England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		21/12/2009

Mr Justice Norris :

1. Mr Peter Da Costa is a former taxi driver with a long experience in the trade. He is a man of ideas and enterprise. One of his ideas was to provide audiovisual entertainment to passengers in taxis by means of video displayed on a high-resolution thin film transistor screen. It was envisaged that the programming and advertising content would be carried on a DVD which would be updated directly to a custom-designed computer in the taxi on a monthly basis. Mr Da Costa formed Cabvision Ltd ("Cabvision"), of which he became a shareholder and director, to develop and to exploit this idea.
2. Tower Technology Partners LLP ("Tower") was a partnership consisting of Mr Feetum, Mr Marsden and Mr Smith ("the Individual Defendants") together with Mr Sharp and Mr Church. These were people who pooled their differing skills to invent and market what they said were tax efficient investment schemes. Tower was formed for the specific purpose of assisting in the formation of a business to acquire and exploit information and communications technology ("ICT") as defined in section 45 of the Capital Allowances Act 2001, to advise on the appropriate tax structures, and to make presentations to and to induce applications from people willing to make subscriptions. The specific ICT in view was the Cabvision idea.
3. On the 4^th December 2003 the Individual Defendants (together with Mr Sharpe and Mr Church) established Tower Taxi Technology LLP ("TTT"). This was the business which it was contemplated that Tower would establish to develop the Cabvision idea. Those five people constituted the Founder Members (and the initial "designated members" who together formed its board), and the founding deed contemplated that Participating Members would join by signing a Deed of Adherence. Its first accounting period ended on 31 March 2004. The constitution recited that TTT intended to raise capital and debt with which to finance the acquisition of ICT software pursuant to a software exploitation agreement to be made between TTT and Cabvision, and then to seek out all commercial opportunities to derive income from that ICT software (including advertising and ancillary income). In furtherance of that business purpose TTT was empowered to do any lawful act and enter into any document whatsoever as might be approved either by a 75% vote of its members or the joint approval of the board of TTT and Cabvision .
4. There were a number of such approved documents. First, there was a Fees Agreement under which Tower agreed to assist TTT by providing advice on the appropriate tax structures, making presentations to and inducing applications from people willing to make subscriptions. In return TTT agreed to pay Tower a sum equal to 10% of the aggregate value of the subscriptions raised as at the first closing date, and a further 10% of the sum raised between that date and the final closing date (each case within five business days after the relevant date).
5. Second, there was an ICT Software Purchase agreement entered on 5^th December 2003. It provided for the acquisition by TTT from Cabvision of the requisite software. The price was £75 million (though this could be reduced). It had to be paid by 31 March 2004. In return Cabvision granted to TTT an exclusive royalty free licence to use the ICT software (which Cabvision warranted that it owned) in up to 10,000 London taxis, and Cabvision promised not to licence any other London taxis for a period of 3 years and to give TTT the right of first refusal to take up any further licences within or outside London. If the whole of the price was not paid on the due date then the number of taxis in which the ICT software could be used by TTT was reduced. (Although the ICT Purchase Agreement contained a valuation mechanism, the parties agreed to pro rate the price to £7500 per taxi). Cabvision had power to terminate the ICT software agreement if TTT persisted in any material breach of obligation for a period of 30 days, and an immediate power of termination if TTT suffered any act of insolvency or altered its constitution.
6. Third, there was an Installation Agreement providing for the installation by Cabvision's associated company, KPM (UK) Taxis plc ("KPM"), of the requisite screens and associated hardware in taxis. At the time of the agreement it was contemplated that KPM would acquire the equipment from Trident Microsystems at a cost of £1450 per unit, and that KPM would charge an installation fee of £150 per unit. (Although Cabvision's pleaded case proceeded on the footing that this was a binding agreement with TTT , Cabvision sought to resile from this and to say that by reason of its being incomplete it existing only in approved draft form and never became binding).
7. Fourth, there was a Taxi Liaison Services and Content Management Agreement entered into by TTT and Cabvision under which Cabvision agreed to arrange for the equipment to be installed in taxis and to manage, package and deliver the advertising content. The cab owner was to be paid £750 per annum by Cabvision to carry the unit. (This was likewise said to be binding in the statement of case, but at trial an attempt was made to throw doubt on this ).
8. Fifth, there was an Advertising Services Agreement: this was entered into between TTT and Cabvision appointing Cabvision as TTT's advertising agent. Under that agreement Cabvision took 25% of the advertising revenue by way of commission and TTT received the remaining 75%. (This was another of the commercial agreements which the statement of case asserted was binding, but which was said in evidence only to amount to an agreement to agree).
9. These agreements were all part of a complex funding arrangement. By the Fees Agreement Tower had agreed with TTT that Tower would seek to induce capital contributions of up to £22.5 million from persons willing to become members of TTT. It was envisaged that TTT would secure a facility from a UK clearing bank of maximum of £67.5 million (or three times the level of the subscriptions, if that was lower). This would give total funding for the TTT business of £90 million. In the ICT software purchase agreement Cabvision promised to procure that loan and to provide security in relation to it to enable TTT to raise the ICT purchase price of £75 million.
10. It is sufficient for the purposes of this action to know that the precise arrangement ultimately negotiated was as follows:-

(a) On 16 March 2004 Lloyds TSB bank plc agreed to lend TTT £67.5 million or (if lower) three times the aggregate amount of members' capital contributions set out in a Drawdown Notice delivered to the bank ("the Facility") for an arrangement fee of £337,500 payable in two equal instalments (on the date of the agreement and on drawdown).

(b) It was a condition precedent to the bank's liability under the Facility both that the Bank of Scotland ("BoS") should guarantee the obligations of TTT under the Facility and that Cabvision should provide a security deposit.

(c) The security deposit agreement was to be entered into between Cabvision and BoS and incorporate a charge on a cash deposit made by Cabvision (out of the purchase monies payable by TTT to Cabvision under the ICT Software Purchase Agreement) in a sum equal to the amount of the initial drawdown together with the net present value of certain margins on interest payments due under the Facility (and this deposit would fund payments due from TTT under the Facility).

(d) TTT was to provide a secured counter-indemnity in relation to Cabvision's liabilities under the security deposit agreement.

(e) Cabvision was also to enter into a security deposit agreement and grant a charge on a cash deposit directly with Lloyds.

(f) The loan under the Facility was to be repaid by TTT out of its trading income, and as the loan was repaid the guarantees would abate and money would be released to Cabvision. The Information Memorandum recorded that Cabvision anticipated that there would be sufficient returns to enable "part or even the whole of the blocked funds to be released".

Money provided by the banks thus went round in a huge circle. The Facility funded the purchase of the ICT Software and the proceeds of the sale of the ICT Software funded the cash deposit which released the Facility. TTT's only actual working capital would come from the balance of the subscriptions after payment of costs and fees.

11. On 5 December 2003 Tower issued an Information Memorandum relating to TTT. It was directed at certified sophisticated investors and investment professionals and was explicit in saying that participation in TTT carried a high risk. At the outset it stated:-

"All statements of opinion and/or belief contained in this Information Memorandum and all views expressed and all projections, forecasts or statements relating to expectations regarding future events or the possible future performance of [ TTT] represent [Tower's] own assessment of information available to it as at the date of this document. No representation by any person is made or assurance given that such statements, views, projections or forecasts are correct or that the objectives of TTT will be achieved. All projections are for illustrative purposes only. Actual results are likely to differ from projected results owing to changes in circumstances and unexpected events. Such differences may be material."

This warning was important because the Information Memorandum annexed a Business Model which assumed that the business commenced on 31 December 2003 and set out a projected profit and loss account on certain assumptions (including subscriptions at the maximum level) and forecast the installation of 3840 systems (320 per month) 5 quarters after achievement of the subscription.

12. The Information Memorandum explained that if the full amount sought from prospective applicants was raised then the rights to exploit the ICT software in up to 10,000 taxis would be acquired for £75 million (funded as 25% by subscriptions and as to 75% by bank lending). It explained that if less than the full amount was raised then there would be a proportionate reduction in the number of taxis licensed. In relation to subscriptions the Information Memorandum provided for a Minimum Level. This is crucial to Cabvision's pleaded case. It was defined as:-

"….valid applications being received (and not having been revoked) for at least the minimum amount of initial Subscriptions required by TTT for the acquisition of the ICT software being £6.25 million".

(In fact, as matters were presented at trial, it did not appear that the ICT Software Purchase agreement provided for a minimum purchase price). Achievement of the Minimum Level would have afforded access to lending of £18.75 million under the Facility and a total capital of £25 million (subject to security deposits, fees and costs). The procedure for Applications set out in the Information Memorandum stated that there was a minimum participation of £50,000, required that a Application Form had to be correctly completed and accompanied by cheque or bankers draft for the amount of the subscription (or appropriate banking instructions given) (which would constitute a warranty that the payment instruction would be honoured on first presentation). The Designated Members of TTT reserved the right to direct the operator (i.e. the authorised person for the purposes of the Financial Services Act) to accept applications (or to accept applications in part only) in any circumstances they considered appropriate.

13. Tower said that the advantage to the investor came from 100% tax relief on the gross investment. If a subscriber had gross earnings of £1 million and (for simplicity) a tax liability of £400,000, then if he subscribed £250,000 to TTT in cash and TTT borrowed £750,000 "in respect of that applicant's subscription" (i.e collective borrowing on behalf of the individual members of the LLP), and the £1 million was used to buy ICT software from Cabvision, then it was said that at the end of the first period of account the subscriber would be eligible to claim a tax refund of £400,000 (thus getting back £150,000 more than been subscribed, plus the benefit of the advertising income stream after the bank loan had been paid off). The payment of a tax refund of £400,000 soon after the initial subscription of £250,000 led certain investors to seek to fund the subscription payments themselves by taking out an individual bridging loan (borrowing the subscription and repaying it with the tax refund). The artificiality of this meant that the scheme was vulnerable to countermeasures being announced in a Budget Statement.
14. Because the scheme had potential tax advantages there had to be closing date by which qualifying investments had to be made. The Information Memorandum contemplated that this would be ascertained in two stages. Initially there would be a First Closing Date (originally set as early as 18 December 2003) and then a Final Closing Date. This was originally 31^st March 2004 (or such other date as Tower in its absolute discretion decided). The Information Memorandum said that if by the Final Closing Date subscriptions at an aggregate amount below the Minimum Level had been received then TTT would not acquire the ICT software and the subscriptions would be returned without interest at the applicants' risk and expense.
15. In relation to this scheme the solicitors acting for TTT were Pinsents and the solicitors acting for Cabvision, KPM and Tower were Martineau Johnson. The scheme constituted an unregulated collective investment scheme. It accordingly required an "authorised person and operator": this role was performed by Capita Financial Managers Ltd ("Capita").
16. These documents and the relationships which they embody form the bedrock of Cabvision's claim against the Individual Defendants. It is common ground that on 16 March 2004 Tower genuinely (but in the event incorrectly) believed that a Budget statement due the next day would undermine the tax advantages of the TTT scheme. They therefore declared a First Closing, and that the Minimum Level had been achieved. The Minimum Level finally included a total of £513,000 subscriptions from the Founders ( £100,000 from each of Mr Feetum and Mr Marsden, £130,000 from Mr Sharp and £188,000 from Mr Church).
17. It is Cabvision's case that when the Individual Defendants found themselves on 16 March 2004 faced with a possible failure of the Cabvision scheme (leaving themselves, along with Mr Sharp and Mr Church, liable as Founder Member for the entire costs of promoting the scheme) they either lied about the amount that had been raised or were reckless as to the truth of representations made by them to that effect, and that the purported subscription by Messrs Feetum, Marsden, Sharp and Church was a complete sham. Cabvision says that there is more to its case than is, but everything else flows from the events of 16 March 2004 and the attempts made by the Individual Defendants cover their tracks thereafter.
18. The anticipated announcement was eventually made with effect from 27 March 2004. There had to be final closing in relation to TTT. But Tower believed that there were still prospective subscribers who might be attracted by a restructured scheme complying with the new rules for the current and following tax years. It appears to be common ground that there was one possible investor willing to put up £18 million. Moreover the response to the TTT offering had been below expectations (perhaps because of its vulnerability to countermeasures). So on 31 March 2004 TTT waived its right to 2250 licences for London cabs under the ICT Agreement, and the right of first refusal to an ICT license in respect of London taxicabs beyond the 10,000 limit, and to a licence in respect of taxicabs outside London, so that licenses to use the ICT software in such contexts could form the prospective businesses of a number of new LLPs. One of these was referred to at trial as "TTT 37" and "Cabvision 6/1a" (which took up the released 2250 licences and was intended to be supplemental to TTT).
19. Although TTT closed as from 26 March 2004 formal completion of the banking documents relating to the Facility and of the ICT software agreement did not occur until 5 April 2004. By this time Cabvision, Tower and TTT had fallen out with Pinsents and with Martineau Johnson, and a new firm of solicitors, Dean & Dean ("the Firm") had been retained: by whom and for what is in issue this action.
20. Undoubtedly part of the retainer concerned the conduct of the costs dispute that had arisen between the participants in TTT and Pinsents and Martineau Johnson. Cabvision says that this part of the retainer was negligently conducted by the Firm (in that Cabvision was wrongly joined to certain litigation in respect of which it has occurred costs). But it is Cabvision's principal case against the Firm that all of the available evidence points unequivocally towards the Firm having been retained to oversee the TTT scheme generally and to the Firm's having day-to-day responsibility for the care and conduct of the scheme. Cabvision say that in breach of this retainer the person at the Firm having responsibility for its performance (Mr Southall) negligently either ignored or failed to appreciate the significance of one of the documents that passed before him on 4 April 2004 and which showed that of the £6,780,894 minimum subscriptions made to the TTT scheme £3,469,966 remained " receivable". It is Cabvision's case that had this been drawn to its attention then it would on 4 April 2004 have abandoned the TTT scheme, withdrawn from the ICT purchase agreement and gone into the market to find alternative funding to develop the Cabvision idea for 10,000 London-based cabs. It asserts that it "was denied the opportunity to avoid the transaction", and in its statement of case (as it stood at trial) argues that in consequence of being locked in

(a) it has incurred what it calls "mitigation costs" in seeking to negotiate new arrangements, put at £2.4 million;

(b) it has lost the profits which it would have made out of the first 10,000 cabs to be fitted with the Cabvision system funded by an alternative investment source (but giving credit for the profits which it actually makes out of the revised TTT scheme ("the loss of profit claim")), put at £2.75 million (though Mr Young perhaps thought it higher);

(c) alternatively it has lost the profit which it could have made if it had not had to incur the mitigation costs ("the opportunity cost claim"), on which no figure was put;

(d) it has incurred loss by entering into the funding arrangements, on which no separate figure was put;

(e) it has incurred loss by being exposed to costs through being joined as a party to litigation, and to the extent that it has to pay or bear any costs seeks to recover those as damages.

21. I have begun by setting out the documents and the general nature of Cabvision's case because (save as regards the Firm) the evidential position trial was most unsatisfactory. There was no central narrative.
22. Mr da Costa was an entirely straightforward man. He described himself as (and demonstrated himself to be) an "ideas" and "handshakes" man who paid no attention to details. He was disappointed and hurt that the Cabvision idea had not proved to be the outstanding success he believed it should have been, and he was convinced that because he had not received £75 million for the Cabvision idea ("I never got what I should have had….I want my just rewards") he had been defrauded by the Individual Defendants, though he could not quite place how. Two examples will illustrate what was a consistent feature of the case. First, Mr da Costa told me that he thought the Individual Defendants had acted dishonestly because they had told him that he would get millions "yet they did not fill up the other LLPs" namely the five supplemental schemes: he felt that there was money available but that Tower diverted it to other schemes they were promoting "and maybe that is what all this is about". Second, in their closing submissions Mr Oliver QC and Mr Couser submitted

"In so far as [the Individual Defendants] are concerned the nub of what occurred is that they promised Cabvision that they would establish and market the Cabvision scheme which would enable Cabvision to successfully launch its product".

Mr da Costa had been encouraged in his perception (that the failure to live up to these promises means that there was dishonesty somewhere) by his solicitor Mr Jens Hill, and it was the lens through which he viewed the past.

23. He produced no narrative statement setting out his recollection of the material events. Instead the trial bundle contained six witness statements (to three of which he did not swear, possibly because they had been produced for other proceedings) addressing particular aspects of the case. Those to which he did swear were fragmentary, argumentative, consisted in large part of opinion or analysis of documents, and were plainly not in his own words. (When asked to consider part of his own witness statement he said "You have lost me. This is double Dutch. This is part of a witness statement but I am not following what is going on"). The language was that of Mr Jens Hills. In short, the witness statements had been prepared with complete disregard for the provisions of Appendix 9 to the Chancery Guide.
24. I have nonetheless wrestled with what evidence was given in chief and that which emerged in cross-examination in order fairly to assess what admissible evidence had actually been given in support of the claim. Mr da Costa was honest, heavily dependent upon others, and (understandably) vague and inaccurate when deprived of that assistance.
25. Mr Jens Hills was committed to what he saw as the interests of his client (for whom he had been acting since 29 March 2004). He began by pressing for information as to what had actually happened on and immediately after 5 April 2004, but seems by late summer 2004 to have formed the view that the Individual Defendants were fraudsters. By 2006 he was referring to the Individual Defendants in open correspondence as

"serial commercial fraudsters who have been responsible for causing millions of pounds of loss and damage to investors who have been conned into supposedly tax efficient investment schemes which have been……..riddled with impropriety and mismanagement".

That perception has shaped the advice that he gave to Mr da Costa and his companies (in particular about what they could and should do in "mitigation" of the fraud) and I gained the distinct impression that at trial I was being presented with a carefully crafted case that reflected Mr Jens Hills' assiduous work over the years, to which my approval was being sought.

26. That case had been in preparation since at least September 2004 when Mr Jens Hills articulated the objective of pursuing the Individual Defendants "PERSONALLY" (as he recorded it). In a disclosed note of 8 February 2005 Mr Jens Hill recorded his thinking in relation to an intended claim against the Individual Defendants in these terms:-

"Essence of claim – focus on Cabvision 6/1a deal and its non-performance. Subsequent statements indicate agreement impossible of performance….. In ideal world Cabvision focuses personal claims on them for maximum quantifiable extent allowed by circumstances = the loss of benefit on £17 million deal. Object of proceedings not necessarily to pursue to trial. Object is to make out clear-cut case, to isolate the causes of the problems, and create framework for negotiating with them in overall settlement… Tactical claim v [Individual Defendants] re deceit, misrep[resentation]; isolate them and identify heads of claim outside LLP framework … drive [Individual Defendants] out of the equation."

That I think is the purpose of the action which came on the trial before me and what has determined its shape and content.

27. It is pointless to look to Mr Hills' evidence for anything like an independent or objective account of events: for his evidence was always directed to justifying the advice he had given. His witness statements (some of which were made in other proceedings and which were during the course of the trial consolidated) set out his analysis of what occurred (undertaken from his perspective that the Individual Defendants were fraudsters and that the Firm was negligent) with a full commentary on the documents. Indeed he initially exhibited a massive chronology (cross referenced and with relevant documentary extracts) setting out his viewpoint in detail. Mr Jens Hills was not so much a witness as an additional advocate. Indeed, so committed was he to his client's cause that

(a) Overnight on 3 June 2009 whilst in the course of being cross-examined on his evidence in support of Cabvision's case he e-mailed Cabvision's Counsel with suggestions as to what evidence he might give in reply (a clear breach of conduct for which he apologised);

(b) On 5 June 2009 he accused Mr Southall (for the first time) of lying to him "from the beginning of the transaction" and of fabricating a key attendance note.

(c) He so failed to separate himself from his client that for part of this action some of the loss claimed was not loss that had been suffered by Cabvision but legal fees which Jens Hills Solicitors LLP had been unable to recover from Cabvision (because it had conducted for Cabvision on a CFA an unsuccessful action against the Individual Defendants relating to the appointment of joint receivers of TTT's assets). For a solicitor to act as such in litigation being conducted in part for the pure benefit of his own firm is wholly improper.

28. My assessment of the evidence of Mr Jens Hills may be summarised in this way. Paragraph 11.06 of the Solicitors Code of Conduct 2007 declares:

"you must not….. act in litigation if it is clear that you…… will be called as a witness, unless you are satisfied that this will not prejudice your independence as…[a] litigator, or the interests of your client or the interests of justice".

Mr Jens Hills failed to have regard to this principle and it substantially devalued even that part of his evidence of which he could speak of his own knowledge or which might fairly be treated as hearsay.

29. A further problem for Mr Jens Hills that emerged at trial was that the case as he analysed it (and to which he was so committed that he was prepared to act as I have recounted) was not the one that had actually been pleaded by Counsel. Whilst adhering to an allegation of deceit or fraud Mr Jens Hill would identify the wrong which Cabvision had suffered in a manner different from that set out in the statement of case. Thus in a letter dated 10 January 2005 which "set out the claims of Cabvision against the founders personally" and which, from its terms, indicates full knowledge of the relevant facts, Mr Jens Hills focused upon (a) an alleged agreement that there was unconditionally due to Cabvision the sum of £58 million from TTT and (b) misrepresentations alleged to have been made in connection with the five supplemental schemes ( to the effect that TTT had been fully successful and that if the five new agreements were entered the full maximum subscription would be raised and a global territorial framework established). In a disclosed note to Leading Counsel (not Mr Oliver QC) dated 21 April 2005 he identified the alleged deceit by the Individual Defendants as being the procuring of the five supplemental schemes (and in particular TTT 37) at time when they must have known that full subscriptions could not be raised. This was the position which he maintained in cross-examination. On one occasion he said:

"…..there was a specific deceit as far as your three clients were concerned that occurred on 29 March…That is my opinion. I can only direct you to the documents…I negotiated on behalf of Mr Da Costa an ICT purchase agreement which I think was a deceit as it was being made. And you should compare the Cabvision 6/1a ICT agreement to the TTT 37 LLP agreement which your client signed on Monday, 5 April…….."

On another occasion his evidence was

"..there is total basis in documents for the fact that when Mr da Costa was committed into the TTT 37 LLP agreement for Cabvision 6/1A, he was being committed into an agreement which was totally incapable of being performed according to its terms to the knowledge of your clients. So the ultimate question in this case is going to be: why on earth should they do that to him?"

On yet another he said that what caused the problem was that the Individual Defendants failed to deliver on what they had said about the five supplemental agreements.

30. In these circumstances I think it vital to look at what Cabvision's pleaded case was, and to examine the somewhat disjointed and differently directed evidence to see whether that case has been proved.
31. In doing so I must take into account the evidence of Mr Sharp. Although a former member of Tower (and in fact responsible for all of the backroom work on the TTT scheme and for its structure) he gave evidence for Cabvision. In relation to Mr Sharp Mr Jens Hills had advised Mr da Costa in January 2005

"in my view you need a witness statement from him as soon as possible, and what you offer him off the record is an amnesty in respect of the claims you will bring against [the Individual Defendants] and agreement that he can be involved as long as his involvement genuinely mitigates against your loss".

Mr Jens Hills said he did not know if his advice had been acted on (and the document was produced too late in the trial for it to be put to Mr da Costa). This uncertainty about whether his advice had been accepted was slightly surprising in view of a e-mail which Jens Hills had sent to a solicitor acting for TTT in some settlement negotiations which stated in unqualified terms that "if [Church] and [Sharp] sever their connections with [the Individual Defendants] and [the Firm] they will secure amnesties from the project principals". But be that as it may, this was clearly Mr Sharp's understanding when he began his evidence, and it came as something of a surprise to him that the Individual Defendants might have a contribution claim against him in the event that they were held liable. But he said that whatever his personal position was all he could do was to tell the truth. I believe he tried to do so. He was at trial a careful and reliable witness: though I think that some of his later written evidence bore traces of the amnesty he had been offered. Any evidence he gave and which favoured the Individual Defendants was in that context of considerable weight (for he was putting at risk the amnesty he enjoyed). Mr Church (who supported him) was less impressive, though still reliable.

32. In relation to the claim against the Individual Defendants on minor matters I also received on behalf of the Claimant the evidence of Mr Shepherd, Mr Morris, Mr Ponsford, Mr West, and Mr Ryder. On the issue of loss and damage I received factual evidence from Mr Langley and the expert report of Mr Young. With these I will deal in their proper place.
33. The Individual Defendants called no evidence. I have paid no attention to the witness statements served on their behalf (save insofar as a small part was incorporated into the evidence of Mr Sharp). I have looked at their Defence solely for purpose of establishing what they put in issue (and so what Cabvision had to prove). Mr Oliver QC has reminded me that where a party declines to call witnesses in respect of whom he has served a witness statement the court may draw an adverse inference. This does not, of course, mean that any allegation that Cabvision makes against the Individual Defendants must be accepted because they did not give evidence: it means only that where the evidence points in a certain direction an adverse inference can (but not necessarily must) be drawn from a failure to call a witness to deal with it, and that inference may strengthen the evidence adduced by Cabvision ( so that, for example, it gains sufficient cogency to discharge the burden of proof on the balance of probabilities of a charge of dishonesty): Society of Lloyds v Jaffray [2002] EWCA Civ 1101 at paras 406-407.
34. I turn to Cabvision's Re-Amended Particulars of Claim (which I should make clear were not settled by Mr Oliver QC or Mr Couser).
35. Paragraph 16 of the RAPoC alleged that in the Information Memorandum the Minimum Level (£6.25 million) was set at the figure which would provide sufficient net funds by 31 March 2004 to enable the Cabvision system to be launched on a scale which, according to Cabvision's judgment, would give it a reasonable chance of success and, in particular, to meet the cost of installing screens (including payments required to be made to taxi drivers) in 1000 London cabs. In their Amended Defence the Individual Defendants accepted that the Minimum Level would have been set a figure which would give the Cabvision venture a reasonable chance of making a commercial success of the exploitation of the Cabvision system.
36. Cabvision chose, however, to lead evidence on the matter. The evidence of Mr Sharp and Mr Church established that the business plan embodied in the Information Memorandum contained assumptions that had been approved by Mr da Costa, and that he appeared fully involved in the process along with Mr Langley. There can therefore be no suggestion that any statement in the Information Memorandum about the Minimum Level constituted a representation of any sort to Cabvision, since Mr da Costa and his adviser participated in its formulation. Moreover the Minimum Level itself was described by Mr Sharp as "a figure without commercial meaning" which was "near to being plucked out of the air". So Cabvision's judgment about the sufficiency of the net funds was not a very considered one: and at trial Mr da Costa readily admitted that a net balance of £1.8 million (after paying costs and fees out of a subscription at the Minimum Level) would not have been enough to install 1000 screens. At one point he in fact put the cash requirement at about £9 million. (It must be said that this latter figure included a reimbursement to Cabvision of £500,000 historic start-up costs which Mr da Costa was persuaded the ICT software purchase agreement and the associated commercial agreements enabled him to recover, but which Mr Sharp was absolutely clear did not. On this issue, so far as it is based in fact, I believe Mr Sharp because of his firmer grasp of detail; and so far as it concerns the legal meaning of the agreements I hold that they did not so provide). At other points he put the free cash needed as being at least £4.25 million.
37. Paragraph 17 of the RAPoC then alleges that on the basis of the assumptions in the Information Memorandum, if the Minimum Level had been obtained then the net funds available for the launch of the Cabvision system would have been in the region of £1.8 million. Although the Individual Defendants do the calculations slightly differently (because they bring in the associated bank borrowing) they admit that the net result on the basis of the assumptions in the Information Memorandum was indeed £1.8 million. But they point out in their pleading (and it was established in the cross-examination of Mr da Costa) that the assumptions in the Information Memorandum were not in fact accurate. The loan arrangement fee was assumed to be £93,750 but was in fact £337,000; the guarantee fee was assumed to be £150,000 but was in fact £175,000; the legal costs were assumed to be £750,000, but they were £841,000 (and the obligation to pay the bankers' legal fees in connection with the funding arrangements was overlooked). A subscription at the Minimum Level would not in the real world produce £1.8 million (inadequate as that was in any event).
38. Against this background it is now possible to look at the representations for which the RAPoC say the Individual Defendants are liable. At the outset it is necessary to flag up that it is fundamental to Cabvision's case that the Individual Defendants are personally and individually responsible for the representations. Tower and TTT are both limited liability partnerships. A limited liability partnership is a body corporate with legal personality separate from that of its members. Representations made by Tower or TTT are not of themselves actionable against the Individual Defendants.
39. This is the first way in which the case is put. On 16 March 2004 Mr Sharp "for and on behalf of" the Individual Defendants, the other designated member and TTT represented in writing "to Cabvision's solicitors" and instructed them that First Closing had taken place because subscriptions exceeded the Minimum Level. The Individual Defendants intended that Cabvision should rely on that representation. The representation was false because only £4,415,393 was then available from relevant qualifying applicants for membership of TTT and accordingly the scheme was not at that time in the required state to proceed to First Closing. There is no question that Mr Sharp was himself dishonest in any way in making the representation: Cabvision put him forward as an honest man. But the Individual Defendants were individually and collectively reckless or indifferent as to the truth of that representation, or alternatively had no honest belief in its truth. That is to be inferred from the fact that they must be taken to have known that the terms of the scheme provided that the Minimum Level had to be attained before signing the Facility, and the question whether it had been attained "was answerable by the simplest administrative and arithmetic enquiries and all information relating thereto was in the possession or control of the [Individual Defendants]". (In the somewhat discursive and cross-referenced statement of case it is said that other inferences ought to be drawn from later events but I leave these out of account in looking at the position on 16 March, given the prominence accorded to the events of that day in Cabvision's skeleton argument). In reliance upon the representation Cabvision proceeded with the scheme, "provided security for obligations incurred by TTT" pursuant to the scheme and entered into the five further agreements. It thereby suffered loss and damage (which I will consider as a separate question).
40. I find the following facts. The process of putting together the scheme that became TTT was begun with Mr da Costa in February 2003. At the launch of the Information Memorandum in December 2003 there were strong hopes that a significant level of subscriptions could be obtained for TTT. The scheme was marketed by brokers and the applications were initially dealt with in the offices of Mr Smith in London and by Mr Greg Marsden (Stephen Marsden's son) or Mr Neale in the offices of the Tower Group in Liverpool. The Information Memorandum had in fact required that all applications be sent to Capita and I am in no doubt that it was Capita that was ultimately responsible for managing and administering the scheme, including the vetting and checking of the applications and the collection of subscriptions. I do not see otherwise how it could have discharged its obligations as an FSA authorised operator. However, despite initial enthusiasm a large group of prospective investors withdrew their interests in February 2004 and thereafter expectations were low.
41. During March 2004 there was regular contact between Mr Sharp and Mr da Costa regarding the likely level of subscriptions, though it seemed clear that the Minimum Level would be exceeded. The Information Memorandum had indicated that the founders might participate. Eventually it was agreed that the founders were to share an allocation of £513,000 of equity. (The documents shown that at earlier stages and in other schedules other figures had been recorded: but Cabvision put forward Mr Sharp and Mr Church as witnesses of truth: and that was their evidence). At the suggestion of Mr Feetum and following discussions with Capita and with Lloyds (involving Mr Sharp and Mr Church) it was agreed that the founders might make this investment by way of offset against the fee due to Tower. Mr Sharp said in evidence (and Mr Church had confirmed in earlier correspondence with Mr Jens Hills) that the relevant application forms were completed by the Individual Defendants on 16 March 2004. Mr da Costa was aware of the desire to do this, though there was no specific formal approach to Cabvision.
42. Prior to the arguments raised in this case Mr Sharp had never considered that there might be a problem in making a subscription by way of an offset against a fee: Mr Feetum said that it could be done. Nor did Mr Sharp see any difficulty in proceeding with an application which did not itself attach either a cheque or instruction to a banker. He regarded it as sufficient for there to be an unconditional commitment to pay where bridging finance was being arranged. Wishing to adopt a pragmatic approach, and after discussion with Capita, Lloyds and Mr da Costa completion proceeded while awaiting funds to be received from members who had committed themselves to making subscriptions. It was Mr Sharp's belief in the course of these discussions that there was no issue about these members fulfilling their subscription obligations in full. (Save in the case of Capita) the evidence does not allow me to place whether these discussions occurred before or after 16 March: but I find that Mr Sharpe's understanding as to the propriety of the arrangement and as to the ability of subscribers to comply with it was consistent throughout.
43. It was rumoured that on 17 March 2009 a budget statement would undermine the scheme by denying to subscribers tax relief in respect of borrowing by TTT. At that stage some subscriptions were held by Capita, some offshore by Channel House Trustees, some bridging arrangements had been approved (with facility letters received by subscribers but no drawdown) and some bridging arrangements were in the course of approval. Those involved agreed to a First Closing on 16 March 2004 in order to lock in current applicants (and made their own subscriptions). The five designated members (the Individual Defendants, Mr Sharp and Mr Church) resolved

"to admit as members all individuals who have completed applications in the form contained within the Information Memorandum which have been completed and witnessed before midnight on Tuesday 16^th of March 2004. Such completed and witnessed applications provide that the admitted member has an unconditional obligation to pay the Initial Contribution … at the earliest opportunity and, in any event, no later than 4 April 2004".

This permitted (in accordance with the Information Memorandum) the acceptance of applications for amounts and in a form which departed from the original specification.

44. Mr Sharp was of the view that First Closing could take place at "the time when we have identified that we have sufficient potential members unconditionally obliged to make their initial contribution". In the course of the day Mr Sharp received from an unidentified sender a schedule of figures from the Tower Group office in Liverpool. It is probable that this had not been prepared by Capita. He forwarded this to Mr Southall at the Firm at 15:55 under cover of an e-mail which described it as showing "the funds receivable". It showed total subscriptions of £6,915,394. Of this £327,594 was held by Capita and was due to be transferred on 19 March 2004, £836,750 was held by Channel House Trustees in Guernsey and was due to be transferred on 22 March 2004; and £3,251,049 was described as "Funds yet to be received" and was accompanied by the narrative

"Applications have been signed and there are, therefore unconditional obligations to pay. These funds are being provided by the individuals' banks and will be transmitted to either Capita or Channel House Trustees and could take up to 10 days to arrive"

Cabvision does not in its statement of case say that this e-mail contained any misrepresentation on which it relied: though in closing Mr Oliver QC said he wished to submit that it had been dishonestly prepared.

45. At 18:16 on the 16 March 2004 Mr Sharp sent a further e-mail to Mr Southall responding to a request for "bullet points" as to the nature of the transaction in relation to the Facility. This is the e-mail referred to in paragraph 21 of the RAPoC. Under the heading "Bullet points as requested" it said:

" First Closing" – this is when members are admitted to the LLP who in aggregate are to make initial contributions in excess of £6.25 million and thus we, as Designated Members, can sign the Facilities letter with Lloyds TSB … We have carried out the First Closing today having received applications totalling over £7.3 million … funds will be transferred to TTT LLP's bank account with Lloyds during the next few days as we have discussed….At the earlier of £22.5 million contributions being obtained (possibly under obligations) and 31^st of March 2004 drawdown of the loan from Lloyds will take place…".

I am not satisfied that in despatching this e-mail Mr Sharp was relying on the schedule he had received from Tower Group (either as to total subscriptions or as to the individual subscriptions of participating subscribers). There is a difference between the total subscriptions stated in the e-mail and that shown on the schedule. This e-mail only became available to Cabvision when disclosure took place in June 2007.

46. The Firm was, at the time it received that e-mail, retained to act (on behalf of all those potentially liable for the fees) in relation to a costs dispute that had arisen with Pinsents (which acted for TTT in the preparation of the scheme documents) and with Martineau Johnson (who acted for Tower, Cabvision, and KPM in the preparation of the scheme documents) in relation to £841,000 of outstanding fees going back to the origins of the scheme. There was a risk that Pinsents and Martineau Johnson would hold onto the key documents (thereby preventing completion) until they were paid. Further, when the TTT offer closed and the Facility was made available and Cabvision was paid there was a risk that Pinsents and Martineau Johnson would attempt to freeze a substantial part of the proceeds of the offer. Marineau Johnson had in fact already issued proceedings and on 16 March 2004 were in the process of serving them on Mr Feetum. Part of the Firm's task under its retainer was to avoid these risks. The Firm was in the course of formulating a without prejudice offer to put to Martineau Johnson. It therefore needed to know what cash was available and when.
47. Notwithstanding the costs dispute Pinsents and Martineau Johnson continued to act for their respective clients as at 16 March 2004. (On 9 March 2004 Martineau Johnson had notified all its clients, including Cabvision, that it was intending to charge them for its continuing work). On 16 March 2004 Mr Sharp therefore asked Martineau Johnson to confirm with Lloyds' solicitors that there were no outstanding issues with the Facility (which was a reference to the need for a phased drawdown if there was to be a First Closing and then a delayed Final Closing). Martineau Johnson responded "We do not have any comments on behalf of Cabvision on the facility letter". Pinsents responded on behalf of TTT by drawing attention to the fact that on First Closing and signature of the Facility TTT would become liable for one half of the £337,500 arrangement fee but would receive no money.
48. The Facility was signed and dated 16^th March 2004
49. On this evidence I hold that Cabvision's first (and primary) way of putting the case fails, for the following reasons.
50. First, "the representation" was not made to Cabvision and Cabvision did not know of the existence of the e-mail timed at 18:16 on 16 March 2004 until June 2007. It cannot have relied on statements contained in this e-mail when deciding to act as it did in March or April 2004.
51. Second, the representation was not made to Cabvision's agent. As at 16 March 2004 the Firm was retained to act on behalf of those potentially liable to Pinsents or Martineau Johnson for costs. The Firm could not be "Cabvision's solicitors" in any general or abstract sense. The Firm was not "Cabvision's solicitors" for the purpose of receiving information about the progress or viability of the scheme generally with a view to transmitting it to Cabvision and advising upon it. The interests of Cabvision in relation to the scheme (and in particular the Facility) were still being looked after by Martineau Johnson.
52. Third, there is no evidence that Mr Sharp himself intended that Cabvision (as opposed to the Firm) should act on any statement contained in the e-mail. Nor is there any evidence that any of the Individual Defendants knew that Mr Sharp would be making the statement to the Firm or that (if possessed of such knowledge) they intended that Cabvision should act on the statement in the e-mail.
53. Fourth, there is no evidence upon which one can properly found a conclusion that Mr Sharp was acting for and on behalf of the Individual Defendants when sending the e-mail. Mr Sharp was undoubtedly the agent of TTT. But the Individual Defendants are not vicariously or derivatively liable for the defaults (if any) of TTT (with whom Cabvision has in any event long ago reached a full and final settlement).
54. Fifth, even if Mr Sharp was the agent of the Individual Defendants he was himself honest and it would be necessary to establish in relation to each of the Individual Defendants independently the necessary fraudulent intent. In an action for deceit you cannot lump all defendants together and treat their case as if it was identical: Angus v Clifford [1891] 2 Ch 449 at 473. A dishonest state of mind or reckless indifference to the truth can often only be established by inference from other proved facts. The facts which found the inference must be set out in the statement of case. Those pleaded facts must be established against each Individual Defendant and it must be just to draw the inference of a dishonest state of mind against each Individual Defendant. This exercise was never undertaken at trial. It is no answer to say that none of the Individual Defendants gave evidence. None of them had to unless some case was raised by inference from the documents or the evidence given by Cabvision's side that one or more of them had the requisite guilty mind.
55. In the skeleton argument (and again in closing) it was suggested that the material facts were that unless the Minimum Level was reached the Individual Defendants stood to bear the costs of the failed scheme, lose their fees and be deprived of the marketing potential of a successful launch; and that the inference to be drawn was that in order to avoid this outcome they lied. These were not the facts pleaded in the RAPoC: and the suggested outcome applies with equal force to Mr Sharp and Mr Church who were accepted as honest men. So these facts cannot themselves found the inference.
56. The facts actually pleaded as founding the inference are set out in paragraph 23 of the RAPoC. The only ones relevant to a representation on 16 March are that it was known that the Minimum Level had to be reached before the Facility was signed and that subscriptions were low: and that whether it had been attained was answerable by the simplest administrative and arithmetic enquiries. This was as true for Mr Sharp and Mr Church (who are accepted as honest) as it was for each of the Individual Defendants (who are accused of dishonesty). So the facts again do not found the inference.
57. Moreover I do not think that the question of whether the Minimum Level had then been attained was that straightforward. This is not least because there is a mis-match between the details given on the schedule sent at 15:55 (totalling £6.9m) and the total spoken to in the e-mail of 18:16 (totalling £7.3m against a Minimum Level of £6.25 m). Even if I assume that, on the true construction of the Information Memorandum and in the events which had then happened, the Minimum Level had not been reached as at 16 March 2004, so that the statement was false (and I am by no means confident that that is so) the evidence does not point to knowledge by the Individual Defendants of that falsity or a reckless indifference to the truth.
58. In argument much was made of the insoluble logical problem of the Individual Defendants using fees payable five days after completion as an offset against a subscription payable before completion. But faulty logic is not the same as dishonesty. On the evidence, honest people like Mr Sharp, Mr Church, Capita, Lloyds and Mr da Costa all made the same mistake.
59. Much was also made of the apparent failure of some applications to conform to the requirements of the Information Memorandum as to amount of subscription and form of payment, with the alleged consequence that they were "invalid" or "fatally flawed". But TTT retained the right to accept "non-compliant" applications, and exercised it. Cabvision argued that TTT could only do so in breach of fiduciary duty. But there is no evidence that anyone was aware of the suggestion that to accept an unconditional obligation to pay in lieu of actual payment or to accept applications below the specified minimum individual subscription would be a breach of fiduciary duty: and the relevant resolution modifying the conditions for acceptance was itself drafted by honest Mr Sharp and honest Mr Church, so it cannot of itself warrant the inference of dishonesty.
60. Much was also made of the manner of completion of the application forms. (Mr Oliver QC fairly acknowledged that the facts material to the case he was advancing on this "invalidity issue" were not pleaded in RAPoC: in consequence there was some difficulty in dealing with the issue at trial. In particular it was not clear to me that the trial bundle documents were in the form finally approved by Capita). It was to this that the evidence of Mr Morris and Mr Ponsford was directed. This evidence was to the effect that Mr Kittle (for whom no form could be found but who a schedule of investors suggested had subscribed for £185,000) had decided not to go ahead with his investment, as did Mr Ponsford ( whose form dated 15 March for £77500 was said to be unsigned but who had paid a deposit of £3220). But on the list of subscribers sent by Mr Sharp to Mr Southall at 15:55 on 16 March 2004 neither Mr Kittle nor Mr Ponsford features as a subscriber. So this evidence goes nowhere in relation to 16 March 2004.
61. In my judgment it is not possible to make good these deficiencies by saying that adverse inferences must be drawn from the failure of the Individual Defendants to give evidence. This would be to throw upon them the burden of proving their honesty. There must first be some material (not a bald accusation, however frequently repeated) which raises a case that the Individual Defendants were dishonest (even though Mr Sharp and Mr Church were not). Here there is not.
62. Sixth, it was absolutely plain (from the schedule and from the e-mail that had been sent at 15:55 on 16 March 2004 that the Minimum Level had only been reached if one counted funds which had not been received but were "receivable". There was simply no attempt to conceal this. If the Firm were Cabvision's agent for the purpose of receiving the information contained in the e-mail of 18:16 pleaded in paragraph 21(1) of the RAPoC then it was already possessed of knowledge of the basis upon which that statement had been made and could not have been misled.
63. Seventh, whilst loss and damage is considered elsewhere, I would here hold that the only consequence of any statement about the Minimum Level made on 16 March 2004 was that the Facility was entered. That committed TTT to the payment of the arrangement fee: but it committed Cabvision to nothing.
64. The second way in which Cabvision puts its case is that in an e-mail of 23 March 2004 Mr Sharp "acting in the like capacity" confirmed in writing to Cabvision that the Minimum Level had been reached and requested Mr da Costa to proceed to order 1000 screens so that they could be installed as soon as possible.
65. There is no doubt that such an e-mail was sent at 10:40 on 23 March 2004. On its face it was sent by Mr Sharp on behalf of TTT and in the right of his being a designated member of TTT. It declared that it required confirmation by another designated member: and such confirmation was given by Mr Church at 18:58 that day by a further e-mail in identical terms (on which no reliance is placed by Cabvision). It is admitted by the Individual Defendants that the e-mail was sent to Cabvision (although actually addressed simply to Mr da Costa who had several roles).
66. It is said that the e-mail was false, in that the Minimum Level had not been reached. Implicit in this allegation is the proposition that the schedule sent on 16 March 2004 showing total subscriptions of £6,915,394 continued to represent the position as at 23 March 2004 (and that no further valid applications had been accepted). It is pleaded that in reliance on this representation Cabvision proceeded to complete the scheme and to enter in the five supplemental schemes.
67. Fact finding for this period is difficult because there is in the evidence no narrative of events. But I can from the issues raised in cross-examination pinpoint the following material matters:-

(a) Because the Budget statement had not (as feared) altered the rules the TTT scheme remained open to further subscriptions after midnight on 16 March 2004 and was still open on 23 March 2004. Differences between the schedule produced on 16 March 2004 and that used for final closing show there were further acceptances: but it is not possible from the material produced at trial to ascertain exactly when such additional applications came in or were processed by Capita.

(b) A without prejudice proposal was put by the Firm to Martineau Johnson that out of the subscription monies already raised the entirety of their costs claim (£841,776) would be covered by a deposit in the Firm's client account held upon a solicitor's undertaking. This raised the issue as to how Capita (as the operator) could consistently with the terms on which subscriptions had been invited in the Information Memorandum pass over subscription monies to TTT before final closing and before expenses had actually been paid.

(c) This provoked enquiries (particularly from Mr Feetum) as to whether Capita and Channel House Trustees had all the compliance material they needed to enable a transfer of funds to the Firm of £841,776. It was the clear understanding of the Individual Defendants (as of Mr Sharp and Mr Church) that the operator had control of the money and would not release it until satisfied as to TTT's compliance with the subscription terms.

(d) Mr Sharp, Mr Church, Mr Feetum and Mr Marsden (but not Mr Smith) requested Capita to make the relevant transfer confirming that "the Partnership has received commitments in excess of the minimum funding requirements". Each of the signatories to the request understood that the word "commitments" had been used precisely because the subscription conditions had been changed to permit acceptance of applications where there was an unconditional promise to pay by cheque, banker's draft or bank transfer instructions.

68. In my judgment this way of putting the case also fails.
69. First, Mr Sharp plainly made the statement (that the Minimum Level had been achieved) on behalf of TTT (not on behalf of the Individual Defendants). It is what his letter itself says: and it is why he wanted confirmation from another designated member (Mr Church). The Individual Defendants are not vicariously or derivatively liable for misstatements by TTT. They are simply liable to contribute to its assets in the event that Cabvision sues TTT.
70. Second, if the Individual Defendants are liable on the statement it must be because they dishonestly caused TTT to make the statement through its agent Mr Sharp. Mr Sharp and Mr Church were themselves honest. So each of the Individual Defendants must once again have known something about the statement that was not known to Mr Sharp (or Mr Church). What this "something" might be was not identified at trial. The fact that TTT was proceeding to Final Closing on the basis of commitments (not payments) was common knowledge and does not demonstrate dishonesty.
71. Third, I am not satisfied on the evidence that it has been proved that the statement that subscriptions (or commitments) of £7.3 million had by 23 March 2004 been achieved was false (or was known by the Individual Defendants to be so). I was referred to no schedule or summary which was said to demonstrate the true position at that date. In particular it was not demonstrated that the "true" subscriptions figure was below £6.25 m.
72. Fourth, on the evidence led at trial it is not possible to find that Cabvision in fact took any notice of this statement or relied upon it in any way. Indeed, so far as I can trace it emerges as "a material fact" only in 2007 (when an amendment was made to the Particulars of Claim following disclosure). When this was pointed out to Mr da Costa he said that he did not find the statement important at the time and that prior to disclosure he did not remember the e-mail. During the course of the trial (and after Cabvision had strongly resisted an application that KPM be ordered to produce documents relevant to the obtaining of the screens) two printed order forms were produced whereby KPM (not Cabvision) placed orders with Trident. Although the date of the purchase order was given as 29 March 2004 in each case, in fact one order was dated 29 January 2004 and the other 29 April 2004, and according to banking documents the first "call off" under either production schedule was in May or June 2004. On this material it is not possible to be satisfied that Cabvision acted on any representation made on 23 March 2004.
73. Cabvision's third way of putting its case was that by Mr Sharp's e-mail of 23 March 2004 to Cabvision the Individual Defendants impliedly represented that a sufficient number of subscribers had either paid cash or given instructions for the payment of cash so as to ensure that sufficient cash would be available at completion or within a tolerably short time thereafter to permit Cabvision to roll out 1000 Cabvision systems. The Individual Defendants were said to have no honest belief in the truth of this representation or were reckless as to its truth.
74. This way of putting the case moves the focus of the alleged misrepresentation from formal compliance with the Information Memorandum to substantial compliance with a statement about the sufficiency of cash availability. In my judgment there are many difficulties in the way of this case, and it too fails.
75. First, there is the problem about the capacity in which Mr Sharp made any statement (as agent for TTT, but not as agent for any of the Individual Defendants).
76. Second, there is the problem of proving the necessary guilty mind on the part of any Individual Defendant in order to convert Mr Sharp's honestly made statement into something dishonestly put forward by one or more of the Individual Defendants.
77. Third, the representation which is to be implied into the actual statement concerns the position at completion. But a statement on 23 March 2004 about the availability of cash at or within a tolerably short time after completion would not be a statement of fact: it would be a present statement about a future state of affairs. As a prediction it is incapable of being true or false when made.
78. Fourth, the entire analysis depends on a coincidence between (a) having attained the Minimum Level and (b) the cash availability at or within a tolerably short time after completion being sufficient to roll out 1000 screens. But the Information Memorandum itself did not define "Minimum Level" in those terms. According to the Information Memorandum the "Minimum Level" was simply the minimum required to buy the software (and in fact the ICT Software agreement specified no minimum). The Information Memorandum itself was at pains to point out that its forecasts (and most especially its business plan) were not to be taken as statements of fact.
79. Fifth, even if the e-mail of 23 March 2004 was capable of being read as making any such representation Mr da Costa and Cabvision would not be misled by it because they would know (having been party to fixing the Minimum Level) that it was, according to the evidence they led, a figure without commercial meaning which was near to being plucked out of the air. Cabvision cannot have thought that simply reaching the Minimum Level would permit 1000 screens to be rolled out: and as Mr Costa acknowledged in his oral evidence, quite plainly it would not.
80. Cabvision's fourth way of putting its case was that Mr Sharp's e-mail of 23 March 2004 amounted to an implied representation that there were then (i.e as at 23 March 2004) sufficient funds available in cash or cash equivalent to ensure that Cabvision would be paid what was unconditionally due to it at completion under the ICT Software Purchase agreement. The Individual Defendants had no honest belief in the truth of this or were reckless as to its truth.
81. In my judgment this way of putting the case also fails.
82. The first, second and fifth objections to the third way of putting the case apply with equal force here. But the particular defect in this analysis is that it is wholly dependent upon a coincidence between the achievement of the Minimum Level and the ability to pay what was unconditionally due to Cabvision at completion. But this is not something that the Information Memorandum stated would happen, and was not something by reference to which the Minimum Level was fixed (according to the evidence called by Cabvision). Moreover, such a "representation" would be a present statement about a future state of affairs. That is because the amount of cash available to pay Cabvision would be dependent on the level of costs and fees that had to be met out of the subscriptions and the level of collateral security that had to be provided. So I have difficulty in seeing how this can be an actionable representation at all.
83. Further, the key factual hurdle at which this argument falls is that (whatever is argued to be the position on 23 March 2004) it is proved that at completion there was no operative misrepresentation. Mr Sharp was entirely clear both in his written and his oral evidence that completion proceeded whilst awaiting funds to be received members who had committed themselves to making subscriptions, and that this was a matter of discussion with and agreement by Mr da Costa. In other words, before completion Mr da Costa knew that at completion there would be a cash shortfall (albeit one which it was hoped would be remedied shortly).

"Mr Faryab: You discussed it with Mr Peter da Costa. So is it fair

to say that Mr da Costa proceeded with this completion in the full knowledge from your good self that funds are hoped or expected some time shortly, we hope, after 5 April?

Mr Sharp: Yes……."

I accept this evidence, although Mr da Costa disagreed with it in part. All Mr da Costa himself would accept was that he knew that the Founders intended to subscribe after final closing. But he acknowledged that if he had been told of a temporary cash shortfall at completion he "would have had no problem with that since it would not have jeopardised the business".

84. Cabvision's fifth and sixth ways of putting its case may be taken together. The fifth way asserts that by a Notice of Drawdown dated 2 April 2004 given by Mr Sharp "for and on behalf of TTT" TTT represented to Lloyd's that £6,780,894 was unconditionally available in the form of capital contributions as at 2 April 2004. It is alleged that that representation was made with the authority of the Individual Defendants (and each of them) as promoters of the scheme and amounted to an express representation by them to Cabvision that the Minimum Level had been reached on the 2 April 2004. In the alternative the sixth way of putting the case says the proceeding to completion on 5 April amounted to an implicit representation by the Individual Defendants and each of them to Cabvision that the Minimum Level had been reached by 5 April 2004. It is once again said that the Individual Defendants lacked an honest belief in the truth of such statements; or alternatively they were reckless as to the truth of the statements.
85. I find the following facts. Certainly from shortly after 23 March 2004 (but possibly from 17 March 2004) Mr Sharp was left (with the assistance of Mr Church) to deal with completion of the TTT scheme. The Individual Defendants were concentrating upon a response to the threat to schemes like TTT by creating five supplemental schemes to raise additional money for Cabvision in a new form. This became vital as from 26 March 2004 when a Revenue statement effectively closed the TTT scheme to any new applicants. If the TTT scheme failed then its subscribers could have been invited to participate in these supplemental schemes.
86. So far as the existing TTT scheme was concerned the most pressing matter was obtaining a release of funds from Capita and Channel House Trustees to fund a payment to the Firm as security for the costs claim that was being pursued by Martineau Johnson (thereby ensuring that the documents would be available to enable completion and that the funds raised would not be subject to any restriction). Capita was invited to part with the subscriptions in its hands for that purpose on the basis that TTT had "received commitments in excess of the minimum funding requirements". Capita's response to this proposal was to note that they had received £8,065,894 worth of subscriptions subject to receipt of completed application forms and of cleared funds, and that "it will only be when this point has been reached that any disbursement payments can be made". Channel House Trustees, however, released £205,000 which was paid over to Martineau Johnson in respect of undisputed fees because Mr Sharp and Mr Church were satisfied that there were sufficient funds committed by way of unconditional obligation to satisfy the Minimum Level. Channel House Trustees also released a sum sufficient to secure the whole of the costs claim (which was placed by the Firm in an account in joint names).
87. Meanwhile Mr Church took up the battle with Capita. He had been advised by specialist Counsel that Capita were being "unnecessarily difficult". He prepared a reply which referred to his thinking on the sufficiency of an unconditional obligation to satisfy the Minimum Subscription and upon use of 'commission due' as a subscription. Capita responded by saying that in their view an application was only valid if correctly completed in accordance with the Information Memorandum and by including a cheque or bankers draft: and they wanted payment to them of the £205,000 that had passed to Martineau Johnson. Mr Church produced a strong draft in response: but Mr Sharp was of the view that a face-to-face conversation would be preferable. Such a meeting took place on the morning of 31 March 2004. Capita agreed to transfer the subscription monies. No one suggested that Capita was dishonest or negligent or acting in breach of its obligations as the operator of the scheme in so doing. Capita produced a schedule. It showed funds raised by subscription as totalling only £6,267,894. It also recorded subscriptions from the founders totalling £513,000. This made the total funds raised £6,780,894. (There were several versions of this schedule in the trial bundle, each with slightly differing figures. It was never satisfactorily explained to me how the one related to the other. But what is clear from all of them is that they did not purport to show only cash receipts by Capita and each highlighted that a substantial sum was "receivable").
88. On 2 April 2004 Mr Sharp, describing himself as "Designated Member, for and on behalf of Tower Taxi Technology LLP" gave notice of drawdown to Lloyds, confirming that TTT had received "the following capital contributions from the following members of the Borrower….. and that such contributions are unconditionally available to the Borrower". The details he gave were "as per Capita Summary: £6,780,894". He instructed that the sum drawn down of £20,342,682 should be paid to Cabvision "on account of monies due by [TTT] to them pursuant to the ICT Software Purchase agreement".
89. So far the documents themselves were concerned, they were in substantially agreed form having been negotiated between Pinsents, Martineau Johnson, DLA (for Lloyds) and Dundas & Wilson (for HBoS). They could not, however, be agreed in final form until the day of completion because they depended upon interest rates payable on that day. The Facility had been signed. But it was still necessary to prepare (apart from the drawdown notice) a payment instruction letter and funds flow statement, the BoS guarantee, a resolution of TTT approving the performance of the Facility, a certificate from Capita (in a form approved by Lloyds) that all relevant checks had been carried out and the requirements of FSMA satisfied, the Security Deposit Agreement, minutes of a board meeting of Cabvision to approve entry of the SDA, and other minor side letters. The terms of these were duly settled: I will need to deal with the matter in more detail in relation to the Firm.
90. Certain figures could not be completed until the actual day of completion. This had been anticipated to be 2 April 2004. But Capita was remitting £2,469,150 (the balance of the actual cash it held) and it failed to give banking instructions in time. So completion was delayed until 5 April 2004. On that date £3,469,966 was still outstanding in respect of subscriptions but Mr Sharp and Mr Church both believed (according to the evidence led by Cabvision) that these sums would become available "in a brief time". I note here my previous finding that Mr da Costa knew this to be the case.
91. In my judgment this way of putting the case also fails. I do not see how on the facts pleaded Mr Sharp's statement to Lloyds on behalf of TTT can be treated as if it was a statement by each of the Individual Defendant's to Cabvision. I do not see how, if Mr Sharp and Mr Church (who were in control) were honest in drawing down the loan and completing the transaction, the Individual Defendants were dishonest. Everyone appears to have relied upon the Capita schedule (and not upon some underlying raw data); this listed, for the benefit of everyone, who had subscribed what, and made clear that a substantial sum remained "receivable". Mr da Costa knew this and cannot have been misled by anything in the drawdown notice (which referred to the Capita schedule and itself stated that the money was "unconditionally available") or the fact of completion. It was Capita as the scheme operator that actually released the subscriptions in cash, and I cannot see upon what basis it could have done so unless ultimately satisfied that the subscriptions could be applied in the TTT venture and did not have to be returned to the subscribers i.e that the subscription terms set out in the Information Memorandum as to the Minimum Level had been met. I note that the sum that eventually appeared on the Capita summary is less than what Capita originally stated the subscriptions to be: I infer from that that Capita must have conducted some sort of exercise to weed out invalid applications. So far as I am aware there was no impediment in the way of Cabvision calling someone from Capita to explain why the original subscription figure was reduced and why the cash subscriptions were released: and I feel entitled to draw the inference that Cabvision acted properly. I can find nothing in the evidence to suggest that any of the Individual Defendants (who were not at this time directly concerned in the completion of the TTT scheme, being taken up with the five supplemental schemes) was possessed of some piece of knowledge (not known to Capita, Mr Sharp or Mr Church) which made it dishonest for him to permit the giving of the drawdown notice or completion of the banking arrangements.
92. I do not know upon what basis Capita decided that the Minimum Level had been reached at 2 April 2004: as I have said, I infer that there were proper reasons. I can see why that might be so. I do not regard it as a breach of fiduciary duty for the Designated Members to have accepted unconditional commitments to pay (in lieu of actual payment), or to have accepted subscriptions in any amount (rather than in the stated sums). If unconditional commitments to pay are acceptable I see no reason why the Individual Defendants and Mr Sharp and Mr Church should not say that they would satisfy that unconditional obligation out of the commissions each would receive by reason of the successful issue. (It is, after all, Cabvision's case that the subscription money had to make cash available "at completion or within a tolerably short time thereafter").
93. That would leave open to objection those applications which on their face made an "unconditional obligation" doubtful. The evidence did not satisfactorily deal with the state of the documents when in Capita's hands. But assuming that Capita took these "doubtful" documents into account in preparing the Capita schedule that would mean that its total of £6,684,519 would have to be reduced by £117,618 in respect of unsigned or unwitnessed forms (Cabvision's closing submissions said £265,618: but random testing produced signed forms for £148,000), and £137,500 in respect of forms which omitted a subscription figure (Cabvision's closing submissions said £177,500 but random testing produced £40,000 of stated subscriptions). This leaves a figure of £6,429,401 – in excess of the Minimum Level.
94. So a submission that Capita got it wrong and released the subscriptions instead of returning them ultimately turns out to depend on whether Mr Kittle ever submitted a form. Mr Morris (who took the opportunity of his making a witness statement to give me his opinion that Mr Smith was a dishonest and manipulative man of no integrity who had been involved in a "Ponzi" bond scheme and with two convicted fraudsters and who had lost Mr Morris £160,000) was dependent upon bare unassisted recollection from the time when he played a supporting role to a tax planning promoter for his evidence that Mr Kittle never signed an application form. I do not regard this evidence (recollected from a standpoint of deep hostility) as reliable. If Capita treated Mr Kittle as a subscriber for £187,500 in preparing the Capita schedule and in deciding whether, as scheme operator, to release the subscriptions to TTT then I consider it more likely than not that they had grounds so to do. The fact that Mr Kittle may at some later stage have decided not to proceed (and that nobody chased up his commitment) and that his form cannot now be traced is beside the point. I do not consider that the inference which I draw from Capita's conduct (that as at 2 April 2004 the Minimum Level could properly be regarded as having been reached) is displaced by any of this analysis.
95. I therefore hold that no actionable dishonest misrepresentations have been made out against any Individual Defendant. The case of dishonesty has not been made out. By completion the Minimum Level had probably been achieved (and the major participants honestly believed that it had): and Mr da Costa knew that a substantial element of it consisted of "receivables".
96. This brings me to the seventh way in which Cabvision puts its case; which is that if it cannot make out dishonesty, then it alleges negligence. The only party which entered into a contract concerning advice in relation to and the promotion of the TTT scheme was Tower (and that contract was not with Cabvision). It is therefore necessary for Cabvision to allege (as it does) that the Individual Defendants assumed personal, individual and collective responsibility for ensuring that each had reasonable grounds for asserting the truth of all of the representations on which Cabvision relies as having been made.
97. There are two bases for the plea. The first is the Individual Defendants failed to make such enquiries as a reasonable person in their respective positions would have made in order to satisfy themselves that "the representations" were true. This is essentially a plea about the breach of a duty which is assumed to exist. Their respective positions are (according to paragraph 2 RAPoC ) "tax consultants who specialise in devising and implementing for their tax-payer clients tax-efficient investment schemes": it is not suggested that they had any particular expertise in capital raising for companies. Addressing the question of breach, no expert evidence was led to establish what "a reasonable person in their respective positions" would have asked about whether Mr Sharp's various statements about the Minimum Level were true. The only benchmark I have is that Capita, the authorised person for the purposes of the FSA, thought it in order to release members' cash subscriptions for the purpose of facilitating completion on the footing that the Minimum Level had been reached. On this evidence I do not see how I can find that each of the Individual Defendants fell below the standard to be expected of a reasonably competent tax consultant who specialised in devising and implementing tax-efficient investment schemes (even if I was were to assume the existence of a duty of care).
98. In the skeleton argument reliance was placed upon defects in the applications (missing signatures, absence of cleared funds, incorrect subscriptions, alterations to subscription conditions, and subscriptions payable out of 'commissions due') as demonstrating that "the submission that this was a job well done, one which discharged any duty of care … cannot be made with a straight face". I do not think that such a submission is a substitute for evidence. In closing it was submitted that the proximity of the parties and the high likelihood that Cabvision would be harmed by careless performance of the duty to verify that the Minimum Level had been achieved when added to these matters "made fanciful any denial that the Founders (sic) jointly and severally owed Cabvision a duty to take reasonable care". Such propositions do not enable Mr Oliver QC to overcome the great difficulty he faced that Mr da Costa and Mr Jens Hills were so persuaded that the Individual Defendants were fraudsters that they did not adduce any proper evidence to establish any duty of care, or any breach of duty; nor did they consider how they were going to run a case that the Individual Defendants were personally and collectively negligent whereas Mr Sharp and Mr Church (who had actually been charged with the task of completing the transaction) were not.
99. As I analyse the evidence

(a) The Information Memorandum contained no representations (and made clear that it did not):

(b) It was not implicit in the concept of the Minimum Level that it would suffice for any business purpose of Cabvision (simply being the minimum sum to needed to acquire the ICT Software);

(c) The Minimum Level had (with the participation of Mr da Costa and Mr Langley) been more or less plucked out of the air;

(d) The Minimum Level had in fact been set at a level which would not have funded the business purpose of launching 1000 screens;

(e) By the time the drawdown was made and the funding arrangements completed Capita, the scheme operator, was of the genuine view that subscriptions could properly be applied to the TTT scheme and did not have to be returned;

(f) At the time that that view was formed and acted upon it was openly stated on documents emanating from Tower Group, Capita and Mr Sharp that not all of the subscriptions would be available in cash and that the bulk were treated as receivables due "under obligation" or by reason of "commitment";

(g) Mr da Costa knew that to be the case before drawdown or completion.

On those facts it is not possible to say that the Individual Defendants negligently misstated anything.

100. The second basis is set out by way of re-amendment in paragraph 24(2) of the RAPoC. This is that the Individual Defendants were "the original promoters of the Tower scheme" to Cabvision, that "their role as promoters continued beyond the formation of TTT", that TTT was "simply a vehicle created and used by them" to promote the Tower scheme, that Cabvision placed a very high degree of trust and confidence in them personally, and that they presented themselves personally as expert in the promotion schemes. The re-amendment was made about one month after it had been pointed out in an interlocutory skirmish before the Master that the pleading contained no particulars that would justify alleging individual responsibility for negligent misstatement on the part of those who did not themselves make any statements.
101. This way of putting the case identifies each of the Individual Defendants as a separate tortfeasor who had individually assumed a duty of care to Cabvision outside his role as a Designated Member of Tower or of TTT. It may be taken that the pleader (responding to the point made before the Master) had in mind Williams v Natural Life Health Foods [1998] 1 WLR 830. This decision requires a primary focus (for the purposes of establishing that personal responsibility has been assumed) "on exchanges… which cross the line between the defendant and [the claimant]" (per Lord Steyn at p. 835).
102. Mr da Costa's evidence in fact contains no such focus. It contains (in paragraphs 20 to 28 of his statement dated 26 February 2009) the generalities that underpin the re-amendment to paragraph 24(2) RAPoC. But it contains no detail exchanges between Cabvision and any of the Individual Defendants upon which one can fasten and treat as demonstrating that, notwithstanding the creation of Tower as the vehicle for giving advice, and the entry of a contract between Tower and TTT providing the reward for that advice, there came into being (or continued to exist) an undocumented, concurrent, gratuitous retainer under which each Individual Defendant owed a duty of care to Cabvision in relation to the raising of capital (as opposed to the creation of tax efficient schemes for their tax-payer clients). Nor did the evidence address how this personal responsibility related to the retainer of Martineau Johnson to act for Cabvision or to Cabvision's retention of Mr Melvyn Langley at a fee totalling £82,500 to provide accountancy and commercial advice.
103. On this evidence I hold that neither on 2 April 2004 nor at completion on 5 April 2004 was any of the Individual Defendants personally responsible for the truth of any representation expressly or implicitly made by Mr Sharp: and even if they were, Cabvision has failed to establish a negligent breach of duty.
104. Whichever way Cabvision puts its case, on the evidence adduced I hold that it has failed to establish liability. I would in any event have concluded that Cabvision had failed to prove the loss claimed.
105. The case on loss and damage was presented in a curious way. In September 2007 there was added to Cabvision's pleaded case a densely worked Schedule of Loss and Damage. This was supported by a lengthy and argumentative witness statement from Mr da Costa dated 18 July 2007, which he acknowledged had been prepared for him by Mr Jens Hills and large parts of which he did not understand. The thesis adopted in this statement was that the TTT scheme should not have completed on 5 April 2004 and that had it not done so then Cabvision would not have been "committed to the various transaction agreements at completion and the banking and security arrangements". Once it was "committed to the transaction and a number of convoluted and complex agreements" it had to try and get itself as far as possible into the position that it should have been in "had it not been led up the garden path". This led to what were called "the mitigation costs" (and involved an unsuccessful attempt to appoint receivers of the assets of TTT and eventually a settlement with TTT).
106. Mr da Costa acknowledged that it was difficult to him to be absolutely certain as to what would have resulted had Cabvision not been committed to the project: but he thought it would have been able to secure alternative investment for 10,000 Cabvision systems. Having been committed, he thought it commonsense that the project was seriously undermined, and did not understand why expert evidence should be considered necessary. He thought the project was undermined by lack of cash flow at critical points (what he called "the fatal impact of starvation of cash"), with consequential delays in implementing the project and consequential loss of revenue streams.
107. In support of this case Cabvision eventually adduced the expert evidence of Mr Simon Young ACA. Mr Young had practised as an accountant in Australia in the music industry before assuming financial and legal responsibility for the London office of Sony Music Europe. He then established a niche practice dealing with the business needs of media-based clients. His brief was to consider the commercial aspects of the operation of Cabvision and the effect of instability in the project relationships. He was requested to give an opinion as to whether Cabvision would within a reasonable period have been able to secure an immediate benefit comparable to £3.75 million in respect of granting an exclusive license to another party to use the Cabvision system in 10,000 London taxis for a term of 10 years: and to give an opinion as to whether the evidence of Mr da Costa was credible and reasonable. These are not perhaps the instructions that an expert accountant might have anticipated.
108. The Individual Defendants did not respond with any expert evidence: but the Firm adduced the expert report of a costs draftsman (Mr Michael Bacon) and of a forensic accountant (Catherine Rawlin). The evidence of Mr Bacon was not seriously challenged in cross-examination. That of Ms Rawlin was (although Mr Young had agreed in cross examination that there was nothing wrong with her calculations as such, and that she had proceeded on the preferable basis of actual accounts). The principal points put to her were not in fact derived either from Mr Young's report or from Mr da Costa's evidence: but I ruled that the points should be put and that (if material to my assessment) I would later examine the evidential basis for them.
109. I will begin with the claim for lost profits. This depends upon the proposition that if Mr da Costa had known "the truth" he would not have completed on 5 April and would have sought and obtained alternative finance. That proposition was not on the evidence established for the following reasons:-

(a) Mr da Costa was on his evidence prepared to complete on the basis that there was money "in the pipeline" i.e. that it would be produced shortly after completion. This was in fact the basis upon which everyone proceeded. What in the event happened was that the money did not emerge from the pipe: not all of the receivables were received. Some subscribers simply did not proceed (whether committed to or not): perhaps because their bridging loan arrangements fell through, or in the changed Revenue climate they decided not to proceed, or for sundry unknown reasons. But nobody knew that that would happen. Cabvision knew "the truth" and took the risk. It has not proved that but for some wrongful conduct by the Individual Defendants it would have withdrawn from TTT.

(b) Mr da Costa has not proved that he would have got alternative finance. He had been negotiating with the Tower Group since about February 2003: and the tenor of his evidence was that he was negotiating with Tower because all the other funders wanted equity participation in Cabvision and were not prepared to accept a limited license of the ICT software together with a revenue stream from advertising. There is thus no factual foundation for inferring that if the TTT project fell through acceptable alternative finance was available. Its existence is pure speculation.

(c) The expert report of Mr Young does not contain a soundly based opinion that alternative finance would have been available. He simply states that an alternative investor should have been prepared to accept an exclusive licence in return for funding of between £4 million and £6.7 million, but without identifying the potential sources or outlining its probable nature. He does not grapple with the actual difficulties that Mr da Costa had faced prior to 2003 in seeking finance outside the envelope of a scheme that gave investors immediate tax relief. He does not address the question of how long it would have taken to put his assumed alternative source in place (though in cross examination he acknowledged that it would be months perhaps years). At times Mr Young appeared to be saying that Cabvision would not have obtained a financial backer at all but would have entered into a joint venture with a media partner: but that was not Mr da Costa's evidence, and appears to run counter to his desire to retain 100% ownership of Cabvision.

110. The case on loss of profit then depends upon identifying the profits which it is said Cabvision would have made with the benefit of such alternative investment, and comparing it with the profit actually made. Cabvision's case on this was put very shortly in closing. I was simply referred to Mr da Costa's witness statement (which contains the analysis by Mr Jens Hills that Mr da Costa himself did not understand) and to Mr Young's report. From this material it is apparent that Cabvision says that it has suffered a loss, but it is by no means easy to see upon what figure it finally settles. That spoken to by Mr Young in the Experts' Joint Statement was £4,097,435. Ms Rawlin was clear in her opinion that Cabvision had suffered no loss, but in the events which actually occurred was better off than it would have been had alternative finance been sought, and better off to an extent exceeding £1 million.
111. I naturally approach with a healthy scepticism the suggestion that a claimant has spent a large sum of money pursuing recovery of a loss that it has not suffered. But this is a very curious case and it is the conclusion which I have arrived.
112. These are my reasons:-

(a) Mr Young was an honest and conscientious man and engagingly frank in cross-examination, but his opinions suffered greatly from the nature of his instructions (both as to the questions he was asked to consider and the material with which he was provided). Ms Rawlin, on the other hand, was a very impressive witness who had approached the task with independence and intellectual rigour, carefully confining herself the matters within her sphere of expertise, and under cross-examination showing readiness to adapt her view to any different factual scenario with which she was challenged. Overall I would be much more inclined to trust her conclusions than those of Mr Young.

(b) The assumptions upon which Mr Young was invited to operate were (through no fault of his own) fundamentally flawed.

(c) Even if the Minimum Level had been attained in cash at completion it was established at trial that this would at most have yielded £1.8 million of free cash, which was insufficient to launch 1000 screens. The assumption that there would have been 1000 operative screens is wrong.

(d) Mr Young agreed that an alternative funder would have had to raise £6 million to get 1000 operative screens. He acknowledged that his report did not proceed on the footing than £6 million was required and that his argument as to the stability of the operation was built on sand.

(e) Although it was assumed that 1000 screens would have been sufficient to launch the Cabvision project, this was not in fact Mr da Costa's view at the time – in an e-mail to Mr Jens Hills he referred to "huge potential problems arising in only raising revenue for 1000 screens". The assumption that the business plan set out in the Information Memorandum could more or less have been adhered to is wrong.

(f) Even if that amount of free cash had been available at or shortly after completion a programme of screen installations would not have begun. That was because Mr da Costa had formed the view that the installation of systems that required a taxi to attend KPM's premises on a monthly basis to have new data uploaded would have been "a logistical nightmare"; so KPM and Trident decided to develop an alternative technology, initially based on GPRS but eventually settling upon a DAB system. Installation of this system did not begin until April 2005. The delay was not caused by any cash shortage: it was caused by the process of development. The assumption that the roll-out would have begun in about June 2004 is wrong.

(g) As at April 2005 there was in any event no cash shortage caused by TTT. By August 2004 Cabvision had in fact received £3 million as working capital, which was well in excess of its expected cash receipts at that date. On grounds that were not explained at trial, Cabvision chose immediately to pay KPM £1.9 million (although not contractually bound to do so) against future deliveries of the yet-to-be-developed screens. There can therefore be no argument (and none was advanced) that development was delayed by a cash shortage. The assumption that there was a cash shortage is wrong.

(h) In December 2005 Cabvision settled the dispute which it had commenced with TTT over TTT's failure to pay what Cabvision said was due. TTT had been invoiced by Cabvision for £22.6 million at completion which bought 3014 licences at £7500 each: and TTT had actually paid £21.49 million of this by transfer to BoS for Cabvision's account. The December 2005 settlement limited TTT's intellectual property rights to 3014 taxicabs (and Cabvision recovered the balance of the 7750 licences for itself). Within weeks of the settlement Cabvision then recovered all but 1000 of the licences purchased by TTT (but it did not repay any of the money it had received on account of the sale of the 3014 licences). The settlement also reduced TTT's share of the net advertising revenue to 10% (from 25%). Account must be taken of the enhancement of Cabvision's position conferred by the terms of the settlement. (Mr Sharp was opposed to settlement on these terms: he described the settlement as meaning that TTT's raison d'être had disappeared and that the members gave away everything to Cabvision).

(i) Mr Young was not invited to rework his assessment of the loss on the basis of these additional facts to which his attention had not been drawn. I am therefore left with the opinion of Ms Rawlin: and I accept it.

113. Had it been necessary to address loss of profit I would therefore have found none.
114. The next element of the damages claim was "mitigation costs". Had it been necessary to address this head of damage I would not have found it proven. One must not be seduced by labels in a damages schedule. "Mitigation costs" is a label applied by Mr Jens Hills: it is still necessary for Cabvision to prove on the balance of probabilities that each item included under the label was reasonably expended in an endeavour do reduce or avoid what would otherwise have been recoverable loss.
115. To do so would be no easy task, because the context in which Cabvision was acting and Mr Jens Hills was advising was complex (and because proper evidence as to the true position was not assembled for the purposes of trial). There was undoubtedly a lack of certainty about what had been received by TTT at completion and what had been received after completion as being "in the pipeline". The subscriptions over all had been lower than expected. Although Mr da Costa believed that he would receiving enough money to launch the Cabvision system his personal expectations did not accord with the reality of what had been planned; the project was and always had been undercapitalised (because of the start-up costs and the amounts that had to be deposited in the bank). There were issues over how and when the funds raised by TTT 37 could be fed into the Cabvision project. There was the general failure of the five supplemental schemes overall to raise any serious money. There was the fact that £841,000 was locked up as security for disputed legal fees. There were problems generated by the fact that at completion not all of the commercial agreements were in absolutely final form. There were delays generated by the development of new technology for the screens. With such interconnected problems it would be no easy task to say that any particular activity was directed to mitigation (strictly so called).
116. Scrutiny of the underlying material discloses the following:-

(a) What underlay the strategy adopted by Mr da Costa on Mr Jens Hills advice was the belief that the Individual Defendants were fraudulent, and that they accordingly had to be removed from TTT if the Cabvision scheme was to proceed. This strategy went far beyond repairing a cash shortfall at completion which was reflected in a reduced payment for the ICT Software.

(b) One example of that is that the "mitigation" pursued by Cabvision and Mr Jens Hills was always designed to ensure that the Individual Defendants did not receive any commission from the TTT launch.

(c) Another example is the attempt by Cabvision to secure the appointment of joint receivers over the undertaking and assets of TTT, an attempt which failed before Mr Justice Lewison and led to an appeal which also failed. The documents in my view disclose that the stated objective of this litigation was to wrest control of TTT from the Individual Defendants and vest it in persons sympathetic to Cabvision (to bring about the hugely advantageous settlement Mr Jens Hills eventually achieved for Cabvision).

(d) The standpoint from which this campaign was conducted was that Mr da Costa believed (whatever contractual documents said) that if the TTT scheme completed he would have whatever money it took to launch the Cabvision system. The steps taken were not designed to repair a cash shortfall at completion but to secure additional advantages to Cabvision by producing all that necessary additional funding. As an example, Mr de Costa had it in his head that immediately upon completion he would be paid £500,000 in respect of historic start-up costs. This had been a proposal in 2003 but formed no part of the business plan in the Information Memorandum. But Mr Shepherd (a witness to Cabvision) emphasised that this was "a big issue" with Mr da Costa: and the documents bear this out.

(e) The strategy was pursued not simply in the interest of Cabvision but also in the interest of KPM (which became a party to the settlement agreement). Thus, for example, Mr Jens Hills' wished to rewrite (or as he put it "adjust away") the settlement accounts to show that KPM had not received £1.9 million (an approach which Mr Sharp considered to be "wholly inappropriate" and which TTT's solicitors described as "dodgy").

(f) Any cash shortfall that had existed in TTT's funding ( and its ability to pay Cabvision under the ICT software purchase agreement) had disappeared by August 2004: yet Cabvision's relentless campaign to get more money out of the Individual Defendants and TTT continued.

117. Mr Bacon was invited to approach Mitigation Costs on the footing that he should try to identify which of the costs claimed related directly to the TTT scheme following completion and which related to other aspects of the Cabvision scheme. It is not from his report possible to identify which of the matters set out in the preceding paragraph he took into account. But assuming he took them all into account then I observe that he reached the view (taking a very fair approach to hourly rates and the adequacy of Mr Jens Hills' time recording) that of the claimed mitigation costs of £662,065 only £95,813 were proper and reasonable costs in mitigation. He was not cross examined upon this figure. The benefit which Cabvision derived from that expenditure (something of the order of £1 million according to Ms Rawlin) far exceeds that sum.
118. Also claimed as mitigation costs were the alleged fees of Mr Langley in the sum of £125,000. I am not satisfied that these were fees genuinely charged to Cabvision and genuinely to be sought against Cabvision. Certainly Mr da Costa's attitude was that if he failed to recover the amount of this bill as damages from the Individual Defendants then it would be necessary to readdress what Mr Langley could charge. Whilst Mr Langley asserted this was a genuine bill he had no satisfactory answer to the question of why he had not sought to recover any part of it since 2004.
119. There was then a claim for losses incurred by reason of Cabvision having entered into the banking arrangements. By the time the Claim Form was pleaded out the banking arrangements had been unwound at no discernible cost to Cabvision. Mr Jens Hills lamely argued in the course of his evidence that one could never be sure what might emerge. But that is not a basis for assessing damages.
120. The final element of the damages claim was for "project expenses written off by the settlement". The basis of this claim was that Cabvision had a sound claim against TTT to be reimbursed certain expenses in connection with the project: but in order to achieve a settlement with TTT it gave up this claim. On the state of the evidence at trial I was not satisfied that this claim had been made out. It was not demonstrated that Cabvision did have a claim for reimbursement of all these expenses: to the extent that it included a claim for £500,000 of historic costs it was plainly wrong. To the extent that a genuine claim reimbursement was given up then rights (particularly recovery of licences and an enhanced advertising revenue stream) were gained in return. I would most certainly therefore not have accepted at face value Cabvision's claim for £1,329,333 (itself not adequately supported by evidence) as project costs written off, and I would have set off against the true figure the additional profits which Ms Rawlin said accrued to Cabvision in the real world (when compared with what would have accrued to it in the "but for" world that would have existed if the alleged wrongs of the Individual Defendants had not occurred).
121. Thus even if liability in deceit had been established I would have found very great difficulty in awarding any damages to Cabvision on the evidence called at trial, and in the light of the expert evidence called by the Firm (which in my judgment survived cross-examination unscathed).
122. I turn to the case against the Firm. It is not in dispute that the Firm was retained by Cabvision to deal with the costs dispute that had arisen with Pinsents and Martineau Johnson ("the Costs Retainer"). Cabvision alleges that this retainer was gratuitous so far as it was concerned. On 15 March 2004 Martineau Johnson commenced proceedings ("the Costs Proceedings") against Mr Feetum alone irrespective its outstanding bills: and on 4 May 2004 they obtained judgement in default against him. On 7 September 2004 Martineau Johnson were given permission to add Cabvision as a defendant to the Costs Proceedings (along with KPM and with Mr da Costa personally): and the claim form in the Costs Proceedings was duly amended in that way on the 11 October 2004. Cabvision's case is that it became a party to the Costs Proceedings because the Firm acted negligently in taking instructions only from the Individual Defendants and acting only in their interests (and not in the interests of Cabvision), and in concealing from Cabvision that they had done so until the order of the court dated 7 September 2004 (giving permission to add Cabvision) was provided. Cabvision asserts that but that breach of duty it would not have been added as a defendant to the Costs Proceedings and that all of the costs which it has incurred in defending them are recoverable as damages from the Firm. It asserts that although the litigation has been settled "costs … are still at large", and that if it has (under any order) to bear any part of the costs then it also claims to recover those as damages.
123. Cabvision also alleges a separate retainer, which is in issue. At trial it alleged that the Firm was retained by Cabvision for the purposes of completing the TTT scheme ("the Completion Retainer"). (Its original allegation it is to be noted had been that the Firm was retained "for the purposes of attending to the formalities of completing" the TTT scheme). Cabvision alleges that it was an implied term of the Completion Retainer that the Firm should at completion attend to what was called "the funds flow statement": and it is contended that what was meant by that implied term was that the Firm would either take proper care to ascertain that the funds due move from one party to another at or prior to completion had so moved or were available to be so moved at or prior to completion: or alternatively the Firm would ensure that all the parties for whom they were acting were fully apprised as to the situation in relation to the funds due to move. In the complete alternative it is alleged that the Firm owed a duty to take reasonable care not to cause loss to Cabvision. In the yet further alternative it is asserted that the Firm held the documents from 2 April 2004 until 5 April 2004 in escrow and owed a duty to Cabvision not to complete the TTT scheme without first ascertaining that all funds had been remitted as between the various parties. In the still yet further alternative the RAPoC assert that the Firm owed an implied duty (being a term to be implied into the Completion Retainer by virtue of the Firm's receipt of the subscription schedule of 16 March 2004 and of the Notice of Draw Down) to ascertain prior to completion that the Minimum Level had been achieved. Cabvision alleges that in breach of these various duties the Firm failed prior to completion to ascertain that the Capita summary referred to in the Notice of Draw Down "established that the Minimum Level had been achieved". Cabvision says that if it had known that the Minimum Level had not been achieved it would either have postponed completion or would have abandoned the TTT scheme and sought other sources of investment.
124. Should all of these various ways of putting the case fail then Cabvision finally relies upon a continuing duty (after completion of the TTT scheme) upon the Firm to inform Cabvision of all matters within the Firm's knowledge concerning the question whether the Minimum Level had been achieved at completion. It pleads that the Firm did not so inform it so that Cabvision was denied the opportunity to withdraw from the five supplemental schemes.
125. The Firm pleaded a full Defence to these issues.
126. Cabvision relied upon the evidence of Mr da Costa, Mr Sharp, Mr Church and Mr Jens Hills. The firm relied on the evidence of Mr Southall. Before joining the Firm he had been a practising barrister. I was therefore alert to the risk that his skills as an advocate might lead to a favourable colouring of his evidence. Giving full weight to that factor I found him a straightforward and reliable witness, occasionally inaccurate (when his evidence was compare with an underlying document), but plainly giving his answers carefully and to the best of his ability, and for the most part (save when defending himself against specific charges of incompetence) in a dispassionate way. Very creditably Mr Oliver QC did not cross-examine him on the basis that Mr Southall had fabricated any of his attendance notes or that he had deliberately lied to Mr Jens Hills.
127. These are my findings of fact. On 13 January 2004 Dr Mireskandari of the Firm was asked to consider a potential complaint about costs bills presented by Martineau Johnson and by Pinsents. The Firm received the relevant copy invoices a few days later. Those from Martineau Johnson were addressed to the Individual Defendants, Mr Sharp, Mr da Costa, Cabvision and KPM. (That from Pinsents was addressed to TTT). Both Martineau Johnson and Pinsents were pressing strongly for payment of their fees; but the Firm did little of substance because it was not provided with any money on account.
128. Mr Southall (who was in the process of joining the Firm at that time) became involved on the 25 February 2004 when he attended a meeting (at which Mr da Costa was present). At this meeting was agreed that TTT would ultimately bear the costs of the challenge to the Birmingham solicitors' costs, but all those potentially liable would stand "shoulder to shoulder". There was then current a proposal that the TTT scheme should complete before the impending budget statement. Martineau Johnson assumed that they and Pinsents would undertake completion, and they became increasingly forthright in their demands for payment by completion. Mr Southall focused on what immediate response could be given, in particular to what he called "the daily lashings from Enid Armstrong" of Martineau Johnson.
129. The priority he set himself was to avoid Martineau Johnson exercising a lien over the relevant documents they had drafted or obtaining an injunction to attach funds produced at completion. He organised his legal thinking by deciding to consider first whether the bills could be challenged on their face, then (if the bills appeared valid) to consider how disruptive court applications could be avoided, and then ultimately to decide whether the bills were reasonable having regard to what Pinsents and Martineau Johnson had been asked to do. To achieve this he decided to acquire a basic grasp of the fundamentals of the transaction and to defer a detailed examination of the 30 boxes of papers emanating from Mr Sharp (and covering the entire project from its inception in 2003) with which the Firm had been provided.
130. By 9 March 2009 both Pinsents and Martineau Johnson had indicated that they expected their fees to be paid at (or within one banking day after) "first closing". Mr Southall consulted leading counsel who advised that the claimed amount of the fees be put on one side pending settlement of the dispute. Mr Southall drafted a letter to that effect and circulated it to his clients (including Mr da Costa) for consideration. After amendment this was sent: but the proposal was rejected by Martineau Johnson.
131. Speculation in the weekend press (to which Martineau Johnson drew attention) prompted a decision to undertake "first closing" at midnight on 16 March 2004. Mr Southall needed to understand what this meant and he needed to know what money would then be available out of which provision could be made for Pinsents and Martineau Johnson's legal fees. Mr Sharp sent at 15:55 on 16 March 2004 his e-mail attaching the spreadsheet showing "the funds receivable together with an explanation of when the funds may be receivable by [TTT's bankers]". At 18:16 that day Mr Sharp sent his e-mail explaining what "first closing" was and how it related to completion of the TTT scheme. First closing duly occurred and the Facility was signed.
132. There was now only a fortnight until final closing had to occur: but agreement had still not been reached upon the Birmingham solicitors' claim for costs (in respect of which Martineau Johnson had commenced proceedings). Mr Southall achieved agreement with Martineau Johnson on 19 March 2004 in terms that required TTT to assemble £841,777 and place it in the hands of the Firm. Messrs Feetum, Marsden, Sharp and Church signed the relevant directions to Capita and to Channel House Trustees and provided them to Mr Southall. Capita at that stage did not consider that they could comply with the request and the entire money eventually came from Channel House Trustees on 24 March 2004. This left the arrangements for final closing to be addressed.
133. Up until 24 March 2004 Martineau Johnson still regarded themselves as instructed by (amongst others) Cabvision in relation to final closing. But that day they learned that steps were being taken to effect "completion" without their involvement. On 25 March 2004 they informed the Firm that they regarded their retainer as having been terminated (including by Cabvision, KPM and Mr da Costa) with effect from 16 March 2004 ( the date of their last instructions).
134. On 24 March 2004 Mr Southall was informed by Mr Sharp that DLA (who represented the interests of Lloyd's bank) wanted solicitors to represent the interests of "the partners i.e the founders" otherwise there would have to be a change in the banking documents for the transaction to go through. DLA had learned that Pinsents and Martineau Johnson where apparently not going to be completing the transaction between themselves: DLA wanted solicitors involved so as to give the banks comfort and so as to avoid having to rewrite the banking documentation to include the "caution wording" necessary if the parties were unrepresented. Mr Sharp enquired if the Firm "would act for the partners in respect of execution of the banking documentation". Mr Southall declined to accept those instructions immediately and wished to think through exactly what he would be taking on.
135. The view he reached was that he would be prepared to oversee completion of the banking transaction, and that he would require his clients to sign a letter waiving any claim to hold the Firm responsible for any matter relating to advice on the documents themselves. For this purpose he prepared a draft letter to be signed by TTT and by Cabvision confirming his instructions to act "in connection with the execution of certain documents listed in the appendix" and expressly confirming that they had not instructed the firm "to advise on the content of the Documents" so that the retainer was confined only "to ensuring that we execute such Documents correctly and in accordance with applicable law". Mr Southall sent his potential clients elsewhere for independent advice.
136. Reynolds Porter Chamberlain (who were particularly well qualified to address such issues) gave their advice to TTT on 29 March 2004. They recorded that the advice was given in connection with the execution of certain documents by TTT and others relating to arrangements with Lloyds and BOS. They recorded their understanding TTT had, at the banks' request, instructed the Firm to be present when the documents were executed, but that the Firm was not going to advise on the contents of the document and had only been instructed to ensure that the documents were properly executed. These instructions must reflect what they were told by Mr Sharp. They advised TTT about the effect of any waiver; and they gave advice about the liability of Pinsents and Martineau Johnson for the documents themselves.
137. The budget announcement on 26 March had precipitated final closing of the TTT scheme: and it had prompted the creation of five supplemental schemes. On 29 March Mr da Costa asked Mr Southall if the Firm would consider two agreements relating to the sale of intellectual property rights in the Cabvision system to the new LLPs. Mr Southall was immediately alert to the potential conflict of interest, and he sent Mr da Costa to Mr Jens Hills. This was how and when Mr da Costa came to instruct Mr Jens Hills.
138. Mr da Costa asked Mr Jens Hills also to advise Cabvision about the waiver which the Firm required before acting in relation to the banking documents. Within Mr Jens Hills' firm the matter was dealt with by Mr Shepherd. He too recorded that he was advising Cabvision in connection with the execution of certain documents by Cabvision relating to an arrangement with the banks, that Cabvision had at the request of the banks instructed the Firm "to be present when the documents are executed" and that the Firm had "only been instructed to ensure that documents are properly executed", that Cabvision would not have any claim against the Firm in connection with the content of the documents, and that Mr Jens Hills' firm had advised separately on the question of liability for such content. Mr Shepherd's record must reflect Cabvision's formal instructions to him. They show what Mr da Costa thought was the role of the Firm.
139. In the light of such advice TTT and Cabvision both signed the letter which Mr Southall had prepared which stated:

" We, TTT and Cabvision, hereby confirm that we have instructed you … to act on our behalf in connection with the execution of certain documents listed in the appendix to this letter ("the Documents"). We confirm that we have not instructed you to advise on the content or effect of the Documents … and your retainer extends only to ensuring that we execute such Documents correctly and in accordance with applicable law".

There was attached an Appendix which identified banking documents that had to be executed, letters that had to be signed, resolutions which had to be recorded and a "Funds flow".

140. On 29 March Mr Southall was also informed by Mr Sharp that there were one or two issues with Capita with which Mr Sharp was dealing and Mr Sharp asked Mr Southall to look over a letter which Mr Sharp had drafted. Mr Southall needed to know whether completion was going to take place. The invitation to look over Mr Sharp's draft was certainly not intended by Mr Sharp or understood by Mr Southall to constitute instructions to consider the underlying structure of the TTT scheme from all perspectives (and in particular to consider the significance of the Minimum Level and the means by which it might be reached). Mr Southall looked at the letter. Mr Sharp also asked Mr Southall if he would be prepared to draft a new document dealing with "the assignment of the as-yet uncleared funds". Mr Southall declined to accept those instructions.
141. Completion was first intended on 31 March 2004. On that day Mr Southall informed the banks that he had been "instructed by [TTT] and [Cabvision] with regard to the execution of all necessary documentation for the completion of the transaction today". DLA had already provided draft documentation and a list of matters that require to be addressed. Mr Southall and Mr Sharp considered this together. One of the documents was the "funds flow statement" showing the precise sums of money coming to TTT and passing between the banks: Mr Sharp agreed to prepare this. He did so and it showed some £3,469,966 as "receivable", together with the cash funds that would actually be passing between the parties.
142. One of the documents that needed to be available at completion was a Minute of a Board Meeting of Cabvision. A draft of this (which had been prepared by Martineau Johnson) was provided to Mr Jens Hills. By the time of actual completion on 2 April 2004 Mr Jens Hills had considered this. The following parts of the document prepared by him (probably in the Firm's offices at completion itself) are material:-

(a) it recorded that Cabvision had received advice relating to the banking arrangements from Martineau Johnson;

(b) it noted that the board of Cabvision considered that the arrangements were for the benefit of the company "in order to ensure that… TTT was in a position to pay the full market price for the ICT software" ;

(c) it recorded the documents which had been produced to the Board for consideration ( which did not include the funds flow);

(d) it noted the counter-indemnity to be given by TTT and that "after signing by [TTT] [Cabvision's] solicitors, Jens Hills & Co, be authorised to take delivery on [Cabvision's] behalf..".

143. The execution of the banking documents could not occur on 31 March 2004 but it did occur on 2 April 2004. Mr Jens Hills attended at the Firm's offices on that occasion. Mr Jens Hills says that he did so simply in order to assist Mr Southall who was overwhelmed by the banking transaction. Mr Southall says that Mr Hills attended as the solicitor currently instructed by Cabvision. Mr Southall's recollection is supported by an attendance note of a telephone conversation in which he records a discussion between himself and Mr Jens Hills as to the importance of the latter's being present at the execution of the banking documentation "as it was very important for his clients [Mr da Costa] and [Cabvision] that everything was completed satisfactorily, in particular they had to complete a Board Meeting and Minute". Mr Southall's recollection is also supported by the terms of the Board Minute prepared by Mr Jens Hills.
144. At that meeting Mr Jens Hills was conscious that TTT and Cabvision had not had Pinsents and Martineau Johnson's previous advice reviewed. He therefore prepared a memorandum for signature containing an agreement between TTT and Cabvision to take whatever steps were necessary to cure and remedy any defects: this memorandum recorded that the documents had been executed "with the benefit of advice from [the Firm] limited to valid execution of the documents only". From the drafts it is apparent that Mr Jens Hills thought about that formulation.
145. Although all the necessary documents were signed the banks were unable to act upon instructions for the movement of funds on 2 April 2004 and the ascertainment of the final figures and the actual transfers had to await 5 April 2004. In the meantime the Firm held the documents in escrow pending transfer of funds.
146. On 6 April 2004 Mr Southall initiated a conversation with Mr Jens Hills upon various aspects of the fees claimed in the Costs Proceedings which, he said, obviously affected Mr Jens Hills' client, Cabvision. In response Mr Jens Hills told Mr da Costa that he would be happy to discuss the issue with Mr Southall "and within reason not to charge for [his] time since [he] would see it as a supporting goodwill exercise incidental to the contractual work on the various Cabvision deals".
147. Mr Jens Hills did so, and took instructions from Mr da Costa. The advice he gave was that whilst the battle with the Birmingham solicitors was obviously Tower's dispute, Cabvision and KPM were in the frame and needed to be sure that their interests were looked after. Mr da Costa's view was that he wished to distance himself from it. Accordingly on 22 April 2004 Mr Jens Hills informed Mr Southall that Mr da Costa considered that Martineau Johnson's fees were the responsibility of TTT , that Cabvision and KPM would never have accepted a liability for costs without confirming that expressly in writing following a board meeting, and that their position therefore was:

" that they do not feel that they need to become directly involved beyond that assistance that may be reasonably requested by the founders of TTT and/or the LLP itself, and in terms of authorising any work by me, they would require agreement as to the costs arising.."

148. As I have recorded, on 4 May 2004 Martineau Johnson obtained default judgment against Mr Feetum. On 24 May 2004 Mr Jens Hills asked Mr Southall to let him know whether there had been any developments in the Costs Dispute that should be of concern to Mr da Costa, and asked to be updated. On 28 May 2004 the Firm applied to set the default judgement aside. They relied on a witness statement of Doctor Miraskandari dated that day which contained the following passage:-

"The Claimant purported to act, not only [for the Defendant, but also for six other individuals and two companies. Those other parties have an interest in both the outcome of the defence of these proceedings but also in pursuing a counterclaim against the claimant. The parties in question are [Mr Sharp], Mr Simon Smith, Mr Stephen Marsden, [Mr Church], [Mr da Costa], Mr Kevin Henry (for whom we do not act), [Cabvision] and [KPM]. I would ask the court to direct that all relevant parties be joined to these proceedings."

I find that in that passage the Firm held itself out as acting for Cabvision in relation to the Costs Proceedings. The Firm did not update Mr Jens Hills by telling him of this.

149. On 17 June 2004 Mr da Costa himself sent an e-mail to Mr Southall recording his belief that neither Cabvision nor especially KPM should become involved in the dispute and stating that for the record he had instructed Mr Jens Hills in the matter. Both he and Mr Jens Hills were ignorant of the evidence that had been filed in support of the then current application. They remained so until an Amended Claim Form was served pursuant to an Order dated 7 September 2004. Mr Jens Hills did not ask for a copy of the Costs Proceedings documents on or after 17 June 2004: nor does he appear to have considered whether he should take any steps. Accordingly no evidence was put in before September 2004.
150. In December 2004 Cabvision, Mr da Costa and KPM served a full Defence in the Cost Proceedings and brought a Part 20 claim against the Individual Defendants, Mr Sharp and Mr Church. They were subsequently amended in May 2005. This Part 20 claim provoked in turn a Part 20 claim by the Individual Defendants, Mr Sharp and Mr Church against Cabvision, Mr da Costa and KPM. The Cost Proceedings were eventually compromised on 12 November 2005 with Martineau Johnson accepting an agreed sum with no order as to costs: but the settlement expressly left open the costs as between the Individual Defendants, Mr Sharp and Mr Church on the one hand and Cabvision, Mr da Costa and KPM on the other. Nobody has sought a determination of that question: and I regard it as abandoned.
151. On this evidence I hold first that the Firm is liable for breach of a duty of care owed towards Cabvision in respect of the Costs Proceedings.
152. I am in no doubt that at the outset the Firm was retained by Cabvision (along with the other potential payers of Martineau Johnson's costs) to act in resisting the claim on the invoices. Dr Mireskandari was right in his witness statement in the Costs Proceedings to suggest that he did so act as at 28 May 2004. It is true that after "completion" Mr Jens Hills was giving assistance to Mr Southall on behalf of Cabvision, acting on a goodwill basis. But this was "behind-the-scenes": so far as both the Firm and Cabvision were concerned the Firm continued to represent Cabvision in the correspondence and negotiations with Martineau Johnson about the Costs Proceedings. This retainer continued until 17 June 2004.
153. I consider that the Firm is in plain breach of that duty. Its duty required it either to act in accordance with the instructions of its client or to make clear to the client that it declined so to act (and to send the client elsewhere). Cabvision had originally decided to stand "shoulder to shoulder" with the Individual Defendants and others. But when Mr Jens Hills told Mr Southall that Cabvision did not wish to become involved in the dispute, the Firm had either to act in accordance with those instructions or to say that henceforth it could not represent Cabvision in the Costs Proceedings (because of Mr Feetum's desire to bring in all other potential payers). Dr Mireskandari's witness statement should not have taken the form it did. When three weeks later Mr da Costa gave direct instructions it should have been reported to him what had already been said in evidence. It matters not if it was the Firm's judgment that Cabvision could not escape being involved in one way or another or that it was in Cabvision's best interests to minimise the costs payable to Martineau Johnson. The Firm had a conflict between the nature of the instructions it was receiving from within its client group, and it could not carry out one set of instructions and disregard the other.
154. I consider that this breach of duty caused loss to Cabvision. Mr Pooles QC argued that what caused Cabvision's joinder to the proceedings was Martineau Johnson's decision to seek the permission of the court to join Cabvision, the Court's decision that joinder was permissible, and Martineau Johnson's decision to act in accordance with the permission which it had received. No doubt these are steps along the journey. But the journey started with an invitation to join all Defendants: and I consider that that may properly be regarded as being the causative event.
155. I was at one time troubled by the fact that Mr Kevin Henry was never held out as a client of the Firm, and the suggestion that all relevant defendants be joined can never have been thought to have been made with his authority, yet the Court gave permission to join him. Would not the same have happened if Dr Mireskandari had said "I do not act for Cabvision. But Mr Feetum would like all relevant defendants joined"? But on the evidence as it is I do not think I can safely conclude that, on the balance of probabilities, that would have happened. Cabvision had a clear view that it did not want to be joined: and it had in Mr Jens Hills a competent commercial solicitor able immediately to advance the argument that the decision on joinder should not be taken without hearing Cabvision or taking account of its position. Cabvision could have said that it was willing to be bound by the outcome of the Cost Proceedings as to quantum. Since there was no real risk that Martineau Johnson would have to look to Cabvision alone for its costs, and a sum sufficient to discharge the bill rested in a solicitors account, the question of liability (if disputed) could have been settled in Part 20 proceedings. But it seems to have been accepted that ultimate responsibility for these costs rested with TTT, and TTT had underwritten the costs of the Costs Proceedings themselves.
156. The question then is to assess the loss caused. The RAPoC do not in paragraph 46 specify any figure. Nor does Cabvision's Schedule of Loss. None was given in Cabvision's opening or in its closing submissions. The Firm submits that that is because the true measure of loss would be the difference between what Cabvision actually spent on its participation in the Costs Proceedings and what it would have spent if the Firm's breach of duty had not occurred: and that since even if the Firm had not suggested that all defendants should be joined Cabvision would have been brought in one way or another, there is no difference. At the other extreme Mr Oliver QC submitted that Cabvision would have obtained the full benefit of the compromise with Martineau Johnson without having to spend a penny, and that the whole of its costs (to be measured by costing the relevant file) were recoverable.
157. The Firm's expert Mr Bacon costed file C1016011, which was Mr Jens Hills' file relating to the Costs Proceedings. He had billed £79,901 for the work actually done. The Firm did not establish that any of it was unnecessary (although Mr Bacon's report noted that Mr Jens Hill did not apply to have Cabvision removed as a defendant); and I would not in the circumstances be inclined to subject Mr Jens Hills' decisions as to what to do to extricate Cabvision from the situation in which the Firm had placed it to exacting scrutiny. Mr Bacon considered the proper and reasonable costs for the work actually done amounted to £60,617. He was not challenged on this conclusion. I accept it as a starting point.
158. Mr Pooles QC then argued that all of this work was done for the three joined defendants (Cabvision, Mr da Costa and KPM) only one of whom was a claimant in this action. Whilst Cabvision might be jointly and severally liable for the entirety of the bill presented by Mr Jens Hills, it had rights of contribution against Mr da Costa and KPM and I therefore ought to take only one third of the reasonable costs as being damages recoverable by Cabvision.
159. This was point was only taken in closing. Mr Bacon appeared in his report to suggest that there was no basis for any apportionment. In consequence there was no examination of who was Mr Jens Hills client for the purpose of the Costs Proceedings: nor was I taken to the terms of the retainer. In these circumstances I am not going to assume that throughout Mr Jens Hills acted for all three joined defendants, or that there is a liability to contribute equally. I shall proceed on the footing that Cabvision was the client and Cabvision is liable for Mr Jens Hills' costs.
160. The question then is whether there is sufficient evidence for me to conclude that Cabvision has proved that but for its joinder it would not have had to spend anything in relation to the Costs Proceedings. There is not. I accept the force of Mr Pooles QC's submission that if other people were to be brought into the Costs Proceedings then it is extremely unlikely that Cabvision could have escaped involvement entirely: and for a successful settlement everybody would have to be bound one way or another. The difficulty is how to factor this into the award. I have concluded that if Cabvision had avoided becoming a defendant to the Costs Proceedings in September 2004 it is likely still to have spent approximately £15,000 (one quarter of the proper costs spend, and about 25 hours at Mr Jens Hills uplifted hourly charge) between then and the settlement in November 2005, establishing its position as against Martineau Johnson and as against the other potential paying parties (of whom the Individual Defendants would have become increasingly hostile in response to Cabvision's accusations levelled against them). I would therefore award damages in the sum of £45,000.
161. On this evidence I hold secondly that Cabvision has failed to make out any broad retainer of the nature for which it contends in relation to completion of the TTT scheme. Three things stand out with startling clarity:-

(a) The entire focus of the Firm's activities was on the banking transaction, and upon the relations between those who had previously been represented by Pinsents and Martineau Johnson on the one side and the banks represented by DLA and Dundas & Wilson on the other, with DLA setting the agenda of the matters to be dealt with. The "completion" (itself a somewhat loaded term) represented drawdown of an existing Facility and the entry into various banking transactions (supported by documents generated for that purpose). Nobody ever asked the Firm to stand back and look at the transaction overall (including the existing ICT Software agreement and the approved commercial agreements). Nobody asked the Firm to calculate what TTT would be paying and how many licences that represented. The only person to whose attention that matter was drawn was Mr Jens Hills in the course of his preparation of the Board Minute. I do not say that the reference imposed upon him a duty to calculate the consideration: but it does emphasise the Mr Southall cannot have been required to do so.

(b) The Firm had been brought in only to be present at the execution of the documents to give comfort to the banks and to avoid a redrafting the transaction documents, and every record of its retainer and every reference to its retainer (including references by Cabvision and Mr Jens Hills) so confine it. Mr Jens Hills' Memorandum is particularly telling.

(c) Mr Southall was acutely conscious both of the limited scope of his retainer and of the potential for conflicts of interest. It is extremely unlikely that he would have accepted any retainer to look after Cabvision's interests, especially since he had invited Mr Jens Hills to attend for that purpose (and Mr Jens Hills' redraft of the Board Minutes specifically so recognised).

162. Nobody says that Mr Southall was ever asked to consider the position of Cabvision and the amount of money it would receive under the already existing ICT Software Purchase agreement (and certainly nobody agreed to pay him for so doing). All the direct evidence says that Mr Southall was asked to attend to the costs dispute and to oversee execution of the banking documents (whether one looks at the documents or considers the terms of Mr Sharp's written and oral evidence). It is impossible to infer or imply some other retainer to consider Cabvision's cash position after the banking documents had been completed. The only ground advanced is receipt of knowledge of the terms of a document (a schedule referring to "receivables", or a Drawdown Notice, or a funds flow statement). But receipt of a document does not create a duty to advise upon its terms and implications, especially a duty to advise someone who was neither the creator nor the addressee of the document, and particularly where the document was received in the course of performing some other retainer.
163. Mr Oliver QC argued that the existence of some implied retainer relating to ascertaining that the full purchase price payable under the ICT software agreement had in fact been paid was not absolutely ruled out by a recognition that the Firm's only task was to oversee signature of documents and not to advise upon content or effect of the documents. Payment of the purchase money is due under the ICT software purchase agreement did not concern advice upon the content of the ICT purchase agreement or advice upon the effect of the ICT purchase agreement but was ensuring that the existing agreement was "executed" (in the sense that an executory obligation was performed). But this is to play with the meaning of the word "execution". The Firm was engaged to oversee signature of documents that were not yet binding, not performance of documents that had been in existence for months.
164. In my judgment the "escrow" argument has no weight. The Firm may well have held the completed documents on 2 April 2004 pending fulfilment of a condition: but that condition related to final agreement upon the size of the relevant deposits (having regard to the interest rates obtaining on 5 April 2004) and movement of funds between the banks. It had nothing to do with agreement upon the number of licences for which TTT was to pay Cabvision and whether payment in full had been made. Nobody gave Mr Southall any instructions on that matter. (Indeed I do not think it was suggested in Cabvision's evidence that Mr Southall was, for example, ever told that the strict terms of the ICT Software Purchase agreement had been departed from and a licence fee of £7500 per taxi substituted).
165. In my judgment "the continuing duty" argument has no weight. Once the banking documents had been signed and the relevant funds had flowed from one bank to another Firm had done that which it had been asked to do. I agree with Mister Pooles QC that the position here is effectively covered by Gold v Mincoff Science & Gold [2001] Lloyd's Rep PN 423. The argument was effectively not pursued at trial.
166. In the result I dismiss this head of claim. But I award Cabvision £45,000 for the breach of the costs retainer.
167. In respect of each of the ways Cabvision has chosen to put its claim I have been concerned to see whether Cabvision has adduced sufficient evidence in support of the charges made against the Individual Defendants. I have not been concerned to see whether in other respects Cabvision was well served by the Tower Group or whether TTT was competently supervised and managed. I have not addressed what I suspect were Mr da Costa's real concerns – the management of TTT after the drawdown and the manner in which the five supplemental schemes were promoted (especially at Cannes). But this was determined by the form of the pleaded case and the forms of liability it sought to establish.
168. I have also had some harsh things to say about Mr Jens Hills as a litigator. It should be recorded that as a commercial solicitor addressing technical issues he proved himself meticulous in approach and unstinting in effort.
169. I will hand down this judgment on 21 December 2009. I do not expect the attendance of legal representatives at the formal hearing. I will adjourn the question of costs and any application for permission to appeal to an early date in next term to be fixed through the usual channels. I will extend time accordingly.

Mr Justice Norris

170. December 2009