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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Business Link Berkshire & Wiltshire Ltd v Fearn [2009] EWCA Civ 455 (20 May 2009) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2009/455.html Cite as: [2009] EWCA Civ 455

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IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM SWINDON COUNTY COURT
District Judge Watkins
4XX44423

		Royal Courts of Justice Strand, London, WC2A 2LL
		20/05/2009

Lord Justice Waller :

1. This is an appeal and cross appeal from a judgment of District Judge Watkins handed down on 28^th April 2008. He gave judgment in favour of Business Link Berkshire & Wiltshire Limited for the sum of £2000 holding that Mr Fearn had made a fraudulent misrepresentation. He held that by a letter of 12^th February 2003 Mr Fearn had dishonestly represented that his company, Regional Producers Ltd, had 25 shareholders in order to induce BLBW to pay that sum to Mr Fearn. He rejected Mr Fearn's evidence that what Mr Evans of BLBW had sought from him was a list of 25 potential shareholders. The judge having found fraud refused however to give BLBW judgment for certain other sums relating to solicitors fees and administration (admin) costs, on the basis that those sums would have been payable in any event by BLBW and were thus not induced by any fraudulent statement.
2. Mr Fearn sought permission to appeal. He also sought permission to put in fresh evidence. The District Judge had found support for his view that Mr Fearn was fraudulent in the representation as to 25 shareholders from the fact that on the list of shareholders produced, certain of them simply did not exist as persons at all. The evidence which Mr Fearn sought to produce was a notebook and statement which supports the view that these persons did exist. Mr Fearn's excuse for not producing this notebook at the trial is that the allegation of fraud was made late and he had failed to remember he had this notebook until clearing out some papers after the trial he came across it.
3. Mr Fearn was granted permission to appeal by Jacob LJ on the basis of the fresh evidence and because although the sums of money involved were low the finding of fraud was a matter of significance to Mr Fearn.
4. Business Link have resisted the new evidence being placed before the court, contending that the existence or otherwise of certain of the people was not key to the judge's finding that Mr Fearn made a dishonest representation. The judge (they submitted) based that finding on the inherent likelihoods and assessing the witnesses in the witness box. They also cross appealed contending that the judge had misunderstood the position as regards the further sums of money. On a correct understanding BLBW submitted, those sums would not have been payable by BLBW in any event and BLBW were induced to pay them by the fraudulent representation.
5. At the conclusion of the argument before the court of appeal it seemed to the court first that it would be unjust not to allow in the fresh evidence and that that evidence did demonstrate that certain persons on the list produced by Mr Fearn which the judge had thought did not exist, did exist. Second, possibly because of the way the case had been argued, it seemed also that the judge may not have appreciated there was a strong argument at least on such documents as were available that the £2000 was in fact due to Mr Fearn without any necessity to show that he had 25 shareholders actually in place. Indeed if that sum was the only sum with which the case was concerned, it seemed inherently likely that Mr Evans would be seeking a list of potential shareholders and inherently unlikely that Mr Fearn would be dishonestly representing that his company now had 25 actual shareholders. In the alternative even if he was dishonestly representing he had 25 shareholders to induce the payment of that sum, BLBW had suffered no loss because that sum was due whether or not he had 25 shareholders.
6. But the appeal was not concerned with the £2000 only, and the position in relation to other sums claimed seemed to be that the Judge had misunderstood the position. Those sums were not payable by BLBW in any event. Furthermore so far as the documents showed they very arguably were not due to be paid unless there were 25 shareholders. On that basis Mr Evans might well have been seeking at least in relation to those sums confirmation that Mr Fearn had obtained 25 shareholders.
7. Thus in a case in which the key issue was whether a fraud had been committed, the court that had heard the witnesses, probably through no fault of its own, had approached the matter on a wrong premise in more ways than one. This court could not say what the result would have been if the matter had been approached on a correct basis. That is not simply because we did not have the transcripts of evidence but because it would need both that correct approach and the assessing of the evidence against that correct approach to be able to reach a proper result. That left only one answer which was to order a retrial.
8. A retrial over such insubstantial sums is unattractive in the extreme. However BLBW suggest that it is important that if they are right they demonstrate that Mr Fearn has sought to obtain public funds by fraud. Mr Fearn submits that it is important that he is able to clear his name from any suggestion of dishonesty. Perhaps some further explanation of what appears to me to be indicated by the documents that we have, and what appear to be inherent likelihoods may give both parties an opportunity to think whether it is a good use of funds to continue the battle as opposed to making some sort of compromise. It may even be that in the way things were handled there was room for misunderstandings which might lead Mr Fearn or the solicitors to whom sums were paid to realise that money was not in fact due, and for the BLBW to recognise that Mr Fearn was not as black as they have sought to paint him.
9. The documents before us were not in chronological sequence. If that were true before the Judge, that would have handicapped both those seeking to present the case and the judge. In relation to any issue of fact and in particular whether someone has been dishonest, the starting point has to be the unchallenged contemporary documents placed in their correct chronological sequence. It was of course Mr Fearn's case that some conversation took place in addition to the documents. Before us Mr Fletcher for BLBW faced with what the documents appeared to show and which was contrary to what the judge thought they showed, talked of there being further discussions. We did not of course have any transcripts and so it was not possible to ascertain whether there was some unchallenged conversation. All we could go on as a starting point for considering whether the judge was entitled to find fraud were the documents, and all one can say is that once the documents were put into chronological sequence they did not support the judge's reliance on them.
10. The chronological picture appears to be as follows:-

(a) Following the outbreak of foot and mouth in February 2001 and the disaster caused to rural communities, the government made available substantial sums of public money. They did so through a variety of agencies or quangos. The agencies or quangos with which this case is concerned were the South Western England Rural Development Agency which "contracted" distribution of money to Great Western Enterprises Limited (itself part of a non-departmental public body called the Wiltshire Rural Regeneration Partnership) but which itself distributed money through Business Link Berkshire & Wiltshire Limited.(BLBW).

(b) Mr Fearn made an application to Wiltshire Rural Regeneration Partnership with a view to obtaining funding to enable him to set up a company called Regional Producers Limited with the aim of having producers as "members from all over the Wiltshire region". On the application form the dates for the achievement of benefits was "Company formed September 2002"; "share money subscribed September 2002"; "Rural Enterprise Scheme Application September 2002 (or sooner if recruitment is ahead of schedule)".

(c) It seems that the Wiltshire Rural Regeneration Partnership were prepared to consider funding the setting up of the company but it wanted Mr Fearn in return for sums paid to him to achieve the recruiting of at least 25 shareholders to put up capital to enable the company to operate. That funding would be divided between four aspects - payments to Mr Fearn personally, payments to Midwest Media Consultants, Lawyers' fees and Administration & Promotion costs. [See B11 dated 2^nd July 2002] The way the money was to be distributed was by BLBW "on behalf of itself and the Group" [by which I understand was meant the various "quangos" responsible for distributing public money], raising purchase orders against the four aspects. "The purchase order would detail what work was being done. The invoice would match that and copies of all work done related to that would be supplied to BLBW". [See B14 a document signed by Tim Evans of BLBW dated 8^th July 2002]. That document also indicated that payments would be staged. It indicated that work for the original £20,000 had been done and that a purchase order and invoices would be produced to cover that sum. It seems that it was contemplated at this stage that further orders would be made and invoices produced if there were at least 8/10 producers as shareholders by the end of July, those orders and invoices "to fund them to take the group up to a minimum of 25 members". Then "If that is successful we will have held back some of the funds that can be released to cover the final costs of running the Initial General Meeting and setting up the final legal documentation".

(d) By the 17^th July the above had been clarified by agreement "in principle" between Tim Evans for BLBW and Mr Fearn. I must set out the relevant parts of a memorandum of Mr Evans dated 17^th July:-

"Regional producers Ltd

Please find as follows the layout for the funding for Regional producers. I have agreed this in principle with Les Fearn.

Time Period	Fearn	Mid west media	Farrells Solicitor	Admin
Up to end of June 2002	£5,800	£2,650	£10,000	£8,693	£27.343
Up to end of July 2002	£3,800	£2,650	£6,000	£2,223	£16.676
1st August until 25 signed up	£2,000	£2,000	£0	£1,900	£5,900
For igm meeting when 25 joined	£400	£700	£7,000	£1,900	£10,000
					£59,919

Of the work until the end of June £20,000 will come from BLBW the balance from the food initiative money. I would like to raise purchase orders for this straight away. I know Les would appreciate payment of these as quickly as possible.

I will raise against each date four purchase orders one against each supplier. The costs above are net of VAT. The purchase order will mirror the proposed plan that backed the bid in terms of short term, medium term goals. Etc.

With each Invoice I will ask them to supply copies of all documents that support the Invoice.

They already have achieved 5 farmers committed to the scheme who will be audited for their suitability over the next two weeks. This was the first target. I have asked for a copy of the terms to which the farmers commit. But since they have reached this assuming you are all happy with the level of commitment then I need to raise the purchase orders for the work up to the end of July.

This will leave just under £16,000 of the Food initiative money outstanding. The target for the end of July is to have 8/10 farmers signed up and committed. If they achieve this then a further £5,900 is available. This will take them through to 25. There is time lag on all of this. That is because their main ongoing costs are holding meeting that are being held now. The farmers then have to come back within a few weeks and say if they will join or not.

The last £10,000 is held back until they have the minimum of 25 members. They organize the IGM meeting and we fund the cost of that and the completion of the legal documentation."

(e) It will be seen that the explanation in the text relates to the four lines in the box. It indicates that the agreement with Mr Fearn was that he would be paid three tranches £5,800 for work done up to end June;£3,800 for work done up to end July; and the third £2000 for work done until 25 shareholders signed up; with a sum of £400 held up until there were 25 shareholders. That £400 was part of the fourth line of the box adding up to £10,000 "held back until they have the minimum of 25 members". It should be noted that part of that last £10,000 was £7,000 for Farrell's solicitors and £1,900 Admin.

(f) Thus following the above BLBW issued a purchase order on 22^nd July for £5,800 which related to 34 days between 1^st May and end of June [B25]; Mr Fearn's invoice dated 25^th July matched that purchase order adding VAT [B26]. BLBW issued a further purchase order on 29^th July for 23 days from 1^st July in the sum of £3,800 [B28] closely although not absolutely precisely matched by Mr Fearn's invoice of 12th August [B29]; importantly both related to work actually done.

(g) On 1^st October 2002 BLBW issued a purchase order for £2000, the third tranche. The letter of 1^st October [B30] identified certain documentation which would have to be produced with the invoice none of which suggested that it would have to be shown that 25 shareholders should have been formally made shareholders for the sum to be due. There is then an important letter of 7^th October from BLBW [B20] which reproduces the box schedule set out above and then states:-

"A purchase order for Farrell's for the £8,000 is being sent direct to them. I have raised a third purchase order for Peter Grimshaw for £2,000. One for Regional producers for a further £1,900 and one for you for £2,000.

This is because whilst you held the IGM early you are now past the 10 shareholder target and aiming for the 25. Once these will have been paid this will leave potentially £10,000 outstanding. My understanding on these is that they become valid when the group reaches a membership of 25. If you have any disagreement with this then I am quite happy to take it back to the original group to see if they will change the basis for payment.

The purchase orders should reach the respective people in the next few days."

(h) The importance of the letter is (as it seems to me) that it confirms that so far as the third line of the schedule is concerned those sums were payable without 25 shareholders having actually been appointed. It was the final £10,000 (£400 to Mr Fearn, £7,000 to Farrells and £1,900 Admin) which would become due only when the group reaches membership of 25.

(i) Mr Fearn sent his invoice for £2000 on 30th December 2002 and it was approved for payment on 7^th February 2003. Surrounding that date is first a letter of 4^th February from BLBW which states:-

"Against yourself there is up to £2,000 you can claim against purchase order 4091. We would be happy to pay that once you have supplied us some details of the 25 plus shareholders."

Following the approval payment of the £2000 Mr Fearn sent the letter of 12^th February 2003 in which he states:

"Regarding my application for £2.000.00 against purchase order number 4091, let me apologise for not including the 25 names required. Please find them listed below. We would obviously appreciate your treating this information as confidential.

[listing of 25 names] "

(j) It is the letter of 12^th February which the judge held to be fraudulent on the basis that the 25 persons listed were not shareholders at that date. The contest at the trial was whether as Mr Evans said in evidence that Mr Fearn had told him that he had 25 shareholders committed or whether, as Mr Fearn suggested, that when Mr Evans said he could now have all the grant money because he had 25 shareholders, he, Mr Fearn, had explained that he did not have 25 shareholders but hoped to have them by the end of March, and Mr Evans had then said he needed 25 names which included not simply shareholders but those on the "interested list", just so he had something for the record.

11. The judge found the letter of 12^th February to be fraudulent. He rejected Mr Fearn's evidence of what Mr Evans had asked for. A critical part of his finding is in paragraph 65 and 66 of the judgment where he says this:-

"65. Insofar as the conversation alleged to have taken place between Mr Fearn and Mr Evans I do not accept Mr Fearn's evidence that a conversation took place in which Mr Evans, in terms, asked Mr Fearn simply to provide him with a list of 25 names just so he had something for the record. Throughout the process, the need for 25 shareholders was constantly emphasised. It appears (but is not limited to) in the following documents;

a) email pg 140/141

b) letter 9/7/02 page 142

c) letter 17/7/02 page 229

d) email 17/7/02 page 230

e) letter 1.10.02 page 120

f) purchase order 1.10.02 page 121

g) letter 8/10/02

h) defendant's invoice 30.12.02 page 157

i) letter 4.2.03 page 122

66. Having heard the evidence, in my judgment it is inherently improbable that Mr Evans would have asked Mr Fearn simply for a list of interested names. He told me that he was not in a position to recommend payment until he had received [of] 25 shareholders names. Having heard the parties' evidence, I am satisfied that no such conversation (see 39-43 above) took place."

12. The judge also supported his finding of dishonesty in these words in paragraphs 80 to 82:-

"80. In addition, the claimant relies on the evidence of Mr Mark Lockyer, (page 159a) who I heard give evidence. His name appears on the list provided by Mr Fearn. He gave evidence that he knew nothing of Regional Producers or any variation on that theme. He could not explain why he found his name on the list.

81. Further, and in addition, the claimants point to the response to a request for further information which was filed pursuant to an order of district judge Adam on the 20^th of January 2008. In that document, Mr Fearn has asked some simple questions about names and addresses. It is said against Mr Fearn that the brevity of his answers can only be explained by him having made up the existence of all the shareholders in the first place.

82. In my judgment, those three points add further weight to the claimant's contention that the letter 12^th [February] 2003 contained a list that was other than a list of shareholders. The evidence persuades me that the list of shareholders contained people who did not exist, and of those who did exi[s]t, at least one knew nothing of Regional Producers."

13. The judge also however found that BLBW could not succeed in recovering the moneys paid to Farrells and the Admin costs. His findings were in paragraphs 86 - 88:-

"86. Aside from the contractual document between the claimant and Great Western Enterprises there is no formal contractual document in [of] the trial bundle. In so far as that contract is concerned it appears to be an express written condition of the contract that £30,000 was to be paid upon recruitment of to where shareholders to Regional Producers, and the final £10,000 was to be paid upon recruitment of 25 shareholders. From that, a total of £1,900 was paid towards Regional Producers (Wiltshire) Ltd, and a sum of £5,925 was paid in respect of legal fees to Farrells solicitors.

87. I have not received any evidence as to the contractual arrangement between Farrells solicitors and any other party. On the balance of probabilities I find that Farrell's would not have undertaken works on any other basis than they would be paid. Consequently, in so far as the solicitors are concerned, they would have been entitled to be paid for the work they did regardless of whether 25 shareholders had been reached or not. I would need to be satisfied on the basis of clear written evidence that the solicitors would have agreed to have been engaged on any other basis, but there is no such evidence. Consequently, I find as a fact that Farrells would have been entitled to claim from the claimants and be paid by them £5,925 in respect of the work they undertook.

88. In so far as Regional Producers (Wiltshire) Ltd was concerned I can find nothing in the documents, nor see anything elsewhere in the evidence that supports the contention that that company would not also be paid for what I understand to be [a] marketing services. Therefore, on the basis of the available evidence, I find that both Regional Producers (Wiltshire) Ltd and Farrells solicitors would have been entitled to receive payment regardless of 25 shareholders being achieved or not."

14. There are a number of problems with the judge's assessment. First in relation to the sum of £2000 paid to Mr Fearn it had actually been approved for payment before the receipt of the letter of 12^th February 2003, and thus was prima facie not induced by anything said in a letter of 14^th February. Secondly the documents relied on by the judge in paragraph 65, save conceivably the letter of 4^th February 2003, do not support the judge's finding that "throughout the process, the need for 25 shareholders was constantly emphasised" as a condition for receipt of the £2000.Indeed the letter of 7^th October 2002 is to the contrary. Furthermore the language of the 4^th February letter could actually be read as consistent with seeking the supply of "some details of the 25 plus shareholders" [my emphasis]. Thus if it were simply the £2000 one was concerned with, the inherent likelihood seems to me to be that Mr Evans would have simply been seeking a list of shareholders and others interested adding up to 25. Furthermore the fresh evidence does indicate that it was unfair to hold that the list contained people who did not exist. That would point to it being unsafe to have found Mr Fearn guilty of fraud.
15. But we are not simply concerned with the £2000. In relation to the sums paid to Farrells and the Admin figure all from the fourth line in the box schedule, they as it seems to me were to be paid when the minimum of 25 shareholders had been achieved. Farrells were not solicitors to BLBW. They were solicitors instructed by Mr Fearn and possibly, once formed, his company. The fact that Mr Fearn or that company might be liable for the fees does not mean that BLBW were liable to pay the same unless the condition of 25 shareholders was fulfilled. The same relates to the Admin costs. BLBW's liability to pay that sum too seems to me to depend on the 25 shareholders having committed themselves.
16. In relation to those sums accordingly the question does arise as to whether there was the conversation that Mr Fearn suggested took place which altered the effect of the documents, or whether Mr Evans was insisting that he had the names of 25 actual shareholders before BLBW would pay those sums. It does not seem to me possible to identify quite where the inherent likelihoods lie once one is addressing these items alone. Mr Fearn and Mr Evans may both have thought that they would like to get the grants all complete before the end of March and Mr Evans might on that basis have been prepared to waive strict compliance with the actual appointment of 25 shareholders. Alternatively Mr Fearn may have at least been honestly mistaken that that was what Mr Evans was now saying since that was all that was needed to make the £2000 available. In the further alternative the judge was in fact right in his assessment of Mr Fearn, i.e. Mr Evans to Mr Fearn's knowledge was insisting that the final payments would only be made on the appointment of 25 shareholders and Mr Fearn dishonestly represented the position in order to obtain these final payments, the liability for which would otherwise fall on him or his company.
17. The findings of the judge cannot stand and there is no choice but to order a retrial. I would allow the appeal and the cross-appeal and make that order.

Lord Justice Rimer :

18. I agree.

Lord Justice Aikens :

19. I also agree