Exsus Travel Ltd & Ors v Turner & Anor

An accounting party bears the legal burden of justifying discharges, while the beneficiary must prove any surcharge. The accounting party need not support every item with a document. Whether the burden is discharged depends on the evidence as a whole, including the nature of the dealings, the available records and witness credibility.

Where relevant vouchers remain with a former employer, an accounting party may identify that fact. The evidential burden may then pass to the employer to produce the documents or explain their absence. A court may accept a general explanation for remaining items where extensive documentary evidence confirms the legitimacy of the great majority of comparable payments.

The appellants commenced proceedings alleging that their former finance director, Mr Turner, and his service company had taken or misapplied company money and failed to maintain proper records. General accounts, rather than accounts on the footing of wilful default, were ordered for dealings spanning more than nine years.

Deputy Master Clark found an overall balance of £2,975.76 due to the respondents and made a substantial interim costs order. The appellants challenged her treatment of the burden of proof, her findings about their disclosure, several factual and accounting conclusions, and alleged failures to address particular submissions. One further ground concerning a £1.3 million surcharge was abandoned.

The central questions were whether the Master had reversed the burden borne by the accounting parties, whether her disclosure and factual findings could be disturbed on a review, and whether particular limitation, VAT and calculation objections should alter the account.

1. Appeal dismissed unanimously. The appeal under rule 52.11(1) of the Civil Procedure Rules 1998 was a review, not a rehearing. Appropriate respect was due to the Master’s evaluation of oral evidence, credibility, documentary material and the numerous items in the accounts, applying EI Du Pont Nemours & Co v ST Du Pont [2003] EWCA Civ 1368.

2. The beneficiary bears the burden of proving a surcharge, while the accounting party must prove a discharge. The manner in which that legal burden is discharged varies with the circumstances. It does not require every payment to be supported by an individual document. The Master was entitled to accept Mr Turner’s evidence about the remaining credit-card expenditure after documents and other records had established that the great majority of comparable payments were legitimate business expenses.

3. An accounting party who is a former employee or officer may explain that supporting company records remain with the former employer. The evidential burden may then shift to that employer to produce the records or give cogent reasons for their absence. Treating missing invoices and inadequate disclosure as part of the evidence did not reverse the ultimate legal burden. The Master was entitled to find that the appellants’ disclosure of emails, attachments and supplier invoices was inadequate.

4. The £100,000 loan was not proved to be interest-bearing. The Master’s conclusion was open to her on the inconsistent documents, the absence of contemporary evidence of interest, the appellants’ false denial of the employee benefit trust and her assessment of the witnesses. It was therefore unnecessary to decide whether the loan had been treated as repaid in 2005.

5. Credits claimed in the account were used to resist the appellants’ attempt to recover money already paid. They were not fresh claims by the respondents to which a limitation defence applied. The parties had operated a global account involving periodic over-invoicing and under-invoicing, so the invoices did not define the respondents’ overall entitlement.

6. Where a VAT-registered entity supplies staff, VAT is chargeable on the full consideration, including recovered salary, PAYE and national insurance costs. The remaining detailed VAT-invoicing objection had received insufficient attention at trial and could not properly be reopened on appeal.

7. A judge need not address every criticism of a witness. It is sufficient to explain adequately why one witness is preferred and to deal with credibility where it affects a material issue. The Master had done so. She was also entitled, as a matter of case management, to refuse to reopen the account for a small item raised only after circulation of her supplementary judgment.

1. Court of Appeal (Civil Division): In [2014] EWCA Civ 1331, the court unanimously dismissed the appeal and upheld the Master’s treatment of the accounts.

2. High Court, Chancery Division: Deputy Master Clark ordered the appellants to pay the respondents £2,975.76 as the overall balance on the accounts, together with costs and an interim costs payment of £215,000. No neutral citation for that decision is stated.

3. High Court, Chancery Division: Master Bowles had previously directed the taking of separate accounts from Mr Turner and Exsus Finance Ltd. No neutral citation for that order is stated.