ON APPEAL FROM
The Hon Mr Justice Silber
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE PITCHFORD
LORD JUSTICE BURNETT
|WATSON FARLEY AND WILLIAMS (a firm)|
|- and -|
(Transcript of the Handed Down Judgment of
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Ben Hubble QC and Pippa Manby (instructed by Clyde & Co LLP) for the Respondent
Hearing dates: 21 - 22 April 2015
Crown Copyright ©
Lord Justice Burnett:
"During this case, the conduct of the Claimant has been subject to detailed scrutiny and for the reasons, which I have sought to explain, I have concluded that:-
a) The Claimant was not negligent (see paragraphs 234-252, 258-262, 265-268, 274-276);
b) Even if the Claimant had produced the 2007 Agreements with the rights and remedies which it is said by the Defendant should have been included and advised in the way in which it is said by the Defendant that the Claimant should have acted, the Defendant would not have taken advantage of or used any of those rights and remedies (see paragraphs 253-256, 263, 269, 271 and 277) or followed that advice (see paragraphs 330-382);
c) The Defendant has not established that he has suffered any of the alleged loss of profits or incurred any of the alleged wasted expenditure (see paragraphs 383-384); and that
d) Even if the Defendant has established that he has suffered a loss of profits and/or incurred any wasted expenditure, this was not a consequence of the Claimant's negligence or any aspect of the 2007 Agreements but a consequence of a variety of other factors. These factors include (but are not limited to) (i) the Defendant's decision to promise to make payments to Mr Rinis to which he is not entitled under the 2007 Agreements which, as I have explained, his counsel has described in an understatement as "slightly naïve"; (ii) thereby removing the incentives set out in the 2007 Agreements for Mr Rinis to perform his duties so as to receive more than the small initial payments until he had performed his duties under each of the 2007 Agreements and thereby radically amending the entire basis of the carefully constructed agreements which protected the interests of the Defendant; (iii) the failure of the Defendant to pay the sums promised to Mr. Rinis at the appointed time and in some instances at all."
The Approach to Factual Challenges
"It was a long settled principle, stated and restated in domestic and wider common law jurisprudence, that an appellate court should not interfere with the trial judge's conclusions on primary facts unless satisfied that he was plainly wrong."
Lewison L.J. returned to the topic in Fage UK Ltd v Chobani UK Ltd  EWCA Civ 5;  ETMR 26. In a vivid passage at para  he said:
"Appellate courts have been repeatedly warned, by recent cases at the highest level, not to interfere with findings of fact by trial judges, unless compelled to do so. This applied not only to findings of primary fact, but also the evaluation of those facts and to inferences to be drawn from them. … The reasons for this approach are many. They include
i. The expertise of the trial judge in determining what facts are relevant to the legal issues to be decided, and what those facts are if they are disputed.
ii. The trial is not a dress rehearsal. It is the first and last night of the show.
iii. Duplication of the trial judge's role on appeal is a disproportionate use the limited resources of an appellant court, and will seldom lead to a different outcome in an individual case.
iv. In making his decisions the trial judge will have regard to the whole of the sea of evidence presented to him, whereas an appellate court will only be island hopping.
v. The atmosphere of the courtroom cannot, in any event, be recreated by reference to documents (including transcripts of evidence).
vi. Thus even if it were possible to duplicate the role of the trial judge, it cannot in practice be done."
The Outline Facts and Judge's Principal Findings
"a) Ekoplyn would develop PV projects in Mytilini … [P]roduction licence applications would be made in the name of special-purpose OE partnerships which would be the Project Companies; in which Ekoplyn and/or Mr Rinis and one of their Associates would be shareholders;
b) Under Recital C, … the Defendant and Mr Weinerman would purchase shareholdings in Project Companies on successful grant of Production Licences for the PV projects;
c) Under clause 2.2, Ekoplyn or Mr Rinis would hold at least 99% of the shareholding in each project company and the Defendant and Mr Weinerman would appoint an additional party to purchase up to 1% of the shareholdings, which party would also be bound by this Agreement; (emphasis added)
d) Under clause 2.3, Ekoplyn would receive €35,000 upon signing which represented €2,000 for each of the 10 projects and €3,000 for each of the 5 OE partnerships;
e) Under clause 3.2, the Defendant and Mr Weinerman would have the right to monitor and check the progress by performing additional due diligence;
f) Under Clause 3.3, Ekoplyn would procure that no project Company would at any time prior to Closing without the prior written consent of the Buyer enter into any contract, liability or other binding agreement with any third party subject to certain limitations except in so far as might be reasonably required to give effect to this Agreement or to satisfy the conditions precedent to Closing set out in Clause 3.4;
g) Under Clause 3.4, Mr Weinerman and the Defendant would be entitled to rescind the agreement without any liability to Ekoplyn in a wide variety of cases including where an event occurs which has a material adverse effect on the Project;
h) Mr Weinerman and the Defendant would purchase the shareholdings of the OE/EE partnerships once the conditions of clause 3.6 had been met or waived;
i) Under clause 3.7, if the conditions precedent were not met by 31 December 2007, then Ekoplyn would be entitled to a further 6 months to replace the project with one or more further projects. If Ekoplyn could not replace the project by 30 June 2008 then Mr Weinerman and the Defendant could complete closing for that project company or rescind the agreement for that company;
j) Under clause 4.1 the developer would within one week of signing, deliver to Ms Murray the Articles of Association, corporate records and executed and undated letters of resignation from the administrators of each project company;
k) Under clause 4.2 the statutory documents referred to in clause 4.1 would be retained by Ms Murray "by way of security"; (original emphasis)
l) Under clause 4.3 there would be a "Pledge of Proceeds of Shareholdings" which would be expressed to be "as security for the First Payment, Mr Weinerman and the Defendant would be entitled to require that all shareholders of the Project Companies assign and pledge the share of profits and all other rights and benefits arising from their shareholdings in favour of Mr Weinerman and the Defendant who would be entitled to perfect such pledge by registration with the Company";
m) Under Clause 4.4, Mr Weinerman and the Defendant would have an early closing option;
n) Under Clause 5.1, Ekoplyn would give a number of warranties including that:-
i) at the Closing Date the project company would have obtained Production Licences for the Projects and all licenses, consents, approvals, certifications and authorisations or other supporting documentation necessary for the issue of the Production License, as well as all Land Rights required for the Project and entry into this Agreement does not violate the validity of such licenses, consents, approvals, certifications and authorizations;
ii) to its knowledge the Production License and any other Permits, all licenses, consents, approvals, certifications and authorizations or other supporting documentation as required by Greek Law which have been obtained up to date, would have been 10W fully issued and obtained and would be valid and in full force and effect and all conditions of such permits and licenses have been fully complied with; and that;
iii) to its knowledge, the Company would have complied with any environmental legislation applicable to it and would have obtained any environmental licenses or permits necessary for carrying on its business which it had obtained to date and entry into this Agreement does not violate the validity of such licenses or permits; and that:
o) Under clause 7.3 Defendant and Mr Weinerman would pay Ekoplyn a bonus of €30,500 per project upon the issue of a decision to award a grant of 40% towards the cost of the project. In addition, Defendant and Mr Weinerman were obliged to provide to Ekoplyn by 31 August 2007 a letter of guarantee in the sum of €305,000 to secure its payment of the bonus to Ekoplyn."
"… there is nothing whatsoever in the evidence which shows or even conceivably indicates that at or before this time when the defendant agreed to make and did make these payments to Mr Rinis that the negotiating position of the Defendant and Mr Weinerman had been impaired or inhibited in the negotiations with Mr Rinis by the alleged negligence of the Claimant. Nor is there anything to show that the Defendant would have acted differently if the 2007 Agreements had contained provisions of the kind now advanced by the Defendant in these proceedings or if it had not contained the matters which Mr Pooles says should not have been included in the agreements or if matters had been explained by the Claimant to Mr Weinerman or the Defendant in the way that Mr Pooles now says that they should have been explained." (para )
"It was clear from his oral evidence that Mr Weinerman considered that the purpose of the provision in Clause 2.2 was to prevent the sale of the project company by Mr Rinis and he did not say anything to suggest that the right to purchase would only arise on closing. More importantly, he took steps to set up the Cypriot company well before closing and soon after the First Agreement was signed."
At para  he continued:
"The next issue is whether Mr. Weinerman, and through him the Defendant, had actually been informed by Ms Murray that there should be an immediate appointment. Mr Pooles contended that Ms Murray had not explained to Mr Weinerman the need for him and for the Defendant to immediately appoint a party to purchase the 1% shareholding. The evidence of Ms Murray, which I accept, was that this matter was understood by Mr Weinerman during their discussions. Mr Weinerman explained in evidence that he knew that if a minority shareholding was taken by him and/or the Defendant, that would be protection against a sale of the project company. So it must have been obvious to Mr Weinerman that this protection was needed immediately from the signing of the agreements and it was not suggested by him that it was otherwise as is shown by a number of other factors."
"In conclusion, having considered all Mr Pooles' submissions and in particular those based on points that emerged from the cross-examination of Ms Murray and the Greek Law expert. I consider that this complaint must be rejected in respect of the First Agreement as (a) there was a provision in the First Agreement for the immediate appointment of a minority shareholder nominated by the Defendant; (b) this was known to Mr Weinerman; (c) if such protection could not have been invoked prior to closing, the Defendant was protected as there could always have been an application for an emergency injunction to restrain a sale by Mr Rinis which would have restrained a sale which if effective could and would have been subject to the Pledge in First Agreement if enforced, and (d) in any event, even if the First Agreement had failed to contain a provision for the immediate appointment of a minority shareholder nominated by the Defendant, the Defendant has not been prejudiced as he would not have taken advantage of it as Mr Weinerman thought that the Defendant had such a right but that nevertheless, he did not pursue it because of neglect."
The reference in the first sentence to the cross-examination of Ms Murray and Ms Fiatakis are to the "concessions" to which I have referred. It is entirely clear that the judge took account of all the evidence of both of these witnesses. In placing the label "concessions" on the passages to which Mr Pooles took us he overstates the position.
"Five factors, whether considered individually or cumulatively, have satisfied me that there is no appropriate causal link between the alleged negligent errors of [Ms Murray] and [Mr Ostrovizky's] loss of profits claim."
i) Mr Ostrovizky became vulnerable to the threats of Mr Rinis because he chose to promise payments outside the 2007 agreements and failed to abide by his later promises. Mr Ostrovizky took responsibility for financing Mr Rinis and came to the series of further agreements with him which the judge had outlined. There was no connection between the drafting of the 2007 agreements and that sequence of events. The problem was that Mr Rinis either could not or would not finance the projects as required by the agreements. He was Mr Weinerman's choice as Greek partner not Ms Murray's.
ii) Even if Ms Murray had given more explicit advice and it had been accepted, the losses would still have followed. On Mr Ostrovizky's case Mr Rinis had been an unreliable, indeed dishonest, partner. Whatever the truth about that, his willingness or ability to finance the projects would have been unaffected by any advice given by Ms Murray. At no stage did Mr Ostrovizky seek to terminate the agreements or vindicate his contractual rights. The true cause of any loss of profit flowed from the decision to continue to deal with Mr Rinis and Mr Ostrovizky's subsequent approach to funding the projects.
iii) Mr Ostrovizky could have resisted any threats to sell the projects by using the remedies open to him. In addition to taking the 1% holdings, injunctive relief was available to him at any time. The agreements could have been terminated.
iv) There was no contemporaneous or other evidence which indicated that Mr Weinerman or Mr Ostrovizky considered that they lacked protection or control as regards Mr Rinis with the consequence that they acted as they did. The judge could not believe, having seen them give evidence, that "if they suspected that their difficulties were or even possibly were caused by Ms Murray's defective services, they would not have complained loudly". No such complaint came until she pressed for her fees in 2010. They were not inhibited at all in their dealings with Mr Rinis by the terms of the agreements.
v) Since no project companies were sold, the failures alleged (which were directed to control to prevent sale by Mr Rinis) were immaterial.
"Mr Justice Silber: But one of the purposes of the Cypriot companies was to give a right of veto?
Mr Weinerman: A right of veto for sale only."
He continued by explaining that it did not have to be a Cypriot company. Then a little later:
"Mr Hubble: Your point is that EW, which is going to be the Cypriot company, shall appoint someone else, another entity –
Mr Weinerman: Any other –
Mr Hubble: to take the minority shareholding?
Mr Weinerman: Correct. That is what I understood, and I am still understanding it like this.
Mr Hubble: The change, so that another entity took a 1 per cent shareholding … was going to give you more protection?
Mr Weinerman: Only, my Lord, one type of protection: for selling the thing. No protection of what is doing inside."
"Mr Hubble: But you knew, as I understand it, that if an … entity took a minority shareholding, that would give you protection against project companies being sold to someone else?
Mr Weinerman: Against sales, yes.
Mr Hubble: You're not suggesting, are you, that during the development process you were going to be controlling the day-to-day activities of the project companies?
Mr Weinerman: Not the day-to-day, but I am reminding my Lord that we thought at that time, that it was a matter of between ten days or – we didn't agree the ten days which was in the law, but we thought that everything here was finishing in a couple of months. Maximum with up to the grant, one year. It took three."
Lord Justice Pitchford
Lady Justice Arden