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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 >> Zazulak (t/a Stefco Precision & General Engineers) v Dickenson & Anor (t/a Asset & Finance Leasing) & Anor [2001] EWCA Civ 630 (27 April 2001) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2001/630.html Cite as: [2001] EWCA Civ 630

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IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HALIFAX COUNTY COURT
(His Honour Judge Barry)

		Royal Courts of Justice Strand London WC2
		Friday, 27th April 2001

1. LORD JUSTICE MANCE: This is an application by Mr Zazulak, who acts in person, to appeal the decision of His Honour Judge Barry, sitting in the Halifax County Court on 4th February 2000. The applicant requires an extension of time to appeal but, having looked at the written material, I would not be troubled by that as an objection and I would be prepared to grant any necessary extension of time if this were otherwise an appropriate case for permission to appeal.
2. The applicant, on 31st July 1996, raised funds for his business by entering into an agreement with the first respondents. He sold them certain specified engineering equipment on terms that the first respondents would lease it back to the applicant for 25 months. However, the gist of the allegation made by the first respondents, which the judge appears to have accepted, is that the applicant continued in financial difficulties, defaulted and gave the first respondents cause to repossess the equipment and terminate the agreement, which took place on 17th March 1998. For the repossession the first respondents used the services of the second respondents, after procuring the opening of an outer gate and breaking into the applicant's premises, in circumstances which meant that the first respondents later had to indemnify the applicant's landlord for damage caused during the breaking in. The first respondents say that they had the landlord's prior consent to breaking in. That is not an issue which I need be concerned with. It appears that the actual breaking in was done by the first respondents, not by the second respondents.
3. The applicant subsequently claimed that a large number of items had been removed unlawfully. Initially at least, and on the pleadings, the applicant contended that the first respondents were not entitled to terminate the agreement or repossess even the items specified in the leasing agreement. The judge's judgment does not deal with that issue. All that the judge says on the subject of default appears to be that the applicant had fallen into disarray in running his business; but he does not deal with the pleaded issue. The natural inference is that it was conceded before him by the applicant, who was at that stage represented by counsel. But Mr Zazulak contends the contrary and, as I have already indicated, in those circumstances the Court of Appeal Office should write to the first respondents and seek their comments; and, since Mr Zazulak agrees and wishes this, the Office should also write to counsel who represented him at the hearing, Mr J Godfrey, and ask for his comments on this aspect.
4. It is right, as Mr Zazulak has pointed out, that the counterclaim alleged huge arrears under the leasing agreement of £7,336.59. It also seems right, as Mr Zazulak says, that those arrears cannot possibly have existed in that amount since the ultimate counterclaim (which also included the amount of the damage to the premises and the costs of repossession, as well as damages for failure to complete further performance of the leasing agreement) totalled no more than £5,461.65. On the face of it, therefore, if there were any arrears justifying the termination and repossession, they must have been very small. But that does not mean that they did not exist and that they were not conceded, and that is the point on which the first respondents and counsel for the applicant at trial should be asked to comment. Were they conceded? If they were, that explains why the judge did not deal with the issue. Was it conceded that termination and repossession was justified? If it was not conceded, then there is, putting it at the lowest, a proper case for consideration on appeal that the judge ought to have dealt with the issue.
5. When the answers have been obtained, they can be put before me in writing and I may consider it appropriate to give an indication of my decision in writing. In that case, Mr Zazulak will have the opportunity to renew the matter orally before me or before the court. Alternatively, I may simply consider it appropriate that the matter be relisted and Mr Zazulak can then attend. He should obviously be sent copies of the responses once they are obtained.
6. Leaving aside that point, the central issue was whether other items not subject to the 1996 leasing agreement had been removed by the second respondents. His Honour Judge Barry in his judgment held ultimately that one such item, a Churchill CNC lathe, had been wrongly removed. He disbelieved evidence by the first respondents that this had been pledged in a separate agreement. He allowed the value of the Churchill CNC lathe against the counterclaim. He also set against the counterclaim, by consent, the value of a number of other items outside the leasing agreement which it transpired had been removed by the second respondents and which the second respondents were continuing to store at their premises and had at all times (at least upon proof of title) been prepared to return.
7. However, there was a major issue - and this was the real issue in the case - whether there were yet further items, many to a very high value overall, which had been removed and which had in some unexplained way disappeared after their removal by the second respondents. That issue was fully fought out, as Mr Zazulak accepts before me. The judge heard evidence on each side. He expressed in his judgment considerable sympathy for Mr Zazulak. Indeed, he took the view, from his demeanour and manner, that he was a decent enough man and unlikely to try to pull the wool over his eyes by telling lies on oath. He also formed a somewhat adverse view of Mr Dickenson, the leading light of the first respondents. But he had absolutely no doubt whatever about the witnesses for the second respondents: he thought they were transparently honest.
8. He also looked at the overall probabilities. He considered the evidence about Mr Zazulak's trading and purchases and he came to the conclusion that the very high value and very large number of further goods which it was said had been taken by the second respondents could not be shown to have been so taken. It is quite obvious that the judge did not accept that Mr Zazulak can have acquired anything like that number or value of goods. He also said that, if and in so far as further goods had existed on Mr Zazulak's premises and had disappeared, that was not attributable to the second respondents. It was a matter of speculation what might have happened. One speculation was that other thieves - vultures who hover around at the time of a repossession - might have taken some items. But however that might be, it was not the first respondents, despite what he felt in some respects about Mr Dickenson's credibility, and it was certainly not the second respondents.
9. In the event, therefore, the claim against the second respondents was dismissed and the first respondents succeeded in defeating the claim against them. They obtained judgment on the counterclaim for £5,461.65, less the full cost price of the Churchill CNC lathe and other items recovered from the second respondents totalling £3,820, making a balance of £1,641.65.
10. The applicant now seeks permission to appeal. I have already dealt with the matter of an extension and with the initial challenge which the applicant makes to the judge's assumption that there had been a default justifying termination and repossession of the leased items. So in that respect this application will be adjourned for subsequent disposal.
11. Another aspect where it seems to me the position needs clarification relates to a plea by the applicant, which the judge did not deal with in his judgment, that the leased items were sold by or on Mr Dickenson's instructions for a value which was well below their true value. Paragraph 16 of the defence to counterclaim, by amendment as served on 2nd December 1999, says:

"Further and without prejudice to the foregoing if which is denied the Claimant is held liable to the Defendant in respect of any loss then it is averred ... that the first Defendant has failed to mitigate its loss by not selling the goods at the Open Market Value as contained within the report of Mr Mascall as being £6400."

12. Mr Mascall was a partner in Bache Treharne, who are surveyors, valuers and auctioneers specialising in the valuation and disposal of plant and machinery assets. In most respects his report amounts to little more than making bricks without straw, but in relation to the pledged assets he at least had knowledge of what assets he was talking about and he was able to state his opinion that the open market value was £6,400 and the estimated restricted realisation price was £3,150. Mr Mascall went on:

"In my opinion the relevant basis of valuation is the Estimated Restricted Realisation Price as these assets had to be sold as it is alleged that Mr Zazulak was in breach of his agreement. The net realisable value of the assets in my opinion is in the order of £4,750 plus VAT excluding any costs which could be incurred for removal or commission which in my experience should not exceed 15% of net realisations. I understand that in this instance there were no costs."

13. I am not sure at the moment that I understand the difference between the figures of £3,150 and £4,750 plus VAT referred to in that part of Mr Mascall's conclusions. But however that may be, it does seem that the amount which the first respondents realised for the leased assets was substantially less, namely only £2,350 inclusive of VAT. That being so, I am at present unclear why the judge did not deal with the allegation of failure to realise a proper value which appears in the defence to counterclaim. On that point also it seems to me that the comments of the first respondents and of counsel who appeared for the applicant at the trial should be sought and the matter should be dealt with in the same way as I have previously indicated. In that respect too, therefore, this application will be stood over for further consideration subsequently.
14. I come now to the more specific complaints made relating to the matters with which the judge did deal. Mr Zazulak has to some extent amplified his written submissions before me this morning. His first and fundamental complaint is that Mr Dickenson was behaving abusively and wrongly. He was trying to get Mr Zazulak's goods and a successful business for himself, and he succeeded. Mr Zazulak says that he thought it was accepted that he had proved the equipment which he claimed had disappeared after being taken by the second respondents. However, that was clearly the issue before the judge. The difficulty that the applicant faces at every point is that the judge heard the evidence. He gave full and clear reasons for the conclusions at which he arrived, despite such sympathy as he expressed for Mr Zazulak. He found that some items were wrongfully taken, as I have indicated; but, as regards all other items, he could not accept either that they could have existed in that quantity and value or that any further items which did exist had been wrongfully taken by the second respondents and had in some way disappeared thereafter into thin air. Mr Zazulak now, I think, suggests that they had been sold in some undisclosed way.
15. Applying the test which I have to apply, it seems to me that there is no real prospect of success and no other compelling reason justifying permission to appeal in respect of that sort of contention. Mr Zazulak says that the judge did not understand the accounts and relied solely on 1997 draft accounts. He certainly referred to them. He did not confine his attention to the draft accounts. He did, however, refer particularly to the accounts for 1997. But it seems to me that, even if one looks simply at the accounts for the year ended 31st March 1996 prepared in October 1996 and based on information and explanations received from Mr Zazulak, which are in the bundle before me at page 304 onwards, one sees there a relatively low turnover: sales of only £27,527 and a net loss of £2,734 for a period of nearly a year. One sees, under "fixed assets", plant and machinery entered at a cost of £5,719 and depreciated to £4,933; and tooling costing £1,230 and depreciated to £1,051. It is not long after that, in July 1996, that Mr Zazulak is in a position where he needs to raise money by selling and leasing back his machinery.
16. Further, if one goes forward to 1997 (although one must be careful with circular arguments on points which are open to issue), I note that there were a number of notices of termination in late 1997 and early 1998. Perhaps more to the point, in February 1998 another firm, P W and P A Turner, who were NC/CNC Service Engineers, wrote expressing concern about the position relating to the CNC machine because they said they had fitted a board to it but had never been paid by Mr Zazulak. They had taken County Court proceedings and the Court Service had written to them on 23rd February 1998 in these terms:

"In reply to your letter of 6 February 1998, as you know, the Court instructed Frank Whitworth, Auctioneers, to organise a sale on site at Stefco Engineering. Unbeknown to ourselves and Mr Whitworth all the machinery on site is the subject of a leasing agreement and is in the process of being repossessed by Asset Finance, Market Street, West Houghton, Bolton [the first respondents]. In addition, the landlord is now in possession for distress for rent. There being no other goods of the defendant, the Court is unable to proceed."

17. That picture is not easily reconcilable with any idea that this was a highly successful business which was accumulating plant and machinery to a very large value, over and above that leased from the first respondents.
18. Mr Zazulak referred before me to the invoices in this same bundle (bundle 3, as I have called it) and I gave him time while I was out of court to go through them and try to identify some invoices totalling £10,000 even, let alone £44,000 to £50,000 worth of goods. He gave me some page numbers and explanations when I came back into court. He included page 7, which is the CNC machine itself and is not a relevant machine since he has been allowed the value of that and it has been credited to him. He included the cost of repairs and the installation of pledged machinery. Again that is not separate machinery which could have disappeared: that is simply work done on leased machinery in respect of which he has received credit, albeit he takes issue with the amount. He did identify some items: page 153, measuring equipment to the value of £1,230; page 157, profile plates valued at £307; page 147, a statement from a company from whom he purchased some items in March 1997 totalling £194; page 72, some tooling at £133.75; and then pages 14 and 15 relating to some £300 for a job where he says that the material was actually removed. Also at page 187 there is further material for £127 which he says disappeared with the second respondents. One thing that is clear is that those items come nowhere near £10,000 and are all pretty small amounts.
19. It seems to me, as it did to the judge, that, however theoretically possible the claim might be, there are tremendous flaws in it. In those circumstances I see no real prospect or compelling reason for an appeal on that sort of point. The judge, it seems to me, contrary to what is suggested, took proper account of the evidence and the material before him. He evaluated all the evidence. He did not just prefer Mr Dickenson's evidence to that of the applicant. That was not his approach at all. He took into account all the material, including the second respondents' evidence.
20. It is said that the judge did not give proper weight to an allegation that the first respondents, through Mr Dickenson, had gained entry to the premises by deception - by a pretence that they were a court bailiff. The judge dealt with that aspect at page 6 of his judgment. He accepted Mr Dickenson's evidence on it, and again I do not see any real prospect of a different conclusion in this court or any other compelling reason for an appeal. Even if one were to accept the proposition that Mr Dickenson obtained the opening of the outside gate by a statement that he was, at least by implication, a court bailiff, it still does not seem to me that that bears on the central issues in the case. As a matter of fact, Mr Zazulak tells me that the witnesses who were called who could have identified Mr Dickenson as the person pretending to have been a court bailiff failed to do so in court. They were given the opportunity to identify him, but they did not. Mr Zazulak says that they were frightened of Mr Dickenson, but that is a matter which the judge had to evaluate in the light of the evidence before him and this court cannot revisit it.
21. The judge also dealt with the wiping of a video which was taken by an employee of the second respondents. It was shown to Mr Zazulak and his solicitors but was, unfortunately, subsequently wiped. Following its showing, Mr Zazulak's solicitors wrote on 28th April 1998 saying that they had formed the view that the video showed a substantial number of items far in excess of those that appeared in the schedule to the leasing agreement. That was the gist of Mr Zazulak's evidence. It was of course very unfortunate that the video was wiped and no doubt that was a matter of suspicion, as Mr Zazulak submits. Unfortunately, that too was an issue which the judge had to grapple with. He heard the evidence of Mr Starkey, who had made the video and in whose family home it was unfortunately wiped - in a way which is not totally unfamiliar to those who have video equipment at home and other family members. The judge had to form a view on the circumstances in which that occurred and whether they were innocent or whether they suggested a desire to conceal evidence or a recklessness about the retention of evidence. He came to a conclusion in favour of Mr Starkey's honesty and, though there was criticism of Mr Starkey for allowing the tape, which he had had the good sense to make, to be wiped, nonetheless the judge accepted entirely Mr Starkey's explanation for its unfortunate wiping in the ordinary course of family life. The judge dealt at pages 4 to 5 in detail with the evidence about what the video had shown and he took it into account. Again it seems to me that there is no prospect of this court reaching a different conclusion and no reason for any appeal.
22. Mr Zazulak also says the judge did not refer to documents in support of the case which he was making. On questioning, it emerges that those are documents in the form of witness statements relating to the issue whether Mr Dickenson pretended to be a court bailiff, on which I have already commented. It seems to me that the judge dealt with that issue fully and adequately in the light of the evidence.
23. So I have to say that, although Mr Zazulak made the same impression on me that he made on the judge as a decent enough man, if I may say so, I am afraid that on none of the other points which he has raised before me, on paper or orally, do I think that permission to appeal would be justified. However, on the two points which I have identified where further enquiries are necessary, this application will be adjourned.
Order: application adjourned for further enquiries to be made in respect of the two aspects identified, but dismissed on all other aspects.