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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Banks & Anor v Cox & Anor [2001] EWCA Civ 821 (17 May 2001) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2001/821.html Cite as: [2001] EWCA Civ 821

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IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL CIVIL DIVISION
ON APPEAL FROM THE CHANCERY DIVISION
(Mr Justice Lawrence Collins)

		Royal Courts of Justice Strand London WC2 Thursday, 17th May 2001

Thursday, 17th May 2001

1. LORD JUSTICE BUXTON: I will ask Jonathan Parker LJ to give the first judgment.
2. LORD JUSTICE JONATHAN PARKER: Before the court are three applications by the defendants in on-going litigation concerning the Grenville Nursing Home, Bideford, Devon. The claimants are Mr and Mrs Banks. The defendants are Mr and Mrs Cox.
3. In order to understand the nature of the applications which are made and to set them in context, it is necessary to summarise the factual background which led to the issue of proceedings and the history of the proceedings themselves.
4. The Grenville Nursing Home has capacity for some 30 occupants, 27 occupants requiring nursing care and three residential occupants. It caters primarily for occupants requiring state funding, and by 1996-1997 some 75% of the occupants of the nursing home were funded by the local authority, the Devon County Council, through the Torridge Purchase District Social Services Department.
5. Mr and Mrs Cox bought the nursing home in about 1986 and thereafter they ran it as a business. In February 1997 Mr and Mrs Cox instructed estate agents to put the nursing home on the market, and on 10th February 1997, having heard about it, Mr and Mrs Banks visited the nursing home and met Mr and Mrs Cox.
6. Subsequently terms of sale were agreed; the consideration was to be £250,000 for the goodwill and assets of the business together with a lease of the nursing home premises at an annual rental of £50,000.
7. On 25th March 1997 Mr and Mrs Banks' solicitors (Messrs Stones of Exeter) sent preliminary enquiries to Mr and Mrs Cox's solicitors (Messrs Seldon, Ward & Nuttall). Preliminary enquiry No 20 read as follows:

"Has there been any material change in the nature or conduct of the Business since the date of the Business's audited accounts."

8. The date of the last audited accounts was 30th November 1996. On 9th April 1997 Mr and Mrs Cox solicitors answered the preliminary enquiries. Their answer to preliminary enquiry No 20 was "No".
9. The transaction was completed on 2nd May 1997 with the aid of a mortgage advance. On completion, Mr and Mrs Cox confirmed through their solicitor that the written information given by them or on their behalf prior to completion was complete and accurate.
10. Following completion, a number of vacancies occurred in the nursing home through the deaths of occupants. Mr and Mrs Banks became concerned that the local authority was making fewer referrals to the nursing home than previously.
11. In about September 1997 a meeting took place between Mr Banks, a representative of the social services department, a Ms Stephens, and Mr Cox. In the course of this meeting Ms Stephens referred to a letter which had been sent by Mr Hobbs, the district manager of the social services department, to all care home owners earlier in the year warning of serious forthcoming cuts in the social services budget. Mr Banks asked for a copy of the letter, which Ms Stephens subsequently provided.
12. The letter was dated 5th February 1997. After referring to the difficult situation facing the department and to a number of factors leading to a reduction in available funding, the letter says this:

"The combination of these factors explains the reductions to be managed within Torridge. It goes without saying that these are extremely serious and I am having to take action now, both in order to live within this year's budget and to reduce commitments at the start of the next financial year."

13. The letter concludes as follows:

"I am sensitive to the effect of our actions on your businesses and can assure you that preserving an open and broadly based market in Community Care is seen by me as central to our approach. I will be careful, therefore, to keep the impact upon you to the minimum and will alert you to any change in circumstances as they develop.

I hope that you find this letter of help in understanding the situation but please let me know if anything is unclear."

14. On 18th August 1998 Mr and Mrs Banks issued the writ in the action against Mr and Mrs Cox and against the solicitors who had acted for Mr and Mrs Banks in the transaction, Messrs Stones. As against Mr and Mrs Cox, Mr and Mrs Banks claimed damages for misrepresentation in (among other things) answering "No" to preliminary enquiry No 20. Their case was that the terms of the letter of 5th February 1997 were such as to render false the answer which was given to that preliminary enquiry. Mr and Mrs Banks' claim against the solicitors was in negligence.
15. The trial of the action took place in April 2000 before Lloyd J. On 17th April 2000 Lloyd J delivered judgment dismissing all Mr and Mrs Banks' claims. He found that Mr and Mrs Cox had never received the letter dated 5th February 1997, and he concluded that even if they had received that letter the terms of the letter did not serve to falsify their answer to preliminary enquiry No 20. Lloyd J further held that Mr and Mrs Banks would have gone ahead with the purchase of the nursing home in any event even if they had learned of the contents of the letter. Lloyd J also dismissed the claim against the solicitors. He refused permission to appeal.
16. On 17th May 2000 Mr and Mrs Banks applied to this court for permission to appeal, indicating that they wished to rely on further evidence. The further evidence upon which they sought to rely consisted, it appears, of witness statements from some 14 individuals together with other documentation. On 15th June 2000 Waller LJ granted Mr and Mrs Cox permission to appeal, and he expedited the hearing.
17. The appeal was heard on 17th July 2000. The appeal was, in the event, allowed and a retrial was ordered. The Court of Appeal (the leading judgment being given by Morritt LJ, with whom May LJ and Forbes J agreed) concluded that the new evidence upon which Mr and Mrs Banks sought to rely suggested that Mr and Mrs Cox may have known of the letter of 5th February 1997 when preliminary enquiry No 20 was answered. The Court of Appeal further held that in the light of that letter, the answer to preliminary enquiry No 20 was capable of being false. On this issue Morritt LJ said this:

"58. The fourth point is whether the representation concerned in the answer to pre-contract inquiry No. 20 was false. The judge" [that is a reference to Lloyd J] "thought not. The notes to which I have referred record him as having said,

`If the letter had been received, was there misrepresentation in response to Business Enquiry No. 20? [That should be obviously preliminary enquiry No 20.] [Preliminary enquiry No 20 asks whether there had been a material change in the nature or conduct of the business. The letter did not constitute a change in the nature of the business. The business had always been a Nursing Home. Similarly, I do not believe the letter affected the conduct of the business as this enquiry relates to the present tense and the letter was a sign as to what was to happen in the future.'

59. In saying that the letter was a sign as to what was to happen in the future the judge appears to have overlooked the passages in the letter which I have quoted already to the effect that the local authority was having to take action both `immediately' and `now'. For my part I do not agree with the judge that the contents of the letter could not give rise to a misrepresentation. Counsel for Mr and Mrs Banks gave as an example the case of a business which sells all its products to a particular retailer, but without a contract for any long term supply. If the retailer informs the producer that he is seeking an additional supplier for most of his requirements that may give rise to a change in the nature or essential quality of the business of the producer. The greater the impact on the existing business the more likely it will change its nature. The change to the nature of the business will be immediate though its consequences may not become apparent until later. If the business is built on a foundation which is withdrawn the change to the nature of the business occurs when the foundation is withdrawn even though it may take time for it to collapse. It follows that in my view the judge was wrong to find that even if the letter or its contents were known to Mrs Cox the answer to pre-contract inquiry No. 20 could not have been falsified. In my view it could have been, whether or not it was can only be determined at trial."

18. The retrial of the action took place before Lawrence Collins J in November 2000. On 4th December 2000 he delivered judgment. He found that Mr and Mrs Cox had received and were aware of the contents of the letter dated 5th February 1997 when answering preliminary enquiry No 20. He further held that, in the light of the contents of that letter, their reply to preliminary enquiry 20 was false and that, had a true answer been given to that preliminary enquiry, Mr and Mrs Banks would not have gone ahead with the purchase. He accordingly found Mr and Mrs Cox liable for damages for fraudulent misrepresentation and he directed an enquiry as to damages. Following delivery of the judgment, Mr and Mrs Banks applied to the judge for a freezing order over Mr and Mrs Cox's assets, which the judge duly granted.
19. Mr and Mrs Cox then applied for permission to appeal against Lawrence Collins J's order. The application for permission to appeal came before Sedley LJ on 3rd April 2001. Sedley LJ refused permission to appeal in respect of some of the proposed grounds of appeal, but in relation to the remainder he directed that the application for permission to appeal come before the full court, with the substantive appeal to follow should permission be granted. Following Sedley LJ's order, Mr and Mrs Banks applied to vary that order by splitting off the application for permission to appeal from the substantive appeal itself. That application came before me on 20th April 2001. Mrs Banks was present on that occasion and made submissions in person, but Mr and Mrs Cox, although they had been notified of the hearing shortly before it took place, were unable to attend. They did, however, send a fax to the court which I considered. Based upon what Mrs Banks told me, I decided that it was appropriate to vary Sedley LJ's order by directing that the application for permission to appeal be split off from the substantive appeal itself and listed as a free-standing application to come on in the usual way. I did, however, make it clear when varying Sedley LJ's order that I was at that stage in no position to form even a provisional view as to whether the application for permission to appeal would or would not succeed. At that stage I had seen none of the papers in the action.
20. That is the historical and procedural background to the applications which are presently before the court. As I said at the outset of this judgment, there are three such applications. The first is the application by Mr and Mrs Cox for permission to appeal in respect of those grounds of appeal which were allowed to remain open by Sedley LJ. That is the first of the three applications. The second is an application to vary the terms of the freezing order made by Lawrence Collins J. The third application is an application to vary the order which I made to which I have just referred.
21. The applications are resisted on behalf of Mr and Mrs Banks by Mr Nigel Wilkinson QC and Mr Tim Penny; but in dealing with the application for permission to appeal we did not consider it necessary or appropriate to invite Mr Wilkinson to make oral submissions. We have, however, considered a written skeleton argument which he has submitted, and which Mr and Mrs Cox have also read and upon which in turn Mr Cox made oral submissions to us.
22. I turn first to the application for permission to appeal.
23. By his order, Sedley LJ refused permission to appeal on all the grounds set out in the written argument then placed before him by Mr and Mrs Cox (a document which is also before us today) except for the grounds set out in paragraph 1(a) and (b) and paragraph 3(a).
24. I will consider each of these in turn.
25. Before doing so, however, it is right that I should record that at the retrial, albeit not today when they have attended in person, Mr and Mrs Cox were represented by counsel.
26. Paragraph 1(a) is in the following terms:

"At both the trial and the retrial the claimants suggested" [the claimants being of course Mr and Mrs Banks] "that we put our nursing home up for lease in 1997 because of a letter sent out by Torridge Social Services on February 5th, 1997 ... . We allegedly suppressed this letter because it warned of imminent cutbacks in the total annual Social Security budget for Torridge of £220,000. This would have affected the income of the business and therefore its saleability."

27. Then follow a number of subparagraphs.
28. In subparagraphs (i), (ii) and (iii) it is asserted that Mr and Mrs Cox did not place the nursing home on the market because of the letter of 5th February 1997, and reference is made to earlier attempts to sell it. Mr and Mrs Cox also seek to adduce further documentary evidence to support this (including two medical reports dated October 2000, long after the events in question).
29. In the first place, I must say that I can see no basis for admitting the further evidence sought to be relied on by Mr and Mrs Cox, consistently with well established principles: see Ladd v Marshall. There was cross-examination before Lloyd J as to Mr and Mrs Cox's previous attempts to sell the home, and any additional contemporary evidence relating to that issue could have been adduced at that stage, let alone at the retrial. In any event, it is apparent from his judgment that the judge at the retrial (Lawrence Collins J) was well aware that the home was put on the market before the letter was received. Thus, in paragraph 64 of his judgment he found that the letter was a topic of conversation before it was actually sent out: that was a finding he was fully entitled to make on the evidence before him.
30. In subparagraph (iv) in paragraph 1(a) Mr and Mrs Cox point out that it has never been their case that they deny having received the crucial letter, rather that they do not recall having received it. They seek to adduce evidence from another home owner to that effect. As to that, the judge was well aware how Mr and Mrs Cox put their case in relation to the receipt of the letter, as appears from paragraph 37 of his judgment, where he says:

"The evidence of Mr Cox was that it was possible that the letter had been received at the Grenville, although he had no recollection of it."

31. As to the evidence of the other home owner, I can for myself see no reason whatever why that could not have been made available at the retrial. Moreover, there was evidence to that effect from other home owners, of which the judge took due note.
32. In subparagraph (v) reference is made to the evidence of Mr Blunt (at the material time an employee of Devon Social Services), given at the trial, that the crucial letter was discussed at a meeting on 24th April 1997 at which Mrs Cox was present. Mr and Mrs Cox seek to rely on a second witness statement by Mr Blunt, made in or about May 2001 (that is to say before the retrial) in which he gives evidence to the effect that he cannot be sure if Mrs Cox was present at that meeting. Mr and Mrs Cox also seek to adduce medical evidence in support of Mrs Cox's assertion that she could not attend the meeting since she had injured her foot in a fall the previous day. For what it is worth, the medical evidence records that her attendance at the doctor took place on 17th May - some three weeks after the meeting. Mr and Mrs Cox also seek to introduce in evidence an insurance claim and an entry in an accident book. Once again, I have to say that I can for my part see no basis for admitting this additional evidence. I can see no reason why it could not be have been produced at the retrial, for whatever relevance it might turn out to have. Moreover, it is I think material to note, when considering the evidence of Mrs Cox, that the judge found that the letter was received and opened by Mr Cox: see paragraph 38 of his judgment. As to Mr Blunt's second witness statement, that was, it appears, produced at an early stage in the retrial and Mr Blunt was cross-examined about it. The judge found him to be a reliable witness and in the event preferred his evidence to that of Mr and Mrs Cox, and he made his findings accordingly. That, it seems to me, was pre-eminently a matter for the judge and is not susceptible of challenge in this court.
33. Subparagraph (vi) relates to the issue whether Mrs Cox was present at a meeting on 26th March 1997 at which the forthcoming cutbacks were discussed, and to the minutes of that meeting which, in their typed version, do not show Mrs Cox as having been present, her name being added in manuscript to the list of those shown as being present. Mr and Mrs Cox seek to adduce further evidence from a Mr Woods, whose handwriting it is. But Mr Woods gave evidence on behalf of Mr and Mrs Cox at the trial concerning this handwritten amendment, and he was cross-examined about it. In the circumstances there is, in my judgment, no proper basis upon which this issue can be pursued any further.
34. I turn next to paragraph 1(b), which reads as follows:

"Even if we did receive the letter in question we do not believe that it represented `a material change in the nature or conduct of the business'."

35. Once again a number of subparagraphs follow. Subparagraphs (i), (ii) and (iii) contain points of argument on this issue. Subparagraph (iv) is in the following terms:

"We have gathered numerous statements and letters from other nursing and residential homes in the Torridge district. They all endorse our view that warnings of cutbacks in Council funding, including the letter of February 5th, 1997, are regarded as part of routine business risk in the care home industry. Two of these ... were not submitted at the retrial. Our solicitor advised us that we already had plenty of supporting evidence."

36. Once again, however, there is in my judgment no basis whatever for reopening this issue.
37. In considering whether or not the reply to preliminary enquiry 20 was false, the judge carefully followed the guidance given by the Court of Appeal in the passage in Morritt LJ's judgment which I quoted earlier. The judge investigated the facts material to this issue, and made findings on them. In the circumstances, his conclusion on this issue seems to me to be unassailable in this court.
38. As to the new evidence which is sought to be adduced, it is to be noted that various home owners gave evidence at the trial, and the judge took their evidence into account. Further, whatever advice Mr and Mrs Cox may have received from their solicitor in this connection appears to me to have no relevance to the issues in the action: but in any event to the extent that evidence as to such advice might be relevant it was available at the retrial.
39. As to the letter being regarded as "routine business risk in the care home industry", evidence to that effect was given at the retrial but the judge did not accept it. Thus, in paragraph 53 of his judgment, the judge said this:

"The other home owners who gave evidence said that the letter would not have appeared significant to them at the time, because it was simply part of a pattern of communications from the social services department. I am satisfied that this is the result of hindsight, or (as in the case of all the home owners who gave evidence except Mr Lloyd) because they were concerned with primarily residential homes, which would not have been as seriously affected, or because they were not so dependent upon social services referrals as was the Grenville, with its 77% proportion of state funded turnover. Nor was there any evidence of the financing of other homes, compared with the Grenville, where the loss of a few patients would make the business not viable."

40. I turn then to paragraph 3(a), which reads as follows:

"We have evidence to show that there are several examples of inaccurate or misleading statements, attributed to Mr and Mrs Banks, which had a significant bearing on the retrial outcome. They were not, as described by the Hon. Mr. Justice Lawrence Collins, `careful and frank witnesses'."

41. In the subparagraphs which follow, Mr and Mrs Cox seek to attack the judge's conclusion as to the credibility of Mr and Mrs Banks and their reliability as witnesses. Those were, however, essentially matters for the trial judge.
42. Under this head, Mr and Mrs Cox seek to adduce new evidence as to Mr and Mrs Banks' abortive attempt to buy another nursing home called "The Warberries". This was a matter on which Mr and Mrs Banks were cross-examined, and to which the judge gave due consideration in his judgment: see paragraph 66. Mr and Mrs Cox also seek to adduce additional evidence from Ms Stephens.
43. As in relation to the previous proposed grounds of appeal, I for my part can see no basis for admitting such evidence. I can see no reason why it could not have been available at the retrial, for whatever relevance it might have had. Mr Cox in introducing his oral submissions to us this morning has handed in a further document which, in substance, covers the same ground as the earlier argument to which I have referred. But it does also describe the personal circumstances of Mr and Mrs Cox, which are to say the least difficult, and it also contends that they have been unfairly and unequally treated by the legal system in the long saga of litigation which has occurred. However, I can for my part see nothing in this further document which significantly adds to the material which Mr Cox placed before us in his original argument referred to by Sedley LJ which I have considered.
44. Mr Cox has made submissions to us this morning (with, if I may say so, great courtesy and clarity) in a situation which is plainly a very difficult one for him to cope with. He has stressed to us the unfortunate circumstances in which he and Mrs Cox now find themselves. He reminds us that they have not been in receipt of legal aid and they have no legal representation, and he further tells us that his financial circumstances are serious indeed. However, I have to focus on those issues upon which this application for permission to appeal turns. I have to say that, despite Mr Cox's submissions and his written arguments, I remain wholly unable to see any proper basis for allowing an appeal to proceed on any of the grounds left open by Sedley LJ.
45. I would accordingly dismiss the application for permission to appeal.
46. LORD JUSTICE PETER GIBSON: I agree and I have nothing I wish to add to my Lord's judgment.
Order: Application dismissed. No order for costs. Legal aid assessment of the respondent's costs.