Natwest Markets Plc & Anor v Bilta (UK) Ltd & Ors

Serious delay in delivering judgment requires special care when reviewing factual findings. Delay alone does not justify setting judgment aside. Where material evidence has been misremembered, overlooked or left unaddressed, and the error may be attributable to delay, a retrial is required if the appellate court cannot be satisfied that the conclusion was right. Closely intertwined findings may require a full retrial.

Dual vicarious liability depends on independently assessing the employee’s relationship with each organisation. The inquiry considers the employee’s integration into their work, business and organisation. Control is relevant but does not determine liability. Contractual arrangements between the organisations cannot exclude liability to third parties. A complete transfer of responsibility away from the actual employer will be very rare.

Ten insolvent companies and their liquidators claimed dishonest assistance and participation in fraudulent trading arising from missing trader VAT fraud involving carbon emissions allowances. The companies’ directors had diverted VAT receipts. Allowances passed through CarbonDesk, a broker, to a trading desk which purchased them for the Royal Bank of Scotland and exported them.

The appellants were the successors in name to the Royal Bank of Scotland and RBS Sempra Energy Europe Ltd. The latter employed the desk’s two traders and supplied them to the bank under a commodities trading agreement. Snowden J found that the traders had deliberately avoided investigating suspected fraud and held both defendants liable for trading between 26 June and 6 July 2009. His reserved judgment was delivered approximately 19 months after closing submissions.

The defendants challenged the dishonesty findings, particularly the failure to address documents potentially corroborating the traders’ account of a dinner with CarbonDesk. They also challenged liability after a compliance instruction to continue trading. The claimants cross-appealed seeking an earlier commencement of liability. The second appellant separately challenged dual vicarious liability, contending that responsibility for the traders had transferred entirely to the bank.

1. The appeals were allowed on Ground A. The dishonesty findings could not safely stand, and the matter was remitted for a full retrial before a different High Court judge. The second appellant’s separate appeal concerning vicarious liability was dismissed.

2. Delay alone does not justify setting aside a judgment. Serious delay diminishes the trial judge’s advantage in assessing witnesses and requires especially careful appellate scrutiny. Under Bond v Dunster Properties Ltd, where a material evidential error may be attributable to delay, the question is whether the appellate court can be satisfied that the conclusion was right. That approach applies equally to mistaken recollection and failure to recollect or address material evidence.

   The omitted documents provided potentially significant corroboration of the traders’ account. Although the findings had an evidential basis and were not shown to be plainly wrong, the 19-month delay prevented an assumption that the omitted material had been considered and discounted. The court could not be satisfied that the central finding about the dinner was right. Its close relationship with the other credibility findings made a limited retrial inappropriate.

3. Contemporaneous documents should test recollections where they can assist. Where records are absent or ambivalent, judges may assess plausibility, conduct, documentary inferences and credibility, allowing for mistaken reconstruction and elapsed time. There is no prescribed location within a judgment for addressing exculpatory arguments, provided sufficient reasons are given.

4. For guidance on retrial, the court rejected the contention that knowingly failing to refer questions or concerns to Compliance necessarily established dishonesty. Under Ivey v Genting Casinos (UK) Limited, actual knowledge or belief must first be established, followed by an objective assessment of conduct. Group Seven Ltd and another v Nasir and others did not dilute the test for blind-eye knowledge. Its observations about lesser suspicions forming part of a person’s state of mind were obiter. Dishonesty remained for determination on all relevant circumstances.

5. Dual vicarious liability requires independent consideration of the employee’s relationship with each defendant. Applying the integration approach in Viasystems (Tyneside) v Thermal Transfer (Northern) Ltd, the traders remained part of both organisations. Contractual descriptions and allocations of responsibility could not exclude liability to third parties.

   The judge’s error concerning one contractual provision did not undermine his conclusion. The actual employer retained direct obligations concerning personnel and supervision. The traders remained its employees and used its offices and systems within a joint business enterprise. A complete shift of responsibility away from the actual employer would be very rare.

The instruction to continue trading and the factual grounds of the cross-appeal were left for retrial. No determination was made of the traders’ ultimate dishonesty or its commencement.

• Court of Appeal (Civil Division): In [2021] EWCA Civ 680 , allowed the appeals against the dishonesty findings and ordered a full retrial before a different High Court judge. Dismissed the second appellant’s separate vicarious liability appeal. The remaining factual issues and the challenge concerning continued trading after the compliance instruction were left for retrial.
• High Court, Chancery Division, Financial List: Snowden J delivered judgment on 10 March 2020 after a five-week trial in June and July 2018. He held both defendants liable for dishonest assistance and participation in fraudulent trading between 26 June and 6 July 2009, and found dual vicarious liability. He granted permission to appeal. The citation of that judgment is not stated.