Environmental Recycling Technologies Plc & Anor v Daley

A fiduciary or quasi-fiduciary position does not raise the civil standard of proof above the balance of probabilities. The person should ordinarily provide cogent documentary evidence, but an explained absence of documents does not require adverse inferences. A trial judge may accept credible evidence despite inconsistencies where the surrounding commercial and local context explains them. An issue not clearly taken at trial cannot be raised on appeal. An employee entitled to rent-free accommodation may recover its rental value when the employer fails to provide it after transferring the accommodation to him in settlement of salary arrears. Office rent may likewise be recoverable where an unchallenged lease and continuing occupation establish the liability.

Sean Daley, a former senior manager employed by Camco Corporation Ltd or its parent, claimed salary arrears and pension contributions. Camco counterclaimed sums which Mr Daley had appropriated from sale proceeds, including repayments of alleged business loans, loan interest, office rent and the rental value of his apartment.

HH Judge Charles Harris QC allowed Mr Daley’s claim and dismissed the counterclaim heads now challenged. Camco appealed, alleging errors concerning the burden and standard of proof, documentary evidence, the genuineness of the loans, the calculation of interest, and the contractual or company-law basis for the rental items. The central issues were whether the judge had properly evaluated the evidence and whether the disputed appropriations were recoverable.

Lady Justice Smith gave the judgment, with Lady Justice Arden and Mr Justice Richards agreeing. The appeal was dismissed.

1. Burden and standard of proof. The judge had placed the burden of proof on Mr Daley. Even assuming that his senior managerial role made him subject to a fiduciary or quasi-fiduciary duty, that did not raise the standard above the balance of probabilities. A person in that position would normally be expected to provide cogent evidence, including documents, in support of a reconciliation statement.
2. Missing documents and credibility. Where there is an explanation for missing documents, the trial judge may decide the case on the evidence available without drawing adverse inferences. The judge was entitled to take account of the different business practices in Kyrgyzstan, Mr Daley’s injury and repatriation before returning company documents, and Camco’s failure to search its own office or obtain documents before trial. He was also entitled to accept the evidence concerning both loans despite inconsistencies, unexplained features and the non-attendance of one lender. Those matters raised suspicion but did not compel rejection of the account.
3. Interest. The argument that the interest paid exceeded the contractual amounts had not been clearly taken at trial. It could not be raised for the first time on appeal.
4. Office rent. The evidence included an unchallenged lease signed for Camco by its office manager, Camco’s continued occupation of premises owned by Mr Daley, and uncontradicted evidence that the rent was reasonable. The alleged company-law objection did not affect the result. The judge’s discussion of the issue, including his reference to [1990] 2 WLR 324, was confusing, but the lease evidence meant that the issue did not require determination.
5. Apartment rental value. Mr Daley’s employment contract entitled him to rent-free accommodation. After the apartment was transferred to him in part payment of salary arrears, Camco no longer provided that benefit. Camco was therefore in breach of the remuneration arrangement, and Mr Daley was entitled to be reimbursed the apartment’s rental value. The company-law objection had no relevance to that contractual entitlement.

The appeal was dismissed.

1. Court of Appeal (Civil Division): In [2009] EWCA Civ 612, dismissed Camco’s appeal.
2. Oxford District Registry: HH Judge Charles Harris QC, sitting as a deputy High Court judge, allowed Mr Daley’s claim for salary arrears and pension contributions and dismissed the relevant heads of Camco’s counterclaim on 30 April 2008.