SUPPLEMENTAL JUDGMENT
The Honourable Mr Justice Henderson :
Introduction
- On 27 April 2007 I handed down judgment in this case, after a seven day hearing in March. For the reasons given in my judgment, I concluded that Mr Hicks' case against Russell Jones & Walker ("RJW") succeeded in part on liability but failed on causation, with the result that he was entitled to no more than an award of nominal damages. I refused Mr Hicks permission to appeal.
- Mr Hicks lodged an appellant's notice, and on 22 May his application for permission to appeal was dealt with by Toulson LJ at an oral hearing. After hearing submissions from Mr Hicks (who was by this stage a litigant in person, appearing with the assistance of Mrs Spence as his McKenzie friend) and junior counsel for RJW, Toulson LJ granted permission to appeal on two points. In paragraphs 13 to 15 of his judgment, he said this:
"13. Reading the pleadings, the claimants' skeleton argument, the notice of appeal and the skeleton argument put in by Mr Hicks, Mr Hicks' strongest point appeared to me to be one not raised by him in direct terms, although I think that it is encompassed by certain of his grounds of appeal. It is as follows. The judge found that the solicitors were negligent in two respects: failing to take proper instructions from Mr Hicks and failing to obtain advice from leading counsel in proper time.
14. As I have indicated, he went on to consider what would have happened if Mr Brindle had been consulted earlier, but the point which has concerned me is that the judgment does not address the following separate question: given that the solicitors did not instruct Mr Brindle in time, what ought they to have done and what consequences flowed from their failure to obtain earlier instructions from Mr Hicks?
15. It seems to me, at least on an arguable basis, that there are two different issues here: the failure to obtain timely advice from Mr Brindle and the failure to take proper instructions from Mr Hicks. Given that they did not obtain proper advice from Mr Brindle, the claimant arguably is entitled to approach the matter not simply by considering what would have happened if Mr Brindle had been instructed in time, but also what would have happened if they had taken proper instructions from Mr Hicks in the context of their inability to arrange a conference with Mr Brindle."
- The grounds of appeal which Toulson LJ held to be arguable were ground 1, namely that I failed to find that RJW were in breach of contract in failing to obtain expert evidence in good time to answer the August 1991 Valuation, and ground 3, that I misdirected myself in failing to hold that RJW's breaches of contract were negligent and causative of Mr Hicks' failure before the Court of Appeal on 19 May 1998.
- In the light of the grant of permission to appeal on the above basis, RJW took the view that I should be asked to make additional findings of fact on various matters which had been covered in the evidence at trial, but on which I had found it unnecessary to make any findings in view of the conclusions which I had reached. To this end, RJW made applications first to myself and then to the Court of Appeal for appropriate directions.
- The matter came before me when I was sitting as the applications judge in early June. I indicated that I would in principle be willing to make additional findings of fact, while the case was still relatively fresh in my mind, and particularly if to do so might help to obviate the need for a partial re-trial in the event that Mr Hicks succeeded in establishing either or both of his grounds of appeal. I said, however, that I would be unwilling to embark on this exercise without the approval of the Court of Appeal, which was already seized of Mr Hicks' appeal.
- On 12 July RJW's application for directions came on for hearing in the Court of Appeal before Lloyd and Toulson LJJ. Mr Hicks again appeared in person, with the assistance of Mrs Spence, while RJW were represented by both leading and junior counsel. After considering some relevant authorities and the provisions of CPR Rule 52.10(2)(b), the Court decided that it had power to accede to RJW's application and that it would be appropriate in all the circumstances to direct me to address the points that contingently arise in relation to the grounds on which permission to appeal has now been granted. Lloyd LJ went on to say in paragraphs 18 to 19 of his judgment:
"18. I should say one or two other things arising consequentially. If the matter does go back to the judge, as I would wish that it should, it will go back on the basis of his indication of willingness to proceed in this way, on the basis of some simple directions with a timetable for written submissions and on the basis that otherwise the rest of the procedure is for him to decide on. He will receive written submissions but he should not receive oral submissions unless he invites them. For my part I do not anticipate that he will need to, or indeed that it will be appropriate for him to, receive additional evidence, but I would not wish to preclude either him or the parties from considering whether additional evidence is necessary on any point.
19. The only other thing I would say in that respect is that, because the appeal is due for hearing in mid-December, it is highly desirable that his judgment should be available in good time before that date, not least because one or other or indeed possibly both parties may wish to take exception with points that he does decide in the course of the supplemental judgment. As I see it, the status of his decision will be that it is, in effect, a supplement to his original judgment so that if there are points in it with which either party is discontented, and on which an appeal can properly be launched, the relevant party can then seek permission to add relevant points to the appellant's notice or the respondent's notice, as the case may be. Of course it may be necessary that further directions are sought from the Court of Appeal in terms of the future conduct of the appeal."
- Both members of the Court agreed that the appropriate course was to refer to me a question to be determined under CPR 52.10(2)(b), and that the question should be framed in brief and general terms. As Lloyd LJ said in paragraph 22 of his judgment:
"22. I do not think that it is appropriate to descend into more detail as to some issues because I think it would be over-prescriptive and over-limiting to the judge. Each party will be able, in the written submissions, to put before the judge its or his formulation of the issues which the judge would need to decide and ought to decide, as well as the way in which it is submitted that he ought to decide. It seems to me that the formula which should be adopted is as follows:
"Given that the respondents failed to arrange a conference with leading counsel to consider the August 1991 valuation in proper time, what (if anything) ought they have to have done by way of obtaining further instructions from Mr Hicks and what consequences flowed from not obtaining earlier instructions from Mr Hicks?"
That is the one question which, put generally, seems to me to embrace all the points that either side would wish to put before the judge, leaving the judge free, as he would have been at trial, to decide how he wishes to deal with it, what points he needs to and can properly should make findings on and what, of course, those findings should be."
Toulson LJ agreed, and said in paragraph 29 that he too thought the issue should be expressed "in the simplest possible terms". He agreed with the formulation proposed by Lloyd LJ.
- The order of the Court of Appeal accordingly directed me to consider the question set out above, and laid down a timetable for the service of short skeleton arguments to be completed by 9 August. It expressly directed that the parties would not make any further oral or written submissions unless requested to do so by myself. I was also directed to make my judgment available in sufficient time to allow for the hearing of the appeal in mid-December 2007. Skeleton arguments were duly served in accordance with the prescribed timetable, and on 6 September I received the transcript of the Court of Appeal's judgment of 12 July. I had hoped to be able to deal with the matter later in September, but unfortunately my commitments as vacation judge left insufficient time for me to perform my task before the beginning of term. The result, I am afraid, is that this judgment is being handed down a good deal later than I had originally intended, although still I trust in good time before the hearing of the appeal in mid-December.
- As envisaged by Lloyd LJ, I have not considered it necessary or desirable to receive either oral submissions or additional evidence. In his written submissions, Mr Hicks has invited me to take into account certain material which was not in evidence before me at the trial in March, including in particular:
(a) a long letter of complaint about the August 1991 Valuation sent by him on 9 July 2007 to the Royal Institution of Chartered Surveyors;
(b) a witness statement of Mr James Houston of Robson Rhodes; and
(c) a witness statement of Mr Trevor Ward, who prepared the BDO Valuation.
I have decided against admitting any of this material, for the following reasons. The letter to the RICS post-dates the trial and also refers to various items of new evidence, which RJW had not seen before and had not had an opportunity to consider or test in cross-examination. In so far as the letter contains submissions, it is much longer than the ten pages allowed to Mr Hicks by the Court of Appeal (it is in fact 31 pages long). I have read the letter, but do not in the circumstances propose to take it into account. For the same reason, I declined to make a direction which Mr Hicks requested me to make in a letter of 9 August 2007 for service of the letter together with its enclosures upon RJW. The position with regard to the witness statement of Mr Houston is that Mr Hicks was debarred from relying on this evidence at the pre-trial review, on the ground that it was irrelevant to the issues to be determined in the first part of the split trial. Mr Hicks did not appeal against that decision, or invite me through his counsel to revisit it at the trial. The position with regard to the statement of Mr Ward is that it was agreed between the parties at the pre-trial review that Mr Hicks would not rely on Mr Ward's statement, or that of his associate, Ms Yabsley, on the basis of RJW's agreement in the terms mentioned in paragraph 25 of my previous judgment. The effect of this agreement was that, although RJW did not accept the validity and correctness of the BDO Valuation, they did accept that Mr Hicks would have been able to obtain a report in the terms of the BDO Valuation for the Court of Appeal hearing in May 1998, subject to the necessary preconditions for obtaining such a valuation being satisfied (including, for example, funding from the Legal Aid Board and permission from the Court of Appeal to adduce it in evidence).
What should RJW have done by way of obtaining further instructions from the Claimants, and what would the result of obtaining such instructions have been?
- I now turn to the question that I have been directed to consider.
- The question is premised upon the proposition that RJW failed to arrange a conference with leading counsel to consider the August 1991 Valuation in proper time. That proposition is of course correct, because I have found that RJW were negligent in failing to arrange a consultation with Mr Brindle before 13 May 1998 which was only three working days before the Court of Appeal hearing. However, I consider that it would be wrong for me to approach the question that I am now asked on the footing that no advice from Mr Brindle could, or would, have been obtained before that date if RJW had performed their duty competently. I have already found (see paragraph 144 of my earlier judgment) that RJW's primary breach of duty lay in their failure to obtain advice on evidence from Mr Brindle in good time, and that in addition to discussing the question of further evidence with the Claimants and seeking their instructions RJW should also have sought advice at the earliest opportunity from Mr Brindle. If the problems with the Claimants' legal aid had been dealt with energetically, if necessary with the intervention of the appropriate partner of RJW (see paragraph 145), there should in my view have been no difficulty in arranging a consultation with Mr Brindle in the period of approximately four weeks when he was likely to be available between Monday, 23 March and Friday, 17 April 1998 (see paragraphs 104 and 113). I have also found that if Mr Brindle had been asked to advise in good time, his advice would still have been not to file any further evidence and not to obtain a further valuation: see paragraphs 149 to 155. It was essentially on the basis of these findings that I concluded that, even if RJW had performed their duty competently, the appeal would still have taken the course which it did, and the Claimants have therefore suffered no loss as a result of RJW's negligence.
- Mr Brindle was the Claimants' chosen leading Counsel, and he had their full confidence. He had recently advised in writing on 25 September 1997 about their prospects of success in defeating Humberclyde's appeal, and had expressed the view that there might be merit in the Conspiracy Action: see paragraphs 93 to 95. Furthermore, Mr Brindle had previously seen and considered extensive material relating to the issues in the Conspiracy Action, including the Proof of Evidence Files, when he first advised the Claimants in March 1996: see paragraph 73. On both occasions it had been Mr Samuels who instructed him, first as an employee of Neil Myerson and then as an employee of RJW.
- I emphasise these points because they are in my judgment highly material to any consideration of what RJW should have done by way of obtaining further instructions from the Claimants, and what those instructions would have been. Put shortly, it seems clear to me that if Mr Samuels had fully explained the position to the Claimants in early 1998, and specifically discussed with them the question of responding to the August 1991 Valuation, his recommendation would have been to seek advice on the question from Mr Brindle, and no steps other than preparatory steps would have been taken to obtain any evidence in response until Mr Brindle had given his views. I believe that the Claimants would have accepted this advice, and that matters would then have proceeded accordingly, with the legal aid position being sorted out in time for a consultation with Mr Brindle in late March or early April. I have already made findings about the advice which Mr Brindle would have given at such a consultation, and I see no reason to modify those findings. I also see no reason to doubt that the Claimants would have accepted and been content with his advice.
- I shall now explain my reasons for reaching this conclusion in more detail.
- Mr Reason's seventh affidavit, which exhibited the August 1991 Valuation, was sworn on 15 January 1998. The directions hearing before the Court of Appeal was due to take place on 27 January. RJW briefed Mr Marshall to appear at the hearing on behalf of the Claimants. On the day, they attended the hearing together with Mr Marshall and Mr Samuels. The result of the hearing (see paragraph 101) was that the Court of Appeal declined to rule on Humberclyde's application to adduce fresh evidence, and adjourned the application to the hearing of the appeal together with any application by the Claimants to adduce evidence in response. According to Mr Samuels' attendance note of the hearing, the Claimants had to rush off once it had concluded but they said they were satisfied with the directions made. Mr Marshall and Mr Samuels then had a lengthy discussion about the future conduct of the appeal. I have already referred to Mr Marshall's evidence about the advice which he gave to Mr Samuels on this occasion: see paragraph 102. Mr Samuels' attendance note is to similar effect:
"Mr Marshall is not sure that we should be preparing any affidavits in response to Reason's affidavits. If we consider that the evidence he is adducing is relevant [I think this must be an error for "irrelevant"] and takes Humberclyde nowhere then why bother responding? He thinks, however, that the most important thing is that we have a conference with Brindle and Paul [Marshall] confirmed that he would be more than happy to be led by Brindle in this matter …"
- On the following day, 28 January, Mr Samuels wrote to Mr Brindle personally. He said that Mr Marshall had recommended him to do so, firstly in order to update Mr Brindle on developments and secondly to ask for his confirmation that he would be willing to represent the Claimants at the appeal. He then summarised recent developments, and explained Mr Marshall's view that Mr Brindle's endorsement of a legally aided appeal which might at first sight appear to lack merit could lend the Claimants' case extra credibility. He said that the target date for the appeal was April 1998, and requested a short written reply from Mr Brindle to confirm that he would be happy to conduct the case up to and including the hearing before the Court of Appeal.
- On 4 February Mr Samuels wrote to Mr Brindle's clerk, enclosing a copy of his earlier letter to Mr Brindle. He said he had not received a reply, and that the Claimants were getting anxious. They had been let down by other counsel before, and had had counsel with whom they were far from impressed. He continued:
"I cannot, however, emphasise enough how impressed they have been with Mr Brindle. They would therefore be delighted if Mr Brindle could confirm that he will represent them at the appeal, such that I would be in a position to ask the Clerk of the Lists to list the appeal for Mr Brindle's convenience as well as the convenience of the leading and junior counsel of the opponents."
Mr Samuels said that he needed a reply one way or the other within the next seven days.
- On 5 February Mr Brindle telephoned Mr Samuels, confirming that he would be happy to do the case and saying that a date in May would suit him far better than a date in April. He asked Mr Samuels to check his availability with his clerk. Mr Samuels then spoke to Mr Brindle's clerk, and was told that Mr Brindle was engaged in a trial until about 24 March, and would then be starting a fifteen day arbitration on 20 April. He was also engaged for a fifteen day trial beginning on 2 June. Accordingly, the period between 12 May and 22 May would be the best time for the hearing. The earlier window between 24 March and 20 April was less certain, because of the risk that the earlier trial might overrun. However, Mr Brindle's clerk said that he would be available to have a conference during that period.
- In the light of this information, Mr Samuels wrote on 5 February to the Listing Officer in the Civil Appeals Office confirming that Mr Brindle would be acting for the Claimants and asking for the hearing of the appeal to be listed on a date convenient to counsel for all three parties. He gave details of Mr Brindle's availability and expressed a preference for the period between 12 and 22 May (the latter date being the end of the Easter Term).
- At this stage Mr Samuels was probably not very hopeful that the appeal would be listed for hearing in May, because on 6 February he wrote to Mr Dix saying it was "highly likely" that they would have to have a conference with Mr Brindle only about a week or two before the hearing of the appeal: see paragraph 109 of my earlier judgment. However, on 24 February Mr Samuels received a telephone call from Mr Brindle's clerk saying that the appeal had been fixed to float on 18 and 19 May. Accordingly, it must then have been clear to Mr Samuels that a conference could be held with Mr Brindle in late March or early April, and at least a month before the hearing of the appeal.
- Meanwhile, on 12 February Mr Samuels had written to the Claimants setting out his thoughts about the matters upon which he would ask Mr Brindle to advise, including the question whether there should be a "plan B" which would involve the production of affidavit evidence: see paragraph 107. On 25 February Mr Samuels wrote to them again, and informed them of the date fixed for the hearing of the appeal. He continued:
"As discussed over the telephone earlier today (Tuesday, 24 February 1998), once Mr Dix has resolved the Legal Aid position once and for all, such that my firm can be guaranteed that Mr Brindle's fees will be paid by the Legal Aid Board rather than by this firm, I will prepare instructions and a brief and I will also arrange a conference."
- It was at this stage, in my judgment, that Mr Samuels' communications with the Legal Aid Board began to get fatally bogged down, with the result that the opportunity to arrange a conference with Mr Brindle in late March or early April was lost. It may be that one reason why Mr Samuels did not pursue the matter as energetically as he should have done, or seek to enlist the help of his superiors at RJW, was that he himself was firmly of the view that no further evidence should be adduced by the Claimants. A further contributory factor may have been Mr Taylor's apparent failure to exercise effective supervision, and his ultra-cautious approach to the obtaining of sufficiently unambiguous authority from the Legal Aid Board before Mr Brindle was instructed. Whatever the precise reason, the opportunity was unfortunately lost. However, for present purposes the important point is that the opportunity was there, and in my view advantage both could and would have been taken of it if RJW had performed their duty competently.
- As I pointed out in paragraphs 143 and 144 of my earlier judgment, the question of how to deal with Mr Reason's two affidavits, and the obvious potential for damage to the Claimants' case posed by the August 1991 Valuation, was a difficult one which involved a number of tactical and substantive considerations. It was a question that called for the judgment of an experienced litigator, and preferably of the leading counsel who would conduct the appeal on the Claimants' behalf. There was no simple or obvious answer to it, and in my view it is only with the benefit of hindsight that the decision not to adduce evidence in answer, or to seek a fresh valuation of the Hotel, can be seen to have been probably mistaken. RJW should in my judgment have been much more alert than they were to the dangers posed by the August 1991 Valuation and should have drawn them specifically to the attention of the Claimants well in advance of any consultation with Mr Brindle. RJW should also have sought the Claimants' views on the August 1991 Valuation, and the evidence that it might be possible to adduce in an attempt to neutralise it, so that this material could be supplied to Mr Brindle for him to consider in advance of the conference. Had the Claimants been asked, I have no doubt that they would then have provided detailed comments cross-referenced to the Proof of Evidence Files in substantially the same way as they were later to do on 14 May: see paragraph 123. However, this material would have been produced with a view to Mr Brindle advising upon it, and I do not believe that any further steps would have been taken before the conference with him. I also feel sure that the Claimants would have been content to proceed in this way. As I have already said, they had complete confidence in Mr Brindle, and even if the question had been fully explained to them I do not believe that they would have wished to second-guess his opinion, or instruct RJW to take any further steps, before his advice was received.
- In his written submissions Mr Hicks now says that, if he and Mrs Spence had known of the existence of the August 1991 Valuation, they would have taken steps to prepare sufficient rebuttal evidence, and would also have obtained retrospective valuation evidence. This would all have been done in advance of the conference with Mr Brindle, with the result that a "plan B" would have been in place and Mr Brindle would not have been obliged to ask them to prepare points of rebuttal at the last minute. Furthermore, instead of being totally ignorant about the history and importance of the August 1991 Valuation, Mr Brindle would have been "forewarned and forearmed and ready to deal with it". If proper rebuttal evidence had been carefully prepared, it is unlikely that Mr Brindle would have vetoed its use, and the probability is that at the hearing of the appeal he would have asked the Court to allow it to be adduced "through the front door", and not just as a fall-back response to Mr Reason's seventh affidavit.
- These submissions raise a number of points, which I will now deal with.
- First, is it correct that the Claimants did not even know of the existence of the August 1991 Valuation until shortly before the conference with Mr Brindle on 13 May 1998? This is indeed what Mrs Spence says in paragraphs 32 and 34 of her second witness statement, but I am unable to accept this evidence. In cross-examination she was shown a detailed note of a telephone conversation which took place on 2 May 1995 between Mr Hicks, herself and Mr Ian Stewart, a former director of Humberclyde. The note records that Mrs Spence informed Mr Stewart that Humberclyde had obtained a valuation of the Hotel from Christie's in late August 1991. The note refers to the valuation as having been in the sum of £9 million, but in my view the reference can only have been to the August 1991 Valuation, and the discrepancy in the amount is accounted for by the fact that the Claimants did not have a copy of it. Mrs Spence went on to refer to the valuation as being based on "Mickey Mouse" figures. The note also records Mr Hicks saying that they had only heard of the valuation in an affidavit sworn in the 1993 winding-up proceedings, and that he had challenged Christie's about it. I prefer the evidence of this contemporary note to the much later recollection of Mrs Spence in her witness statement, and I therefore proceed on the basis that the Claimants knew of the existence of the August 1991 Valuation from 1993 onwards, although it is not suggested that they had a copy of it.
- Furthermore, before she was shown the note of 2 May 1995 Mrs Spence accepted in cross-examination (Transcript, Day 3, page 133) that:
"I think the first we knew of the £10 million valuation was in October 1997 through the letter from Pinsents."
This was a reference to the long letter of 9 October 1997 from Pinsent Curtis to the Legal Aid Board, which does indeed contain three separate references to the August 1991 Valuation, and quotes (in paragraph 17.8 on page 29) the conclusion that the open-market value of the Hotel as at 19 August 1991 was in the region of £10 million. Mrs Spence's evidence indicates that a copy of this letter must have been forwarded to the Claimants in October 1997, presumably by Mr Samuels, and I find on the balance of probabilities that this is what happened. Again, however, there is no suggestion that the Claimants had a copy of the August 1991 Valuation at this stage.
- A copy of the August 1991 Valuation was of course exhibited to Mr Reason's seventh affidavit, and a copy of the affidavit together with its exhibits was served on the Claimants by post under cover of a letter dated 15 January 1998 from Pinsent Curtis. The evidence of Mr Hicks, which I accept, is that neither he nor Mrs Spence read the affidavit or exhibits, but simply passed them straight on to RJW, and did not retain any copies. Mr Hicks said in cross-examination that he knew RJW would be coming on the record in a matter of days, and when documents were received it was his normal practice to send them straight on to his solicitor who would then review them and "do a brief" which he would send back to the Claimants for their comments.
- On the day before the directions hearing, 26 January, Mr Hicks telephoned Mr Samuels in relation to the forthcoming hearing. One of the matters they discussed was whether the Claimants should attend. Mr Samuels said there was no reason why they should not come, and undertook to inform them of the time and place of the hearing once he had the relevant details. According to his attendance note, he also said that he would give them a copy of the hearing bundle prepared by Pinsent Curtis for them to take back. He said he would like them to look at Mr Reason's sixth and seventh affidavits, particularly the sixth one. I see no reason to doubt that this is an accurate record of what Mr Samuels said. However, neither Mr Hicks nor Mrs Spence recollected having been given a copy of the hearing bundle to take away, and on balance I am satisfied that this did not happen. As I have already mentioned, the Claimants had to leave in a hurry after the conclusion of the hearing on 27 January, and I suspect that in the rush Mr Samuels' intention to give them a copy of the bundle was forgotten about.
- The upshot is that, although the Claimants did in my view know about the existence of the August 1991 Valuation from 1993 onwards, and had been reminded of it as recently as October 1997, they did not have copies of Mr Reason's two affidavits or the exhibits to them in their possession, and nothing was done by Mr Samuels to remedy this until shortly before the conference with Mr Brindle in May. That was in my view a breach of duty on his part, and he should have taken steps either before or soon after the directions hearing to ensure that the Claimants had copies of Mr Reason's evidence. As I have already indicated, he or Mr Taylor should also have drawn their attention specifically to the August 1991 Valuation, and discussed with them the problems to which it gave rise.
- Mr Hicks says that the result of any such discussion would have been the preparation of rebuttal evidence and the obtaining of a retrospective valuation of the Hotel. I do not agree. I do not doubt the strength and sincerity of Mr Hicks' present view on this question, but in my judgment it is largely the product of hindsight. In my view a fair appraisal of the pros and cons of adducing further evidence, in the context of the ongoing efforts to arrange a conference with Mr Brindle as soon as possible, would quickly have led to the conclusion that no steps should be taken, except on a preparatory basis, until his advice had been obtained. The question whether there should be a "plan B" was pre-eminently one for leading Counsel to consider. So too was the question whether a further valuation should be obtained, bearing in mind that it would inevitably be retrospective and would have to be based upon projections provided by the Claimants, whereas the August 1991 Valuation had the great advantage of being contemporary, was prepared by a reputable firm of independent valuers, and was consistent with the 1994 Valuation.
- The Claimants were always keen to file affidavit evidence about the merits and value of the Conspiracy Action, so I accept it is likely that if the August 1991 Valuation had been drawn to their attention they would have set about gathering material that could be used in rebuttal, whether or not they had been asked to do so by RJW. This exercise would doubtless have produced the ten items of additional evidence relied upon in paragraph 61 of the Re-re-Amended Particulars of Claim, and this material would have been supplied to Mr Brindle in advance of the conference. However, I do not believe that it would have caused him to change his mind. When the same material was belatedly supplied to him on 14 May, he took the view that it did not provide an obvious refutation of Mr Reason's evidence, and considered that the points both individually and cumulatively "lacked the sort of impact that would influence the outcome of the judgments that the Court of Appeal was going to have to make": see paragraph 123 of my earlier judgment. If the material had been supplied to him before a conference in March or April, Mr Brindle would have been able to review it more thoroughly, and he could have questioned the Claimants about it when they met. However, there is no evidence before me which suggests that a more thorough scrutiny would have fortified the potential impact of the ten points. On the contrary, after they had been the subject of oral evidence and submissions at the trial before me, Mr Crystal was driven to concede in his closing submissions that they had been demolished by Mr Livesey QC, and that realistically the Claimants' case on causation came down to the question of expert evidence. Mr Crystal therefore did not deal with any of the ten items of factual evidence in his written or oral submissions, and for the same reason I found it unnecessary to deal with them in my earlier judgment. Nor can it be said, in my view, that Mr Crystal's concession was in any way incautious, or that it is open to more than one interpretation. In the course of his closing submissions, he said without qualification (Transcript, Day 7, page 22):
"Mr Livesey yesterday demolished the material that was produced between 13 and 14 May."
A little later, I made it clear to Mr Crystal that I regarded the question of causation as possibly the crux of the whole case, and said I was anxious that he should have every opportunity to comment on it. I asked whether he accepted that the points which could have been derived from the Proof of Evidence Files would upon examination not have provided sufficient ammunition, to which his answer was:
"I think it is difficult … I know your Lordship keeps looking at the transcript and your Lordship will have heard me say that Mr Livesey demolished those … it would be difficult, I anticipate, to persuade your Lordship that those items separately or cumulatively would of themselves have negated the August 1991 Valuation."
- With regard to the question of further expert evidence, I have already made it clear that in my view this question too would have been put to Mr Brindle, and no steps to obtain such evidence would have been taken beforehand. Even if I am wrong about that, the further question arises of how it would have been obtained, and who would have paid for it. The BDO Report cost around £10,000, and I see no reason to suppose that a report obtained in 1998 would have cost significantly less. There was no evidence at trial to suggest that either of the Claimants would have been able or willing to pay for such a report, and they were of course legally aided. In order to obtain a fresh report, RJW would have needed to obtain prior authority from the Legal Aid Board. Mr Samuels was definite on this point in cross-examination: he said that under the Legal Aid regulations at the time prior authority was always needed for an unusual step such as instructing an expert valuation witness. The correspondence with Mr Dix shows that the Board was already concerned about the costs of the appeal, and I agree with the submission for RJW that the Board would have required favourable advice from Mr Brindle or RJW before funding such a report. However, such advice would not have been forthcoming, either from Mr Brindle or from RJW, so the likelihood must be that a report would not have been obtained. Mr Brindle, as we have seen, was not in favour of obtaining a fresh report when he advised in May, and would have taken the same view even if he had been asked to advise in good time before the hearing. Nobody suggests that this view was, or would have been, negligent. It is equally clear that nobody at RJW was in favour of obtaining a fresh report; and even though it may be said that neither Mr Samuels nor Mr Taylor had given the matter the full consideration which it deserved, I am sure that if they had given it full consideration they would not have decided to recommend the obtaining of a fresh report on their own initiative, but would instead have referred the question to Mr Brindle. So by one route or another I come back to the conclusion that Mr Brindle's views on this question would have been determinative.
Further questions
- In the light of the conclusion which I have reached, I do not propose to consider in detail the further hypothetical questions which would arise if rebuttal evidence and/or a fresh valuation similar to the BDO Valuation had in fact been obtained before the Court of Appeal hearing on 19 May 1998. I will, however, briefly indicate my view:
(a) that the Court of Appeal would probably have refused the Claimants permission to adduce the further evidence; and
(b) even if the Court of Appeal had given permission for it to be adduced, they would probably still have concluded that the debt owed by HIHL to Humberclyde in September 1991 substantially exceeded the value of the Hotel.
- On the first point, it is a notable feature of the hearing before the Court of Appeal that no part of Mr Reason's sixth and seventh affidavits was admitted apart from the August 1991 Valuation, and the August 1991 Valuation was admitted only because it was at least notionally in evidence before Chadwick J. Furthermore, the Court refused Mr Brindle's last-minute application to adduce new evidence for the Claimants: see paragraph 132 of my earlier judgment. The rule in Ladd v Marshall [1954] 1 WLR 1489 was arguably inapplicable to the admission of evidence going to Humberclyde's procedural complaints about the course of the hearing below, but I see no reason to doubt that it applied in the usual way to the admission of evidence going to the question of valuation of the Hotel. This certainly seems to have been the basis upon which the Court of Appeal proceeded. Such evidence was relevant to the issue whether the Conspiracy Action should be assigned to the Claimants, and Chadwick J had made a final decision on the merits in relation to that issue. The whole purpose of his directions on 14 February 1997 had been to enable the Claimants to place before the court such facts and arguments as were not already covered by the evidence and submissions of the liquidator: see paragraph 78. An expert valuation such as the BDO Valuation could with reasonable diligence have been obtained and adduced in evidence before the hearing of the liquidator's application for directions on 10 and 11 June 1997. The same is true of any other items of rebuttal evidence upon which the Claimants might have wished to rely. Accordingly, the test in Ladd v Marshall would not have been satisfied. It is possible that the Court of Appeal might have been prepared to take a more indulgent view, because the Claimants were litigants in person and because they were not, strictly speaking, parties to the application before Chadwick J. However, the transcript of the hearing shows that the court was taking a strict line on questions of new evidence, and on balance I think it unlikely that they would have made an exception for the Claimants.
- On the second point, it is enough for me to say, first, that I see no reason to suppose the rebuttal evidence would have carried any more weight before the Court of Appeal than it did at the hearing before me, especially in view of Mr Brindle's lack of enthusiasm for it, and, secondly, that I do not believe the Court of Appeal would have attached much, if any, weight to a retrospective valuation of the Hotel, based on projections provided after the event by the Claimants, in comparison with the contemporary August 1991 Valuation. The likelihood is that, if the Claimants had served such a valuation on Humberclyde in good time before the hearing, Humberclyde would have obtained evidence in reply from Mr McArthur similar to that contained in his two witness statements for the hearing before me. If the Court of Appeal had been prepared to admit the fresh valuation relied upon by the Claimants, it would presumably also have admitted the evidence in reply; and in the light of that evidence it would have had a reasonably full understanding of the basis upon which, and the context in which, the August 1991 Valuation was made.
- In addition, if the court had decided to look at the question of valuation in the light of fresh evidence, it would probably have examined the amount of the debt owed by HCIL to Humberclyde much more closely than it actually did. In his judgment Morritt LJ said that there seemed to be "little doubt" that the debt in September 1991 was £14.5 million: see paragraph 136 of my earlier judgment. However, in the aide memoire which she prepared for the hearing before Chadwick J Mrs Spence had herself referred to a figure of £16.3 million for the total indebtedness in April 1991: see paragraph 87(4). This figure was based on a letter from Mr Jourdain of Humberclyde to Mr Hicks dated 24 June 1991, which was not challenged by Mr Hicks at the time. To this figure there had to be added the further sums borrowed by HIHL under the two facility letters in June and July 1991 (see paragraphs 50 and 51), and interest from May 1991. The resulting figure would therefore have been well in excess of £17 million. Even if the Court of Appeal had taken the view that the August 1991 Valuation was on the low side, there would in my view have been no solid basis upon which it could have concluded that the value of the Hotel was anywhere near as high as £17 million.
- Finally, it is worth pointing out that the estimates of projected profit and loss for the Hotel in the BDO Valuation were based on the assumption that all construction work had been completed and the Hotel had 383 rooms available for letting. The correct figure, as Mr McArthur verified by personal observation and as Mr Hicks substantially accepted in cross-examination, was that the Hotel in fact had only 287 lettable rooms. The BDO Valuation was therefore made on the basis of a fundamentally mistaken assumption. It is true that the BDO Valuation included a deduction of £500,000 to represent the cost of the outstanding works which were required to complete the Hotel to the specification indicated (see paragraph 11.2), but no explanation is given of how this figure was arrived at, or how long the necessary works would have taken. This is by no means the only respect in which RJW submit that the BDO Valuation is seriously flawed, but it is by itself sufficient to make the point that its methodology is suspect.
