Manolete Partners PLC v Ebrahim Dalal

On an appeal challenging factual findings, it is insufficient that a different conclusion was open to the trial judge. The appellant must identify a flaw in logic, a gap in reasoning or inconsistent treatment of the evidence.

Where a claim depends on estimates derived from incomplete evidence and several uncertain variables, a court may reject an alleged discrepancy if it could result from estimation error. No precise margin of error is required. The civil burden of proof requires an overall assessment on rational and objective grounds. A general denial of calculation accuracy may permit challenges to each constituent element. Missing company records do not themselves justify an adverse inference where no specific disclosure failure is established.

Manolete Partners PLC, as assignee of claims belonging to Bolton Poultry Ltd, sued its former director Ebrahim Dalal for allegedly misappropriating profits arising from undeclared sales. The High Court dismissed the claim after finding that the available evidence did not establish additional sales on the balance of probabilities: [2022] EWHC 1597 (ChD).

Manolete appealed on four grounds, alleging that the judge had exceeded the pleaded case, made logical or evidential errors, misapplied the burden of proof and failed to account for missing company records. The central issue was whether the judge was entitled to reject an estimated 10-year sales discrepancy as insufficiently reliable to prove liability.

1. Appeal dismissed. Lord Justice Arnold gave the leading judgment, with Lord Justices Newey and Moylan agreeing.
2. Pleadings. The defendant’s general denial of the accuracy of the HMRC calculations permitted him to challenge each constituent element of those calculations and the reliability of the overall exercise. The judge therefore did not go beyond the pleaded case by examining matters including sale prices and other variables.
3. Appellate review. The judge’s Appendix 2 calculation produced estimated sales approximately 12.2% above reported sales, but the judge had first found no additional sales in the 2009 year on which the HMRC investigation principally focused. He was entitled to regard that as undermining the reliability of the longer-period calculation. He was also entitled to take account of uncertainties concerning the number and weight of chickens, the reliability of the FSA records and the evidence of truthful witnesses who denied knowledge of undeclared sales. The fact that a different conclusion was open did not demonstrate an appealable error.
4. Burden of proof. The judge had not impermissibly resorted to the burden of proof. He considered the whole evidential picture, including gaps, countervailing evidence and possible alternative explanations, and applied the civil test requiring rational and objective grounds for concluding that the case for believing the alleged event occurred was stronger than the case against it. This was consistent with the guidance in Re A (Children) (Care Proceedings: Burden of Proof) and the formulation in Milton Keynes Borough Council v McNulty.
5. Company records. The principle in Re Mumtaz Properties Ltd did not assist Manolete. The judge had not relied on a failure by Mr Dalal to disclose particular documents, and no specific complaint or cross-examination case had established that relevant records had been withheld.

• Court of Appeal (Civil Division) dismissed Manolete’s appeal.
• High Court of Justice, Business List (ChD) dismissed Manolete’s claim against Mr Dalal: [2022] EWHC 1597 (ChD).