England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
(CHANCERY DIVISION)
(Mr Justice Evans-Lombe)

		Royal Courts of Justice Strand, London, WC2A 2LL Friday 20th July 2001

Lord Justice Longmore:

1. The short point that arises on this application for permission to appeal is whether the trial judge is to be permitted to read self-evidently inadmissible or arguably inadmissible material as part of his pre-reading of material in what will obviously be a major piece of litigation. The case arises from the well-known misdemeanours of Mr Nick Leeson who succeeded in bringing down the Barings group of companies (to whom I refer compendiously as "Barings"). They are now in liquidation or under different management and seek to recover damages from, inter alia, the various accountants who audited the various companies particularly Coopers & Lybrand Singapore ("Coopers") the auditors of the Singapore company in the year before the collapse occurred and Deloitte & Touche ("Deloittes") who audited the previous two years accounts, as well as Coopers London who audited the London entities in all three years. The accountants deny liability on the grounds that the companies collapsed due to alleged mismanagement and misfeasance on the part of Barings personnel quite apart from any negligence that could be proved against the accountants and they say further that, even if any causative negligence could be proved, there was a massive degree of contributory negligence on the part of those who were running the Barings companies. The collapse initiated various inquiries and procedures of which three are especially important for the purposes of this application:-

(1) The inquiry of the Board of Banking Supervision in the United Kingdom; that inquiry resulted in the Board of Banking Supervision report ("the BOBS report")

(2) The inquiry by inspectors appointed by the Ministry of Finance in Singapore ("the Singapore report")

(3) The Chancery proceedings in which the Secretary of State for Trade and Industry successfully sought disqualification orders against various Barings directors; those proceedings were initiated by a substantial affidavit sworn by Mr Christopher Taylor of Price Waterhouse ("the Taylor affidavit").

2. The judge, Evans-Lombe J., who has been assigned to the proceedings against the accountants and has been managing the action for about 2 years, has decided at the instigation of the defendants, that he would like, if time is available to him, to read the BOBS report, the Singapore report and the Taylor affidavit as part of his pre-reading before the trial begins. He has, in fact, already read the BOBS report but some time ago. Barings have arranged, with the consent of the judge, for his indication of intent to be treated as an order to the effect that he be permitted to read or, as relevant, to re-read these documents for the purpose of an application to seek permission to appeal. The judge refused to give permission to appeal himself and such permission has also been refused on the papers by Robert Walker LJ. The application has been renewed on notice and on 25th May we heard that renewed application and dismissed it. We now give our reasons.
3. We heard submissions from Mr Bathurst QC and Mr Aldous QC for Barings Singapore and Barings London respectively. Those submissions had a distinctly old-fashioned flavour. They started with the submission that no rules of court or new practice (such as judges reading the papers in a case before submissions are made to them) could turn inadmissible evidence into admissible evidence. With that, of course, we agree. They further submitted that the decision as to what to pre-read was more than a mere case management decision and, if it was wrong, this Court should be prepared to reverse it.
4. They then asserted that the two reports contained controversial findings of fact concerning the management of Barings by their senior corporate personnel; these findings were almost certainly inadmissible at the trial; the reports also contained evaluative statements of opinion, judgment and criticism which were certainly inadmissible at trial. These passages were helpfully highlighted in yellow and blue respectively and, the submission continued, the judge could read the non-highlighted passages if he wished, but was not entitled to read the highlighted passages, unless, perhaps, he was asked to give a specific ruling on admissibility (and then only at the time he was so asked). It was unlikely he would be asked to give such a ruling since argument on the point was not really conceivable. The Taylor affidavit had not been similarly marked since the whole of it was inadmissible; it is fair to say that the rigidity of this stance in respect of the Taylor affidavit weakened somewhat during the hearing.
5. In response to this Mr Butcher QC for Deloittes and Mr Field QC for Coopers submitted that there was no authority for the proposition that a judge was never allowed to read inadmissible material and that it was absurd to deny the judge the opportunity (if he wished to take it) of availing himself of 3 compendious documents the information in which was collected from numerous different original sources and which give a convenient pre-trial picture of the terrain and issues to be covered. Practically everyone who had been concerned in the case had read his or her way in by using one or more of these documents and why, they asked, should the judge be the only person denied that advantage? To the extent that the reports contained inadmissible material, particularly in the form of adverse judgments against Barings directors, the judge could be trusted to try the case on the admissible evidence placed before him and put any inadmissible material out of his mind when it came to deciding on his own judgment.
6. Both sides relied on Three Rivers District Council v. Governor and Company of the Bank of England [2001] UKHL 16, the Claimants for the proposition that passages of reports which were inadmissible in evidence should not be used for any purpose by a trial judge, the Defendants for the proposition that a pre-reading exercise before a trial was totally different from an interlocutory application to be decided without oral evidence e.g. to strike out for failure to disclose a cause of action (the Three Rivers case) or for an interim injunction such as in the Savings & Investments Bank v. Gasco [1984] 1 W.L.R. 271 case. For myself I do not consider that the Three Rivers case or the Gasco case touch the issue which we have to consider; neither side could cite any closer authority and the issue has to be approached as a matter of principle.
7. There is to my mind no principle which inhibits a judge from hearing or reading inadmissible material as such. Any such principle would be much too far-reaching. Any judge and particularly a judge trying a long case may accidentally see or hear material which is not admissible evidence; this must have happened even more frequently before the Civil Evidence Act 1995 made considerable inroads into the hearsay rule of evidence for civil cases. Quite apart from anything else the suggested principle would be entirely impracticable where a single person is judge of both fact and law. (Trials with juries give rise to quite separate considerations but even there, apart from previous convictions, juries on occasion see and hear material which may be inadmissible and, if so, a strong direction from the judge that they are to try the case on the evidence they see and hear in court is usually ample to allay any disquiet.) The suggested principle as enunciated by Mr Bathurst thus had to be that the judge may not read or hear inadmissible evidence save where it happens by accident or it is necessary for the purpose of a ruling. But a principle, subject to such exceptions, is hardly a principle at all and it becomes at most a proposed practical rule. There is no authority for such a practical rule and, to my mind, practical good sense is strongly against such a rule.
8. Long cases are peculiarly burdensome for a single judge to try. The parties' best estimate is that it will be necessary for the case to be opened to the judge in the six weeks between 18th June and 31st July and then for the evidence to begin on 1st October and last for 30 weeks; the defendants assert that this is still an underestimate. In these circumstances it becomes, in my view, a manifest absurdity to suggest that some principle of law or practical rule should deny to the judge the liberty of finding the way into the case which he considers most useful to him. The absurdity increases when one becomes aware that all this material is in the public domain; the reports are documents published in their respective countries at the request and with the sanction of emanations of the state; Mr Taylor's affidavit is not only publicly available in the same way as the other affidavits but was the essential foundation of many of the findings of Jonathan Parker J in the directors' disqualification proceedings. Mr Bathurst somewhat unenthusiastically submitted that Evans-Lombe J should not even be allowed to read the public and reported judgment of his erstwhile Chancery colleague (if he had not already done so) on the basis that it was inadmissible in so far as it decides controversial findings of fact and evaluative judgments. That is the unrealistic consequence of Mr Bathurst's supposed principle but I cannot accept that it is right.
9. The truth is that what the judge decides to pre-read in a case before trial is a matter for the judge's discretion, not a matter of principle. The judge has decided, as a matter of his discretion, that (if he has time) he would find it useful to read the two reports and the affidavit. That is an unassailable exercise of his discretion.
10. Mr Aldous submitted that this conclusion would seem incomprehensible to a layman and particularly to those directors who have been criticised in the reports without the safeguard of having the right to cross-examine those who had given evidence critical of them. He said further that, if justice were to inspire confidence, it was essential that those individuals, who were the subject of the very serious allegations mounted by the accountants in the present case, should be able to feel that the playing field was not tilted against them at the very start. He even used the phrase, "poisoning the well of justice".
11. To my mind, this submission is misguided. The intelligent layman not involved in the case would surely be amazed that the one person who was not going to get a complete picture of the background to the case was the judge who was trying the case. He would also be amazed to think that the most useful way of assimilating the facts of the case was to be denied to the very person whose assessment of the faults is going to be conclusive for the parties.
12. Nor does it seem to me that concerns by those who have been criticised in the reports are justified. This is the time when not only can their account of the events of this sad debacle be fully told but they can also say (if they wish) why those accusing them of negligence and misconduct are mistaken. If they are prepared to give evidence on behalf of the claimants, they will be eager and anxious that justice should be done. Once the judge has listened to 30 weeks of evidence, the chance of his having been influenced by inadmissible evidence perused by his pre-reading is entirely negligible.
13. Both Mr Bathurst and Mr Aldous submitted that the judge's short judgment on this topic showed that he was ready to be improperly influenced by the conclusions of the reports. They pointed to two passages in particular in the first of which he said the coloured highlighting would alert him to the passages objected to

"so that in reading them, I will realise that a challenge is to be made to the conclusions which those passage express."

In the second passage he said

"The parties, so far as these reports are concerned, I hope can trust me not to allow myself to become over-persuaded by the marked passages and the conclusions which they express."

Counsel submitted that these passages showed the , judge (1) thinking that the Barings personnel criticised in the reports had the burden of displacing the criticisms made and (2) being already persuaded or half persuaded by the marked passages. These were hopeless submissions; the whole tenor of the short unreserved judgment is that the highlighted passages would not influence the judge at all. I just do not believe that this judge will need any reminder at all that he is to try the case on the admissible evidence and only on the admissible evidence or that there is no initial burden on those against whom allegations are made to show that the allegations are untrue. The numerous counsel in the case will, no doubt, be mentioning the matter frequently in any event.

LORD JUSTICE POTTER:

14. I agree that this application must fail, but not without certain misgivings. It seems to me that the course followed by the parties prior to the hearing, and in particular a change of approach by the defendants to the problem of redacting material which was on any view inadmissible as evidence, forced the judge into an undesirable but necessary practical decision in the interests of efficient case management. It also seems to me that, with a measure of goodwill and co-operation, which for various reasons was not achieved, an acceptable compromise upon the material to be placed before the judge could and should have been reached. However, the question has been argued before us, essentially as a matter of principle, namely whether, in his pre-reading in a long and complicated action, the judge is at liberty to read material, part or parts of which consist of information and views which are inadmissible as evidence in the suit, without excising such part or parts, on the basis that he considers the material as a whole will be useful in understanding the relevant facts and issues in the case and that, when deciding such issues, he will exclude from his consideration those matters which have not been adduced in evidence before him or made the subject of admissions by either party.
15. Considered in those terms, I agree with Longmore LJ that the matter is essentially one for the discretion of the judge in the course of his case management powers following the receipt of full submissions by the parties. That being so, the court will only interfere with the decision reached by the judge in a case of obvious error or unfairness. So to hold, is not in my view to accept that the developing powers of case management encouraged by the recent civil justice reforms are capable of turning inadmissible evidence into admissible evidence, but merely that some compromise between principle and practice is both necessary and desirable when complicated litigation takes place over previously well–trodden ground.
16. I am also conscious of the power of the argument that judges are human beings too; thus, in a system where the judge also performs the function of a jury, he should, as a measure of self protection against unconscious influence, as well as for the avoidance of disquiet on the part of the objecting party, exercise caution before reaching a decision which will involve him in reading a body of inadmissible evidence which that party fears may adversely affect the outcome of the case.
17. That said, however, our system has long recognised that judges are, by accident and necessity, frequently exposed to material which is both inadmissible and the subject of objection; yet it is also accepted that they are capable of compartmentalising it within their minds and ignoring it when coming to their decision. Indeed, it is common practice both at first instance and on appeal for the court to read evidence 'de bene esse' before ruling on the question of its admissibility. In days when pre-reading is not merely permitted as a practice, but is regarded as necessary for the proper despatch of judicial business, no other approach is practicable. This approach, and the need to trust the judge to exclude inadmissible matters from his mind when coming to his decision, is an inevitable incident of disputes over admissibility. It does not amount to admitting as evidence that which is inadmissible; it simply requires the judge to prepare himself in advance while leaving over questions of admissibility for decision if and when they arise in the course of the hearing.
18. In this case, in relation to the BOBS Report and the Singapore Report the claimants did not take objection in principle to the reading of a large part of those documents. Indeed they accepted that much of them could and should usefully be read, while seeking the deletion of various passages, variously coloured, the admissibility of which required to be ruled upon at trial if the defendants sought to introduce them. The difficulty was that the passages were interspersed throughout the reports and, in places, could only be deleted at the expense of rendering the passages which the judge was to read incomplete in a manner which hindered rather than helped his comprehension. It was on that basis that the judge came to the decision which he did. Speaking for myself, it seems to me that it would have been open to him, and indeed a desirable course, to allay the concerns of the claimants in large measure by agreeing not to read certain passages which were largely self-contained and in which the principal criticisms of the conduct of individual Barings' directors were set out by the Inspectors. However, the matter was not clear-cut and I am not prepared to hold that the judge was plainly wrong, not least because I consider that those passages which were highly judgmental were most plainly those which the judge accepted were inadmissible and which he would conscientiously ignore when coming to his decision.
19. The document which has caused me most concern is the affidavit sworn by Mr Christopher Taylor in the disqualification proceedings, the purpose of which is stated in its introduction to be 'to review certain of the available documentary material relating to the collapse of Barings, to set out and summarise the facts and matters relating to that collapse insofar as they are relevant subject matter of these proceedings, and to identify and comment on failings of the respondents revealed by that documentary material'. Nonetheless, it has been described by Mr Butcher QC for Deloittes, without contradiction, as the single most helpful source of material as to what happened within Barings. It is set out chronologically in a clear and comprehensive manner, bringing together a wide range of materials scattered throughout the trial bundles. As Mr Butcher also put it, if the Taylor affidavit did not exist, it would be necessary for the defendants to invent it, in the sense that if the judge were prevented from reading it, the defendants would incorporate its content into their opening submissions. It is that position which, in my view, represents the essential artificiality of the stand upon principle taken by Barings in this case. A good deal of the affidavit is simply factual and consists of hearsay evidence which is in principle admissible if made the subject of appropriate notices. In addition, relevant documents are conveniently gathered and put in context. It also seems to me that Barings wrong-footed themselves before the judge in a manner which has still not been corrected. At a case management conference in July 2000, they agreed to address the issue of the admissibility of the statements in Mr Taylor's affidavit by marking it up in the same way as the BOBS and Singapore reports. However, by the time the matter came before the judge on the occasion of his decision, they had failed to do so. That is still the position. In those circumstances, the judge took his decision to read the affidavit as well as the two reports, if he thought fit, on a compendious basis. I am not prepared to fault him for doing so.
20. Long cases of this kind present peculiar problems to judges entrusted with their conduct. In some instances they are but one constituent of consecutive or associated trials to which the judge is assigned precisely because he has dealt with earlier proceedings relating to different aspects of some natural or commercial disaster, or some City fraud, in which similar issues and common personalities (sometimes joined as parties, or otherwise involved in different capacities) are involved. Where this is so, judges are bound to be exposed to evidence in one case which will not be admissible in another, or will be aware of judgments formed elsewhere which require to be ignored or re-evaluated in subsequent proceedings. Yet, in such cases it is not suggested that the judge is incapable of fairly trying the case. Nor, in these proceedings, do I find reason to suppose that the judge's mind will become 'polluted' by what he reads, or that he will reach his decision on any basis other than the evidence properly adduced before him in the course of the trial.
21. I too would dismiss this application.
ORDER: Application dismissed; Claimant to pay the respondents' costs of the application insofar as agreement exists already; otherwise costs assessed summarily in the sum of £13,000 within 14 days. (Order does not form part of approved Judgment)