England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(MR JOHN BALDWIN QC)

		Royal Courts of Justice Strand London, WC2A 2LL
		10 June 2015

1. LORD JUSTICE UNDERHILL: This is a renewed application for permission to appeal against a decision of Mr John Baldwin QC, sitting as a Deputy High Court Judge, following refusal on the papers by Lewison LJ. The decision appealed from was itself on an appeal from a decision of the Master giving the Respondent summary judgment. This is accordingly a second appeal. Subject to one point which I shall have to consider shortly, it is governed by the restricted criteria for granting permission set out in CPR 52.13(2).
2. The Applicant has been represented by Mr Andrew Butler of counsel who appeared at both stages below. Mr Iain Pester of counsel has, exceptionally, appeared on the application and I have allowed him to make very limited submissions.
3. Given the nature of this application, I will not set out the factual background or the reasoning of the Master or the judge and will proceed directly to the grounds of appeal. I will consider grounds 1 to 3 on the basis simply of the evidence as it appeared before the Master -- that is, without considering the new material, the refusal to allow which is the subject of ground 4.
4. Ground 1 reads as follows:

"The learned judge was wrong in his evaluation of the evidence and in particular his conclusion that "nothing in the defence or the evidence filed on the application come close to establishing any breach" of the obligations which, for the purposes of the application, were presumed to exist."

5. That wording reveals the fundamental problem as regards this ground. Even if what the Applicant says is correct, it would be a case of mis-assessment of the evidence and would raise no important point of principle or practice. Nor, subject to what I will be discussing in relation to ground 4, is there any other compelling reason to hear it. The ground thus fails to satisfy the second appeals test.
6. However, I should say something about the substance of the ground because it feeds into what I shall be having to say when I consider ground 4. I am bound to say that I can see no plausible basis for arguing that the Respondent's conduct in funding another project on which he expected Mr Spencer to be engaged would necessarily prejudice the project to which the loan related (that is, 2 Audley Way). According to the evidence Mr Spencer walked off the Audley Way project in mid-October 2010, whereas construction work did not begin on the Treetops project until January 2011. It was, therefore, not self evident that Mr Spencer's engagement on the latter would prejudice in any way his involvement on the former. But even if there could have been predicted to be some overlap, there is nothing unusual in a firm of building contractors being involved on more than one project. On the face of it -- and subject again, as I say, to the points which I have to consider in relation to ground 4 -- Mr Spencer could be left to judge what he was or was not able to undertake without prejudicing his contractual obligations on existing projects, and the Respondent cannot be in any way criticised for funding a further project in which he was to be engaged.
7. Ground 2 suffers from the same problem. Even if the Master and the judge gave no or insufficient weight to what I might call in shorthand "EasyAir points (v) and (vi)", that gives rise to no important point of principle or practice. The principle is not in doubt. All that is said with that is that it has not been properly applied. That could not satisfy the second appeal criteria. Again, however, I should also say that I am not satisfied that there is anything in the substantive point. There is a real distinction between Micawberism and the point encapsulated in the relevant paragraphs in EasyAir. There has to be some good reason for thinking that a Defendant will be able to improve their case at trial. There seems in this case to have been nothing in the evidence before the Master to justify such a belief, for the reasons I have already outlined.
8. The substantive contention behind ground 3 -- whether or not the judge addressed that question adequately -- is that summary judgment should not have been refused, this being a self-evidently suspicious state of affairs requiring careful scrutiny with the assistance of disclosure and cross-examination -- in other words, the Miles v Bull point. Again I see no point of principle here. If the Master's and the judge's antennae were insufficiently sensitive to the alleged skullduggery, that is a case of a one-off misjudgment. But it will be clear from what I have already said that I do not believe the circumstances disclosed by the evidence were anything like as suspicious as those in Miles v Bull. Much is made in particular of the Respondent's failure to pursue Mr Spencer on his guarantee and the supposed inconsistency between saying that he is impecunious and continuing to engage him on the Treetops and other projects. I am not sure that there is any such inconsistency: a man may have no worthwhile capital but still be capable of running a building project. But even if that explanation is unconvincing, and the Respondent has a commercial interest of his own in not pursuing Mr Spencer, it is a big, and by itself impermissible, leap from that to saying that he was implicated in the original default alleged by Mr Spencer at 2 Audley Way.
9. That, however, brings me to ground 4. It is not entirely straightforward whether the second appeal criteria apply to the challenge to the judge's refusal to admit further evidence. Whether to do so was itself an issue on which his was the first decision, although it could be said that for the purpose of 52.13(1) the decision appealed against was not that decision but the decision to dismiss the appeal against the decision of the Master. But I am prepared to proceed for present purposes on the basis of the ordinary criteria governing the grant of permission to appeal.
10. As Mr Butler suggests in his skeleton argument, treating this ground as a first appeal requires me to apply the same criteria also to the other grounds of appeal. I can see no basis for such a submission either in the rule itself in or in the decision of this court in Burgess, to which he referred me. The question addressed at paragraph 100 of the decision of the judgment of Jonathan Parker LJ in that case is a quite different one. However, as will appear, that is not a point of central importance.
11. Turning to the substance of ground 4, and applying the ordinary criteria for permission to appeal, I am afraid that despite the strenuous submissions of Mr Butler. I cannot accept that there is a realistic prospect of a successful appeal against the decision of the judge to exclude this evidence. I am prepared to accept for present purposes that the evidence in question appears to show a close association between the Respondent and Mr Spencer and his family, and that it may suggest that the Respondent and the Spencers have a scam going on under which projects are set up to fail, enabling the Respondent to benefit from penal rates of interest with the benefit of full security. I must emphasise, since this is a public hearing, that I am in no way finding that that is the case. I am simply saying that I am prepared to proceed on that basis on the basis of the evidence that I have seen. However, the court will not deny the Respondent a judgment simply because he has, or may have, behaved without commercial integrity towards other people. It will certainly not entertain contested evidence about collateral matters whose effect is at most to create a prejudice against the party in question. There must in this case be shown to be some connection between the wrongdoing alleged on the part of the Respondent and Mr Spencer and what caused the debtor's default in the present case.
12. As to that, Mr Butler has not in my view come up with any "case theory" which is capable of explaining why the misconduct which he says can be detected in the other cases makes it more likely that the Respondent knowingly induced Mr Spencer to pull out of the Audley Way project and cause it to fail. He did not submit that the Audley Way project was itself a scam of the kind alleged in the other cases: that would, as he acknowledged, be inconsistent with the limited amount of the Applicant's guarantee. All that he could and did say was that the fact that the Respondent and the Spencers had the association that they did rendered it substantially more plausible that the Applicant would connive in Mr Spencer pulling out of the Audley Way project in order to go and work on the later Treetops project. That seems to me not only purely speculative but implausibly speculative. I cannot see why it should be in the Respondent's interest to sabotage this project and to risk suffering a very substantial loss in excess of the limited amount of the guarantee.
13. The judge was thus, in my judgment, plainly entitled to form the view, and it is my own view, that the further evidence which it was sought to introduce was not capable of proving or helping to prove any of the matters on which the Applicant sought to rely in his defence.
14. In those circumstances, although I would have taken a view about grounds 1 to 3 if I had thought that ground 4 was arguable. Since that is not the case, I must refuse permission to appeal.