Jogo Associates Ltd & Ors v Internacionale Retail Ltd

In this appeal the appellant (Internacionale) appeals against the decision of HHJ Langan QC sitting in the Chancery Court at Leeds granting summary judgment in a claim made against it. The claim arose out of its purchase of the business of Jet Star Retail Limited (“Jet Star”), a discount fashion retailer of women’s clothing, from the administrator of Jet Star. That claim was made by the Respondents to the appeal, three connected companies - Jogo Associates Ltd, The Pinstripe Clothing Company and Red Orange Clothing Ltd; I shall refer to these as Jogo. Jogo alleged that it had supplied Jet Star with clothing and was relying on a retention of title clause in respect of goods delivered to Jet Star for which it had not been paid.

Internacionale’s primary defence to the claim was that the retention of title clause had not been agreed at the time of the purchases, but only at or about the time when Jet Star went into administration. Jogo denied this. The judge concluded that there was no solid evidence to disbelieve Jogo. On appeal, Internacionale did not dispute the decision of the judge on the evidence before him, but contended that this court should admit fresh evidence which would show that summary judgment should not have been granted.

It is necessary to explain the background in more detail and the way in which the evidence emerged, as the most important evidence was served a few days before the hearing of the appeal.

Jet Star had traded as Mark One. The business of Mark One had a long history. It was initially founded by Mr Mark Brafman, through a company called Mark One Ltd; this company went into administration in 1996. The business was then acquired by others and subsequently in 2004 purchased by the Baugur Group, an Icelandic Company that made many such acquisitions. It was then acquired by Northworld Limited, a vehicle for Hilco UK Ltd, retail restructuring specialists, a company to which Mr Robert Schneiderman was a consultant.

Jet Star was incorporated on 8 May 2008 to acquire a substantial part of the Mark One business from Northworld which was also in administration. That purchase was completed on 27 May 2008 with some of the purchase price being paid to Northworld and the balance left outstanding with Northworld which was given a qualifying floating charge over the assets of Jet Star; the rest of the Mark One business was left with the administrators who had been appointed for Northworld, two partners of Deloittes.

At the time of the acquisition the shareholders of Jet Star were Mr Mark Brafman and Mr Bulbinder Singh who owned 50% each. At the time of the acquisition, both men were disqualified from acting as directors; Mr Brafman had been disqualified in 2001 and Mr Bulbinder Singh in 2003. The directors of Jet Star were Mr Brafman’s wife, Michelle Brafman, and Ms Dolly Deacock, a person with long experience of the retail trade and who had been closely involved in the business of Mark One for many years, latterly as a buyer and merchandising director. The evidence indicated that Mr Brafman played a significant role in the running of Jet Star.

Between July and November 2008, Jogo sold goods to Jet Star.

On 14 October 2008, Mrs Brafman and Ms Deacock resigned as directors of Jet Star; there had apparently been a falling out between Mr Bulbinder Singh and Mr Brafman and Mr Brafman’s shares were transferred to Mr Singh. On 27 October 2008, Jogo issued a winding up petition against Jet Star. Jet Star went into administration on 19 November 2008 when Northworld, as a holder of the qualifying floating charge, appointed administrators – Mr Neil Bennett and Mr Michael Healey of Leonard Curtis, licensed insolvency practitioners in London.

While the administrators of Jet Star sought to sell the business, Jet Star continued to trade. The business was sold on 25 November 2008 to Internacionale for a price of £1m to include stock which was valued in the agreement at £750,000. Internacionale took over most of the shops and continued the business.

On 9 July 2009, Jogo issued a claim against Internacionale claiming it had supplied stock to Jet Star on terms and conditions, which included a retention of title provision, set out in three letters dated 3 June 2008 which were signed by Ms Deacock. Each contained a paragraph which stated:

“As per the enclosed terms and conditions we reserve title to all goods which are supplied by our company to Jet Star Retail Ltd under all present and future contracts. Title to our goods will only pass to Jet Star Retail once our company has received settlement in the form of cleared funds for those goods which form part of the said contracts.”

Jogo contended that Internacionale had wrongly converted the stock supplied on those terms as Jet Star had not paid Jogo; the value of the stock was said to be about £1.1m.

In its defence served on 21 August 2009, Internacionale put forward as their defence the position advanced by the administrators who had rejected the retention of title claim based on the letters which bore the date of 3 June 2008. Internacionale asserted that it believed that the administrators suspected that the letters had not been signed on the date on the face of the letters but rather at the time or after the commencement of Jet Star’s administration. The defence referred to other claims brought against the administrators by suppliers in Birmingham and in London relying on nearly identical letters.

On 22 September 2009, Jogo made an application for summary judgment on the claim.

Internacionale applied for a stay pending the resolution of a claim in Birmingham by another supplier against the administrators where the supplier was relying on a similar letter and where the administrator was contesting its validity. The application for an adjournment was refused on 5 November 2009. Internacionale therefore served in December 2009, in opposition to the summary judgment application, a statement by Mr Milton of Internacionale and a statement by Mr Bennett, one of the administrators, dated 16 December 2009. Mr Milton’s statement referred to the proceedings in Birmingham; Mr Bennett’s statement referred to the fact that Jogo had not relied on the letters of 3 June 2008 in their letter of claim dated 14 November 2008 and there were no copies of the letters in the files of Jet Star. He exhibited a statement he had made in the Birmingham proceedings on 2 June 2009 in which he set out a chronology of his dealings with Ms Deacock. I refer to this at paragraph 37 below.

The proceedings in Birmingham were brought by Mr Bulbinder Singh trading as Isher Fashions UK, relying on Ms Deacock’s letter of 9 June 2008 (whose terms included provisions similar in purported effect to those of 3 June 2008 referred to in paragraph 10 above); the administrators defended the proceedings on the basis that they did not admit that there was a retention of title clause; the administrators made no admission about the letter of 9 June 2008 and did not allege fraud. On 22 January 2010, HHJ Simon Brown determined preliminary issues deciding that the retention of title clause was incorporated. By the time of that hearing the administrators had not developed the evidence beyond that set out in Mr Bennett’s statement of 3 June 2009; no positive case was advanced about the letters.

At the summary judgment hearing in these proceedings on 24 March 2010, HHJ Langan QC held that Internacionale had no real prospect of defending this point primarily on the following findings of fact: (i) Internacionale had a case of no more than suspicions – it had relied on the hearsay of Mr Brafman, there were no copies on Jet Star’s files, a high proportion of the goods were delivered close to the administration, and the fact that Jogo launched winding up proceedings first and continued to deliver stock. The judge referred to the proceedings in Birmingham. He concluded that there was “no solid reasons for disbelieving” what Jogo say.

Summary judgment was granted for damages to be assessed; no interim payment was ordered. Directions for the assessment of damages were agreed on 3 June 2010.

On 25 August 2010 Internacionale applied for permission to appeal on the basis of a witness statement from Ms Chesser which stated that Internacionale had not been able to obtain, prior to the summary judgment hearing, a witness statement from Mr Brafman as he was not prepared to co-operate. After the judgment they had approached Mr Brafman; it had taken some time to persuade him to sign his statement.

In his witness statement dated 13 August 2010 Mr Brafman described his position in Jet Star and his working relationship with Ms Deacock. He said he was with Ms Deacock in Manchester on 3 June 2008; he attended a meeting at which Ms Deacock and Mr Kamani were present; he did not believe that Ms Deacock met Mr Kamani separately. He did not believe that the letters could have been signed by her on that date as he would have known of them because of his close working relationship with Ms Deacock. He denied the assertion made by Mr Kamani that he had advised him to procure the letters. He went on to say that he had had lunch with Ms Deacock in early December 2009; he told her he did not know about the letters. His statement continued:

“I asked Dolly whether she really signed the letters on the date that they are dated. Dolly answered stating that she signed them on the date that they were signed and did not say anything further. She half smiled when she said this statement, which adds to my belief that she is being untruthful.”

He went on to say he warned her about the trouble she would get into and told her she should withdraw the letters. His statement then referred to other suppliers who had letters to similar effect; he had not been told about them.

On 22 October 2010, permission to appeal was granted by Longmore LJ who adjourned to the court hearing the appeal the decision as to whether to admit the fresh evidence.

The response of Jogo was to serve a third witness statement from Mr Kamani and a statement from Mr Hughes, Jogo’s solicitor. Mr Hughes’ statement annexed two statements made by Mr Brafman in early 2009 that were at complete variance with his statement made in August 2010. I will refer at paragraph 30 to both of those statements; Mr Hughes also gave an account of his conversations with Mr Brafman.

Ms Chesser and Mr Irvine, of Internacionale’s solicitors then served further witness statements made on 16 December 2010 and 7 January 2011 setting out their conversations with Mr Brafman about his conflicting statements. On 14 February 2011, Internacionale filed a further application notice to adduce fresh evidence – those statements of Ms Chesser and Mr Irvine to which I have just referred and a third witness statement of Ms Chesser dated 10 February 2011. This last was the more important as it exhibited a transcript of Ms Deacock’s interview on 15 May 2009 under s.236 of the Insolvency Act 1986 in the presence of Mr Bennett, one of administrators, and solicitors representing the administrators and Ms Deacock. I will refer to this at paragraphs 33.ii) and 37.xii). Ms Chesser’s statement explained that she had been told on 12 January 2011 by Sprecher Grier Halberstam LLP (SGH), the administrators’ solicitors, that they would be serving the transcript in proceedings in a claim by other suppliers, Peach Melba, due to be heard in the Chancery Division on 21 February 2011; the administrators’ evidence in the Peach Melba claim (including the transcripts) was sent to her on 27 January 2011.

On 15 February 2011, Mr Hughes served a further statement in response to Ms Chesser’s statement made on 16 December 2010 and Mr Irvine’s made on 7 January 2011 in which he set out a further account about the taking of the statements of Mr Brafman and Mr Brafman’s comments made to him in a telephone conversation on 3 February 2011 on what Ms Chesser and Mr Irvine had said in their statements.

On 24 February 2011, a few days before the hearing, Internacionale made an application to admit yet more evidence - a fourth witness statement of Ms Chesser dated 23 February 2011 and a statement of Mr Bennett dated 23 February 2011.

It was common ground that, although there were several decisions of this court setting out the applicable principles for the admission of fresh evidence, it was sufficient to refer to the judgment of Arden LJ in Aylwen v Taylor Johnson Garrett [2001] EWCA Civ 1171 where, after referring to Ladd v Marshall and Langdale v Danby [1982] 1 WLR 1134, she concluded:

.. the practice of the Court of Appeal as recorded in the annual practice is to decline to admit fresh evidence even on an appeal against summary judgment unless the special grounds in Ladd v Marshall apply. It seems to me that a similar approach should apply to the reception of fresh evidence on applications under CPR 3.4 and 24.1 as now apply to other appeals (see Hertfordshire Investment v Bubb), respecting of course the type of difference in application of the principles to which Lord Bridge referred in Langdale v Danby. Moreover, I would accept that the same should apply to amendments to statements of case adduced for the first time in the Court of Appeal to avert the unfavourable outcome of an application to dismiss a claim under CPR 3.4 or CPR 24.2”

The three conditions set out in Ladd v Marshall were: (i) the evidence could not have been obtained with reasonable diligence for use at the trial; (ii) the evidence must be such that, if given, it would probably have an important influence on the result of the case, although it need not be decisive; (iii) the evidence must be apparently credible, although it need not be incontrovertible.

In the circumstances of this case it was clear that the second and third questions should be considered together, as the essential question was credibility. I therefore turn to consider the fresh evidence - (1) that from Mr Brafman and (2) that from Mr Bennett in respect of Ms Deacock.

As I have set out at paragraph 17 above, Miss Chesser stated that it was not possible for Internacionale to obtain Mr Brafman’s evidence prior to the summary judgment hearing; he would not cooperate with or assist Internacionale; it was relying on the efforts of the administrator.

However, in my view, it was clear to Internacionale and its solicitors by late January 2011 that the administrator could not get Mr Brafman to sign a statement; no effort was made by Internacionale or its solicitors over the ensuing month to contact him or to try and obtain a statement.

It seems clear that it was only in April 2010 that Mr Brafman was contacted by Mr Nigel Fisher of Internacionale; he received the first letter from their solicitors on 12 April 2010; he was then prepared to assist – the delay was in getting him to sign his statement. There was no reason why this approach could not have been made before the hearing.

Assuming that Internacionale acted with reasonable diligence to obtain his evidence, his evidence is simply not credible:

Points could and were made about the way in which Mr Brafman’s statements had been drafted so as to avoid stating when Mr Brafman had become aware of the letters; a faint attempt was made to try and reconcile them. However the statements are plainly inconsistent and irreconcilable. A judge considering his evidence would not be able to attach any weight to his evidence; he is not a credible witness. The statement made in August 2010 would in the circumstances have had no influence on the outcome of the summary judgment application. His evidence was therefore not admissible as fresh evidence.

There were only two statements before the court from Ms Deacock, that dated 31 March 2009 referred to in paragraph 12.iii) and one of the same date in materially the same terms to which I refer at paragraph 37.x). It was contended, however, that the transcript of her interview and the evidence from Mr Bennett in his statement of 23 February 2011 cast sufficient doubt on her account that, if it had been before the judge, he would not have granted summary judgment.

The first question is whether that evidence could have been obtained with reasonable diligence:

It is clear that Internacionale were relying on the administrators to provide as much evidence as is possible; they had not, in my view, exhibited any want of due diligence. The administrators were simply not prepared to do more at any time than suited their interests.

I therefore turn to consider whether the fresh evidence would have influenced the outcome. In my view, although points could be and were made about the way in which Ms Deacock’s statement of 31 March 2009 was expressed and about her phraseology in the few lines of the interview that were relevant, these are of no materiality in impugning her statement of 31 March 2009 in which she stated the letters were signed on 3 June 2008. All the interview does is to provide a small modicum of support to Mr Brafman’s presence at the meeting on 3 June 2008, but, as will be seen, it is no more than that.

The only evidence that casts any real doubt on the statement of Ms Deacock that the letters were signed on 3 June 2008 is Mr Bennett’s account of what she told him at a meeting on 26 February 2009 in relation to the signing of the letters. This was an account which Mr Bennett gave, despite the many other statements he has made, for the first time in his statement of 23 February 2011. The issue is whether given the way that Mr Bennett conducted himself and the way the statement emerged, it can be regarded as sufficiently credible and reliable to raise a real doubt about the truth of Ms Deacock’s statement.

To understand Mr Bennett’s conduct and the context of his statement of 23 February 2011, it is necessary to set out an account of Mr Bennett’s prior evidence of his dealings with Ms Deacock in evidence put before (i) Judge Langan QC and this court in these proceedings, (ii) in the Birmingham proceedings on 3 June 2009 and (iii) his report to the Companies Court made on 3 April 2009 in support of an application to interview Ms Deacock under s.236.

In his statement of 23 February 2011, Mr Bennett set out for the first time a very different account of the meeting with Ms Deacock he had had on 26 February 2009.

It was accepted by Mr Peter Arden QC that the part of Mr Bennett’s statement set out at subparagraph 38 vii) above where he said that she said the letters were signed in November 2008 was a statement that put in issue whether Ms Deacock had signed the letters on 3 June 2008. No challenge was made to its admissibility on the basis it might have been made at a “without prejudice” meeting; that was it seems because Mr Bennett’s statement did not put forward sufficient for this to be argued and Ms Deacock had not been asked about the meeting. The question was whether the statement of Mr Bennett that Ms Deacock had said that the letters were signed in November 2008 was credible. In judging the credibility and reliability of that statement by Mr Bennett I have had regard to the following:

The extent to which Mr Bennett’s account in his statement of 23 February 2011 can be regarded as credible has caused me some anxiety. The sole supporting document was the insertion of the November date into the comfort letter; that would have been insufficient. However, he is an officer of the court. Although his conduct as an officer of the court calls for a detailed explanation which plainly should have been given by him in his statement of 23 February 2011, he was not a party to these proceedings. He had not provided any explanation of the obvious questions to Internacionale; it is possible that for some unexpressed reason he felt he could not refer to what he says was said by Ms Deacock on 26 February 2009; one possible explanation is that he thought it was privileged as made at a without prejudice meeting. Furthermore it is right to take account of the fact that we were told that the administrators have no financial interest in the dispute, for in the event of Internacionale having to pay the claim (or any part of it), they have no recourse under their agreement with the administrator.

In the circumstances, I consider that the evidence from Mr Bennett to the effect that Ms Deacock had admitted that the letters were signed in November 2008 rather than on 3 June 2008 is relevant to the application for summary judgment. It could have a bearing on the outcome of the case and accordingly (unlike that of Mr Brafman) it ought to be allowed in on the appeal as satisfying the Ladd v Marshall criteria. Reconsidering the application for summary judgment in the light of this new evidence, it seems to me that it provides the defendant with a prospect of defending the claim which is more than fanciful, but not one which is very substantial; the word shadowy comes to mind. The doubts as to the probable success of the defence arise because of the circumstances that I have described in relation to the making of the statement. I would therefore allow the appeal, but I would impose on the Defendants a condition requiring the payment into court of a substantial sum.

The amount of the payment that would be required is not easy to assess given the size of the claim, £1.1m, and £200,000 interest and Internacionale’s contention that the claim is worth substantially less. However taking into account the value of the stock in the purchase agreement between Internacionale and the administrators, the probability that the value took into account third party claims and the very substantial mark ups in this trade, I consider that the amount should be £600,000, to include an element for interest. I would invite submissions as to the timing of the payment and any other consequential directions.

I agree.

I also agree.