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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 & Ors [2000] EWCA Civ 5565 (17 July 2000) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2000/5565.html Cite as: [2000] EWCA Civ 5565

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IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CHANCERY DIVISION
(MR JUSTICE LLOYD)

		Royal Courts of Justice Strand London WC2
		17th July 2000

Monday, 17th July 2000

1. LORD JUSTICE MORRITT: This is the appeal of Mr and Mrs Banks brought with the leave of Waller LJ from the order of Lloyd J made on 17th April 2000. By that order he dismissed the claim of Mr and Mrs Banks against Mr and Mrs Cox, the first and second defendants, for damages for fraudulent, reckless or negligent misrepresentation inducing them to buy from the Coxes the business of the Grenville Nursing Home and a 50 year lease of 81 Meddon Street, Bideford, Devon where it was carried on. He also dismissed the Banks' claim against the third defendant, a firm of solicitors, for damages for negligence. There is no appeal against that part of his order as Waller LJ refused permission. Mr and Mrs Banks seek to rely on evidence not before Lloyd J, for which they need the permission of this Court, and in the light of that evidence they seek an order for a new trial.
2. The relevant facts are as follows. At all material times down to 2nd May 1997 Mr and Mrs Cox were the owners of the freehold of 81 Meddon Street, Bideford, Devon in which they carried on the business of a nursing home called Grenville Nursing Home. It had the capacity for 30 patients of whom not more than three might be residential. It was registered under the Registered Homes Act 1984 with the Exeter and North Devon Health Authority and the Social Services Department of the Devon County Council.
3. By early 1977 77% of the patients were state funded. The patients were old and, in the case of 27 out of 30 of them in need of nursing care. Inevitably death gave rise to vacancies which, if the home was to remain viable, had to be promptly filled. The nursing home was dependent on the Social Services Department not only for the financial support of the patient but also for referrals of new patients to replace those who had died.
4. The Registration and Inspection Department of the Devon County Council was responsible for the inspection of nursing homes to ensure that they were properly run and the patients properly cared for. In 1995 Mr Adrian Blunt was appointed the new District Manager of that department.
5. In May 1996 Mr and Mrs Cox sought to sell the Grenville Nursing Home, but, being unable to find a buyer, they then took it off the market.
6. The accounts for the year ended 30th November 1996 indicated a profit of £76,000 on a turnover of £480,000. The profit was less than in the year before because of the increased cost of providing the requisite nursing care.
7. The Grenville Nursing Home was not the only residential or nursing home in the area. The owners of several of them formed an association called the Resident Care Homes Association. At the material time Mr Philip Woods was the Chairman and Mrs Cox the secretary. Officials of the Registration and Inspection Department held regular meetings with the officers of the Resident Care Homes Association.
8. There was a meeting of the Resident Care Homes Association on 29th January 1997. It was informed that the District Manager's letter, that is Mr Hobbs the District Manager of the Torridge Purchasing District of the Social Services Department of the Devon County Council, would be discussed at the next meeting probably in February.
9. By 5th February 1997 Mr and Mrs Cox had instructed Christies, a local firm of estate agents, to sell the Nursing Home and a new 50-year lease of the premises for £250,000 and an annual rent of £50,000. That offer came to the attention of Mr and Mrs Banks. Mr Banks went to see Mr Cox and was satisfied by what he was then told. Coincidentally on the same day Mr Ian Hobbs of the Torridge Purchasing District wrote the letter which is at the heart of this action. The letter was addressed to all residential/nursing homes and to all providers that were used by that department. It is dated 5th February 1997 and is headed "Re: Community Care Financial situation - Torridge District Council "and was written by Mr Hobbs. So far as material the letter stated:

"You may already have become aware of the difficulty financial situation facing my Department, either through discussions with Care Managers or through the press. Those of you who attended the last forum meeting of residential and nursing home owners were advised then of the potential resources shortfall that we were anticipating that we may have to meet.

I wanted to write to you personally to bring you up to date with the current situation and to advise you of the action we are currently taking to manage our resources, both immediately and for the next financial year. I hope that this letter will clarify the position but I would be happy to meet with any of you or to discuss the situation over the telephone if that would help.

I have known for some months that the next financial year was likely to see a reduction in the level of resources available to my District, compared to the anticipated resources at the time of writing the Purchasing Intentions. I shall not know the final picture until after the County Council sets its budget on 5th February but early indications are that I will have to plan to meet a reduction of over £220,000 as compared to the Purchasing Intentions resource assumptions.

There are several reasons for this."

10. Mr Hobbs then went into the reasons in three numbered paragraphs. He then continued:

"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.

The Social Services Committee has endorsed an approach which is based upon further prioritising resources to those in greatest need and my staff are working on the basis that services should first be provided where there is an imminent risk of breakdown in someone's chosen home situation. I am also having to assert a position where no new package of care is offered unless the equivalent sum of money has been saved from somewhere else ie I am unable to increase the total net spending for the remainder of this financial year. Savings would typically arise where a package ends but may also need to involve a review of need and a reduction of services to an individual where to do so would not endanger that person's well being."

11. The letter continued in the same vein in terms I think it is unnecessary to quote and concluded:

"I am sensitive to the effect of our actions on your business 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."

12. Mr and Mrs Banks duly applied for registration in respect of the Grenville Nursing Home in February 1997. They instructed the third defendant to act as their solicitors on 21st February 1997 and by 24th February there was an agreement between Mr and Mrs Banks and Mr and Mrs Cox to purchase, subject to contract, the nursing home and the business. The purchase price was, as asked, £250,000 and the annual rent under the lease was to be £50,000.
13. On 25th March 1997 the solicitors acting for Mr and Mrs Banks submitted pre-contract inquiries to those acting for Mr and Mrs Cox. Inquiry number 20 was one of 26 and appeared under the heading 'miscellaneous' after a number of inquiries concerning the assets, trade operations and employees of the business and before several more concerning accounts and capital commitments of the business. Inquiry No. 20 asked:

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

14. On the following day, 26th March 1997, there was a meeting of the Resident Care Homes Association. The typed minutes suggest that Mrs Cox was not present but, according to the further evidence of Mr Bishop on which Mr and Mrs Banks seek to rely, on the copy Mrs Cox sent to Mr Bishop her name had been added in manuscript. Those present at the meeting were told of a prospective meeting with the manager of the Registration and Inspection Department, that is Mr Blunt, on 24th April and informed that the minutes of that meeting would be available at the next meeting of the Resident Care Homes Association.
15. On 8th April 1997 the solicitors for Mr and Mrs Cox answered the Pre-contract inquiry No. 20. It was an unqualified "No". The contract proceeded towards completion.
16. Between 21st and 23rd April 1997 Barclays Bank Plc made a formal offer of finance to enable the Banks to buy the Grenville Nursing Home. The relevant form was signed by the relevant official of Barclays and by Mr and Mrs Banks on or before 23rd April. It contained an unconditional offer of a loan of £85,000 to be repaid over 10 years to be secured by a charge on the leasehold interest in the nursing home.
17. On 24th April 1997 as the further evidence now suggests Mr Blunt attended a meeting with representatives of the Resident Care Homes Association. In his witness statement on which Mr and Mrs Banks seek to rely he states that it was at this meeting that he discussed with Mrs Cox the contents and implications of the letter from Mr Hobbs dated 5th February. In a further statement from Mrs Cox to which I shall refer later this is not accepted.
18. On 25th April 1997 there appears to have been some communication between the solicitors acting for Mr and Mrs Banks and one of them. The attendance note indicates that Mr Banks may not have been aware that the loan finance had proceeded beyond the stage of the original letter of intent for he was warning them about the dangers of proceeding on the basis of the letter of intent alone.
19. On 30th April 1997 there was a further meeting of the Resident Care Homes Association which Mrs Cox did attend. The minutes of that meeting record that the minutes of the meeting with the Registration and Inspection Department held on 24th April would be available at the next meeting of the Resident Care Homes Association.
20. Contracts for the purchase and sale of the nursing home were exchanged and completed on 22nd May 1997. Mr and Mrs Banks then proceeded to run the nursing home. They met with Jenny Stephens of the Social Services Department in September 1997. Ms Stephens was Mr Hobbs' assistant. The purpose of the meeting was to ascertain why the numbers of referrals to the Grenville Nursing Home had declined. The meeting was also attended by Mr Cox. Ms Stephens produced the letter of 5th February 1997 written by Mr Hobbs and promised to send a copy of it to Mr and Mrs Banks. The copy originally sent appeared to be dated 5th January 1997. This was in fact a draft only and a copy of the letter as sent and dated 5th February 1997 was provided later.
21. The production of that letter gave rise to these proceedings. The writ was issued on 18th August 1998. Mr and Mrs Banks claimed against Mr and Mrs Cox damages for fraudulent, reckless or negligent misrepresentation in a number of respects. Their counsel limited his claim before us to the answer to precontract inquiry No. 20 to which I have already referred.
22. The trial took place before Lloyd J on and between 12th and 14th April 2000. He heard oral evidence from about ten witnesses including Mr and Mrs Banks, Mr and Mrs Cox and Mr Hobbs and Mr Bishop, the owner of the Buckleigh Grange Residential Home, who was called by the Coxes, but not from Mr Blunt.
23. Lloyd J gave judgment on 17th April 2000. Due to a fault in the mechanical recording we have not had the benefit of an approved transcript of what he said. We have used a full note made by the solicitors for the third defendant who is no longer concerned. With some alterations I understood counsel to agree that the note was substantially accurate.
24. The judge found as a fact that Mr and Mrs Cox had not received the letter from Mr Hobbs dated 5th February 1997 and were not aware of its contents. He considered that even if they had received the letter or been aware of its contents the representation made in the pre-contract inquiries would not have been thereby falsified. In addition he considered that if the letter or its contents had been disclosed to the Banks they would have proceeded with their purchase anyway. He refused permission to appeal.
25. Mrs Banks was evidently most upset at this result. She wished to appeal but the judge refused permission. The Banks were no longer in receipt of legal representation. So Mrs Banks personally set about finding further evidence.
26. On 17th May 2000 Mr and Mrs Banks applied to this Court for permission to appeal. The order they sought was a new trial. They indicated that they would seek to rely on further evidence. Details of that further evidence followed on 23rd May and consisted of statements from some 14 individuals.
27. Permission to appeal, an expedited hearing and a stay of execution was granted by Waller LJ on 15th June. In doing so he suggested that Mrs Banks, who then appeared in person, should consider limiting her application for leave to adduce fresh evidence on the hearing of the appeal. In the event Mr and Mrs Banks were represented by leading and junior counsel on the hearing of the appeal and the application was limited to the witness statements of three individuals, that is, Mr Blunt, Mr Bishop and Mrs Banks herself.
28. The evidence of those three witnesses may be summarised as follows. I take first Mr Blunt. He states that until December 1998 he was the Manager of the Northern Division of the Devon Social Services Registration and Inspection Department based in Barnstaple. He describes how he had quarterly meetings with Mr Woods and Mrs Cox as the Chairman and Secretary of the Resident Care Homes Association, the purpose of which was to ensure a link between their two organisations. He refers to Mr Hobbs' letter of 5th February 1997 and the minutes of the Resident Care Homes Association for 26th March 1997 with the reference to the forthcoming meeting with him on 24th April and continues:

" 4. I have a clear recollection of the meeting that I had with Mrs Cox and Mr Woods at which the letter from Mr Hobbs was discussed. I can categorically confirm that this item was a subject of discussion.

5. Looking at the date of the letter from Mr Hobbs and the content of the 26th March 1997 minute of the meeting of the RCHA, I believe it is highly likely that the meeting with Mr Woods and Mrs Cox at which the letter was discussed took place on 24th April 1997. In any event it was before Mr and Mrs Cox sold the Grenville, for as set out at paragraph 15 below, it was at this meeting that Mrs Cox advised me that the Grenville was being sold.

6. I cannot recall whether I had seen a copy of the letter before the meeting. Certainly, I would have been made aware of the gist of the letter before the meeting because of the impact it would have had on homeowners, particularly those who had high financial margins."

29. Then in paragraph 9 he continues:

"The meeting referred to at para 5 above would, as usual, have been between Mrs Cox, Mr Woods, and myself. No one else would have been present.

10. The content of the letter was discussed with Mr Woods and Mrs Cox. I can particularly recall it because it was an emotive issue for homeowners at the time. I do not recall that the letter was specifically on the agenda for the meeting but I do recall that the issue of the letter from Mr Hobbs was raised by Mr Woods at the meeting. It arose in the context that homeowners were always accusing the Local Authority of favouring their own Local Authority homes and not paying a fair market price for beds in the independent sector. I was concerned at the impact of the letter because of its possible effect on home owners, particularly those who had substantial mortgages and who required a high level of occupancy to service their loans. This concerned me particularly because a reduction in cash flow to a particular home could lead eventually to a drop in standards. This could lead eventually to enforcement action being taken by me.

11. I have, on the making of this statement, re-read carefully the letter from Mr Hobbs. The letter indirectly concerned me because of the effect on Home Owners who might no longer be getting their usual referrals from Local Authorities and not getting sufficient referrals from the private sector (North Devon was not a particularly robust economic area at the time). As a result homeowners might begin to struggle.

12. If I had been a homeowner or a home owner/manager, I would have regarded this letter as an essential piece of information. I would need it to plan for the future. Any home receiving referrals from the local authority would have been affected, if not in the short term at least in the medium to long term, if the Local Authority had maintained its position. In my opinion, the home would have had to consider its position in the light of the letter, as those referrals would clearly be declining."

30. Then in paragraph 15 he said:

"I cannot recall if I had a copy of the letter in my possession at the time of the meeting but I do remember specifically discussing the letter. As I recall Mr Woods said something like 'are you aware of this letter and what is your view on it?' He may have handed me a copy of the letter. I cannot now recall how, but I knew the contents of the letter anyway. To the best of my recall Mrs Cox was present and I can remember no surprise being expressed when the letter was mentioned. As I recall she appeared aware of the letter and its contents. Mrs Cox was always active in the discussions we had generally. As best I can recall both Mrs Cox and Mr Woods thought that the Council were discriminating against private homeowners by preferring their own beds, a theme that had run through many of our meetings."

31. Mr Blunt also states that he prepared the agendas for the meetings and notes of the discussion at the meetings copies of which he sent to Mr Woods and Mrs Cox separately. His own copies were kept at his office in Barnstaple but when, in May 2000, he tried to reread them to refresh his memory they could not be found. He confirms that he left Devon in December 1998 and that it would have been difficult for Mrs Banks to contact him due to the local authority's policy of refusing to disclose details of an ex-employee's forwarding address. He had no contact with Mrs Banks until 4th May 2000.
32. I turn then to the further evidence of Mr Bishop. Mr Bishop is the proprietor of Buckleigh Grange Residential Homes and a member of the Resident Care Homes Association. He maintained a file of the minutes of the meetings of that association and produced his copy of the minute of the meeting held on 26th March 1997 as supplied to him by Mrs Cox. That copy contained the manuscript edition to indicate that Mrs Cox had been present. He presumes that the addition had been made by Mrs Cox herself. At the trial Mr Bishop gave evidence on behalf of the Coxes.
33. Finally I turn to the case of Mrs Banks. She describes how upset she was when the judge dismissed her claim. On the same day she wrote a letter to Mr and Mrs Philip Woods. She indicated that she intended to appeal. She claimed that a year before the trial they had told her that Mrs Cox had discussed the contents of Mr Hobbs' letter with them but that they had not wished to become involved. She asked them to help her by telling the facts as they knew them to be and to contact her. After delivering the letter personally Mrs Banks was contacted by Mrs Woods. Mrs Woods told her that she would have to speak to her husband about it.
34. On 25th April 2000 Mrs Banks received a letter from solicitors acting for Mr and Mrs Cox requiring her to withdraw her allegations of perjury. The statement of Mrs Banks continues:

"On 16th May 2000 I telephoned the Cheverells to speak to Mr Woods. He answered the telephone. I asked him whether he would allow me access to the RCHA files he held. (Mr Woods was the Chairman of that association until it stopped meeting). Mr Woods said that there were no files anymore. He told me that his wife had a 'clear out"about three weeks ago' and that they had been destroyed.

I said that I had received a solicitors letter about three weeks ago in connection with my 'defamation'. Mr Woods said that it was his wife who had told Mrs Cox, not him and that I should take the matter up with her. I asked Mr Woods if the files were really destroyed and he relied 'definitely'. I asked Mr Woods whether they had been destroyed since I had been to see Mrs Wood and he told me that he thought so. I asked him if Mrs Cox had been to see his wife and he replied that she had. I asked him if she had come about my letter and he said that she did. I asked him if the files had been destroyed before or after Mrs Cox's visit. Mr Woods replied 'around the same time'. Mr Woods said that there was no 'intrigue', it was simply the case that a lot of paperwork had collected and his wife had wanted to have a clear out."

35. In response to these statements others have been produced by and on behalf of Mr and Mrs Cox. The first is that of Mr Philip Woods. He has made a witness statement dealing with the allegations made against him by Mrs Banks and also with parts of the statement of Mr Blunt. With regard to the former he said:

"After the court case had apparently finished, Mrs Banks visited my wife asking for our help. She presented a letter to my wife. After some discussion between ourselves, my wife and I decided to hand the letter to John and Sonia Cox. We did think that would be the end of the matter.

When Mrs Banks found out that we had handed the letter to John and Sonia Cox she spoke to me on the telephone and told me that she was 'disgusted' with my wife for handing the letter over. She had previously asked for copies of minutes of various meetings that she decided she needed and she asked for these again. I explained that myself and my wife had had a clear out and we had got rid of a great deal of documentation. Mrs Banks chose to see this as part of a conspiracy with the Coxes. I categorically deny this. We are not and we never have been involved in the litigation. We got rid of a lot of documents we had in storage because we were about to receive a delivery of some new office furniture."

36. With regard to the latter, that is the statement of Mr Blunt, Mr Woods accepts that there were regular meetings between him and Mrs Cox and Mr Blunt and, though he does not specifically recall it, accepts that it is possible that there was such a meeting on 24th April 1997. He continues paragraph 9 of same statement:

"What I can say that is that our meetings were many, and they covered all sorts of things. Sometimes Mr Blunt would put matters that he thought relevant down on his minutes and this would not necessarily always correspond with matters that myself and Mr and Mrs Cox thought relevant, which we would enter on our minutes. Sometimes we would photocopy his minutes and attach them to ours and send them out etc.

As to the specific question of the letter of 25th February 1997, I have to say I cannot recall discussing the letter although it may have been flagged up. What Mr Blunt says at paragraph 10 concerning the impact of the letter is not strictly correct. Whilst I agree that it could possibly be seen as 'an emotive issue', I have to say that it is an issue that would recur again and again, year after year. I would not regard a letter such as the 5th February letter as vital.

I recall at some point Mr Blunt saying something like 'the future looks fairly bleak', but I have to say that it has always been bleak. You never know what is on the horizon in our business. I do feel that it was a 'them and us' situation. Social Services were always extremely wary about budgets etc. If we relied on Social Services we would be put out of business and we always had to take on private clients.

I would say that every year there has been that sort of 'doom and gloom' discussion coming out of Social Services. They would always have spent their budget that they would receive in April by Christmas and you would really have to try and get through the post Christmas months as best you could until the next April.

If we had received an official letter from Devon County Council, my view would be that it was 'another one of those letters' and I believe Mrs Cox would have had the same view as me.

I wouldn't regard a letter like this as vital."

37. Mrs Cox also has made a further witness statement dealing with all the fresh evidence put forward by Mr and Mrs Banks for the purposes of this appeal. She accepts that she told Mr Blunt that she and her husband were selling the Grenville Nursing Home. She does not deny his assertion of a meeting on 24th April but is "unsure" if it took place, "cannot be categoric" or "speak with any certainty" about it. She relies on the fact that she had an accident the day before when she slipped and fell at the Warminister Service Station. This accident has given rise to proceedings in the Barnstaple County Court against Forte (UK) Ltd and papers relating to those proceedings have been produced by Mrs Cox's solicitor, Miss Macnamara, who has also produced a witness statement. The medical report filed in connection with those proceedings shows that originally Mrs Cox thought that she had sustained "merely a bruising injury so she did not seek any medical attention." She did not consult her medical witness until October 1997. With regard to the statement of Mr Bishop she denies that she altered the minute of the meeting of the Resident Care Homes Association held on 26t March 1997. In connection with her meeting with Mr and Mrs Woods on 19th April 2000 she says:

"Finally, I would comment on paragraph 42 of the appellant's skeleton argument where it is written that Mrs Woods had a meeting with me on or around 19th April 2000 when Mr and Mrs Woods's file were 'destroyed' by Mrs Woods.

This is clearly meant to imply that we had a meeting in order to destroy important files. This is absolute nonsense. I met Mrs Woods after the trial as Mrs Woods said that she had received a letter from Mrs Banks making various allegations about myself and my husband and that she really thought I should see the letter. I therefore went to see Mrs Woods when she presented me with a copy of the letter, which I sent to my solicitors."

38. Counsel for Mr and Mrs Banks accepted that unless his application in respect of the witness statement of Mr Blunt succeeded the appeal must be dismissed. The converse also follows in the sense that the grounds of opposition to the application include the grounds that if Mr Blunt's evidence had been available at the trial the result would have been the same because of the judge's conclusion on the meaning of the representation and his finding that the Banks would have proceeded even if the letter from Mr Hobbs had been produced before completion. If those grounds are rejected for the purposes of the application then they should be rejected for the purposes of the appeal too.
39. Accordingly it is convenient to start by considering the principles to be applied by this Court on such an applicant. Those provisions were formally contained in Rules of the Supreme Court Order 59 r. 10(2). They provided that where, as here, there had been a trial on the merits, an application for leave to adduce fresh evidence on the hearing of the appeal had to show "special grounds". The special grounds came to be known as the rules in Ladd v Marshall after the decision of this Court in the case of that name reported 1954 1 WLR 1489. Those rules provided that further evidence would be admitted on the hearing of an appeal only, and I quote from head note to that case,

" (1) if it is shown that the evidence could not have been obtained with reasonable diligence for use at the trial, (2) if the further evidence is such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive, and (3) if the evidence is such as is presumably to be believed."

40. The relevant provisions are now to be found in the Civil Procedure Rules. In the case of appeals, or applications for permission therefor, made before 2nd May 2000 the relevant provision is Rule 59.10(2) set out in the first schedule to the Civil Procedure Rules. That is in the same terms as Rules of Supreme Court order 59 r. 10(2) but the power is to be exercised in accordance with the overriding objective set out in CPR Rule 1.1 and 1.2. In the case, such as this, of appeals or applications for permission therefor made after 2nd May 2000 the relevant rule is CPR 52 r. 11(2). This provides that on an appeal the Court will not consider evidence not before the Court below unless it has given permission for it to be used. Thus the permission of the Court is still required but it is no longer necessary to show "special grounds". The discretion of the Court under this rule also must also be exercised in accordance with the overriding objective.
41. In my view the principles reflected in the rules in Ladd v Marshell remain relevant to any application for permission to rely on further evidence, not as rules but as matters which must necessarily be considered in an exercise of the discretion whether or not to permit an appellant to rely on evidence not before the Court below. As May LJ, with whom Forbes J and I agreed, said in Hickey v Marks (Court of Appeal 6th July 2000) unreported:

"The principle for the future will be that, since the Civil Procedure Rules are a new procedural code, the former body of authority will not apply, although of course the intrinsic persuasiveness of all relevant considerations, including, if they arise, those which were considered persuasive under the former procedure, will be capable of contributing to a just result."

42. The contrary was not argued. For my part I would accept as apt the description of counsel for Mr and Mrs Cox that the principles remain the same but the Court is freed from the straitjacket of so-called rules.
43. Accordingly I shall consider each of the factors to which I have referred in turn in relation to the evidence of Mr Blunt. Though they should also be considered in relation to the evidence of Mrs Banks and Mr Bishop it was, I think, accepted that whatever the result of the application with regard to the evidence of Mr Blunt the same order should be made with regard to the evidence of Mr Bishop and Mrs Banks.
44. The first question therefore is: have Mr and Mrs Banks established that the evidence they now seek to rely on could not with reasonable diligence have been obtained for use at the trial?
45. The application was originally supported by a short statement from Mrs Banks prepared by her without legal assistance. In the light of the comments made in the skeleton argument of counsel for Mr and Mrs Cox and, no doubt, because by then the Banks were legally represented Mrs Banks' original statement has been followed by a much fuller one.
46. In her second statement Mrs Banks describes how and when she first appreciated the potential significance of the evidence of Mr Blunt. This was in April 1999 when she read the minutes of the meeting of the Resident Care Homes Association held on 30th August 1995 which had been disclosed by Mr and Mrs Cox in December 1998 but not produced for inspection until April 1999. She tried to contact Mr Blunt in mid-1999 through the Registration and Inspection Department but by then he had left Devon. She continues:

"I was told that Mr Blunt had left Devon and my requests for information about his new employer or address or telephone number were refused. I was told that the information was covered by the Data Protection Act and also that it was against their policy to disclose such information.

4. I was also asked why I wanted to contact him. I replied that I wanted to establish

4.1 What information Mrs Cox might have about local issues affecting Homes in the area through her position as Honorary Secretary of the RCHA association.

4.2 Whether he might be able to comment on the letter sent by Mr Hobbs

4.3 What Mr Blunt knew about Mrs Cox and Mr Woods in connection with the RCHA.

5. I was told that these inquiries would be better addressed to (a) Chairman of RCHA and (b) Mr Hobbs. I had already made relevant enquiries of these persons and those enquiries were continuing."

47. She then describes how she made further attempts by telephone to the General Office (Human Resources) at County Hall in Exeter. They suggested that she should write a note for them to send on, which she did. Subsequent inquiries do not show that it was sent on to Mr Blunt. After the trial before Lloyd J she again contacted the Registration and information Department. She states: And I quote from paragraph 7 of the statement:

"I told the senior manager in the Registration and Inspection Unit the gist of Mrs Cox's evidence in court and said I simply wanted to ask Mr Blunt whether he had any comment on Mrs Cox's evidence. The manager, Mrs Flat, gave no guarantees that she could assist but asked that this specific information be referred to in a letter which she would send on to Mr Blunt. This was sent to him and thereafter, he responded in writing."

48. It is suggested by counsel for Mr and Mrs Cox that this account does not show the requisite degree of diligence. He points out that in her first statement Mrs Banks did not refer to having sent a note to Mr Blunt. He relies on the fact that even if it was sent it was inadequate and should have been followed up by further inquiry from her solicitors. In addition he relied on a letter from Devon County Council dated 11th July 2000 stating that it is the practice to forward letters addressed to a former employee but not to disclose information on the telephone. In the latter case the county council would take the number of the person making the inquiry and try to pass it on to the former employee. His submission may be summarised as complaining that too little was done too late.
49. For my part I do not accept this objection. It is necessary to put oneself in the position of the parties in the summer 1999 with the trial likely to take place in the early part of 2000. At that time Mr Blunt was only a name to Mrs Banks derived from the Resident Care Homes Association minutes disclosed by Mr and Mrs Cox. She did not then know the evidence it now appears Mr Blunt can give. Mr and Mrs Banks were not in receipt of legal aid. They were paying their own costs through legal fees insurance which ran out before the trial. Mrs Banks made three separate attempts to contact Mr Blunt, to his former office, to head office in Exeter and by the note she sent. To suggest that she should have followed up all these enquiries by further letters from her solicitors seems to me to be a counsel of perfection, not a requirement of reasonable diligence. In my view this condition is satisfied.
50. Is there evidence such as is presumably to be believed?
51. There is no suggestion that Mr Blunt is anything other than an honest man who has set out in his statement, to the best of his ability, what he now remembers. That is not to say that events did happen as he describes them. That would be a matter for determination by the judge, if a new trial is ordered, to be made after having heard all the evidence including the cross-examination of Mr Blunt, Mrs Cox and, no doubt, Mr and Mrs Woods too. There is no ground for rejecting the application on this score.
52. Is the evidence such that if given it would probably have an important influence on the result?
53. Counsel for Mr and Mrs Cox submits that this condition is not satisfied. He makes a number of points. First, whilst not suggesting that the evidence of Mr Blunt is not important, he submits that it is not as significant as counsel for the Banks has suggested. As he said, the evidence of Mr Blunt does not suggest that Mrs Cox did received the letter from Mr Hobbs. It does not indicate the extent to which Mrs Cox took part in the discussion to which Blunt refers but neither Mrs Cox nor Mr Woods remember.
54. Second, he points to the evidence given at the trial by owners of other homes in the area, namely Mr Lloyd, Mr Bishop and Sister Mary John, who owned or ran the Warren Nursing Home, Buckleigh Grange and Lakenham Convent respectively, that the letter from Mr Hobbs was of no significance and was typical of many letters emanating from the local authority. Third, he relies on the contents of the letter from Mr Hobbs and the evidence Mr Hobbs gave at the trial to suggest that the impact of the local authorities cut-backs would be felt by residential homes not nursing homes and that a reduction of £220,000 in a budget of over £9m and spread over 65 homes with an aggregate of 800 beds would be insignificant in relation to any one home. Fourth, he submits that even if Mrs Cox had receive the letter or knew of its contents the answer to pre-contract inquiry No. 20 would still not have been false because the letter did not signify any change in the nature or conduct of the business. This submission was upheld by the judge, whose decision counsel for Mr and Mrs Cox sought to support. Fifth, he relies on the finding of the judge that even if Mr and Mrs Banks had been made aware of the letter they would have proceeded with their purchase just the same.
55. This is a strong case powerfully made by counsel for Mr and Mrs Cox. I will, in the first instance, consider each of his points separately. The first relates to what Mr Blunt actually states. It is true that he does not say that Mrs Cox had received a copy of the letter nor does he indicate the part Mrs Cox played in the discussion. But neither Mrs Cox nor Mr Woods denies that the meeting occurred, only that they do not remember it. If the evidence of Mr Blunt was accepted, then it could - and I emphasise could - justify a finding that only a week before the sale of the nursing home by Mr and Mrs Cox to Mr and Mrs Banks Mrs Cox was aware of the contents of the letter from Mr Hobbs and of the concern of Mr Blunt as to its possible impact on the homes he was responsible for inspecting.
56. The second point relies on the evidence at the trial given by other homeowners. But there are grounds for concluding that as their respective positions were different from that of the Coxes so would have been their reactions to the letter from Mr Hobbs. In the case of Mr Lloyd the referrals to which he referred came through the Social services "rich and poor alike" and he considered that they had been lucky to keep fairly full occupancy. In the case of Mr Bishop the home is residential not nursing. In the case of Sister Mary John the convent is residential and filled with private, not publicly funded, referrals.
57. The third point relates to the contents of Mr Hobbs' letter. The points made by counsel for Mr and Mrs Cox may, no doubt, fairly be made about its contents. But they do not reflect the view of Mr Blunt, who was, as he says, indirectly concerned at the time. In his view, which might or might not be accepted at the new trial, the contents of the letter were essential pieces of information for a home-owner.
58. The fourth point is whether the representation concerned in the answer to pre-contract inquiry No. 20 was false. The judge thought not. The notes to which I have referred records him as having said:

"If the letter had been received, was there misrepresentation in response to Business Enquiry No. 20? Business Enquiry 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 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 product 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 a trial.
60. The fifth point involves the question whether if the letter or its contents had been made known to the Banks before they bought the nursing home it would have made any difference. The judge thought not. In the note of his judgment he is recorded as saying:

"I should add that I also would have been extremely doubtful whether the letter would have led Mr and Mrs Banks not to proceed with their purchase had it been disclosed to them. Mr Cox certainly would have downplayed the letter and Mr Banks had been happy to rely upon what he said in relation to the accounts that he would have relied upon Mr Cox in this instance. Social services too would have downplayed the letter. In this respect it is important to note that the reduction of £220,000 referred to in the letter was across the whole of the Torridge Social Services budget. Mr Banks was extremely keen to proceed and given that the letter is entirely consistent with the warnings given by Chestertons in their earlier report I believe they would have proceeded in any event. Accordingly, had it been necessary for me to decide the issue the Banks would have failed on causation also."

61. In arriving at that conclusion the judge rejected the evidence of Mr and Mrs Banks to the contrary. At an earlier stage in his judgment he had referred to Mr and Mrs Banks ignoring the advice given by their solicitor and recorded in the attendance note dated 25th April to which I have referred and to the fact that the finance from Barclays Bank Plc did not materialise until 30th April 1997. In the latter respect he appears to have overlooked that the offer had been made and accepted in writing on 23rd April 1997. I also observe that the test adopted by the judge, that is, whether had they known of the letter or its contents the Banks would have withdrawn from the sale may not be the right one if it were found that the representation was made fraudulently (including recklessly). In that event it would be presumed that the representation did sufficiently induce Mr and Mrs Banks to buy the nursing home unless Mr and Mrs Cox could establish the contrary and to establish the contrary they would have to show that the misrepresentation did not even cause Mr and Mrs Banks to persevere in a decision already taken. See Barton and County Nat West Ltd [1999] LlLR (Banking) 408, 421, paragraphs 54 and 55.
62. I have so far been considering the five points made by counsel for Mr and Mrs Cox in the context of the question whether the evidence of Mr Blunt could have an important influence on the result in relative isolation from each other. But it is also necessary to consider the possible cumulative effect of the evidence of Mr Blunt. In doing so I am not seeking in any way to prejudge the outcome of any trial that we might order. But for the purposes of assessing the importance of Mr Blunt's evidence it must be pointed out that his evidence could - and again I emphasise could - justify findings that Mr Cox did received a copy of Mr Hobbs' letter, did discuss its contents with Mr Blunt at the meeting on 24th 1997 and deliberately concealed them from Mr and Mrs Banks. In that event it would be apparent that she had given dishonest evidence at the first trial and in her witness statements on this appeal which, presumably, would be used at any retrial. It would also cast doubt on her evidence concerning the manuscript amendment to the minute of the Resident Care Homes Association meeting held on 26th March 1997 and raise a host of further questions concerning the destruction of the papers by Mrs Woods at much the same time as Mrs Cox had been to see Mr and Mrs Woods. That in turn could reflect on the evidence of Mr Woods and the findings of the judge as to misrepresentation and causation to which I have referred. In short the evidence of Mr Blunt could lead to the establishment of a claim in deceit which, in the absence of such evidence, has been dismissed.
63. Accordingly I conclude that the evidence of Mr Blunt does satisfy all three principles to be derived from Ladd v Marshall. But that is by no means conclusive. As pointed out by counsel for Mr and Mrs Cox they have been through one trial at which allegations of fraud have been made but dismissed. Is it just that they should now have to face another, particularly when it was not their fault that Mr Blunt did not give at the first? And could a second trial be fairly conducted given that it must take place in a very different atmosphere from the first? These are weighty considerations. If we refuse to admit the evidence of Mr Blunt and therefore do not order a retrial there is the possibility that a case of deceit would be left without redress. If we admit the evidence and order a retrial it will take place before a judge alone. No doubt he will be addressed by counsel for Mr and Mrs Cox on the extreme caution with which he should approach the allegations made against the Coxes given the previous history of the proceedings. As between these alternatives I consider that we should trust the good sense and judgment of the judge at a second trial, and so adopt the first alternative by ordering a retrial. I prefer this to the second alternative of leaving a possible fraud unredressed by refusing a retrial. But in doing so I would emphasise the importance of the judge at the trial keeping well in mind, as I am sure that he or she will, the fact that it is a retrial, and that Mr and Mrs Cox may face disadvantages in its conduct which they would not have experienced if Mr Blunt had given evidence at the first trial.
64. For all these reasons I would admit the evidence of Mr Blunt. In that event the further evidence of Mr Bishop and Mrs Banks should be admitted too. In the light of all the evidence, including the further evidence of Mr Blunt, Mr Bishop, Mrs Banks, Mrs Cox and Mr Woods I consider that the findings of Lloyd J are unsafe. In those circumstances I would order a new to be conducted by another judge of the Chancery Division.
65. LORD JUSTICE MAY: I agree with my Lord that the Court should admit the evidence of Mr Blunt, Mr Bishop and Mrs Banks to which my Lord has referred on this appeal. I also agree that in the light of that evidence and for the reasons which Morritt LJ has given this appeal should be allowed and that we should order a retrial.
66. MR JUSTICE FORBES: I also agree and have nothing to add.
(Appeal allowed; retrial ordered; costs of both parties of this appeal and of application to admit fresh evidence should be in the discretion of the judge hearing the retrial).