Keith Davy (Contractors) Ltd v Ibatex Ltd

An appeal based on procedural irregularity succeeds only where the irregularity was serious and made the decision unjust. Delay, an imperfect judgment, or reformulation of a preliminary issue does not by itself justify a retrial.

A judge may widen a preliminary issue where its original formulation is too narrow, but should notify the parties and invite submissions if judgment has been reserved. Contractual quality and recourse are distinct: a statement that goods are first grade may be commercial information and need not create liability where the parties agreed non-recourse terms. Appellate courts will not disturb factual findings open on the evidence, particularly where the trial judge saw and heard the witnesses.

Merchants sold yarn to cloth manufacturers under eight contracts. The buyers complained about the quality of yarn supplied under the second contract and brought a counterclaim. The trial was confined initially to whether that yarn had been sold as first-grade yarn, with the parties agreeing on the consequences for recourse.

The trial judge later recognised that he had forgotten the limited nature of the preliminary issue, expanded it to include whether the sales were on non-recourse terms, and issued several draft judgments. The buyers appealed, alleging delay, unilateral redefinition of the issue, disregard of the parties’ common ground, and erroneous factual findings. The central question was whether these matters caused injustice or made the decision unsafe.

1. Disposition and governing threshold. Lord Justice Tuckey delivered the first judgment, and Lord Justices Mummery and Schiemann agreed. The appeal was dismissed with costs. Under rule 52.11.3(b) of the Civil Procedure Rules 1998, an appeal may result in a retrial only where the lower court’s decision was unjust because of a serious procedural or other irregularity. It is insufficient to establish an irregularity alone; seriousness and resulting injustice must also be shown.
2. Delay and reformulation of the issue. The judge’s admitted failures in preparing the judgment amounted to regrettable procedural or other irregularities, but did not cause injustice. The delay was not comparable to the circumstances in Goose v William Sanford, where judgment took 20 months and the judge had lost his notes. A judge is not bound by a preliminary issue as originally directed or agreed if it proves too narrow. Where judgment has been reserved, the proper course is ordinarily to notify the parties and invite further submissions before redefining the issue. Here, the parties were later given an opportunity to make written and oral submissions, and no prejudice resulted.
3. Quality and recourse. The terms first grade and without recourse addressed different matters. The former concerned the quality of the yarn; the latter concerned legal liability for defects. The evidence showed that first-grade yarn could be sold either with or without recourse. The judge therefore did not misunderstand the parties’ common ground by treating recourse as the decisive issue. His finding that the initial agreement was on non-recourse terms meant that a later statement about the quality of particular yarn had commercial rather than contractual significance.
4. Factual findings. The judge’s credibility assessments and findings were open to him on the evidence. The Court of Appeal gave weight to his having seen and heard the witnesses. Even after subjecting the decision to greater scrutiny because of the irregularities, the court could not say that it was wrong.

1. Court of Appeal (Civil Division): In [2001] EWCA Civ 740, the court dismissed the appeal and awarded costs to the respondents.
2. Leeds Mercantile Court: His Honour Judge McGonigal handed down final judgment on 18 July 2000, deciding the preliminary issue and the related question of recourse in favour of Keith Davy.