Refuels Ltd v BIP Chemical Holdings Ltd & Anor

Factual and Procedural Background

The application for permission to appeal arises from a judgment given by HHJ Cadwallader in the Circuit Commercial Court in Manchester on 9 September 2021. The underlying claim involved a breach of warranties in a share purchase agreement by which the Defendant sold the entire issued share capital of Company A to Company B. Company A's business was the refinement and treatment of chemicals, specifically recycling mixed fuels. The claim, issued on 7 January 2020, alleged breaches of warranty, focusing primarily on two points: material adverse changes to the business not disclosed since the accounts date, and that Company A conducted business outside the normal course.

The particular allegation at issue concerned a prolonged and systematic fraud perpetrated by a former director in conspiracy with a customer, Company C. It was alleged that Company C sold mixed and contaminated fuels to Company A at inflated prices, with the excess profits being split between the director and Company C. The Defence denied these allegations and challenged their sufficiency.

Neither the former director nor Company C were parties to the action, nor did they give evidence at trial. Evidence supporting the fraud allegation was given by a representative of Company B, which the judge found credible and supported by documentation. The judge concluded, on the balance of probabilities, that Company C defrauded Company A in conspiracy with the former director. Damages were awarded but limited by a cap on liability in the agreement.

Company C subsequently sought to challenge the judge’s finding of fact via an appeal filed more than two years after the judgment. The appeal was unusual as Company C was not a party to the original proceedings and the notice was filed well beyond the 21-day time limit prescribed by the Civil Procedure Rules (CPR). The court adjourned the application for hearing by a panel of three judges.

Legal Issues Presented

1. Whether a non-party to proceedings may be granted permission to appeal a finding of fact made against them in the original judgment.
2. Whether the court should grant an extension of time for filing an appellant’s notice beyond the 21-day limit under CPR 52.12(2)(b).
3. Whether the procedural fairness requirements under Article 6 of the European Convention on Human Rights were breached by making adverse findings against a non-party without that party giving evidence or having the opportunity to respond.
4. Whether common law principles of fairness entitle a non-party to challenge findings of fact made against them in civil proceedings.

Arguments of the Parties

Appellant's Arguments

• The appellant argued that their right to a fair trial under Article 6 of the European Convention on Human Rights was infringed because adverse findings of fraud were made against them without an opportunity to make representations or challenge the allegations.
• They contended that the findings had serious reputational consequences and should be subject to challenge despite not being a party to the original proceedings.
• The appellant sought an extension of time for filing the appeal, arguing that the delay was due to lack of knowledge of the judgment and that the failure to comply with the 21-day limit was neither serious nor significant.
• Reliance was placed on cases such as Re W (A Child) and Cie Noga d'Importation et d'Exportation SA v ANZ Banking Group Ltd to support the contention that findings of fact can be challenged even if not part of a formal order, especially where Convention rights are engaged.
• They also relied on common law principles of fairness requiring that a person adversely affected by findings be given an opportunity to respond, citing R v Davis and R v SSHD ex p Doody.

Respondent's Arguments

• The respondents argued that there is no jurisdictional bar to a non-party appealing, but the strict time limits under CPR must be observed, and extensions of time are exceptional.
• They emphasized the public interest in finality and efficient conduct of litigation, highlighting that the appellant had knowledge of the judgment over a year before the appeal was filed and had not acted promptly.
• The respondents submitted that the appellant’s lack of engagement with the litigation and conscious decision not to pursue the matter earlier undermined the application for extension of time.
• It was pointed out that the appellant is not bound by the judgment and that the judgment cannot be relied on as evidence of the findings in any future proceedings.
• The respondents relied on authority confirming that findings of fact do not amount to a determination or order unless they affect the substantive rights or outcomes of the parties, and reputational consequences alone do not justify an appeal.
• They further argued that the appellant had been invited to give evidence and declined, and that the judge was entitled to make findings on pleaded issues based on the evidence presented.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began by acknowledging the unusual nature of the appeal: a non-party seeking to challenge a factual finding made over two years earlier. It confirmed that while there is no jurisdictional bar to such an appeal, strict time limits apply and extensions of time are exceptional. Applying the three-stage test from Denton v TH White Ltd, the court found the failure to file within 21 days was serious, given the public interest in finality and efficient litigation.

The appellant’s reason for delay—initial ignorance of the judgment—was undermined by the fact that the appellant had read the judgment over a year before filing the appeal and had delayed further despite adverse commercial consequences. The court rejected the contention that the failure was not serious or significant.

Turning to the merits, the court held that the appeal did not present very strong grounds. The allegations of fraud were pleaded issues, and the appellant had been invited repeatedly to give evidence but declined. The court distinguished cases where findings were extraneous or unpleaded, noting that the judge was entitled to decide pleaded issues based on the evidence before him.

The court considered the procedural fairness protections under Article 6 ECHR and common law fairness principles. It found that the appellant’s procedural rights were not breached as they had an opportunity to give evidence and the findings were necessary to the claim between the parties. Furthermore, the appellant was not bound by the judgment and it had no legal effect against them.

The court also emphasized the importance of finality in litigation and the risk of satellite litigation if non-parties were routinely permitted to challenge findings with purely reputational consequences. The court noted that the appellant had alternative remedies available in ongoing proceedings where the allegations were being directly contested.

Overall, the court concluded that the appellant’s application for an extension of time should be refused, and the appeal dismissed.

Holding and Implications

The court REFUSED the application for an extension of time to file the appellant’s notice and thereby DISMISSED the appeal by the non-party. The refusal was based on the serious and significant delay, lack of promptness, and absence of very strong grounds for appeal.

The direct effect of the decision is that the judge’s findings of fact against the non-party remain undisturbed and binding only between the original parties. No new legal precedent was established. The decision reinforces the strict application of procedural time limits and limits the circumstances in which non-parties may appeal factual findings made in civil litigation, especially where those findings have no direct legal consequences for them and where alternative remedies exist.