England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
QUEEN'S BENCH DIVISION
(MR STRAUSS QC)

		Royal Courts of Justice Strand, London, WC2A 2LL
		17th July 2012

Lord Neuberger:

1. This is an appeal, brought with the permission of Sir Richard Buxton, by Mr Srimal Perera against a judgment given against him on 12 September of 2011 by Mr Nicholas Strauss QC, sitting as a deputy judge in the Queen's Bench Division. The judgment was given in proceedings brought by Grunwick Processing Laboratories Limited trading as Bonus Print, a company in administration (to whom I shall refer to as Grunwick). There is also an appeal brought by Mr Perera against the refusal of the judge to award any interest on an amount of damages of £160,000 awarded in his favour against the personal representatives of Mr Umed Dhanak (deceased) in proceedings heard by the judge at the same time.
2. The basic facts are as follows.
3. Mr Perera was employed for a substantial amount of time, some 20 years, by Grunwick, as an industrial chemist. Grunwick's business was that of processing photographs, which involved silver being produced in pure form, effectively as a by-product of an electrolytic process. The process resulted in pure silver which was in flake form: such silver flakes are only produced by electrolysis, and cannot be produced by any other means.
4. Mr Perera brought proceedings against Mr Dhanak for a substantial sum of money which he said was owing to him as a result of silver he supplied to Mr Dhanak, who was a jeweller. In the course of those proceedings, Mr Dhanak's solicitors wrote to Grunwick who, as I have said, were Mr Perera's employers, and Grunwick concluded that Mr Perera had stolen the silver from Grunwick during the course of his employment. They therefore brought proceedings against Mr Perera. For obvious reasons the two sets of proceedings were heard together.
5. The two sets of proceedings were heard over a period of some 15 or 16 days between May and July 2011, and resulted in a full and careful judgment, which Mr Strauss handed down on 12 September 2011 (by which time Mr Dhanak had died). He found, among other things, and of central importance for present purposes, (i) that the silver provided by Mr Perera to Mr Dhanak was silver flake; (ii) that the silver flake had been stolen by Mr Perera from Grunwick; (iii) that Grunwick were therefore entitled to damages from Mr Perera; and (iv) that Mr Perera was entitled to the judgment, in the sum of £160,000 against Mr Dhanak's estate. At the end of his judgment, having come to those conclusions and explained his reasons, the judge said "I will hear argument on the amount of interest "
6. The matter was then adjourned to 20 December when the judge decided, among other things, that Mr Perera's claim for interest against Mr Dhanak's estate on the £160,000 should be dismissed, because Mr Perera had failed to provide any figures to show the amount of interest he claimed, either in anticipation of, or at, the hearing on 20 December. The judge also decided that the amount of interest that Grunwick could claim from Mr Perera would be determined at a further hearing.
7. That, in very brief form, is the history of the proceedings.
8. Mr Perera sought permission to appeal to this court on a number of grounds. As between him and Grunwick, Sir Richard Buxton gave him permission to appeal on essentially one issue, namely that in light of the findings of fact the judge made and/or failed to make, it was not open to the judge to have concluded that Mr Perera stole silver in the amount the judge found or at all. As between Mr Perera and Mr Dhanak's estate, Mr Perera has permission to appeal to the extent that it was a wrong exercise of the judge's powers to have deprived Mr Perera of the right to recover interest, as he did at the hearing on 20 December 2011.
9. I turn, then, to the question whether it was open to the judge to enter judgment for Grunwick against Mr Perera for a sum representing the value of the silver which Grunwick claimed that Mr Perera had stolen. On that issue, Mr Mark Jones, who appears for Mr Perera on this appeal, but who did not appear below, has presented his submissions with exemplary clarity and succinctness. He relies to a substantial extent on the approach of the House of Lords, and in particular in the speech of Lord Brown to a judgment of Bingham J in the case of Rhesa Shipping Company SA v Edmunds [1985] 1 WLR 948, in particular the speech of Lord Brandon of Oakbrook at 955F to 956M. In that case, Bingham J had to consider the cause of the total loss of the vessel Poppy M, which sank at sea; having rejected a large number of other possible explanations, he decided on a particular cause, namely that the Poppy M had collided with an unidentified moving submerged submarine, which had never been detected, never been seen, and had never surfaced.
10. Having referred to Sherlock Holmes' observation to Dr Watson that:

"How often have I said to you that, when you have eliminated the impossible, whatever remains, however improbable, must be the truth",

Lord Brandon said that that aphorism, while no doubt justified in a …….detective story, was not an appropriate approach for Bingham J to have …….adopted.

11. As Lord Brandon explained, there were three reasons for this. First, that the judge was not always bound to come to a conclusion on the evidence; he was entitled to shelter behind the burden of proof. Secondly, the dictum can only apply when one can be confident that every other conceivable explanation can be rejected and that one, and only one, explanation has survived. The third reason, as Lord Brandon explained, it was the need for common sense.
12. In this case, the judge had seen a number of different explanations from Mr Perera as to where he had got the silver. However, those explanations were either withdrawn by Mr Perera, as his case changed on a number of occasions, or were justifiably, as Mr Jones accepts, rejected by the judge.
13. Mr Jones relies on the fact that there was no evidence that any silver had actually been stolen from Grunwick. Grunwick's accounts and records did not show the loss of any silver; further, there was no explanation as to how the silver could actually have been stolen. There was a strong suggestion made on behalf of Grunwick during the hearing that Mr McGredy, another employee of Grunwick responsible for security, had been a party to the theft. However, there was no evidence to support that suggestion, and the judge made no finding in support of it. Further, there was no other positive evidence, such as traces of silver being found on Mr Perera's person or unexplained bags having been removed from Grunwick's factory premises by him, or video records of what was going on in those premises. Indeed, there was no record of Mr Perera ever having been suspected of theft over the 20 years he was employed by Grunwick. This is particularly significant, says Mr Jones, in the light of the substantial quantity of silver alleged to have been taken.
14. In those circumstances, Mr Jones says, it was simply not open to the judge to conclude that the silver was taken by Mr Perera from Grunwick.
15. In my view, it was open to the judge to reach the conclusion that he did, and the reasoning in Rhesa Shipping [1985] 1 WLR 948 does not cast doubt on the conclusion he reached. As already mentioned, the judge found that it was silver flake which was provided by Mr Perera to Mr Dhanak. As Longmore LJ said during argument, it is not suggested that the judge was not entitled to reach that conclusion, and it is highly significant, because, as already mentioned, the only method whereby silver can be obtained in flake form is as a product of electrolysis. While Mr Perera did come up with one or two suggestions, in particular working in his garage, to suggest how he might have obtained silver flake (other than stealing it from Grunwick), those explanations were, as I have said, either withdrawn or justifiably rejected by the judge.
16. Given that there was no other source which Mr Perera got even near to identifying for the silver flake he supplied to Mr Dhanak, it seems to me that the judge's conclusion, even before one examines the evidence any further, was one which was easy to justify. He had a ready source, namely Grunwick's factory, and there was no other conceivable source. The judge's conclusion thus accords with common sense, Lord Brandon's third point. Further, the conclusion is not at all improbable, and, of course, the famous Sherlock Holmes dictum includes the words are "however improbable".
17. It also seems to me that another fact which Mr Jones particularly relies on, namely that there was no record of any loss in the books or records of Grunwick's, was properly addressed and dealt with by the judge. In the first place, Grunwick's records were kept in such a way that, if silver had been removed as alleged, it would not have been noticed or recorded at that stage. Secondly, as the judge said in paragraph 67 of the judgment, the silver allegedly taken by Mr Perera:

"represented in total about 4 per cent of the silver produced at Grunwick in the relevant period and it is not surprising that its loss was not noticed at the time."

18. Further, the judge did look for an explanation as to how the silver might have been taken. He expressly did not find whether or not Mr McGredy was involved, and again, bearing in mind the first reason raised by Lord Brandon as to why the Sherlock Holmes dictum was not applied, namely the judge's right, indeed on occasions it is the judge's duty, to shelter behind the burden of proof, it seems to me that the judge was quite entitled to make no finding. It was quite open to him to leave open the question of whether, if Mr McGredy was in some way involved, whether in a dishonest way or because he did not operate the security nearly as well as he should have done. Of course it could be that he was honest and operated a good system, but Mr Perera had found a way round it.
19. The judge said in paragraph 67:

"Although Mr Perera could not have stolen the silver from the large …. machines, it was quite possible for him to have done so from the smaller machines on the mezzanine floor or to have in some way obtained the key to where the silver was stored."

He went on:

"I am satisfied that Mr Perera stole the silver, but it is neither possible or necessary for me to reach a conclusion on the means by which he did so."

20. The fact that the thefts went on for a long period is not particularly striking, because, again as Longmore LJ pointed out in argument, employers generally trust their employees, and if a dishonest employee finds a way of defrauding his employers in a way that the records will not detect, it is not particularly surprising if it continues for a very long time. As to the means of getting the silver out, it would seem that getting on to pound of silver a day during Mr Perera's working time at Grunwicks may have been removed on average, if the judge's finding is correct. We were not provided with any idea of the volume of the silver involved, and it may well be that a pound a day would be relatively easy to remove each day without any suspicion but that is simply a matter of speculation.
21. Rhesa Shipping [1985] 1 WLR 948, has been considered and distinguished in a number of subsequent cases, including Datec Electronic Holdings Limited v United Parcel Services Limited [2007] 1 WLR 1325, paragraph 48 per Lord Mance, Ide v ATB Sales Ltd [2008] PIQR 35, paragraph 45 to 47 per Thomas LJ, and, most recently, by Mr Andrew Popplewell QC sitting as a deputy judge in Do-Buy 925 Ltd v National Westminster Bank Plc [2010] EWHC 2862 QB at paragraph 52.
22. That last case concerned a slightly different point, but in a passage which I would respectfully adopt, Mr Popplewell said that in civil fraud cases, it was:

"common place … that the party making the allegation can often do no more than point to the acts of the alleged conspirators and seeks to demolish the innocent explanation put forward, not infrequently relying on their inherent probability and internal inconsistencies rather than any directly contradictory evidence. The court rejects those explanations and may legitimately conclude that the conspiracy is established both by reference to that being the most probable alternative explanation and by an inference to be drawn from the fact that an untrue explanation has been put forward."

23. With appropriate amendments given that this is not a civil fraud case, I consider that that approach applies here and that the judge was well entitled to reach the conclusion that he did. I would therefore dismiss Mr Perera's appeal insofar as it relates to the judgment entered in favour of Grunwick.
24. I turn then to his other appeal, that in relation to Mr Dhanak's estate. The point, as Mr Jones said again in his very clear and succinct submissions, is a short one. The judge basically took the view that Mr Perera and his advisers had had more than two months (between the handing down of judgment on 12 September and the hearing on 20 December) to put forward his case on interest. By the time the hearing took place on 20 December, no figures at all were produced.
25. In light of the court time which the case had already taken, in light of Mr Perera's shifting case on various issues, the judge was fully entitled to take the view that he did. It was a decision which may be characterised as a robust case management decision, and this court should generally support rather than undermine such decisions.
26. An additional point in this connection made by Mr Jones is that it was either unfair or inconsistent for the judge to have taken the view he did about Mr Perera's claim for interest against Mr Dhanak's estate, given that the judge was prepared on 20 December to stand over the calculation of the interest which Grunwick was entitled to recover from Mr Perera. In my view there is nothing in that point, although it has some initial attraction.
27. First, as Sullivan LJ pointed out, Grunwick had actually prepared some figures for interest, and although the judge thought they were not perfect, that was in stark and substantial contrast with what Mr Perera had signallly failed to do in relation to his interest claim against Mr Dhanak's estate. Secondly, the interest calculation Mr Perera had to carry out was clear from 12 September when the main judgment was handed down, whereas Grunwick were not in a position to make any interest calculations until shortly before the hearing on 20 December because the judge had prepared a further judgment which was only available in draft some time in early December. Thirdly, it is said that the judge proceeded on the basis that it was unnecessary to have another hearing if Mr Perera was deprived of his interest, but that turned out to be wrong once he had dealt with Grunwick's claim for interest, because it became apparent that there would have to be another hearing in relation to that. In my view, if that did justify reconsideration of the rejection of Mr Perera's claim for interest, it was a point to be made on his behalf by his representatives at the hearing on 20 December after the judge had decided to adjournment in relation to Grunwick's claim for interest. It was not a point made to the judge, and I think it is too late to raise it in this court. However, in fairness to those representing Mr Perera below, and indeed in fairness to Mr Perera, I have to say that it seems to me clear that the judge would have rejected such an argument for the first two reasons I have given.
28. In those circumstances I would reject the appeal of Mr Perera both as against Grunwick and as against the estate of Mr Dhanak.

Lord Justice Longmore:

29. I agree.

Lord Justice Sullivan::

30. I also agree.

Order: Appeal dismissed