Pendleton & Anor v Westwater

Permission to appeal may be granted where a proposed ground has a realistic prospect of success, even though the issue was not pleaded or decided finally at trial. An election argument may be arguable where judgment has been entered against a company, but the pleadings indicate that the substantive claim was principally against its director personally and that the company could only be liable as principal through agency.

An illegality issue may also proceed on appeal where the evidence arguably supports knowledge of the relevant deception, despite the issue not having been pleaded at trial. Permission to appeal does not ordinarily justify a stay of execution.

The Pendletons obtained judgment in the Newcastle upon Tyne County Court against Alan Westwater concerning several loans evidenced by cheques and other transactions. Default judgment had previously been entered against Swingware Limited, a company associated with Mr Westwater, in respect of the cheques.

Mr Westwater sought permission to appeal the county court judgments on two grounds. First, he argued that judgment against the company constituted a conclusive election inconsistent with a continuing claim against him personally. Secondly, he argued that the property transaction was illegal because it involved deception of the building society and that Mrs Pendleton possessed sufficient guilty knowledge.

The application also sought a stay of execution.

1. Permission to appeal. Permission was granted on both proposed grounds because each had a realistic prospect of success.
2. Election. The county judge had rejected reliance on Morel Brothers v Earl of Westmoreland [1903] 1 KB 64 and related authorities, treating them as distinguishable because the claim had been advanced against the company and Mr Westwater in alternative, joint or several forms. Rix LJ considered that the pleadings arguably contained no case of joint liability. If the company could have been liable for all three cheques, it may have been only because Mr Westwater acted as its agent. Judgment against the company could therefore be inconsistent with pursuing Mr Westwater as the true principal.
3. Illegality. The county judge had initially put illegality aside because neither party had pleaded or relied upon it. On reconsideration, he found that Mrs Pendleton lacked sufficient knowledge to be a party to the illegal transaction. Having considered the earlier findings and the transcript evidence, Rix LJ concluded that there was a realistic prospect that an appellate court might find guilty knowledge and that the illegality issue should proceed, notwithstanding its omission from the original pleadings. The general principles discussed in Chitty on Contracts would be available for argument on the appeal.
4. Stay. A stay of execution was refused. The general principle was that an appeal did not itself lead to a stay, and no execution activity then appeared to be under way. In any event, the permitted grounds did not relate to every component of the judgment sum.

• Court of Appeal (Civil Division): Permission to appeal granted on the election and illegality grounds; stay of execution refused.
• Newcastle upon Tyne County Court: His Honour Judge Walton gave judgment on liability on 1 March 2000 and a subsequent judgment on 4 January 2001 concerning permission to appeal.