Simon Passfield KC & James Hannant successful in High Court

05/08/2024

Singh v Garcha [2024] EWHC 1844 (Ch): Trial Judge’s decision overturned due to failure to give adequate reasons

1. It is well established that an appeal court will generally be very slow to overturn findings of fact made by a trial judge (see White Book at 52.21.5 and the cases cited therein). However, this will not be the case where the trial judge fails to give adequate reasons for such findings (see White Book at 52.21.7).

• In Singh v Garcha [2024] EWHC 1844 (Ch), Simon Passfield KC and James Hannant (instructed by SP Legal Solutions) acted successfully for an appellant trustee in bankruptcy in overturning the dismissal of possession and sale applications where Zacaroli J was satisfied that the judge below had failed to give adequate reasons for his conclusion that the bankrupt had no beneficial interest in the properties and failed to address important evidence which was inconsistent with such a finding.

• This case provides a helpful illustration of the (admittedly rare) circumstances in which it will be appropriate for an unsuccessful litigant to seek a re-trial on the grounds of the failure of the first instance tribunal to properly perform its functions.

Background

• The Appellant (“T”) was the Trustee in Bankruptcy of the First Respondent (“B”). B was the wife of the Second Respondent (“HG”).
• Proceedings were first issued by T seeking declarations as to the extent of T’s beneficial interests in two properties conveniently referred to throughout proceedings as: (i) Malham Drive; and (ii) the Lock. Following issue, a third property was added to proceedings (335 Bath Road) (together: “the Subject Properties”).
• Of those properties: (i) Malham Drive was jointly owned by B and HG; (ii) the Lock was solely owned by B; and (iii) 335 Bath Road was solely owned by HG.
• Sometime prior to the proceedings being issued, HG had pleaded guilty to a number of counts of fraud during his trial in the Crown Court and was subsequently sentenced to a custodial term.
• Separately, HG was the subject of proceedings brought under the Proceeds of Crime Act 2002 (“the PoCA Proceedings”).
• When the PoCA Proceedings came before the Crown Court on 8 September 2017, a settlement agreement was reached, under which B agreed to relinquish any interest she held in numerous properties (included in a schedule to the agreement). The Subject Properties (and one other property), however, were specifically ‘ring-fenced’ and not included in the assets available for confiscation.
• During the course of the PoCA Proceedings, a number of statements were made by both B and AG which appeared to assert that all properties (including the Subject Properties) were jointly owned by them. At trial, both of the Respondents sought to distance themselves from those statements, including denials that those statements were signed by them and assertions that those statements had been made by others on their behalf but without instructions.
• In addition to those statements, T placed reliance upon the conveyancing files for both of Malham Drive and the Lock and in particular upon documents which appeared to record that B and HG had given instructions to their conveyancing solicitors to the effect that at the time of purchase of Malham Drive, they wished to hold that property as beneficial joint tenants.
• At trial, the Respondents relied heavily upon the existence of a martial agreement (“the Marital Agreement”) which pre-dated the acquisition of the Subject Properties, which they argued evidenced an intention that all properties acquired by either of B or HG after their marriage were to be beneficially owned by HG only. In closing, T was compelled to accept that the Maital Agreement was not a fabrication, but nevertheless asserted that properly understood, it merely evidenced an intention that HG would remain the sole beneficial owner of the properties acquired by him before the marriage (which did not include the Subject Properties).

The decision below

1.  At trial, the judge accepted that the Marital Agreement embodied the intentions of the Respondents as to the future ownership of property. However, the trial judge did not rule out the possibility that the Respondents’ intentions changed over time.
2. In respect of the Subject Properties, and in tight summary, the trial judge:
   1. noted that: (i) 335 Bath Road was solely owned by HG; (ii) the starting point was that HG owned the entire beneficial interest in that property; and (iii) there was no evidence that there was any agreement between the Respondents at the point of acquisition that B would have any interest in the property and further that there was no evidence of detrimental reliance sufficient to found a common in tension constructive trust in B’s favour;
   1. as regards the Lock, held that there was an express agreement (in the form of the Marital Agreement) that HG would be the sole beneficial owner of the property and that B had not been properly challenged on her reasons for entering into the agreement; and
   1. stated that he was satisfied that in relation to Malham Drive that there was a clear and express common intention between Mr and Mrs Garcha that the beneficial ownership would be held in a way which was different from the legal ownership. 
3. In support of those determinations the trial judge concluded:

‘I confirm that nothing which I have seen or read persuades me that there is any or any sufficient evidence to enable me to conclude that any point after the entry into the marital agreement there was an agreed departure from the terms of the marital agreement as to the beneficial ownership of Mallam Drive as between [HG] and [B], when compared to the common intention expressed in the marital agreement’.

1. T’s application was accordingly dismissed with costs.

Basis for the appeal

1. T appealed against the decision on 9 grounds which were condensed (as regards HG) into the following three lines of challenge: (i) the judge failed to give reasons for his conclusions as to the intentions of the Respondents in purchasing the Properties, and failed to weigh up all of the evidence in reaching them; (ii) complaints as to the judge’s conclusions in respect of the Marital Agreement; and (iii) complaints as to the judge’s conclusions on detrimental reliance.

The appeal court’s summary of the applicable legal principles

1. A major part of T’s appeal arose out of was said to be the trial judge’s failure to give proper or adequate reasons for his decision. In his judgment on the appeal, Zacaroli J set out what he considered to be the relevant authorities (at paragraphs 27 to 31) as follows:

27.  The requirement that a judge give adequate reasons for his or her decision was explained by Lord Phillips MR in English v Emery Reimbold & Strick Ltd (Practice Note) [2002] EWCA Civ 605; [2002] 1 WLR 2409 , at §15 to §21.

28.  It is unnecessary for a judge to deal with every argument advanced by the parties: “It is sufficient if what he says shows the parties, and if need be the Court of Appeal, the basis on which he has acted…” (Griffiths LJ in Eagil Trust Co Ltd v Pigott-Brown [1985] 3 All ER 119, 122 ) which Lord Phillips MR said, at §18, applied to judgments of all descriptions. At §19, he said:

“It follows that, if the appellate process is to work satisfactorily, the judgment must enable the appellate court to understand why the judge reached his decision. This does not mean that every factor which weighed with the judge in his appraisal of the evidence has to be identified and explained. 

But the issues the resolution of which were vital to the judge’s conclusion should be identified and the manner in which he resolved them explained. It is not possible to provide a template for this process. It need not involve a lengthy judgment. It does require the judge to identify and record those matters which were critical to his decision. If the critical issue was one of fact, in may be enough to say that one witness was preferred to another because the one manifestly had a clearer recollection of the material facts or the other gave answers which demonstrated that his recollection could not be relied upon.”

29.  At §21, Lord Phillips MR said:

“When giving reasons a judge will often need to refer to a piece of evidence or to a submission which he has accepted or rejected. Provided that the reference is clear, it may be unnecessary to detail, or even summarise, the evidence or submission in question. The essential requirement is that the terms of the judgment should enable the parties and any appellate tribunal readily to analyse the reasoning that was essential to the judge’s decision.”

30.  Mr Willetts drew my attention to the following passages of the judgment of Patten LJ in Weymont v Place [2015] EWCA Civ 289 , at §1, §4, §5 and §6:

“1.  The Court of Appeal does not usually entertain appeals where the only grounds of challenge to the judgment of the trial judge relate to the judge’s findings of fact. Decisions of this Court and the Supreme Court have repeatedly recognised the advantages which the trial judge enjoys in hearing the live evidence and assessing the credibility of the witnesses. The function of the appeal court is not to re-hear the case but to review the decision which the trial judge has made. For this reason, it will only interfere with his findings of fact if it becomes clear that there was no evidence to support them; that the judge misunderstood the evidence; or that he made findings which no reasonable judge could, in the circumstances, have made see Re B (a Child) [2013] UKSC 33 at [52]-[53] .

…

4.  But the relative immunity of the trial judge’s findings of fact to interference on appeal depends upon the trial process having been conducted in a way which confirms that the trial judge has properly considered and understood the evidence; has taken into account the criticisms of the evidence advanced by the parties’ legal representatives; and has reached a balanced and objective conclusion about points on which differing or inconsistent evidence has been given in making the factual findings which form the basis of his decision.

5.  An important aspect of this process is the production of a properly reasoned judgment which explains to the parties and to any wider readership why the judge has reached the decision he has made. This includes making a reference to the issues in the case; the legal principles or test which have to be applied; and to why, in cases of conflicting factual evidence, the judge came to accept the evidence of particular witnesses in preference to that of others.

6.  The judge is not, of course, required to deal with every point raised in argument, however peripheral, or with every part of the evidence. The process of adjudication involves the identification and determination of relevant issues. But within those bounds the parties are entitled to have explained to them how the judge has determined their substantive rights and, for that purpose, the judge is required to produce a fully reasoned judgment which does so: see English v Emery Reimbold & Strick Ltd. [2002] EWCA Civ 605 . The production of such a judgment not only satisfies the court’s duty to the parties but also imposes upon the judge the discipline of considering the detail of the evidence and the legal argument.”

31.  In Simetra Global Assets Ltd v Ikon Finance Ltd [2019] EWCA Civ 1413 , Males LJ, at §46, added that “fairness requires that a judge should deal with apparently compelling evidence, where it exists, which is contrary to the conclusion which he proposes to reach and explain why he does not accept it”.

Alleged failure to give reasons for the trial judge’s conclusions as to the intentions of the Respondents in purchasing the Properties

1. Having identified the relevant legal principles, Zacaroli J turned to grounds 1 – 3 and T’s broad contention that the judge had failed to give reasons for his conclusions as to the intentions of the Respondents in purchasing the Properties, and failed to weigh up all of the evidence in reaching those conclusions.
2. Zacaroli J first noted the existence of ‘important evidence’ which was inconsistent with the Respondents’ assertions that the properties were wholly beneficially owned by HG, in the form (primarily) of the evidence given by them in the course of the POCA proceedings and (secondarily) documents in the conveyancing file in relation to the acquisition of Malham Drive.
3. Whilst Zacaroli J accepted that the trial judge had this evidence in mind, he also noted the absence of any reference to that evidence in his reasoning, save for a single reference to it in relation to Malham Drive that did not enable the reader of the trial judge’s judgment to understand his reasoning in rejecting it.
4. As to Bath Road specifically, Zacaroli J noted that no reference was made in relation to that property to the inconsistent evidence in the PoCA proceedings, such that it was impossible to know whether the trial judge either (i) accepted the explanations of the Respondents in which they denied that the statements in those proceedings, purportedly made by them or on their behalf, were in fact made by them or on their behalf, or (ii) concluded that they did make, or authorise, such statements, but concluded that they were not true. 
5. This analysis led to Zacaroli J’s observation on the significance of the distinction and how it might impact on the Respondents’ claim for equitable relief in circumstances where the Respondents may have made prior statements in separate proceedings which were untrue:

‘The difference is important, particularly because if [the trial judge] concluded that [the Respondents] did make or authorise the statements, that may well have given rise to further questions. In particular, whether having made prior statements which, if [the Respondents] case in these proceedings was to succeed, must have been untrue, impacted on a claim to equitable relief’.

• Having addressed this issue and also having noted the existence of other omissions, Zacaroli J concluded that the judgment below: (i) did not allow the parties or the appeal court to analyse the reasoning essential to the trial judge’s decision; (ii) failed to show that the judge had reached a balanced and objective conclusion about points on which differing or inconsistent evidence has been given in making the factual findings; and (iii) failed to deal with contrary evidence and explain why that evidence was not accepted. In light of those determinations, the Judge allowed the first three grounds of appeal:

I consider that by reason of these omissions, the judgment fails to enable the parties or an appeal tribunal to “analyse the reasoning that was essential to the judge’s decision” (per Lord Phillips MR) and fails to show that the judge “has reached a balanced and objective conclusion about points on which differing or inconsistent evidence has been given in making the factual findings which form the basis of his decision” (per Patten LJ). Similarly, I consider that there was contrary evidence which the judge should have dealt with and explained why he did not accept it (per Males LJ). Accordingly, I allow the appeal on grounds 1 to 3.

Complaints in relation to the trial judge’s treatment of the Marital Agreement

• The second point of challenge to the judgment of the trial judge was in relation to complaints made by T as to the judge’s conclusions in respect of the Marital Agreement.
• The trial judge’s decision in this regard was; ‘In terms of the interpretation of the specific provisions of the marital agreement itself, I respectfully adopt and prefer, in comprehensive terms, the interpretation of the relevant clauses of the marital agreement as advanced to me by counsel for [the Respondents].
• In this regard, Zacaroli J first accepted that (as with grounds 1-3) the trial judge had failed to give sufficient reasoning for his decision such that it was: ‘not possible to understand the process of reasoning which led the judge to his conclusion’. Accordingly, the appeal was allowed on that further ground.
• The Judge then turned to address T’s subsidiary point relating to the trial judge’s reliance upon the fact that B had not been challenged on her evidence as to her reasons for entering into the Marital Agreement. That evidence was (in summary) that the purpose of the Martial Agreement was to protect pre-agreement properties acquired by the Respondents.
• HG sought to argue that B’s evidence in this regard needed to read in accordance with other statements made by B in her second witness statement.
• The significance of those other statements was rejected by Zacaroli J who held that: ‘I find nothing… in these passages from [B’s] second statement which undermine her clear evidence as to the reason for entering into the Marital Agreement that she gave in her first witness statement’.
•  Accordingly, Zacaroli J considered that the trial judge ‘fell into error’ in placing reliance on the fact that B’s evidence as to the reasons why she entered into the Marital Agreement were not challenged in reaching his conclusions both as to the interpretation of the Marital Agreement and as to the subsequent joint intentions of the Respondents and as result allowed the appeal under this ground.

Complaints as to the trial judge’s conclusions on detrimental reliance

• Zacaroli J did however uphold the judgment in relation to final point of challenge regarding T’s complaints as to the trial judge’s conclusions on detrimental reliance.
• First, he held that although the trial judge’s reasons for concluding that there was no detrimental reliance suffered by B were ‘very shortly stated’ it fell into a different category. It was not the case that in this regard there was a critical piece of inconsistent evidence which the judge had failed to deal with. Rather, it was sufficient for the trial judge to say that: ‘…on the totality of the evidence presented – [the judge] was not satisfied that the burden of establishing detrimental reliance had been established’.

Conclusion

• The majority of Zacaroli J’s judgment was focused on the need for a trial judge to give reasons for the decisions that they make. The importance of doing so arises out of: (i) the need to ensure that the appellate process can function properly (English v Emery Reimbold & Strick Ltd (Practice Note) [2002] EWCA Civ 605; [2002] 1 WLR 2409 [19]); (ii) the fact that the parties are entitled to have explained to them how the judge has determined their substantive rights (Weymont v Place [2015] EWCA Civ 289 [6]); and (iii) the fact that fairness requires that a judge should deal with apparently compelling evidence, where it exists (Simetra Global Assets Ltd v Ikon Finance Ltd [2019] EWCA Civ 1413[46]).
• It is important however not to overstate the effect of the principle. As was held by Lord Phillips in English v Emery Reimbold & Strick Ltd (Practice Note): ‘This does not mean that every factor which weighed with the judge in his appraisal of the evidence has to be identified and explained’. Neither does the process necessarily require a lengthy judgment (ibid.).
• As Zacaroli J observed in dismissing T’s complaint that insufficient reasons had been given by the trial judge for concluding that there was no detrimental reliance suffered by B, the Judge does not need to give reasons for every decision that they might make. Where there is no critical piece of apparently compelling evidence, it may well be sufficient for the judge to conclude on the totality of the evidence that they prefer the case of one or other of the parties.
• The true position was summarised by Patten LJ in Weymont v Place [6]:

‘The judge is not, of course, required to deal with every point raised in argument, however peripheral, or with every part of the evidence. The process of adjudication involves the identification and determination of relevant issues. But within those bounds the parties are entitled to have explained to them how the judge has determined their substantive rights and, for that purpose, the judge is required to produce a fully reasoned judgment which does so: see English v Emery Reimbold & Strick Ltd. [2002] EWCA Civ 605 . The production of such a judgment not only satisfies the court’s duty to the parties but also imposes upon the judge the discipline of considering the detail of the evidence and the legal argument’.

• Appeals on grounds of a judicial failure to give reasons are comparatively rare. However, where the judgment below does not permit the losing party to properly understand the reasons why the judge has found against them, the only recourse may be to appeal on the basis of an absence of or inadequacy in the reasons given by the judge for their eventual decision.

Simon Passfield KC and Jamie Hannant were instructed by Sanjeev Punj of SP Legal Solutions.