Purushothaman v Malik & Ors

This is the judgment of the court.

There are before the court applications in four cases for permission to appeal and related applications to adduce fresh evidence in the appeals if permission to appeal is granted. Permission is also needed to appeal out of time. In reality, however, it is accepted by the applicants that the applications for permission to appeal and the grant of permission to appeal out of time depend entirely upon the court's decision on whether to admit in the proposed fresh evidence in the proposed appeals.

The issues for decision therefore are: (1) whether time for seeking permission to appeal should be extended; (2) whether permission should be granted at this stage to adduce fresh evidence on appeal; (3) whether permission to appeal should be granted; and (4) whether, if it is, the appeal should be by way of review or re-hearing. It has emerged in the course of the hearing this morning that the last is not controversial and it is accepted that if the permission to appeal is granted then the appeal should be by way of review only. The aim of the applicants in all cases is to succeed on the appeals and to obtain a retrial of the four cases.

The four cases all concern road traffic accidents. The accidents all happened many years ago. The cases were brought between 2008 and 2009. In each case the claimant in the proceedings was the innocent driver of a car which was damaged by the defendant. In each case the accident gave rise to claims in the County Court in which the contentious issue - or at least one of them - was the amount that the claimant could recover in respect of the cost of a replacement car that was hired whilst the claimant's car was being repaired. In each case the car was hired on credit hire terms. Therefore in each case the question arose as to whether the claimant was entitled to recover the actual contract rate at which the replacement car was hired on credit terms or whether the defendant had proved that the Basic Hire Rate or “BHR” for hiring such a car on non-credit terms was lower than the actual contractual credit hire rate notionally charged to the claimant.

The four cases are set out in a summary sheet which has been prepared by the parties. The summary sheet gives details of the names of the case, the judge at first instance, the date of the first instance decision, the credit hire rate and the BHR as found by the judge and that which is now said to be the relevant hire rate that should have been found by the judge. The summary also details the date of application to the Court of Appeal for permission to appeal. I will not read out those details but a schedule is to be incorporated, as agreed between the parties and the court, at the end of this judgment.

In each case the credit hire company involved was Accident Exchange Ltd (“AEL”) and in each case the defendant, which was backed by the defendant's motor insurance company, had obtained evidence of BHRs from a company called Auto Focus Ltd (“Autofocus”) which was then in the business of providing information and “experts evidence” in support of challenges by motor insurers of defendants in this type of case. The aim, in each case, was to reduce the amount that could be recovered by claimants for the hire of the replacement cars. Characteristically this evidence from Autofocus was given in the form of a statement which was served under the Civil Evidence Act for use in the County Court proceedings. The statements were, of course, given with a statement of truth at the end of them by the maker. In each case it was AEL which, by right of subrogation or assignment, would in fact recover the sum awarded by the judge in respect of the cost of hiring the replacement car. In each case either AEL adduced no evidence before the County Court judge or put in evidence that was too late and therefore the judge refused to consider it.

After the four cases, which were all decided between April 2008 and July 2009, AEL began to do investigation work into the methods of Autofocus. Mr Evans of AEL has said in his evidence to this court that he was suspicious from 2008. However, it was a particular case in September 2009 - the Archer case - which led him to order much more detailed investigation work into the methods of Autofocus. That detailed investigation started in October 2009. The conclusion, as of today, is that in the view of AEL there was widespread falsification of evidence by employees of Autofocus including Helen Whysall, William Paul Wilcox and Elaine Carlton Walker. This is said to have occurred over a long period of time. It is AEL's case that the investigations demonstrated that surveys contained in Autofocus reports had not in fact been carried out as described in the witness statements of employees and if such surveys had been carried out then their results were misrepresented. Investigations by AEL resulted in an action by AEL against Autofocus in the Queen's Bench Division. That action foundered when the latter went into administration. Autofocus is now in a creditors' voluntary liquidation.

It is said on behalf of the applicants in the present applications (effectively AEL) that as a result of the widespread malpractices of Autofocus in producing tainted reports in many RTA cases in County Courts throughout England and Wales that AEL has been deprived of recoveries from defendants and therefore ultimately motor insurance companies of between £20 million and £50 million. That figure is very much in dispute but it demonstrates the magnitude of the battle being fought between the credit hire industry on the one side and the motor insurers on the other.

The foundations of each of the four applications for permission to appeal is that there is now fresh evidence which will show that the evidence given in support of the defendant's case before the particular county court judge in each of the four cases was untrue and that if the judge has known its provenance he would not have relied upon it at all. It is submitted that the result in each case is that there would have been a significant difference in the judge's findings for a figure for the BHR. The aim of the present exercise is therefore to obtain permission to adduce this fresh evidence on the appeals in each case, with the consequence that the appeal should be allowed so that there will be an order for a retrial of the issue of BHR in each case.

Originally there were applications in respect of other aspects of the County Court decisions but those have not been pursued.

The applicants wish to adduce statements by Mr Stephen Evans and Mr Jason Lee in support of their appeals. Mr Evans is the Chief Executive of AEL Group Plc and a director of its wholly owned subsidiary AEL. He has made witness statements in support of each of the four appeals and he has made three statements in support of all four of the appeals together. His evidence is principally concerned with two aspects. The first is in relation to each of the Autofocus reports that was produced for each of the four cases before the County Court. The second is to highlight and summarize the results of investigations of electronic data stored in Autofocus's system which is called “mirror disk”. It was recently supplied to AEL by the liquidator upon the order of the court. Mr Evans' latest witness statement, which was served only yesterday, is concerned with what figure for BHR the judge in the County Court might have arrived at had other evidence been put before the judge by AEL or perhaps the defendant's advisers in proceedings rather than the Autofocus evidence. Broadly speaking this evidence attempts to show that the claimant in each of the four cases would have received substantially higher sums for car hire costs (based on the BHR) than they did in fact receive, based on each of the judges' conclusions and the Autofocus evidence in each of the four cases.

Mr Lee is a solicitor and a director of the practice known as PCJ Solicitors Ltd who acts for AEL and through them for the applicants in each of the four cases before us. His latest statement dated 21 November 2011 deals with the results of the investigation of the Autofocus IT systems “mirror disk”, to which we have referred and the information in it, as a result of obtaining access to this pursuant to the order that we have mentioned. In paragraph 17 of his latest statement, Mr Lee makes a very serious allegation that Autofocus was never really “independent” of its main solicitor and insurance clients and was “at all times acting in concert” with them in implementing insurance policies towards the credit hire industry. Taken at its face that allegation implies that both insurers and solicitors were party to the alleged widespread fraudulent practices of Autofocus, including that said to have been practised in the four cases the subject of these applications.

That has led Mr Mark Simpson QC to appear on behalf of one of the firms of solicitors this morning to protest and to say that all these allegations are vigorously denied. Mr Edis QC, on behalf of the four applicants, accepts that is not necessary to put forward those allegations as a part of the applications today and he does not do so. He has accepted in open court that the material that has been forwarded on behalf of those instructing Mr Simpson must be investigated and that, if necessary, a proper course will be taken in response. We will therefore say no more about those allegations.

The basis of the applications is that this fresh evidence from Mr Evans and Mr Lee would establish that in each of the four cases the evidence from Autofocus that the defendants relied on in the County Court actions was untrue or fraudulently misrepresented and/or that it was based on research that had not been carried out. Therefore the judge's conclusions on the BHR was based on such improper evidence and cannot be regarded as sound. Moreover it is said that because this evidence was fraudulently or knowingly misrepresented facts, then the claimant in each case was denied a fair trial.

In order to be able to adduce this evidence on appeal the applicants must demonstrate that it is in the interests of the “overriding objective” to do so. In that respect the pre-CPR cases, including the leading case of Ladd v Marshall [1954] 1 WLR 1489 remain of relevance and are of powerful persuasive authority (see the note in the White Book 2011, page 1162). The very well known Ladd v Marshall tests are these:

For the applicants, Mr Edis QC submits that all these tests are satisfied and that in the very peculiar circumstances of this case it is clear that permission to appeal out of time should be given. For the respondents, Mr Stuart-Smith QC submits that there is no good evidence to show that the actual results in the County Court were wrong. Furthermore he submits that evidence that is now sought to be adduced to show that the result was wrong was available, with due diligence, at the time and before those trials took place. He points particularly to the fact that AEL did not obtain evidence in support of the particular BHR at the time of the County Court trials or did not do so in time, but that it attempts to rely on evidence of facts available then, through the latest witness statement of Mr Evans. Next, he submits that there is now evidence in the form of statements from SG Consultancy which shows that the rates used by the County Court judges were consistent with market rates and that the range of rates quoted in the surveys used in the trials are broadly consistent with the ranges now provided by SG Consultancy.

Mr Stuart-Smith has taken us through the four particular cases and submits that in three cases AEL sought to put in reports which tackle the evidence of Autofocus but did so in a manner which did not satisfy the judge that it should be permitted to be given in evidence. He showed us in particular the evidence of Mr Bradshaw that was attempted to be put in in one case. Mr Stuart-Smith pointed out that Mr Bradshaw was one of six investigators that were employed at the time by AEL to look at evidence put in in support of defendants' positions in this type of case. Mr Stuart-Smith further submits that this demonstrates that it was possible at the time for AEL to have investigated much more thoroughly the work that was undertaken by Autofocus employees such as Miss Whysall and her colleagues. Therefore it could have been done in advance before the trial. Mr Stuart-Smith also pointed to the fact that Mr Evans has already stated in other proceedings in cross-examination that if such checking evidence had been done and it had been demonstrated that Miss Whysall's evidence was suspect then that would have been compelling evidence. Mr Stuart-Smith further submits that it was clear that Mr Evans was suspicious of the Autofocus approach to evidence from 2008. He says there was no reason why the enquiries that were subsequently carried out could not have been carried out at an earlier stage. He points out that three out of the four cases with which we are now concerned took place after Mr Evans' suspicions were first aroused. He therefore submits that the first of the three tests in Ladd v Marshall cannot be satisfied in these cases. That is because, he submits, the key must be whether or not in respect of each individual case it could have been shown that the evidence that was adduced by Autofocus was reliable and could be demonstrated to have been wrong.

In our view the key to our approach must be the fact that the evidence produced by Autofocus in each of these four cases was apparently tainted because it was not the result of real work and real reports. We appreciate that the extent to which that is the case is very much in issue. However, we do conclude that the fact that there is evidence to demonstrate that there was what has been called in the course of argument a “systemic slipshod approach” or “systemic fraud” must be evidence in support of a strong argument that in each case the claimant has not had a fair trial in contravention of both domestic law and contrary to Article 6 of the ECHR. Unless we are satisfied that this is something that would have been clear or obvious if AEL had done investigations of Autofocus at the time but they chose not to do so, then it seems to us clear that there is a strong case for saying that this evidence ought to be admitted upon appeal. We are not satisfied that it would have been obvious. As Mr Edis pointed out in his reply there was no requirement for AEL to act as a police force and there was every right of AEL to assume that Autofocus was being honest and was abiding by the rules, especially given that there was a signed statement of truth for each piece of evidence that was used by Autofocus. There was nothing specific to demonstrate that Autofocus was being carefree (at the least) with its research, reporting and figures. It is, we are satisfied, only as a result of the investigation since October 2009 and in particular those that have been done very recently on the IT systems of Autofocus that have produced the situation as it is today. We do not accept that the argument can be, as it were, sliced up for each individual case. We are satisfied that the most recent evidence demonstrating that there was a systemic failure on behalf Autofocus does go to the question of whether or not this evidence would have been available with reasonable diligence for use at the trial. In our view it would not have been.

We are satisfied that this proposed fresh evidence, if it had been adduced at the trials, would probably have an important influence on the results in each case. If the judge had concluded that the Autofocus evidence was tainted in each case and that he could not therefore rely on it, then he would have had to say, it seems to us, that the defendants had not demonstrated that the BHR was lower than the credit hire rate than was actually charged. That would mean, prima facie, the claimants would have recovered the full credit hire rate in the absence of any other evidence. Accordingly we are satisfied that all the Ladd v Marshall tests are fulfilled in these cases. We are satisfied that it is in the interests of the overriding objective to say that that evidence should be admitted in these appeals.

That leads to the next question which is whether or not we should grant permission to appeal out of time. It is emphasized by Mr Stuart-Smith that there is a strong interest in the finality of litigation both from the point of view of the individual litigant and the wider public. Mr Stuart-Smith submits that it is important that we take note of all the factors that are set out in the checklist at CPR 3.9 which deals with relief from sanction and should therefore be addressed in this case. We therefore briefly consider each of those.

The first is the interests of the administration of justice. Bearing in mind the nature of the fresh evidence which we have just said will be allowed to be adduced on the appeal it seems to us very much in the interests of the administration of justice that time to appeal should be extended. The second matter is whether the application for relief has been made promptly. Mr Stuart-Smith submits that it has not been and that there are unexplained delays in the applications for permission to appeal which were only made in May of this year. Given the very serious nature of the allegations that are being made against Autofocus we can understand the caution that was exercised, therefore we do not think that comes down against the applicants in this case. The third issue is whether the failure to comply was intentional; there is no evidence of that. The fourth is whether there is a good explanation for the failure. We accept the submission of Mr Stuart-Smith that there could have been more of an explanation for the delay that there was, but we are satisfied that it is adequate in these cases. The fifth is the extent to which the party in default has complied with the rules, practices, directions, court orders and any relevant pre-action protocol. That is not relevant in this case. The sixth is whether the failure to comply was caused by the party's legal representative. That, therefore, is also irrelevant. The next concerns the trial date and that is also irrelevant. The next is the effect that the failure to comply has had on each party. We accept that the effect on the respondent parties, particularly the motor insurers, would be that by granting leave out of time old matters will have to be brought back to be reconsidered again. However, given the nature of the allegations made against Autofocus, we think it is absolutely necessary in the interests of the administration of justice that that be done even so long after the original trials. Lastly, there is the effect which the granting of relief would have on each party. We have already said what the effect will be on the motor insurers; the effect on AEL will be to give AEL an opportunity to test its allegations with regard to the practices of Autofocus and to see whether or not it has, as it alleges, suffered as a result because it has not received the compensation which it says it ought to have done.

Accordingly, having reviewed the checklist we are satisfied that these are proper cases in which there should be an extension of time. Accordingly, we extend time and we give permission to adduce the evidence of Mr Lee and Mr Evans.

In the circumstances we will grant permission to appeal. We do so on the basis that there is a reasonable prospect of success in demonstrating that there were fatal flaws in the evidence of Autofocus and therefore that the basis upon which the judges made their conclusions on the BHR to be applied cannot be sustained.

That leaves the question of how these appeals should be managed. It also leaves over questions about other appeals, because it was emphasised to us by both Mr Edis and Mr Stuart-Smith that there may be thousands of similar County Court cases in which Autofocus reports were relied upon by judges and which may now be suspect. We have come to the conclusion that it would be wrong to attempt to deal with all these issues today. We think that the correct way to deal with them is to have a directions hearing. This should be conducted by either one or preferably two Lords Justices who will be in the constitution that will actually be conduct the hearings of these appeals in these four cases, or possibly one or two or three of them, or possibly more cases as well. The shape of the appeal hearing is of importance and the question of how evidence is to be dealt with in it is also important. We think it practical and sensible therefore to have a separate directions hearing along the lines which we have just suggested. We will make orders accordingly.