England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CENTRAL LONDON COUNTY COURT
(HIS HONOUR JUDGE MEDAWAR)

		Royal Courts of Justice Strand London WC2 Thursday, 8th March 2001

Thursday, 8th March 2001

1. LORD JUSTICE MANCE: I will ask Lord Justice Jonathan Parker to give the first judgment.
2. LORD JUSTICE JONATHAN PARKER: This is an appeal by Mr Kanapathipillai Shivaharan, the defendant in the action, against an order made by His Honour Judge Medawar QC in the Central London County Court on 14 October 1999. By his order, Judge Medawar entered judgment in favour of Trevellyan Developments Ltd (the claimant in the action and the respondent to the appeal) in the sum of £8,250 and costs, and dismissed a counterclaim by the appellant. The appeal is against the judgment entered on the claim; there is no appeal against the dismissal of the counterclaim. Permission to appeal was granted by Chadwick LJ on 7 April 2000.
3. The appellant appears on this appeal by Mr Robert Duddridge of counsel; the respondent by Mr Lawrence Jones of counsel.
4. The appellant was employed by the respondent as manager of a petrol station at 35 Beddington Lane, Wallington, Croydon. The business of the petrol station also included a shop. The appellant's employment began on 1 June 1994 and ended on 2 August 1996, when he was dismissed for misconduct. He subsequently obtained an award from an Industrial Tribunal based on unfair dismissal.
5. In the action, the respondent claims primarily that, whilst employed by the respondent, the appellant dishonestly stole items of stock from the shop at the petrol station and placed such items for sale in a shop which he operated himself in partnership with a friend in Chessington, some ten miles away, from September 1995 onwards. The respondent quantifies its loss under this head at £25,565. Secondly, the respondent claims that the appellant dishonestly returned unsold newspapers which had been supplied to his shop as being newspapers which had been supplied to the shop at the petrol station (which had a sale or return agreement in respect of unsold newspapers), thereby obtaining a credit for which he did not account to the respondent. The respondent puts its loss in respect of return of unsold newspapers at £4,843.18. Thirdly, the respondent claims that the appellant made unauthorised telephone calls from the petrol station at a total cost to the respondent of £66.29 plus VAT. The respondent also claims general damages under various heads, based on allegations of misconduct by the appellant.
6. By his Defence, the appellant denies taking any stock from the petrol station shop, and he denies returning unsold newspapers from his shop through the petrol station (although he asserts that on some three occasions he brought unsold newspapers from his shop to be sold at the petrol station shop, allowing the petrol station shop to retain the proceeds of sale). By his Defence, he admitted that he used the telephone at the petrol station on occasion, but he alleged that he had obtained the respondent's prior consent to his doing so on the basis that he would refund the cost of the calls and that prior to the commencement of the proceedings he had not been asked to pay for them. However, at the trial he admitted the claim of £66.29 plus VAT in respect of use of the telephone. By his counterclaim, the appellant counterclaims for unpaid wages and damages for wrongful dismissal and false imprisonment.
7. As noted earlier, the judge awarded the respondent a total of £8,250 on the three specific claims relating to missing stock, returned newspapers and use of the telephone. He made no award of general damages under the remaining heads of claim. In addition, as noted earlier, he dismissed the appellant's counterclaim.
8. At the trial, the respondent was (by the leave of the judge) represented by its Chairman, Mr Lance Trevellyan. The appellant was represented, as he is on this appeal, by Mr Duddridge.
9. Oral evidence on behalf of the respondent was given by Mr Trevellyan, and by Mr Andrew MacDonald, an area manager of the respondent responsible for the area in which the petrol station is situated. Both these witnesses were cross-examined. The appellant gave oral evidence and was cross-examined but no other witnesses were called on his behalf.
10. The respondent had previously served witness statements by a Mr Sivagurunathan and a Mr Jayabalan (each of whom was at the material time employed by the respondent as manager of another petrol station), but in the event neither of those gentlemen was called to give oral evidence.
11. The judge, as will appear, took an unfavourable view of the appellant's credibility as a witness, concluding that the account which he had given in evidence contained inconsistencies and on occasion half truths.
12. On this appeal Mr Duddridge challenges the judge's conclusion as to the credibility of the appellant, but that challenge is based upon his submissions as to the sufficiency of the evidence adduced by the respondent in support of its claims. It is the appellant's contention that even if one disregards the appellant's evidence as wholly unreliable, nevertheless the evidence adduced by the respondent in support of its claims is not sufficient to discharge the burden of proof, and that the judgment should accordingly be reduced to the agreed sum of £66.29 plus VAT in respect of the claim in relation to the appellant's use of the telephone.
13. As to the missing stock claim, apart from admissions made orally and subsequently in writing by the appellant in the course of an interview conducted by Mr Trevellyan and Mr MacDonald on 2 August 1996 (the day of the appellant's dismissal), there was no direct evidence of any missing items of stock. However, Mr Trevellyan (who is himself a Chartered Accountant) produced in evidence quarterly sales margin reports in respect of the petrol station shop for the period from 1 April 1995 to 31 December 1996 which showed that in the quarter beginning 1 October 1995 (shortly after the appellant began operating the shop in Chessington), the gross sales margin started to deteriorate from its previous level of 14.94 percent, and that in the quarter ended 30 June 1996 it reached an all-time low of .37 percent. The figures also show that following the dismissal of the appellant, the gross sales margins increased.
14. Mr Trevellyan further produced a calculation of book loss based on gross margin on sales at other petrol stations operated by the respondent which showed a total loss during the period from October 1995 to June 1996 of £25,565 -- the figure which the respondent claims in respect of missing stock. Mr Trevellyan's evidence was that he was instrumental in producing these figures.
15. Mr Trevellyan provided two witness statements, the truth of which he confirmed in oral evidence. In his first witness statement he set out at some length what he had been told by an unidentified informant about the appellant's conduct, all of which evidence was, of course, hearsay since the informant himself was not called. In both his first and second witness statements, Mr Trevellyan referred to test purchases which had been made by Mr Sivagurunathan and by a Mrs Dunning at the appellant's shop in Chessington for the purpose of comparing what was being sold at that shop with what was on sale at the petrol station shop. Written statements by each of those individuals were annexed to Mr Trevellyan's second witness statement, but in the event neither of them was called to give evidence. However, it is material to note that in paragraphs 6 and 7 of his second witness statement Mr Trevellyan said this:

"6. The result of our test purchases showed that although the Defendant did not sell exactly the same items like for like as the stock which were in the Plaintiff's shop, he sold the same things. When I visited his shop I saw on display stock which were identical to the Plaintiff's stock, although the Defendant sold other items as well. The items were priced up with identical labels and packed in identical carrier bags.

7. The Defendant also had identical suppliers, in some instances as the Plaintiff's suppliers. An example of such suppliers was D & D Snack Foods who supplied items such as Red Mill crisps and snacks and Primula dips. These were products peculiar to D & D Snack Foods in the South london area and, I was told, the dips were being consumer tested on the market in petrol stations. Furthermore, two items purchased by Mr Sabaratnam Sivagurunathan, the Foxes mints and Bassetts Liquorice Allsorts were Jet promotion products which the defendant confessed to taking fron the petrol station shop and which I believe were not available for resale elsewhere as they were supplied to the Plaintiffs for promotional purposes and not resale."

16. The reference in that last paragraph to appellant confessing to having taken such items from the petrol station shop is a reference to an admission made by the appellant in the course of the interview (to which I have already referred) which took place on 2 August 1996. I shall return to consider those and other admissions made in the course of that interview.
17. The respondent, through Mr Trevellyan, also relied at trial on the inability of the appellant to produce purchase invoices relating to certain items sold at his shop which were also available at the petrol station shop as free promotion items.
18. As to the admissions made by the appellant at the interview on 2 August 1996, it is clear from the transcript of that interview (the interview was recorded without the knowledge of the appellant) that the appellant was placed under a great deal of pressure, and that repeated threats were made to call the police if he did not make a full confession. Mr Trevellyan nevertheless relied on these admissions in support of the respondent's claim. In particular, he relied on an oral admission by the appellant in the course of the interview that he had taken some promotional items from the petrol station shop (being items supplied free to customers of the petrol station shop, but for which the respondent had had to pay) and had sold them in his shop in Chessington; and on a written statement written out by the appellant in the course of the interview at the bidding of Mr Trevellyan to the effect that he, the appellant, would repay the respondent a total sum of £8,250 over a period of 12 months.
19. As to the claim in respect of returned newspapers, Mr Trevellyan produced in evidence a schedule showing an "unexplained difference" of £4,843.18 for the relevant period, that is to say October 1995 to July 1996. In the course of this appeal, Mr Jones has told us that the claim in respect of returned newspapers is intended to be additional to the claim of £25,565 for missing stock. On that basis the respondent's total claim amounts to some £30,408. However, it is apparent from the terms of the judge's judgment that he was proceeding on the basis that the claim in respect of unsold newspapers is in effect subsumed in the claim in respect of missing stock so that the total claim is £25,565. For my part, I had understood that to be the position and I propose to proceed upon that basis.
20. I turn to the material parts of the judge's judgment. The judge found that the appellant had taken items of promotional stock from the petrol station shop for sale at his shop in Chessington, and that items of promotional stock were included in the test purchases to which Mr Trevellyan referred in his witness statements. He also found that it was more probable than not that the appellant had been guilty of "siphoning off" other items of the respondent's stock and selling them in his own shop, and that the appellant had been guilty of other "fiddles" in the form of the return of unsold newspapers and use of the telephone. He accordingly found liability to be established.
21. Given the nature of the challenges made to the judge's finding on liability, it is necessary to quote a substantial part of the judge's judgment starting at page 5 of the transcript of the judgment at letter F:

"Matters came to a head when former employees at the petrol station spoke of what was going on and provided Mr Trevellyan with information which fuelled his suspicions and went some way to explain what he considered to be a diminishing trading record of the petrol station shop by assessing the losses to the claimant over the period in question and in particular, the three months up to 30th June 1996. Mr Trevellyan has concluded that some £25,000 has been lost.

The basis for his calculation is the comparison with what might be expected based on audited returns of other petrol stations within the group and a comparison with how well this petrol station shop was doing before and after the period during which the defendant was largely devoted to his own interests and business between September 1995 to June 1996.

Mr Trevellyan, who is by profession an accountant, is criticised for not adducing this evidence through an independent accountant, although the defendant neither used an accountant through whom to challenge the claimant's evidence, nor challenged the underlying information upon which calculations of loss were made. The defendant has not made full disclosure of the accounts relating to his own business, let alone all of the invoices and other documents upon which they might have been produced. Test purchases made at the shop on 2nd August 1996 by Mr Shivagrunata, and Mrs Dunning, and set out in a schedule marked LJPT1, annexed to Mr Trevellyan's supplemental witness statement, dated 13th August 1998, relating to items also stocked at the petrol station shop are significant since amongst the invoices which have been disclosed by the defendant there are invoices which relate to the purchase of some such items, but no invoices relating to the purchase of some of the items, such as the Panbar snacks, which were exclusive to the petrol station. It leads to the inference that he was taking some stock from the petrol station shop and selling it as if his own stock in his shop. This would, as I find, account for some of the discrepancies.

Amongst the test purchases were, as I find, items of the claimant's stock intended to be part of free promotions to the petrol station customers for which the claimants have had to pay.

The defendant was interviewed by Mr Trevellyan in the presence of Mr McDonald on 2nd August 1999. The interview was recorded without the knowledge of the defendant, but, as I have said, I am satisfied that he was not unlawfully detained. During the course of it Mr Trevellyan showed his exasperation with the defendant and exerted considerable pressure on him to admit what Mr Trevellyan believed he had done. He made some admissions, but denied having taken any money or having stolen anything. He made some admissions in writing which he says were made under duress. These admissions are that he has confirmed using the complainant's telephone without authority in connection with his shop for which he is liable to pay. Although he now denies taking promotion stock, as I have said, I find that he did do so and he has confirmed taking unsold newspapers from his shop -- previously he described it as 'his friend's shop' -- to the petrol station without permission. There is some evidence that items from the petrol station were being sold at his shop.

He has also admitted employing someone at the petrol station, who was in receipt of family credit, or income support, but that is irrelevant so far as this enquiry is concerned.

His written admissions concluded with what is said to be an agreement to repay in respect of stock taken. For three months he is to repay £500 on the first of each month and for the following nine months £750 per month, in all amounting to £8,250. The document concludes with the words:

'Lance, if you think I steal through you, I am very sorry and apologise to you for my....'

Then the defendant says the next word is 'your', but it does not seem to be, and then it ends up with:

'.... all back losses.'

These admissions were made at a time when the defendant was under considerable pressure. They amount to little more than an admission that if there were stock losses for which he could be held responsible he would make up any financial loss suffered by the claimants.

Save for the matters mentioned, there is no direct evidence of stock losses and it is difficult to be certain about the extent of financial loss to the claimants on the evidence adduced. The defendant was plainly neglecting his duties and his dismissal was plainly justified. It does not follow that in the absence of effect by him he is to be held responsible to make up the entire estimated loss of profit.

I am satisfied that he was operating a number of what might be described as 'fiddles' which did cause loss to the claimants. These were the telephone, the return of unsold newspapers through the petrol station shop, and the sale of Jet promotion items in his shop paid for by the claimants. Over and above this it is also more probable than not that some of the claimant's stock were siphoned off and sold as if his own stock.

Taking as an example the position as regards newspapers and magazines, it cannot simply be a coincidence that during the period in question there was a dramatic unexplained fall in the profit from their sale at the petrol station shop. It is more probable than not that the defendant was causing this loss by what he was doing as evidenced by his returning his own unsold newspapers, etcetera, through the petrol station. This saved him from loss because he did not have the benefit of a sale or return agreement for his shop and it deprived the claimants of profit, if not to the full extent of the unexplained difference of £4,843.18, then to some substantial sum approaching this amount.

No great weight could normally, or would normally, be attached to admissions made under duress. It is plain that the defendant was under great pressure from Mr Trevellyan and Mr McDonald on 2nd August 1996. However, what the defendant has said has frequently been inconsistent. He has often lied and told half truths when comparing what he said in one statement or another. For example, the pleadings.

There is sufficient evidence in the matters I have referred to to conclude, as I do, that in the interview he was offering to repay money, the loss to the claimants of which he was admitting was due to him and what he claims. He makes proposals for repayment. He is not agreeing the figures put forward by Mr Trevellyan, that is to say, the £25,000, or thereabouts. There comes a time in the interview when he says:

'If I make more money, then I will pay you more money, but you have to come down.'

Mr Trevellyan goes on to accept the defendant's offer of £500 for each of three months. Under some pressure the defendant then agrees to pay £750 for each of the next nine months, as I have said £8,250 in all."

22. The judge then turned to the issue of quantum. As to that he said this in his judgment:

"The claimants are clearly entitled to damages. How are these to be assessed? I am unable to accept the gross margin deficiency as sufficiently establishing the loss attributable to the defendant's activities. Based on the established losses caused in relation to newspapers, and the other items that I have found proved, it is probable that some considerable part of the gross margin deficiency was caused by the defendant. There is no actual proof of the extent of financial loss, but it is unlikely to have been less than £10,000 or two-fifths of the deficiency identified.

Giving the defendant the benefit of the doubt as to the extent of the loss caused by him, I have come to the conclusion that the fair way to assess the damages is to fix them in the sum that he was prepared to admit liability to repay, that is to say £8,250. I do that, not simply in reliance on his admissions, but on the assessment of the evidence relating to what he did and the probable minimal financial effect that that would at least have on the claimants. Accordingly there will be judgment for £8,250 and the counterclaim is dismissed."

23. The judge's reference to the appellant's admissions and to his admitting liability to repay £8,250 are references to admissions made by the appellant in the course of the interview to which I have already referred.
24. I turn next to the grounds of appeal. Ten grounds put forward. It is contended firstly that the judge failed to have regard to the principle that the more serious the allegation, the more cogent the evidence which is required to prove it, and that this led the judge to draw inferences which were unjustified and which were founded on hearsay, suspicion and innuendo, and led him to make a finding of liability on evidence which was insufficient on any view to discharge the burden of proof which lay upon the respondent.
25. Next, as to the finding that the appellant siphoned off stock (in addition to promotional items), it is contended that the judge was not entitled to make such a finding, given that Mr MacDonald had accepted in cross-examination that he had not noticed any stock missing from the petrol station shop, and that there was no direct evidence that any stock had either been taken by the appellant or had gone missing.
26. Thirdly, it is contended that the judge should not have placed any significant weight on the evidence in relation to test purchases, bearing in mind that such evidence was hearsay evidence since neither Mr Sivagurunathan nor Mrs Dunning had been called to give evidence.
27. Fourthly, it is contended that the judge ought not to have given any significant weight to the witness statements of Mr Sivagurunathan and Mr Jayabalan since neither was called to give evidence.
28. Fifthly, it is contended that the judge ought not to have received opinion evidence from Mr Trevellyan on the figures that he put before the Court; that being, it is contended, the function of an expert witness.
29. Sixthly, it is contended that the judge was wrong in concluding that the appellant had not given full discovery.
30. Seventhly, it is contended that the inference which the judge drew based on the appellant's inability to produce purchase invoices relating to certain items of stock purchased from his shop in the course of the so-called test purchases was improper and unsafe since (in summary) the appellant was placed at a substantial disadvantage by the production by Mr Trevellyan in the course of the trial of a bundle of purchase invoices which the defendant had earlier disclosed.
31. Grounds eight, nine and ten of the grounds of appeal relate to quantum. By ground eight it is contended that there was no basis for the judge's finding that the appellant had caused a loss to the respondent of "some substantial sum approaching" the claimed sum of £4,843.18. By ground nine it is contended that there was no basis for the judge's inference that the respondent's loss was "not likely to have been less than £10,000". By ground ten it is contended that the judge was wrong to base his assessment of quantum on the offer to repay and made by the appellant in the course of the interview on 2 August 1996.
32. In his oral submissions in support of the appeal, Mr Duddridge began by challenging the judge's adverse conclusion in relation to the appellant's evidence submitting that the judge's conclusion as to his credibility was based upon, or at least tainted by, his erroneous assessment of the evidence adduced by the respondent in support of its claim.
33. Next, Mr Duddridge referred us to the much quoted words of Lord Nicholls in the case of Re H [1996] AC 563 at 586-7. In the course of his speech Lord Nicholls approved the dictum of Ungoed-Thomas J In re Dellow's Will Trust [1964] 1 WLR 451, 455, where he said:

"The more serious the allegation the more cogent is the evidence required to overcome the unlikelihood of what is alleged and thus to prove it."

34. Mr Duddridge submits that the judge failed to have regard to this fundamental principle and that this led him into error. He further submits that the judge fell into the error of treating the unreliability of the appellant's evidence as a factor tending to prove the respondent's allegations, and that the judge failed to appreciate that notwithstanding any deficiencies in the evidence of the appellant, it remained for the respondent to make good those allegations by the evidence which it adduced. He submits that the evidence before the judge, whether looked at as separate items of evidence or whether looked at collectively, was not capable of establishing to the required standard of proof that the appellant had behaved dishonestly in the respects alleged.
35. Mr Duddridge submits that the judge ought not to have given any weight to the evidence relating to the so-called test purchases, given that the purchasers were not themselves called to give evidence, and as foreshadowed in the grounds of the appeal that the same consideration applies to the witness statements provided by Mr Sivagurunathan and Mr Jayabalan.
36. Mr Duddridge accepts that he took no point at the trial as to the admissibility of the hearsay statements and that, accordingly, he cannot complain that they were admitted in evidence. However he submits, as he submitted to the judge, that no evidential weight ought in the circumstances to be attached to them.
37. In his written skeleton argument, Mr Duddridge submits, (and this was a submission which he did not expand orally), that the judge was in error in relying on Mr Trevellyan's figures in the context of the issue of liability. He submits that whilst the figures themselves may constitute evidence of fact, it was nevertheless for an expert accountant rather than for Mr Trevellyan as a witness of fact to draw inferences from them. He further submits that the fact that the appellant did not himself call expert evidence, or indeed any evidence, to counter Mr Trevellyan's evidence based upon the figures, does not make Mr Trevellyan's evidence admissible.
38. Mr Duddridge also submitted orally that the evidence of the figures is equivocal in that, as Mr Trevellyan frankly accepted in the course of his cross-examination, there may be many explanations for a drop in gross margins.
39. Mr Duddridge points to the possibility that the responsibility may lie wholly or partly with other employees who worked at the petrol station who either left or were dismissed at about the same time as the appellant.
40. As to ground seven of the grounds of appeal, Mr Duddridge submits that the appellant was taken by surprise when, in the course of his cross-examination by Mr Trevellyan, Mr Trevellyan produced a lever-arch file which he asserted contained all the invoices disclosed by the appellant, and challenged the appellant to find invoices for particular products including products purchased by Mr Sivagurunathan and Mrs Dunning as test purchases. Mr Duddridge says that none of the invoices in the lever-arch file had been included in the trial bundle, that he (counsel) had not been provided with a copy of the file before it was produced in evidence and that the appellant was in effect ambushed. Mr Duddridge accepts, as he is bound to do, that the judge allowed the appellant and his advisers time to consider the file overnight, but he points out that by the following morning, when the trial resumed, he, Mr Duddridge, had been able to find purchase invoices for all but some four or so of the items in question (those remaining items representing items similar to free promotion items available at the petrol station shop).
41. As to the judge's finding that the appellant had "siphoned off" stock, Mr Duddridge relies on the fact (as noted earlier) in the course of cross-examination Mr MacDonald accepted that he had not noticed any stock going missing notwithstanding that he regularly visited the stockroom. Mr Duddridge further submits that the judge ought not to have placed any weight on the so-called admissions made by the appellant in the course of the interview on 2 August 1996, given the circumstances in which that interview took place and given the pressure which was plainly placed upon the appellant in the course of that interview.
42. Mr Duddridge also refers to unchallenged evidence by Mr Trevellyan that there were video films showing the appellant taking boxes from the premises at 11.00 o'clock pm or later. He submits that this evidence is, in itself, of no significant weight in the context of the allegations made by the respondent in that there could have been any number of explanations for it. He points out further that the video evidence was not put directly to the appellant when Mr Trevellyan cross-examined the appellant.
43. Mr Duddridge further submits that it is highly significant that there was, before the judge, no evidence of specific items of stock having gone missing in circumstances where, he submits, one would have expected such evidence to be available from the books and records of the respondent.
44. As to quantum, Mr Duddridge submits that given the absence of any direct evidence of stock losses, the judge was in effect indulging in a process of guesswork as to the extent of the loss caused by the appellant's dishonest behaviour, something which the judge was not entitled to do. Mr Duddridge further submits that, given the circumstances in which the written offer to repay £8,250 was made, the judge should not have placed any reliance upon it. In summary, Mr Duddridge submits that the entire case against his client is founded upon assertions, suspicion and innuendo, and that, when analysed, the evidence before the judge fell far short of that which would have been sufficient to discharge the burden of proving the serious allegations made by the respondent.
45. Mr Jones submits that the judge was fully aware of and applied the principle that the more serious the allegation the more cogent the evidence required to prove it on the balance of probabilities, and that it was not necessary for the judge to refer expressly to that principle in the course of his judgment. He further submits that it was a matter for the judge what weight he attached to the hearsay evidence, no point having been taken as to the admissibility of such evidence.
46. As to the file of invoices, Mr Jones points out that in August 1998 an order for specific discovery was made on the respondent's application, whereby the appellant was required to disclose, among other things, invoices relating to the trade carried on at his shop for the period from September 1995 to 2 August 1996, and that further requests for disclosure were subsequently made. The appellant, he submits, was at all material times very well aware of the nature of the case against him in relation to missing stock, and of the relevance of purchase invoices establishing that items identical to free promotion items offered by the petrol station shop, which were offered for sale in his Chessington shop, had not originated at the petrol station shop but had been purchased elsewhere.
47. He also points to the fact that although the appellant swore an affidavit in response to the specific discovery application in which he deposed that a number of invoices had been removed by the police and that he had been told by the police that they had subsequently been destroyed, it subsequently transpired that the invoices had not been destroyed but were merely being held by the police pending collection.
48. He further submits that the judge was entitled to attribute weight to the admissions which the appellant made in the course of the interview on 2 August 1996, and he has taken us in some detail through the transcript of that interview, pointing out a number of admissions made by the appellant which, he submits, cannot be assumed to have been made in response to pressure, given the detail contained in them which, as appears from the transcript, originated not with the questioner but with the appellant himself.
49. In summary, Mr Jones submits that the evidence before the judge was sufficient to justify the findings which the judge made, and on that basis he invites us to dismiss this appeal.
50. Turning first to Mr Duddridge's challenge to the judge's adverse finding as to the credibility of the appellant, in my judgment there is no substance whatever in that challenge. As Chadwick LJ said when granting leave to appeal on the papers:

"It is fair to say that the judge took an extremely poor view of the applicant's credibility as a witness. Insofar as the applicant's defence depended upon his own evidence, the judge rejected it. He was clearly entitled so to do so. The judge saw and heard the applicant at a trial. He was in a much better position that an appellate court would be to assess whether the applicant was telling the truth. There is to my mind no real prospect that this Court would think it right to differ from the judge in that respect."

51. I respectfully agree with those observations and I confirm that I can see no basis of challenge to the judge's adverse finding as to the appellant's credibility.
52. Turning then to the first of the grounds of the appeal relating to the standard of proof, I have no doubt at all that the judge had the relevant principle (which is well known) very well in mind. Indeed, I see from page 69 of the transcript at letter C that in the course of Mr Duddridge's closing submissions, the judge himself referred to this principle. He is quoted in the transcript as saying:

"The more serious the allegation the more cogent the evidence."

53. The question, therefore, is whether the evidence before the judge was sufficient to justify the findings which the judge made both as to liability and as to quantum.
54. I turn first to the judge's finding on liability. The evidence before the judge on that issue included the following; firstly, evidence of a dramatic fall in gross profit margins at the petrol station shop during the relevant period ending with the appellant's dismissal, accompanied by a subsequent recovery thereafter. In my judgment, this was evidence of the existence of a significant adverse factor at work in the trading pattern of the petrol station shop which had, during the relevant period, a serious effect upon its profitability. That evidence, in my judgment, was powerful evidence to which the judge was entitled to have regard in the context of the respondent's allegations.
55. Secondly, the judge had before him a summary of the returns in respect of newspapers which showed a very substantial fall in the profit margin to something around .7 percent during the relevant period. It is to be noted that the deterioration in profit margin in relation to newspapers mirrors the deterioration in the gross profit margin shown by the other figures produced by Mr Trevellyan, to which I have just referred. Further, in relation to newspapers, there was before the judge the evidence of Mr MacDonald in his witness statement at paragraph 5 where he said:

"During the six months ended March 1996 Mr Trevellyan and myself had completed profitability reviews of various categories of stock, in particular, newspapers, magazines and the non VAT category. Mr Trevellyan told me on several occasions that he did not understand the newspaper sales results and he suspected the returns were not being processed correctly.

Various spot checks were undertaken to confirm the accuracy of the returns. Overall the gross margin performance of the shop began to deteriorate and in the quarter ended June 1996 almost no gross profit was made. Instead of 17% - 18% the actual gross margin was less than 1%."

56. Thirdly, the judge had before him evidence of the video films, to which I referred earlier in this judgment. The films were not in fact shown to the Court, although I understand that the relevant equipment was there to enable that to be done had either party sought to do it. Mr Trevellyan refers to these video films in his second witness statement as follows in paragraph 8 where he said this:

"Unfortunately, I do not have the video tapes themselves as these belong with the police. However, I do have the Plaintiff's security videos, which show, amongst other things:

[I leave out (a) and (b) and go to (c)]

(c) The Defendant driving a white Rascal van.

(d) The Defendant moving various boxes from the Jet petrol station out of sight to either his van or his car."

57. Mr Trevellyan also referred to the video evidence in the course of his own oral evidence under cross-examination from Mr Duddridge. At page 31 of the transcript of the trial proceedings just below letter E, Mr Duddridge asked him this question:

"Q. In any event you say that you saw him [that is the appellant] taking in a white paper bag which you initially thought contained cigarettes.

A. Which I photographed, yes.

Q. You cannot be sure that it contained cigarettes?

A. Let us put it this way. The answer to your question is no. I cannot be 100% sure, but if you remember what a carton of cigarettes looks like. It is long and oblong and the corners stick out about a foot from the bottom of the bag. If they were invoices they would bend and be shapeless."

58. (I interpose to say that the explanation for this offered by the appellant was that the bag contained invoices.)

"I observed this particular incident which I photographed, but what is more the video evidence shows [the appellant] taking boxes of something out of the premises at 11 or 12 o'clock at night when there were no tanker deliveries. Again, you know, when we get to cross-examination no doubt I will have an opportunity to put that evidence to [the appellant] and ask him what he was doing.

Q. But you did not see what was in the boxes?

A. The truth is, no. The evidence does show things being taken off the shelves and placed in the boxes, but from the angle of the camera, as the boxes leave the front door you cannot see inside the boxes."

59. Although in that passage Mr Trevellyan indicated that he intended to put the existence and the significance of the video evidence to the appellant in cross-examination, in the event he did not do so. It was never put directly to the appellant, although no challenge was made by the appellant either in evidence or through Mr Duddridge in his closing speech as to the existence of this evidence. Had such a challenge been made, no doubt the appellant could have been recalled in order to give his explanation. But that, in the event, did not happen. In the result, there was evidence of goods being moved in circumstances which were, to put it at its lowest, sufficient to give rise to some suspicion, without any explanation of his conduct by the appellant.
60. Fourthly, the judge had before him hearsay evidence relating to the test purchases, coupled, as I indicated earlier, by direct evidence from Mr Trevellyan himself as to what he had seen on his own visit to the Chessington shop. In this connection, I quoted earlier paragraph 6 of his second witness statement. It is, in my judgment, of significance that the items in question were, according to Mr Trevellyan's evidence, priced up with identical labels and packed in identical carrier bags. Also of significance is the fact that, despite the opportunity to look through the file of invoices overnight, neither Mr Duddridge nor the appellant nor the appellant's solicitors were in a position to produce purchase invoices covering four of the items (the subject of the test purchases), being items which were similar, if not identical, to items supplied to the petrol station for free promotion. Nor, it is right to say, has any such purchase invoice in respect of those items been produced since the hearing.
61. In addition the judge was, in my judgment, plainly entitled to conclude, having observed the appellant in the witness box, that he was giving dishonest evidence. No doubt the judge took account of the possibility that there may be a number of reasons why a witness may give untruthful evidence, but that is not the end of the matter so far as this case is concerned. The appellant gave specific evidence in relation to the return of unsold newspapers which was plainly incredible. Moreover, it was open, in my judgment, to the judge to infer from the appellant's oral evidence that he had sought to conceal from the respondent the fact that he was trading from the Chessington shop during his period of employment by the respondent. Also of highly doubtful credibility was the appellant's explanation (to which I referred earlier) that the contents of the white bag which he was carrying were invoices rather than items of stock.
62. On that evidence, and bearing in mind that the judge was, as I have said, fully entitled to conclude that the appellant was giving dishonest evidence in relation to matters specifically in issue, it was, in my judgment, fully open to the judge to reach the finding on liability which he made without attaching any weight whatsoever either to the admissions made in the course of the interview on 2 August 1996 or without reference to the evidence of the unidentified informant, to which I referred earlier. There was also before the judge hearsay evidence from a Mr David Self, who was employed as salesman for a supplier of snack foods which supplied stock both to the petrol station shop and to the Chessington shop. That evidence confirmed to some degree the claims which the respondent made.
63. However, without attaching any weight whatever to those three categories of evidence, there was, in the evidence to which I have referred, amply sufficient evidence to justify the judge in reaching the finding as to liability which he made. Nor, in my judgment, is there any substance in Mr Duddridge's written submission that the figures put forward by Mr Trevellyan represent, in some degree, opinion evidence such as could only properly be received from an expert witness. As I have said earlier, Mr Trevellyan was himself an accountant and was fully competent to explain to the judge how these figures had been arrived at and what they meant. Thereafter it was for the judge to draw any relevant inferences from those figures and from that evidence in the context of the claim which the respondent was making.
64. As to the witness statements of Mr Sivagurunathan and Mr Jayabalan, the judge did not refer specifically to those witness statements in the course of his judgment, but in my judgment they do not in any event take the matter any further.
65. So far as the admissions at the interview on 2 August 1996, it is not entirely clear from the judgment what weight the judge was prepared to give those admissions. As I have made clear, I have left them out of account in this judgment for the purpose of testing whether there was sufficient evidence before the judge to justify the finding of liability which he made, and I conclude on that basis that there was sufficient evidence to justify that finding.
66. Turning to quantum, the judge was, on any view, faced with a difficult task in relation to the assessment of damages under these heads of claim, given the absence of direct evidence as to the amount of stock taken by the appellant and as to the number of newspapers returned by the appellant via the petrol station shop. Moreover, no evidence whatever had been adduced by the appellant himself as to the trading operation at his own shop. So the judge had to do the best he could on such evidence as was before him.
67. The respondent was contending for a loss of £25,565 including (and I proceed on that basis) a loss of some £4,843 in respect of returned newspapers based upon Mr Trevellyan's figures. The appellant had denied causing any loss but the judge had found otherwise. In the event, the judge took a starting figure of £10,000 to include some £4,000 in respect of returned newspapers, but reduced it to the figure of £8,250, which the appellant had offered to pay at the conclusion of the interview on 2 August 1996. In my judgment, it cannot be said that in so doing the judge erred in principle or adopted a wrong approach. Where misappropriations of stock have occurred over an extended period, as the judge found to be the case here, it will in general be extremely difficult, if not impossible, for the victim to come forward with precise evidence as to the extent of its loss. But that does not mean that the Court has to throw up its hands and decline to order compensation.
68. In my judgment, the judge was entitled on the evidence before him to assess quantum as he did.
69. For those reasons I would dismiss this appeal.
70. LORD JUSTICE MANCE: I agree with the reasoning and conclusions of Lord Justice Jonathan Parker. I add only a few words of my own since the way in which this trial proceeded has given me some cause for concern.
71. The claimant was represented by Mr Trevellyan in person. The judge gave permission for his application to represent the claimant, and the defendants through counsel did not resist it. In a case of this seriousness, despite the familiarity with the facts that Mr Trevellyan undoubtedly possessed, I think this was unfortunate. Mr Trevellyan was necessarily unable to handle and to cover the material and the issues as an experienced lawyer would have been able to.
72. The trial proceeded in these circumstances with informality, not to say speed, although the defence was, in the event, given overnight to consider its position regarding the invoice documentation. The defence also went along with the informality. Counsel for the defendants allowed the use of every sort of hearsay material. The notice of appeal originally suggested that this should not have been permitted, but it was agreed to by the defence, and as my Lord has mentioned that ground of appeal has not therefore been pursued.
73. Amongst other things, counsel did not insist upon points being put directly to the defendant or material being shown directly to the Court, although it seems to me that it was obvious that such points and material would be, or were being, relied upon; the most clear instance of this relates the use of the video and the evidence given by Mr Trevellyan about what it showed and about what the police video evidence showed. As my Lord has pointed out, Mr Trevellyan evidently had it in mind at that stage to cross-examine the defendant about what the video material showed. One assumes that he probably overlooked this. In the event the defendant was cross-examined on the general subject of stock transfers and as to whether he had taken stock, which he denied.
74. On the other hand, it can be said that the accuracy of Mr Trevellyan's account of what the video showed was not challenged in any way in cross-examination by the defence, and if there was some positive explanation of an innocent nature which the defendant had to put forward in relation to the course of events so recounted by Mr Trevellyan, then it was on the face of it for the defendant to give evidence about that. But he did not give any evidence in chief about it at all. Counsel at no stage objected to the fact that the video material was not put to the defendant by Mr Trevellyan. That is despite the fact that the evidence given by Mr Trevellyan was again referred to in final speeches and was clearly being relied on.
75. Similarly, counsel for the defendant did not insist that the authors of hearsay material should be called. There may well have been in all these respects, indeed it seems to me that there was, a clear tactical element, as counsel now effectively admits. He thought that the existing evidence could be argued to be weak, and that, if it went in, its weight would be limited. He may well have preferred not to give an opportunity to the claimant to improve it. That tactic had of course its risks; if and in so far as the defendant had a positive explanation for what was said to have been captured on video or what was said in the hearsay material to have occurred, no such positive explanation came before the Court. Likewise, since the hearsay witnesses were not required to be called, there was no opportunity to qualify, or have them withdraw, their evidence in cross-examination, or to elicit from them the possibility of some innocent explanation of what they had observed.
76. In the circumstances the appellant's main point remains before us that the evidence, weak as it is submitted to be even when taken overall, cannot satisfy the applicable test in relation to a charge of this seriousness. That, as my Lord has mentioned, it is common ground was stated accurately by Lord Nicholls In re H [1996] AP 563 at 586:

"...the more serious the allegation the less likely it is that the event occurred and, hence, the stronger should be the evidence before the court concludes that the allegation is established on the balance of probability. Fraud is usually less likely than negligence."

77. Then there is a citation from Ungoed-Thomas J In re Dellow's Will Trusts [1964] 1 WLR 451 at 455:

"The more serious the allegation the more cogent is the evidence required to overcome the unlikelihood of what is alleged and thus to prove it."

78. To which Lord Nicholls adds further:

"This approach also provides a means by which the balance of probability standard can accommodate one's instinctive feeling that even in civil proceedings a court should be more sure before finding serious allegations proved than when deciding less serious or trivial matters."

79. In the light of that guidance and test I have considered closely whether the judge's conclusions can be supported. Like my Lord, and in view of the same factors that he mentioned, I come to the conclusion that they can. Undoubtedly the fact that the defendant was shown to be dishonest at various stages is nowhere near sufficient; that he was dishonest in various respects is clear on the material before the Court. There was a change of story regarding his shop, from one where his original account was that he had no connection until ultimately, after referring to its being a friend's shop, he admitted a half share in circumstances where the friend, although named, has never been identified in any relevant documentation.
80. There was his telephone misuse, despite a memorandum of 6th May 1996, it would appear. There was a failure in his affidavit of December 1996 to refer to the fact -- which one would have thought on the face of it was important -- that the shop sold cigarettes as well as confectionary and newspapers, and an unconvincing attempt at trial to suggest that confectionary here included cigarettes. There was the wholly incredible account of the position relating to newspapers put forward in the defence and in evidence.
81. I remind myself again that the defendant may have lied for many reasons, and that he may do so for reasons unconnected with any guilt or any of the breaches of duty currently alleged. In this case he may of course have been embarrassed by the discovery of his shop trading. He may have been embarrassed by the excessive extent of his telephone usage, and if one concludes that he was guilty of abuse and the theft of monies in relation to the newspapers, that certainly does not by itself mean that he was guilty of theft of stock. But there is, as my Lord has pointed out, a great deal of objective evidence which all points in one direction, and when taken overall it seems to me that the conclusion which the judge reached was right.
82. There was, in relation to the newspapers, the wholly incredible story from which a positive inference of misappropriation of monies could clearly be drawn. The profit margin on newspapers dropped to the point where it was virtually non-existent. That means either newspapers were disappearing or (and this would be the inference in the light of other material and indeed his own evidence) he was bringing in newspapers which he could not return through his own shop; he was bringing them into the petrol station and the proceeds of the sale of actual newspapers were disappearing (being removed by him); the sale of those actual newspapers was being covered up by their replacement by the newspapers brought into the petrol station from his shop, which were then returned to the petrol station's newspaper wholesalers. That, of course, he denied in interview, but it seems to me the judge was quite entitled in the light of all material to reach the conclusion that that was what was occurring.
83. There is the video material of the moving of a box, as well as the further evidence given relating to the police video material to which I attach less weight. There were no stock transfers during this period. No plausible reason was suggested why this defendant should be removing a box in the middle of the night. There was the direct observation by Mr Trevellyan of the carrier bag or bags (I think it was on two occasions) containing an oblong cigarette-like box and the implausible explanation (that this was invoices being, for some reason, removed) which was given to Industrial Tribunal.
84. There was the test purchases of identical goods with identical labels supplied in identical bags made by two witnesses. They were not called, but those tests purchases were not, it seems, an issue at the trial. There was the observation by Mr Trevellyan himself of items for sale at the shop. There was the photograph he took which enabled him to show that there were cigarettes on sale at the shop as well as confectionery and papers, as had been suggested in the affidavit of December 1996. There was the further fact that, in relation to at least four items of material, (including the complimentary items which should have been sold through the petrol station and which, as far as Mr Trevellyan and others knew, were not available anywhere else). Here were no invoices supplied by the defendant in relation to the shop. That is despite the fact that the question of invoices had been in the arena for a considerable time. There was also in the background the unsatisfactory, incorrect and wholly unexplained suggestion in the course of discovery that the police had said that documents had been destroyed. Clearly they had not been, because they were shortly afterwards supplied by the police when asked. There is the minor factor which my Lord has mentioned, that is the D & D salesman's letter, which reports someone in the shop saying that certain items, crisps, would be "obtained from the other shop", which the D & D salesman (who supplied both premises) understood to be the claimant's petrol station. Most importantly of all though, there is the material relating to the gross turnover and profit margins, not merely relating to newspapers but relating to the petrol station as a whole, which puts the other material into context and, it seems to me, leads to the inevitable conclusion that the defendant, as manager of the petrol station, was engaged in, as the judge put it, a large number of illegitimate activities.
85. The fall off in gross turnover and profit margin coincides with the period of his management of the petrol station, and the concurrent running from September 1995 of his own shop, and it ends when he was dismissed on 2nd August 1996. It seems to me that the evidence overall is only consistent with and did establish, in the case of newspapers, the misappropriation which I have already identified, and, in the case of the general shortfall in turnover and profit margin, the disappearance of stock by abstraction by the defendant.
86. In those circumstances, like my Lord, I consider that this appeal fails as regards liability, and that it is unnecessary to place any weight in reaching that conclusion upon the interview. I fully share counsel for the defendant's concern about the way in which the admissions were obtained in the interview. It was, it seems to me, most unfortunate that Mr Trevellyan, evidently a forceful character, was allowed by his legal advisors to conduct this interview by himself, or at any rate in the way he did. He referred throughout repeatedly to going to the police if the defendant did not come clean on what Mr Trevellyan thought was the extent and nature of his activities. It seems to me that was a wholly inappropriate method of interview. Had it been necessary to place weight on the interview, I would have viewed this appeal in a different light but, in my judgment, it is not.
87. So far as quantum is concerned, there is nothing that I wish to add to what my Lord has stated. It seems to me that the judge's figure, rough and ready as it was, was one at which he was entitled to arrive and I have no concern that it is too high in the light of the factors which he identified. In those circumstances I agree that this appeal fails.
(Appeal dismissed; assessment of costs against defendant; assessment to be adjourned; separate assessment under section 11 ordering that payment be out of central funds) (Order does not form part of approved Judgment)