In a rare instance of the Court of Appeal overturning a judgment on factual grounds, on 10 May 2021, the court ordered a retrial of an £83 million commercial fraud case after judgment was not handed down for 19 months. The court found that the delay was inexcusable and the judgment lacked the appropriate degree of scrutiny on the key issues and conclusions of the case. Whilst the Court of Appeal did not find that the judge's decision was necessarily wrong, there was sufficient doubt about the reasons why it was right such that the judgment should be set aside.
Unsurprisingly, the prospect of a retrial raises significant practical consequences – not least from a costs perspective. This is particularly so as the facts of the dispute took place in 2009 and have already been litigated in the High Court over a five week trial in 2018.
In this article, we consider the ramifications of a delayed judgment and the practical implications of a retrial in the appellants' favour.
The dispute heard by the High Court in Bilta (UK) Limited (in liquidation) and Ors v Natwest Markets Plc and Another  EWHC 546 (Ch) concerned claims for dishonest assistance and knowing participation in fraudulent trading by assisting a VAT carousel fraud in the carbon credit market. The claim was brought by Bilta (UK) Limited and a number of other insolvent companies, together with their respective liquidators, against NatWest Markets plc (previously the Royal Bank of Scotland at the relevant time) and Mercuria Energy Europe Trading Limited, an indirect subsidiary of the bank. Mercuria was the employer of traders who traded EU carbon credits called EU Allowances.
The case is one of several stemming from a system introduced by the EU in 2005 that imposed carbon quotas on businesses. So-called "missing trader intra-community fraud" (known as MTIC fraud) is the theft of VAT from national revenue authorities by fraudsters who exploit the way that VAT is treated in cross-border trades where the movement of goods is free from tax. In its most simplistic form, an MTIC fraud involves a company in one EU member state importing easily transportable goods VAT-free from another EU member state, and selling them within the first country with VAT added to the sale price. This results in the importer running up extensive liabilities to national revenue authorities (HM Revenues & Customs, in this case) to account for the VAT which it had received. The dishonest directors of the importer would then cause its VAT receipts to be paid away to third parties and the remainder of the price to be paid to the supplier of the goods, with the result that the importer (the Claimants, in this case) would be left with no assets and would default on its liabilities to the revenue authorities.
In summary, Mercuria caused NatWest to acquire an unprecedented number of EU Allowances in the summer of 2009 from an intermediary called CarbonDesk Limited. Despite this sudden and extraordinary increase in trading, the bank denied that its traders knew or turned a blind eye to the fact that the market was clearly riddled with fraud.
In his judgment handed down in March 2020, Mr Justice Snowden found the Defendants liable for dishonest assistance and knowing participation in fraudulent trading by reason of NatWest's trading with CarbonDesk. NatWest was subsequently ordered to pay £50 million to liquidators of the Claimant companies.
The Defendants advanced seven grounds for appeal – including points relating to the delayed judgment and allegations that the judge failed to consider the evidence as a whole.
Court of Appeal's decision
The Court of Appeal ruled that it did not have faith that Snowden J's decisions were correct after he failed to address evidence that would potentially exonerate the traders. In particular, the court was concerned that the judge had overlooked vital evidence about a dinner meeting between the traders and the head of CarbonDesk. Snowdon J found that the traders were not initially dishonest but ultimately "took the wrong road" and deliberately failed to question CarbonDesk's business model for fear of learning the truth.
However, the Court of Appeal agreed with NatWest that Snowdon J failed to address evidence that one of the traders had in fact raised questions about the increase in volumes of EU Allowances at the dinner meeting and received an explanation regarding CarbonDesk's business strategy with which he was satisfied and appeared to have acted upon. That does not sit squarely with the activity of someone who thinks CarbonDesk’s high volumes are tainted with VAT fraud. The court held that this is where the delay in rendering the judgment became a significant factor on appeal:
"A judge is not required to address every point and, when a judge has evidence on which to base their findings of fact, the mere fact that there is evidence pointing the other way which the judgment does not address is not a justification for allowing an appeal. A judgment given in a timely fashion can be assumed to have been prepared with a full recollection of the relevant evidence. If it were possible to assume that the Judge had had the hit list and the relevant emails in mind when drawing the relevant conclusions, then an appellate court could take the view that he did not mention the evidence because he simply did not think it outweighed the other material before him which was supportive of his conclusions. However, the 19 month delay means we cannot make that assumption. We are in no position to say that the Judge’s finding that questions were not asked at the CarbonDesk dinner was plainly wrong, but in these circumstances, considering the significance of the evidence which was not referred to, that is not the test. The question is whether we can be satisfied that the finding is right…We regret to say that we cannot. These contemporaneous documents support a view of the facts very different from the one the Judge found. They do corroborate aspects of Mr Gygax’s evidence and could, for example, lead one to conclude that he had not given false evidence about the dinner, even if he had lied about his knowledge of VAT on carbon trading."
In delivering their judgment, Lady Justice Asplin, Lady Justice Andrews and Lord Justice Birss referred to the general, albeit unwritten, rule emphasised by Sir Geoffrey Vos (then the Chancellor of the High Court) in the more recent case of Bank St Petersburg v Arkhangelsky  EWCA Civ 408 that judgments should be delivered within three months of the end of a trial – even in long and complex cases. This is consistent with the principle that justice delayed is justice denied. Parties to commercial litigation are entitled to receive their judgments within a reasonably short period of time. Any other approach would lead to a loss of public confidence in the English justice system.
Delay alone, however, is not itself determinative of unfairness. As illustrated above, the question for the Court of Appeal, particularly in a case involving allegations of dishonesty, was whether the delay adversely affected the quality of the decision such that it cannot be allowed to stand. Thus, there must be a basis for believing that there may have been a causal link between the excessive delay and the alleged failings in the judgment. This will necessarily require the appellate court to exercise special care in reviewing the evidence, the judge's treatment of the same, and his findings of fact and reasoning.
In our experience, the time period for handing down of judgments varies enormously and will depend upon the complexity of the individual case and the judge's level of business. Fortunately for other first instance judgments, retrials have been avoided where the judge has mitigated the effect of any delay by analysing the evidence on each issue in minute detail and as a whole – such that no material error is found to have occurred because of the delay.
Interestingly, whilst Snowdon J denied that the delay in producing his judgment lead to any errors in his analysis of the evidence, he was narrowly persuaded to grant permission to appeal because this was a complex case which carried serious consequences of findings of dishonesty for the traders and institutions operating in a regulated sector. He recognised that these points, when coupled with the observations made about the long delay in the production of a judgment, may require an appellate court to conduct a careful review of the findings to be satisfied that no injustice has been caused to parties by the delay.
There is no denying that having the dispute heard once again in the High Court, with witnesses and experts being recalled to give evidence before a different judge, is a highly unpalatable prospect – even if it is the right thing to do in the interests of justice. Two notable points are borne out of this.
- First is the effect on the recollection of the witnesses of fact given the effluxion of time. By the time the trial is reheard, they will be giving testimony on events which occurred over 12 years ago.
- Second is the costs position for the 'winning' party at first instance, but 'losing' party on appeal. In his consequentials judgment, Snowdon J ordered the Defendants to pay £8 million on account of legal costs on an interim basis, which represented 55% of the total amount claimed by the Claimants. Interim payments on account of costs are frequently ordered when a first instance decision is subject to an appeal, notwithstanding that in such a situation the ultimate assessment and payment of costs is conditional upon the first instance decision surviving the appeal – which it has not. It seems unfortunate that, subject to the findings of the judge at retrial, the 'winning' party should be penalised for what is effectively a mistrial due to the court's delay in rendering a judgment.
We understand that Rosenblatt, the solicitors acting for Bilta, is considering whether to appeal to the Supreme Court.