Caldero Trading Ltd v Leibson Corporation Ltd & Ors

An appellate court hearing a fact-based appeal must respect the trial judge’s assessment of witnesses, commercial probabilities and documents. It should not substitute its own view merely because another assessment is possible. Intervention is justified only where the conclusion was one no reasonable judge could reach, or where the judge plainly misinterpreted the evidence.

Commercial plausibility must be assessed in the context of the parties’ respective contributions, roles and obligations. A financing arrangement in a joint venture is not inherently improbable merely because one participant’s finance is treated as capital rather than repaid before the other participant receives a share of the venture’s value.

Caldero, a minority shareholder in Beppler & Jacobson Limited, presented an unfair-prejudice petition under section 994 of the Companies Act 2006. The petition was settled on terms requiring the majority shareholder to buy Caldero’s shares at fair value, subject to determination of whether sums invested in the company and its subsidiary were loans or capital.

After a 13-day trial, David Richards J held that all relevant investments were to be treated as capital: [2013] EWHC 2191 (Ch). The appellants challenged that conclusion on the basis of commercial improbability and selected documents, including a spreadsheet and bank-loan material. The central issue was whether the judge had been entitled to reach his factual findings.

1. Disposition. The Court of Appeal unanimously dismissed the appeal. The challenge was purely factual and concerned the trial judge’s assessment of two principal witnesses and the surrounding evidence.
2. Commercial probabilities. The appellants argued that it was commercially improbable for the financing partner to provide funds treated as capital while the other partner retained a substantial interest in the venture. That analysis was misplaced. The parties were quasi-partners, each contributing something essential to the joint venture. One contributed finance; the other contributed local connections, expertise and work, without separate remuneration. The judge was entitled to assess the arrangement in that context.
3. The judge had not found that the financing partner gave an unlimited commitment or a blank cheque. He could control expenditure, scale back reconstruction proposals, stop providing funds or require further funding to be advanced as loans. The arrangement was therefore not inherently commercially improbable.
4. Appellate restraint. The Court of Appeal was not entitled to second-guess the judge’s assessment of credibility, commercial plausibility or the weight of the evidence. The judge had seen and heard the witnesses and had been entitled to prefer Caldero’s case.
5. Documents. The judge had considered the Bianca spreadsheet, the January 2007 email and the bank loans. He explained why they did not establish the appellants’ case. The Court of Appeal could not replace that assessment with its own unless the judge had plainly misinterpreted the documents, which he had not.
6. Practice observations. Lord Justice Jackson separately endorsed criticism of the excessive skeleton arguments and appeal bundles. He observed that serious failure to comply with the applicable page limits, to use sensible bundles or to provide a realistic time estimate may justify strict adverse costs orders. Those observations were additional to the ratio and did not alter the disposal of the appeal.

• Court of Appeal (Civil Division) Hearing an appeal from the Companies Court, the court unanimously dismissed the challenge to the factual determination.
• High Court of Justice, Chancery Division, Companies Court David Richards J determined the Investment Issue after a 13-day trial and held that the sums invested in the hotels were to be treated as capital: [2013] EWHC 2191 (Ch).