Mrs Justice Sharp:
Introduction
1.
The Claimant in this action is Withers LLP (“Withers”), a firm of solicitors.
Withers acted for Mrs Harrison,
the Defendant to these proceedings, and a former client, between November 2005
and October 2007 in relation to a dispute between Mrs Harrison and her former
husband John Harrison. The dispute arose out of ancillary relief proceedings
between Mr and Mrs Harrison in the Family Division of the High Court, and the
judgment handed down in those ancillary proceedings on 30 September 2002, by Recorder Florence Baron QC (now Baron J): “the Baron judgment”.
2.
Withers now sues Mrs Harrison for the sum of £93,992.37 plus interest in
respect of unpaid bills for professional charges and disbursements incurred
between 1 July 2007 and 26 October 2007. Mrs Harrison’s defence to the action
consists of a counterclaim for negligence
against Withers. Central to the claim of negligence is advice given to Mrs
Harrison by Withers, in relation to proceedings brought by Mrs Harrison
against Mr Harrison in the Queen’s Bench Division of the High Court (HQ07X00297
– “the QB proceedings”) to set aside the Baron judgment on the grounds that it
was obtained by fraud or material non-disclosure. Mrs Harrison obtained a
freezing injunction in the QB proceedings, but those proceedings came to an end
when Mr Harrison obtained summary judgment in respect of Mrs Harrison’s claim.
3.
It is Mrs Harrison’s case that the QB proceedings were hopeless and
would not have been brought by her but for the negligent advice she was given.
In consequence, it is said that Withers is not entitled to be paid for work
done or attributable to the claim, and Mrs Harrison is entitled to damages in
respect of the costs she became liable to or agreed to pay to Mr Harrison,
after the QB proceedings were struck out.
4.
It is said by Withers that Mrs Harrison now seeks to blame Withers for
what were in fact the consequences of her own reckless refusal to accept or
follow the advice that she was given. It is said that Withers was not negligent
in advising that there was a proper case to argue that the Baron judgment
should be set aside, and that Mrs Harrison was warned against proceeding with
her claim, or bringing an application for a freezing injunction, given the
substantial risks involved. It is said that Mrs Harrison incurred the
substantial legal costs she did (both her own and Mr Harrison’s for which she
became liable) not because of any negligent advice she received, but because
she quite simply refused to accept or follow the advice she was given.
The evidence
5.
The parties have made available to me a very large amount of documentation,
including the material available in the ancillary relief proceedings. In
addition, I have heard evidence for Withers from the legal team who advised Mrs
Harrison at all material times: Mr Andrew Ford and Mr Andrew Wass from Withers;
and Mr John Wardell QC and Miss Tiffany Scott of counsel. Mrs Harrison gave
evidence on her own behalf. With the odd exception, the numerous conferences
and consultations which took place are evidenced by attendance notes (often
more than one) taken at the time by one or other of the lawyers present. The
content of the attendance notes, where there was more than one, in substance
corroborated each other, and supported the evidence given by the Withers
witnesses. Although Mrs Harrison disputes their accuracy in certain respects,
it is important to note at the outset that I am entirely satisfied that the notes
I have seen are an accurate record of what was said on each occasion, though,
inevitably, they are not a complete record, and cannot convey the precise tone
of the consultations about which I heard oral evidence.
6.
Insofar as what follows was contentious at the trial (and a great deal
of it was not) it represents my findings on the evidence.
The history/factual background
7.
Mr and Mrs Harrison were married in 1988 when Mrs Harrison was in her
early thirties. They had two children, born in 1990 and 1994. It is said in the
Baron judgment that both parties had successful working lives before the
marriage: Mr Harrison was a solicitor; Mrs Harrison had a public relations
business and then set up a company called Uniquely Australian Pty Limited
(“UA”) selling Australian products. The marriage was obviously not a happy one
and there had been a number of separations before the parties finally separated
in December 2000.
8.
The divorce petition
was presented on 5 December 2000 and the parties were eventually divorced in
November 2002.
9.
Amongst the matters at issue in the ancillary relief proceedings, were
the value of various assets owned by Mr Harrison, in particular, of two
companies, one of which he had sold, Fastcash Limited, (Fastcash) and one of
which was still operating, Interchange Organisation Limited (Interchange) also
known as FirstrateFX and incorporated under the name The London Cash Exchange
Wholesale Limited (or LCE).
10.
Question 1 of Mrs Harrison’s Fourth Questionnaire in the ancillary
relief proceedings required Mr Harrison to disclose bank statements of
his accounts and those of his named businesses, including FirstrateFX (and
therefore Interchange). On 27 May 2002 at the pre trial review hearing of the
ancillary relief proceedings before Black J, as she then was, Mr Harrison’s
counsel stated that all such statements had been disclosed: he said Mrs
Harrison had been provided with “every single bank statement for [Mr Harrison]
and the businesses from separation.” As a result, Question 1 was struck
through and Mr Harrison was ordered to reply to Mrs Harrison’s questionnaire,
as now amended by the court.
11.
The ancillary relief hearing took place in July 2002 over 5 days before
Baron J.
Fastcash
12.
Fastcash was a cheque cashing/foreign exchange business with retail
outlets, and was incorporated in August 1997. Mr Harrison owned 90 per cent of
the shares. (Baron J accepted Mr Harrison’s case that the remaining 10 per cent
were not his, but were held by a nominee for a Mr Richard Cook). By a sale
agreement dated 5 December 2000 Fastcash was sold to Dollar Financial (UK)
Limited (Dollar), the British subsidiary of a US company together with a
company called London Cash Exchange Ltd. The negotiations for the sale of
Fastcash were kept secret from Mrs Harrison and when she discovered the sale
agreement by accident, she made an application for a freezing injunction against
Mr Harrison which she obtained from Bodey J on 12 December 2000.
13.
The price paid for Fastcash consisted of two elements: £1.9 million in
loan notes, plus an agreed figure (£120,000) for the net assets and an earn-out
based on a complex sliding scale relating to profits over the following
calendar year – 2001. Baron J found the earn-out or deferred consideration -
the precise figure for which had yet to be determined - to be £945,945. She
did not accept Mrs Harrison’s contention that the earn-out had yet to be
determined because Mr Harrison wished to make a further “secret profit”.
Interchange
14.
Interchange was incorporated in June 2000. It provided wholesale cash to
retail “money shop” outlets, taking a percentage commission on the cash
provided. Its history was dealt with by Baron J as follows:
“In December 2000, the Husband [Mr Harrison] considered that
Interchange had a rosy future. He hoped that it would service all Dollar’s cash
needs in the long-term and that he could groom it for sale to that organisation
within a 2 year period. In an affidavit deposed to in December 2000, the Husband
said … “I anticipate that within 24 months Dollar Group would unhesitatingly
acquire this business for a substantial sum”.
Despite this assertion, the Husband’s expectations in that
regard have not come to pass because Dollar decided to provide its cash
requirements on an in-house basis (save for some surplus foreign exchange). The
result is that the Husband has had to seek new sources of business for
Interchange.
When the earn-out period ended, Interchange began to operate on
a commercial basis and started to trade effectively in January 2002. The
enterprise currently operates from rented offices in Bryanston Street with a
total of 3 members of staff (apart from the Husband). Since January the Husband
has taken several steps to enhance and support the business. In particular, he
has introduced cash (via Director’s loan) of some £318,000 and he has recruited
a key employee called Ilyas Azam (who has valuable contacts within the trade),
he has sought shop front premises near Marble Arch (at an annual rent of some
£85,000) because he hopes that a retail presence will help to cover overheads.
The Husband is very hopeful that this business will succeed but
it is early days. The Wife [Mrs Harrison] has sought to value this business.
She instructed Miss Pincott to seek to establish its value and this became a
hotly contested issue before me. In her second report, Miss Pincott said that,
although she could not value the business, it might be worth as much as £1.6
million. This calculation was based on an extrapolation of 12 days trading on a
straight-line basis. I find this attempt to have been wholly fanciful. Next (in
her third report), Miss Pincott sought to produce a more refined calculation
based upon the companies daily reconciliation sheets for a 4 month period.”
15.
The two expert accountants who gave evidence before Baron J, Miss
Pincott and Mr Harrison’s expert, Mr Lawrence, agreed Interchange was not
saleable because of its short period of trading and lack of track record. They
disagreed however as to its value. Mr Lawrence considered it was valueless,
because of its lack of marketability and its current loss making position, a
conclusion he drew from its management accounts produced by Mr Harrison, which showed
Interchange trading at a loss and which in Mr Lawrence’s opinion was the best
basis for establishing its real trading to date.
16.
In her second report to which Baron J referred, Miss Pincott used some
daily reconciliation statements showing daily cash movements, less some
expenses, for Interchange during two periods in April 2002 to estimate the
profitability of Interchange. Mrs Harrison said the daily reconciliation sheets
had come into her possession from anonymous sources (and I shall refer to them,
as did Baron J, as the Hildebrand documents; see further paragraph 19 below). The
second report and the Hildebrand documents on which it was based were provided
to Mr Harrison’s solicitors on 24 May 2002, the Friday before the pre-trial
review before Black J on the 27 May.
17.
Miss Pincott also used the Hildebrand documents to assist her in
producing her third report, to which Baron J also referred. Miss Pincott concluded
Interchange had made a profit of £22,000 over the best 4 month period (February
to May 2002) which she then annualised. She then enhanced the annualised figure
in expectation of an increase in profits, and applied a multiplier 4 to arrive
at a bottom line valuation of £648,000. In contrast to Mr Lawrence, she
decided to ignore the management accounts which showed trading at a loss.
18.
Miss Pincott’s third report did not find any more favour with Baron J
than her second had and Baron J had no hesitation in preferring Mr Lawrence’s
evidence and approach. Baron J said she considered “Miss Pincott’s valuation
was wholly contrived and speculative I do not consider that the business has
any present value and the attempt to give it a value was a simply waste of
costs.” In the result, the only asset value Baron J attributed to
Interchange was the investment of £318,000 of family money made in it since
December 2000.
The Hildebrand documents
19.
At the trial, it was alleged by Mr Harrison that Interchange’s premises
had been broken into; and that the Hildebrand documents had been tampered with
and were therefore, by inference, unreliable. Mr Radwan, an employee of
Interchange, and a witness for Mr Harrison, said in his written evidence that
the break in had occurred on 9/10 May 2002, he had suspected Interchange’s
computers had been tampered with, and the incident had been reported to the
police on the 19 or 20 May 2002 (thus, before the PTR when Miss
Pincott’s second report was given to Mr Harrison). Dean Stinton, also an
employee of Interchange and a witness for Mr Harrison said in evidence that he
also suspected someone had entered the office on evening of 9 May 2002 without authorisation. He discovered one computer had been used by someone before
he arrived for work on 10 May 2002, and represented to the court in his oral
evidence that he had accessed Interchange’s daily reconciliation sheets on 10
May and knew on that date that “numbers had been changed” so that “the
figures on the reconciliation sheet that morning did not match.” Baron J
accepted the evidence of Mr Harrison and his witnesses about the break-in and
considered they had given honest evidence about it.
20.
Baron J concluded that “Apart from causing a great deal of upset and
adding to the costs of these proceedings, the Hildebrand documents had not added
anything to the overall knowledge of the Husband’s wealth.” Although Baron
J was not prepared to find that Mrs Harrison had obtained the Hildebrand
documents unlawfully (Mrs Harrison denied employing private detectives to
obtain them) she rejected as improbable Mrs Harrison’s contention that the
documents had been sent to her by her husband or his employees in order to
discredit her.
The judge’s view overall
21.
There can be no doubt that Baron J was very critical of Mrs Harrison’s
case, Mrs Harrison herself and her approach to what, in Baron J’s view, should
have been a fairly straightforward matter.
22.
I cite as an example what Baron J said about Cash on Cars, a franchise
business bought by Mr Harrison, which he said, operated from 1998 until early
2001 when it operated only to collect outstanding debts:
“During this litigation the Wife claimed that the Husband had
deliberately chosen not to operate this business [Cash on Cars] in order to
reduce its value. It is her case that failure of the business “is cosmetic
and manufactured temporarily for the purpose of these proceedings”. She
claims that the Husband will revive it once this case has ended. In essence,
she asserts that the Husband has suppressed the true value of Cash on Cars to
her detriment. I do not find this allegation to be made out. I have taken into
account all the points which have been raised in her evidence and in the
careful written submissions of her Leading Counsel but I do not find any of
them convincing and I dismiss them all.”
23.
Baron J’s conclusions about Mrs Harrison were these.
“I have no doubt that the Wife has a number of good qualities.
In her youth, she was enterprising and worked hard. She worked during the
marriage and cared for the children. However, she has found her relationship
with the Husband to be a very hurtful experience and she struck me as a woman
who is now lonely and adrift. She is completely mistrustful of the Husband –
both as to his actions and motives. She may have had justification for her
concerns at the outset of these proceedings but I find that thereafter she has
failed to take a proportionate view of the assets and issues at stake in this
case.
Every part of the Husband’s evidence has been subject to the
closest scrutiny. He has been made to produce evidence to support virtually
every aspect of his disclosure. Despite this, the Wife has not managed to prove
that his presentation was other than broadly correct. Whilst some figures were
inaccurate, they were not such as to alter the overall asset position. The Wife
has described this case as “white collar crime with a divorce attached”. Having
seen her give her evidence, I consider that she still believes this statement.
She very bitter towards the Husband and feels that his actions have been geared
towards doing her down…..”
24.
Significantly, Baron J rejected Mrs Harrison’s evidence that Mr Harrison
had deliberately sought to misrepresent or suppress evidence of the true value
of his assets, and her views of Mrs Harrison are in pointed contrast with her view
of Mr Harrison which was as follows:
“The Husband came across as much less volatile individual than
the Wife. He was calm and more measured with an air of resignation about him.
It is clear that he failed to inform the Wife about the sale of
Fastcash. He says that he did not do so because he felt that she would have
interfered with the sale. He certainly hid his affair from the Wife and did not
tell the truth about moving in with Mrs Watson, when the parties separated in
December 2000.
Despite these points, I find that his presentation of his assets
has been fundamentally correct throughout and I consider that he has done his
best to make a success of his various business ventures. I note that, until the
sale of Fastcash, this family did not have any significant wealth.”
25.
Baron J also considered the costs incurred had been wholly
disproportionate to the assets or the issues involved. The costs estimates
showed Mrs Harrison had spent some £425,000 and Mr Harrison some £210,000. The
judge found the level of expenditure had made it difficult to resolve what
should have been a relatively straightforward case, and the erosion of assets
it had caused made it much more difficult to achieve a proper and fair solution.
26.
The blame for this was laid very firmly at Mrs Harrison’s door:
“The costs. (b) The Wife’s attitude to the Husband and
his disclosure. As set out above, she has described this litigation as “white
collar crime with a divorce attached”. She does not trust the Husband and she
has required every point to be verified, corroborated and checked. This has led
to a huge amount of disclosure – which, in turn, has increased the Husband’s
costs enormously. His costs are much higher than is usual for this type of
case.
(c) The Wife has pursued a number of issues relentlessly to
little purpose. In particular (i) the value of Cash on Cars, (ii) the current
value of Interchange and (iii) the many other issues which are set out in this
Judgment about which I have made specific findings.
The Wife’s costs are twice those of the Husband – she has
borrowed against her home to fund them. Clearly any person is entitled to spend
their own resources as they choose but I am of the view that that decision
cannot be allowed to distort a fair outcome to litigation.”
27.
In consequence, Baron J broadly adopted the Leadbetter
approach to costs. She decided the costs incurred should be added back above
the line before deciding on the proper distribution of assets, save for that
part of the costs which might not be recoverable. She added back 70 per cent of
the costs paid to date by each party, but omitted the costs still to be paid, which
the parties would have to find from their own resources (whoever was ordered to
pay them).
28.
In the result, she held in summary, that Mrs Harrison had net
liabilities of £46,152 and that Mr Harrison had net assets of £1,256,211. After
taking account of costs, she awarded Mrs Harrison a lump sum of £600,000 and
£10,000 a year (which has come to an end) and £10,000 a year to each of their
children, which continues. She made no order for the costs of the ancillary
relief proceedings themselves.
After the Baron judgment
29.
It is evident that Mrs Harrison was deeply dissatisfied with the Baron
judgment and remained convinced that Mr Harrison had defrauded her with the
assistance of his accountant and Dollar.
30.
In 2004 she instructed her personal accountant, Michael Coussens, to
investigate the matter further. She also employed private investigators to
assist.
31.
On 21 November 2005, Mrs Harrison first consulted Withers for advice as
to the merits of various claims she wished to bring against Mr Harrison, his
accountant, a Mr Nunn and Dollar. As she was alleging fraud and dishonesty
against Mr Harrison she was advised to speak to Mr Andrew Ford. Mr Ford is the
practice group leader of Withers’ Commercial Litigation and Fraud team. He
qualified as a solicitor in 1994, joined Withers in 1995 and became a partner
in 2002.
32.
Mrs Harrison’s firm belief that Mr Harrison, with the assistance of others,
had obtained the Baron judgment fraudulently and that he had hidden
considerable funds from the court, is evident from a detailed 8 page background
document she sent to Withers on or about 22 November 2005 describing her
intended claims. The background document is entitled “Background history to
V. Harrison’s civil litigation/trust claims arising from asset raiding/share
defraudment in respect of Fastcash Ltd, the London Cash Exchange Ltd, Cash on
Cars Ltd, the London Cash Exchange (Wholesale) Ltd, UA Importers Ltd and all
other assets (corporate & personal) held co-jointly as at July 2002”.
33.
On 25 November 2005 Mr Ford and Mr Andrew Wass, then an assistant
solicitor (now a partner) at Withers saw Mrs Harrison for the first time. From
then on, Mr Ford had the overall conduct of Mrs Harrison’s claim against Mr
Harrison assisted by Mr Wass, who carried out most of the day-to-day conduct of
the matter under the supervision of Mr Ford. At this first meeting, Mrs
Harrison explained that she wanted to bring a claim against Mr Harrison and his
associates, including Mr Harrison’s former accountant and Dollar. Her case as
set out in the background document and further e-mails she sent to Mr Ford on
28 and 29 November 2005 was that it was “clear as day” that she had been
the victim of fraud.
34.
After the meeting, Mr Ford sent Mrs Harrison an engagement letter
together with Withers’ terms of business, which she signed on 29 November 2005
and returned to confirm that Withers was instructed to act for her. In her
email of 29 November 2005, Mrs Harrison noted that the “costs appeared to be
steep versus divorce proceedings”. In his reply of the same date Mr Ford
said:
“I appreciate that the level of costs is high, but I want to be
realistic so that you understand what is involved if this matter is to be
pursued. I will keep costs as low as I can, but it is inevitable that such a
piece of litigation will be expensive.”
35.
Thereafter (and indeed throughout the period of the retainer), Mrs
Harrison produced further detailed documentation to support her case. This
included a long report dated 22 July 2005 prepared by Mr Coussens which unequivocally
supported her complaint that her former husband had deliberately misled the court
about the value of her assets with the assistance of Mr Nunn. His conclusions
were that:
i)
Mr Harrison had lied about damage to some opal panels and had
undervalued them by £99,610. (The panels were stock belonging to UA which by
then was jointly owned). In the ancillary relief proceedings Mrs Harrison
alleged they were worth £100,000 and Mr Harrison had deliberately undervalued
the panels at £20,000 on the basis they were warped and unsaleable. Baron J valued
them at £20,000, their written down stock value);
ii)
Dividends due to Mrs Harrison had been diverted by Mr Harrison;
iii)
Mr Harrison had lied in Court about the scope of the tax investigation
into Cash on Cars Limited, which he and his wife had set up after returning to
this country. As a result, Baron J was led to believe that his tax affairs were
in order and that he was reliable;
iv)
Mr Harrison had deliberately withheld the statutory accounts in respect
of Cash for Cars with the result that the Court was unable to make a
fully-informed decision as to the company’s value;
v)
There were various accounting anomalies in respect of management
accounts for Cash for Cars;
vi)
Mr Harrison had hidden the true value of the earn-out to which he was
entitled on the sale of Fastcash to Dollar. According to Dollar’s accounts, the
understatement totalled £1,107,555;
vii)
The value of Interchange had been understated by £1.62 million;
viii)
Mr Harrison had failed to disclose in his Form E the payment he had
received for the net current assets of Fastcash;
ix)
Mr Harrison had failed to disclose the payment he had received in
respect of the net current assets of Fastcash;
x)
Mr Harrison had failed to disclose two bank accounts in the name of
Interchange.
36.
According to Mr Coussens, the above list was not exhaustive and he was
able to identify other anomalies and discrepancies which showed that Mr
Harrison had given a “grossly distorted” view of his net worth in the
ancillary relief proceedings. In his view, Mrs Harrison had been “the victim
of obstruction and false testimony for which she has borne the full financial
burden”.
37.
In Mr Ford’s view the Coussens Report was full of assertions that lacked
convincing supporting evidence, but there was sufficient material to take the
matter forward. After an initial review of the materials supplied to him, he
met Mrs Harrison again, on 15 December 2005.
38.
During the course of their initial meetings Mr Ford explained to Mrs
Harrison (i) that an allegation of fraud could not be advanced without material
which established on the face of it a case of fraud; (ii) that she had to
produce new evidence rather than attempt to re-argue issues made before the
Family Division in the ancillary relief proceedings; (iii) that she would need
to bear in mind that any court considering her claim would start from the
position that she was a ‘woman scorned’ who was simply not happy with the
outcome of her divorce; and (iv) that she would need to be able to demonstrate
that the court had been materially misled, if she were to overturn the
decision.
39.
Mr Ford formed the view that Mrs Harrison was a bright woman who had
acquired a certain amount of legal knowledge, though she was not a lawyer.
She was adamant that she had been the victim of a fraud perpetrated by her husband
and she was determined to pursue him via the courts, whatever it took. But he
warned her that to undertake further legal proceedings against her former husband
in separate proceedings would be very expensive and of the emotional price that
she would have to pay, as to litigate something so personal would place her
under enormous strain. However, Mrs Harrison was determined to press on and confirmed
to Mr Ford that she was willing to spend money on legal costs. Mrs Harrison
said that she wanted to undertake as much of the background work as possible.
The instruction of counsel
40.
In January 2006, Mr John Wardell QC was instructed to advise on the
merits of the claims that Mrs Harrison wanted to bring against Mr Harrison, Mr
Nunn and Dollar (Mr Ford had advised instructing a senior junior but Mrs Harrison
opted to select a silk). Mr Wardell specialises in general commercial and
professional negligence work; and has a particular interest in civil fraud. He
was recommended by Mr Ford who had worked with him before.
Consultation with Mr Wardell on 26 January 2006
41.
In an e-mail of 20 January 2006 to Mr Wardell, to which he attached the
Baron judgment Mr Ford described Mrs Harrison’s grievance as follows:
“VH [Mrs Harrison] believes that JH [John Harrison], together
with his accountant (Ian Nunn of Nunn Hayward) conspired to take money out of
the assets owned jointly by John and Vivien. Further, she believes they
conspired to produce inaccurate financial details before the court, so that the
court was unaware of the size of assets available for distribution in the
divorce proceedings.
Nunn was, at one stage, Vivien's personal accountant as well as
accountant to the relevant companies. He has a track record of providing
misleading financial statements etc which have led to sanction.
We have been asked to see if we can bring a claim against JH,
Nunn (& ors) for conspiracy, negligence etc. VH does not want to go back
before the Family court as she has no confidence in their ability/willingness
to deal with her allegations, in the context of Family Proceedings.”
42.
Mr Wardell was also sent a copy of a bundle of documents prepared by Mrs
Harrison for the purpose of explaining to her lawyers why she was sure that she
had been defrauded by her former husband with the help of Mr Nunn and Dollar. Included
in it was the report from Mr Coussens, and summaries prepared by Mrs Harrison
dealing with the specific allegations made by her against her former husband
and Mr Nunn.
43.
Mr Wardell in his witness statement in these proceedings said this:
“The very confident language used by Mrs Harrison was reflected
in her demeanour and her instructions at the consultation at my chambers on 26 January 2006. She was very much of the view that she had a compelling and unanswerable
case that her former husband had deliberately misled the Court and she was keen
to issue proceedings against him, Mr Nunn and Dollar as soon as possible. Her
conviction that she had been cheated by Mr Harrison with the help of Mr Nunn
and Dollar never wavered. ”
44.
Mr Wardell shared Mr Ford’s view however, that the documentation was
much less convincing than Mrs Harrison and Mr Coussens appeared to believe. In
particular, although he did not have sufficient material to dismiss the
complaint out of hand, he said he did not see any proper basis for alleging
that Mr Nunn and Dollar were parties to a conspiracy. On the other hand, in his
view there were the makings of a case that her former husband had deliberately
misled the court and suppressed key documents.
45.
In this regard, Mr Wardell said he considered the following to be of
significance:
i)
The language of Dollar’s accounts tended to support the suggestion that
the earn-out was substantially higher. Mrs Harrison herself was convinced that
this was the case because the terms of the agreement with Dollar entitled Mr
Harrison to an enhanced payment if the new stores which had been opened at
around the time of the sale had in fact met their targets;
ii)
A private investigator engaged by Mrs Harrison had established that
Interchange had many more bank accounts than had been disclosed by Mr Harrison
at the time of the ancillary relief proceedings;
iii)
There was documentary evidence that, at least on one reading, appeared
to support Mr Coussens’ conclusions about the opal panels;
iv)
Mr Harrison had a history of conduct consistent with dishonesty: in
October 1995, when they lived in Canada, he cleared their joint bank accounts
and went to England leaving Mrs Harrison destitute. This prompted her to obtain
injunctions in both Canada and in England. After a reconciliation, the couple
moved to this country and set up Fastcash and other businesses. Mr Harrison
excluded Mrs Harrison from the business and then negotiated its sale without
telling her about it. On discovering some incriminating documents in the boot
of her car, Mrs Harrison was prompted to obtain yet another freezing order.
46.
In the circumstances, Mr Wardell said he was very concerned to try and
lower Mrs Harrison’s expectations and to ensure that she did not issue
proceedings before he had had the opportunity of getting to the bottom of her
complaints.
47.
He therefore made it clear both at this meeting and subsequent meetings
that Mrs Harrison would require solid evidence before she could proceed against
Mr Harrison for fraud or material non-disclosure. Having re-read the relevant
authorities and in particular Livesey v Jenkins [1985] 1 AC 424, he reached
the conclusion that in a matrimonial case material non-disclosure was of itself
a ground for setting aside a judgment.
48.
In an email of 30 January 2006 from Mr Ford to Mrs Harrison, Mr Ford said
he and Mr Wardell were both encouraged with the information that Mrs Harrison
had supplied during the consultation and considered it was worth her taking the
matter forward before evaluating the prospects of proving fraud at trial. Mrs
Harrison was asked to supply a set of the ancillary relief trial bundles and
for copies of relevant correspondence.
Investigations in 2006
49.
In the ensuing months, Mrs Harrison had many consultations with Mr
Wardell attended by Withers (on the 9 March 2006, 22 June 2006, 2 August 2006,
3 October 2006, and the 20 October 2006) during which the lawyers endeavoured to
establish whether there was any substance to Mrs Harrison’s complaints and evidence
to corroborate them.
50.
Mrs Harrison produced amongst other things, the set of the trial bundles
from the ancillary relief proceedings and a considerable quantity of further
material which she claimed supported her case against Mr Harrison, Mr Nunn and
Dollar.
51.
Information was also provided deriving from her private investigator
about various bank accounts. It suggested Interchange had had, since 2001, two
sterling accounts at the Cavendish Square branch of the Royal Bank of Scotland
in use at the time of the ancillary relief proceedings. These were accounts numbered
10178400 and 10153726 (“the 726 account”). The account numbered 10178400 had a
balance of approximately £1,839,200 in May 2005. In addition, there were at
least three other accounts in Interchange’s name (numbered 10186756, 10192624
and 10192632).
52.
Mrs Harrison’s firm instructions to Withers unequivocally supported by
Mr Coussens were that these accounts including the 726 account had not been
disclosed during the ancillary relief proceedings. There were also lists of Mr
Harrison’s disclosed bank accounts in the ancillary relief proceedings including
a schedule prepared by Messrs Sears Tooth (who acted for Mrs Harrison in the
ancillary relief proceedings) setting out Mr Harrison’s bank statement
disclosure as at 25 September 2002, and which did not include these accounts.
53.
Possibly in August 2006, but certainly during this period, further
evidence emerged from a police report which concerned the date upon which Mr
Harrison’s employees had reported the break-in at Interchange’s offices, to the
police. The police report confirmed that the break-in had been reported on the 24 May 2000, that is, after the PTR before Black J, when Mr Harrison and his
advisers had been given Miss Pincott’s second report which used the Hildebrand
documents (the daily reconciliation sheets) to arrive at a valuation for
Interchange of as much as £1.68 million.
54.
Mr Wardell considered the police report to be potentially significant to
Mrs Harrison’s case for the reasons explained in his witness evidence:
“I think it important that I explain why I considered that it
was a significant document. Mr Harrison’s evidence at the ancillary relief
hearing had been that, since Dollar had brought the foreign exchange wholesale
operation in-house, Interchange was not going to be nearly so successful as he
had hoped. He supported his case about the lack of profitability by reference
to management accounts that he had produced in advance of the PTR in May 2002.
The information in the management accounts could not be reconciled with a
number of daily reconciliation sheets that Mrs Harrison said she had received
from an anonymous source. On the strength of these documents, Mrs Harrison’s
expert valued Interchange as being worth as much as £1.68 million. This report
was I believe served on Mr Harrison either at or shortly before the PTR, at
which various disclosure orders were made against Mr Harrison. Later that day,
Mr Radwan, an employee and director of Interchange, reported to the police that
there had been a break-in earlier on in the month and he accused Mrs Harrison
for being responsible for the break-in.
At the trial, evidence was given on behalf of Mr Harrison that
the computers had been tampered with during the break-in giving rise to the
implication that no reliance could be placed on the reconciliation sheets that
had been sent to Mrs Harrison. He produced other reconciliation sheets which
supported a much lower profit figure and a much lower valuation. Mrs Justice
Baron concluded that the valuation methodology adopted by Mrs Harrison’s valuer
was flawed and she eventually concluded that the company had no positive value
at all.
In the circumstances, there was a compelling case that the
break-in had been invented to throw doubt on the validity of the documents that
had been obtained by Mrs Harrison. If this were the case, then it was likely
that the reconciliation sheets that Mrs Harrison had received were accurate.
This being so, I regarded it as obvious that, if Mrs Justice Baron had been
persuaded that the break-in had been invented in order to raise doubts about
the reconciliation sheets, she would have been likely to come up with a
positive value for Interchange. However, as I made clear to Mrs Harrison both
before the issue of proceedings and subsequently (see in particular the Note
for Counsel dated 24 October 2007), I was always of the view that, to be
confident of establishing that the break-in had been invented to cast doubt on
the reconciliation sheets and to show that Baron J would probably have come up
with a positive value for Interchange, the point about the break-in needed to
be linked to the failure to disclose bank accounts. In other words, the
evidence of a break-in was potentially of great significance if Mrs Harrison were
right about the hidden assets in the non-disclosed bank accounts but was not of
itself sufficiently compelling to justify running it as a stand-alone issue of
fraud.”
55.
During this period (on 7 July 2006) Mr Ford also sent Mrs Harrison a
note of advice written by a member of Withers’ Family Law department, the
purpose of which was to identify exactly what Mrs Harrison would need to do to
overturn the Baron Judgment. The note referred in terms to the judgment in Livesey
v Jenkins [1985] AC 424 and various passages from Lord Brandon’s speech, including
one in which he said:
“[i]t will only be in cases where the absence of full and frank
disclosure has led the Court making…an order that is substantially different
from the order which would have been made if such disclosure had taken place
that a case for setting aside can possibly be made.” And “Parties who apply to
set aside orders on the grounds of failure to disclose some relatively minor
matter or matters, the disclosure of which would not have made a substantial
difference to the order which the court would have made as approved, are likely
to find their applications being [summarily] dismissed, with costs against
them…”
56.
By the end of this period, Mrs Harrison was advised that there was
insufficient evidence to justify pursuing claims against Mr Nunn or Dollar but
that there was merit in investigating Mrs Harrison’s allegations against Mr
Harrison. In particular that Mr Harrison had received approximately $1.3
million more from the sale of Fastcash and LCE to Dollar than he had disclosed
in the ancillary relief proceedings, and that he had concealed the existence of
various bank accounts containing over £1 million held at RBS in relation to
Interchange.
57.
The view was taken that the Queen’s Bench Division would be more rigorous
on the issue of fraud than the Family Division. Pursuant to an agreed strategy,
therefore, the decision was made first, to obtain permission from the Family
Division to use the documents disclosed in the ancillary relief proceedings, and
then, as Withers advised Mrs Harrison, to obtain disclosure from RBS to verify
the information obtained from her private investigators before pursuing any
claim against Mr Harrison to set aside the Baron judgment or applying for a
freezing injunction against him.
58.
Mrs Harrison considered an application for a freezing injunction was
necessary for reasons explained by Mr Wardell:
“Mrs Harrison was very concerned that, if Mr Harrison got wind
of what was happening, he would take steps to dissipate his assets. Since she
had been compelled to obtain freezing orders on at least two previous
occasions, her concern about this seemed entirely justified. This is why at
that time, we were not thinking of making a similar application against Dollar
because she was convinced that it would be impossible to prevent word of that
getting back to Mr Harrison.”
59.
Mr Wardell had discussed the proposed strategy with another silk. Mr
Wardell said:
“As I am not a matrimonial practitioner, I thought it sensible
to seek the advice of a matrimonial silk to ensure that the proposed strategy
did not conflict with any guidance given by the Family Division and would not
otherwise be thought to be inappropriate. I discussed my strategy with Charles
Howard QC, who specialises in financial provision and I was pleased to discover
that he considered that the proposed course was appropriate.”
The RBS disclosure
60.
On 16 January 2007 therefore, Mr Wardell applied on Mrs
Harrison’s behalf, to Macfarlane J in the Family Division of the High Court.
Macfarlane J granted Mrs Harrison permission to use the documents disclosed in
the ancillary relief proceedings including the witness statements, the
transcripts of the hearings and the Baron judgment. Such documents were to be
used in support of the proposed applications for a disclosure order against RBS
and a possible claim to set aside the Baron judgment on the grounds of fraud
and/or material non-disclosure.
61.
On 26 January 2007, the claim form in the QB proceedings to set aside
the Baron judgment was issued.
62.
On 30 January 2007, junior counsel then acting for Mrs Harrison applied to
Grigson J and obtained a gagging order against RBS. On 6 February 2007 there
followed the application for a disclosure order against RBS for disclosure of
bank statements for accounts in the name of, inter alia, Interchange and/or LCE.
The disclosure order was granted by Dobbs J.
63.
The basis of the application before Dobbs J was set out in Mrs
Harrison’s witness statement dated 16 January 2007. At paragraph 5 of that
statement, Mrs Harrison stated:
“I have now received information that Interchange has, and has
had since February 2001, accounts at the Cavendish Square branch of the Royal
Bank of Scotland which were not disclosed within the ancillary relief
proceedings in 2001 and 2002 despite the fact that Mr Harrison was ordered to
produce all the bank statements on all of Interchange’s accounts. Assuming that
the information I have been given is accurate and that these accounts were
being used in 2001 and 2002 (which I have very good reason to believe is the
case), I will then have conclusive proof of the fact that not only did my
former husband lie on oath in our ancillary relief proceedings but that he did
so in order to hide the true value of the joint assets.”
64.
At paragraphs 35-39 of her witness statement Mrs Harrison provided
justification for the application for disclosure against RBS:
“In addition, I have learned through information provided by one
private investigator, which has been corroborated by other private
investigators, that Mr Harrison hid from the Court the existence of a
number of Interchange’s bank accounts. I refer to the management accounts that
Mr Harrison produced for Interchange exhibited at VRH7. These showed
that Interchange had two sterling accounts with the Royal Bank of Scotland
Cavendish Square branch, numbered 10153750 and 10132869. Interchange also
had a Canadian dollar account and a US dollar account. Recent information
provided by private investigators has shown that at the date of the hearing,
Interchange had two other sterling accounts at the same branch (numbered
10178400 and 10153726) which were opened on 19 February 2001 and were in use at the time of the proceedings. Indeed account number 10178400 apparently had
a balance of approximately £1,839,200 in May 2005. In addition, there are at
least three other accounts in Interchange’s name, namely, 10186756, 10192624
and 10192632. The existence of these further accounts was never disclosed at
the time.
At the PTR before Mrs Justice Black on 27 May 2002 Mr Harrison’s counsel told the Judge that he had disclosed to us ‘every single bank
statement for my client and the businesses from separation.’ I attach at VRH7
a copy of the transcript together with a schedule drafted by Sears Tooth
illustrating Mr Harrison’s bank statement disclosure as at 25 September 2002,
and extracts from the management accounts of The Interchange Organization
Limited showing the accounts held at Royal Bank of Scotland in 2002. In
reliance on this assurance I limited the information sought in my
questionnaire. In the light of the information obtained through private
investigators, this appears to have been a deliberate misrepresentation. I
should perhaps add that I have informed the police who are investigating Mr
Harrison’s financial affairs and actions taken by our joint accountant about
these bank accounts. In my dealings with DS Lambert who has been liaising
directly with Revenue to confirm the factual evidence, I was given the
impression that the information I had provided was accurate, including the fact
that there were undisclosed bank accounts.
The reason why it is necessary to make an early application for
disclosure of these accounts is simple. If, as I expect may well be the case,
some or all of these accounts were not dormant at the time, then I will have
conclusive proof that Mr Harrison lied to the Court in order to suppress the
value of Interchange. I would then not hesitate to proceed with my intended
action to set aside the judgment delivered by Mrs Justice Baron in September
2002, and bring to account/fully investigate the role which others may have
played. On the other hand, if the information I have been given turns out to be
wholly inaccurate, I would want the opportunity of considering whether to
proceed with my claim even though, as I pointed out above, I have compelling
evidence that Mr Harrison’s evidence on other matters was untruthful.
To ensure that there is no possibility of any active bank
accounts remaining hidden, I would ask that the disclosure order should extend
to any accounts in the name of the following entities set out in Schedule 2 of
this witness statement, namely: FirstrateFX Limited, now known as V5 Car Loans
Limited (company number 3747252), First Rate Foreign Exchange Limited, now
known as Interchange Retail Limited (company number 4168560), The First Rate
Group Limited (company number 4169370), and The London Cash Exchange Wholesale
Limited, now known as The Interchange Organization Limited (company number
4019832). Mr Harrison’s evidence before Mrs Justice Baron was that these
companies were all dormant and that they were simple “reservations of name”
that he made when he renamed Interchange as FirstrateFX. Bearing in mind the
various discoveries I have made, I consider that there are powerful reasons for
not taking what he said about these other companies at face value.
Finally, I should make it clear that if the disclosure exercise
shows what I anticipate it will show, then I will immediately be seeking
wide-ranging injunctive relief against Mr Harrison. It is for this reason that
I have asked that the Royal Bank of Scotland should not divulge the existence
of this application to anyone else including Mr Harrison, any of Mr Harrison’s
associates, or any officer, servant or agent of Interchange or any associated
company. In the light of his previous conduct, Mr Harrison would not hesitate
to take steps to dissipate his assets if he found out what was going on.”
65.
Mrs Harrison’s witness statement was supported by a list of disclosed
bank accounts which Mrs Harrison verified and exhibited to her statement and by
Mr Coussens’ report dated 22 July 2005, also exhibited to her statement. In
section 9 of his report, Mr Coussens said as follows:
“It has been brought to my attention that a bank account was
opened at The Royal Bank of Scotland Cavendish Square branch on 19th February 2001. The account number is 10178400 and the balance in hand at
June 2005 is £1,839,241. This account was not disclosed to the Court in bundles
“J” (Burgundy) and “K” (Yellow).
A further account was opened at the same branch, number
10153726, and its existence was also undisclosed.
The disclosure of management accounts, Court bundle page number
000204, being the final updating disclosure on which the Court and Grant
Thornton relied shows quite clearly the individual bank accounts under current
assets which exclude the two accounts mentioned above.
The Court bundle list of business accounts disclosed also
excluded these accounts.”
66.
The order made by Dobbs J limited disclosure of the bank statements to
Mrs Harrison’s legal advisers. Mrs Harrison was not entitled to inspect copies
of the documents disclosed but her legal advisers were permitted to inform Mrs
Harrison of information in the documents disclosed including balances on the accounts
and any date or dates deemed material.
67.
On 8 February 2007 under cover of a letter from the Group Litigation
Department, RBS disclosed various bank statements. The letter was headed: “Production
order: Interchange Organisation Ltd.” The first line said: “Please find
enclosed the following documents in relation to the Production Order for our
customer, Interchange Organisation Ltd.” Amongst the bank statements now
disclosed were those for the 726 account.
68.
The 726 statements were headed: “RBS Re Interchange Organization Ltd”.
The address was stated to be “1st Floor Argyll House” on the
first 9 sheets, “1st Floor Argyll House 246 Regent Street” on the 10th
and “1st Floor, Argyll House 246 Regent Street, Depot Code 190” on
the other three.
69.
Mr Wass inspected the RBS disclosure, including the bank statements for
the 726 account. On 12 February 2007 Mr Wass sent Mrs Harrison a note on
the RBS disclosure. His note recorded that only one account (the 726 account)
was operating during the ancillary relief proceedings and that it contained
£25,000 throughout the proceedings. Mr Wass noted that it should have been
disclosed by Mr Harrison in 2002, but had never had a balance of more than
£26,000 in it.
70.
In her email in reply sent to Mr Wass on 12 February 2007 Mrs Harrison
wrote that she was “delighted to have successfully proven further
non-disclosure of the bank accounts” and said that it “destroyed Baron’s
presumption of innocence and honesty in JH’s [Mr Harrison’s] favour, by
this latest proof positive of non-disclosure of bank accounts…the case for
fraud could not now be better proven.”
71.
However, contrary to the position as Mrs Harrison and Withers then evidently
believed it to be, the 726 account was not an Interchange account, but an RBS account
in which Interchange had a beneficial interest; and though the 726 account (and
its bank statements) had not been disclosed in the ancillary relief proceedings,
the £25,000 in the 726 account had been. In Interchange’s Balance Sheet dated
24 April 2002 (a document exhibited by Mrs Harrison to her witness statement of
16 January 2007) it was disclosed in what was described as “Treasury Account”,
containing £25,000 under the heading “Current Assets”.
Disclosure application against Dollar
72.
Following the disclosure from RBS the amount in the 726 account was
sufficiently small to raise the question whether to seek similar pre-action
disclosure from Dollar. The advice of counsel and Withers, set out in an e-mail
from Mr Wass dated 14 March 2007 was that if Mrs Harrison was determined to
proceed whatever the outcome of the Dollar application, she should get on with
the claim, and seek disclosure from Dollar at the same time. Mrs Harrison
decided not to follow this advice but to apply for disclosure from Dollar.
73.
On 22 March 2007, Miss Tiffany Scott of counsel was first instructed as
junior counsel for Mrs Harrison (in place of junior counsel who had previously
been instructed). She is a junior barrister in the same chambers as Mr Wardell,
she was then of some 9 years call, and practices in the field of commercial
chancery work.
74.
On 30 March 2007, Miss Scott applied for and obtained a gagging order
against Dollar from Swift J and then a disclosure order against Dollar from
Jack J on 18 April 2007.
75.
On or about 17 May 2007, Dollar provided a bundle of disclosed documents
which showed that the inference drawn by Mrs Harrison that Mr Harrison had
received $1.3 million more for the sale of Fastcash and LCE than he had
disclosed was mistaken.
76.
The implications of the Dollar disclosure were discussed in detail at
two telephone conferences between Mr Wardell, Ms Scott and Mrs Harrison which
took place on 21 and 24 May 2007. Meanwhile, an order was obtained extending
the time for service of the claim form in the QB proceedings to 26 July 2007.
77.
As the notes of the two consultations show, Mrs Harrison and Mr Coussens
were convinced the Dollar disclosure showed Mr Harrison had received
substantially more on the sale of the business than he had previously disclosed
(though Mr Coussens was later to change his mind). Mr Wardell did not
agree, and said so at the telephone consultation with Mrs Harrison on 24 May 2007. He advised Mrs Harrison, as he had before, that she needed solid
evidence to go ahead with her claim. He also advised her that the evidence of
the undisclosed bank account containing £25,000 was not enough on its own; they
needed more than that to be sure a judge would set the judgment aside because
Mr Harrison may convince a judge that he had simply overlooked disclosing the
account which may lead the judge to refuse to set aside the judgment.
78.
Further inquiries were then made of Dollar on Mrs Harrison’s
instructions, to clarify various points raised on the Dollar disclosure, and to
ensure the inference drawn by Mrs Harrison from Dollar’s accounts was indeed
mistaken.
The consultation of the 25 June 2007
79.
On 25 June 2007 a further lengthy consultation with Mr Wardell took
place, attended by Mrs Harrison, Miss Scott and Mr Wass. It was clear that the
result of the Dollar and the RBS disclosure was that Mrs Harrison could not
show there was “a big pot of money” that Mr Harrison had not disclosed in the
ancillary relief proceedings. This was emphasised to Mrs Harrison. Mr Wardell
also advised Mrs Harrison amongst other matters, that in view of the Dollar
disclosure and the RBS disclosure, he had “a real concern” that she
would find herself at the end of a losing judgment with costs consequences.
80.
By now Mr Wardell had discussed the Dollar disclosure with Mr Coussens,
who agreed that it did not support the preliminary conclusion Mr Coussens had
reached. Her points on the Dollar disclosure were gone through in detail, but Mrs
Harrison still did not agree with her lawyers’ advice that the Dollar
disclosure had drawn a blank. There was discussion about asking Dollar for
clarification on certain points. Mr Wardell asked Mrs Harrison if she wanted to
carry on if those enquiries drew a blank Mrs Harrison said: “I will go ahead
anyway. If I get a blank then I’ll go ahead anyway.”
81.
Despite the pessimistic advice she was now being given, Mrs Harrison continued
to maintain there was “substantial evidence” of Mr Harrison having lied
to Baron J in the ancillary relief proceedings and that her case remained a
strong one (see for example the letter sent by Mrs Harrison to her lawyers on
23 July 2007, shortly before she was sent the letter of advice referred to in
paragraph 83 below).
82.
About a week or so after the consultation of 25 June 2007 Mrs Harrison gave instructions that an application should be made for a freezing
injunction as soon as possible. Mr Wardell was concerned about this as he now believed
her prospects of success were no longer strong enough to justify the risk of
adverse costs orders.
Written Advice given on 23 July 2007
83.
In the light of concerns within the legal team about how matters now
stood, a letter of advice from Mrs Harrison’s legal team was prepared by Miss Scott
to be sent to Mrs Harrison. Miss Scott sent a first draft to Mr Wass and Mr
Wardell for their comments on 17 July 2007. The draft’s final paragraph said
this:
“While there is probably sufficient evidence available for us to
plead a case against John, we must advise you against issuing proceedings
against him and subjecting yourself to a cross-undertaking in damages consequent
upon obtaining a Freezing Order. There is no real lynchpin here to convince a
Judge to make a finding of fraud. All the evidence we have at present could
quite possibly and plausibly be explained away by John and the risk to you is
substantial in those circumstances”
84.
On 23 July 2007 shortly after Mrs Harrison sent her letter of the same
date, Mr Wass sent Mrs Harrison the letter of advice in its final form. It represented
the opinion of Withers and both counsel concerning the application for the
freezing injunction and the pursuit of her claim against Mr Harrison, as the
email to which it was attached said.
85.
In that letter Mrs Harrison was advised, amongst other matters that:
i)
She should re-assess her position and the prospects of success before
incurring further substantial costs in pursuing her case against Mr Harrison
and committing herself to the cross undertaking in damages which would be
necessary should she successfully apply for a freezing injunction;
ii)
Whilst there was still a prospect of obtaining a freezing injunction
based upon the documentary evidence obtained from RBS revealing the existence
of an undisclosed bank account, the failure to obtain any incriminating information
from Dollar was damaging. Mrs Harrison might well not obtain a freezing
injunction and if she did, Mr Harrison was likely to wage an expensive campaign
to get it lifted;
iii)
The lack of any hard proof that Mr Harrison did receive substantially
more from Fastcash and LCE than he had disclosed during the ancillary relief
proceedings would discourage any trial judge from overturning the Baron judgment;
and
iv)
It would be easy for Mr Harrison to argue that he must have overlooked
the RBS account and there was therefore no question of the Baron judgment
having been obtained by fraud.
86.
In summary, the letter concluded:
“Vivien, we know you feel very strongly about John’s [Harrison’s]
dishonesty and are anxious to proceed. However, we are very concerned that you
might be throwing good money after bad and, although we consider the claim can
be pleaded, there are obvious dangers in proceeding.”
87.
The letter could not have been clearer as to the dangers of proceeding
and the concerns of her legal team. Yet Mrs Harrison says she did not place
much importance in the letter of advice, which she says “purported” to
contain a warning of the risks she would face were she to proceed, because she
knew there would be a telephone conference that afternoon.
88.
Later on the same day, that is the 23 July 2007, the telephone consultation anticipated by Mrs Harrison took place. Mr Wardell was attended by Miss
Scott and Mr Wass. At that consultation the concerns clearly expressed in the
letter of advice were made even more forcefully. As the notes of the
consultation record, Mr Wardell made it clear to Mrs Harrison that in the light
of the blank drawn from the Dollar disclosure and that the 726 account only had
£25,000 in it, there would be a strong judicial reluctance to make a finding of
fraud or overturn the Baron judgment. Mr Wardell expressed his “strong
anxiety” that the application for a freezing injunction would be unsuccessful;
and his “real concern” at the risk Mrs Harrison faced in trying to
obtain a freezing injunction and in pursuing a claim against Mr Harrison. Mrs
Harrison was told of the dangers of proceeding and the grave concerns of her
legal team that she was “throwing good money after bad”. Mr Wardell asked
Mrs Harrison whether she wanted to proceed if her chances of success were only
30-40 per cent; her response was it was “better to try and lose than not try
at all”.
89.
Although Mrs Harrison concedes that Mr Wardell is recorded as expressing
strong anxiety that the application for a freezing order might not succeed, she
says she did not receive the impression that her case was hopeless; and she
would have expected any such view to be forcibly expressed. She says she
received the impression that there remained good prospects for obtaining an
order, particularly on the basis of the undisclosed 726 account.
90.
If Mrs Harrison did receive such an impression, then in my view, it can
only be because she did not listen to what was being said, or chose to ignore
what she was being told because it did not accord with her views, which were it
seems to me, by now, entrenched. Mr Wass said in evidence, and I accept, that
a bald analysis of the notes of the consultation does not convey the very stern
tone, the volume of his voice or the manner in which Mr Wardell gave the
advice, which “was in as forceful a manner as he had ever known leading
counsel to give advice”.
91.
As Mr Wardell and Miss Scott were later to say to Mr Lawrence Cohen QC
in a letter dated 24 October 2007, accurately in my view, in summary Mrs
Harrison was advised that although there was sufficient evidence to plead a
case against Mr Harrison, in the light of Dollar’s disclosure and the discovery
that the 726 account only had £25,000, there was now no real lynchpin which was
likely to convince a judge to make a finding of fraud. The thrust of their
advice was that although the claim could be brought, it should not be.
92.
Despite the pessimistic advice she had been given, and the great caution
and concern expressed by her legal team against proceeding, Mrs Harrison
instructed Withers to apply for a freezing injunction against Mr Harrison and
to proceed with her claim against Mr Harrison to set aside the Baron judgment.
Particulars of Claim and the Freezing Injunction
93.
Particulars of Claim were drafted by Miss Scott in accordance with Mrs
Harrison’s instructions. After discussion of their content with Withers and Mr
Wardell they were served on 27 July 2007. It is clear from the evidence of Mr
Wardell and Miss Scott to which I have referred above, that the main, if not
the only reason why they felt it was possible to pursue a claim in fraud and
attempt to obtain a freezing injunction was the apparent non-disclosure of the
726 account and the £25,000 it contained, combined with the evidence relating
to the break-in.
94.
The Particulars of Claim pleaded six instances of fraudulent
misrepresentation and material non-disclosure by Mr Harrison in the ancillary
relief proceedings which it was said were made to suppress the true value of
the joint assets and to obtain a favourable judgment. The first allegation
concerned the non-disclosure of the 726 account. It was pleaded that Mr
Harrison was required to disclose in the ancillary relief proceedings all bank
accounts operated by Interchange, and that he had concealed the existence of
the 726 account which contained approximately £25,000 during 2002.
95.
The other pleaded allegations related to (1) the break-in. It was said
Mr Harrison and his employees had fabricated a break-in at Interchange so they
might claim the Daily Reconciliation Sheets (the Hildebrand documents) had been
doctored and so they would be disregarded; (2) an HMIT inspection which it was
alleged was ongoing during the proceedings but which it was said Mr Harrison
failed to mention when questioned on the point; (3) Mr Harrison’s annual
drawings, which it was said had been considerably understated over the relevant
period; (4) the value of the opal panels held as assets by UA. It was said Mr
Harrison’s representation at the ancillary relief proceedings that their low
stock value (of £20,000) reflected their (damaged) value, was false because, as
confirmed in a letter from a Mr Walter Iberti dated 8 January 2003, they were
in good condition and worth more than £100,000; and (5) Mr Harrison’s company,
Cash on Cars. It was alleged Cash on Cars had not ceased trading as Mr Harrison
had represented at the ancillary relief proceedings but continued trading under
the name Log Book Loans during 2002 and 2003.
96.
On 26 July 2007 Miss Scott made an application to Butterfield J, for a freezing
injunction at a without notice hearing also attended by Mr Wass. A transcript
of the hearing is in evidence. The application was prepared by Miss
Scott. Mr Wass’s affidavit in support of the application and Miss Scott’s skeleton
argument described the non-disclosure of the 726 account as “compelling
evidence of fraud”.
97.
At the hearing on 26 July 2007, as the transcript of the hearing shows,
Miss Scott informed Butterfield J of the contents of Dollar disclosure
(paragraph 26 of her skeleton argument had pointed out that suspicions
regarding the remuneration Mr Harrison had received on the sale of Fastcash to
Dollar (to which Mrs Harrison had referred in her first witness statement) had
not been substantiated). Miss Scott showed the judge the RBS account statements
disclosed pursuant to the order of Dobbs J; and drew Butterfield J’s attention
to the fact that the 726 Account, which she described as an account in relation
to Interchange, only had a balance of £25,000 over a particular period during the
ancillary relief proceedings. Miss Scott said: “it is fair to say that is
not an enormous amount of money” to which the judge responded “Not in
the context of this case it is not, is it?”
98.
While the other pleaded allegations of material non-disclosure/fraud
were mentioned briefly in Miss Scott’s skeleton argument, she did not seek to
rely upon them but concentrated on the fact that the 726 Account had not been
disclosed, and on the evidence obtained after the ancillary relief proceedings that
the break-in had not been reported to the police on 19/20 May 2002, as alleged
in witness statements served by Mr Harrison and his employees, but on 27 May
2002 only an hour or so after the PTR in the ancillary relief proceedings in
which Black J had made disclosure orders against Mr Harrison in relation to
Interchange. Butterfield J said he did not need any persuasion that there was a
perfectly valid claim in relation to at least some of the matters raised.
99.
Miss Scott’s views on the viability of Mrs Harrison’s claim and whether it
was proper to plead it are essentially the same as those of Mr Wardell. In her
witness evidence she says:
“The money in the RBS Account was in any event an asset of
Interchange which should have been disclosed during the ancillary relief
proceedings. As we later learned, the money in the RBS Account was in fact
disclosed in the ancillary relief proceedings, so presumably Mr Harrison
himself considered it to be an asset of Interchange which he was required to
disclose. I do not believe it would have made any difference to the way Mr
Justice Butterfield approached the application if I had said that the account
appeared to be an account in the name of RBS which held money of Interchange.
In purely monetary terms the revelation that Interchange held a
further £25,000 in a separate bank account may not have made a difference to
the actual Order made by Mrs Justice Baron. In my oral submissions I expressly
stated “it is fair to say that is not an enormous amount of money” to
which the Judge responded “Not in the context of this case it is not, is it?”
However the right question to ask was whether or not Mrs Justice
Baron would have reached the decision she did and made the Order she did if she
had known both that Mr Harrison had deliberately hidden assets from the Court
and (together with the “second plank” on which I relied at the Freezing Order
application) that he had lied to the police and the Court about a break-in in
order to discredit company documents that tended to show that the business of
Interchange had real value. There was a proper case to argue that she would not
have done so.
Had Mrs Justice Baron been told that Mr Harrison had failed to
disclose one of Interchange’s accounts despite an express direction that all
accounts should be disclosed and had she also had before her evidence that the
break-in was a fabrication designed to cast doubt on documents Mrs Harrison had
received tending to show that Interchange was making a profit, Mrs Justice
Baron may well have concluded that Mr Harrison was involved in a conscious
exercise to hide the true value of Interchange and would not have remained of
the view that Grant Thornton’s valuation of Interchange was “wholly
contrived and speculative”. There was a proper case that Mrs Justice Baron
would not have made an order in the terms that she did, both substantively and
as to costs.
The Alleged Break-In
One of the criticisms now made by Mrs Harrison is that the facts
concerning the alleged break-in were not new or were not of great
significance. However, Mrs Harrison’s first witness statement dated 16 January 2007 and exhibit stated that it was only after the Baron Judgment was handed
down that Mrs Harrison discovered that the alleged break-in had been reported
immediately after the PTR at which the importance of the reconciliation sheets
was first appreciated by the Court and by Mr Harrison.
An employee of Interchange, Dean Stinton, told the Court at the
trial of the ancillary relief proceedings that he knew on 10 May 2002 (over 2 weeks before the PTR) that documents had been accessed on the office computer and
tampered with. Yet he did not think this a sufficiently important matter to
report the crime or tell Mr Harrison about it, even though Mr Stinton and his
colleague Mr Radwan were well aware that Mr and Mrs Harrison were embroiled in
acrimonious divorce proceedings in which the value of Interchange was a central
issue.
As pleaded at paragraph 29(2)(d) of the Particulars of Claim, Mr
Stinton told the Court that he knew on 10 May 2002 that numbers had been changed so that the figures on the reconciliation sheet that morning
did not match. Mr Stinton also told the Court that he had printed out these
different reconciliation sheets daily and kept a manual record, but curiously
he had not kept copies of the two different reconciliation sheets which he
claimed did not tally in order to demonstrate his belief that one had changed
overnight.
As to the materiality of the break-in, I did not represent to
the Court [at the hearing for a freezing injunction] that the issue of the
break-in was crucial to the way in which Mrs Justice Baron approached the
case. Rather, Mrs Harrison’s case was that Mrs Justice Baron was persuaded not
to rely upon the report of Grant Thornton which placed a value on the business
of Interchange, and that this was crucial to the way the Court
approached Mrs Harrison’s case since Mrs Justice Baron accepted Mr Harrison’s
assertion that Interchange was a business with negligible value.
Having heard evidence from Mr Harrison and his witnesses
regarding the alleged break-in and tampering with company documents and having
assessed those witnesses as giving that evidence honestly, Mrs Justice Baron
accepted Mr Harrison’s evidence and contention (and that of his expert witness)
that Interchange had no real value. Mrs Harrison’s case was that had Mrs
Justice Baron known that Mr Harrison and his witnesses had lied to the Court
about the break-in and tampering in order to discredit the authenticity of the
reconciliation sheets she had obtained then the Judge’s assessment of the
credibility of the witnesses would inevitably have been fundamentally
different. If she had also known that Mr Harrison had failed to disclose a
bank account containing assets of Interchange then she may well have reached
the conclusion that Mr Harrison was attempting to suppress evidence which tended
to show that Interchange was a business that had value. For the purposes of
the Freezing Order application, it could properly be said that on that basis
there was a good arguable case that Mrs Justice Baron would not have had “no
hesitation” in preferring the evidence of Mr Harrison’s accountant and
would not have found that Mrs Harrison’s accountant’s evidence was “wholly
contrived and speculative”.
There was therefore a proper case to argue that the evidence of
the fabricated break-in (coupled with evidence of hiding assets in the RBS
Account) would have made a substantial difference to the outcome in the
ancillary relief proceedings. I did not suggest in my oral or written
submissions before Mr Justice Butterfield that the allegation regarding a fabricated
break-in was a “stand-alone” allegation which would (if made out) of itself
necessarily justify setting aside the Baron Judgment.”
100.
On 27 July 2007 the freezing injunction and the claim in the QB
proceedings were served on Mr Harrison.
Manches’ letter of 4 September 2007
101.
On 4 September 2007, Manches LLP, Mr Harrison’s solicitors in the
ancillary relief proceedings, wrote to Withers that he intended to apply to set
aside the freezing injunction on the ground that it had been obtained by
non-disclosure and misrepresentation, and to strike out the claim as
misconceived. The Manches letter contained a detailed rebuttal of the matters
relied on in support of the application for a freezing injunction, and the
Particulars of Claim.
102.
In particular, it showed that the £25,000 in the 726 account had in fact
been disclosed by Mr Harrison during the ancillary relief proceedings where it
was referred to in Interchange’s balance sheet under the name “Treasury
Account”. The sum of £25,000 had therefore been taken into account by the
experts and Baron J in valuing Interchange. The letter explained that the 726
account was an internal account of RBS in which Interchange had a beneficial
interest, holding a deposit of £25,000 which RBS required Interchange to
deposit in support of its foreign exchange trading.
103.
In the letter, Manches invited Mrs Harrison to discontinue the proceedings
and pay Mr Harrison’s costs on the standard basis, otherwise Mr Harrison would
apply on the return date (18 September 2007) for the freezing injunction to be
set aside, the claim to be struck out, for indemnity costs and an inquiry into
damages.
104.
Mr Wass immediately forwarded Manches’ letter to Mrs Harrison. Mrs
Harrison says she did not study that letter very closely, having previously had
a number of hostile letters from that firm in the divorce proceedings.
105.
Mr Wardell and Mr Ford did so however. They were abroad together on an
unconnected professional matter when they received it. Their joint view was
that Mrs Harrison should give Withers immediate instructions to explore a
settlement so that she could withdraw from the proceedings with as little
damage as possible. Their joint recollection is that they telephoned Mrs
Harrison. Mr Ford says he remembered that the call was a difficult one. Mrs
Harrison would not listen and was frustrated with what she saw as negative
advice. She was certain that she could un-pick Manches’ letter. In the end, it
was agreed that the discussion would have to wait until they returned. Mrs
Harrison says she does not recollect receiving any such call of which there is
no attendance note.
Advice given on 10 September 2007
106.
On the 10 September 2007 after Mr Wardell’s return, there was a further
telephone consultation with Mrs Harrison, and all four of her lawyers to advise
her on the implications of Manches’ letter.
107.
In summary, as Mr Wass’ and Miss Scott’s attendance notes record, Mrs
Harrison was advised by Mr Wardell and by Mr Ford as follows:
i)
She was reminded that in July her lawyers had been very cautious, had
advised her that she should not proceed with her action and had tried very hard
to persuade her not to do so;
ii)
It was now clear there was no material non-disclosure in relation to the
RBS Account and so the main plank of the freezing injunction application and
the claim had been removed. Mrs Harrison was told that the freezing injunction
could not be maintained and that there was a high risk the claim would be
struck out. Further, even if the claim was not struck out, she was bound to
lose; and
iii)
Mrs Harrison had reached the end of the road, enough was enough, and she
should give up now. She was strongly recommended to discontinue proceedings
immediately.
108.
Mrs Harrison refused to accept the advice to discontinue. However, she
did agree that she would consent to the discharge of the freezing injunction
and that Withers would play for more time to allow her to deal with any strike
out application. Accordingly, Withers agreed a consent order with Manches (dated
17 September 2007) discharging the freezing injunction and vacating the return
date. Mr Harrison’s costs were reserved.
Advice given on 27 September 2007
109.
On 24 September 2007, as had been anticipated, Mr Harrison
issued an application to strike out the claim and, in the alternative, for
summary judgment, an order for costs on an indemnity basis and an inquiry into
damages.
110.
In a letter from Manches dated 24 September 2007, Mr Harrison
offered to settle the case on terms that Mrs Harrison discontinue her claim,
pay Mr Harrison's costs to the date of settlement on the standard, rather than
the indemnity basis and that there be no inquiry as to damages suffered by Mr
Harrison and/or Interchange, which might otherwise be payable by Mrs Harrison
pursuant to the cross undertaking in the freezing injunction.
111.
On 27 September 2007 Withers sent Mrs Harrison a letter from Mr Ford expressing
the concern of Withers and counsel that Mrs Harrison was ignoring the very firm
advice she had been given to discontinue the proceedings. The letter said the
whole team (Mr Wardell, Miss Scott, Mr Wass and Mr Ford) had input into the
letter and were as one on the advice it contained. In the letter, Mr Ford strongly
recommended that Mrs Harrison accept the settlement terms offered by Mr
Harrison. In addition he said:
i)
Mrs Harrison had been advised in consultation on 23 July 2007 that “we were very cautious about whether you ought to pursue an application for a
freezing injunction and we advised that you should not bring the application”;
ii)
Mr Ford reminded Mrs Harrison that on 10 September 2007 she was told “our strong recommendation was that you should discontinue proceedings
immediately”;
iii)
Mrs Harrison was told, again, that Mr Harrison had clearly shown that the
£25,000 contained in the 726 account was in fact disclosed and that any claim
based on material non-disclosure was hopeless. In summary, the letter noted:
“The ‘big picture’ points that would give you a chance of
getting the judgment overturned have been knocked out. In any event even if
you did win at trial – which we are virtually certain you will not – your
husband has no money or substantial assets which you will be able to pursue on
renewed ancillary relief proceedings. There is nothing to gain by continuing to
prosecute this claim, and everything to lose both financially and emotionally.”
112.
Mr Ford repeated that there was an extremely good prospect the claim
would be struck out and that she should immediately call a halt and draw a line
under the proceedings; there was insufficient evidence to take the case forward
and no prospect of obtaining further evidence to support it. The letter
reminded Mrs Harrison that if she continued, she would face a very heavy
indemnity costs order. In addition, there would also be an inquiry as to
damages and she may be ordered to pay a sum pursuant to her cross-undertaking
in the freezing injunction. The letter said:
“Our unequivocal advice to you is that you have come to the end
of the road and that you must do the best deal you can now, before the strike
out application is heard, and discontinue the proceedings. You asked us to play
for more time so that you could consider your position and this we did. You
must now follow our advice and discontinue the proceedings and make an offer to
pay JH’s costs.
Manches have in their letter offered settlement terms which we
very strongly recommend that you accept. You will have to pay your husband’s
costs on the standard basis but you will not have to pay damages pursuant to
your cross-undertaking on the freezing order. We believe that this is a good
offer in the circumstances and it is quite possible that we can still strike a
deal with Manches on costs under which you will pay less than your ex-husband
would be likely to be awarded by the Court on an assessment. You will save the
costs of instructing us to prepare for and represent you at a 1-day hearing in
October which, we believe, you are almost bound to lose resulting in payment of
vastly increased costs to your ex-husband no doubt on the indemnity basis and
possibly a wasted costs order.”
113.
Mrs Harrison refused to accept or follow this advice. She sent Withers
by email a large number of lengthy responses to Mr Harrison's evidence and
the advice she received on 10 and 27 September 2007, in which she
rejected or disputed the advice given. She did not however take issue with what
it was said she had been advised in July 2007, either as to bringing the claim
or the application for a freezing injunction. In her responses, Mrs Harrison described
the Manches’ letter as “rambling nonsense” and “bluster and puff”.
She sought to raise new allegations of fraud or perjury against
Mr Harrison and/or allegations of false accounting and other claims
against Mr Nunn and/or Dollar. In a letter of the 1 October 2007 for example, she rejected the advice as “entirely misplaced and fundamentally wrong”.
She said her legal team’s view of the evidence was “overtly simplistic,
narrow in focus and leaves aside vast swathes of common sense and other proof
which supports my overall claims against fraud and deception as committed by
[Mr Harrison] and aided by others.” She said the advice in relation to
the 726 account was “entirely wrong…if this isn’t fraud I don’t know what is.”
In her annotations on a further witness statement from Mr Harrison, she said
the point made that the 726 account was an account of RBS, not of Interchange was
“supreme nonsense. Did the money belong to RBS, No!”
114.
Both Withers and counsel took the view that none of Mrs Harrison’s
further allegations could be substantiated or properly raised in the proceedings.
Advice given in October 2007
115.
Throughout October 2007 it was made plain to Mrs Harrison in numerous
telephone consultations, as well as in writing that in the view of all her
lawyers she had reached the end of the line, her case had collapsed, it was
bound to fail and she should discontinue immediately. She was also repeatedly
advised that contrary to her own view, none of the material she provided
contained allegations that could be substantiated nor would they assist in
defending the pending strike out application. It was also made plain that in
view of their professional obligations, counsel did not consider the plea of
fraud could be maintained, nor could the current or new allegations being made
by her be advanced to a court on her behalf. Mrs Harrison flatly refused to
accept this advice.
116.
Mr Ford sent an email to Mrs Harrison on 17 October 2007 setting out the advice she had received in her call with Mr Wass and in a telephone
consultation that morning. In summary, he said:
i)
She had received advice that she was unable to adduce evidence to
support the pleading and had no new evidence to support any proposed amendment;
ii)
She would need to obtain some evidence to support the allegation that Mr
Harrison had misled the court in the ancillary relief proceedings;
iii)
It was not possible to defeat the pending strike out application, as
there was ‘no real prospect’ of her succeeding in her claim;
iv)
The court would not be interested in suspicion or unsupported
allegations of conspiracy; and
v)
Every care had been taken to explore her numerous and various
allegations, but none of them stood up to scrutiny.
117.
His email also reminded Mrs Harrison that:
i)
Any issues that were before the ancillary relief proceedings court could
not be re-argued;
ii)
Technical breaches or allegations of contempt of court, could not be
relied on unless such contempt could be demonstrated as having a bearing on the
Baron judgment; and
iii)
Inference and theories were not enough – it was necessary to demonstrate
that Mr Harrison had lied to and misled the court.
118.
Mrs Harrison’s hopes now appeared to rest on her receiving further evidence
from Surrey police. She told Mr Wardell that if nothing was produced by Surrey
Police, she would be “the first one to walk away from the case.” No
further evidence was forthcoming, as Mrs Harrison was told by Mr Wass in an email
of 22 October 2007. Mrs Harrison did not walk away from the case. Counsel now
confirmed they could no longer continue to act for Mrs Harrison.
119.
As is clear from the email exchange between Withers and Mrs Harrison on
22 and 23 October 2007 Mrs Harrison was outraged and felt that she was being
abandoned, even though she had been warned that counsel would have to withdraw if
no new evidence was forthcoming. Mr Wass told Mrs Harrison he could not ignore
the position either. He was, however, prepared to organise a second opinion
from another barrister, if she needed confirmation that the advice she had
received was correct.
120.
Further advice was then obtained from Mr Lawrence Cohen QC at short
notice. Mr Wardell and Miss Scott prepared and sent to him a ‘Note to Leading
Counsel’ which set out in some detail the factual background and circumstances
that had led to their withdrawal.
121.
On 24 October 2007 Mr Cohen, attended by Mr Wass, provided an opinion at
a telephone conference with Mrs Harrison. Mr Cohen made it clear that Mrs
Harrison’s case was “hopeless”.
122.
Though Mrs Harrison had now been told by two silks that her case was
hopeless, and repeatedly told that the best advice was to withdraw and limit
the damages and costs she would inevitably otherwise incur, she refused to take
that advice. On 25 October 2007 she terminated her retainer with
Withers.
Events after the termination of the retainer
123.
Mrs Harrison now continued the claim in person. She opposed Mr Harrison's
application for strike out/summary judgment at the hearing before
HHJ Seymour QC which took place between 29 and 31 January 2008. On 31 January 2008 HHJ Seymour QC gave summary judgment in favour of
Mr Harrison.
124.
Mrs Harrison applied to the Court of Appeal for permission to appeal against
HHJ Seymour QC's decision. It was refused. On 30 October 2008 she made a renewed oral application in person which was refused by the Court
of Appeal.
125.
On 23 December 2008, a consent order was made in the proceedings
agreeing the amount of Mr Harrison’s costs at £205,000 plus interest at 8 per
cent from 31 January 2008 until the date of payment.
The judgment of HH Judge Seymour QC
126.
At the outset of the trial, and again as part of his closing
submissions, Mr Crawford invited me to read the judgment of HH Judge Seymour QC
given on 31 January 2008. He accepted it did not bind me, that the parties were
not the same and indeed the issues were not the same. But he submitted I needed
to read it as part of the background or history, and the precursor to the order
giving summary judgment on Mrs Harrison’s claim. Mr Knox objected to my doing
so. He submitted that it was neither relevant nor probative. I agree.
127.
It does not follow because the judge at the summary judgment hearing was
persuaded that Mrs Harrison’s case stood no realistic prospect of success (or
even, if it be the case that he thought it should not have been advanced) that
Withers was negligent in the advice it gave Mrs Harrison. It need hardly be
said that a finding of negligence against the losing sides’ lawyers is not the
inexorable consequence of a claim being summarily dismissed. Moreover there
would be particular need for caution in this case because Mrs Harrison appeared
in person at the hearing before HH Judge Seymour QC. It appears for example, that
Butterfield J was shown the disclosed RBS accounts at the application for the
freezing injunction whereas HH Judge Seymour QC was apparently told the
opposite by counsel for Mr Harrison. It is to be doubted whether HH Judge
Seymour QC had the benefit of the argument or disclosure I have had in this
case: certainly it is most unlikely that he would have seen the privileged
material passing between Mrs Harrison and her lawyers which I have seen.
128.
It is difficult to avoid the conclusion that I was being asked to read the
judgment because HH Judge Seymour QC had obviously taken an adverse view of Mrs
Harrison’s case, as pleaded, and I was being invited to do so as well –
possibly for reasons he found persuasive. Whether that is right or not, I did
read the judgment, as Mr Crawford invited me to do in his closing submissions, de
bene esse but this did not alter my view as to its materiality except as
part of the history. In the end, I have to draw my own conclusions about the
issues which arise in this case from the evidence which I have read and heard.
The Counterclaim
129.
The legal principles which apply to the claim are not controversial and
may be summarised as follows. Mrs Harrison must establish that Withers failed
to meet the standard of a reasonably competent commercial solicitor with the
relevant expertise having regard to the standards normally adopted in his
profession: see Midland Bank v Hett, Stubbs &
Kemp [1979] Ch 384, especially at 402–3 per Oliver J, and e.g. Hurlingham
Estates Ltd v Wilde & Partners [1997] 1 Lloyds Rep. 525. Withers is not
liable for what may in the result turn out to have been errors of judgment, “unless
the error was such as no reasonably well-informed and competent member of that
profession could have made”: see Saif Ali v Sidney Mitchell &
Co [1980]
AC 198
at 220D per Lord Diplock. Withers’ conduct must be judged in the light of
events as they appeared at the time, and not with the benefit of hindsight. As Megarry
J said in Duchess of Argyll v Beuselinck [1972] 2 Lloyd's Reports 172 at
185:
“In this world there are few things that could not have been
better done if done with hindsight. The advantages of hindsight include the
benefit of having a sufficient indication of which of the many factors present
are important and which are unimportant. But hindsight is no touchstone of
negligence. The standard of care to be expected of a professional man must be
based on events as they occur, in prospect and not in retrospect … On any
footing, the duty of care is not a warranty of perfection.”
130.
Though a number of other matters were set out in Mrs Harrison’s pleaded
case (as amended during the course of the trial) her claim that Withers was
negligent centres on advice given to her on two matters. First, the 726
account. It is her case that it should have been apparent to a careful lawyer
that the disclosed statements for the 726 account did not establish that Mr
Harrison’s counsel’s statement in the ancillary relief proceedings was false:
if the account was not an account of Interchange, its non-disclosure was not a
breach of counsel’s assurance. Second, it is said that Withers was in breach of
duty by 23 July 2007, following the Dollar disclosure, when it failed to advise
her not to pursue the claim (which could then have been allowed to expire
without service of the claim form, which would have become invalid on 26 July).
The case on negligence: the 726 account
131.
I do not consider Mr Wass was in error in failing to spot the 726
account was an RBS account or that even if he was his error was not an error
which no reasonably competent solicitor with the relevant experience would have
made even after a close scrutiny of the various statements. It seems to me that
the criticisms now made by Mrs Harrison in relation to the RBS account are
unrealistic and formed with the benefit of hindsight.
132.
Mr Crawford relies in particular on the description of the account
holder in the 726 account, and the addresses given on that account’s
statements, in particular when compared with those on other Interchange
accounts disclosed at the same time.
133.
I do not consider it would have been obvious merely from the name (“RBS
Re Interchange Organization Ltd”) on the 726 account statements nor from
the address on them (Argyll House, which was not Cavendish Square - the branch
from which the documents emanated) even in comparison with the other disclosed
statements, that the 726 account was an account of RBS rather than Interchange.
As it happens, I agree with Miss Scott, who said that it is not obvious even
looking at the matter now.
134.
Mr Wass considered the 726 account was an Interchange account, relying
on the statements themselves, in the context of the other reasonably credible
information available to him. This included Mrs Harrison’s very firm
instructions, supported unequivocally by her professional adviser, Mr Coussens
(himself an accountant) and verified in her witness statement of 16 January
2007, that the 726 account was an account belonging to Interchange (which was
after all, the basis on which disclosure had been sought and obtained from RBS).
The disclosure order made by Dobbs J required RBS to disclose bank statements for
the 726 account and other accounts “in the name of Interchange”. The
covering letter under which RBS disclosed the bank statements for the 726
account and other accounts described the disclosure as given “in relation to
the Production Order for our customer, Interchange Organization”. Moreover,
money came into the 726 account from an Interchange account (10132869) and went
out to an Interchange account. Everything therefore pointed to the 726 account
being an Interchange account.
135.
I am not surprised therefore that it was not obvious to Mr Wass, nor for
that matter, subsequently to Miss Scott, or Butterfield J (to whom the accounts
were shown) that the 726 account was not an account of Interchange, but an
account of RBS in which Interchange had a beneficial interest. Thus I do not
think there was any reason to suppose before the receipt of the letter from
Manches of the 4 September 2007, that the 726 account was an internal RBS
account in which Interchange had a beneficial interest.
136.
Mr Crawford submits that Withers was not entitled to rely on Mrs
Harrison’s instructions or Mr Coussens’ report: they needed to satisfy
themselves by looking at the primary evidence, in particular having regard to
the high probability that would be needed to advance such serious accusations
(or indeed the Bar Code of Conduct with regard to the pleading of fraud) and to
Mrs Harrison’s position as a client emotionally involved in her case.
137.
A lawyer is not normally obliged to “second guess” his or her client’s
factual instructions and is normally entitled to proceed on the basis that they
are correct: Brown v Bennett [2002] 1 WLR 713, at [114] and Orchard v
South Eastern Electricity Board [1987] QB 565. Whether it is appropriate
for a lawyer to go further, must depend on the facts.
138.
Mrs Harrison is obviously an intelligent woman, as Mr Ford perceived at
the time. She had been in business herself, and she had a great familiarity
with the business of Interchange. (Baron J described Mrs Harrison as “clearly
enterprising and innovative” in relation to certain ventures for which she
had organised the necessary finance before her marriage). Throughout the
material period, Mrs Harrison gave her lawyers extremely detailed instructions about
her husband’s financial affairs, and the various company and financial matters
which had to be considered, including on the accounts. Such matters were
discussed also in great detail during the numerous consultations which took
place.
139.
I think Mr Wass was, in all the circumstances, entitled to rely on Mrs
Harrison’s instructions and the other evidence, including what he himself could
see, in proceeding on the basis that the 726 account (and it followed, the
money in it) had not been disclosed. I do not therefore consider Mr Wass was
negligent in forming that view and advising Mrs Harrison accordingly.
140.
Moreover, even if Withers had known the 726 account was one of RBS in
which Interchange had a beneficial interest, I do not think it would have made
any difference to the way they, or Mrs Harrison, or indeed Butterfield J
approached her claim. The money in the RBS account was an asset of Interchange
which should have been disclosed in the ancillary relief proceedings (it later
turned out of course, that it had been, albeit in a Treasury account, and it
follows Mr Harrison and his advisers must have concluded it was an asset of Interchange
he was required to disclose).
141.
There is no evidence before me of the terms on which the amount in the
726 account was held, but since Interchange had a beneficial interest in the
account, Mr Harrison it is said by Mr Knox was technically in breach of his
disclosure obligations in not obtaining and disclosing the bank statements (or
at least, Mrs Harrison has not proved that he was not). But it seems to me, even
if Mr Harrison was not obliged to disclose the bank statements for the 726
account, as I have said, he had to disclose the money in the account – and on
the information before them, Withers had (non-negligently in my view) concluded
he had not done so.
142.
Mr Crawford submits in answer to the asset point, that the material
misrepresentation pleaded in the Particulars of Claim was a failure to disclose
the bank statement – not that the account and the monies in the account had not
been disclosed. It seems to me that this a wholly artificial view of the claim
as Miss Scott said in her evidence. It was specifically pleaded that Mr
Harrison concealed the 726 account which contained approximately £25,000 in
2002: and the purport of what was pleaded in paragraphs 2, 30(1) and 32 of the
Particulars of Claim was the concealment of the underlying asset, not (merely)
the account itself.
143.
It is also said by Mr Crawford that it would have been impossible
properly to plead a case of material non-disclosure of the asset because
Withers could not have known that the money in the account was not disclosed,
but in my view it follows from the fact that there was reasonably credible
material that the 726 account had not been disclosed, that the money in the
account had not been disclosed either.
144.
It is suggested by Mr Crawford that on learning of the 726 account a
reasonably careful solicitor would have looked at Interchange’s balance sheet
to see whether the amount was included, and that the £25,000 in the
unidentified Treasury Account in Interchange’s balance sheet, should have “raised
doubts” as to whether the sum in the 726 account had in fact been
disclosed. Further investigation he says would have revealed that on 26 March 2002, the date of the transfer of £25,000 by Interchange to the RBS account, its
daily reconciliation statements showed a “Transfer to Treasury Account” of that
sum. The latter documents were not put to Withers’ witnesses. But in any
event, again, I think this is a view reached with the benefit of hindsight. At the
time it was reasonable to conclude the 726 account was an account of
Interchange which had not been disclosed, and (it followed) neither had the sum
in it. The Treasury Account, as listed in the Interchange balance sheet, had no
number or bank account details attached to it. As Mr Knox says, it was not just
Mrs Harrison’s legal team who did not spot it. Mrs Harrison had plainly done an
enormous amount of work on the documents she had access to, and, as Mr Knox
says, was very familiar with the Interchange balance sheet, but she did not
spot the possible connection either.
Was Withers negligent in advising Mrs Harrison that her
case could go forward by 23 July 2007?
145.
The parties are agreed as to the relevant tests for setting aside
judgments. The parties to ancillary relief proceedings are under a duty to make
full and frank disclosure of all relevant circumstances and material
non-disclosure is itself a ground for setting aside a judgment in such
proceedings. The absence of full and frank disclosure must have been such as to
have led to the court making an order that is substantially different from the
order which would have been made if such disclosure had taken place: see Livesey
v Jenkins [1985] 1 AC 424. The legal test for setting aside judgments on
the grounds of fraud (which includes deliberate concealment) is that the new
evidence will be material if it entirely changes the nature of the case: Kuwait
Airways Corporation v Iraqi Airways Corpn [2003] EWHC 31 (Comm).
146.
Mr Crawford submits not only was there no fraudulent misrepresentation
in this case, but even if there had been, in particular that as to the
726 account could not have affected the order of Baron J since she did not rely
on it in reaching her conclusions. He submits it is inconceivable
given the method of valuation of Interchange that, had Baron J known that there
was an extra £25,000 in its balance sheet, she would have reached a different
conclusion. Thus he says, Withers was negligent in advising Mrs Harrison on 23
July 2007 that her case against Mr Harrison was a pleadable one, even if they
were not negligent in failing to spot the 726 account was an account in which
Interchange had a beneficial interest, and that the £25,000 had already been
disclosed.
147.
As for the break-in, the allegation made was that Mr Harrison had falsely
alleged that there had been a break-in at Interchange’s premises for the
purpose of discrediting Miss Pincott’s valuation of Interchange based on its
daily reconciliation sheets. Whether or not there was sufficient to plead (as
opposed to prove) that there had been no break-in, Mr Crawford submits it was
plain that the alleged fraudulent misrepresentation did not affect the judge’s
decision. This is because Baron J rejected as “wholly fanciful” Miss
Pincott’s second report which relied on the sheets, not because the
information in the documents could not be relied upon, but because she regarded
her methodology as flawed. For the purpose of arriving at a valuation for
Interchange, the judge therefore placed no reliance at all on the figures from
daily reconciliation statements, whether sought to be discredited by Mr Harrison
or not. Mr Crawford submits none of the other “makeweight” allegations should
have been advanced.
148.
He therefore submits the claim was never a pleadable one at all; and Mrs
Harrison should have been clearly told so on the 23 July 2007: see County Personnel Ltd v Alan R. Pulver & Co. [1987] WLR 916 (CA). Mr Crawford says
to tell her that her claim was pleadable was to encourage her to pursue her
claim, which she was very keen to do because of her strong belief she had been
defrauded. He submits, contrary to the evidence of Withers’ witnesses, Mrs
Harrison was not advised on the 23 July 2007 that she should not proceed. He
relies on what he submits is the clear difference between the first draft and
the final version of the letter of advice of the 23 July 2007, and the absence of any note in the attendance notes made of the conference later that day to the
effect that Mrs Harrison was told in terms, not to go ahead.
149.
Mr Knox submits Mr Crawford’s approach to the representation re the 726
account on its own, and the amount it contained, is simplistic and ignores the
potential impact of the evidence relating to the fabricated break-in. Mrs
Harrison’s case against Mr Harrison in the ancillary relief proceedings was
that he was manipulating the figures and had misled the judge. Mr Knox says the
right question to ask was whether or not Baron J would have reached the
decision she did and made the order she did if she had known both that Mr
Harrison had deliberately hidden assets from the court and had lied to the
police and court about a break-in and tampering in order to discredit company
documents that tended to show Interchange had real value.
150.
Mr Harrison’s expert based his analysis entirely on the management
accounts which derived from Mr Harrison. Mr Knox submits there was a proper
case to argue that had Baron J known that Mr Harrison and his witnesses had
lied to the court about the break-in and tampering in order to discredit the
authenticity of the reconciliation sheets Mrs Harrison had obtained, then the judge’s
assessment of the credibility of the witnesses and the material (including the
management accounts) produced by Mr Harrison would have been fundamentally
different. She would not in those circumstances have found Mr Harrison’s
presentation of his assets to be “fundamentally correct throughout”. If
Baron J had also known that Mr Harrison had failed to disclose a bank account
containing assets of Interchange then she may well have reached the conclusion
that Mr Harrison was attempting to suppress evidence which tended to show that
Interchange was a business that had value. There was a proper case to argue
that Mrs Justice Baron would not have had “no hesitation” in preferring
the evidence of Mr Harrison’s expert based on management accounts produced by
Mr Harrison which purportedly showed a current loss making position; and would
not have found that Mrs Harrison’s accountant’s evidence was “wholly
contrived and speculative” .
151.
In my view, it is clear from the evidence, that the state of Mrs
Harrison’s case as at the July 2007, following the RBS and Dollar disclosure, was
the subject of the most anxious consideration on the part of all the lawyers. The
conclusion reached by all of them, for the reasons explained by Mr Wardell and
Miss Scott in their evidence was that there was indeed a proper case to argue even
though there were grave reservations about its prospects of success.
152.
This was a conscientious conclusion reached after a careful and considered
analysis of the evidence by four experienced lawyers who were acutely aware of
their professional obligations in relation to advancing and maintaining a claim
in fraud; and though the Withers lawyers had to exercise their own judgment it
is material in my view, that all four lawyers, including a highly experienced
silk with particular expertise in this field, and an experienced junior counsel
were of the same view: see e.g Regent Leisuretime Ltd. V Skerret [2006] EWCA Civ 1184 [2007] P.N.L.R. 9. CA.
153.
I am not persuaded that their conscientious analysis and conclusion was wrong,
or so wrong, as to be negligent in the light of events as they appeared at the
time, rather than with the benefit of hindsight. It seems to me in the end, that
the conclusion they reached was a matter of judgment as Mr Ford said in his
evidence (and as Mr Wardell also said: “it was a judgment call”);
but whether it was or not, their conclusion was one which in my view it was
open to a reasonably competent lawyer to reach.
154.
As Mr Ford and Mr Wardell both said in their evidence, it would have
been much easier for them if they had been able to say at the time that Mrs
Harrison’s case was hopeless: but though they were very pessimistic about Mrs
Harrison’s prospects of success they just did not feel they could go that far. Mr
Ford said: “I have to be careful not to give advice that suits me. Though I
didn’t think her case would ultimately succeed, I couldn’t hand on heart, say
it was hopeless.”
155.
Withers was not negligent therefore to have advised on 23 July 2007 that there was a pleadable claim to set aside the Baron judgment. There was
a proper case to argue that Mrs Harrison could meet the test laid down by the
authorities for setting aside judgments on the grounds of fraud or material
non-disclosure. In any event, that conclusion, shared by Leading and Junior counsel,
was not a conclusion which no reasonable lawyer, properly considering matters,
could have reached.
156.
As for the allegations of fraudulent misrepresentation, apart from those
relating to the 726 account, and the break-in, I do not consider the presence
or absence of these points had any real bearing on the advice given to Mrs
Harrison at any material time, nor any causative part to play in the loss she
is alleged to have suffered. In other words, they are beside the point. Mrs
Harrison was advised before the application for the freezing injunction
application that these were not “stand alone” points which justified proceeding
or applying for a freezing injunction. She was advised the non-disclosure of
the 726 account was the main, if not the only reason why Withers and counsel
felt it was possible to pursue her case; and after the receipt of Manches’
letter making clear that the money in the 726 account had been disclosed, she
was advised to discontinue immediately. It was quite clear therefore that they
were regarded as “make weights” (as Miss Scott described them in her evidence)
in support of the main plank of the pleaded claim, and were included in the
Particulars of Claim on that basis.
157.
Various criticisms were made of their inclusion in the pleadings, but there
is no pleaded allegation of negligence against Withers for their inclusion in
the Particulars of Claim and I agree with Mr Knox that it is too late to raise
them now.
158.
For the sake of completeness I should add that various other
allegations, particularly those pleaded in paragraph 21 (b), (c), (m) and (n)
of the Amended Defence and Counterclaim were not put to Withers’ witnesses and
I therefore need say no more about them.
Causation and reliance
159.
Mrs Harrison’s case is that she relied on the advice she was given, and
that it caused her loss. Had she been advised that the case could not proceed,
the retainer would have been terminated and she would have had no further
liability for Withers’ fees, and would not have incurred any liability to pay
Mr Harrison’s costs. If the position had been properly explained to her, it is
said the only rational course would have been for her to give up. Her evidence
is that this is what she would have done. But Mr Crawford says in addition, if
she had decided to press on she would have faced such difficulties in all the
circumstances, that the application for a freezing order would not have been
pursued, and it is very unlikely that the claim would have been prosecuted by
her without such an order, which had previously been regarded by her as
essential. The claim form would have needed to be extended (it was due to
expire on the 26 July 2007); she would have had to find other solicitors (who,
it must be assumed, would not have acted negligently) and she would have been
most unlikely to have obtained a freezing order in person.
160.
Whether or not the actual words, “you should not proceed” were used at
the consultation of the 23 July 2007, it seems to me that Mrs Harrison, despite
what she says now, was given the clearest advice of the dangers of proceeding
and the grave concerns of her legal team that she was “throwing good money
after bad”; and she was forcefully warned against proceeding with her claim
or bringing an application for a freezing injunction given the substantial
risks involved. The lawyers clearly thought it was against her best interests
to proceed, and in my view Mrs Harrison knew full well that this was their view
(at one point during the consultation she urged Mr Wardell to “listen with
an open heart”). It seems to me that far from encouraging her, as
it is now suggested they did, the lawyers tried very hard to persuade her not
to proceed. Almost the last word to Mrs Harrison from Mr Wardell of that
consultation was of his “severe reservations” about the matter going
forward, a view he expressed throughout the consultation. Mrs Harrison’s
instructions however were that she wanted to go as far as she could, and the
case went ahead despite the advice she was given, not because it.
161.
In my view, the lawyers’ summary of the advice Mrs Harrison had earlier
been given, recorded in the attendance note of Miss Scott of the consultation
of 10 September 2007 (see paragraph 107 above) was accurate; it accords with
the contemporaneous evidence, and that of Withers’ witnesses which I accept.
Mrs Harrison did not then dispute it. Nor did she dispute that she had been
advised that she ought not to pursue an application for a freezing injunction
as was said in a later letter from Withers to her of the 27 September 2007. Mrs Harrison’s detailed response of 1 October 2007 took issue with many other
points raised in the letter of 27 September 2007, but not that one.
162.
As Mr Knox says, the advice in July did not come out of the blue: Mr
Wardell had previously advised Mrs Harrison in June of his “real concern”
that she would find herself on the end of another losing judgment with costs
consequences, was pessimistic about the prospects of success of the claim, and
clearly warned Mrs Harrison against proceeding with her claim or bringing an
application for a freezing injunction given the substantial risks involved.
163.
Mrs Harrison therefore incurred the costs she did (both her own and Mr
Harrison’s for which she became liable) not because of any negligence on the
part of Withers but because she refused to accept or follow the advice she was
given against proceeding with her claim or bringing an application for a
freezing injunction given the substantial risks involved.
164.
Even if however, Withers had advised Mrs Harrison on 23 July 2007 that
the case could not be pursued and an application for a freezing injunction
could not be made, I consider Mr Knox is right when he says it is perfectly
obvious that Mrs Harrison would still have pursued the claim and sought to
obtain a freezing injunction in person, even if she could not find a firm of
solicitors to act on her behalf.
165.
What happened after Manches’ letter of 4 September 2007 and the eventual termination of the retainer is in my view highly instructive. Mrs Harrison
is clearly resourceful and intelligent, and I have no doubt would have taken
active steps to enable her to pursue her claim, come what may, even if she had
been unsuccessful in obtaining a freezing injunction herself.
166.
That after all, is precisely what she did do for more than a year after
the freezing injunction was discharged by consent on 17 September 2007 and after she terminated Withers’ retainer having been told repeatedly in September
and October 2007 that her claim was hopeless and should be withdrawn. She
continued to actively pursue her claim in person and issued in person two
applications by notice (for third party disclosure and transfer to the Family Division)
dated 25 January 2008 supported by a lengthy witness statement. She appeared in
person before HHJ Seymour QC and at the hearing sought the reinstatement of the
freezing injunction. She issued an appellant’s notice in person seeking
permission to appeal HHJ Seymour QC’s order and then sought permission to
appeal in person from the Court of Appeal at an oral hearing.
167.
Mr Knox submits, and in my view rightly, that in reality, Mrs Harrison
was obsessed with the fraud she believed had been perpetrated on her by her
former husband. She was convinced she had a compelling and unanswerable case
that her husband had deliberately misled the court during the ancillary relief
proceedings. She was unwilling to accept any advice to the contrary. She
incurred the substantial legal costs she did (both her own and Mr Harrison’s)
not because of any negligent advice she received but because she quite simply
refused to accept or follow the advice she was given. Even when it was clear
that the monies in the 726 account had in fact been disclosed and therefore her
claim was hopeless Mrs Harrison flatly refused to accept this.
168.
In giving her account before me, I am bound to say that at various times
in my view Mrs Harrison said what she thought would support the case she was
now advancing, rather than giving an accurate account of her recollection of
events. To take only one example of many, Mrs Harrison claimed in evidence that
she only went to the Court of Appeal in person because she had no choice and
wanted to recover her costs. It is plain from her Appeal document asking for
permission to appeal (which was 13 pages long) presented by her in person, that
this was simply not the case; that she remained convinced of her former
husband’s ‘misconduct’, and that she continued to make extremely serious allegations
against Mr Harrison not limited to the allegations relating to the Dollar
‘fraud’ and the 726 account, not because she had to, but because she believed
them to be true.
169.
Mrs Harrison’s evidence on many points was simply contradicted by the
contemporaneous documents, including the attendance notes of her meetings with
her lawyers as I have already said, which she was forced to dispute in order to
advance her counterclaim. No suggestion was ever made during the course of the
trial on her behalf however as to how it could be the case that the Withers
witnesses independently recorded substantially similar accounts of the
consultations for example. Mr Crawford did not feel able to put to any Withers
witnesses anything other than that their record was wrong on Mrs Harrison’s
instructions. In contrast, I considered the Withers witnesses gave an accurate,
careful and truthful account of material events. Insofar therefore as Mrs
Harrison’s evidence contradicts that of the Withers witnesses, I do not accept
it.
170.
As I have said, Mrs Harrison was advised repeatedly following receipt of
Manches’ letter of 4 September 2007 that her claim was hopeless and should be
withdrawn. She refused to accept or follow that advice but continued the claim
incurring further liability for costs (both her own and Mr Harrison’s).
171.
On any view, therefore, even if I am wrong as to the conclusions I have
reached on negligence, there is in my view, no basis whatever on which Withers
can be held liable or responsible for the costs incurred by Mrs Harrison or Mr
Harrison (for which she became liable) after the 10 September 2007 when she was
advised to discontinue the proceedings immediately and make an offer to pay Mr
Harrison’s costs. It would also follow that Withers would be entitled to the
fees and disbursements incurred thereafter, the liability for which was incurred
because Mrs Harrison failed or refused to accept or follow the advice she was
given to discontinue the proceeding.
172.
For the sake of completeness I should also deal with the issue of
contributory negligence which Mr Knox raises. In essence, it seems to me there
is little distinction between his argument on causation, which I have accepted,
and the points he makes on contributory negligence. On the footing that I am
wrong in my finding that the advice given on 23 July 2007 was not negligent, if as I have also found, Mrs Harrison was the effective cause of her loss
thereafter, in failing or refusing to accept the advice she was given to stop,
then her conduct broke the chain of causation. Whether the issue is raised as
one of causation or contributory negligence, the effect is the same; and I do
not accept Mr Crawford’s argument that if Withers was negligent in the advice
it gave on 23 July 2007, Mrs Harrison is entitled to recover all the losses she
incurred thereafter. There is a limit to the hypothetical variables with which
it is desirable to deal, but it is certainly my view, that even if Mrs Harrison
was not the sole author of her own misfortune, as I have found she certainly
was principally responsible for it.
173.
I should also deal briefly with the claim to loss and damages, again on
the footing that I am wrong in the conclusions I have reached on negligence.
174.
Mrs Harrison’s original claim in these proceedings was that Withers’
negligence caused her to suffer loss and damage comprising (i) the sum of
£205,000 plus interest, paid or payable to Mr Harrison in respect of his costs;
(ii) the costs (though they were not quantified) incurred by Mrs Harrison in
respect of negotiations conducted on her behalf by Mishcon de Reya in
negotiating the agreement with Mr Harrison with regard to his costs; (iii)
costs of £163,976 already paid to Withers to the extent that they were incurred
in consequence of Withers’ negligence – though this amount was not specified;
(iv) the costs claimed by Withers in this action; and (v) the exposure to
claims for damages to Mr Harrison pursuant to the cross-undertaking given by her
in the application for the freezing injunction.
175.
However, by the end of this trial Mrs Harrison’s claim for loss and
damage was put in this way. First, it is said by virtue of Withers’ negligence,
she is entitled to be relieved of the liability to pay its fees charged for
work done on or after 23 July 2007 – and for earlier work on the Particulars of
Claim that should not have been undertaken (the parties are broadly in
agreement as to those sums). In addition it is now accepted on Mrs Harrison’s
behalf that her liability for Mr Harrison’s costs after 15 October 2007 was not caused by Withers’ negligence. Therefore, it is said Mrs Harrison is entitled
to damages of the amount of Mr Harrison’s costs, but limited to the amount she
would have had to pay if she had accepted his offer of settlement in the letter
of 24 September 2007 on the 15 October 2007 (21 days after the date of the
letter, by analogy with CPR r36.2 (2)(c)). I have already said that in my view,
the relevant cut-off date is 10 September 2007. But whether it is that date, or
not, a point arises as to how this court should quantify this part of Mrs
Harrison’s claim to damages.
176.
The offer made in Mr Harrison’s letter of 24 September 2007 was that Mrs Harrison should pay his costs of the proceedings, including the freezing
injunction, on a standard basis. Mr Harrison’s bill, as drawn, according to Mrs
Harrison, amounted at the 15 October 2007 to £100,724.37.
177.
Mr Crawford submits, in the circumstances, it would have been unlikely
that Mrs Harrison would have challenged the bill, or risked the costs of an
assessment. Given the shortness of the period of the dispute (3 months) and
having regard to the fact that whether costs are awarded on a standard or
indemnity basis, they must be reasonably incurred (see Fourie v Le Roux
[2007] UKHL 1, at 1229) a fair estimate of what Mrs Harrison would have had to
pay, and therefore of her damages claim, on the footing that the cut-off date
was the 15 October 2007 would be £100,000.
178.
It would have been wholly disproportionate in my view, in view of the
amount at stake to send the matter for some form of assessment. Had I been
required to do so, I would have invited the parties to agree the amount of Mr
Harrison’s actual costs having regard to the relevant cut-off date of 10 September 2007. I would then have made a discount to reflect the probable discount for
assessment on a standard basis and to take account of the fact that a small
further discount could have been achieved as part of a negotiated settlement. Withers
proposed a discount of 40 per cent (30 per cent to reflect assessment on a standard
basis, and 10 per cent to reflect a settlement). Mr Crawford’s proposed
discount was 0.7 per cent. Looking at the matter in the round, I would have
made a discount of 25 per cent.
179.
In the result however, in the light of my conclusions, I reject Mrs Harrison’s
case that Withers was negligent, and there will therefore be judgment for
Withers on its claim, and Mrs Harrison’s counterclaim is dismissed.
