Mullarkey & Anor v Broad

An appellate court will usually refuse to entertain a case which was available but not advanced at trial where further evidence might have affected its success. The party seeking to change its case bears a heavy burden to show that the evidence and conduct of the trial could not have differed materially.

Permission to appeal on grounds containing a new point does not itself give binding leave to rely on that point at the appeal hearing. The court retains its discretion, particularly where the trial was conducted on an expressly confined basis and the proposed alternative case would have required further factual investigation.

The appellants, creditors of Southill Finance Ltd (in liquidation), brought misfeasance proceedings against its former director under section 212 of the Insolvency Act 1986. Lewison J dismissed the application after finding that fraudulent breach of duty had not been established.

At trial, the appellants had confined their case to fraud in order to avoid limitation. On appeal they sought instead to rely on an alleged prohibited loan to directors under section 330 of the Companies Act 1985, and on section 21(1)(b) of the Limitation Act 1980. They also challenged a factual finding concerning loans to Gentlesound Ltd.

The central issue was whether the appellants should be permitted to advance that alternative case for the first time on appeal.

1. Appeal dismissed unanimously. Lloyd LJ, with whom Moses and Pill LJJ agreed, refused to permit the appellants to change the basis of their claim.

2. Although the grounds on which permission to appeal had been granted included the new statutory argument, that permission did not itself confer leave, binding at the full hearing, to rely on a point not advanced below. The appellants still had to satisfy the appellate court that it was fair to allow the new case.

3. The court applied the principles stated in Pittalis v Grant [1989] 1 QB 605 and Jones v MBNA International. A party is normally expected to put its whole case at trial. A new point should not be admitted if evidence might possibly have been called which would defeat it, or if its resolution depends on factual evaluation that the trial judge was best placed to undertake.

4. The trial had been expressly conducted on the basis that the claim depended upon fraudulent breach of duty. The proposed alternative case would have required further questions and potentially further evidence, including evidence about the alleged loans and, for Gentlesound, whether Southill was a relevant company within the statutory regime. The court could not safely conclude that the evidence would have been materially unchanged.

5. The court therefore did not determine whether the alleged transactions contravened section 330 of the Companies Act 1985, or whether section 21(1)(b) of the Limitation Act 1980 would have excluded limitation. Those were matters in the unpermitted new case.

• Court of Appeal (Civil Division): The appeal was dismissed: [2009] EWCA Civ 2.

• High Court, Chancery Division (Lewison J): The section 212 misfeasance application was dismissed with costs. Judgment was handed down on 3 July 2007.