When appealing a judgment in England, the default position is that an appellate court will not interfere with the factual findings of a lower court unless it is convinced that no reasonable court could have reached that conclusion on the basis of the material before it. This is a very high bar. In practice, it means that it is rare for a lower court’s factual conclusions to be overturned on appeal where those findings are based on a first instance judge’s evaluation of witness evidence (where it is recognised that the trial judge has an inherent advantage over an appellate court in assessing the primary facts). This is often the case, for instance, in litigation involving complex and long-running frauds, where contemporaneous documentary evidence is often sparse and the judge’s assessment as to the reliability (or otherwise) of key witnesses is crucial to the outcome.
In the recent case of Natwest Markets PLC v Bilta (UK) Ltd  EWCA Civ 680, the Court of Appeal provided a reminder that this general rule does not apply in one particular set of circumstances: namely, where there has been a significant gap in the period between the conclusion of the trial and the issuing of the judgment. In such cases, a much less stringent standard will apply, focusing not on whether the trial judge’s conclusions were wrong, but on whether the Court of Appeal can be positively satisfied that those conclusions were correct. As this case demonstrates, this can make a critical difference to the outcome of an appeal.
Background Facts and First Instance Decision
The claim in Natwest was concerned with a type of VAT fraud relating to the trading of carbon credits (“EUAs”) issued under the EU Emissions Trading Scheme. The trading of EUAs within an EU Member State attracted VAT, but the import or export from one Member State to another was VAT-free. The fraud was implemented by one trading company importing EUAs from State A to State B (paying no VAT), then selling them on within State B (with VAT added). The latter transaction would give rise to a VAT liability for which the company would normally have to account to State B’s tax authorities (in this case UK HMRC). At this point, the director of the trading company would syphon off the VAT and vanish, leaving an unpaid VAT liability which the company could not satisfy.
The claimants in Natwest were the companies (now in liquidation) whose directors had perpetrated the VAT fraud (in breach of their duties to those companies). The defendants were the employers of traders who had bought a significant quantity of EUAs (indirectly) from the claimants in June and July 2009, and allegedly turned a blind eye to the fact that the EUAs they had traded in were obviously part of a fraudulent scheme (thereby dishonestly participating in the perpetuation of that scheme).
The trial took place over five weeks in June and July 2018 (some 9 years after the relevant events had taken place). There was then a 19 month interval until judgment was handed down in March 2020. One of the central issues at trial was whether the traders had been aware of (or at least suspected) the VAT fraud at the time they had bought the EUAs. The trial judge heard evidence from the traders involved, and found that much of their evidence was not credible. He concluded that they had been at all material times aware that the EUAs were likely being sold to them as part of a wider fraudulent arrangement, and accordingly found them liable for dishonest assistance and knowingly being party to fraudulent trading.
The Court of Appeal’s Decision
The crux of the defendants’ appeal was that the first instance court’s judgment failed to take into account a number of contemporaneous documents which were prima facie potentially inconsistent with the judge’s conclusion that the traders had been dishonest. While the judge had been taken to these documents in the course of submissions, they were not referred to in his judgment.
The Court of Appeal began by pointing out that, in a normal case (and especially in a complex case where the judge was having to evaluate multiple, contradictory sources of evidence), a judge is not required to address every single point put to him, and the mere fact that a judgment omits to mention a particular matter pointing the other way from a judge’s overall conclusion is insufficient grounds for allowing an appeal. This is because, when given in a timely fashion, a judgment “can be assumed to have been prepared with a full recollection of the relevant evidence”.
However, the Court of Appeal went on to say that where there had been a considerable delay in issuing the judgment, the latter assumption could no longer hold. Specifically, where a delayed judgment failed to expressly refer to certain factors, it could not simply be assumed that the trial judge had nonetheless had regard to those matters in reaching his decision. The relevant test in such circumstances was not whether the judge’s findings were plainly wrong, but whether the Court of Appeal could be satisfied that the original finding was correct. This would in turn warrant much closer scrutiny of the trial judge’s reasoning than would typically be appropriate in an ordinary appeal.
In Natwest itself, the Court of Appeal found that the documents which the judge had omitted from his overt analysis were, at least on their face, potentially inconsistent with the trial judge’s findings that the traders had been actively dishonest. It therefore could not be satisfied that the judge’s conclusions were necessarily correct, and therefore allowed the appeal and ordered that a new trial should take place with a different judge.
It is noteworthy that the Court of Appeal reached this conclusion notwithstanding that it also found: (i) there was no basis to doubt the judge’s conclusion as to the overall credibility of the defendants’ witnesses, (ii) that the judgment had been prepared with “considerable care and attention to detail”, (iii) that the judge clearly had a basis in the evidence for drawing the conclusions that he did, and (iv) that the additional documents may ultimately make no difference to the conclusions another trial judge may reach. Any of these factors, even in isolation, may well have been fatal to an ordinary appeal. The Court of Appeal provided no guidance as to the length of delay which would typically warrant the application of this less stringent test. However, it noted that the general expectation is that judgments will be issued within 3 months of the conclusion of the trial, and it may therefore be that any material delay beyond this will potentially engage this lower standard.