First Discount Ltd v Guinness & Ors

This is a two-pronged application made on behalf of first Mr Cranston and secondly three members of the Guinness family, who were all defendants in original proceedings brought by First Discount Ltd (“FDL”). Anyone interested in Mr Cranston’s action [1997] F No.140, the action in which Mr Cranston was a defendant, can read the judgment of this court delivered on 24 January 2002 EWCA Civ 71 and such reader will observe, firstly, that Master Rose gave judgment on bills of exchange signed in April 1997 on 25 November 1997; secondly, that Buckley J, before whom new evidence was placed suggesting that Mr Cranston’s signature may have been fraudulently procured by or on behalf of FDL, refused to give an extension of time of about 500 days for the purpose of applying for permission to appeal on 14 April 2000; and thirdly that on 24 January 2002 this court, before whom yet further new evidence was placed, granted an extension of time for applying for permission to appeal from the decision of Buckley J, granted permission to appeal from that decision but dismissed that appeal even in the light of the further new evidence.

That, of course, was that, but there is now an application to re-open that appeal pursuant to the Taylor v Lawrence [2003] QB 528 jurisdiction in the light of yet further new evidence. That jurisdiction is now encapsulated in CPR 52.17 which provides in paragraph 1:

What a reader of that judgment of the Court of Appeal will not know is that in another action, [1997] F No.68, again brought by First Discount Ltd but this time against the three defendants of the name of Guinness, those three defendants submitted to a consent judgment, also on bills for exchange, on 27 August 1997, nearly ten years ago. The Guinness defendants then sought to rely on new evidence, likewise to the effect that their signature to the bills for exchange had been fraudulently procured by or on behalf of First Discount, and they sought an extension of time, on this occasion of rather more than 500 days, to obtain permission to appeal. That application also came before Buckley J, who refused the application for an extension of time again on 14 April 2000. No application for permission to appeal from that decision was launched and since the material available to the Guinnesses at that time would have been no more cogent than it was in Mr Cranston’s case that was, no doubt, well advised.

Now, however, there is an application for an extension for time to seek permission to appeal from the decision of Buckley J refusing an extension of time for the purpose of appeal and thus an extension for that application of over six years is now required. The same yet further evidence is relied on.

The basis of the latest batch of new evidence is that since the judgment of Buckley J in both actions and the decision of this court in the Cranston action, Mr Ravi Tuli was indicted on a number of counts at the Inner London Crown Court and pleaded guilty in July 2006 to being concerned in the management of both First Discount and the company from whom First Discount obtained the discounted bills of exchange while he was an undischarged bankrupt and while subject to a director’s disqualification order. He, Mr Tuli, had always maintained in the civil actions with which these applications are concerned that he had not been concerned in the management of FDL (First Discount) so that First Discount was a sheltered holder of the bills, as described in the original judgment of this court, and would thus have the rights of a holder in due course.

So it is now said by Mr Moeran, who appears both for the Guinness defendants and for Mr Cranston, that First Discount, through Mr Tuli, was a party to a fraudulent misrepresentation made by Mr Tuli in the Cranston case that Mr Cranston’s signature was required on the back of the bills to identify the name of the authorised signatory in front of the bills whereas, in fact, it was required in order to render Mr Cranston personally liable.

In the Guinness case it is said that the representation was that the signature of the back of the bill was to be used for administrative purposes, but as Mr Moeran points out that was in the context that a relevant term of the credit agreement, namely an original term that the Guinness defendants should give personal guarantees, was to be deleted. It is said further that the evidence given in these matters at the time of the applications for summary judgment, to the effect that Mr Tuli had little or nothing to do with the management of First Discount, particularly the evidence given by Miss Hayward, Mr Deboo and Mr Tuli himself must have been perjured.

In the light of Mr Tuli’s conviction on his own plea of guilty to the offences I have described, there is obvious force that Mr Tuli’s evidence and perhaps some other evidence given at the time of the summary applications was indeed perjured evidence; that would go very seriously to the credit of both Mr Tuli and First Discount, but whether it would result in a conclusive victory for the defendants in either case might well be a question because the mere fact that Mr Tuli was involved in the claimants in a way that he had sworn that he was not, does not necessarily lead to a conclusion that there would be a defence to the bills on the grounds of fraudulent misrepresentation, and some of the difficulties that might be in the way of mounting such a defence are alluded to in paragraphs 21 and 22 of the judgment of this court.

As I said on that occasion, this sort of allegation is the kind of allegation the Queen’s Bench masters and judges do listen to quite frequently in response to claims for summary judgment on bills of exchange. The almost invariable reaction of masters and judges in those circumstances, if the claim is asserted at the appropriate time, is to give leave to defend on bringing the amount of the bills into court. But these applications arise in very different circumstances. This court is now being asked to grant an enormous extension of time for the purpose either of granting permission to appeal or of making a Taylor v Lawrence application. Mr Moeran sensibly treated the two applications as effectively being legally equivalent although it could be said, as Mr Moeran recognised, that a party seeking to rely on Taylor v Lawrence is in an even more difficult position than a party who is merely seeking extension of time for permission to appeal of about six years.

We have been referred to Taylor v Lawrence in some detail and we have also been referred to subsequent cases, in particular to Couwenbergh v Valkover [2004] EWCA Civ 676 and Re Uddin (A Child) [2005] EWCA Civ 52. To the extent that there may be any difference of approach in those two later cases, this court must regard itself as bound by the later of those cases, namely Re Uddin, and for myself the principle that I take from that is the principle relied on by Mr Moeran (1) that there will be cases where the desirability of finality does have to be relegated to cases where it can be shown that there is a corruption of process, but (2) that there must be a powerful probability that injustice has been perpetrated. It maybe sufficient on that first limb of Taylor v Lawrence for it to be probable that there was a corruption of process, but there then has to be a powerful probability that an erroneous result has occurred as a result of that corrupted process. That is directly relevant in the application made by Mr Cranston and Mr Moeran accepts the same kind of considerations must arise in the Guinness case.

In my judgment, bearing all the circumstances of this case in mind, both the application of Mr Cranston and the application of the Guinness defendants will have to be rejected. I say that firstly because there has to be finality in litigation. The original judgments here have stood for nearly ten years and it would be an extraordinary thing in a case brought on bills of exchange for those judgments to be upset as much as ten years later. Secondly, I have already adverted to the normal order that might be made if these kind of allegations by way of defence, however strong, were made at the proper time, namely leave to defend conditional on bringing the amount of bills into court. That would probably be impossible now for the Guinness defendants, since they have been made bankrupt and of course Mr Cranston is in an even more difficult position because he needs to reopen a concluded appeal.

But the main reason why I have come to the conclusion that I have is that the applicants cannot show that they come within what I will call the third limb of the Taylor v Lawrence jurisdiction, viz. that there is no alternative effective remedy. These defendants have two possible courses. They have a cross-action in deceit if the allegations are correct, both against First Discount and against Mr Tuli, and they also have available the remedy of starting an action to set aside the judgments as having been procured by fraud. It seems that Mr Cranston has indeed started a cross-action. Mr Moeran says that he is concerned about the procedural difficulties of such an action; he instances the possibility of res judicata, which is hardly applicable if an action is brought to set aside the judgment procured by fraud, and he also instances possible difficulties of limitation. If there are difficulties of limitation, Mr Cranston only has himself to blame.

One sees that various arguments may be put forward of course, but Mr Cranston is in the position where he can respond. As far as the Guinness defendants are concerned, they have had every opportunity to bring either a cross-action or an action to set aside the judgment on the grounds of fraud. There is no evidence before the court as to any reason why they have not sought to do so. It must be remembered that these are actions brought on bills of exchange. Bills of exchange are the life-blood of commerce. They are treated as cash. It may be thought to be harsh that a court is not prepared to reopen judgments on the basis of fraud, albeit fraud that is only relied on ten years after the event, but there are many cases in the books in which judgment has been obtained on bills of exchange but nevertheless money has been not properly due. It has generally been the view of the courts that a defendant should primarily be left to a cross-action. Of course fraud is different; if fraud is shown at the proper time then there will be a defence even to an application for summary judgment on bills of exchange. But ten years down the line is not, in my judgment, an appropriate ground for invoking the Taylor v Lawrence jurisdiction, nor yet for giving a very substantial extension of time for an appeal against a judgment which has stood for about six years.

For those reasons I would refuse all the applications.

I agree. In particular I agree with my Lord, Lord Justice Longmore’s observations about the Uddin case. I would like to add one point. When this court takes into account the existence of alternative remedies it can, in my judgment, also have regard to any appropriate remedy against a third party. In this case there was the possibility of a cause of action against a discount house, City (Europe) Ltd (“City”). At one stage certain of the Guinness applicants made a claim against City. It was open to all the Guinness applicants to seek to pursue this cause of action. In fact the role of City was known throughout. It is no answer that the Guinness applicants subsequently underwent bankruptcy. Mr Tony Guinness was made bankrupt in 1997 but I have no reason to believe that he was not discharged within the three years or so of 1997. In any event, even if he was in bankruptcy in 1997 and the years immediately following that, it would have been open to him to ask the trustee in bankruptcy to bring an action against City or to obtain an assignment of the cause of action from the trustee in bankruptcy.

The chronology which is in the papers for this appeal states that Mr Michael Guinness and Mrs Carol Guinness entered into individual voluntary arrangements which were approved in 2000. This approval took place after the judgment of Buckley J but before January 2002, when Mr and Mrs Guinness were themselves declared bankrupt. According to the chronology, at the time of the approval of the individual voluntary arrangements Mr and Mrs Guinness had legal aid to bring proceedings against City for an indemnity. However, those proceedings were never brought.

I also draw attention to the conclusion to which Buckley J came in his judgment of 14 April 2000 as to the delay, for example, in the Guinness case. No reason had been given for the delay that occurred in the period between the default judgment on 25 November 1997 and the service of the notice of appeal from that judgment on 29 April 1999 or in the further period between the service of this notice of appeal and December 1999 when the first part of the further evidence was served. So there has been a substantial delay in that case. That delay is also a relevant consideration so far as this court is concerned.

For all these reasons and the reasons which my Lord gave, I would dismiss the application to reopen the appeal in Mr Cranston’s case and dismiss the application for permission to appeal in the case of Mr Michael Guinness, Mr Tony Guinness and Mrs Carol Guinness.