Great Future International Ltd & Ors v Sealand Housing Corporation & Ors

An appellate court should distinguish questions of law from case-management decisions. Whether evidence is relevant and admissible is a question of law. Where proposed evidence is logically probative of an issue such as bad faith or mitigation, it should be admitted. A judge may nevertheless control or exclude admissible evidence under Civil Procedure Rules 1998, rule 32.1. That power must be exercised with great circumspection and in support of dealing justly with the case. An appellate court may interfere where the first-instance judge has misdirected himself on admissibility, thereby invalidating the discretionary decision.

The claimants invested in a Shanghai development project and obtained judgment on liability for breach of warranty, misrepresentation and fraud. During the inquiry as to damages, the defendants sought to question the claimants’ witnesses about an alleged approach by an employee of Deutsche Bank to an expert witness. They argued that the approach was evidence of bad faith in negotiations concerning mitigation and the sale of shares.

Lightman J excluded the proposed line of questioning, treating it as irrelevant and relying also on case-management considerations, including delay, cost and overlap with proposed contempt proceedings. The defendants appealed. The central issue was whether the evidence was relevant and admissible, and whether it should nevertheless be excluded under rule 32.1.

1. Appeal allowed. The Court of Appeal unanimously held that the proposed line of questioning should be permitted. Costs were summarily assessed at £10,000, to be set off against costs owed to the appellants.
2. Per Arden LJ, the judge had treated admissibility as a matter of case management, but admissibility involved a question of law. The proposed evidence was clearly relevant and admissible because the defendants alleged that Deutsche Bank had authorised an improper approach to the expert and that this demonstrated bad faith relevant to the conduct of negotiations and mitigation of damages.
3. The fact that the person who allegedly made the approach was not himself a witness did not prevent the defendants from putting their case to the claimants’ witnesses. Whether the evidence ultimately proved productive was a matter for the inquiry.
4. The court recognised the wide discretion of trial judges in managing lengthy proceedings and the rarity of appellate intervention where there is no error of law or perversity. However, the judge’s misdirection on admissibility invalidated the exercise of discretion.
5. Rule 32.1 still gave the judge power to exclude evidence which was otherwise admissible. That power had to be exercised with great circumspection and in support of dealing justly with the case. In the circumstances, the evidence should not be excluded. The overlap with contemplated contempt proceedings could be managed by appropriate safeguards, including restrictions on the use of evidence and warnings to witnesses.
6. The expert’s delay in reporting the alleged approach was a matter for cross-examination, not a ground for excluding the evidence.

• Chancery Division: Lightman J excluded the proposed line of questioning during the inquiry as to damages, following his judgment on liability dated 2 November 2001.
• Court of Appeal (Civil Division): The appeal was allowed. The proposed evidence was held relevant and admissible, and the discretion to exclude it was to be re-exercised in accordance with the proper legal approach.