Business Link Berkshire & Wiltshire Ltd v Fearn

Where a finding of fraud rests on an erroneous reading of contemporaneous documents, and fresh evidence materially undermines that finding, the appellate court should reassess the case on the correct basis. Unchallenged contemporary documents, placed in chronological sequence, provide the starting point for evaluating dishonesty and any alleged conversation. A payment already approved before the alleged representation is prima facie not induced by it. Conversely, sums payable only on satisfaction of a contractual condition may be induced by a dishonest representation about that condition. If the appellate court cannot safely determine the result without re-hearing the evidence, the proper order is a retrial, even where the sums involved are modest.

The respondent funded the appellant’s proposed company through a staged funding arrangement. The county court found that the appellant had dishonestly represented in a letter that the company had 25 shareholders and awarded the respondent £2,000. It refused recovery of sums paid for solicitors’ fees and administration costs, finding that those sums would have been payable in any event.

The appellant appealed, seeking to adduce fresh evidence concerning persons named as shareholders. The respondent cross-appealed in relation to the additional sums. The central issues were whether the letter was dishonest, whether the relevant payments were induced by it, and whether the trial judge had assessed the documentary and oral evidence on a correct basis.

Appeal and cross-appeal allowed; fresh evidence admitted and retrial ordered.

1. The fresh evidence showed that persons whom the trial judge had considered fictitious did exist. It was therefore unjust to exclude the evidence.
2. The documentary record did not support the trial judge’s conclusion that the requirement for 25 shareholders had consistently been treated as a condition of payment of the £2,000 tranche. The documents indicated that this sum had been approved for payment before the disputed letter was received. It was therefore prima facie not induced by the letter. If the £2,000 was due irrespective of the number of shareholders, the respondent had suffered no loss in paying it (paras [5], [14]).
3. The position differed for the solicitors’ fees and administration costs. The funding schedule indicated that these sums formed part of the final tranche, payable only when at least 25 shareholders had been obtained. The fact that the solicitors or the company might have been entitled to payment from another party did not establish that the respondent was liable to pay them without fulfilment of that condition (paras [15]-[16]).
4. In a factual dispute, particularly one involving dishonesty, unchallenged contemporary documents placed in their correct chronological sequence must provide the starting point. Any alleged conversations and witness evidence must then be assessed against that documentary foundation (para [9]).
5. The trial judge had approached the fraud issue on a wrong premise in more than one respect. The Court of Appeal could not determine what result would have followed from a correct approach and a fresh assessment of the evidence. The findings could not stand, and a retrial was the only appropriate order, despite the modest sums involved (paras [7]-[8], [17]).

• Court of Appeal (Civil Division): allowed the appeal and cross-appeal, admitted fresh evidence, and ordered a retrial.
• Swindon County Court: District Judge Watkins, on 28 April 2008, found a fraudulent misrepresentation and awarded £2,000, but rejected recovery of solicitors’ fees and administration costs.