DHL Air Ltd. v Wells

Allegations of fraud and deceit must be distinctly pleaded. A court should not uphold a finding of dishonesty based on an allegation which was neither pleaded, addressed in closing submissions nor put to the witness or party concerned. The question is whether the procedural irregularity caused prejudice; in a case turning on dishonesty, the appellate court must be able to say that the finding would have followed had the allegation been properly raised. The gravity of a finding of deceit remains important regardless of the value of the claim. Procedural discipline and proportionality are also required in the conduct of civil proceedings.

A pilot accepted an offer of employment with DHL Air and attended a training course. He remained employed by Virgin, however, and later decided not to join DHL. DHL claimed the training costs in contract and, alternatively, deceit. The county court dismissed the contractual claim but found deceit on the basis that the pilot had falsely represented by his conduct that he was free to be trained for DHL.

The deceit allegation on which judgment was based had not been pleaded, addressed in closing submissions or expressly put to the pilot in evidence. The pilot appealed. DHL served a respondent’s notice seeking to uphold the judgment on a different dishonesty allegation. The central issue was whether the unpleaded basis of deceit could properly support the judgment.

1. Appeal allowed. Judgment was entered for the defendant, with costs to be assessed if not agreed.
2. Fraud and deceit involve an allegation of dishonesty. Because such a finding may have consequences beyond the immediate dispute, allegations of fraud must be distinctly pleaded: Davy v Garrett [1877] Ch D 473; Bradford Third Equitable Benefit Building Society v Borders [1941] 2 All ER 205.
3. The judge’s finding rested on a representation by conduct which had not been pleaded, dealt with in closing submissions or expressly put to the pilot. Although some related matters had emerged in the evidence, they had not been considered in the specific context of that allegation. The Court of Appeal could not be satisfied that there had been no prejudice, particularly because the pleaded allegations had not themselves been found dishonest.
4. The respondent’s alternative argument, that dishonesty arose when the offer letter was signed, would require the appellate court to overturn the judge’s findings about the pilot’s intention. Those findings were upheld.
5. In obiter observations, the court considered that, had a deceit been properly pleaded, the loss of the opportunity to find another person for the course would have been recoverable loss caused by the deceit, subject to quantification.
6. A finding of deceit is a grave matter regardless of the size or value of the claim. The trial judge was also criticised for failing to control the proceedings proportionately, including by allowing a split trial in a relatively small claim and failing to focus the parties on the real issues.

• Court of Appeal (Civil Division): appeal allowed; judgment entered for the defendant, with costs to be assessed if not agreed.
• County court: contractual claim dismissed, but DHL succeeded on its alternative claim in deceit.