England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM MEDWAY COUNTY COURT
HIS HONOUR JUDGE RUSSELL-VICK QC

		Royal Courts of Justice Strand, London, WC2A 2LL Friday 26th October 2001

MR JUSTICE DAVID STEEL:

1. This is an appeal, brought by permission of this court, against an order made by HH Judge Russell-Vick QC sitting at the Medway County Court. By virtue of his order, he awarded the claimant some £56,000 in damages, inclusive of interest, against the defendant for the conversion of six motor cars.
2. The background is unusual. The defendant, Mr David Fuller, is a second-hand car dealer. He has two premises near Chatham, trading from one under the name "Strood Motor Company" and from the other under the name "Maingate Motor Company". The turnover was about 1,500 cars per annum, with most of them being ex-fleet vehicles with high mileage purchased at auction and re-sold at a modest profit.
3. The claimant, Mr Anthony Barker, is the respondent to this appeal. He was also a second-hand car dealer albeit a relative newcomer to the business, being a builder by trade. He traded from premises in Gravesend, under the name of "Birchwood Motor Company". In fact, he was only in the business for about a year, from about February 1993 to April 1994. During that period, he had a turnover of less than one hundred cars. He then wound up the business, which had not been successful.
4. Both because of his lack of experience and his other commitments, Mr Barker had engaged a manager, a Mr Gary Wilson, who had in fact worked at some previous stage for the defendant. When the claimant decided to wind up his business, Gary Wilson suggested that he, Mr Wilson, should arrange for the defendant to sell off the balance of his stock. This suggestion was taken up by the claimant, and, on the final day of trading, four cars were duly handed over.
5. In due course the claimant discovered that the defendant had been able to sell the four cars but that the proceeds of sale, some £13,000, and had been transferred by the defendant, not to him, but to Mr Wilson's wife. The outcome was twofold. First of all, Mr Wilson was prosecuted for theft. In November 1994, he pleaded guilty. On the 9th December 1994, he was sentenced to twelve months' imprisonment. Secondly, on the 6^th November 1996, Mr Recorder Pullman gave judgment in favour of the current claimant, against the current defendant, in regard to the four cars.
6. During the course of the police investigation, a statement had been taken from Mr Fuller. Having described Mr Wilson coming round to see him to confess that he owed the claimant a substantial sum of money, Mr Fuller's statement went on:-

"Tony mentioned some cars which had come to me, or were supposed to have come to me for Gary over the last twelve months totalling about 11 cars. We discussed the situation. Later that day, I got a phone call from a bloke called Dominic who also came to my house whilst Tony was there. He outlined some problems that he had with Gary... Before Dominic arrived at my house I spoke to Gary and suggested he came over to my house. Whilst all four of us are at my house, that is, Dominic, Tony, Gary and myself, I put it to Gary that the 11 cars sold to me from Birchwood Motor Company and the money paid for them had not been passed on to Tony and that he basically owed them - Dominic and Tony - £30,000 between them. He, Gary, did not deny or make any comment to confirm this. I made it clear to them that I had paid for the vehicles legitimately, and if Gary had stolen the vehicles or the proceeds, that it was nothing to do with me."

7. This material was the catalyst for the present claim. Paragraph seven of the Particulars of Claim asserted in terms that: "The plaintiff has established that the defendant took possession of a further seven of these vehicles for sale by the said Wilson." The further particulars of this allegation have a somewhat chequered history. The number of cars in respect of which the claim was made was in due course reduced to six, the claimant abandoning a claim with regard to an Alpha Sud.
8. The principal details of the parties' contentions are set out in a somewhat unsatisfactory Scott Schedule as follows:-

a) Vauxhall Carlton, registration G516 VMF.

This had been purchased by the claimant on the 23rd April 1993. The claimant's records prepared by Mr Wilson suggested a sale to a Mr Kuller on the 2nd December 1993, for £4,799. The defendant accepted that the car came into his stock, but it was his case that he had purchased the same from Gary Aston Cars for £5,200 on the 11th October 1993.

b) Ford Granada, registration H447 HJO.

This had been bought by the claimant on the 24th March 1993. The claimant's records, as prepared by Mr Wilson, purportedly identified a sale to a Mr Walker on the 24th September, 1993. Again, the defendant accepted that the car had formed part of his stock but that he had purchased the same from the Portman Car Centre on the 13th September 1993 for £6,700.

c) Mercedes 200 T registration E320 BKK.

This had been purchased by the claimant for £8,000 on the 9th April, 1993. The claimant's records showed a sale to Maingate Motor Company on the 21st January 1994 for £6,700. The defendant accepted that this car had been purchased from the claimant for that price. What was in issue was whether that price had been paid.

d) Volkswagen Golf registration G566 WHT.

This had been purchased by the claimant on the 17th April 1993 for £4,613.78. The claimant's records purportedly show a sale to a Mr Gooding on the 4th December 1993 for £4,650. As regards the defendant, he accepted that it came into his stock but he contended that the same had been purchased from Gary Aston Cars on the 1st October 1993 for £3,750.

e) Ford Sierra registration H159 HBF.

The claimant contended that he had purchased this car in late 1993 for £4,650.00 from a Mrs House. This was disputed and there was no entry in the claimant's records, either of its purchase or of its subsequent disposal. The defendant accepted that the car had been part of his stock following a purchase of the car on the 14th January 1994 for £3,400 from a Mr Mullane.

f) Ford Sierra Sapphire registration H776 UCL.

9. It was the claimant's contention that he had purchased this car from a casual customer in November 1993 for £3,500. This was in issue. There was no entry recording this car in the claimant's documentation. Again, the defendant accepted that it had been in his stock, but that he had purchased the same for £3,700.00 on the 7th December 1993 from a Mr Mullane.
10. It follows from this introduction that the three principal issues relating to liability on which the Judge had to rule were as follows:

i. whether payment was ever made for the Mercedes;

ii. whether the claimant ever owned the Sierra and the Sapphire: and, if he had, whether the defendant had purchased them from him or from Mr Mullane;

iii. whether the defendant had ever purchased the Carlton, the Granada and the Golf from the claimant or from Gary Aston or Portman respectively.

11. The trial occupied no less than five days. Initially, it took place on the 12th, 13th and 14th of July, 2000, whereafter it was adjourned and completed on the 18th and 21st of August. As many as twelve witnesses were called by the parties. Apart from himself, the claimant's witnesses included Mrs House and Mr Goodin. So far as the defence case was concerned, in addition to the defendant himself, the witnesses included Mr Jenner, the proprietor of Gary Aston Cars, Mr Harris, proprietor of the Portman Car Centre and Mr Bovis, the defendant's former partner, who had been responsible for running Maingate Motor Company.
12. Judgment was reserved, and was handed down on the 1st September. Variously described by members of this court on the applications for leave to appeal as "short" and "crisp", it only ran to just over four pages of which something approaching two pages were devoted to the background and more than one page was devoted to the issues of quantum. The Judge refused permission to appeal. The defendant then made an application to this court for permission to appeal and it was only on the restored oral application that any clear intimation of the primary argument now advanced by the appellant, namely that the Judge had failed to give adequate reasons for the conclusions that he had reached, entered the arena. Leave was duly granted on the 7th March 2001.
13. It is most unfortunate that the primary complaint against the Judge's judgment was raised so late. As explained by Lord Justice Henry in Flannery v. Halifax Estate Agencies Limited, [2000] 1 WLR 377 at page 383:-

"...[L]eave should be sought from the trial Judge immediately after judgment is delivered. On the application for leave, if a "no reasons" point is being taken, then the potential respondents should consider inviting the judge to give his reasons, and his explanation as to why they were not set out in the judgment, in an affidavit for use at the leave application and at the hearing if leave be granted."

14. No such opportunity was afforded to the trial Judge. The position now is that well over a year has passed since the giving of the judgment and indeed HH Judge Russell-Vick QC has since retired from the bench. Accordingly, any opportunity for the judge to re-evaluate his reasons has been completely lost. Bearing in mind that the claim is only for £56,000 inclusive of interest, and the total legal costs of the parties, even prior to the appeal, were not far short of that sum, this is a particularly unsatisfactory state of affairs.
15. We have been reminded of the general comments made by this court in Flannery on the duty to give reasons. There is no need for me to cite the relevant passage yet again. As the decision makes plain, it was well established before the implementation of the Human Rights Act that a court owes a general duty to give reasons for its decision. The Strasbourg jurisprudence is entirely supportive of that approach. Of course, the extent of the duty will vary according to the nature of the decision and the circumstances of the case. But where there is a decision on the merits, adequate reasons should be given to explain the outcome, though it would not be necessary to provide a detailed answer to every argument. Indeed, it is only if adequate reasons are given that a party can effectively exercise its rights of appeal: see e.g. Hadjianastassiou v. Greece (1993) 16 EHRR 219.
16. There may be circumstances in which some or all of the reasons are not explicit, but it seems to me that, if an inference is to be made as to the reasons that the judge must have had in mind by reference to, say, the arguments advanced by the parties and to the documentation, it must be a necessary inference for otherwise the Court would be embarking upon a process of guesswork. I also recognise that the approach must be proportionate. What might constitute adequate reasons for the purpose of a small county court claim between two car dealers may not be sufficient for the purpose of a multi-million pound commercial action. But, on any view, the losing party should know why he has lost.

The Mercedes

17. The only reference in the judgment to the Mercedes, apart from recording that the defendant conceded that he had bought it from the Birchwood Motor Company via Wilson, was in a section of the judgment dealing with the question of quantum, which reads as follows:

"The Mercedes 200 T E320 BKK - this vehicle was one of the few prestige cars bought by the claimant. He paid £8,000.00 for it in April 1993 and used it for himself as transport. It too passed to the defendant, via Wilson, for £6,700.00 and sold for £7,495.00 to a Mr Newman in January 1994. There was some dispute as to the true selling price and I find that the net profit that the claimant would probably have made had he retained the car, would have been about £1,500.00.

18. No reference is made whatsoever to the issue as to whether the defendant had in fact paid the purchase price, although it is necessarily to be inferred that the judge accepted the claimant's case that he had not been paid.
19. Is it possible, from the documentary material and from the arguments put to the trial judge to ascertain what the judge's reason for that conclusion must have been? I fear not. The respondent submitted that, whilst it had been common ground that a sum of £6,700.00 had indeed been paid over, "the judge was entitled to find, on the balance of probabilities, that the one payment of £6,700 actually related and should be applied to E48 PMK and not E320 BKK." This is a reference to another Mercedes car that was sold at about the same time by Birchwood to Strood Motor Company. The difficulty with this proposition is that the judge makes no such finding. Indeed, there is no reference to this other Mercedes whatsoever.
20. The defendant's case was that the car was bought and paid for by the Maingate Car Company. Indeed, the car duly appears in the Maingate stock book on the 21st January 1994, as bought from the claimant for £6,700.00. The Maingate bank statement shows a debit of £6,700.00 on the 28th January. The claimant's bank account contains a credit in the same amount two days earlier.
21. All this was supported by evidence from the defendant's former partner, Mr Bovis. It was accepted in argument that, if the claimant's contention that the car was never paid for was indeed correct, Mr Bovis's evidence must have been dishonest. We have not seen a transcript of Mr Bovis's evidence but it is not clear if it was even suggested to Mr Bovis that his evidence was untruthful. In any event, it is impossible in these circumstances for this court to substitute its own reasons in support of the judge's apparent conclusion.

The Sierra and Sapphire

22. The dispute as to whether these two cars ever formed part of the claimant's stock is adverted to in the judgment in only the most subterranean way. In paragraph 5, the Judge said: "The defence puts the claimant to proof of ownership of the cars in question...." (albeit in fact a challenge was only made vis a vis the Sierra and the Sapphire). He then went on, after referring to the Scott schedule, "I am satisfied on all the evidence and the balance of probability that all six cars were part of the claimant's stock."
23. Albeit that a reference to the issue can just about be deduced, there is no reasoning whatsoever in support of the conclusion. Is it possible to identify what the Judge's reasons must have been? Again, I fear not. As already set out, the Scott schedule simply records the fact that Mr Barker claimed to have bought the Sierra from a Mrs House and the Sapphire from some unknown casual customer, albeit neither of the purchases were recorded in the stock book, nor indeed any re-sale. The schedule also recorded the fact that the defendant claimed to have bought both cars from a Mr Mullane and to have sold one to a Mrs Banning and the other to a Mr Brett, all of which transactions were recorded in his stock book.
24. We have been shown a transcript of the claimant's and Mrs House's evidence, touching on these issues. So far as Mr Barker was concerned, he was unable to explain why the response to a request for the particulars of the matters relied upon in support of the averment that the cars were part of his stock was formulated as follows: "By reference to the plaintiff's stock book and the plaintiff's subsequent witness statement. Oral evidence in support of that respect will be given at the trial". In short, the particulars made no reference to the alleged source of these cars and inaccurately suggested that the transactions were recorded in the stock book.
25. As regards Mrs House, she was, she explained, not in fact involved in the sale of the car, which was dealt with entirely by her husband. Nor was she able to assist with the added complication that her son Dominic had given a statement to the police to the effect that he had both bought and sold the car.
26. I have not forgotten that Mr Mullane was not called to give evidence, but the reality is that it is impossible to discern what the Judge's reasons must have been, nor is it possible to substitute, with any confidence, reasons of our own to support his conclusions.

Vauxhall, Ford and Golf

27. The judge rejected the defendant's case that he purchased these three cars from Gary Aston and Portman respectively. Indeed he concluded that the defendant and both Mr Jenner and Mr Harris were knowingly untruthful in their evidence in support of such transactions. The judge found that the sales (including for this purpose the sale of the Mercedes, the Sierra and the Sapphire) were "a mirror image" of the other four.
28. The Judge did at least give some reasons for this conclusion. He devoted one paragraph of the judgment to the evidence of Gary Wilson, who had been called on the behalf of the defendant. He concluded that his evidence was wholly unsatisfactory, a point of view which is hardly surprising in light of the matters recounted earlier on in this judgment, and rightly not challenged on this appeal. In consequence he rejected the evidence of Mr Wilson that these three cars had been sold by him to the persons named in the claimant's stock book. The judge accepted the evidence of Mr Goodin that he had not bought the Golf and even Mr Wilson was disposed to concede, I understand, that the buyers for the Carlton and the Granada were inventions.
29. It is perhaps surprising that Mr Wilson was tended as a witness of truth by the defendant. In the result the credibility of the defendant's case was obviously tarnished. This court has not been shown Mr. Wilson's statement, let alone a transcript of his evidence. But it must be doubted whether this material of itself went any further than establishing that Mr Wilson took advantage of an earlier opportunity to defraud the claimant, even before his business got into difficulties.
30. The Judge turned to the defendant's case in his main paragraph on liability, which I quote in full:

"8. First he denied that the claimant had proved ownership of the six cars. I find that the claimant's evidence and the documents show that he had purchased them either at auction or from a private seller e.g. the Mercedes 200T. Second he averred that he or his business had purchased the cars from another source (save the Mercedes which he accepted came from Birchwood via Wilson) in particular Gary Ashton Cars, Portman Car Centre and Mr Mullane. Documents were produced and oral evidence called in respect of the first two but Mr Mullane was not called. I have considered that evidence carefully but I have to reject it. It is not in accord with the evidence of the meeting in March 1994 when there was clear reference by Wilson and the defendant as to 11 cars which the defendant had had from Wilson. The defendant sought to minimise the impact of that meeting and what was said. I find however that the claimant had a clear recollection of it and knew that the defendant was admitting having that number of cars from Wilson and knew that they were the claimant's. Thereafter he has not told the truth about them and he has called other evidence which regrettably I find untruthful. He holds himself out as an honest trader and I find in general terms that he is but like many in the second hand car business he finds it difficult to turn away custom for profit. Unusually in this case he was buying from another source rather than at auction. I find that he was well aware of Wilson's position with the claimant (i.e. was an employee and not a partner) and that any proceeds of sale should have gone to the claimant and not to Wilson personally. There was therefore a form of conspiracy between them as is well demonstrated by the four cars subject of the criminal case and Recorder Pullman's judgment."

31. The thrust of this paragraph appears to be that all the evidence of the defendant, Mr Jenner and Mr Harris on the topic had to be rejected as it was inconsistent with the reference to some 11 cars said to have been obtained by the defendant from Wilson according to the police statement quoted earlier in this judgment. The difficulty with this approach is obvious:-

i. The reference to eleven cars derives largely from a piece of hearsay evidence contained in the defendant's statement to the police. Although the defendant appears to have adopted the figure, it is unrealistic to treat the extract as containing an admission.

ii. It is clear that the defendant did indeed purchase other cars from Wilson prior to the four: for instance both Mercedes and an Orion Ghia all of which appear in the defendant's stock book.

iii. The mathematical conclusion that there were a further seven cars is not consistent with either party's case, a point of all the greater significance in the light of the uncertainty with regard to the claimant's purchase of the Sierra and the Sapphire.

32. Quite how in these circumstances the police statement alone could be used to impeach the evidence of Mr Harris and Mr Jenner is not clear. Further, as regards the defendant, the judge, in almost the same breath, finds him, in general terms, an honest man. The immediate jump to the conclusion that there was "a form of conspiracy" between him and Wilson, "demonstrated" by the later history of the four cars, is not easy to follow.
33. The appellants submit that the judge has given no coherent explanation as to why he rejected the defendant's case on the purchase of the three cars. The respondent sought to bolster the judge's conclusion by reference to the following matters:-

i. The statements of Mr Harris and Mr Jenner were produced during the adjournment. Accordingly, it was submitted that it was proper to approach them with considerable caution.

ii. The documents produced by Mr Jenner and Mr Harris were unconvincing. The invoices contained no number and thus it was not possible to determine a proper sequence for them in relation to other transactions.

iii. The invoice produced by Mr Harris was conceded to be a recently created copy.

iv. Neither Mr Harris nor Mr Jenner was able to give convincing accounts, let alone documentary support, as regards their acquisition of the vehicles.

v. There was evidence that Mr Wilson had purchased petrol for the Granada at a date apparently co-incident with the transfer of the car from Mr Harris to the defendant.

34. These points were all well made, but it is striking that the Judge makes no reference to any of them in his reserved judgment. It is not possible to conclude that he must have adopted these arguments or some of them as part of his reasoning. I accept that the issue was essentially one of credibility which the judge was well placed to assess. But, for my part, any confidence that the judge has taken advantage of that position is gravely undermined by the lack of reasoning. I have very much in mind the warning of Schieman LJ, in a very different context, that it is illegitimate to "comb through a patently deficient decision for signs of the missing elements and to try and amplify these by argument into an adequate set of reasons": see Anya v. University of Oxford [2001] EWCA Civ 405, [2001] 1 RLR 377.
35. The judge may very well have come to the right conclusion, but I regret that there are no adequate reasons, whether explicit or implicit, for it. In the absence of a transcript, let alone the advantage of seeing and hearing the witnesses, I do not consider that this Court can reach a fair conclusion of it own, the more so where there is an element of overlap with the two earlier issues.
36. The outcome is very unpalatable. This is a modest claim, arising out of events some eight years ago on which very substantial costs have been expended. The inadequate reasoning was not raised until a very late stage in the appeal process. But the clear conclusion that I have reached is that this is a judgment that must be set aside. I say nothing about the minor issues of quantum that were raised before us.
37. In these circumstances, the appropriate course is to order a new trial but I earnestly hope that the parties can reach a compromise either by direct negotiation or by mediation.

LADY JUSTICE HALE:

38. I agree.
39. For the reasons given in the judgments handed down this appeal will be allowed.
Order: Appeal allowed; order in the terms of paragraphs 1 to 4 of counsel's draft as agreed with substitution of the date of 9^th November for 2^nd November in both cases where it appears; no order for any interest additional on the sums; no order as to costs. (order does not form part of the approved judgments)