fees or commissions, or
the "added-value" element on suppliers' invoices. I am sure that you would
agree."
38. The appellant's response, by his letter dated 6th November
1995, was:
"I do not accept your allegation that you have not been remunerated as per our
various verbal agreements."
39. Mr Salter was constrained to concede that the respondent's letter was a better presentation of his ultimate case than was his client's letter in answer. I think that it is strongly arguable that the appellant's reference to the respondent's remuneration `as per our various verbal agreements' was a reference to the conversations to which I have referred in which he represented - or mis-represented - the level of profit generated, on the basis of which the parties implemented the agreement for equal division.
40. I would like to pay sincere tribute to the forensic charm as well as
efficiency that Mr Salter has brought to the hearing before us; but not even he
has been able to satisfy me, at the conclusion of the painstaking study of the
evidence which we have conducted, that the judge was wrong in his central
determination as to the terms of the agreement reached between the parties. I
would dismiss the first appeal.
41. I turn to the second appeal which requires more detailed consideration to
be given to the transaction which is the subject of it, i.e. the tenth
transaction named "Mag Masters (2)". The judge found that, contrary to the
appellant's contention, this had not been a transaction of type C because it
had not involved a lease. What had occurred was that the appellant had made an
unsecured loan to the customer at in effect an interest rate approaching 30%
per annum. The customer had defaulted on the loan and, although the judge made
no specific finding to this effect, the appellant had lost about £30,000.
Meanwhile, presumably towards the outset of the transaction, the appellant had
paid £1,450 to the respondent by way of his entitlement to a share in
fees. The judge recorded that the respondent contended that he had understood
the transaction to be an orthodox one of type A. The judge did not expressly
accept or reject the respondent's contention as to his state of belief; but on
balance I infer that he accepted it. Certainly the appellant never claims to
have explained to the respondent the nature of the transaction, or that it fell
outside all three types of transaction considered at the meeting in January
1992 or that, without security, it was of an extremely risky character.
42. In a schedule served by the appellant upon the respondent through
solicitors about a month before the hearing on 1st March 1999, the
appellant made clear that he proposed to argue, at the taking of the account at
that hearing, that the sum of £1450 paid by him to the respondent should
be paid back or credited to him by reason of the absence of profit derived from
the transaction and that £15,000, being half his loss on the transaction,
should also be paid or credited to him.
43. At the outset of the hearing on 1st March the appellant duly
sought to raise these arguments. His first contention was that there was no
need for him to re-amend his counterclaim in order to raise them. The argument
was based on rule 6 of order 43 of the Rules of the Supreme Court 1965, which
was then in force and which then applied to proceedings in the county court;
soon afterwards the matter came to be governed by paragraph 4 of the Practice
Direction, No. 1, PD, 40A, of the Civil Procedure Rules 1998, the wording of
which is very similar. The rule provided:
"In taking any account directed by any judgment or order all just allowances
shall be made without any direction to that effect. "
44. The appellant argued that his claims totalling £16,450
represented `just allowances' which the court was obliged to make in his favour
in any event. How, as a matter of justice, he asked, could the respondent be
permitted to retain a payment referable to profits on a transaction in
circumstances where it had emerged that there were none? How, as a matter of
justice, he asked, could the respondent require an account of profits generated
by the joint transactions without allowing for the substantial loss incurred in
relation to one of them? The appellant's contention was, and is, that the
logic of the judge's judgment of 1998 had been that he and the respondent were
equal partners and, as such, in the ordinary way, should equally bear losses as
well as profits.
45. In the light of the judge's refusal to entertain these claims, however
presented, the justice of the appellant's claim that the respondent should
share the loss has never been explored. Nor, I suggest, are we in this court
in a position to explore it properly. It seems to me, however, that if the
appellant decided, without reference to the respondent, to undertake a
particularly risky transaction, outside the types of transaction canvassed at
their meeting in 1992, a question would arise as to whether in law - or indeed
in justice - any part of those losses could be visited upon the respondent.
46. At all events, I am clear, as was the judge, that the reference to `just
allowances' in rule 6 did not entitle the appellant to bring in these claims.
No authority has been cited by counsel upon the ambit of that rule or, now, the
paragraph in the Practice Direction. In my view, however, the provision should
not be so construed as to enable the parties to the taking of an account to
demand a significant alteration of the parameters within which the account is
to be taken. If not agreed, those parameters will be set by the court in
judgment following the delivery of pleadings, the tender of evidence and the
making of submissions. In this case it was following just such an exercise
that the parameters were set by the judge in his judgment in 1998; and his
determination was that an account should be taken in relation to the
respondent's entitlement to one half of the commissions, fees, profits or other
benefits from any source flowing from the twenty two transactions negotiated by
the appellant. A direction was given for a Scott Schedule to be prepared in
which the appellant would set out, among other matters, the price at which
equipment was purchased and sold and any "arrangement or introduction fee or
other benefit received by [him] from the supplier, customer or
finance-house".
47. Thus in my view the appellant needed permission to re-amend his
counterclaim in order to press the claims totalling £16,450. In this
regard he faced the obvious argument that he was seeking to re-amend his
pleadings after judgment had been given. But this argument, contended the
appellant, was based on a misconception. He argued that, as at 1st
March 1999, the relevant judgment had not yet been given. He argued that the
substantial loss which he made on the tenth transaction was always part of his
evidence; that on his primary case, as articulated in 1998, that loss was for
him to bear alone; that, by his judgment in 1998, the judge rejected his
primary case and directed an account; and that the appropriate time - or at any
rate an appropriate time - for him to articulate these claims was once the
account had been directed to be taken.
48. These arguments of the appellant were rejected by the judge. He held
that the obvious place for the appellant to have articulated these claims would
have been in the pleadings before the court at the hearing in 1998. He held
that it had been open to the appellant then to plead, without prejudice to his
primary defence, that were the respondent's case for equal division to be
accepted, the division must also include losses and in particular the loss
referable to this transaction.
49. It is relevant to note how in 1998 the appellant had cast his counterclaim
for £6,400. His primary case was that, just prior to the final
transaction negotiated by the respondent upon his introduction, they had agreed
that the respondent would pay him £6,400. But, by paragraph 13 of the
amended counterclaim, the appellant pleaded:
"Further or in the alternative, if which is denied there was any agreement
between the parties as is alleged in paragraph 3 of the Statement of Claim, the
[appellant] avers that all provisions of the oral agreement were reciprocal,
accordingly he would be entitled pursuant to the oral agreement to 50% of the
[respondent's] commission of £12,800 on the said transaction."
50. Counsel appearing for the appellant on 1st March 1999
conceded, as has Mr Salter, before us that it would have been open to the
appellant to have made his claim for £16,450 in analogous format at that
time. The argument is simply that, though possible, such was not necessary.
The problem for the appellant is that the long hearing in 1998 and the
meticulous judgment given at the end of it were devoted to the ascertainment of
the terms of the agreement between the parties and in particular whether all
profits should be shared. In my opinion the obvious time for consideration to
be given to what if anything the parties agreed in respect of losses, and to
whether the loss generated on the tenth transaction was within the scope of any
agreement which encompassed losses and should be included in any direction for
an account, was at that hearing.
51. Until this point I have withheld from the judgment a fact which, in my
view, makes the judge's refusal to permit the proposed re-amendment
unassailable. I have referred to the fact that, by June 1998, the counterclaim
had been amended. The amendment had been made pursuant to leave given by the
judge in February 1998 and its effect was to delete from the pleadings a
counterclaim which the appellant had originally included referable to this
tenth transaction. Mr Salter stresses that the original counterclaim had only
sought repayment or credit of the sum of £1450 and had not also sought
payment or credit for the sum of £15,000. That counterclaim, thus
limited, had been founded upon the following pleading:
"It was an implied term of the agreement between the parties, implied by custom
and usage of brokers within the TV and associated industries equipment finance
field, that if either party paid a fee to the other for the introduction of
business and such business thereafter proved loss-making, the party who had
been paid a fee would share the loss to the extent of refunding the fee."
52. Why had this part of the counterclaim been deleted? In his oral evidence
in 1998 the appellant explained, in passing, that the relevant documentation
had been sketchy. There was no need for him then to elaborate on the problem
to which he was referring. In refusing on paper the appellant's application
for permission to appeal, the single Lord Justice speculated that the appellant
had made a tactical decision not to pursue a counterclaim which might undermine
his primary case. But, whatever the explanation for the amendment, the fact is
that the counterclaim referable to the tenth transaction fell away. Nor did
the appellant by his lawyers explain, whether to the court or to the
respondent, that, in the event of a finding on the main issue adverse to him,
he intended to reintroduce a counterclaim referable to this transaction. Had
that been made clear in 1998, it would no doubt have provoked debate as to the
proper time for the articulation of such a claim.
53. In his second witness statement dated 1st June 1998, the
appellant could not more clearly have explained his stance in relation to the
loss on the tenth transaction:
"My Counterclaim in respect of the "Mag Masters Ltd" transaction completed in
March 1993 was abandoned by me at the directions hearing before His Honour
Judge Hallgarten on 25th February 1998. I have accordingly lost the
sum of £30,000 which I advanced to the customer as part of this
transaction in addition to the sum of £1450 which I gave to [the
respondent], which again illustrates the financial risks I frequently bore. In
these proceedings [the respondent] is seeking a fixed share of my profits - at
no time has he shown any willingness at all to bear any financial risk or to
contribute to any part of my losses."
54. So it was clear that the loss of £30,000 and the alleged overpayment
of £1450 were to be no part of the appellant's case. This representation
was of profound importance for reasons well expressed by the judge, in refusing
permission to re-amend, as follows:
"Finality is important and it seems to me that what the parties could have
dealt with at the hearing they should have dealt with at the hearing in order
to create that finality...Where the parties realise what the odds are on one
side against the other, they are able to reach an informed view about whether
the case is worth fighting or should be settled. [The respondent] fought the
case on the basis of the particular cards that had been disclosed by
the[appellant] and the cards that he had in his own hand. The case might well
have taken a completely different course had this particular issue been there,
£15,000 in particular being the kind of sum which may well have cancelled
out the entirety of [the respondent's] claim."
55. His task necessarily being to demonstrate that the discretionary exercise
which the judge conducted was flawed, Mr Salter argues to us that the judge
placed too great weight upon the appellant's delay in articulating these claims
and correspondingly too little weight upon the relative prejudice to the
parties which would flow from the decision, so great for his client in the
event of a refusal of permission and so slight - or at least so remediable in
costs - for the respondent in the event of grant. But, in the passage quoted,
the judge clearly, and in my view fairly, weighs the extreme prejudice that
would flow to the respondent from the effective re-introduction, following
abandonment, of what in the context of the case was a very substantial matter
the proper time for the consideration of which had now passed.
56. Far from being clearly wrong or otherwise at fault in his conduct of
the discretionary exercise, the judge was in my view right to refuse permission
to re-amend the counterclaim. So I would dismiss the second appeal also.
Schiemann L.J.:
57. I agree.
LORD JUSTICE PETER GIBSON:
58. I also agree. But in deference to the arguments
attractively presented by Mr. Salter Q.C. for the Appellant, Mr. Rushmer, I add
a few words of my own.
59. The main appeal is an appeal not on law but on fact and as such it faces
obvious difficulties. But Mr. Salter submitted that the Judge's findings were
vulnerable because he did not adopt what Robert Goff L.J. suggested was the
right approach in The Ocean Frost [1985] 1 Lloyd's L.R. 1 at p. 57:
"Speaking from my own experience, I have found it essential in cases of fraud,
when considering the credibility of witnesses, always to test their veracity by
reference to the documents in the case, and also to pay particular regard to
their motives and to the overall probabilities. It is frequently very
difficult to tell whether a witness is telling the truth or not; and where
there is a conflict of evidence such as there was in the present case,
reference to the objective facts and documents, to the witnesses' motives, and
to the overall probabilities, can be of very great assistance to a Judge in
ascertaining the truth."
Mr. Salter said that where the comparative veracity of the Respondent, Mr.
Dickinson, and Mr. Rushmer is tested (1) by reference to their motives, and (2)
by reference to the objective facts proved independently of their testimony and
the overall probabilities, the court should conclude that the Judge was clearly
wrong to accept the evidence of Mr. Dickinson as to the terms of the agreement
made at the Kettner's meeting. He further submitted that the Judge's
conclusion was based not on the views formed by observing the witnesses give
evidence but on the plausibility of the Respondent's case and that this court
should be prepared to depart from the conclusion of the Judge.
60. Robert Goff L.J. was not laying down a universal test for determining the
veracity of witnesses in all types of cases. He was merely saying that in
cases of fraud he had found it essential to do what he described. Unlike
The Ocean Frost , the present case is not a case of fraud. In the
ordinary case like the present, how a judge will decide on a witness's veracity
will depend on the particular circumstances and for my part I think it would be
wrong to seek to lay down any absolute requirement for determining what is
essentially a matter for the judgment of the judge. I do not doubt that in
many cases, even where there is no fraud alleged, the judge will test the
veracity of witnesses in the way suggested in The Ocean Frost. But a
judge cannot be shown to have erred for not adopting that test.
61. In the present case we have a manifestly careful and detailed reserved
judgment of an experienced judge who has frankly acknowledged the difficulty he
had in determining where the truth lay. There was no contemporaneous
documentation relating to the oral agreement at Kettner's and, as the Judge
said, a good deal turned upon the reliability of the recollections of the two
major protagonists, seeking to recall what passed between them 6 years
previously, and upon their credibility. The Judge plainly regarded Mr.
Dickinson as an unsatisfactory witness whose evidence on a number of points was
either acknowledged by himself to be wrong or was held to be wrong, and Mr.
Salter has rightly drawn attention to those matters. But all the more serious
matters were expressly noted by the Judge, and it does not follow from the fact
that a witness has been found not to be credible on specific points that he
must also be disbelieved on other points. The Judge also found that Mr.
Rushmer's evidence was "in many ways equally unsatisfactory". In that
assessment I cannot see how this court could say that the Judge misused the
advantage which he had over this court in having seen and heard Mr. Rushmer
give evidence. For the reasons given by Wilson J., the Judge was entitled to
take that view.
62. In attacking the Judge's conclusion on what agreement was reached at the
Kettner's meeting, Mr. Salter in my view overstated the strength of Mr.
Rushmer's position vis-à-vis Mr. Dickinson. Of course Mr. Rushmer's
contribution to the joint venture was important, but so was Mr. Dickinson's.
He had an extensive list of contacts and great knowledge of the specialised
industry in which they were to be collaborating. The Judge's conclusion of a
50/50 split was supported both by Mr. Palmer's evidence and in particular by
the fact that that was the basis agreed by Mr. Rushmer with Mr. Savage for the
M2 Video transaction, although it was of type B.
63. I am not impressed by the further point taken by Mr. Salter before us,
although not taken below, that the agreement was too vague to be enforced. Mr.
Dickinson's case on the content of the agreement was not pleaded as precisely
as it should have been. But there was no doubt at the trial what his case was,
and in my judgment the judge was entitled to take the view that Mr. Dickinson
had discharged the burden on him of proving that case.
64. On the application for leave to appeal from the Judge's refusal to allow
an amendment to the Defence and Counterclaim, whilst I would concur in giving
leave, I would dismiss the appeal essentially for the reasons given by Potter
L.J. when refusing leave to appeal on paper. In the Statement of Claim Mr.
Dickinson had claimed damages and an account. Mr. Rushmer, by para. 9 of his
original Defence and Counterclaim, had pleaded that if, which was denied, any
sums were due to Mr. Dickinson from him, he would seek to set off the sums due
to him under his Counterclaim from Mr. Dickinson. He then in paras. 11 to 14
of the Counterclaim referred to the transaction with Magmasters, pleading
expressly in para. 14 that he had made a loss of £30,000 on the
transaction. But all that he then claimed from Mr. Dickinson in respect of
that transaction was the fee of £1,450 paid by him to Mr. Dickinson which
Mr. Dickinson refused to refund. Paras. 11 to 14 and the claim for £1,450
were deleted by the amendment for which leave was given on 25 February 1998.
As he himself described it in his Witness Statement, Mr. Rushmer abandoned his
counterclaim in respect of that transaction. Had he maintained that claim and
extended it to include half of the claimed £30,000 loss, there may have
been two consequences. One might have been to cause Mr. Dickinson to
reappraise whether it was worth his while pursuing his claim when so
substantial a counterclaim was made against him. The other and, in my view
more certain, outcome would have been the investigation at the trial of the
claimed loss.
65. In my judgment, therefore, it was not by reason only of the delay on the
part of Mr. Rushmer in putting forward the claim in respect of the loss until
after the trial that the Judge refused the amendment. To allow the late
amendment would have prejudiced Mr. Dickinson in a way for which he could not
be adequately compensated. That exercise of discretion by the Judge was in my
opinion unquestionably right.
66. For these as well as the reasons given by Wilson J. I would dismiss these
appeals.
Order: Appeal dismissed. Appellant to pay respondent's costs of the Appeal
and Application for PTA, subject to detailed assessment if not agreed; stay of
execution of the judgment imposed (by HHJ Hallgarten) on 7th June
1999 be removed; stay of assessment of the costs of the action and the taking
of account imposed by the judge on the same day be removed; and that there be
payments to the respondent of the sum of £16,299, plus interest paid into
court to the credit of the action. Order does not form part of approved
judgment.