England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEEN'S BENCH DIVISION
(HIS HONOUR JUDGE MORRELL,
Sitting as a Judge of the Queen's Bench Division)

		Royal Courts of Justice Strand London WC2 Tuesday, 5th February 2002

Tuesday, 5th February 2002

1. LORD JONATHAN PARKER: This is a renewed application by Mr Christopher Reynard, who appears by Mr John Haines of counsel, for permission to appeal against an order made by His Honour Judge Morrell sitting as a judge of the Queen's Bench Division, in an action brought against Mr Reynard by Messrs Alliotts, a firm of accountants. By his order the judge entered judgment for Alliotts in the sum of £66,109.14 plus interest, and he dismissed Mr Reynard's counterclaim. He also ordered Mr Reynard to pay Alliotts' costs of both the claim and counterclaim, and dismissed an application by Reynard for permission to appeal. Mr Reynard applied for such permission to this court and I refused permission to appeal on paper on 23rd November 2001.
2. At the outset I should say that I am extremely grateful to Mr Haines, who has been very recently instructed, for his most helpful submissions.
3. The factual background to the action is, in broad summary, as follows. In about 1962 Mr Reynard commenced business selling skiing holidays in Scotland. In about 1965 he transferred that business to a company called Howglen Limited. The business was successful, and in about 1966 Mr Reynard expanded it by acquiring a property in the south of England where he provided activity holidays.
4. In about 1969 he engaged the service of a chartered accountant, a Mr Damyon (of Croydon & Co, which later merged with Alliotts), to attend to certain financial matters which had arisen. Thenceforth, Mr Damyon was the person responsible for provision of accounting and auditing services to Howglen. Mr Damyon remained a partner in the firm - that is to say Croydon & Co, until it merged with Alliotts in 1996, when he retired. Thus Croydon & Co, and Alliotts, were Howglen's auditors until Howglen went into receivership in January 1996.
5. In 1987 Mr Reynard sold the skiing side of Howglen's business, under the name Ski Europe, in order to concentrate on the provision of activity holidays. The skiing business was sold to a Mr Peter Kite; but Mr Reynard retained a small interest in the business.
6. Thereafter, the business of Howglen prospered until 1993, when there occurred a tragic accident in which four young people died of hypothermia in a canoe trip in Lyme Bay. The trip had been organised by Mr Kite. This tragedy led to investigations into Howglen and consequent negative press coverage as to Howglen's own activities and procedures, which in turn led to a dramatic fall in Howglen's profits.
7. By the time Alliotts were due to start work on the audit of Howglen's accounts for the year ending 31 December 1994, Alliotts were owed £66,109.14 in unpaid fees. Accordingly Mr Damyon wrote to Mr Reynard asking him personally to guarantee payment of those fees. Mr Reynard duly did so, signing the appropriate documents.
8. The judge found that Mr Reynard well knew that had he not given these guarantees there would be no accounts of Howglen, Howglen's bank would have withdrawn its support and Howglen would have collapsed. He further found that Mr Reynard was not invited by Mr Damyon to seek separate advice but that had Mr Damyon invited him to do so, and had he in fact sought independent advice, he would nevertheless have signed the guarantees in any event. The judge also found no evidence to suggest that Mr Damyon knew at the time he invited Mr Reynard to give these guarantees that Howglen was in financial difficulties, and he concluded that an allegation of fraud made by Mr Reynard against Mr Damyon in this connection should never have been made. In the light of Mr Haines' submissions (to which I shall refer later in this judgment) I must read a passage from the judgment (at page 21) dealing with this aspect of the case:

"On 30th January 1995, when he received the guarantees for his signature, Mr Reynard must have known that Howglen was in serious trouble. There is no evidence, however, that Mr Damyon knew that then. In his oral evidence, he conceded that it had crossed his mind as a possibility, which was one reason, no doubt, why his partners were insisting on the personal guarantees. He also pointed out that Mr Reynard had been dilatory in settling Alliotts' accounts in past. The fact remains that, at that juncture, Mr Reynard was in the best position to know that Howglen was critically short of working capital. If Mr Damyon had advised him to seek independent professional advice, it is not fanciful to conclude that if he had done so, the advice he would have received would have amounted to this: that it might well be that Howglen should stop trading but that if Mr Reynard believed that the company should and could continue, either the fees should be paid, with or without the help of an increase in Howglen's overdraft facility; or the guarantees should be signed. Given Mr Reynard's optimistic and unrealistic nature and his own investment in Howglen, the Court's judgment is that he would have chosen to sign the guarantees."

9. In January 1996 Howglen's bank appointed administrative receivers, with a view to the sale of Howglen's business as a going concern. In due course Howglen was placed in own creditors' liquidation.
10. The Department of Trade and Industry subsequently took proceedings against Mr Reynard under the Directors Disqualification Act 1986. Those proceedings led to his being disqualified initially for a period of ten years, reduced on appeal to five years.
11. In 1996 Alliotts brought the present action against Mr Reynard on the guarantees which he had signed in relation to unpaid fees. Mr Reynard counterclaimed, alleging breach of retainer, breach of duty and misrepresentation. He did not dispute the outstanding fees; his defence to the claim was by way of set-off. At the outset of a long and careful judgment the trial judge, His Honour Judge Morrell, recorded that, whilst Alliotts were represented by counsel, a Mr Christie, Mr Reynard had conducted his case in person. Referring to Mr Reynard's oral submissions in reply, the judge said this:

"Mr Christie [counsel for Alliotts] provided the court with written submissions. Mr Reynard then addressed the Court for two and three quarter hours from a prepared text. The Court invited him to supply a copy to the Court and to Mr Christie while he read from it, but he declined to do so. At 4.15pm it was plain from the thickness of the bundle he was using that there would not be time for his oral submission to be completed without the undesirable necessity of going into another day and the Court insisted that he should conclude by 4.45pm. Necessarily, he abbreviated the remainder of his address and, at the end, he handed to the Court and to Mr Christie, copies of the submissions he had been making. The Court assured him that it would read his submission and look at the documents referred to within it. The Court has spent a further four hours in doing so. The oral submissions were little different from the written ones. All the documents in the eleven file bundles referred to in the submission have been examined. Many were referred to in the course of the hearing, but others were not. The Court has taken all of them and the submissions Mr Reynard makes in respect of each of them into account in coming to its decision. Finally, the Court records its admiration for the way that Mr Reynard has conducted his case. It is not without factual complexity and it has been clear that he has put a considerable amount of effort into its preparation at every stage of the hearing. In particular, he has succeeded in addressing the issues in a manner that has assisted the Court. It should also be recorded, that he has been greatly assisted by Mr Christie in the finding of documents he has needed when giving his own evidence and when cross-examining Alliotts' witnesses."

12. Turning to the issues, the judge commented that the court's decision on the various issues had been "largely determined by the view it has formed of the character and credibility of the two principal persons involved", that is to say Mr Reynard and Mr Damyon.
13. As to Mr Reynard, the court found that he was not unaware of his managerial responsibilities during the years when he ran Howglen. It concluded that in suggesting otherwise, Mr Reynard had either deliberately sought to mislead the court, or he had simply deceived himself. The court found that he exhibited a "detachment from reality" and that "the impression given was of insouciance and a lack of realism probably the result of an inability to appreciate any other point of view other than his own". Consequently, in the absence of unequivocal support for his assertions of fact from other evidence, where Reynard's evidence conflicted with the evidence of Mr Damyon, the judge preferred the evidence of Mr Damyon, whom he described as "unassuming, precise, cautious, realistic, conscious of the scope of the duties in the ordinary course of an auditor and of an accountant and, importantly, honest".
14. The judge then proceeded to examine with the greatest care the various allegations made by Mr Reynard in his counterclaim. In the result, he concluded that Mr Damyon (and hence Alliotts) were not in breach of any of their duties to Mr Reynard or to Howglen Limited, and that there was no negligence on their part. The judge said this in relation to the duty owed by Mr Damyon to Mr Reynard and to Howglen (at page 29 of the judgment):

"The Court finds that Alliotts and Mr Damyon were under a legal duty to provide Mr Reynard and Howglen with audit and accountancy services and with accountancy advice; and with advice upon other matters when invited to do so and provided Mr Damyon agreed to do so. Alliotts and Mr Damyon were under no legal duty to provide advice, unbidden, on commercial matters touching the business of Howglen or investment decisions made by Mr Reynard."

15. The judge concluded further that the only reasonable criticism that could be made of Mr Damyon, although it was not one which had been pleaded, was that he failed to advise Mr Reynard to seek independent professional advice before signing the guarantees. However, the judge concluded that this did not contribute to the failure of Howglen or to the consequent losses suffered by Mr Reynard and, as I noted earlier, that Mr Reynard would have signed the guarantees in any event.
16. Mr Reynard seeks permission to appeal on essentially two grounds. First, he complains that the judge failed to take into account sufficiently the very large volume of documentary evidence which was before him and which was to a large degree unchallenged. Mr Haines in his submissions this morning has focused upon two specific conclusions of the judge. One, in relation to the extent of Mr Damyon's duty - and I have quoted the relevant passage earlier - and two, as to his knowledge of Howglen's financial difficulties when Mr Damyon invited Mr Reynard to sign the guarantees. Second, it is submitted that the judge did not afford Mr Reynard a fair hearing, and that his rights under Article 6 of the European Convention of Human Rights were accordingly infringed. It is asserted that he was not provided with a proper opportunity to present his case, and in particular to open it, and that there was not equality of arms, in that the judge did not afford him the degree of assistance to which, as a litigant in person, he was properly entitled. It is also submitted that the judge descended into the arena, taking too active a part in the proceedings and that he interrupted too much, particularly during Mr Reynard's cross-examination of Mr Damyon.
17. I turn to the allegation of unfairness first. I can see no substance whatever in the suggestion that the hearing was in any way unfair to Mr Reynard. On the contrary, it is manifest on the face of the judgment that the judge went out of his way to ensure that he, the judge, had fully understood the points sought to be made by Mr Reynard and that he had addressed them fully in his judgment. In imposing a time limit on Reynard's closing oral submissions the judge was acting well within his discretion in relation to case management; indeed it is apparent from the passage from the judgment which I quoted earlier that he was fully justified in limiting the time available to Mr Reynard to present his closing submissions orally, thereby avoiding the necessity to continue the hearing on the following day. It is suggested by Haines that Mr Reynard was not afforded a proper opportunity to open his case since the procedure adopted by the judge - as to which there can be no criticism - was that Mr Reynard should give his evidence first since the contested issues arose on his counterclaim.
18. Complaint is made about the fact that Mr Christie was allowed to open the matter briefly and then, I am told, very shortly thereafter, Mr Reynard entered the witness box to give his evidence. However, I can see nothing in those facts which begins to suggest that Mr Reynard was not afforded a full, fair and proper opportunity to present his case. Indeed, it seems to me perfectly clear from the way in which the judge described the proceedings in the passage which I have quoted, that he was afforded every proper opportunity, and that the judge took every step to make sure that that was so.
19. As to the criticism that the judge descended into the arena, there are circumstances where it is appropriate for the judge to do so in order to assist the litigant in person or to ensure that he, the judge, fully understands the points which are being made. I can once again see no substance whatever in that complaint.
20. As to the proposed ground of appeal relating to the judge's conclusions on the evidence, once again there seems to me to be no substance whatever in that ground. The judge made findings and reached conclusions on the basis of an inference from primary facts which appear to me to be unassailable in the Court of Appeal.
21. There is a further difficulty in Mr Haines' way. The court has been provided on this application only with a fraction of the documentation which was before the judge. Initially, no documentation at all was supplied when the application for permission to appeal was issued. When this was queried by the Civil Appeals Office, Mr Reynard's solicitor wrote on 20th November 2001 saying this:

"The specific documents referred to in the Judgment are not relevant to the Application for Permission to Appeal. For that reason, they have been omitted from the bundle. The point that I am making is that the learned Judge in the Court below failed to take account of the large amount of documentary evidence which was provided and which, to a large degree, was unchallenged. In my view, therefore, there would be no purpose served by including all that documentation in this particular application."

22. That was, of course, a decision for Mr Carmichael to take; but it has undoubtedly placed Mr Haines in a difficulty. He has placed before me a file of documents on which he relies as showing that, as he put it, there was documentary and oral evidence before the judge from which he could and should have inferred that the duty of Mr Damyon and of his firm was wider than that found by the judge, and included a duty to advise Mr Reynard, at the time when the guarantees were taken, of the serious financial position of Howglen.
23. I can, for my part, see no substance in that submission either. No doubt there were some documents from which it would have been possible for the judge to draw an inference contrary to that which he in fact drew; but, as the judge says in the passage from his judgment which I quoted earlier, he was faced with an enormous amount of documentary evidences all of which he took into account. In my judgment Mr Haines' submission goes nowhere towards suggesting that there is any basis upon which the Court of Appeal could interfere with the conclusions which the judge reached based upon the inferences which he drew from the entirety of the documentary and oral evidence before him. The same applies, in my judgment, to the findings which he made as to Mr Damyon's lack of knowledge of the financial position of Howglen at the relevant date.
24. When refusing permission on the papers I said this:

"I can see no basis for an appeal based on any infringement of Article 6 of the European Convention of Human Rights in the manner in which the judge exercised his case management powers. As to the substantive issues, the judge's conclusions as to liability were based on findings of fact which are unassailable in the Court of Appeal. An appeal on those issues would have no real prospect of success."

25. Despite Mr Haines' helpful submissions this morning, for which I am grateful, I remain firmly of that view and accordingly I dismiss this application.
(Application dismissed; no order for costs; permission to appeal to the House of Lords refused).