Judgments - Datec Electronics Holdings Limited and others (Respondents) v. United Parcels Services Limited (Appellants)

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    43.  At paras 67 to 76, Richards LJ accepted the substance of Mr Reeve's criticisms. He said:

    "67. In my judgment the case advanced by the claimants has considerable force to it. There is sufficient evidence about the three Datec packages and the surrounding circumstances to enable the court to engage in an informed analysis of the possible causes of the loss and to reach a reasoned conclusion as to the probable cause. The fact that the experts were unable to reach a conclusion of their own does not preclude the court from reaching such a conclusion on the totality of the evidence and in the light of the findings of fact.

    68. I think it particularly important that the packages were recorded as reaching UPS's hub and as being 'out for delivery' on 26 July, and that they were identified by the floor supervisor as being stacked behind a delivery vehicle. Those established facts greatly reduce the scope for uncertainty, and the inferences that can be drawn from them as to the condition of the packages and in particular as to their labelling assist in the assessment of the subsequent fate of the packages.

    69. I also think it important that there was detailed consideration at the trial of all possible explanations for the loss. It was not suggested that there might exist any realistic possibility that the experts had failed to canvass. The court was in a position to look closely at the evidence for and against each of the possible explanations. In practice that could be done largely by reference to the broad possibilities identified by UPS's Mr van Beusekom.

    70. In relation to those possibilities the judge gave compelling reasons for finding, first, that the packages had not been delivered to L&A (paras 49-53 of his judgment). That finding did not depend on where the burden of proof lay; and although the judge did not dismiss the possibility that the packages had been delivered to L&A and mislaid or stolen within L&A, he evidently and rightly considered it to be unlikely. His finding was firmly grounded on evidence not only about the Datec packages and UPS's delivery procedures, but also about L&A's own operation at Schipol.

    71. The judge also gave compelling reasons for finding that theft by a third party was improbable (para 59 of his judgment). He dealt only briefly with third party theft from the hub itself, concentrating on the difficulty of gaining access without being recorded by the CCTV cameras (as to which, see paras 23 and 42 of the judgment). I would add that the overall security arrangements at the hub, as summarised at para 14 of the judgment, also militate strongly against the possibility of a third party gaining access and removing the packages undetected. As to theft by a third party from a delivery vehicle, I agree with the judge that it is improbable - I would say highly improbable - that a casual thief would have found by chance a delivery vehicle left accidentally unlocked (there was no evidence of any vehicle being broken into), have picked out three packages of the weight and size of these packages, and have removed them without detection.

    72. The two examples of accidental loss mentioned by the judge at para 66 of his judgment were delivery to the wrong address (by a driver other than Mr Kadim) and placement of the packages in the overgoods area.

    73. In my view the hypothesis of misdelivery is highly implausible, for all the reasons given by Mr Reeve in his submissions (para 57 above). It would require a most improbable combination of events for the packages to have been lost in this way, involving multiple errors by the UPS driver, errors by the recipient and a subsequent failure by the recipient to return the packages when the mistake was detected. The fact that prompt inquiries within UPS about the whereabouts of the packages produced nothing to support this hypothesis is a further factor telling against it.

    74. The judge's second example, of placement of the packages in the overgoods area, provides an even less plausible explanation for the loss. Again I agree with the reasons advanced by Mr Reeve in his submissions (para 58 above). It is difficult to see how the packages might have got to the overgoods area in the first place, given the evidence that they had labelling sufficiently intact and legible to be scanned 'out for delivery' and to be identified by the floor supervisor. But if they had got to the overgoods area, the strong probability is that they would have been identified and delivered or returned or that they would have been sold and accounted for. The system does not admit of any sensible possibility of their simply disappearing accidentally and without trace.

    75. Although the judge referred to those two possibilities of accidental loss as examples, there does not seem to me to be any other realistic way in which packages of this size and weight might have been lost accidentally, either from the floor of the hub or from one of the delivery vehicles.

    76. That leaves for consideration the possibility of theft by one or more UPS employees. It should be noted at the outset that there is nothing inherently implausible about such an explanation: far from it. Although there were only 18 cases of established theft from the Amsterdam operation between 1998 and 2002, there was a large number of losses the causes of which had not been established (41 in July 2002 alone); and it would need only a relatively small proportion of such losses to be attributable to employee theft for the total losses from employee theft to run into the 100s over the same period. There was also evidence to support the view that the Datec packages might be targeted for theft or identified as containing high value items. Although there was no direct information about their value on their labelling or accompanying documentation, the contents were described as 'electronic components'. Moreover, L&A was known to handle high value items of this sort, so that the delivery address would have been significant to anyone 'in the know'. The experts acknowledged the possibility of targeted theft by organised criminals and agreed that, if the packages were stolen, it was probably a case of targeted theft."

    44.  It is right at this point to say a word about Mr Kadim's position, although I agree with Richards LJ that it is not ultimately critical. The judge in addressing Mr Kadim's position treated four considerations as casting "real doubt" on any contention that he had stolen the packages: the fact that Mr Kadim went voluntarily to the police, the fact that it was not obvious from the labelling and documentation that the packages were particularly valuable (and there was no evidence that Mr Kadim knew that they were, although it was "possible" that he did), the fact that he did deliver one package to L&A on 26 July 2002 and the absence of any convincing evidence that the packages were loaded on his vehicle. Richards LJ commented:

    "77. I am inclined to agree with Mr Reeve's submissions (para 60 above) concerning Mr Kadim's subsequent conduct and explanations to the police, and to place less weight on them than the judge did. But the explanation of employee theft does not depend for its cogency on putting the blame specifically on Mr Kadim or on other otherwise identifying the responsible employee or employees. The explanation fits well with the known facts even though the employee or employees concerned cannot be identified."

    I agree with Richards LJ's comments. I do not regard either Mr Kadim's voluntary visit to the police, when he knew they were seeking to arrest him, or his delivery of one package to L&A as any particular indication of innocence. Mr Kadim's statement (quoted in paragraph 35 above) was also not that he was not on 26th July familiar with the Schiphol South East route - all that is known is that this had not been his regular route. But, as the judge said, the respondents' case does not depend on putting the blame on any specific employee of UPS. If Mr Kadim is right in suggesting that another unscheduled UPS driver may have taken these three (or presumably all four) missing packages for delivery, the questions arise why this driver took the packages and why he never delivered them.

    45.  Mr Flaux for UPS submits that the Court of Appeal, in concluding that employee theft was the relevant cause, paid insufficient attention to the primacy of the judge's findings, that it was lured into a process of elimination (which could at best arrive a conclusion as to which of many possible causes was the least unlikely, rather than a conclusion as to any cause which was more probable than all the others viewed together) and that, despite lip service to the need for clear and cogent evidence, it found wilful misconduct when there was an absence of any such evidence.

    46.  As to the correct approach in an appellate court to findings and inferences of fact made by a judge at first instance after hearing evidence, there was no disagreement between counsel. In Assicurazioni Generali SpA v. Arab Insurance Group [2003] 1 WLR 577, Clarke LJ summarised the position, referring also to a passage in a judgment of my own:

    "14. The approach of the court to any particular case will depend upon the nature of the issues kind of case determined by the judge. This has been recognised recently in, for example, Todd v Adam (trading as Trelawney Fishing Co) [2002] EWCA Civ 509, Lloyd's Rep 293 and Bessant v South Cone Incorporated [2002] EWCA Civ 763. In some cases the trial judge will have reached conclusions of primary fact based almost entirely upon the view which he formed of the oral evidence of the witnesses. In most cases, however, the position is more complex. In many such cases the judge will have reached his conclusions of primary fact as a result partly of the view he formed of the oral evidence and partly from an analysis of the documents. In other such cases, the judge will have made findings of primary fact based entirely or almost entirely on the documents. Some findings of primary fact will be the result of direct evidence, whereas others will depend upon inference from direct evidence of such facts.

    15. In appeals against conclusions of primary fact the approach of an appellate court will depend upon the weight to be attached to the findings of the judge and that weight will depend upon the extent to which, as the trial judge, the judge has an advantage over the appellate court; the greater that advantage the more reluctant the appellate court should be to interfere. As I see it, that was the approach of the Court of Appeal on a 'rehearing' under the Rules of the Supreme Court and should be its approach on a 'review' under the Civil Procedure Rules.

    16. Some conclusions of fact are, however, not conclusions of primary fact of the kind to which I have just referred. They involve an assessment of a number of different factors which have to be weighed against each other. This is sometimes called an evaluation of the facts and is often a matter of degree upon which different judges can legitimately differ. Such cases may be closely analogous to the exercise of a discretion and, in my opinion, appellate courts should approach them in a similar way.

    17. In Todd's case [2002] 2 Lloyd's Rep 293, where the question was whether a contract of service existed, Mance LJ drew a distinction between challenges to conclusions of primary fact or inferences from those facts and an evaluation of those facts, as follows, at pp 319-320, para 129:

    'With regard to an appeal to this court (which would never have involved a complete rehearing in that sense), the language of "review" may be said to fit most easily into the context of an appeal against the exercise of a discretion, or an appeal where the court of appeal is essentially concerned with the correctness of an exercise of evaluation or judgment - such as a decision by a lower court whether, weighing all relevant factors, a contract of service existed. However, the references in rule 52. 11 (3) (4) to the power of an appellant court to allow an appeal where the decision below was "wrong" and to "draw any inference of fact which it considers justified on the evidence" indicate that there are other contexts in which the court of appeal must, as previously, make up its own mind as to the correctness or otherwise of a decision, even on matters of fact, by a lower court. Where the correctness of a finding of primary fact or of inference is in issue, it cannot be a matter of simple discretion how an appellant court approaches the matter. Once the appellant has shown a real prospect (justifying permission to appeal) that a finding or inference is wrong, the role of an appellate court is to determine whether or not this is so, giving full weight of course to the advantages enjoyed by any judge of first instance who has heard oral evidence. In the present case, therefore, I consider that (a) it is for us if necessary to make up our own mind about the correctness or otherwise of any findings of primary fact or inferences from primary fact that the judge made or drew and the claimants challenge, while (b) reminding ourselves that, so far as the appeal raises issues of judgment on unchallenged primary findings and inferences, this court ought not to interfere unless it is satisfied that the judge's conclusion lay outside the bounds within which reasonable disagreement is possible. In relation to (a) we must, as stated, bear in mind the important and well-recognised reluctance of this court to interfere with a trial judge on any finding of primary fact based on the credibility or reliability of oral evidence. In the present case, however, while there was oral evidence, its content was largely uncontentious.'

    In the same case Neuberger J stressed, pp 305-306, paras 61 to 64, that the question whether there was a contract of service on the facts involved the weighing up of a series of factors. Thorpe LJ agreed with both judgments."

    The judgment of Ward LJ in the Assicurazioni Generali case may be read as advocating a different test, which would equate the approach of an appellate court to findings of fact with its approach to decisions taken in the exercise of a discretion. As Waller LJ correctly pointed out in Manning v. Stylianou [2006] EWCA Civ 1655, that is not the correct test, and it is the judgment of Clarke LJ in the paragraphs quoted above from his judgment that gives proper guidance as to the role of the Court of Appeal when faced with appeals on fact.

    47.  In the present case, the judge's findings of primary fact have not been challenged. One or two small points have been made on factual matters, but they are of no or minor relevance and do not justify Mr Flaux's submission that the Court of Appeal exceeded its proper role in reviewing the judge's conclusions. Essentially, what have been in issue have been the inferences with regard to the causation of loss to be drawn from primary facts which are not in dispute. Mr Flaux, in my view correctly, accepted this was a correct analysis of the central issues, when opening the appeal. I note in parenthesis that Richards LJ appears to have treated as applicable the steeper appellate hurdle that would have applied if the appeal had been related to an evaluation or judgment or a decision analogous to the exercise of a discretion; even so he arrived at the conclusion he did on the basis that the judge had in his paragraph 66 failed to take into account relevant considerations; in particular the judge had failed to follow through the two examples he gave of accidental loss and to consider what each involved and how plausible each might be (cf paras 85 to 87). I do not disagree with Richards LJ's latter comments, but in my view the situation is one where an appellate court is well placed and entitled to re-consider for itself the judge's findings as to what should or should not be inferred regarding causation from the primary facts which he found.

    48.  Nor do I accept Mr Flaux's submission that Richards LJ was lured, by a process of elimination, into accepting as the probable cause the least unlikely of a range of possibilities all of them unlikely. That was the error the House identified in the approach taken by the judge at first instance in Rhesa Shipping Co SA v. Edmunds (The "Popi M") [1985] 1 WLR 948. The reasoning of Sedley LJ in the present case may be open to criticism both for suggesting that sufficient was known for the court to base its conclusions on the least improbable cause and for doing this. But that of Richards LJ, with whom Brooke LJ agreed, is not.

    49.  Richards LJ summarised his conclusions as follows:

    "79. Looking at the matter overall, it seems to me that the judge did overstate the factors telling against employee theft and understate the factors telling in favour of it. I consider employee theft to be a much more likely explanation than the judge found it to be. Perhaps more importantly, I regard as implausible and improbable the explanations of accidental loss to which the judge referred when concluding that accidental loss was more likely than employee theft.

    80. If conducting the exercise of evaluation for myself, I would conclude that theft by one or more UPS employees was the probable cause of the loss and that the claimants' case had therefore been proved on the balance of probabilities. That conclusion would lead in turn to a finding of wilful misconduct within article 29 of the CMR and the consequential disapplication of the limit imposed by article 23 on UPS's liability. (I should mention, for the sake of clarity, that I agree with the approach of Andrew Smith J at para 68 of his judgment towards In re H (Minors) [1996] AC 563 and its application to the standard of proof in this case. In the circumstances the burden on the claimants to prove their case is not a particularly heavy one.)

    81. My conclusion does not depend on the separate loss of the Axxis package, but I accept the submissions by Mr Reeve that the loss of the Axxis package adds to the improbability of other possible causes and makes employee theft all the more probable.

    82. I have borne very much in mind the observations of Brooke LJ in Lacey's Footwear (Wholesale) Ltd v Bowler International Freight Ltd [1997] 2 Lloyd's Rep 369 with which I am in respectful and total agreement, as to the need for a properly rigorous approach to the available evidence. It is the evidence, properly analysed, which in my view leads to the conclusion. That is also why I disagree with the judge's description of the claimants' case as 'too speculative'".

    50.  I find the reasons given by Richards LJ for reversing the judge compelling. None of the possibilities mentioned by the judge in para 66 affords any plausible explanation of the disappearance of the three packages, still less of all the four that were due for delivery to L&A on 26th July 2002. In their joint memorandum the two experts were in fact agreed that the possibilities of loss, Missorted, Mislaid and Damaged/thrown away/sold at auction, under head I were each "less likely than others", in view of the sighting of the packages by Mr Karbouche correctly stacked and labelled on the spur shortly before loading. None of these possibilities anyway offers any comprehensible explanation for the disappearance of three (or in fact four) large and valuable packages. The possibilities, Mis-delivered and Delivered in error, under head II run up, as previously stated, against the inherent implausibility of three or four separate packages due for delivery to L&A all being innocently misdelivered on the same day without any DIAD signature being obtained from anyone. The possibilities floated before the judge (but not even mentioned by him in his paragraph 66) under head II, Labelling issues, are remote in the extreme for the reasons given in paragraph 27 above. As to head IV, Theft, the joint memorandum categorised all the possibilities as "less likely", except for those involving a UPS driver or employees, and the judge found that, if the packages were stolen, it was probably by a UPS employee. Inevitably, any systematic consideration of the possibilities is subject to a risk that it may become a process of elimination leading to no more than a conclusion regarding the least unlikely cause of loss. But, as I have said, I do not consider that Richards LJ fell into that trap. I share, without hesitation, the view which he formed overall that theft involving a UPS employee was shown on a strong balance of probability to have been the cause of this loss.

    51.  In agreement with the reasoning of the majority contained in the judgment of Richards LJ in the Court of Appeal, I would therefore dismiss this appeal.

LORD NEUBERGER OF ABBOTSBURY

My Lords,

    52.  I have had the privilege of reading the draft opinion of my noble and learned friend Lord Mance and agree that this appeal should be dismissed.

 
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