England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM NOTTINGHAM COUNTY COURT
THE HON MRS JUSTICE COX DBE
4CB00535

		Royal Courts of Justice Strand, London, WC2A 2LL
		29/11/2007

Lord Justice Jacob:

1. This is an appeal by permission of Sir Henry Brooke from a judgment and order of Cox J given, unusually, in the Nottingham County Court, on 6^th March 2007. She dismissed the action by Mr and Mrs Trka against three brothers, Barry, Anthony and Gary Hulbert, their company Four Ace Travel Ltd and a company called Proline Travel Limited. There was another defendant, Carl Biddles. The proceedings against him were undefended and the Trkas have obtained judgment against him, although he has not satisfied it.
2. The appeal is solely on fact. There is no dispute as to the principles upon which this Court should act. They were summarised by Clarke LJ as he then was in Assicurazione Generali v Arab Insurance Group [2002] EWCA Civ 1642; [2003] 1 WLR 577 at [12-23] in a passage approved in the House of Lords in Datec Electronic Holdings v UPS [2007] 1 WLR 1325. I do not set the passage out here: it suffices to say two things. The first is that the test to be applied is that where a party has been acquitted of fraud, the decision in his favour should not be displaced except on the clearest grounds. The second is that where the findings of fact depend essentially on oral evidence, as is the case here, the more reluctant this court will be to interfere with those findings.
3. I would add this. The charge below was essentially one of fraud and forgery. So the Judge herself had to apply the general rule in a civil case that the more serious the allegation the higher the standard of proof that is required, see re H [1996] AC 593 at p. 586 per Lord Nicholls at p.586. It is against these standards, we are asked, on appeal, to find forgery, deliberate perjury and a conspiracy to pervert the course of justice.
4. Prior to the events of which the Trkas complain, the Tkras and Mr and Mrs Biddle each owned 25% of Proline, the 6^th Defendant. It owned some old buses and ran a school bus business providing services to Leicester Council. A licence (called an "O-licence") was needed for this. It was in the name of Mr Trka, having been obtained by him prior to the incorporation of Proline and before his involvement with Mr Biddles when he ran a single bus business which he called Tommyline.
5. Mr Trka was both a driver and a mechanic. Proline was run with Mr Biddles doing all the paper work and managing the finances, with Mr Trka being in charge of bus maintenance and himself doing some of the driving and organising the other drivers.
6. The Judge summarises the history of Proline at [22-39]. There was no controversy as to this, save a dispute as to whether Mr Trka had put any money into the project to help finance the purchase of buses and by way of start up generally. The Judge accepted his evidence – and rejected that of Mr Biddles - to the effect that he had put in an amount of £7,400 made up as to £5,000 for the buses and £2,400 start-up costs. That is not challenged and is a matter of some importance to the appellants' case.
7. It is common ground that in late August 2001 Mr Biddles decided he no longer wanted to continue with the Proline venture. He telephoned Mr Trka to say so. What happened thereafter was the subject of an acute conflict of evidence between Mr Trka and the Hulberts.
8. I start with the Hulbert version, as recounted by Mr Barry Hulbert the only one of the brothers who gave evidence. It runs like this. Proline had kept and maintained its buses on premises owned by them used for a haulage business. Mr Biddles knew the Hulberts. When he had decided to close the business he had some discussions with the Hulberts during which they agreed to buy the assets of Proline (consisting of some old buses and, as it was perceived, the ongoing contracts with Leicester) for £12,000. This having been agreed initially, Mr Biddles drew up the terms in a draft document called a "Bill of Sale". A few days later, on 1^st September (a Saturday) there was a meeting to sign the document. Actually the document was retyped on the day by Mr Biddles so as to put in the date and to add "Independent witness, Mr John Stretton" with a place for him to sign. The document was then signed by Mr Biddles, and the three Hulberts. The signing was witnessed by Mr Stretton. Mr Trka was present when all this happened.
9. For convenience I reproduce the document in full but without the signatures.
BILL OF SALE

1/09/2001

1. four Daimler Fleetline and Council contracts sold to Four Ace Travel Ltd for the sum of £12000.00.

2. Operators licence in the name of Antony Trka to remain the same at the time of sale.

3. Mr Trka to be installed as a transport manager, with wage increase and company vehicle for his personal use.

4. Minibus finance transferred to Four Ace Travel Ltd

5. All parties in full agreement to the terms listed above

6. Mr Trka to agree Four Ace Travel Ltd to use his O licence for the foreseeable future

7. Cheques issued by the council in the name of Mr Trka to be reissued for the same amount by Mr Trka to Four Ace Travel Ltd

Purchasers …….. Four Ace Travel Ltd

1. Barry Hulbert ……………………..

2. Anthony Hulbert ………………….

3. Gary Hulbert ………………………

Vendors

Carl Johnson Biddles ………………

Independent witness

Mr John Stretton ……………………

Mr Trka present at the time of both parties signing

10. So, maintained Mr Barry Hulbert, Mr Trka knew exactly what had gone on and was content with it. The assets moved to a new company which had been set up called Four Ace Travel Ltd (the 4^th Defendant). Mr Trka continued to hold the O-licence and to work as transport manager and a driver. As provided in the Bill of Sale the council paid cheques to him personally and he wrote cheques initially to Mr Hulbert and then to Four Ace.
11. Mr Trka's version was quite different. He said he was never at a meeting on the 1^st September. His position (maintained from the outset when the Bill of Sale was first relied upon) is that the document was and is a sham – a forgery produced after the litigation started and designed to convince the court that there really was a sale of assets of Proline to Four Ace.
12. The Judge rejected Mr Trka's version. The question before us in the end, as was agreed, was whether she was wrong so to do. Theoretically it would be possible for the document to be a sham produced to evidence a genuine agreement, but realistically if the document was a sham and both Mr Hulbert and the witness to the document, Mr Stretton were lying, there is no realistic chance of the court holding that.

The argument for the Trkas

13. I turn to Mr Oulton's argument for the Trkas. He began by identifying five matters which showed that Mr Biddles was a thoroughly dishonest man:

(a) He falsely denied that Mr Trka had made any initial investment into Proline when Mr Trka had in fact paid £7,400.

(b) He claimed that he had put £25,000 from his business Profile to set up Proline when there was not any material in Profile's accounts to support this and Profile was borrowing at a high rate of interest.

(c) He created and used a business credit card in Mr Trka's name without the knowledge or consent of Mr Trka. Moreover that card was used by Mr Biddles to make payments into his own, separate, business, Profile Motors. In short it was used to siphon off money properly belonging to Proline.

(d) He took the entire £12,000 paid by the Hulberts for the assets of Proline

(e) He must have been involved with a false or falsified invoice for £7,461.25 from Ace Transport to Proline dated 30^th August 2001, just 2 days before the alleged meeting of 1^st September. The invoice contains three items. The first is for parking (the buses were kept on Ace Transport's land). The second and third are written in a different hand and are supposed to be for the sale of a bus (a Daimler Fleet Line) and some tyres. It was shown that a sale by Ace of a bus was wholly improbable and in any event the idea of such a sale at a point when Ace was just about to buy the assets of Profile makes no sense.

14. The Judge did not mention point (b). She found points (a), (c) and (d). She considered but made no finding in relation to (e). Mr Oulton submits that if she had considered all five of these matters, she should have concluded that Mr Biddles was dishonest, was willing to forge (e.g. by the creation of the credit card account in Mr Trka's name) and the creation of the false invoice (done to fit with an entry in Proline's books of a payment of the exact sum to Ace Transport). This would then be of considerable weight when assessing the genuineness or otherwise of the Bill of Sale and Mr Biddles's account of that.
15. Next Mr Oulton turned to the evidence of Mr Barry Hulbert. The Judge found him "to be essentially a straightforward and careful witness." That, submitted Mr Oulton, was demonstrably wrong. In paragraphs 21-22 of Mr Hulbert's signed witness statement he had in effect deposed to an incident alleged to have happened shortly after the alleged sale on 1^st September. The allegation was that Mr Trka had put on his desk a letter from Leicester Council saying that the contracts were being terminated by reason of defects in the vehicles. He said he asked Mr Trka what was going on, and, importantly, that "if I had known the contracts had been cancelled, we would not have agreed to purchase the business and Mr Trka was quite apologetic about what had happened." The point of this was to show that Mr Trka knew all about the purchase of the business and its assets.
16. In fact there was no such letter from the Council at that time. The letter was dated 12^th December, well after the alleged transaction. In chief Mr Hulbert corrected the date to say it was some months later but made no other correction – the sting of the point remained in his evidence. But of course if Leicester only terminated the contracts several months after the purchase, the suggestion that the purchase would not have gone ahead if Mr Hulbert had known about the cancellation evaporates. Under cross-examination, when faced with this, he withdrew the whole of the paragraph. Mr Oulton submitted that none of this can be explained away – Mr Hulbert must have deliberately made up the story to demonstrate that Mr Trka knew of the sale of the business.
17. Also going to Mr Hulbert's veracity, submitted Mr Oulton, was what happened – or rather what did not happen – before the proceedings were commenced. A letter before action was sent by the Tkra's solicitors to the Hulbert brothers on 14^th November 2002. It alleged that there had been a partnership (note not a company) between Mr Biddles and Mr Trka, that the Hulberts had purchased Mr Biddles' interest for £12,000 in October 2001 and that Mr Trka was entitled to the same amount plus an account of all moneys used in the operation of the business. The obvious reply to this letter, if the Bill of Sale really existed, was to say: "this is nonsense, we bought all the assets, you knew all about it, and here is a copy of the Bill of Sale to prove it."
18. Mr Oulton relied upon the fact that the actual reply did nothing of the sort. It asked for documentation to prove Mr Trka's interest in Four Ace Travel Ltd and Proline Travel Ltd saying that if the documentation was produced "we are happy to pursue the matter further."
19. A further letter of 27^th February was sent, this time setting out the true facts about Proline Travel Ltd as to its shareholding. It then alleged that what Mr Biddles had sold was his (and his wife's) shareholding to Four Ace and that was all. The obvious response to this letter, submitted Mr Oulton, would again have been to have produced a copy of the Bill of Sale to prove a sale of assets, not shares and that did not happen.
20. Mr Oulton pointed out that even when the proceedings started, the initial defence did not mention the Bill of Sale. What the defence alleged was that "in or about October 2001 the fourth defendant [Four Ace Travel Ltd.] acquired the assets and goodwill of Proline Travel Ltd." and that there had been a transfer of assets "in or about early October 2001." There was some discussion before us as to whether the non-reference to the Bill of Sale was a lawyers' oversight. Obviously we cannot go into that and must go by the evidence below. Mr Oulton made the point that if the Bill of Sale existed at the time and was in the hands of the defendants' lawyers it is most surprising it was not referred to. Nor would one expect the pleader to say the transfer was "in or about early October" if he had the exact date of 1^st September 2001 on a document in his hand.
21. Further, Mr Hulbert said under cross-examination that the Bill of Sale was a document important to him and that it was he who wanted it as a receipt. So, submitted Mr Oulton, his evidence about the reason for the failure to refer to the document by way of answer to either letter before action and in the initial defence was even less credible. Mr Hulbert simply said he did not know why he had not done so.
22. Nor, submitted Mr Oulton, did Mr Hulbert have any explanation why Mr Trka was not asked to sign the document himself, given that clauses 2 (Mr Trka to continue to hold the licence) 3 (Mr Trka to get a wage increase) 6 (Mr Trka to agree to use his O licence for Four Ace) and 7 (Mr Trka to reissue to Four Ace Council cheques issued to him) clearly involved him on any view. Why, however naïve Mr Hulbert might be as a man of business, would he not get Mr Trka to sign, given particularly the obvious importance of the licence?
23. There is also this. Four Ace Travel Ltd was not incorporated until 28^th September 2001 – four weeks after it is referred to in the Bill of Sale. Mr Hulbert's evidence as to this was that it had been decided to have a company earlier. But even so, submitted Mr Oulton, just to name the purchaser as a company as if it already existed when Mr Hulbert knew full well that there was no company in existence at the time would be a very odd thing to be doing even for an unsophisticated man.
24. The upshot of all this, Mr Oulton submitted, is that the Judge was wrong to treat Mr Hulbert as a witness of truth.
25. As to the evidence of Mr Stretton, Mr Oulton attacked this as implausible for essentially three reasons. First was the identification evidence. Mr Stretton was being asked to give evidence some 5 years after the event. The one and only time it is suggested he saw Mr Trka was at the signing of the Bill of Sale. Mr Trka was just one of six people in the room. Yet in court Mr Stretton identified Mr Trka as the man who had been at the meeting. Not only was that in effect a dock identification with all its well known dangers, it was so implausible that one can only reasonably suppose Mr Stretton was making it up to assist the defendants – it was too good to be true. The suggested motive for this is that he was a long-standing friend of the Hulberts and they regularly put business (tyre repairing and changing) his way.
26. Next was Mr Stretton's account of how he came to sign the document. This, submitted Mr Oulton, did not make sense, quite apart from differing from Mr Hulbert's story. His account in his witness statement was that he was asked to witness the document, said he would, and followed Mr Hulbert into the office where the others were, witnessed the signing and went out again. That of course could not be so – for until he had agreed to witness the document his name as a witness could not have been, as it is, typed on. Mr Hulbert's account was that he first asked Mr Stretton whether he would witness the document, got his agreement, re-typed the document, went out and got him into the meeting. There was no immediate following. Mr Stretton's evidence about this could not be right.
27. Mr Oulton's third reason for saying that Mr Stretton's evidence should have been disbelieved was nothing to do with what Mr Stretton actually said. It was that the very nature of the purported Bill of Sale and the whole story about its purported production and subsequent events was so incredible that it just could not be.
28. Mr Oulton pointed out first that it purports to bind Mr Trka but does not require his signature. Mr Oulton submitted that no one, however inexperienced in business, would do a thing like that. The only rational explanation is that rather than forge his signature – which would be difficult, resort was had to the device of saying he was present.
29. Then Mr Oulton relied upon the conflicting accounts of the details of the witnessing by Mr Stretton, to which I have referred.
30. He also relied upon the change in the story about the retyping. The original witness statements of Messrs Biddles and Hulbert did not mention this at all. Mr Hulbert volunteered it under cross-examination. He said the original Bill of Sale brought in by Mr Biddles did not have space for an independent witness and so he re-typed it, adding the place for Mr Stretton as a witness. He said he had not mentioned this before because he did not think it relevant. That in itself is an answer which causes one to wonder, submitted Mr Oulton. Why not just write on the existing document – and the story about lack of space does not make sense given the shortness of the actual text. A more likely explanation is that Mr Hulbert realised that he had to explain how Mr Stretton's name could be on the document if it had been prepared before the Saturday meeting.
31. Then it was said, if Trka had been present he would have expected to get half of the £12,000. Muddled and naïve as he was, he surely would have raised this with Mr Biddles and probably the Hulberts but did not. This has particular force given the Judge's finding that Mr Trka had put his own money, a lot by his standards, into Proline.
32. Further, Mr Trka was, according to the Bill of Sale, supposed to get a pay rise. But he did not. That is something, if the document were true, he surely would have raised with the Hulberts. It is not suggested he did. So, submitted Mr Oulton, Mr Trka's conduct after the arrival of the Hulberts and the departure of Mr Biddles is entirely consistent with his, muddled, thinking that only the Biddles interest (whether of a company or a partnership makes no difference) had passed to the Hulberts.

Discussion

33. Does all this show that the Judge was wrong – or, putting it more accurately given the standard required, must have been wrong? I have reached, with some anxiety and only having read and re-read the transcripts of evidence, the conclusion that the answer is no. I say that for the following reasons.
34. First the Judge had seen and heard the witnesses and had been immersed in the detail over four days. There are actually two points here – "seen and heard" and "immersed". "Seen and heard" is an important factor but should not be taken too far, as Lord Bingham has pointed out in his lecture "The Judge as Juror" ("The Business of Judging", OUP 2000).
35. The "immersed" point is of more significance here. Lord Hoffmann put it this way in Biogen v Medeva [1997] RPC 1 at p. 45:

"The need for appellate caution in reversing the judge's evaluation of the facts is based upon much more solid grounds than professional courtesy. It is because specific findings of fact, even by the most meticulous judge, are inherently an incomplete statement of the impression which was made upon him by the primary evidence. His expressed findings are always surrounded by a penumbra of imprecision as to emphasis, relative weight, minor qualification and nuance (as Renan said, la vérité est dans la nuance), of which time and language do not permit exact expression, but which may play an important part in the judge's overall evaluation."

36. Of particular importance here is the Judge's assessment of Mr Trka's evidence as incoherent and unreliable (judgment para. 50). There was clearly material upon which she could reach this finding, for instance (1) the very different way the case was originally pleaded (a claim to dividends in Four Ace and for specific performance of an alleged agreement entitling the Trka's to 50% of the shares in Four Ace), (2) the somewhat improbable allegation that immediately after Mr Trka received the telephone call from Mr Biddles he told Mr Hulbert about it and Mr Hulbert expressed the view that the company was worth at least £80,000 without ever having even seen its books and (3) Mr Trka's clear inability to understand business matters.
37. Many of the points made in support of the appeal depend upon an assumption that a rational person, concerned to look after their own interest, just could not have put up with what is said to have been going on. But that rather goes out of the window where you have someone as muddled as Mr Trka was – and the Judge was in a unique position to assess this.
38. This muddle supports Mr Warner's answer to the why-not-raised-earlier points. At the time of the letters before action and in the original particulars of claim Mr Trka was not alleging a sale of assets – the allegation was that the Trkas had an agreement with the Hulberts for 50% of the shares of Four Ace Travel. It is true that production of the Bill of Sale was an obvious way of refuting the claim. And Mr Hulbert did not explain why he just did not do that. However it is not so irrational, given the nature of the claim, to ask for more information before agreeing to consider it. As to not referring to the Bill of Sale in the original Defence, its substance (a sale of assets) was pleaded – and by way of a positive allegation.
39. As to the points made about Mr Biddles being a dishonest man the Judge essentially accepted that Mr Biddles was dishonest and Mr Warner did not challenge that. It did not follow that the Hulberts were dishonest too. Mr Warner did not challenge the points made by Mr Oulton which I have set out at [13]. So, for instance, the falsified invoice was not shown to have anything to do with the Hulberts. A possible explanation was that Mr Biddles needed to have an invoice justifying a payment out of Proline's books, but it did not matter. In the end the invoice is a red herring about which there was a bit of mystery and the Judge was entitled so to regard it.
40. The Judge made a finding that the Hulberts believed that Proline was all Mr Biddles' company – that Mr Trka had no personal ownership of the business. That is a possible explanation of why Mr Trka was not made a party to the Bill of Sale. As I have said the document purported to bind Mr Trka but its actual form did not concern him – it was a Bill of Sale of the assets. Actually its form on any view is bizarre – it purports to be a sale by Mr Biddles personally, not Proline.
41. Of particular importance is that the Bill of Sale does not stand alone. The Judge found (and there was material for her to do it) that prior to it Mr Biddles and the Hulberts had had discussions about the sale with Mr Trka present (paras.56 and 58). If he was alive to what was happening, it was then, not at the point of the Bill of Sale that he would have expressed his concerns, instead of, as the Judge found, standing by.
42. Moreover his conduct in making out cheques for Council contracts first to Mr Hulbert and later to Four Ace is consistent with the Bill of Sale – if he had no inkling of what had happened why would he have gone along with this?
43. His muddle is also consistent with the Traffic Area Network Operator Summary which showed Four Ace as the company, the Hulberts as directors and Mr Trka simply as the Transport manager.
44. So, despite the finding that Mr Trka had put £7,400 into Profile, it was open to the Judge to hold that he did not understand what was going on and that it does not follow that he just must have expected to get something back if all the assets were being sold. Moreover of the £7,400 he had put in, £5,000 was for the buses. So a sale from which he ought to have received £6,000 is not so fanciful – particularly given that he would continue to have a job after the buy in by the Hulberts and the fact that the buses had deteriorated further (two were used only for spares by then).
45. As for Mr Hulbert, even if one accepts that the paragraph 21 evidence was wrong, the Judge was entitled to hold him essentially honest. This she did having rejected Mr Trka's rather improbable account of his conversation with Mr Hulbert immediately after Mr Biddles had told him that he wanted to close the business. Moreover Mr Hulbert can hardly have been rationally making up the story with the sting in it, given that the letter was not only a disclosed document but referred to in his statement, and that the date was on the letter and was bound to come out. He just got things wrong. The Judge did not deal with this point explicitly but she was entitled to conclude that Mr Hulbert was essentially honest.
46. What then of Mr Stretton? Suppose he was gilding the lily about recognising Mr Trka after so many years. Nonetheless he gave evidence of witnessing the signatures and the Judge has accepted that. That is indeed so. One can only assess the veracity of that evidence against the background of all other facts. Unless the sheer logic of all other matters forces one to the conclusion that the document simply could not have come into existence on 1^st September 2001, then it was open to the Judge to accept his evidence. For the reasons I have given, sheer logic does not require this.
47. Finally there is the forensic point that if the document was a deliberate concoction, a better job would have been done. The force of the point is considerable. After all one has to suppose the Hulberts and Mr Stretton gathering together to concoct it – indeed at some point after the defence was filed on Mr Oulton's case. Why would they make it a sale by Mr Biddles alone? Why would it say Mr Trka is to get a pay rise when by then they knew he had not in fact got one? Why get the date inconsistent with the defence? Why concoct it at all? And why so late, rather than, for instance, in response to the letter before action?
48. In the end I am not satisfied that the Judge was wrong. So I would dismiss the appeal.

Lord Justice Dyson:

49. I agree.

Master of the Rolls:

50. I also agree.