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05 May 2020
Applying for permission to advance new evidence on appeal is a complex application which has had varying degrees of success in the courts. Zheng Yougxiong v Gate Ventures plc(1) is a useful example of the application of the criteria in the context of insolvency proceedings.
Mr Zheng was a shareholder in, and creditor of, Gate Ventures plc. He sought and failed to obtain an administration order against Gate Ventures plc based on a £2.5 million debt (the first application).
Gate Ventures plc told the court that it would be receiving quarterly payments of £50,000 from another company, Ginger & Moss Limited. Those payments were shown in its cash flow forecast, which formed part of a plan to pay off its creditors. When asked at the hearing why the first payment had not yet been received, Gate Ventures plc stated that it was because of the first application having been made.
At the hearing of the first application, Judge Prentis concluded that Gate Ventures plc was insolvent on a cash flow basis, but not on a balance sheet basis. Thus, although there was a reasonable prospect of the administration's purpose being achieved, as a matter of discretion, the judge refused to make the administration order. Gate Ventures plc had a better prospect of being able to trade out of its cash flow difficulties if it remained outside a formal insolvency process. That conclusion was based on evidence presented by Gate Ventures plc, which included its plans for trading out of its difficulties and incorporated the cash flow forecast which demonstrated its ability to do so.
On 2 December 2019 Mr Justice Roth refused permission to appeal Prentis's verdict. Zheng pursued an application for permission before Mr Justice Zacaroli, which was refused on the grounds of appeal on which he relied.
New evidence was uncovered showing that the quarterly payments of £50,000 from Gate Ventures plc were not obligatory but a payment plan that had merely been discussed. Zheng applied to amend his grounds of appeal and seek permission to appeal on that basis and on the basis that Gate Ventures plc had deliberately misled the court.
The criteria which must be satisfied for an appeal are as follows:
Zacaroli was satisfied that there was a real prospect of successfully establishing that had the new evidence been available to the judge at the time of the hearing, it would probably have had an important influence on him when he was weighing up the reliability of both parties' evidence.
As regards Zheng's allegation that Gate Ventures plc had deliberately misled the court, Zacaroli decided that it was not something that he could determine without cross-examination. However, he thought that there was a real prospect of establishing on appeal at least a prima facie case that the court had been misled.
Therefore, Zacaroli granted permission to appeal on both grounds of the application.
Applying for permission to advance new evidence on appeal is a complex application which has had varying degrees of success in the courts. This case is a useful example of the application of the criteria. Zacaroli granted permission to appeal as he was satisfied that the evidence could not have been obtained with reasonable diligence for use at a hearing and that there was a real prospect of establishing that the decision may have been different if the new evidence had been available to the first-instance judge.
This case makes it clear that if unreliable evidence is put before a court, decisions based on that unreliable evidence can be challenged on appeal or by a new action being brought. In the case of this insolvency proceeding, the company has been left in a state of limbo as it continues to fend off administration applications.
For further information on this topic please contact Simon Hart or Emily Saffer at RPC by telephone (+44 20 3060 6000) or email (firstname.lastname@example.org or email@example.com). The RPC website can be accessed at www.rpc.co.uk.
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