England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CHANCERY DIVISION
(His Honour Judge Rich QC)

		Royal Courts of Justice Strand London WC2 Friday, 8th June 2001

Friday, 8th June 2001

1. LORD JUSTICE PETER GIBSON: I will ask Clarke LJ to give the first judgment.
2. LORD JUSTICE CLARKE: On 15th March 2000 His Honour Judge Rich QC, sitting as a judge of the High Court in the Chancery Division, gave judgment for the defendant after a trial of an action and dismissed the claimants' claim with costs. No application was made at that time for permission to appeal because it was recognised by the claimants that the judge had made his decision on the facts after hearing evidence from the principal protagonists. The claimants now seek permission to appeal out of time on the ground that new evidence has come to light. They also seek permission to rely upon that new evidence.
3. On 9th February 2001 Chadwick LJ, having considered the applications on the papers, held that the question whether or not permission to appeal should be granted is inseparable from the question whether or not the applicant should be permitted to adduce and rely upon the new evidence. He observed that in the circumstances that the order sought on appeal if permission to appeal were granted is for a new trial, the decision whether or not to allow the applicants to rely on the further evidence is likely to be determinative not only of the application for permission to appeal but also of the appeal itself. He accordingly directed that the application for permission to appeal be adjourned for an oral hearing on notice together with the application to adduce the further evidence, and that the appeal should follow if permission was granted.
4. It has realistically been accepted by Mr Holmes on behalf of the respondents that the determination of the application to adduce the further evidence is likely to be determinative both of the application for permission to appeal and of the appeal itself. Thus, it is in effect common ground that, if the new evidence is admitted, the proper course is to extend the time for the application for permission to appeal, to grant permission to appeal, to allow the appeal and to direct a new trial, but that, if the new evidence is not admitted, the proper course is to refuse to extend the time and thus to refuse permission to appeal. I turn therefore to the new evidence in the context of the underlying dispute.
5. The first and second claimants are the adult children of the respondents, David Hugh Gillingham (whom I shall call "Hugh"), and the third claimant, Rosalynde, his estranged wife (whom I shall call "Rosalynde"). The claimants' action relates to the ownership of certain shares in two private family companies, Daux Agricultural Limited ("Daux") and Daux Designs Limited ("Designs"), presently registered in the name of Hugh. The claimants' case is that the shares now registered in Hugh's name, four shares in Daux and four in Designs, are held by him on trust to transfer them to a settlement established for his children because they were transferred to him by Rosalynde subject to an express agreement that he would immediately transfer them to the trustees of the settlement.
6. In 1962 Hugh married Rosalynde and was given land known as "Rosier Farm" and "Daux farm" near Billingshurst in West Sussex by his father. In the same year Hugh and Rosalynde established the first of a number of family companies, namely Elgin Property Management Company Ltd ("Elgin"). In 1965 Hugh created a discretionary settlement for the benefit of his children ("the settlement"). The assets settled included two shares in Elgin. The current trustees are Mrs Anne Gillingham (Hugh's sister), Hugh and two professional advisers. Daux and Designs were incorporated in 1965 and 1968 respectively. The initial shareholders and directors in each case were Hugh and Rosalynde, holding one share each. Hugh transferred his shares in Daux and Designs to the settlement in 1976 and 1977 respectively. Rosalynde retained her one share in Daux and Designs respectively until they were transferred to Hugh in circumstances which were the subject of the issues in this action and on this application. Subsequently, there was a further issue of shares in Daux and Designs, so that at present the trustees of the settlement hold four shares in each company, as does Hugh.
7. Hugh transferred Daux Farm to Daux and Rosier Farm to Elgin in 1977 and 1982 respectively. From about 1982 Hugh spent most of his time in Spain, where he had various business interests, leaving his son David and brother John to carry out the day to day running of the companies. From about 1991 the family were increasingly aware that land owned by Daux and Elgin had potential development value and were in discussions with the local planning authority and potential developers. In 1999 the land owned by Daux and by a subsidiary of Elgin was sold for £1.25 million, with provision for further substantial payment in the event of the land being developed.
8. From about 1996 onwards the relationship between Hugh and the rest of his family became strained and subsequently broke down in the spring of 1998. Rosalynde's evidence was that she learned that the shares in Daux and Designs had not been transferred to the settlement but were registered in Hugh's name at a meeting with members of the family in May 1998.
9. It was accepted at trial on behalf of Hugh that, if he had accepted the transfer of Rosalynde's shares on the terms of the agreement she contended for, he would be bound to transfer them to the children's trust fund. The judge identified the sole issue for decision as being whether he accepted, on the balance of probabilities, Rosalynde's evidence that her shares were transferred and accepted by Hugh on that basis. Rosalynde's case was that in 1994 she decided that she would transfer her shares to the settlement for the benefit of the children. She discussed her intention with Hugh, who agreed to arrange for the shares to be transferred to the settlement. Instead and contrary to that agreement, Hugh arranged for the shares to be transferred to him by share transfers, which Rosalynde accepted bore her signature, and he has been registered as shareholder. Rosalynde contends that she did not intend that Hugh should ever have any legal or beneficial interest in the shares and that Hugh knew and accepted that. Hugh's case is that Rosalynde agreed to sell the shares, which were virtually worthless, to him for £2. He told her that eventually he would like to give the shares to David and Sara but did not go any further.
10. The judge's findings may be summarised in this way. There was very little documentary evidence before him. He found that Rosalynde had signed the share transfers and had done so after the details, in particular Hugh's name as transferee, had been filled in. He also found, on the balance of probabilities, that Rosalynde had received the £2 nominal consideration from Hugh, although he accepted that payment would not detract from Rosalynde's case if it was made and received on the basis of the agreement which he contended for. The judge did not accept Rosalynde's evidence that she had transferred the shares subject to the agreement that she contended for. The judge took the view that, if Rosalynde had transferred her shares on the basis she alleged, it was inconceivable that she would not have told David at the time that she had done so. The fact she did not tell David at the time, which was his evidence, meant that her account could not be accepted. The judge recognised that his finding meant that Rosalynde had entered into a transaction which did not benefit her. He found the explanation for her conduct in Hugh's evidence, which he accepted, that Hugh, having taken advice, recommended that Rosalynde should transfer the shares to him rather than into the settlement; and she accepted that recommendation on the expectation that what benefited Hugh might in due course benefit her children.
11. The new evidence on which the claimants wish to rely is a letter dated 27th January 1994 from Hugh to Rosalynde, signed by both of them and, it is said, retained by Rosalynde as a record of the agreement between them. The letter is in these terms:

"Dear Rosalynde,

re: Share Transfers

Daux Agricultural Limited and Daux Designs Ltd.

I understand from David that you would be prepared to sell the two shares in the above companies to me at their Nominal Value of £1.00, on my undertaking to transfer them for the same Nominal Value to the Children's Trust Fund.

I therefore undertake to transfer to the D. H. Gillingham Children's Trust the £1.00 share in Daux Agricultural Ltd and Daux Designs Ltd, for the sum of £1.00 each on receipt of the two shares from you.

If you would signify your agreement by signing that you concur with the above arrangement and return one copy to me, keeping the other for your record, I shall hand the matter over to the Company Auditors to have it put into effect.

With Kind Regards and Best Wishes,

Hugh."

12. Underneath is written in typescript:

"CONCUR. R. S. GILLINGHAM

Signed".

13. Then there is the signature of Rosalynde and the date "31/1/94".
14. Thus, on its face the letter is of obvious importance to the resolution of the issue between the parties. It was written by Hugh to Rosalynde and the copy which we have contains the agreement of Rosalynde. Indeed, we understand that the original is available and in court. Rosalynde signed it at the bottom and dated it, as I have indicated, 31st January 1994. To my mind, on its face, it provides direct and significant support for Rosalynde's case. The question for decision is whether we should admit the letter.
15. The power to admit new evidence is reflected in CPR 52.11(2)(b), which provides:

"(2) Unless it orders otherwise, the appeal court will not receive -

...

(b) evidence which was not before the lower court."

16. The court will exercise its discretion to admit the evidence in accordance with the overriding objective contained in CPR 1.1, which provides:

"(1) These Rules are a new procedural code with the overriding objective of enabling the court to deal with cases justly."

17. Paragraph 2 of CPR 1.1 sets out a number of particular matters to be taken into account when the court is applying the overriding objective.
18. It follows, to my mind, that under the CPR the court will consider all the circumstances of the case in deciding whether to admit new evidence. It is no longer necessary for the applicant to show "special grounds", as was necessary under RSC Order 59 rule 10(2). This court has already so held in Banks v Cox, unreported, 17th July 2000. In the course of his judgment in that case, Morritt LJ adverted to the principles
19. which were applicable under RSC Order 59 rule 10(2), as set out in the familiar case of Ladd v Marshall [1954] 1 WLR 1489, namely, that further evidence would be admitted on the hearing of an appeal only

(1) if it was shown that the evidence could not have been obtained with reasonable diligence for use at the trial;

(2) if the further evidence was such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive; and

(3) if the evidence was such as was presumed to be believed.

20. Morritt LJ expressed his conclusions in this way:

"41. In my view the principles reflected in the rules of Ladd v Marshall remain relevant to any application for permission to rely on further evidence, not as rules but as matters which must necessarily be considered in an exercise of the discretion whether or not to permit an appellant to rely on evidence not before the Court below. As May LJ, with whom Forbes J and I agreed, said in Hickey v Marks (Court of Appeal 6th July 2000) unreported:

`The principle for the future will be that since the Civil Procedure Rules are a new procedural code, the former body of authority will not apply, although of course the intrinsic persuasiveness of all relevant considerations, including, if they arise, those which were considered persuasive under the former procedure, will be capable of contributing to a just result.'

42. The contrary was not argued. For my part I would accept as apt the description of counsel for Mr and Mrs Cox that the principles remain the same but the Court is freed from the straitjacket of the so-called rules."

21. May LJ and Forbes J agreed. The contrary was not argued in this case. It is therefore appropriate to apply that approach to these applications. I turn, therefore, to the circumstances of this case.
22. It is convenient to consider the Ladd v Marshall criteria in reverse order. As to the third, it is common ground that the new evidence is credible because it is accepted that the letter is genuine and bears the true signatures of both Hugh and Rosalynde.
23. As to the second, the letter is, in my judgment, important evidence which would have had an important influence on the result. Mr Holmes made a number of submissions to the contrary in his skeleton argument. They were briefly as follows. He submitted that the judge found against the claimants because he preferred Hugh's evidence to that of Rosalynde. Mr Holmes stressed in his skeleton argument that the judge did so having found that

(a) Rosalynde did not, contrary to her sworn evidence, sign the share transfer form in blank;

(b) Rosalynde did, contrary to her sworn evidence, receive a cheque for £2 from the defendant, being the consideration for purchase of the shares;

(c) she would have told her son David that she had agreed with Hugh to have the shares transferred into the settlement if she had really done so, since her avowed motive was to give him by that means a stronger position in the management of the companies, but she did not; and

(d) the financial situation of the companies was so poor that it was credible that Rosalynde would have agreed to sell her shares in them for £2.

24. I accept that the judge did reach those conclusions. I also accept that he reached them, at least in part, not on the basis of Hugh's evidence but on the documents before him, the evidence of David and what he regarded as the inherent improbability of Rosalynde's evidence. Mr Holmes submitted that the production of the letter would not have affected those conclusions. I am unable to accept those submissions. On its face the letter is compelling evidence which might well have led the judge to form an entirely different view as to Rosalynde's evidence and as to the probabilities.
25. Mr Holmes further made these submissions. The judge made it clear, he submitted, that both parties were agreed that the initial proposal was that the shares should be transferred to the settlement. In Hugh's evidence at the trial he fully accepted that the initial proposal was that the shares would be transferred into the settlement, but his case was that, after taking advice and discussing his own position with her, he and Rosalynde had later simply agreed that he would buy the shares from her for £2. The transaction took place at the end of March 1994, whereas the letter was dated some two months earlier. The letter, he submitted, was plainly superseded by the subsequent agreement, and the judge would have so found.
26. It will no doubt be open to counsel on behalf of Hugh to make those submissions at any retrial, but to my mind they do not nullify the effect, or apparent effect, of the letter. There is, so far as I can see, nothing in Hugh's evidence which reflects an existing agreement as opposed to a proposal by Rosalynde that the shares would be transferred for £2 to the children's trust fund. It was not Hugh's evidence that there was an agreement which was subsequently varied. Indeed, as my Lord has pointed out in the course of the argument, such a case would be essentially inconsistent with Hugh's case as pleaded in paragraph 5 of the defence.
27. While I am not in any way attempting to predict the result of a retrial or indeed what the result of the trial would have been if the letter had been available, I am firmly of the opinion that it would probably have had an important influence on the result, even if it might not have been decisive. In these circumstances, I would hold that the second of the criteria in Ladd v Marshall is satisfied.
28. As to the first, Mr Holmes submits that the evidence could have been obtained with reasonable diligence for use at the trial by Rosalynde. There is undoubtedly some force in that submission. Rosalynde's explanation for not producing it is that she had no recollection of receiving the letter or keeping a copy of it, and that she did not think of looking in the old tin deed box belonging to her father, where it was subsequently found. She certainly did not deliberately suppress the letter, because it obviously assists her case. I am by no means satisfied that she cannot satisfy the first paragraph of the criteria, but I am willing to assume that, if she had exercised reasonable diligence, she would have searched or procured the search of the tin box. Nevertheless, even on that assumption I would hold that we should admit the letter.
29. The letter was not solely Rosalynde's letter. As indicated earlier, it was written by Hugh and signed by Rosalynde. It seems to me to be inconceivable that Hugh did not have a copy of it, at any rate at one time. Yet, he neither disclosed it nor referred to it in evidence. So far as I am aware, he has not so far explained why that is so. In paragraph nine of his skeleton argument, Mr Holmes makes this submission:

"The Claimants suggest that it is significant that [Hugh] did not disclose his copy of the letter ...; but the significant fact is that neither party disclosed it, and it is submitted that they did not do so for this simple reason: the letter was superseded by the subsequent agreement."

30. That submission is based on no more than speculation. There is no support for the suggestion that Rosalynde did not disclose the letter because it was superseded by a subsequent agreement. As to Hugh's position, there is no evidence from him that the agreement evidenced by the letter was superseded by a subsequent agreement. He may have deliberately decided not to disclose the document and/or not to refer to it, or he may have forgotten about it. Assuming that he simply forgot about it and that his copy of the letter no longer exists, I am nevertheless firmly of the view that justice requires that we should admit the letter. The CPR 31.6 provides:

"Standard disclosure requires a party to disclose only -

(a) the documents on which he relies; and

(b) the documents which -

(i) adversely affect his own case;

(ii)adversely affect another party's case; or

(iii)support another party's case..."

31. It was properly conceded by Mr Holmes in the course of the argument that it was Hugh's duty to disclose this document in accordance with CPR 31.6, just as it was Rosalynde's duty to disclose it.
32. In all the circumstances, I have reached the clear conclusion that justice requires that we should admit the letter. I recognise that this will have the effect of there being a new trial; I also recognise the general principle that finality in litigation is of great importance; but each case must be decided on its own facts.
33. For the reasons that I have given, I would admit the letter, extend the applicant's time for making permission to appeal, grant the application for permission to appeal, allow the appeal and order a new trial.
34. I would only add this by way of postscript. It is by no means necessary that there should be a new trial. I observe that it was always Hugh's intention to transfer the shares into the trust. If he should decide to do so, no doubt a new trial would not be necessary, but, for the reasons I have given, I would allow this appeal and order a new trial.
35. LORD JUSTICE PETER GIBSON: The present case provides a good illustration of the important effect which the overriding objective can have on decisions taken by the court when exercising a power under the Civil Procedure Rules.
36. Prior to 26th April 1999, I doubt if under the familiar Ladd v Marshall principles the new evidence in the form of the letter of 27th January 1994 would have been admitted. Whilst entirely understandable, the fact that Rosalynde forgot the existence of the letter might not have been a sufficient reason for saying that the new evidence could not have been obtained with reasonable diligence for use at the trial. But, in my judgment, the matter in dispute could not be said to have been resolved fairly or satisfactorily in the absence of the letter. Hugh's failure to disclose that letter is not explained. It was a document which he himself had prepared and it plainly did not support his pleaded case but supported Rosalynde's case.
37. In these unusual circumstances it seems to me that, considering how to exercise our discretion in the light of the overriding objective and with a view to giving effect to it, we ought to say that dealing with the case justly requires that the document should be admitted. And that leads to the consequences which my Lord has suggested.
38. I therefore concur in the orders which he proposes.
Order: Appeal allowed. We give the applicants the costs of the application and of the appeal. We are setting aside the order below and ordering a retrial. We will reserve to the judge hearing the retrial the costs below. We do so because of the absence of an explanation as to why the letter of 27th January 1994 was not disclosed by Hugh. (Order does not form part of approved judgment)