England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM NEWCASTLE-UPON-TYNE COUNTY COURT
(HHJ WALTON)

		Royal Courts of Justice Strand London WC2 Wednesday 28th November 2001

1. LORD JUSTICE LAWS: This is a defendant's appeal brought with permission granted by Rix LJ on 30th April 2001 against orders made by His Honour Judge Walton in the Newcastle-Upon-Tyne County Court on 4th January 2001 following an earlier judgment given by him in the action on 1st March 2000. There were a number of issues between the parties but only two arise for consideration on this appeal. In order to explain them, I should briefly set out the material facts.
2. The claimants are husband and wife. The first defendant was, so far as I can see from the evidence, effectively the sole owner or certainly in control of the second defendant company, which it is said he had purchased off-the-shelf. In September 1988 the second defendant company bought the freehold of a hotel in the Isle of Wight. By a written contract made on 8th January 1989 the claimants agreed to work for the second defendant as managers of the hotel for not less than ten years at a salary of £13,000 per annum and an entitlement to certain percentages of the profits generated at the pool table, the bandit machines and the bar of the hotel.
3. The business ran into financial trouble. The claimants helped out with their own money. Relevant to the appeal are three cheques drawn by them. The first and third of these cheques, for £3,000 and £7,000 respectively and respectively dated 19th November 1990 and 11th November 1991, were made out to the first defendant personally. The second, for £4,000, was made out on 5th December 1990 to a third party, Country Fresh, which was a firm of butchers that supplied the hotel. In the proceedings the claimants were to assert that these sums had been loans to the first defendant, which they were entitled to recover from him. The first defendant admitted that the cheques had been drawn and honoured. His defence on the merits was that these three sums had been paid to or for the benefit of the second defendant company and not himself. The judge found on 1st March 2000 (see paragraph 32 of his judgment) that all these sums had been paid at the first defendant's personal request, and for reasons he gave at paragraphs 32 to 34 he rejected the first defendant's defence on the merits and found in the claimants' favour. That finding is not sought to be disturbed on this appeal. But the first defendant had a second point in answer to the claim to recover these loans. It was that on 28th January 1998 the claimants had obtained a default judgment against the second defendant company which included the sums claimed in respect of the money advanced by these three cheques. Such a judgment was undoubtedly obtained, and I shall refer to it further shortly.
4. Accordingly in March 2000 it was submitted for the first defendant that the claimants were fixed with an irrevocable election made by them to go against the second defendant in relation to these sums and the election barred any claim against him, the first defendant. The judge rejected that argument; and the first issue in this appeal is whether he was right to do so.
5. The second issue concerns a different aspect of the dispute between the claimants and the first defendant and does not involve the second defendant company at all. In late 1990 or early 1991 the second claimant, Mrs Pendleton, agreed to buy a property in Stanley, County Durham from the first defendant for £20,000. The property was to be acquired with the aid of a mortgage and the first defendant was to pay the mortgage instalments - on the claimants' case, out of the money which he owed to them. The first defendant was to assert that it was agreed that the property was to be reconveyed to him once the mortgage was paid off, but the judge rejected that. In the event the mortgage was not paid regularly; and at length, and unknown to the claimants at the time, the building society obtained an order for possession of the property. So it was that there arose a claim against the first defendant by the second claimant for damages for breach of contract arising out of this transaction. The damages took the form of an indemnity against the mortgage debt ex facie owed by the second claimant.
6. The point sought to be taken by the first defendant on this part of the case, though it was not taken until a long time after the judge's first judgment of 1st March 2000, is that the contract should not be enforced in the second claimant's favour because it was tainted with illegality and she was a knowing party to the illegality. It seems that the building society would not advance a mortgage amounting to 100 percent of the purchase price. So it was represented to them, and it appears in the conveyance, that the true purchase price was not £20,000 but £29,000 and on that basis a mortgage of £20,000 was advanced. This representation was a lie. The price was never £29,000, but was £20,000. There was never any payment of £9,000 to the vendor over and above the sum of £20,000.
7. The first defendant's case, not adumbrated until the judge had given a reserved judgment after a hearing as to quantum of damages in November 1990, was that the second claimant was a knowing party to this dishonesty. The judge dealt with this argument substantively on 4th January 2001 in the context of a hearing about permission to appeal. He rejected it and found in the second claimant's favour. The first defendant says he was wrong to do so; that is the second point in the case.
8. I turn then to the first issue. The judge said this at paragraphs 36 to 39 of the judgment:

"36. Mr Bloomfield relies upon Halsbury's Laws, vol. 37, para. 394, note 6: '... if the plaintiff's claim is against two or more defendants in the alternative, a judgment against one bars the claim against the other ... for by such judgment the plaintiff has made his election as to which of the defendants he wishes to proceed against'. Also, Morel Bros. v Earl of Westmoreland [1903] 1 KB 64, CA, per Collins M.R.: '... if there has been a conclusive election by the plaintiffs to adopt the liability of one or two persons alternatively liable they cannot afterwards make the other liable.

37. The claimants do not argue that the sums in question are not covered by the judgment entered against the second defendant but Miss Gilbert submits that the case does not fall within the Morel Bros. principle where the Particulars of Claim alleged in the alternative three possible variations, namely, the individual liability of the first defendant, the joint liability of both defendants and finally the individual liability of the second defendant.

38. I reject the first defendant's submissions for the reasons which follow. If, as was contended, the court concentrates its attention on how the case was pleaded, it was pleaded alternatively as a liability of the first defendant alone, a joint liability of both defendants and finally as a liability of the company alone. If attention is concentrated on how the case was advanced in the witness statements and oral evidence it was clearly presented as a liability of the first defendant, not the company. This was not just because it was expedient: the Particulars of Claim appear to me to put the matter on the same basis until what appears, in context, a change of direction in the prayer.

39. Given these circumstances it seems to me that the cases relied upon can and should be distinguished. They deal with a case in which a party has advanced his claims on the basis that the liability in question was either one defendants or the other and made a clear election as to which. They do not deal with a situation where the case has been advanced upon a number of alternate bases. Given the number of variations pleaded it does not seem to me that by entering judgment the claimants made an unequivocal election that the liability in question was the second defendant's and the case therefore falls outside the principle relied upon."

9. It is convenient to see how the case was pleaded. Here are the relevant extracts from the particulars of claim:

"7. On or about 19th November 1990 the first Defendant orally requested the Plaintiffs to lend him £3,000 in order to re-finance The Seagrove Hotel. The Plaintiffs agreed and paid the first Defendant by means of a cheque for £3,000 drawn on the Halifax Building Society dated 19th November 1990 and made payable to the first Defendant personally. The Plaintiffs' joint account with the Halifax Building Society was accordingly debited with £3,000. This loan agreement was made at the first Defendant's home in Stanley, County Durham.

8. On or about 5th December 1990 the second Plaintiff informed the first Defendant by telephone that The Seagrove Hotel would have to close for the Christmas period unless Country Fresh, a local butcher, was paid their overdue account. Country Fresh had refused to give any more credit. The first Defendant asked the Plaintiffs to pay Country Fresh to help the first Defendant and that he would repay the Plaintiffs. By a cheque drawn on the Halifax Building Society and made payable to Country Fresh and dated 5th December 1990, Country Fresh were paid £4,000. The Plaintiffs' joint account at the Halifax was accordingly debited with £4,000.

The Plaintiffs aver that this £4,000 was a loan to the first Defendant personally made payable at his request to Country Fresh. If (which is not admitted) it was not a loan to the first Defendant it was a loan to the second Defendant.

9. On or about 11th November 1991 the first Defendant orally requested the Plaintiffs to lend him £7,000 in order to re-finance The Seagrove Hotel. The Plaintiffs agreed and paid the first Defendant by means of a cheque for £7,000 drawn on the Halifax Building Society dated 11th November 1991 and made payable to the first Defendant personally. The Plaintiffs' joint account with the Halifax was accordingly debited with £7,000. This loan agreement was made at the first Defendant's home in Stanley, County Durham.

10. By letter dated 12th June 1991 the first Defendant wrote to the first Plaintiff, after a crisis where there was not enough money to pay all the staff wages, inter alia:

'Please rest assured I confirm to you and Maureen that I promise to pay in full all of the money the Company owes you as quickly as possible - I would never let you down as I sincerely appreciated your help earlier this year and late last year.'

In consideration of this promise the first Defendant to be personally liable to repay the monies owed by the second Defendant the Plaintiffs continued to manage The Seagrove Hotel, in circumstances where they were entitled to terminate their said Contract dated 8th January 1989 by reason of non-payment of wages and other expenses of running The Seagrove Hotel.

...

12. If (which is not admitted) the said loans of £3,000 on 19th November 1990 and £4,000 on 5th December 1990 were loans to the second Defendant, the first Defendant by the said letter of 12th June 1991, agreed to repay the Plaintiffs from his own resources and to repay sums owed by the second Defendant to the Plaintiffs in respect of shortfalls between expenditure and cash income.

13. On or about 25th April 1993 the Allied Irish Bank appointed Law of Property Act receivers to the second Defendant. The first Plaintiff's accounts for week ending 25th April 1993 showed that the Plaintiffs were owed £18,022.91 inclusive of the £3,000 pleaded in 7 hereof, the £4,000 pleaded in 8 hereof and the £7,000 pleaded in paragraph 9 hereof. The Plaintiffs aver that the sum owed by the second Defendant was £4,002.91, namely £18,002.91 less £14,000."

10. Then the prayer in the particulars of claim is in part in these terms:

"And the Plaintiffs claim against the first and/or second Defendant:

(1) £3,000 pleaded in paragraph 7 hereof;

(2) £4,000 pleaded in paragraph 8 hereof;

(3) £7,000 pleaded in paragraph 9 hereof;

(4) £10,065.72 pleaded in paragraphs 10

and 11 hereof;

(5) £4,002.91 pleaded in paragraph 13 hereof."

11. Thus the primary case put forward in the body of the particulars of claim was that the three relevant sums were loans to the first defendant personally; and that of course was the positive case made by the claimants before His Honour Judge Walton in March 2000 and accepted by him. However, in relation to the advance of £4,000 to Country Fresh there is an express averment in the alternative that it was a loan to the second defendant: see paragraph 8. Paragraph 12 proceeds on the premise that if the loans of £3,000 and £4,000 were not made to the first defendant they were made to the second defendant; and paragraph 13 asserts in terms that the money owed to the claimants by the second defendant was net of the £14,000. Then in the prayer as regards each of the three sums the claim is put as a claim against the first defendant, or against both defendants jointly, or against the second defendant.
12. It is entirely clear, as forcefully submitted by Mr Bloomfield, that the evidence of both claimants in their statements and in their testimony at court in March 2000 was that the loans were made to the first defendant personally. As I have said, the first defendant's case is that the claimants have made a conclusive election to pursue the section defendant by virtue of the default judgment entered on 28th January 1998. The leading case upon which Mr Bloomfield relies is Morel v Earl of Westmoreland [1903] 1 KB 64, CA [1904] AC 11, HL. In the Court of Appeal the Master of the Rolls said this (page 76):

"The plaintiffs, having obtained judgment against the Countess on the footing that she was severally liable as the principal, cannot now turn round and say that she was an agent for the purpose of imposing liability upon her husband as the principal. In this point of view the liability of the husband and wife is not joint, but the liability of one is inconsistent with the liability of the other."

13. Then page 77:

"... we must look at the case in the light of general principle; and it seems clear, so regarding it, that, if there has been a conclusive election by the plaintiffs to adopt the liability of one of two persons, alternatively liable, they cannot afterwards make the other liable: see Scarf v Jardine. Here, on the hypothesis that the writ covers an alternative claim against the husband or wife, the issuing of the writ will not involve any election; but, if on the road to trial of the action the plaintiffs accept judgment against one of the two defendants, that may be called an interlocutory step, but it is a complete judgment upon which execution may be issued against that defendant and which alters her relation to the other defendant; and I think it is impossible to say that it is not a conclusive election to make the wife liable to the exclusion of the liability of the husband."

14. I should say that in that case the judgment against the Countess of Westmoreland that was relied on was a judgment taken under Ord 14 of the then Rules of Court; that is, of course, summary judgment upon its being demonstrated that there was no defence to the action.
15. In their Lordships' House, Lord Halsbury LC said this (page 14):

"The result was that the plaintiffs got judgment against the agent. They cannot get judgment against the principal also. It is an alternative remedy; it cannot be made available against the two."

16. Then Lord Davey (page 15):

"I am disposed to think that if the proof had established a joint liability the plaintiffs would not have been prejudiced by signing judgment under Order XIV against one of the joint debtors. I think they might then go on and shew that the other debtor was also a joint debtor. But if the proof which they tendered at the trial shews, not a joint debt by the two, but an alternative claim against one or the other, then I think that by signing judgment against one they have, on the principle of Scarf v Jardine, elected to take their remedy against that one, and cannot afterwards sue the other who is not jointly but alternatively liable."

17. In the present case we have to confront these following features:

1. Taking the particulars of claim as a whole, including the prayer, the case was pleaded on a number of alternative bases including that of joint liability on the part of the first and second defendants. I accept at once that that appears from the prayer only; and it is plain, as I have already said, that the substantive case brought by the claimants as it emerged in their evidence at trial was that the debt was owed by the first defendant.

2. The judgment in question against the second defendant was a default judgment, entered therefore without the court having to consider the merits of the matter at all. Of course where judgment is entered summarily under Ord 14 of the old rules the court is concluding on the merits that they lie all with the plaintiff.

3. The second defendant was merely the vehicle for the first defendant's activities.

4. The judgment against the second defendant remains unsatisfied.

18. The merits here are all one way. In the context of this case the first defendant's reliance on an election by the claimants is the barest technicality. If the doctrine of election threatens to work injustice it must be applied rigorously, with great care, and as narrowly as may be consistent with legal principle. It is right that I should pay tribute to Mr Bloomfield, who has argued his case, unattractive on the merits though it is, with great vigour and resource, and for my part I am grateful to him.
19. It is necessary, as it seems to me, just to look at the terms of the judgment itself. The order was made, as I have said, on 28th January 1998 by the district judge at the Consett County Court. It has three paragraphs:

"1. The Plaintiff do have summary judgment [that is a mistake: it is no doubt it was a default judgment] against the 2nd defendant in the liquidated sum of £18,222.91 plus interest in the sum of £1,922.44 and that the Plaintiff do have judgment against the 2nd defendant in addition for such general damages as shall be assessed by the court on a date to be fixed.

2. The Plaintiff do have an extension of time pursuant to Order 17, rule 11 until 4.00 pm on Friday 31 July 1998 in which to request that this case be set down for hearing, and in default of so requesting the Plaintiff's claim shall be deemed automatically struck out."

20. Paragraph 3 deals with costs and it is not necessary to set it out.
21. The judgment was made pursuant to an application issued on 13th January 1998, which was in terms for:

"1. Judgment against the second defendants and costs.

2. An extension of costs until 31st August 1998 for setting the case down for hearing."

22. The application was supported by an application sworn by Mr Anderson, the claimants' solicitor. In paragraph 1 of that affidavit he asserts that certain correspondence shows that a defence which had been served had not been prepared on behalf of the second defendant - in fact it was a defence put in for the first defendant only - so it was that Mr Anderson said:

"Accordingly, the second Defendant has not filed a Defence and the Plaintiffs are entitled to enter judgment forthwith against the second Defendant."

23. The affidavit then proceeds to set out something of the procedural history of the case. The application for judgment against the second defendant is not referred to again until the last paragraph, paragraph 11. I notice, however, that on the way in paragraph 6 this is said:

"Mr & Mrs Pendleton worked for the First and/or Second Defendants in a hotel called the Seagrove Hotel in the Isle of Wight. Part of their claim is that they lent monies to the First and Second Defendant in order to finance the Seagrove Hotel. Mr Pendleton kept detailed accounts and his accounts show that the Plaintiffs are owed £18,022.91."

24. Then in paragraph 11 to which I have referred:

"I further request that Judgment be entered against the Second Defendant in the sum of £18,022.91."

25. Taking all these materials together, it seems to me that on these specific facts - and I lay down no general rule whatever - it is not demonstrated that the claimants made a conclusive or unequivocal election by taking default judgment on 28th January 1998. I repeat, a default judgment requires no consideration of the merits. Mr Anderson's affidavit does not condescend into the precise legal structure or nature of the claim against the second defendant. I have read paragraph 6 in which reference is made to monies lent to the first and second defendant. The learned district judge reading the materials placed before him would not be in a position to determine the factual basis underlying the judgment proposed. I would not accept the bare proposition advanced by Mr Bloomfield that the entry of the judgment in every case, without more, necessarily amounts to an election. Indeed there is some material, with respect, in the judgments of their Lordships in the Court of Appeal in Morel showing that the court has to see the basis of the claim that was made leading to the judgment in order to determine whether there was or was not a conclusive election.
26. It may be - and the question is an important one - that in principle a default judgment does not bar the continuance of a claim against other defendants under the rule in Morel's case. I do not distinctly so hold. I make it clear that for my part I conclude that there was no unequivocal election here by reference, as I have said, to the particular facts of the case. In those circumstances I would reject Mr Bloomfield's argument upon the first issue.
27. I turn then to the second issue. As I have said, this point was taken against the second claimant very late. It surfaced in a skeleton argument put in on behalf of the first defendant in relation to permission to appeal after His Honour Judge Walton had delivered a reserved judgment on quantum of damage in November 2000. In Birkett v Acorn Business Machines [1999] 2 All ER (Comm) 429 this Court held as follows, reading the headnote at page 429H:

"Held - If a transaction was on its face manifestly illegal, the court would refuse to enforce it, whether or not either party alleged illegality. If a transaction was not on its face manifestly illegal, but there was persuasive and comprehensive evidence of illegality, the court might refuse to enforce it even if illegality had not been pleaded or alleged. The principle behind the court's intervention of its own motion in such a case was to ensure that its process was not being abused by an invitation to enforce sub silento a contract whose enforcement was contrary to public policy. Where, however, allegations or evidence of illegality emerge for the first time at trial, the court should take such a course only if it was satisfied that it would not involve any palpable risk of injustice to the claimant by reason of his inability to rebut the illegality by adducing additional evidence or making more comprehensive submissions."

28. In deciding whether to refuse to enforce the agreement in relation to the Stanley property between the second claimant and the first defendant, the judge on 4th January 2001 examined the question whether the second claimant was a knowing party to the deception of the building society. There is no doubt but that she signed a conveyance relating to the property in question which stated the purchase price at £29,000, and equally there is no doubt but that the actual consideration was £20,000. The judge considered two witness statements made by the second claimant and the notes of her earlier oral testimony which had been taken. He did not have the advantage of a transcript. Such a transcript is in the event now before us. He said this at page 22 of the transcript, page 475 of the bundle:

"In the result it seems to me that the position is far from clear. Mrs Pendleton has at some times appeared to accept that in her presence at the Clough & Cairns office there was a discussion in which the proportionate mortgage was discussed, and the £9,000 deposit discussed, and that by implication, if not expressly, at the time she signed the document applying for a mortgage these were matters of which she was aware, but it is also right that when in evidence she was taken to this specific point, on each occasion it would appear that she qualified her replies by saying that she was not aware of what was going on in the full sense, that she only achieved such awareness at a later stage when the solicitor who was handling her case at that point in time took her to the problem, and that it was not until then that she realised that what had happened had a dishonest and fraudulent aspect so far as the building society is concerned. In making any finding of fact the test is the balance of probability, and here Mr Bloomfield would, no doubt, make the point, and indeed does make the point, albeit perhaps not expressed in these terms, that the inherent probabilities do favour Mrs Pendleton knowing the implications of a document to which she set her hand, particularly when one adds the replies that she gave in evidence.

On the other hand Miss Gilbert invites me to consider the replies which she gave which qualified the knowledge for which Mr Bloomfield contends, and I am bound to say that one impression of her that I retain from the original hearing is her lack of sophistication in matters of a business kind. Mrs Pendleton struck me, and I say this without any disrespect to her, as limited in her insight into business matters, and indeed I referred to that impression in the course of my first judgment. I do not accept on the basis of the case to which Miss Gilbert refers me that where a matter is not being the subject of argument at the time, and the court is in effect being asked to decide a question of fact long after the appropriate time for making submissions in relation to it has passed, that a good deal of caution has to be exercised, and in the result, having considered the submissions on both sides, I am not satisfied that the state of evidence justifies a finding that Mrs Pendleton did knowingly involve herself in an agreement to deceive the building society. She may well have come to know in due course, and one problematic area is the extent to which after-acquired knowledge has coloured her evidence, but doing the best I can at this late stage my finding is that on the balance of probabilities she did not realise there was a deception of the building society involved."

29. The two witness statements had been crisply summarised by the learned judge in his judgment of 1st March 2000 thus:

"50. In her first witness statement, Mrs Pendleton stated that she came to be involved in purchasing the property because the first defendant was in difficulty meeting a VAT liability of the second defendant. He made the suggestion that she should purchase the property and he would meet the mortgage payments 'out of the money he owed me'. She thought the purchase price was £27,500 and that a 100% mortgage was to be provided. Her statement appears to say ('I now understand') that she did not realise at the time that the purchase price stated in the document was £29,000 and the advance itself just over £20,000.

51. In her second statement she said the price suggested was in fact £20,000. She was present at the estate agents when a higher figure was discussed as a device to obtain £20,000, since a 100% mortgage could not be obtained."

30. Both parties before us have relied on certain passages from the transcript of the second claimant's evidence, and I should set out the greater part of these. At page 5 of the transcript, page 273 of the bundle:

"... to my knowledge this property was going for sale for a fee of £20,000. But Mr Westwater was there all the time. But because they couldn't raise - I was naive about these buildings and I didn't know much about what was going on. The people at Clough & Cairns were Mr Westwater's friends. Now they agreed and they fiddled the figures of £29,000, because they could only get an 85% mortgage. So they said that if they put the figures up to £29,000, it would show that a £9,000 deposit had been paid by Mrs Maureen Pendleton, which was untrue, because I didn't pay that deposit. But it was only for figures' sake so they could get this mortgage.

Then it was all sorted down like - which at the time I thought was right. So this is how they obtained the mortgage of £20,000, which I did not agree to pay Mr Westwater this £9,000 back. We was in no position whatsoever to pay him this 9,000, but they had convinced me that it was their way of getting an 85% commercial mortgage on this building. Which at the time I had heard the sum of £29,000 mentioned, but it wasn't until maybe a couple of years or a year last year or the year before, when I realised that they had only been granted the 85% commercial mortgage. But I did agree to pay this £9,000, it was all just done for a fiddle for Mr Westwater."

31. At page 37 of the transcript, page 305 of the bundle:

"Q. And you signed an agreement - I am not sure whether we have the agreement itself, but you signed an agreement, did you not, to buy - it shows that you were buying the place for £29,000?

A. I've already explained that, your Honour.

Q. Yes?

A. And you're just going on and on and on. I've explained that to if best of my ability.

Q. You explained...?

A. How it come to 29. And it was only 20,000. They fiddled the figures so he could get this £20,000 mortgage.

Q. You accept, do you, Mrs Pendleton, that you signed documentation saying or agreeing to buy the place for £29,000?

A. I accept that I was...

Q. Yes or no?

A. ... that I was naive and I signed the document.

Q. Right. You signed documents or a document at least, agreeing or apparently showing he was buying the property for £29,000?

A. With the £9,000 deposit, which showed on the documents 'Paid'. So therefore I still only signed for £20,000, even though it showed £29,000.

Q. You knew that it was going to show £29,000?

A. It showed £29,000 and with a £9,000 deposit paid. That's 50 times I've said that."

32. Then at page 38 of the transcript, page 306 of the bundle:

"Q. Because what it comes down to is that the lower figure, the £20,000-odd, if building society or the mortgage company, whoever it was had been told the truth, then the money would not have been advanced, would it?

A. It wouldn't have been released, that's right.

Q. No. So let me understand your evidence. This was an agreement that was dishonest. Is that what you are saying?

A. Well, I'm not saying it was dishonest on my part.

Q. You are saying that - I am sorry, let me check it; I want to know what you knew. On your evidence you knew, did you, that the transaction was not as it appeared on the paper?

A. Well, I thought because the original price was £20,000, I was just naive about the whole matter of fact, sir.

Q. You say you were naive?

A. So I still thought I was only signing for 20,000. I didn't really understand it, sir."

33. Then lastly at page 39 of the transcript, page 307 of the bundle:

"Q. ... There was never any question of you paying £29,000 for the place, was there?

A. That was never the question of 29,000.

Q. So that when the figure of £29,000 appears, that was a deliberately untrue figure, was it not?

A. It was when Mr Anderson, the solicitor, told us that the top figure was 29,000, I couldn't believe it.

Q. Mrs Pendleton, £29,000 ...

A. Yeah.

Q. ... was a deliberately untrue figure, was it not?

A. Because that's what they had to - said to put down. I didn't it down, they put it down.

Q. It was a deliberately untrue figure?

A. It was - that's what they put down. I was only agreeing with them.

Q. You knew that you were signing...?

A. I didn't know.

Q. You did not know?

A. I thought I was signing for £20,000.

Q. You did not know until you saw the document...?

A. 'Til it was pointed out by the solicitor.

Q. And yet, you see - so you thought that the document you were signing showed £20,000, did you?

A. Yes.

Q. Even though you knew...?

A. I didn't know. I've just told you.

Q. So when did you discover that there had been...?

A. It was when Mr Anderson pointed the fact out. Because I was still - I was telling Mr Anderson that the figure was £20,000. He was keep coming up with this figure and I was keep saying 'It's not the right figure, that's not what I signed for'."

34. Some of these answers are plainly equivocal and they were given at a trial at which no issue of illegality as such or consequent unenforceability of the contract between the second claimant and the first defendant was being raised or canvassed. Moreover although, as the judge pointed out, the standard of proof applicable at this time was the civil standard of probability, nevertheless it is trite law that the graver the allegation made against a party the more it will take to establish it on the balance of probability. The burden of course on this issue lay on the party asserting the illegality, that is the first defendant. Then also the court has to exercise special caution if it is going to decline to enforce a contract in circumstances where the flaw of illegality has been raised as late as it was here: see Birkett's case.
35. From the passage in his judgment of 4th January which I have set out, it is plain that the judge was influenced - it may be greatly influenced - by the impression which the second claimant had made upon him in March 2000 as someone who was unsophisticated in business affairs. We, of course, have not had the advantage of seeing and hearing the witness. It seems to me quite impossible to hold that the judge was not entitled to conclude that it was not demonstrated that the second claimant was party to the deception of the building society. With respect, whether any of us might have reached the same conclusion had we been sitting at first instance is of course another matter altogether and an irrelevant one. In these circumstances, for my part I would also dispose of the second issue in this case against the first defendant; and I would dismiss the appeal.
36. MR JUSTICE HARRISON: I agree.
37. LORD JUSTICE THORPE: I agree that the appeal be dismissed for the reasons given by my Lord. I echo his tribute to Mr Bloomfield's skilful and valiant advocacy.
ORDER: Appeal dismissed; the first defendant pay the claimants' costs of this appeal; leave to appeal to the House of Lords refused (see questions below). The Court was asked to certify the following questions as ones of public importance and for leave to appeal to the House of Lords.

"1. Whether the entry of judgment in itself is conclusive of an election by a claimant to treat one defendant as liable to the exclusion of others where there is alternative liability as between defendants.

2. Whether, for the purposes of determining if there has been a conclusive election by the claimant as to which defendant is liable where there is alternative liability as between defendants, there is any distinction between judgment following application for summary judgment and default judgment entered in default of defence."

(Order does not form part of approved Judgment)