Awberry v Marley Building Materials Ltd.

J U D G M E N T

1. LORD JUSTICE RIX: I will ask my Lord, Maurice Kay LJ to give the first judgment.

2. LORD JUSTICE MAURICE KAY: The appellant is claimant in proceedings in which he seeks to recover damages for personal injury and consequential loss as a result of an accident at work on 1st June 2001. The respondent was the appellant's employer at that time. On 1st November 2001 liability was admitted on behalf of the respondent. Proceedings were issued on 17th February 2004. A defence was filed on 15th April 2004. It reiterated the admission of liability but took issue with aspects of the appellant's case on quantum. He was seeking damages in the region of £300,000. The respondent's advisers valued the claim at about £210,000. On 19th April 2004 they made a payment into court pursuant to Part 36 of the Civil Procedure Rules. It was in the sum of £189,218.72 which was based on a gross figure of £210,000, discounted by reference to recoverable benefits of £20,781.28.

3. On 7th May 2004 the appellant's solicitors gave notice of acceptance and requested payment of the sum in court. The respondent's solicitors received that notice on 11th May and on the same day filed an application for permission to reduce the sum in court by £55,362. A Part 36 payment may only be reduced with the permission of the court (see CPR 36.6(5). The application for permission to reduce was based on the discovery by the respondent's solicitors on or about 22nd April that the appellant had received £55,362 in the previous December under the terms of a personal accident insurance policy which was maintained by the respondent in respect of all its employees.

4. The respondent's application for permission to reduce came before District Judge Henry on 26th July 2004. She refused it. In her judgment she referred to Flynn v Scougall [2004] 1 WLR 3069 (neutral citation: [2004] EWCA Civ 873) and the adoption therein of the words of Goddard LJ in Cumper v Pothecary [1941] 2 KB 58 at page 70 where he said:

"... apart from matters such as fraud or mistake affecting the original payment, the court should consider whether there is a sufficient change of circumstances since the money was paid to make it just that the defendant should have an opportunity of withdrawing or reducing his payment."

5. In Flynn , May LJ considered this approach to be "consistent with the overriding objective" of the CPR. The district judge then said this:

"I find that the only possible ground that the defendants have, applying this test, is whether there has been a mistake, and whether that mistake is a reason for me to make an exceptional decision to allow the defendants to withdraw or reduce the payment.

"The facts of this case are that it was the failure of the defendants' solicitors to take into account the previous payment to the claimant of £55,000 odd under a health insurance policy before they made the Part 36 offer. And when I say `failure to take into account' I was told the sequence of events, and it appears that they only found out that this payment under the health policy had been made some two days after the Part 36 offer had been made, but it took them nearly three weeks to actually make the application that I am now hearing.

"I am not persuaded that it is just in all the circumstances for the court to exercise its power under [CPR] 36.6(5) on the facts of this case, to reduce the payment in. In this case the claimant considered the payment in and decided to accept it, the miscommunication between the defendants' insurers and the health insurers and the delay in making this application after they found out are factors that are taken into account in reaching my decision, and I find that the test has not been met in this case and I am not going to exercise my power to allow the defendants to withdraw that offer."

6. The respondent appealed to a circuit judge. Such an appeal is governed by CPR 52.11. The requisite approach is one of review unless there is a contrary provision in a Practice Direction or the court considers that a rehearing would be in the interests of justice (see CPR 52.11(1)). It is common ground that those exceptions were and are inapplicable in the present case and that the task of the circuit judge was one of review. The power of the circuit judge upon appeal is set out in CPR 52.11(3) in these terms:

"The appeal court will allow an appeal where the decision of the lower court was (a) wrong or (b) unjust because of a serious procedural or other irregularity in the proceedings in the lower court."

7. It is not suggested that a serious procedural or other irregularity occurred in the hearing before the district judge. Accordingly, for the appeal to the circuit judge to succeed it had to be established that the decision of the district judge was "wrong".

8. The appropriate approach has been variously articulated. In Tanfern Ltd v Cameron-MacDonald [2000] 1 WLR 1311 at 1317E-F. Brooke LJ adopted the formulation of Lord Fraser of Tullybelton in G v G [1985] 1 WLR 647 at 652:

"... the appellate court should only interfere when they consider that the judge of first instance has not merely preferred an imperfect solution which is different from an alternative imperfect solution which the Court of Appeal might or would have adopted, but has exceeded the generous ambit within which a reasonable disagreement is possible."

9. In the present case the respondent's appeal to the circuit judge was successful. HHJ Charles Harris QC referred to the provisions of CPR 52.11, observing that the appeal was limited to a review and he set out the terms of CPR 52.11(3). He also set out a lengthy extract from the judgment of May LJ in Flynn v Scougall . He then said:

"The question is whether it would or would not be just in all the circumstances to permit the Part 36 payment to be modified in the manner suggested."

10. He referred to the rival arguments of the parties before concluding:

"If permission is given to reduce the Part 36 payment, the claimant will, of course, have the opportunity to continue to trial in order to seek to establish what he contends is the full value of his claim which might, indeed, exceed the sum which he was disposed to accept. I think that the injustice to the defendant would clearly be very considerable if it were not allowed to resile from its position, based as it was on a mistake. The mistake is a "good reason" such as May LJ referred to in Flynn v Scougall . The injustice to the claimant would be very modest in the circumstances."

11. Those passages considered in isolation might suggest an approach such as would be appropriate on a rehearing. However, the learned judge then said this:

"But it is urged upon me that this conclusion, which an appellate tribunal might understandably reach, should not prevail in this case because the decision of the district judge, it is said, was within the ambit of what was a legitimate exercise of her discretion, and the appeal court should not exercise its own discretion unless it can be shown that there was something wrong, outside the ambit of reasonable discretion, about the decision made at first instance. So it is necessary, I think, to consider in a little detail the terms of the judgment of the district judge."

12. With that in mind, he considered the terms of the judgment of the district judge so as to see whether it had been "wrong". His conclusion is to be found in this passage:

"It is to be noted that she does not deal anywhere with the factor of requiring a defendant to pay £55,000 above and beyond a sum which it would have considered if in proper possession of the facts appropriate to pay. It is argued by counsel for the claimant that, `Well, since that was what the whole thing was about, she must have had it in mind' but it does seem to me that it would have been appropriate, if she did have that in the forefront of her mind as a consideration to balance against the three factors which are mentioned, for her to have mentioned it. It appears from the terms of the judgment that that factor was either not in her mind or not in the forefront of her mind to balance against the others. She seems to have thought that the relevant factors were that there had been an acceptance and that the defendants had been slow in making the application. (I am not persuaded that, although it could have been made quicker, the period of time was in fact so long as to constitute criticisable delay.) I do conclude that on analysis of the judgment, it cannot be seen to be clearly the case that the district judge had properly taken into account the major injustice to the defendant of requiring it to be held to a payment 25 per cent or so higher than that which it would have intended to make, and in those circumstances it is appropriate to set aside the decision of the district judge and to exercise the discretion of this court. Accordingly, I shall allow the appeal from the district judge. I give leave to the defendant to modify its payment into court."

13. What is now before this court is a second appeal within the meaning of CPR 52.13. Latham LJ granted permission on 3rd December 2004. It is implicit in his stated reasons that he considered it arguable that the learned circuit judge had not identified an error on the part of the district judge but had simply substituted his own exercise of discretion.

14. On behalf of the appellant Mr Menzies advances three grounds of appeal: (1) the approach of the circuit judge was fundamentally flawed because he considered how he would have exercised his own discretion under CPR 36.6(5) before considering whether there was an identifiable error in the judgment and reasoning of the district judge; (2) he did not succeed at any stage in identifying an error on the part of the district judge; (3) he was not justified in concluding that the district judge had failed to consider the argument on behalf of the respondent that if it were not allowed to reduce its Part 36 payment it would have to pay the appellant about £55,000 more than its valuation of the claim. I should add that it is assumed and has been assumed throughout by both parties that the payment of £55,000 under the accident insurance policy would or might have reduced any liability on the part of the respondent by the equivalent sum.

15. I do not consider that the first ground of appeal is sustainable. Whilst it is true that the circuit judge expressed his own view about the proposed reduction before he analysed the conclusions of the district judge this has to be seen in context. He had already referred to CPR 52.11(3) and established that his task was one of review rather than a rehearing as would have been the case before the Civil Procedure Rules came into force. Moreover, the expression of his own view is followed immediately by his acknowledgment of "the ambit of a legitimate exercise of discretion" and the corresponding necessity to consider the terms of the district judge's judgment in detail. This satisfies me that he was aware of the need to avoid simply substituting his own exercise of discretion for that of the district judge. Nor do I consider that by expressing his own view in advance of his analysis of the district judge's decision he disabled himself from properly and objectively considering whether the decision of the district judge had been "wrong". As a matter of style it may have been preferable if he had structured his judgment in a different order but I do not consider that his failure to do so vitiates it.

16. The second and third grounds of appeal can be considered together. Mr Menzies submits that it is fanciful to suggest that the district judge did not have in mind the implication for the respondent of a refusal of permission to reduce the amount of money in court. It is obvious that she had it in mind because it was the essential reason for the application before her. Nevertheless she was entitled to conclude that it was not determinative of the application and that the other factors to which she referred should prevail. In such circumstances it could not be said that her decision was "wrong". On behalf of the respondent Mr Ford submits that the circuit judge was correct to conclude that the district judge had failed to consider or to accord sufficient weight to the injustice that would accrue to the respondent if it were not permitted to reduce the amount of money in court. He invites an interpretation of the judgment of the circuit judge by reference to which it can be seen that the approach of the district judge had indeed been "wrong".

17. In my judgment the reasoning and conclusion of the circuit judge were correct. He identified as common ground that the payment into court of the larger sum had been the result of a mistake. He said:

"It is accepted that what had happened was that there had been a shortcoming or mistake in communication or conceivably some shortcoming in disclosure by the claimant such that those advising the defendant were not in possession of the full facts at the time they decided to pay into court the sum they did. It was clearly a simple mistake."

18. It seems that this had not been common ground before the district judge when the appellant had been alleging that the application to reduce was based simply on a change of mind on the part of the respondent. However, it is notable that the district judge made no factual findings resolving the issue as it then was. Whether or not the district judge had had in mind the injustice of the potential impact to the respondent of refusing it permission to reduce, the circuit judge was plainly correct to refer to it and to evaluate it. His analysis was that the injustice to the respondent "would clearly be very considerable" whereas any injustice to the claimant consequent upon permission to reduce would be "very modest" because he could, if so advised, fight on rather than accept the lesser sum. That analysis was undoubtedly correct. It led to the conclusion to which I have already referred that:

"... it cannot be seen to be clearly the case that the district judge had properly taken into account the major injustice to the defendant of requiring it to be held to a payment 25 per cent or so higher than that which it would have intended to make."

19. In other words, he considered the decision of the district judge to have been "wrong" because she had failed to consider or to accord proper weight to a matter of fundamental importance in assessing the justice of the case. In my judgment the approach of the circuit judge when properly analysed in this way was correct. It was not necessary for him to find perversity or Wednesbury unreasonableness on the part of the district judge (see the speech of Lord Fraser of Tullybelton in G v G (above) at page 653. In that case Lord Bridge of Harwich adopted at page 656C-E what Viscount Simon, Lord Chancellor, had said in Charles Osenton and Company v Johnston [1942] AC 130 at page 138:

"... if the appellate tribunal reaches the clear conclusion that there has been a wrongful exercise of discretion in that no weight, or no sufficient weight, has been given to relevant considerations such as those urged before us by the appellant, then the reversal of the order on appeal may be justified."

20. As Tanfern and other cases make clear, that line of authority continues to resonate following the coming into force of the CPR. It illuminates the correct approach to be taken when there is an appeal by way of review and the appellate court is concerned to see whether the appealed decision was "wrong". I am entirely satisfied that it was the approach taken by the circuit judge in the present case. I cannot fault his reasoning or his conclusion. Accordingly, I would dismiss the appeal.

21. LORD JUSTICE RIX: I agree with my Lord's judgment and with his reasons. The issue is ultimately whether the circuit judge was entitled to say that the district judge was wrong. I agree that he was. He found that what had occurred was "clearly a simple mistake". There was no suggestion that there was any lack of diligence or due care or application on the part of the defendant's advisers and it was accepted that what had happened was that there had been a shortcoming or mistak in communication or conceivably some shortcoming in disclosure by the claimant. Mr Menzies acknowledges that he is bound by those facts and indeed accepts them.

22. The district judge however made no findings as to what had caused the £55,000 payment to have been left out of account in the calculation of the amount paid into court. It had been in dispute before her that there had been any mistake. It had been argued that there had been something more akin to a change of mind. In these circumstances the absence of any finding as to these factual issues went well beyond a mere failure to state the obvious. The circuit judge was therefore entitled to find that the balance of justice was clearly in favour of the appellant, as he did, and that the district judge had failed to have regard to or to give proper weight to the essential factual basis that there had been a simple mistake, responsibility for which could not be assigned to one side rather than the other. For all these reasons, I agree that this appeal should be dismissed.

Order: Appeal dismissed with costs.