England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		01/12/2005

Mr. Justice Evans-Lombe :

1. I have to deal with an application made by the defendants Sir Alexander Fraser Morrison ("FM") the 1^st defendant and Stephen John McBrierty ("SM") the 2^nd Defendant, made on Wednesday the 30^th November the week immediately preceding the intended commencement of the trial on the 5^th December, that I should recuse myself from trying the case. The application arises in this way: in the course of my pre-reading into the case I noticed that it was intended to call as a witness for AWG Group Ltd ("AWG") Mr Richard Jewson ("Mr Jewson") who, at all material times until March 2002 was a director of AWG and chairman of the audit sub-committee of its board. Alerted by the name I then discovered that Mr Jewson is well known to me of which fact I in turn alerted the parties on the 29^th November. The response of the claimants was to indicate that, rather than risk my withdrawal and the consequent delay in obtaining another judge and his completing the pre-reading process on which I have already spent a week, they would not call him to give evidence since they did not regard him as other than a relatively peripheral witness. The response of the defendants is contained in a letter from Messrs Dechert LLP of the 30^th November the conclusion of which was to ask me to withdraw.

2. The case arises from the take-over by AWG of Morrison plc ("Morrison") in which FM and SM were respectively the chairman, and in effect, the chief executive officer. They also held between them a substantial proportion of AWG's shares. In August 2000 AWG made an approach to Morrison with a view to bidding for the whole of the issued share capital of that company. In due course a bid was made which AWG declared to have gone unconditional on the 21^st September 2000. It is AWGs' case that it was procured to make the bid and to declare it unconditional as a result of a representation that Morrison's profits in the full year to March 2001 would be £30.5m, that that representation was made to the board of AWG by the defendants at a time when they had no bona fide belief that such a level of profit would be achieved, and that, in making the representation, the defendants fraudulently procured Morrison to conceal from AWGs' "due diligence" inquiries, material facts from which AWG might well have concluded that that level of profit was unachievable and that they should withdraw their bid.

3. At the outset of the hearing of the defendant's application I described my connection with AWG and with Mr Jewson in the following terms: AWG is a company whose primary business is supplying water to industry and the public in East Anglia and in particular in Norfolk. My family are farmer/landowners in Norfolk and so in the area of operation of AWG. I have had dealings with AWG, not always harmonious, over the years on such subjects as access for the purpose of sinking boreholes and running pipelines. Mr Jewson lives in the next village to the village where I and my family live being approximately 1 mile distant. Our families have known each other for at least 30 years. Our children are friends and we have dined with each other on a number of occasions. Mr Jewson and I in the past were tennis partners. Mr Jewson has recently been appointed Lord Lieutenant of Norfolk. I would have the greatest difficulty in dealing with a case in which Mr Jewson was a witness where a challenge was to be made as to the truthfulness of his evidence.

4. As is apparent the case which the claimants seek to make out against the defendants involves serious allegations against prominent businessmen for whom, if those allegations are found proved, most serious consequences would follow both in the damages which they might be required to pay and in the consequences that such findings would have for their future careers.

5. In the judgment of the Court of Appeal in Locabail (UK) Ltd v Bayfield Properties Ltd [2000] QB 451 to which the then Lord Chief Justice The Master of the Rolls and the Vice Chancellor contributed the following passage appears at paragraph 25 where, having set out a number of circumstances where the court could not conceive that objection could properly be made the court went on to say:-

   "By contrast, a real danger of bias might well be thought to arise if there were personal friendship or animosity between the judge and any member of the public involved in the case; or if the judge were closely acquainted with any member of the public involved in the case, particularly if the credibility of that individual could be significant in the decision of the case…."

6. In Taylor v Lawrence [2002] 3 WLR 640 at paragraph 60 the Court of Appeal having cited decisions of the House of Lords including the Locabail case said this:-

   "…the House of Lords has put to rest the conflicting views as to how the test in cases of apparent bias should be expressed. It can now be said that the approach should be:

   'The court must first ascertain all the circumstances which have a bearing on the suggestion that the judge was biased. It must then ask whether those circumstances would lead a fair-minded and informed observer to conclude that there was a real possibility… that the tribunal was biased." (See Re Medicaments and Related Classes of Goods (No 2) [2001] 1 WLR 700 at 727 (para 85).)"

7. The defendants grounds of objection to my continuing to hear the case are set out in the letter of 30^th November of Messrs Dechert who act for FM and to which I have already referred and in which those advising SM concur. For the sake of brevity I will not set out the contents of that letter in the text of this judgment but will append a copy of it. In paragraphs (i) – (iv) on the second page the defendants' advisors set out aspects of Mr Jewson's evidence, or areas of the evidence in the case which may be within his knowledge although not dealt with in his witness statement, which are or may become contentious in the course of the hearing and which might have lead to my being confronted with having to decide on whether I regarded his evidence as reliable. The claimants answer to these problems is to say that they will not call Mr Jewson but will call any two of Mr Challon, Mr Morris and Mr Cronin, fellow non-executive directors of Mr Jewson who were also members of the audit committee of AWGs' board at the material times. The claimants submit that those two witnesses are able to give all the relevant evidence in the case which Mr Jewson could have given if called. It is also pointed out that Mr Gourlay, the non-executive chairman of AWG is already a witness and will be called. Clearly this step would remove any embarrassment that I might feel in having to decide directly whether I regarded Mr Jewson's evidence as reliable.

8. The defendants object that to do so would deny them the opportunity to cross-examine Mr Jewson who would have been removed as a witness for a reason extraneous to the subject matter of the trial i.e. to save the embarrassment of the judge. In so doing "the natural course of the trial will have been altered…". Criticism of the failure to call a witness able to give relevant evidence and to ask the court to draw inferences from his absence will be impossible. Mr Jewson as chairman of the audit committee may be said to be "primus inter pares" of the non-executive directors with the possible exception of Mr Gourlay. Any criticism of the discharge of their duties by these directors is likely to constitute, indirectly, a criticism of Mr Jewson who may be expected to have concurred in any decisions which they took. It is said that, even if the claimants do not call Mr Jewson, the defendants may wish to call him and it is unfair that they should not be in a position to cross-examine him although he is a natural witness for the claimants. Particular stress is laid on Mr Jewson's position as chairman of the audit committee which was responsible to supervise the post acquisition accounting by AWG in respect of the incorporation of the business of Morrison into the AWG Group of companies. In particular, the audit committee will have had to deal with information passed post acquisition, from the financial staff of Morrison and AWG, to AWGs' accountants from which it may be possible to determine what was AWGs' contemporaneous assessment of the true value of the business and assets of Morrison.

9. The defendants also draw attention to the aspect of the defence where it is alleged that the deficiency of assets taken over from Morrison, of which AWG complain, was actually caused during the period of post acquisition trading by the new group which trading was conducted under the control of the AWG board of which Mr Jewson was at all material times a member and which extended for a period of approximately 6 months from the 21^st September 2000 for the remainder of Morrison's accounting period concluding in March 2001. This defence will involve criticism of decisions taken by the board of AWG during that period during which Mr Jewson remained a director. It is said that an observer might well think it to be inappropriate that a judge weighing the merits of such a defence had an established friendship, extending over a long period of time, with a member of the board responsible for taking any relevant decisions.

10. It is Messrs Decherts opinion contained in a letter of 18^th November 2005 which I have been shown, that "the evidence will last until somewhere between late June 2006 and mid October 2006 with the conclusion of the submissions of the parties being quite some time thereafter."

11. In deciding whether I should recuse myself from the case I have first to decide, applying the test derived from the authorities which I have set out above whether all circumstances which have a bearing on the suggestion that I might arrive at a conclusion in the case through bias would lead "a fair minded and informed observer to conclude that there was a real possibility" that that might be the result of my failure to withdraw.

12. I have come to the conclusion that my continuation as judge in the case will not fail the test. Mr Jewson's witness statement is mainly directed to the issue of causation of loss and to the impression made on the board of AWG of the representations made by the defendants in the course of AWG's "due diligence" inquiries. I can see no reason why the proposed new witnesses will not be able to give the evidence which Mr Jewson would have given. The fact that they are giving it in his place should not constitute an unfair disadvantage to the defendants. The same is true of the evidence given by Mr Jewson of the impact of the letter of 11^th September 2000 on the AWG board; see item (ii) in Messrs Decherts letter of the 30^th November. It does not seem to me that Mr Jewson's supervisory role as chairman of the audit committee and any recommendations that he may have given as to the treatment of financial information from Morrison in the accounts of the new AWG Group can be relevant to any judgment that I give. It will be for me to decide, if necessary, whether the accounts properly record such information applying my view of the appropriate accounting principles which may or may not agree with view of the audit committee. Insofar as there may be evidence from members of the audit committee of precisely the terms in which the financial information was provided to the auditors, or to the committee itself, the proposed new witnesses are just as able to give that evidence as Mr Jewson.

13. It has always been within the discretion of the claimants as to which AWG board members to call to give evidence and not, prima facie unfair to the defendants that late in the day they may elect not to call a witness who has given a witness statement but substitute other witnesses, provided proper notice is given of what those replacement witnesses are going to say. It will be open to the defendants to criticise the claimants case if a comparison between the evidence given by the replacement witnesses diverges from the witness statement which has been delivered by Mr Jewson. In those circumstances my role will be whether any such divergence undermines the evidence of the replacement witnesses. I observe that if this happens, the reliability of Mr Jewson's witness statement will come into question but I do not regard this as presenting a significant problem.

14. It is point (iv) of Messrs Decherts letter which seems to me to be the high point of the argument that I should recuse myself. However I have come to the conclusion that it does not drive me to do so. Mr Jewson was not an executive member of the board responsible for the day to day trading decisions of Morrisons after the acquisition. The question will not be whether particular trading decisions were ill judged but whether or not they caused relevant loss. I do not think that "a fair-minded and informed observer" would conclude that I was less likely to decide that trading decisions of AWG during the post acquisition period were mistaken and causative of loss because at the time Mr Jewson was a non-executive member. In any event I am assured by counsel for the claimants that there is no record and no other evidence that Mr Jewson was party to any of the post acquisition trading decisions of AWG.

15. In the present case it seems to me that there is a second stage to be gone through in arriving at my conclusion. In a case such as this with complex facts, substantial documentary disclosure and large numbers of individual witnesses there is always the possibility that the course of the trial will be affected by the unexpected emergence of facts which place the role of individuals, in this case Mr Jewson, in a new light and which might lead me, at any stage in the course of the trial, to conclude that I ought not to be the judge who decides whether or not the serious allegations made by the claimants against the defendants are made out. I have to balance whether the apparent role of Mr Jewson in the overall circumstances of the case leads to a risk that such a changed picture might emerge. I have to balance such risk against the undoubted disruption to the administration of justice generally caused by having to find a new judge to try a case of this length at short notice and also the inevitable further cost imposed on the parties resulting from the ensuing delay. I have come to the conclusion that such a risk, which must always be present, is to small to drive me to the conclusion that I should recuse myself. For these reasons I must dismiss the application.