It is sometimes said that a judgment is written for the losing party; all that the winning party cares about is that it has won. However, a recent Court of Appeal decision is a salutary reminder that when a judgment is not carefully written, the failure to give adequate reasons for the conclusions may lead to a retrial, and so give the losing party a second bite at the cherry. All litigants, winners and losers, should take note.
Simetra Global Assets Ltd and another v Ikon Finance Ltd and others
In Simetra, the claimants claimed to be victims of a foreign exchange trading Ponzi scheme. Certain of the defendants (Ikon) owned the trading platform on which this trading supposedly took place, and also held trading accounts in the claimants’ names.
The claimants advanced claims against Ikon for dishonest assistance and damages for deceit and conspiracy. The claims arose out of confirmations (being certain letters and an email) provided by Ikon, which appeared on their face to confirm outstanding balances of some US $292 million held in trading accounts in October 2014. In fact, the money was not there.
During a 13-day trial in the High Court, the trial judge focused on two issues only: whether Ikon acted dishonestly, and whether the claimants relied on Ikon’s confirmations as referring to real funds (as opposed to notional funds held in a demonstration account). In a succinct 13-page judgment, the trial judge decided both issues in favour of Ikon and dismissed the claim.
The claimants appealed and submitted that the judgment’s critical findings were unexplained and unjust because the judgment failed to address many of the issues which arose at trial, its conclusions were cursory, its reasoning was limited, and it failed properly to analyse the witness and documentary evidence on a number of critical issues. The Court of Appeal held that the submissions were well-founded and granted a retrial before a different trial judge.
The relevant law
In Simetra, the Court of Appeal (at paragraphs 37 to 49) reviewed the authorities and provided valuable guidance as to the relevant law and the appellate court’s approach.
First, the approach to the trial judge’s findings of fact. Even if the appellate court would have found differently, it would not interfere unless the findings were plainly wrong; that is, the trial judge had fundamentally misunderstood the issue or the evidence, or plainly failed to take the evidence into account, or reached a conclusion which the evidence could not on any view support.
Second, the trial judge’s duty to give adequate reasons for his conclusions. This duty is a function of due process, and its breach may itself be a ground of appeal. The parties are entitled to know why they had won or lost. Indeed, inadequate reasons may obscure whether the court had misdirected itself, and thus whether an appeal on the substance is available. For the appellate process to work properly, the judgment must enable the appellate court to understand why the trial judge reached his decision.
Crucially, what is required to meet this duty turns on the subject matter. For a straightforward factual dispute whose resolution turns on which witness is telling the truth, it may be enough for the trial judge to summarise the evidence, indicate which witness is preferred, and briefly explain why. However, for disputes involving something of an intellectual exchange, with reasons and analysis advanced on either side, the trial judge must enter into the issues canvassed before him and explain why one case is preferred over the other. The trial judge need not deal with each and every point in issue, but he must identify and explain the issues, the resolution of which were vital to his conclusions.
Pulling together the authorities, the Court of Appeal noted that:
- Succinctness is desirable, but short judgments must be careful judgments.
- Not every point need be addressed, but the judgment must show that care was taken and the evidence as a whole was properly considered. Deciding which points must be addressed or can be omitted is itself an exercise of judgment.
- The best way to demonstrate the exercise of the necessary care is to identify the issues which need to be decided, marshal (however briefly and without needing to recite every point) the relevant evidence, and give reasons why the principally relevant evidence is either accepted or rejected.
- A judge should deal with apparently compelling evidence, where it exists, which is contrary to the conclusion which he or she proposes to reach, and explain why he or she rejects it.
- A judgment which fails to follow the above requirements is not necessarily inadequately reasoned, but it will need to be particularly cogent.
The Court of Appeal also noted that once it is acknowledged that a retrial is necessary, the appellate court should not tie the hands of the trial judge who would retry the case, such as by prescribing that certain findings of fact must be made.
Simetra provides valuable guidance as to the relevant law and the court’s approach. The authorities are well settled, but, as ever, the difficulty is in the application of the principles.
The threshold to obtain a retrial is very high; a retrial is a “serious step which must be regarded as a last resort”. However, Simetra was an unusual case, and the Court of Appeal’s extensive criticism of the trial judge was striking. Various aspects of the judgment were criticised as “confusing” (paragraphs 139 and 142), “impossible to understand” (paragraph 162), and resting upon “flimsy foundations” (paragraph 179). There was a “wholesale failure to deal with the contemporary documents” (paragraph 168), and the trial judge “did not engage with the real thrust of the expert evidence” (paragraph 173), and his “approach to the witnesses was unbalanced” (paragraph 174). The judgment also failed to deal with the case against certain defendants whose liability was a condition precedent to the case against Ikon in dishonest assistance (paragraphs 136 to 138).
The Court of Appeal case of Inter Export LLC v Townley and another (in which I appeared as junior counsel) provides a good contrast. There, the Court of Appeal criticised the trial judgment as “extremely puzzling and unclear” in part, that its structure could have been “clearer by far”, and it “was not a judgment whose structure and manner of expression met the standards normally to be expected of the High Court.” Nevertheless, it held that the trial judge “reached her conclusion on [the key issue] with great thoroughness and care” and the appeal was dismissed.
There are three takeaways here:
- First, the law and the court’s approach is well settled. The appellate court will be slow to grant an appeal on the basis of a failure to give adequate reasons. However, it can happen, even to judgments by experienced judges. It is a matter of degree.
- Secondly, the law and the court’s approach applies to any appeal from a first instance decision, including appeals from the County Court. Subject to cost considerations and broader tactics, this may be a powerful and relatively unexplored option in such cases.
- Thirdly, practitioners should remember that there is an established procedure to follow if there is a belief that there was a failure to give adequate reasons. If an application for permission to appeal on this ground is made to the trial judge, he should consider whether this has merit (adjourning if necessary) and, if so, provide additional and adequate reasons. Similarly, if such an application is made to the appellate court and appears to be well-founded, the appellate court should consider adjourning the application and remitting the case to the trial judge to provide additional and adequate reasons.