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Neutral CitationNumber:

[2010]

EWHC

306

(CH)

IN

TIIE HIGII

QOURT

OF

JUSTICE

CHANCERY DTVISION

Case

No:

HC08C03684

Roval

Courts of

Justice

Strand.

London.

WCZA

2LL

Date:

19/0212010

Claimants

Defendants

Before

:

THE IION MR JUSTICE

BLAIR

Between

:

(1)

DAVrD BAXTER

EDWARD

THOMAS

(2)

PETER

SAFIDFORD

GANDER

-and-

BPE

SOLICITORS

(a

firm)

Mr Jeremy Cousins

QC

and

Mr

Hugb Jackson

(instructed

by Wright

Hassall

LLP) for

the

Claimants

Mr

Michael

Douglas

QC

and Mr Michael

Davie

(instnrcted

by Beale

and

Company

Solicitors

LLP)

for

the

Defendants

Hearing

dates:

2,3,4, 5 and

8

February

2010

Approved

Judgment

I

direct

that pursuant

to

CPR

PD 39A

para 6.1

no

official

shorthand note shall

be

taken

of this

Judgment

and that copies

of

this

version

as handed

down may be

treated

as

authentic.

THE HON MR JUSTICE

BLAIR

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THE

HON

MRJUSTICE

BL{R

Aooroved

Judqment

Mr

Justice

Blair

:

Thomas

and

Gander -v-

BPE

Solicitors

l.

This

is

a

claim

by

the

claimants,

Mr

David

Thomas

and

Mr Peter

Gander,

against

their

former

solicitors,

BPE

Solicitors,

which

is a

firm

with

offices

in

Cheltenham

and

elsewhere.

It

is alleged

that

the

defendants

were negligent

in

connection

with

the sale

of

the

claimants'

shares

in

a

company called PDP Management Services

Ltd ( PDP ).

At

the

last

minute,

the

vendor

withdrew

from

the deal. The

claimants

allege

(among

other

things)

that

the

defendants

were

negligent

in failing

to advise

the

claimants

that

by

then

the

transaction

had

completed.

Had

they

known,

their

case

is

that they

would

have

insisted

upon

the

transaction

being

given

fuIl effect, and

would have required

the

receipt

of

monies payable

under

the

buyer's

solicitors'

undertaking.

The defendants'

case

is

that

completion

did not take

place,

so that

there was

no failure

to

advise

in

that

respect,

and

that

even if it

did, the

actual course

of

events

demonstrates

that the

parties

would

nevertheless,

in

the changed

financial

circumstances,

have agreed

that

the

transaction

should

be

cancelled.

The

claimants

accept that,

if

their

claim

succeeds,

they have

to

give

credit for

the value

of

the shareholdings

which

they

retained

in

PDP,

but

there

is

a

dispute

as

to

how

much

their

shares

were

worth.

The setting

up

and

proposed

sale

of

PDP

2.

The

facts

as I

find

them

to be

are as

follows.

Mr

Thomas's

background

is in banking

where

he

held

senior positions

with

Midland

Bank

(now

HSBC)

and then

the

TSB

Group.

On being

made

redundant

from

his

position

as an Area

Director

for

the North

West,

he

took on

a senior

management

role at a company

called

Legat

& Trade. Part

of

his

responsibilities

was

to

bring

to market a

new service

in

respect

of

what has

been

called

mortgage

affears

counselling.

He

subsequently

moved

to a company

called

Intrum

Justitia

which

is

a

credit managernent

goup,

and it was

through

that

business

that

he

met

Mr

Peter

Wilson, who

was Group Finance

Director. Through

Mr

Thomas,

Intrum

Justitia

recruited

Mr

Gander,

a

mathematics

graduate

who

already had

experience

at

a senior

level in

this tlpe of

business, and

who

was

engaged

to set

up a

similar

unit within

Intrum

Justitia.

3. Following

the

three

of them

being made

redundant,

in

the course

of 1997, IvIr

Thomas,

Mr

Gander

and Mr

Wilson

decided

to

set up PDP

as

a company operating

in

the mortgage

counselling

field.

The company

was

incorporated in

1998 with

offices

inBanbury.

PDP

had

an issued

share

capital

of

f

10,000

divided

into

10,000

Ordinary

Shares

of fl. The

three shareholders

each

owned

one third of the issued

share capital

(to

be

precise

Mr

Wilson

owned

3334

shares and the

claimants owned

3333

each).

They

were

each

directors,

ffid Mr

Wilson

was also the Company

Secretary.

There

were three

registered

charges

attaching

to the

shares,

two of which

were held

by

Close

Invoice Finance

Ltd

which

provided

factoring

services to the company.

4.

Reflecting

the

expertise

of its

founders,

the company's

business was the

provision

of

services

of

behalf

of lenders

in

relation

to

mortgage

affears,

but a

major

source of

business

became

what

they

describe

as

utility

companies' service calling. To

quote

from

the

claimants'

written

opening, it

was

in

this

field that Powergen

became

a

major

source

of

PDP's

business.

By

the

summer of 2007,

it

is

common

ground

that

Powergen represented

in

excess

of a third

of

PDP's

turnover. As

regards their

respective

responsibilities,

Mr Thomas

told

me

that Mr

Gander dealt

with the

mortgage affears side

of

the

business,

Mr

Wilson

dealt

with

the

utilities

side

of

the

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THE

HON

MRJUSTICB

BLAIR

Annrcved Judsment

Thomas

and Cmnder

-v-

BPE Solicitors

business,

ffid

he dealt with

the

property

side

of

the business,

by

which

facilities

were

provided

for buy-to-let

investors.

5.

Both Mr

Thomas

and

Mr

Gander

gave

evide,nce

at the

trial,

though

Mr Wilson

did

not.

I found them both

to be honest

witnesses, who did

their

best to

assist

the court

on

the matters

in issue.

Mrs

Thomas

and

Mrs

Gander

provided witness

staternents,

but

they were

not subject to

cross

examination,

and so

were not

called.

(The

same

applies

to

Mr

Richard

Lilley, who

was

Mr

Gander's

banker

at

the

time of

the

transaction.)

I

shall

come back

to

their

evidence,

but

it is not

in

dispute

that

for a

long

time

personal

relationships

between

the

clairnants

had

been

strained.

Relationships

deteriorated

to

the

point

that

the

claimants had little

to

do

with

each other

at

work

from

about

the

summer

of

2004.

Though

a

substantial

part

of

their

witness statements

deals

with

this

subject,

as their written opening

puts

it,

the

reasons

for these

diffrculties

are

perhaps

unimportant.

The important

point,

which

I fully accept,

is

that

these

difficulties

existed

and caused

the directors

to

wish for

a

parting of

the

ways.

Additionally,

Mr

Gander lives

in

Croydon,

which is

a

five

hour

return

drive

from

the

company's offices

in

Banbury, which

meant that he

and

his

wife

(who

also

worked

for

the company)

had

to

live

in

inadequate

PDP funded

accommodation

during

the

week.

Furthermore,

both

claimants reached

an

age

at which

they

wished to

retire.

In

addition,

as Mr Thomas

puts

it,

there was

a

perception

growing

within PDP that

its business

was

on

a

plateau,

and

it

was

time to

sell.

6. In

late

2005

or early 2006, an outside

party

approached

the

directors

with

a

view

to

purchasing

PDP. In

the event this approach did

not

lead

to

a

sale,

but it appears to

have caused the

directors to

take the

possibility

seriously.

I

am satisfied

that by then,

as

they

contend, each of the claimants was anxious

to

sell

their

stakes

in the business.

In late

2A06,

the directors

decided

to

retain the

services of

Mr Ken Elrick

to

market

PDP through

his Tudor Holdings consultancy. The

claimants

point

out that

Mr Elrick

had

a substantial

financial incentive to

achieve a sale,

and

at a

high

value,

becauseo

in

addition to

his hourly

based

fees, he

was entitled to

be

paid

10

per

cent

of any

consideration

over

f2.85m.

The company's

accountants,

Merrick &

Co,

prepared

a

draft share valuation dated 16 October

2006.

Its

conclusion

was

that, The

minimum

value of

the

company

based

on the last three

years'

post

tax

profits

to

March

31 2006

is 91,480,000

and the maximum f2,368,000 using

5 or

8 as a

profit

multiple

respectively.

If the forecast

figures for

the

three

years

to

31 March

2009

are

used,

ffid

these

may

or may not

be

maintainable

profits,

the

minimum

value of the

company

is

f,3,455,000 and

the maximum value is

f5,520,000

using 5 or 8 as a

profit

multiple

respectively.

If a

six

year

average

of

historical

and forecast

profits

is

used, then

the

minimum

value

would

be

f2,465,000

and

the maximum value

would be

f3,944,000

using

5 or 8

as a

profit

multiple respectively.

The

MBO

7.

Efforts to

market

the

company did

not

meet

with

success,

and

the

parties

began to

think in

terms of Mr Wilson

(who

was

younger

than either of them)

buyrng

out

his

fellow

shareholders.

Discussions

between

Mr

Wilson and Mr Mike Johnson of

Royal

Bank

of

Scotland

in

May 2007 led

to

concrete

proposals

for a

purchase

by Mr Wilson

funded

by

the

Bank.

The

transaction was

styled

Project

Communicatot''.

Mr

Elrick

drafted

Heads

of

Terms setting out the agreement

in

principle

reached

betwee,n

the

shareholders.

A

new

company

subsequently

called PDP

Management

Holdings Ltd

was

to

be set up

to

purchase

the

shares in

the company

for f,3 million funded as

to

the

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THE

HON

MR

JUSTICE

BLAIR

Aoproved

Judgment

Thomas

and Gander

-v-

BPE

Solicitors

cash

element

by

lending

from

the Bank.

Mr

Wilson

was

to

receive

shares

to

the value

of f,l

million in

the

new

company

in

exchange for

his shares

in

PDP,

Mr

Gander was

to

receive

f950,000

in cash

on completion,

and

Mr

Thomas

was

to

receive

f550,000

in

cash

and

f,500,000

in

interest

bearing

deferred loan notes

at

a

coupon

of

0.5%

over

base

rate.

Mr

Thomas

says

that he

was

reluctant

to

accept

loan notes

rather

than the

fulI

amor:nt

in

cash,

but

Mr

Gander's insistence on

taking his

share

in

cash

made

such

an {urangement

inevitable.

It

was

at this

point

in

time

that

the

parties

retained

solicitors, the

firms

in

question

being

recoillmended

by Mr

Elrick.

On

30

May

2007,

the claimants went

to

the

offices

of

the

defendant

firm,

where

they were introduced

by Mr

Elrick

to Mr

Tim

Ward, the

partner

who

would

handle

the transaction

on

their behalf. At

that

time,

he

had been

qualified

for

some

ten

years.

The

deal

was

outlined

to

him,

and the

claimants say,

and

I

accept,

that

he

told

them

that

he had considerable

experience in

acting in

the

sale

and

purchase

of

companies,

as indeed

he

had.

The

Heads

of

Terms

were sent

to him

the

following

day

(they

were signed

by the

parties

on

5 June

2007).

The

claimants

formally

instructed the defendant

to

act

for

them

in

the

sale

of

their PDP

shares

by

a

letter

of retainer

dated 1

June

2007

. Mr

Ward

was to be assisted by

a

trainee

solicitor

called

Mr

David

Dew.

The

transaction

was

not

considered

a

complex one, and at

this

stage,

completion

of the

sale was

envisaged

as taking

place

in

July 2007.

Meanwhile,

Mr

Wilson

instructed

Rickerbys, another

Cheltenham

firm of

solicitors,

on

behalf

of himself

and

the

new company

Holdings

that

would

purchase

the

shares in

PDP.

Rickerbys

initially

acted

through Mr

Richard

Knight,

a

partner.

Mr Knight

was

assisted

from

mid-July

2007 onwards

by

Mr Richard Cusack,

who

had

qualified

in

Septernber

2006.

In

the

week commencing 20

August 2007, which is

the crucial

week

so far as

the

completion

issue is

concerned, Mr

Knight was

on

holiday

and Mr

Cusack had conduct

of

the transaction on

behalf

of

Holdings

and

Mr

Wilson,

subject

to

the superuision

of

Mr

Edward

Davies

and

Mr

Jonathan

Morley,

both

partners

in

Rickerbys.

A

Staffordshire

firm

of

solicitors called

Knight

& Sons acted

on

behalf

of

National

Westminster

Bank

Plc

(part

of

the Royal Bank of

Scotland

group),

which

provided

finance

for

the

transaction

and

also

for RBSIF

(Royal

Bank of Scotland

Invoice

Financing

Limited)

which

was

to

take

over

the

factoring

business

from

Close.

Knight

&

Sons acted

through a

solicitor

called

Ms Joanna Dale.

I

should

say

at

this

point

of time

that

Mr

Ward,

Mr Dew and Mr

Cusack

gave

evidence

for

the

defendants

at

trial.

As

discussions

proceeded,

following

due diligence by

accountants appointed by the

Bank, the company's projections

were revised

downwards,

and

the Bank

reduced the

cash

advance

from

f,l,500,000

to f

1,300,000.

Mr

Ganderhowever

continued

to

insist

on

payment

of

f950,000

in

cash in full,

and

anxious as

he

was

for

the

deal to

proceed,

in

about late

July

Mr

Thomas

agreed

to

take f350,000

in

cash

with

f,700,000

in

loan

notes

repayable

over five

years.

That

was

the

final shape of

the

deal so

far as the

vendors

and

purchasers

were

concerned.

Matters

progressed

up

to

the

week of Monday

20 August

20A7.

As

Mr Thomas

explains,

on that

day Mr

Wilson

ran revised

financials

(i.e.

a cash flow forecast) based

on

the

current

position,

ffid

was

concerned

about

the

short

term

cash

flow

of

the

company.

Mr

Gander

offered

to defer

fl50,000

of

his

payment

by way of

loan notes,

or

take

an

equity stake

of

€150,000

following

the

deal,

but

Mr

Elrick

told

them

that

the

Bank was

not comfortable

with this

late change, and

would

only

agree

to

it

subject

8.

9.

10.

lt.

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THE HON MRJUSTICE

BLAIR

Anoroved Judqment

Thomas

and

Gander

-v-

BPE

Solicitors

to reducing

the

up-front

advance

by

the

same

amount.

On 22

August

2007,

Mr

Dew

sent

the

documents

including the

Share

Purchase

Agreement

to

the

claimants

for

signing, but they were

asked

not

to

date

them.

Mr Thomas

and

Mr

Gander

duly

signed,

and the documents

were

subsequently

taken

by

Mr Wilson to

Rickerbys.

12.

At

this point,

it

is

convenient

to

note the

material

adverse change

provisions

in

the

SPA

and the Loan

Agreement. By the clause

5

and Schedule

4

of

the

SPA

the

sellers

(that

is,

the

claimants and

Mr

Wilson)

warranted

to the buyer

(that

is

PDP

Management

Holdings

Ltd), inter

alia, that

since

the

Accounts

Date,

which

was 31st

March 2007, there

had

been

no

material

adverse

change

in

the

turnover,

financial

position

or

(so

far as the Sellers are aware

but

without

making enquiry

of

any

third

party),

the

prospects

of

[PDP]

(see

paragraph

17). The Loan

Agreement

between

National

Westminster

Bank

Plc and PDP Management

Holdings

Ltd by

which

the

loan to

fund the

purchase

was made also

contained

warranties.

By

clause

8.1(g),

Holdings warranted

that

...there

has

been no material

adverse

change

in

its

business

or

financial

condition

of the

business or

financial

condition

of

the

Group

since

the

date

of

[the] financial

statements .

13.

The terms

of

the SPA

(as

set out

below)

contemplated completion

taking

place

on

the

date of the

agreement at

a

place

agreed by

the sellers

and the

buyer.

In fact,

a

meeting

room

was

booked for the completion meeting at

Rickerbys'

offices

on the

afternoon

of

Thursday

23

August 2007.

(Mr

Ward

did not

plan

to

be

present.)

Completion

did

not

occur as

planned

because an issue again arose

as to the impact

on

the fransaction

of

possible

cash flow difficulties facing the

business.

Mr

Cusack of

Rickerbys

made

a

note

of

receiving

a

telephone

call

from

Mr

Elrick

at

9 a.m.

on23 August

2007, to

the

effect

that there

was a

small

problCIn

in

that

sales

in PDP had

fallen

quite

substantially

in

the

last

coupie

of months .

Mr

Thomas and

Mr

Gander

describe how

they met

with

Mr

Wilson

and

Mr

Elrick

at

the

latter's

home that

morning. Mr

Gander

said that

he

would

be

prepared

to

put

up to

f150,000

into the

new

company

if

the

need arose.

Mr

Cusack's

attendance

notes also

record

a call from

Mr

Ward

that

morning

'oin

respect

of

the

changed

deal , though

Ndr Ward

still thought

that

completion was achievable

that day or

possibly

the

next.

In

any

case, matte,rs were

resolved, ffid

that

afternoon Mr Gander

emailed

Mr

Dew to the

ef,[ect that

'\pe

are

going

ahead with the

original

deal - straight cash

to

me .

On the

evening

of

Thursday

23

August 2007,

Mr

Cusack

was

told that the Bank

'Just

needed

sight

of

the

signed

docume,nts in

preparation

for

sending the monies

through

on

24

Augusf'.

All

seemed

set therefore for

completion the

following

day.

The

issues

between

the

parties

14.

Up to

24 August

2007,

there are

no relevant factual

issues between the

parties.

The

issues

that arise

between thern

thereafter are

heavily

dependent

on

what happened

next. I will

need

to

consider

the facts

carefully,

and reach

findings on the

matters

in

dispute.

To

put

the

discussion

into context,

I

begin,

as the

claimants have

done, by

identiffing the relevant

issues.

(1)

Did

completion

of the

transaction

occur on

24th August 2007

( the

completion

issue )?

The

claimants

say

that

it

did,

the

defendants say

that

it

did

not.

This has

bee,n

described

as

by far the most important

issue

in the

case, and it

is where

the

bulk

of

the

parties'

written

and

oral

submissions

have been focused.

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THE HON

MR JUSTICE

BLAIR

Aoproved

Judgment

Thomas

and

Gander -v- BPE

Soliciton

(2)

Were

the defendants

negligent

in

failing

to

advise the claimants

of the fact of

completion

and

of

the

rights

arising

in

that

regard

in

respect

of

an

undertaking by

the

purchaser's

solicitors

to

transfer

the

completion money

( the

faihne

to

advise

issue )?

This

is

largely

dependent

on the

sonclusion

reached

in

respect of the

completion

issue.

(3)

If

completion

did not

occur

because

of

the

non-acceptance,

or rejection

of,

the

purchaser's

solicitors'

undertaking,

was

this negligent

on the

part

of the

defendants

( the

non-acceptance

of

rxrdertaking

issue )?

A number

of

sub-issues

arise in

this

regard.

One is

whether,

if

the

defendants

in fact

accepted

the undertaking

by

subsequent

email,

as

a matter

of

law

such acceptance

was

effective

upon

sending,

as

the claimants

argue

by

analogy

to

the

postal

ruIe ,

or

whether

acceptance

by email

should

be

treated

in

the same

way

as

other instantaneous

cofilmunications

(Entores

Ltdv

Miles Far

East

Corporationl19551

2

QB

327),as the defendants

argue.

(4)

In

the

light

of

information

which

emerged

on

25

August

2007

,

would the claimants

in

any event have

agreed

voluntarily

to

rescind,

or

as

the

defendants

prefer to put

it,

not

to

proceed

with,

the

transaction

despite completion? Would

any

attenrpt

to

adhere

to

completion

have foundered

because

of the complexities and

expense

of

litigation

( the

causation

issue )?

(5)

What

is

the value

of

the

assets in

the

form

of their

original

shareholdings

in

PDP

which the

claimants

have

retained

as

a result of the abandonment of the transaction

( the quantum

issue )?

Friday.

24

August 2007

15.

Mr

Thomas

took

24

August

off

and spent

it

with

his

family in

Oxford. Mr

Gander,

in

the

expectation

that

completion

would

occur

that

day, had

packed

his

things

up in

PDP's

Banbury

offices,

and returned

to

his home in

Croydon.

He

was shortly

to

go

on

holiday

to Italy

to

mark

his

30th

wedding anniversary

and

the

end

of

his

working

life.

Mr

Ward

was

in

and

out of

the office on

Friday

(he

was working on another

transaction

at

the

time), and

when

he

was absent

Mr

Dew dealt

with

the

matter. As I

have

said, by

that

time

Mr

Cusack

was handling the

matter

at

Rickerbys

for the

purchaser,

the

partner

in charge

(Mr

Knight)

being on

holiday.

Mr

Ward

records in

his witness

statement

that,

All

of

the signed,

undated transaction documents

were

at

Rickerbys by the

morning

of 24

August

2007 . By then

the

bank

had

put

Knight &

Sons

in

funds

(the

firm

held

f.1,410,000

ready to be

paid

to Rickerbys). During the

morning,

Mr

Cusack

sent copies

of

the

signed

transaction documents

to

the

defendants

and

to

Knight

& Sons

by way

of

attachments

to emails

(some

thirty

seven

were sent

this

way at 11.08).

In

fact,

Mr Ward's

recollection

is not

quite

accurate,

because

though

by

the

afternoon

almost

all

the documents

had been

sent

to the

defendants,

the

Loan

Note

signed

by

Mr Wilson in

respect

of

that

part

of

the

consideration

due to Mr

Thomas

was still outstanding.

16.

Thereafter,

it is necessary

to examine

the

sequence

of events

in

some

detail.

In this

respect,

I have

heard

oral

evidence

from three of

the

four

solicitors who

were

involved

that

afternoon, namely

Mr

Ward

and Mr Dew of

the

defendant firm, and

Mr

Cusack

of

Rickerbys.

I

should say

that

Mr

Dew

and

Mr

Cusack

have

since

moved

to

new

firms.

I

found

each

of

them to

be honest witnesses,

who

were

concerned

to put

an

accurate

account

before the court,

though

my

impression was

that

Mr

Ward, in

7/23/2019 Att_1447620820391

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THE

HON

MRJUSTICE

BLAIR

Appruved

Judsment

Thomas and

Gander-v- BPE Solicitors

particular,

had

a

tendency

to

reconstruct

what took

place

after the

event.

This

may be

in

part

because

he

was

dealing

with

other

matters

at

the time,

and did not

expect

his

conduct

of

this transaction

to be called into

question

until, without

prior

warning, his

firm

received

the

Professional

Negligence

Pre-action

Protocol

dated 13

Decenrber

2007

from

the

claimants.

By then,

some

months

had

passed.

In any case, since the

recollection

of

all

three solicitors

is

strongly

challenged

by

the

claimants,

the

documentary

evidence

in

the

form

of

emails and

otherrvise

is

of

prime

importance.

As

regards

the receipt

of ernails

when

they were

out

of the

office,

I

should

mention

that

at

this

time none

of

the

solicitors had

a

BlackBerry.

The

early

afternoon

17.

At

15.00,

Mr

Ward

says

that

he

still

did

not

know

whether completion

was

likely

to

take

place

that

day

or the following

week.

The

weekend was

the

bank holiday

weekend,

ffid

the

banks

would

be

closed

on

Monday. The

defendantso case

is that

there

was

no

urgency

in

that

regard.

I am

satisfied

that

Mr Ward instructed

Mr Dew

to call

Mr

Cusack

to call him

(Mr

Ward) on his mobile

phone

when

he was ready

to

complete.

Mr

Cusackos

secretary

took

a

note

of a telephone

message

left

by Mr Dew

at 15.03:

 Re:

Completion project

communicator

Can

you

call

Tim

Ward

when

you

are

ready

to

cornplete .

18.

Under

clause

4.3.1

of

the

SPA,

at

completion

the

buyer had

to

pay

the

sum of

f I,300,000

by

telegraphic

transfer

to

the

sellers'

solicitors,

i.e.

the defendants.

However,

it

is

common ground

that

at

15:30

in

the

afternoon,

the

time for

making

same-day

electronic

transfers

expired

without

the

funds having been

transferred,

so

that

payment

of

the

purchase

consideration

that

day

was

no

longer

possible.

In

fact,

the

buyer's

solicitors (i.e.

Rickerbys)

were

not

themselves in

funds.

The

Bank's

solicitors

(i.e.

Knight

&

Sons)

still

held

the

money

which had

been

drawn down under

the

various

facilities.

By

an

email

sent

at

15:50, Mr

Cusack

forwarded

the last

of

the signed

documents

required

for

completion

to Knight

&

Son.

By

an

email sent

at

15:51,

Mr

Cusack

sent

Mr Ward

(copy

to Mr

Dew)

the

signed

Loan

Note.

This

is

the

first of

two ernails

which

cast particular

light

on what the

parties

did

and

said at

the

time. Mr

Cusackos

email

read:

 I

now attach

signed

Loan

Note

for

your

records.

I will

call

shortly,

hopefully

to

complete.

The

defendants

accept

that

all

the documents

had

now been

provided

ffido

as

they put

it

in

closing,

were

ready

to

be dated

on

the

basis

that completion

took

place.

But,

as

the

claimants put

it

in

closing,

Mr

Cusack had

apparently

overlooked

the

bank

deadline

of

15:30.

At

I

5:52

the

phone

records

show

that

Mr

Dew

called

Mr

Ward's

mobile

phone.

He

told him

that

he

had

received

the

Loan

Note.

Mr Ward

says

of this

conversation,

'oAs

19.

2A.

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http://slidepdf.com/reader/full/att1447620820391 8/36

2r.

THE

HON

MRJUSTICE

BLAIR

Approved

Judqment

Thomas

and

Gander

-v-

BPE

Soliciton

the 15:30

bank telegraphic transfer

deadline

had

passed

and we

had

not

completed

I

realised

that

it would not be

possible

to

transfer the

funds to

BPE's bank

account that

day.

At that stage I did not know

whether

or

not Rickerbys

had received

the

fuirds

from RBS'

solicitors

Knight

& Sons.

In view of

the

fact that

the money could

not

be

transferred

that day

I immediately

realised that

there

was

no

point

in Richard

Cusack

calling

me

to

complete on

Friday

unless

I

had

an

undertaking from

him

to

transfer the

money. Alternatively, if we had been

completing

on

Tuesday,

Rickerbys

would

have

required an

undertaking

from BPE

confirming

that,

following

transfer of the

money

we would hold the money to Rickerbys

order

until

completion

by

telephone.

I

therefore

instructed David Dew to email

Richard

Cusack

requesting

an

undertaking

as

there

was no

point

in

Richard

Cusack

telephoning

me

to

complete

without an undertaking in

place .

Whatever

Mr Ward may

have

thought

at

the time,

it is

clear

that

he

and

Mr Dew

spoke, and the documentary record

shows

that

in response

to

Mr Cusack's

ernail

sent

at

15:51,

Mr

Dew emailed

Mr

Cusack at

t5:59

as follows:

o'Many

thanks for this.

In

readiness for

completion

please

can

I have

your

undertaking

to

transfer

f,1,300,000 to

our account on

Tuesday?

Please

could

you

call

Tim on

his

mobile

(07766 426592) to complete.

What

the

parties agreed as to completion

22.

I

set

out

below the

terms

of

the SPA

as

to

completion,

but

note that

it contemplated

completion

taking

place

on

the date

of the

agreement

at a

place

agreed

by

the

sellers

and the

buyer.

As I

have

said, a completion

meeting

in

respect of

the transaction

was

originally

planned

by Rickerbys,

ffid

a

meeting

room

booked

at

their offices

on the

afternoon

of 23

August

2007,

albeit

Mr

Ward

did

not

plan to

be

present. That

meeting went off

because of the

issue

which

emerged

that

morning

as

to

the

impact

on

the transaction of

possible

cash flow

difficulties,

and

which

was

resolved

later

that

day.

Mr Ward

maintained

in

cross

examination

that completion

was

nevertheless

something

that

had

to

occur

at

a

o'formal

moment

in time .

He said:

o'It

is

vital

in

all

corporate

transactions

and

I

have followed

this

in

everything

that

I

have

done

--

that

an undertaking

is

simply

a

prerequisite

to

completion.

It is

one

of

the conditions

that

need to

be

put

in

place

before

you

can complete.

It

is nothing

more

than

that.

There

has to

be

a formal

moment

in time

in which

the

parties

agree

that completion

has

been effected.

On

this

basis,

the

question

arises as

to

when

and

how

that

formal

moment

in

timeoo

was

to occur,

in

circumstances

in which

there

was

to

be

no

completion

meeting,

and

payment

could

not be

made

that

day

because

the

deadline

for electronic

transfers

had

passed.

23.

This

issue

has

given rise

to

a fundamental

difference

between

the

parties

which

is

at

the heart of

this case.

The

claimants

invite

the court

to

infer

that

a

conversation

took

7/23/2019 Att_1447620820391

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THE HON

MRJUSTICE BLAIR

AoorcvedJudsment

Thomas

and

Gander

-v-

BPE

Solicitots

place

at around

16:00 between

Mr

Cusack

and

Mr

Ward

in which the

method of

completion

wim

agreed.

It

is

necessary

to be clear

as

to

the submission

in this

respect.

To

quote from the

claimants'

written

closing,

Very

soon

after

this

[i.e.

Mr

Dew's

email

sent

at 15:59], Mr

Cusack

spoke by

telephone

to

Mr

Ward

to say that

the bank

was

ready to complete

and that all

documentation

was

in

place.

Mr

Cusack

had

Mr

Ward's mobile number

...

.

In

the

course

of

the call the solicitors

recognised that

completion

could

only

be

achieved

by

undertakings

as

the bank

deadline

had

passed.

Mr

Cusack

was

unprepared to

give

an

unqualified

undertaking

to forward

monies

as

they

\ilere

still

with Knights, so

it

was

agreed

that

a

pair

of undertakings

would

suffice: first an

undertaking

from Knights

to Rickerbys

to

forward

the

monies

on

Tuesday:

secondly

Rickerbys'

undertaking

to

forward monies

when

received

from

Knights . These

factual

assertions are said

to

be supported

by certain

material,

and

 each

of

these documents

supports the fact

that

Rickerbys

got

in touch

with

Mr

Wardoo.

I

draw

attention to

the words

it

was agreed

that

a

pair

of

undertakings

would

suffice o because this is

the

first

of two

ways

in which

the

claimants

put

their case

on

completion.

As their

oral closing

made

clear,

their

case

is

that

it was

agreed

in

this

conversation

that

the

receipt

of

the

undertakings

would

suffice

to

complete

the

transaction. If so, Mr

Ward's

formal

moment

in

time

can be

established

by

refere,nce

to the time when the

pair

of

undertakings

were received

later that

afternoon

(as

they

were)

at

the

defendants' offices.

24. The

following material

is

relied

on

by

the claimants to

support

the

inference

of such a

conversation.

(1)

First, it

is

pleaded

in

the

defence

that,

By

late afternoon

the

parties

were

in a

position

to

complete

the

sale and

purchase

transaction

save

that it

was too

late

to

transfer

funds

that

day

because

the

bank

deadline

for

electronic

transfers

had

passed .

In

paragraph

1

1,

the

defence goes

on to

plead that,

It

was

agreed

between

Mr Tim

Ward

of

the

Defendant and Mr

Richard

Cusack of

Rickerbys that

an

undertaking

of

payment

by

Rickerbys would

subsequently

be

acceptable

in

place

of transfer

of

funds and

that

completion would

be

made

by telephone .

The

claimants

point

out

that

the statement

of tnrth

is

signed

by

Mr Ward, and

they

rely

on the fact that

the defence

expressly

asserts

an

agreement

between

the

two

solicitors.

(2)

The

claimants

also

rely

on

the

response

of

27

March

2008 by

the defendants'

solicitors' following receipt

of

the

Letter

of

Claim

in

Decernber

2007.

This

says

among

other

things that,

ooThe

aim

was to complete

on

Thursday

23

August

but

the

papenilork

was

not in

place

and

during the course of the

following

day,

Fnday 24

August

it

was

apparent

that

Rickerbys were

working

to

finalise the

documentation

with

the bank.

By

4pm

on

24 August

Rickerbys

had indicated

that

the bank

were

ready

and

the documentation was

in

place

but

the cut offtime for

the

transfer of

funds

had

been missed and it

was

not

possible

to

transfer

the

money that

day''.

This

(it

is

submitted)

places

the

time

of such agreement at

about

16:00.

It

shows,

it

is

said,

that

there was

a

telephone coillmunication,

because

some of the things

which

were

'tndicated'o do

not appear

from

any

of

the emails.

(3)

Third,

the

claimants

refer Mr Ward's

evidence,

including

an earlier witness statement

made

by him in

connection

with

sunmary

judgment

proceedings

in

which

he

says,

 ...

we heard

from

Rickerbys

that

the documentation

with the

bank

was complete and

they were

ready

to

proceed .

It

was

conte,lrded

that

none

of

the

ernails indicates that

the documentation

with

the

bank

was complete

and

there was a

readiness

to

proceed.

7/23/2019 Att_1447620820391

http://slidepdf.com/reader/full/att1447620820391 10/36

THE HON

MR JUSTICE

BLAIR

Approved

Judqment

Thomas

and

Gander

-v-

BPE Solicitors

That

must

have

been

gleaned,

the

claimants

say,

by some

other

means

of

communication.

In

this respect,

the claimants

point

out that

in

cross

examination

Mr

Cusack

said

that,

I

believe

that

I

was in

touch with him

[Mr

Ward]

throughout

the

day''.

A

similar

contention

is made

as

regards the next

passage,

in

which

he

says, By

this

time

it

was

past

the

cut-off

time

for

bank transfers

and it

was

therefore

impossible

for

the

funds

to

be

transferred

that

day.

The

only

alternative

was

to

obtain

an

undertaking

from

Rickerbys

and Knight

&

Sons

to

transfer

the

funds

to

complete

the

following

TuesdaS

28m

August

as the Bank

Holiday

intervenedo'.

Finally,

reference

is

made

to

a

passage

which

states

that,

I

discussed the

position

with

David

Dew,

who

sat

in

the

same

room,

and

asked

him

to

send an

e-mail to Richard

Cusack asking him

to forward

an

undertaking

to

transfer the funds to our

account

on Tuesday. The

intention,

once

an acceptable

undertaking

had

been received was to

complete the

transaction

by

telephone

as is

standard

practice

in

this

situation.

(I

should note

that

although

Mr

Dew

sat

in the

same

room as

Mr

Ward,

they

were

not physically

together

at

16:00

because

Mr

Ward was

not

in

the

office

at

that

time.

He did

not return

until

after 17:00

that

afternoon.)

25.

The

defendants

submit

that none

of this

provides

evidence

that such

a

conversation

took

place

between

Mr

Ward

and

Mr Cusack, and

in particular

provides

no evidence

that

Mr

Ward

was

expecting

a pair

of

undertakings .

The

evidence

of Mr

Ward

and

Mr

Cusack

in

cross-examination

was

that they

did

not

recall

such

a

conversation.

The

Rickerbys' phone

records

which might

have established

such

a

conversation

could

have

been adduced,

it

is

said,

but are not

in

evidence. The

conversation

is

not

pleaded,

and

it

is,

in

the defendants'

view, an invention

designed

to filI

a

gaping

hole

in

the claimants'

case.

Their

own case as advanced in

closing

submissions is

that

the

parties

through

their

respective

solicitors ...

agreed

that

completion

of

the

Transaction

would

take

place

by

means

of

(l)

Rickerbys

providing

an

undertaking in

agreed

terms

that

they

would

pay

f 1.3m

in completion

monies

to BPE on Tuesday 28

August

2007

and

(2)

a telephone

call

between

Mr Ward for BPE

and

Mr

Richard

Cusack

for

Rickerbys

agreeing

actual

completion .

The

primary

difference

from their

pleading

is

that the

agreement

is

not

expressly asserted

to

have been

reached

between

Mr

Ward

and

Mr Cusack.

26.

The

defendants

rely

(as

they

put

it

on

oral

closings)

on

conduct,

circumstances

and

practice

as

o'supporting

the

agreement

that completion would

be

upon agreement

of a

satisfactory

undertaking

and

a telephone

call .

They

rely

in

particular

on:

(1)

The

contemporaneous

documentary

material, namely Rickerbys attendance

note of

15.03

recording

Mr

Dew's

telephone

call

to

Mr

Cusack

stating,

Can you call

Tim

Ward

when

you

are

ready

to complete :

Mr

Cusack's ernail to

Mr

Ward

of

15.51

stating, 'oI

now

attach

signed

Loan

Note

for

your

records.

I will

call shortly to

complete :

Mr

Dew's

email

to Mr Cusack

of

15.59

stating,

In

readiness

for

completion

please

can I

have

your

undertaking

to transfer

f1,300,000

to

our

account

onTuesday?

Please

could

you

call

Tim

onhis

mobile

(07766

426592)

to complete.

(2)

The evidence

of Mr Ward

who stated,

...I

would need

to

be satisfied

that the

terms

of

the

undertaking

were

acceptable

and

if

they

were

I

could

complete

the

transaction

by means

of

a telephone

call to Richard Cusacko', ffid of Mr Dew who

said

in

cross

examination

that

he

had

glven

Mr Ward's mobile

number

to

Mr Cusack because,

I

was

aware that

once

the

undertaking

had

been

received,

it

would

be

necessary

in order

to achieve

completion

that

Mr

Cusack

would

speak to

Mr Ward.

7/23/2019 Att_1447620820391

http://slidepdf.com/reader/full/att1447620820391 11/36

THE

HON

MR JUSTICE BLAIR

Anoroved Judsment

27.

28.

Thomas and

Gander

-v-

BPE Solicitors

(3)

The need in a consensual transaction

for

the

form

of an

undertaking to

be

accepted

by

the receiving

party.

In

that regard, Mr Ward

said

in

cross

exarnination:

*And

in this

arrangement it never altered

from

the

fact that that

was

going

to

be

by

tele,phone.

I

do

not

know

the form of

the undertaking

that was

going

to

be given,

it

had not

been discussed

in detail.

I

did

not

know

whether

it

was

going

to

be signed

by

a

partner

in an acceptable

form.

I didn't

know

whether

it

was

going

to

come by

just

an ernail, on

headed

notepaper.

I

didn't

know

when

it

was

going

to

arrive. You would

not agree

to

complete

simply

on

undertakings without

a

definitive

phone

call and

a

moment

in

time

in

order

to

effect that

completion.

My

conclusions on this

issue are as

follows.

The

claimants

are

probably

right

to

submit that

there

were

communications

between

the solicitors

that

cannot now

be

pinpointed.

On

the other hand,

this

period

around

16:00,

when the

claimants

say

that

the

conversation

took

place,

has

been

the

subject

of

the

closest scrutiny

during the

course

of this case. In

the

event,

the claimants

accept

that they

cannot

point

beyond

inference

to

such

a conversation.

It

does

not

feature

in their helpful and

thorough

chronology

prepared

for the

trial.

Although

it is fairly

said that

neither of

them

excluded

the

possibility

in

cross

examination,

Mr

Cusack

cannot

recall making

the

call, and

Mr

Ward cannot recall receiving

it, and

that

in itself

is

important

evidence.

In

the

absence

of clear evidence that

this

conversation

took

place,

I

do not

feel

able

to

draw an

inference

that

it

did.

However,

this conclusion

may not

greatly

matter,

because

it

is

common

ground

that

something

was agreed

between

the firms

about

completion. The real

issue

(in

my

judgment)

is

what

was

agreed,

rather

than

how it

was

agreed. In

that

regard,

I

consider that

there has

been

a

degree of

reconstruction of

eve,nts

in

the witness evidence,

particularly in Mr Ward's evidence.

The safest

course

appears

to

me

to

look

to

the

contemporaneous

material

in

form

of

Rickerbys

attendance

note of

15.03,

Mr

Cusack's

email of 15.51,

and

Mr Dew's email

to Mr

Cusack

of

15.59. Each

of

these

contemplates

a

phone

call

to

complete

the transaction.

The

latter

also

refers to

an

undertaking, stating:

In

readiness

for

completion

please

can I have

your

undertaking to

transfer

f,1,300,000

to our

account

on

Tuesday?

Please

could

you

call Tim

on

his mobile

(07766

426592)

to complete.

That

in my

judgment

is where the

parties

got

to so far as

completion

was

concerned

that

afternoon,

and on balance I

accept

the

defendants'

case

as to

what

was agreed

in

this

regard. It

did not need

to be

spelled

out

that the undertaking

or

undertakings

which

Rickerbys were

to send

would

have to

be

acceptable

to the

defendants, since

that

would

have

been obvious.

Thereaftffi, n

call between

Mr Cusack

and

Mr Ward

was

required

to

complete

the

transaction.

It

follows

that

I reject

the claimantso invitation

to

infer a conversation

in

the course

of

which

it

was agreed

that

a

pair

of undertakings

would suffice .

As the

defendants

argued,

correctly

in my view, it is

very unlikely

that Mr

Ward would

have agreed that

the

receipt

of

undertakings

would

suffice

to

complete the

transaction, since

he would

not

know

until

he

got

them whether

the undertakings

were

adequate

or

not.

In

the

claimants'

oral closing a variant was advanced as

follows: Alternatively

-

we

can

see

this is

possible

-

the

solicitors

might

have arranged that

there

would be confirmation

on the

part

of BPE

that the submitted undertakings

were acceptedo ffid

that

completion would

occur upon that

confirmation . This

way

of

putting

the case

was

to

e,nable a

submission

that completion

was effected

by

a

brief

phone

call

that

took

place

7/23/2019 Att_1447620820391

http://slidepdf.com/reader/full/att1447620820391 12/36

THE

HON

MRJUSTICE

BLAIR

Annroved

Judsment

Thomas

and

Gander

-v-

BPE Solicitors

in

disputed

circumstances

later

that

afternoon.

I do

not

consider

that I should

infer

an

agreement

in these

terms

either.

For

the

reasons I

have

grven,

I

have concluded

on

balance

that

a

call

between

Mr

Cusack

and

Mr Ward

was

required

to

complete the

transaction,

and there

is

no

reason

to

confine

that

requirement

to confirmation

by

the

defendants

that the

submitted

undertakings

were

accepted.

The

provision

of the

undertakings

29.

On

the

evidence,

what

happened

next

is

as

follows.

Having

received Mr

Dew's

ernail,

Mr

Cusack

set

about

providing

an

undertaking.

Since Rickerbys

did

not

have

the

money,

he required

a

back

to back

undertaking

from

Knight

&

Sons

(which

he

probably

aranged

by

phone,

as

he accepted

in cross

examination).

After

a

chasing

email

sent

at

16.59,

this

eventually

arrived. In

order to

provide

an

undertaking on

behalf

of his firm,

Mr

Cusack

had

to

obtain approval

from

a

partner,

which

again he

did.

At

I 7

.14,

he

faxed

through

these undertakings

to

the

defendants. The first was

on

Rickerbys

headed

notepaper

FAO Tim

Ward dated 24 August

2007.

It read:

 Dear

Sirs

PROJECT

COMMUNICATOR

Please

accept

this

fax

as

our undertaking

to

send

you

by

telegraphic transfer

the

amount

of

f1,300,000

in

respect

of

the completion money

for

the above

matter

upon receipt

of

the

same

from

Knight

&

Sons

pursuant

to their

undertaking (copy

enclosed).

Yours

faithfully,

Rickerbys

30. The

second

was

Knight

&

Son's

undertaking to

Rickerbys

again dated 24 August

2007.

It read:

 Dear

Sirs,

Acquisition

of PDP

Management

Services

[Holdings]

Limited

( Acquisition )

Limited by

PDP

Management

We

curently

hold

the

sum

of f 1,410,000

(one

million four

hundred

and ten

thousand

pounds)

in

our

client

account

( the

Sum ).

On bank

opening on

the

morning of Tuesday 28 August

2A07 we undertake

to

instruct

our

bankers

to

transfer

the

Sum

to

your

account

with Lloyds

TSB

Bank plc

(sort

code:

... and account

number:

...

).

Yours

faithfully,

Knight

& Sons

31. Because

the

undertakings

were

sent

by

fax, whereas

the

parties

had been

communicating

by

email,

I

am satisfied that

they

were

not

seen

by

either

Mr

Ward

or

Mr

Dew immediately.

By now

it was after

five in the

evening

before the bank

7/23/2019 Att_1447620820391

http://slidepdf.com/reader/full/att1447620820391 13/36

THE HON MRJUSTICE

BLAIR

Approved Judqment

Thomas

and

Gander

-v- BPE Solicitons

holiday

weekend,

ffid

Mr Ward

had returned

to

the

office.

At

this

point, he

called

the

claimants on their mobile

phones.

He

explains

in

his

witness

statement

that

he

called

Mr

Thomas

from

his office

at

17:33, the

call

lasting

approximately

5

to 6 minutes.

During

this

conversation,

he

says,

he

discussed

the

current

situation.

At

17:39,

he

called

Mr

Gander.

This call

lasted approximately

4 to 5

minutes.

His

recollection

(which

I

accept)

is

that

he had

not

at

that point had sight

of

the

undertaking

from

Rickerbys. He says that

he

informed both

his

clients

that

the transaction

had not

yet

completed.

32.

In response to Mr Ward's witness

statement to

this

effect, both

claimants

provided

furttrer

witness

staternents

in substantially

the same

terms.

Neither

has

any

o'recollection

of

the

call but

if

he

did

speak to me

then I

have

no

doubt

whatever

he

said

to

me

acoorded

with my

understanding that

the

transaction

had

not

completed .

Whilst the

cl4imants

do

not recall the

tele,phone

conversation,

they

are

clear

that

it

must

have been the

case

that

Mr

Ward

did

not

inform them

about

the undertaking

he

had received.

Otherwise,

they say, they

would have

bee,n

prepared

to

accept such

undertaking

r{ther

than

insisting

on the receipt

of

cash.

It

is

somewhat

strprising

(Mr

Thomas described

it

as a

little

bizarreo')

that

neither

claimant

has any recollection

of

the calls.

It

Was

the

only occasion

that

day

on

which

either of

them

spoke

to their

solicitor, a

day on

which

they

hoped that a

transaction

would

complete

which

(as

their

evide,lrce emphasises) they

saw

as

vital

to

their

futures

and those

of

their

families.

That

howeven

is the

position,

and I

conclude

that

since

Mr

Gander

had

already

established

thpt the

money

haci

not arrived

in

his account

by

the time of

the calls

(which

he regarded

as

constituting

completion)

whatever

Mr V/ard

had to say did not

make

an

irnpdct

on him. The

same

must

apply

to Mr

Thomas,

though

he did

not

establish

the

position

as

to

his

bank

balance

until

he

got

back

home

that

night after

dinner.

The 17:44

phone

call

33. Shortly before trial, the

defendants'

general

telephone

records

were disclosed,

ffid

these

show

that

at

17.44

(in

other

words

shortly

after

the call by

Mr

Ward

to Mr

Gander)

a

phone

call

of

15

seconds

duration

was

made from BPE's

general

line

to

Mr

Cusack's

extension

number

at

Rickerbys.

This has

given

rise

to

a further

important

factual

dispute between the

parties.

I

start

by

setting out

the

claimants'

case as

to this

phone

call. To

quote

their closing

submissions,

ooBy

5:44

[Mr

Ward] saw

the

undertakings and called Mr

Cusack's

direct

line to confirm

receipt

and

the

fact of

completion.

...

The call was

not

strictly

necessary

given

the earlier

arrangement as

to

urdertakings to be given

to

achieve

completion.

It

was

a courtesy, grven the

time

of

day,

so

that Mr Cusack

would

know that

everything

was

finalised.

...

This

call

can

have had

no other

purpose.

I

have already mentioned

the

claimants' alternative

case

as

to completion, nsrmely that the

solicitors

arranged

in

the

disputed conversation

(i.e.

at 16:00)

that

there

would be confirmation on

the

part

of

the defendants

that

the

submitted undertakings

were accepted, ffid that

completion

would occur upon

that

confirmation.

Their case is

that this

happened

when

Mr

Ward

phoned

Mr

Cusack

at

17.M.

They say

(again

quoting

from their

written closing)

that

following

the call, Mr

Ward

ttren

realised

that

since completion had occurred

on

the Friday, but monies

would not be received

for

four

days,

interest which

accrued

on

the monies

would

belong to

his

clients,

and he caused

Mr

Dew to

send

the 6:00

e-mail .

7/23/2019 Att_1447620820391

http://slidepdf.com/reader/full/att1447620820391 14/36

THE HON

MR

JUSTICE

BLAIR

Anproved

Judement

Thomas

and

Gander

-v-

BPE

Soliciton

Though

I have

rejected

the

claimants'

alternative version

of

the

disputed

conversation

at

16:00,

I

must set

out

my

factual

findings

as to

the call

at

1,7:44.

Mr

Ward

accepted

in

cross

examination

that

though

the

call was

not

made

from his

office

extension,

he

and

Mr Dew

were

the

likely

candidates

for

making

it.

However,

he

said

that he

did

not

remernber

making

the call,

and

did

not

believe that he

made it.

He

thought that

the purpose

of

the

call would

have

been

to

raise the question

of

interest over the

long

weekend

(which

was not

mentioned

in

the

undertakings),

and thought it may have

been

made

by

Mr

Dew.

The

claimants

respond

in

that regard

that

Mr

Ward

said

in

his

witness

statement

that

he

directed

Mr

Dew

to

raise

the

interest

point

by ernail.

The

only

thing

that

needed

to

be

said

on the

phone,

the claimants

argue,

was that the

undertakings

were

fine,

the

deal was done,

and the

paper work

could be

sorted

out

on

Tuesday,

and that

could

be

done

within fifteen seconds.

The

solicitors

disagreed.

Mr

Ward

said

in

cross

examination that

considerably

more

than

fifteen

seconds

would be needed,

allowing for

opening

courtesies, the

agreernent

to

complete

the

transaction,

the reconfirmation

he

said

he would ask for

that

Mr

Cusack was

holding

the

documents signed

by

his

clients,

and

satisfinng

himself

that

Mr

Cusack

would

send the papenvork

to

Mr

Ward

the next business

day.

Moreover

the

defendants

submit,

if

a

call

had

been made

making

completion, it would be

natural

for Mr

Ward to

raise

the

question

of interest

which

was covered

in

the

subsequent

email

sent

by

Mr

Dew.

Mr

Cusack

said

in

cross examination that he

did

not

rernember

the

call,

but

that

bearing

in

mind

that

this

was

his first

unassisted

completion, if

I had

made

this

call to

complete,

I

believe that

call would have

taken

a

lot longer

than

15

seconds . He

mentioned

other

completion formalities

to be carried

out subsequent

to

the

completion

phone

call,

such

as dating the

documents,

which

he

says would have

been

discussed

with Mr

Ward.

On

the balance

of

probabilities,

I

am

satisfied

that

Mr

Ward

and

Mr

Cusack

did

not

speak

to each

other at 17:44.

My

reasons

are as

follows.

First,

there is the

evidence

of Mr

Ward

and Mr

Cusack

themselves.

Although this

is not

wholly satisfactory in

some respects,

the

fact

is that

neither of them

recall making or receiving

a

phone

call

from

the other at

this

time.

In

particular,

the

evidence of

both

is

positively

that

there

was no

phone

call

by

which

the transaction was completed, at this time or

later.

Second,

this

seerns

to

me

to be

supported by

the overall

probabilities.

It is unlikely

that if

as the

claimants

contend, d

conversation

had taken

place

between them at

17:44 to the

effect

that

the transaction had completed, neither

solicitor would have

informed

his

respective

client.

Mr

Ward

had

just

come

off

the

phone

to his

clients,

and he

would

surely

have

called

back

if

completion had occurred.

A

more likely

explanation,

and

the one

I

accept, is

that he saw the undertakings

after speaking

to

his

clients,

but

did not

regard

thern

as

satisfactory,

because

they did not cover

interest

pending

receipt

of

the funds

on Tuesday. Third,

there

is the

short

time span

of

the

call,

namely fifteen

seconds.

The

claimants'

factual

case

in

closing

has,

I

think

it

is

fair to

say, been

crafted

to

enable a call

on completion

credibly

to

fit within this

time

span. I

accept

their

submission

that,

interest aside,

all

was by

now in

place

to enable

completion

to

go

forward,

and

the

conversation

could

have been brief.

But

even on

that basis,

I cannot

accept that

fifteen seconds would

be

sufficient

even

for

the

briefest

of

completion calls.

On

balance,

I

am satisfied that the defendants'

factual

case as

regards

this call is

correct.

The

call

was made

(I

find) either

by Mr

Ward

or

Mr

Dew,

and was

probably

about

interest. As

I

shall explain

shortly

Mr

Cusack

had

probably

left

by

the

time it was made,

but

in any

case,

he

did

not

answer the

phone.

34.

35.

36.

7/23/2019 Att_1447620820391

http://slidepdf.com/reader/full/att1447620820391 15/36

THE

HON MRJUSTICE BLAIR

Anoroved Judsment

37.

39.

40.

Thomas and

Gander

-v- BPE Solicitors

38.

That brings

me to the evidence

in

respect

of

interest.

Mr

Ward says

that

the

rurdertaking offered

by Rickerbys

was

unsatisfactory

because

it did

not

make

provision

for

interest between

completion

occurring

and

payment

of the

purchase

monies

after

the bank holiday

weekend.

He

says

that

he

directed

Mr Dew

to

send

an

email to

Mr

Cusack

requesting

an

amended undertaking

that made

provision

for

interest.

Mr

Dew

said

in

his witness

statement

that he could

not specifically recall

the

conversation,

but

that he believes

that

Mr

Ward

was concerned

about interest

accruing

on the completion

monies

over

the

bank

holiday

weekend

and

asked him to

obtain

a

revised

undertaking

from Rickerbys

that

made

provision for

interest

until

payment.

The

documentary

record shows

that

at

18:00, MrDew

sent

the

following email

to

Mr

Cusack:

 Thank

you for

your

undertaking,

please

could

you

include interest

from

today when the

f,I,300,000

is transferred to

our

client

account.

The claimants

submit (quoting from their closing

submissions)

that

the sending

of

this

email

o'reflected

completion's

having

taken

place,

triggering

the

right

to

interest

on

monies

held .

They then

deal

with

Mr

Ward's explanation

of the

email:

Mr

Ward

zuggested

that the

email

amounted

to

a

request

for

a revised

undertaking

... .

It is

common

ground

that the ernail

did

not, in

terms,

request

an amended undertaking;

it

simply

requested

the inclusion

of

interest

in

the monies

transferred.

It

is to

be noted

that, in

the absence

of

any indication that the

text

is to be

constnred

as

raising

a

question

(there

is,

for

example, no

question

mark and

the

word

please

is

included),

its

plain

meaning

is as

a

direction

and not a

request

for change.

This reflects

an

underlying

entitlement

to

interest

on

completion

monies .

Thereafter,

to

complete

the

claimants'

account of events, it

is said that,

Messrs

Ward and

Cusack,

both

appreciating that

nothing

remained to

be

done,

left

their

officeso'.

Beginning

with

the

last

point

first, Mr Ward's evidence

is that

he left the office

sometime

after six o'clock,

which

accords

with

the claimantso

view.

The

timing

may

be more important

in

the

case

of

Mr

Cusack.

It was

put

to

him

in cross examination

that

he

was

still in the

office at

quarter

to six. He

said that, I

donot

believe

so, no''.

He said that

by this time,

he

would

have

been

anxious to

get

out

of

the

office

to

e,njoy

the long weekend.

As

the defendants

say,

Mr

Cusack

had no

personal

interest

to

protect

in

maintaining

that completion

did

not

take

place-he

has

never

worked for

BPE

and

now works

in

Australia.

Though

he

suffers

from the same difficulties

of

recollection

as

the

other

solicitors,

and there is

no

means of

veriffing

his

precise

time

of

departure

that

evening,

I

found

his

evidence

convincing

in

this

and other

respects,

and accept it. It

follows

that

I find that he had left by

the

time

the email

of

18:00

arrived.

The last to leave

was

Mr Dew,

who

was

due to

be

away

for two

weeks

on

a

charity

trek

the firm

was

sponsoring

in Morocco,

and so

stayed

late. He

believes

that

he

would

have

left

the office at around 2l:30. The

following

exchange took

place

in Mr

Dew's

cross

examination:

ooQ.

So

when

you

dispatched that ernail

at 6 o'clock,

what

was

the

position

then

as

far as

you

saw it?

4t.

7/23/2019 Att_1447620820391

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THE HON

MR

JUSTICE BLAIR

Aoproved

Judsment

42.

43.

Thomas

and

Gander

-v-

BPE Solicitors

That

the undertaking

originally

received

from Mr

Cusack wasn't in

satisfactory

form.

It

needed to

be

revised

and

emailed to us,

or

alternatively

by

fax,

and

that

once

we

had received

that undertaking,

it

would

be

reviewed

and if it

was agreed,

then following

that,

arrangements

would

be made

in

order

to complete the

share

purchase.

Right.

So

in

order

to do

the

deal

that

evenitrg,

n

further

phone

call

was

going

to

be

needed?

Yes,

at some

stage.

Yes.

Either

from

Mr

Ward to

Mr

Cusack or Mr Cusack

to

Mr

Ward?

Yes.

Mr

Dew

appeared

to

me

to

be

a

reliable

witness,

and

I accept

his

evidence in

this

respect.

But

despite

his subjective

view

of what

it meant,

the language

of

the

ernail

of

18:00

must

be viewed

objectively,

and it

is

open to interpretation.

As

the

claimants

submitted,

it

can

be

read

as

suggesting

that,

completion having

occuffedo interest

should

be

added

to

the

completion

monies

when transferred on Tuesday.

Clearly,

there

was

no

entitlernent

to

interest

over the weekend in

the

absence

of

completion on

Friday.

But

in

my

judgment,

viewed

against

the factual matrix as I have

found it

to

be, a more

natural reading

is

that the email

was

a

request for

something

additional

to

that

provided

for

in

the

undertaking

which

Mr

Cusack had sent three

quarters

of

an

hour

earlier. If

completion

was

to

happen

on the

basis

of the undertakitrgs, then

the

claimants

were entitled

to

interest

earned

on the

funds

prior to

receipt

of

the money.

In

my

view,

the defendants

are

right

to submit

that

the email

amounted

to

a rejection

of

the

undertaking.

Interest

need

not, in my

view, have

been an

obstacle to

completion

that

night,

since it

is hard

to see what objection

there

could

have

bee,n

to

agreeing

to

pay

it.

On

the other hand,

the

money

was actually held

at that

point

by

Knight

& Sons,

and

their

assent

would have

been

needed,

and

Mr

Cusack

would

have

required

a

partner's

approval

before

irmending

his

firm's

undertaking. But in

any

case,

whilst

a satisfactory

undertaking

was

required

for

completion,

a

completion

call

between

Mr

Ward

and Mr

Cusack

was

(as

I

have

held)

also

required. That did not

happen

that

evening.

In

that

regard,

Mr

Cusack's

evidence was

he

held

the vague

recollection

when

he

went home

that

completion

had taken

place.

But

he

said, and

I

accept,

that he left

the

office

forgetting

that

he should have

made

a

phone

call to

Mr

Ward

to complete. He

was

clearly upset

that he had

fallen

short

in

this

regard,

as

the

following

exchange

in

cross

examination

shows:

Mr

Cusack,

the

situation

is

this, isn't

it,

in

truth:

you

left

your

office

believing

that

you

had

completed because that's what

you

had done.

You

prepared

an attendance

note the

following

Tuesday,

noting

that

the

deal had

completed,

because

that's

what

you

believed

had

happened,

and

you prepared

that billing

narrative recording

completion

because

it's

what you believed

had happened?

A.

a.

A.

a.

A.

o'Q

7/23/2019 Att_1447620820391

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THg

HON

MRJUSTICE

BLAIR

AoDloved

Judqment

44.

45.

46.

Thomas

and

Gander

-v-

BPE Solicitors

A.

No,

the

billing

nalrative, to

take

that

one

in

a side

completion

would

just

be

a

very

general

term.

I

didn't

recall

exactly

-- or

didn't

record

exactly

what

I

was

doing

for

seven

hours,

so

it would

have

been

a

general

--

I was

working

towards

completion

of

this matter

in

seven

hours' time.

I do

not

believe

completion

occurred

on

the

Friday

evening although

at

the

time,

I

had the

mistaken

belief

that my

actions

had

completed,

although

I

did

not

go

through

everything

I

should

have

done

to

complete,

which

was

v€ry

mistaken

and

--

a

very

mistaken belief

and something

that

--

well,

I wasn't

doing

my

job

properly.

So,

no I don't

--

yes,

we

didn't

-- we

didn't

complete.

I

have

quoted

this

passage

not

by way of censure

of

Mr

Cusack,

but

because

of

the

light it

sheds on the

issue I

have

to decide.

The

reference to

the term

completion

in

the

billing

narrative which

he

prepared,

showed

no

more, as

he

said,

than that

he was

working

towards

completion

that day.

Mr

Ward accepted

in

cross-examination that

it

would

have

made

sense

to close

the

deal off

that

Friday.

When

asked

*hy,

before

leaving

the

office,

he

did not

himself

pick

up

the

phone

and ttry to

get

through

to

Mr

Cusack,

he did

not

have

an

explanation.

Mr

Dew

says

that he thinks

he

made

a

chasing

call

as

to

interest

sometime

between

18:00

and

19:30, but

was

told

that

Mr

Cusack

had left the office

(the

phone

records do

not confirm this

evidence

but

there

is

no

reason

to

doubt

it).

Before

leaving himself, he

left

Form 395

for

filing

with

Companies

House

for Mr

Ward,

but

(as

the

claimants

point

out) did not

leave a

handover

note

to

the

effect

that

he had not received

a

response

to his email

from

Mr

Cusack.

He believes

that

he

would have

left

the

office

at around

2l:30.

I

have

the

strong

impression

that

the transaction

was

left in

an

unsatisfactory

state on

that Friday

night.

The explanation,

I have

no

doubt,

lies

in the timing, coming

just

before

the

bank holiday weekend. The

last

minute

hitch

(for

which

Mr

Ward

was

in

no

way

responsible)

had

prevented

completion

the

previous

day

as

planned.

For

whatever reason,

the loan note

signed

by

Mr Wilson

arrived

too

late

to

permit

the

hansfer of

funds

that Friday

afternoon.

By

the

time

undertakings

had arrived,

it was

Friday

evening,

and

both

Mr

Ward and Mr Cusack were

anxious

to

get

away.

The

question

of

interest

was

raised but

not

resolved.

Despite

the detailed

analysis

which

this

case

has

required,

I doubt that the forrnalities

of

completion

were

foremost

in any

of the solicitorso

minds.

The

fact

is that no-one foresaw

any

difficulties

remaining,

least

of

all

Mr

Ward, who

planned

to be

on

holiday

on

Tuesday, though he

would

be

available

on

his

mobile

phone,

and could, he said,

have

arranged

cover

if

necessary.

The claimants'

case

is

that the

evide,lrce as

to the

events

that

Friday

has to be

considered

in

the

context of alleged admissions by

Mr

Ward,

ffid

that when

these and

other matters are taken into account,

the

court

should conclude

that the

transaction

did

complete

on that day. It has

been

argued that Knight &

Sons

would

not have

given

its

undertaking

unless satisfied that completion had taken

place. As it is

put

in the

claimants'

closing submissions,

o'Inherent

in the

case advanced by the

defendants

is

the suggestion

that

Knights

incompetently

released

fimds

without taking

any

steps to

see

that

the

Bank's

position

was

secured . I

reject

this contention.

Since

the

funds

were

not

to

be

transfemed

that day,

an undertaking

from Knight

&

Sons

was

a

necessary

preliminary

to completion, which could

not have taken

place

that

day

7/23/2019 Att_1447620820391

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TIIE

HON

MR

JUSTICE

BLAIR

Aoproved

Judqment

Thomas

and

Gander -v- BPE

Solicitors

without

it.

The provision

of

the

undertaking does

not

show that

completion had

occured.

I

regard

this

as

a

neutral factor.

Before

reaching a conclusion

as

to

completion

however,

I

must

describe

what happened over the

following

days.

Saturday.

25

August 2007

47.

It

is

convenient

to begin

by

setting out

a

summary of the

claimants'

case

from

their

opening.

In

complete

ignorance

of

what had happened

the

previous

duy,

it is said, the

claimants

learned

from

Mr

Wilson

of

the

serious

threat

to

PDP

from

the

loss

of

Powergen's

business

in

the

course

of

Saturday 25

August. Mr Gander was

the first

to

hear around

lunchtime,

and

Mr

Thomas

spoke

to

Mr

Wilson at about

18:45

having

been

unavailable

earlier

in

the

day. Mr Wilson informed

the

claimants that he had

that

morning spoken

to

a

contact

at

Powergen

who

told

him

that

there was

going

to be

a

substantial

down

turn

in

invoicing,

because

Powergen

intended

to

take

in

house

much

work

which had previously

been

outsourced.

Mr

Wilson

mentioned

that he had

also

spoken

to

Mr

Elrick

who expressed

the view that the

projected

reduction

in

business

would

mean

that

revenues

would be

inadequate

to

sustain

the

transaction

which

would

have

to

be

called

off.

Both Mr

Thomas

and Mr

Gander

(erroneously

they

submit in view

of the

fact

of

completion) were

of the

view

that

disclosure

would

have

to

be

made

to

the

bank and

that in

consequence the deal would fall

through.

Mr

Wilson

told

both claimants

that he

considered

they

should speak

to

the

defendants

on

the

following

Tuesday

to

call

off'

the

transaction.

Mr Gander sent

an

email

to

Mr

Ward

at

16:29

on

25

August

stating

that

for reasons

beyond

his

control,

and

of which

he

was

previously

unaware,

the deal

would not

go

through and was

cancelled.

48.

Mr

Wilson

did

not

give

evidence

at

trial, and

this

account

of

how

news

of the loss of

the

Powergen

business

was received

by

him

on

Saturday morning

may

seem

surprising.

As

Mr

Jeremy

Cousins

QC

for

the

claimants

put

it

in

opening,

the

coincidence

is

absolutely

rernarkable.

But it

is

the evidence

of both

the claimants,

and

as Mr

Cousins

QC

correctly

said, the

defendants do not dispute

it

as to

the essentials.

The

specific

effect

of

the

loss

of

the

business

was

further explored

in

the

part

of

the

case

that concerned

quantum,

ffid was

in

broad terms as

follows. PDP's

turnover

for

the

year

ending

3l March

2007

was f4,617,932, and

it

is common

ground

that

Powergen

(which

Mr

Thomas

said was

the

company's

major

client)

accounted

for

34%

of

the

company's

turnover

that

year.

(It

appears that

this

percentage

had

been

rising

prior

to August

2007.)

Commenting on the experts'

views

as

to

the

expected

loss

of turnover

which was

f,lm in the view of the

claimants'

expert

and

f0.5m

in

the

view

of the

defendants'

expert,

the claimants said in

closing that,

it

is

more

like

one

and a

half million

that

is

lost,

from four

and

a half

million

down

to

about

three

million .

This

was described

by

the

claimants

as the

o'hammer

blow

of a

loss

of a

third

of

the

business .

Mr

Gander in

particular

emphasised

that

at the

time,

he would

have

regarded

it

as fraudulent

not to disclose

these developments

to the Bank.

Neither

claimant may have

had

any

formal

disclosure

duties

to the Bank, because

it

was Mr

Wilson

(or

his

new

company)

who

were in

contractual relations with

the

Bank.

Strictly

speaking,

it might

be

said that

neither

claimant

had

any disclosure

duties at all,

since

their

own

contract

was

with

Mr Wilson, who

was

himself

the

source

of the

information.

But I

am

satisfied that this was

not how

they

saw

it

at the

time, no doubt

reflecting

the fact

that this

was an entirely

consensual transaction.

Mr

Wilson,

Mr

Thomas and

Mr

Gander

had founded

PDP's

business,

and

nursed

it

through until

it was

sufficiently

viable

to

be sold.

Despite

the

differences between Mr

7/23/2019 Att_1447620820391

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THE

HON

MR

JUSTICE BLAIR

Aonroved

Judsment

49.

50.

52.

Thomas and

Gander

-v-

BPE Solicitors

51.

Thomas and

Mr

Gander,

all

three were essentially

partners in the

same

enterprise,

and

the claimants

would

not,

in my view,

have wished

this

transaction

to

go

througb

on

a

false

premise.

The

question

arises

therefore

whether the claimants

would

have

stood on

their

legal

elrtitlement,

assuming

that the

transaction completed

the

day

before.

The

defendants

submit

that the reality

is that,

regardless

of

the

position as to

completion,

the

claimants

would have

agreed to

unscramble

this transaction.

On

that

basis,

it is

submitted, any negligence

that may be

proved

on

the

part

of the

defendants

did not

cause the claimants'

loss.

This

is the causation

issue,

which

I

shall

express

my

conclusions

on

in

due

course,

but

first I

must set

out

my

findings

of

fact as to

the

events

on

Saturday 25

August

2407 .

It

is common

ground

that

the loss

of

the Powergen

business

had

very

serious

financial

implications

for the

company.

The experts called

by

the

parties

on

the valuation

issue

concluded

(on

figures

now

agreed) that the

value

of

the company

would

have declined

substantially between

Friday

24

August

2007 and

Tuesday

28

August

2007

(the

defendants' expert says

foom

about

f3.6m

to about

f-l.32m,

the

claimants'

expert

says

from

about

f,lm to

about

f0.5m).

On

the

assumption

that the

purchase

had

gone

ahead,

a

substantial

additional

burden would

have

fallen on

the business

in

the

form

of

the

transaction

charges

and

borrowings from

the

Bank.

The

due diligence

report

commissioned by

the Bank

suggests

that

as

well as substantial

deal

costs, the

capital

repayments

would

have

been

f,130,000

in

year

1,

and f219,000

in

subsequent

years,

and

that the

interest

payments

would have

been

f134,000

in 200718, f,119,000

in

200819

and

f

105,000

in2009110.

These

details

would

not

perhaps

have

been

in

the claimants'

mind on 25

August,

but

as

their

evidence made clear,

the

general

implication

of

the loss

of

the

Pow€rgexl

business

was

fully

understood

by

them. As

Mr

Thomas

(who

had

himself

been

a

se,nior

banker)

put

it,

in

effect the

company

could

not

afford the

commitment

it was

entering into. . . . All was in

jeopardy

at

that moment.

He was asked:

a.

Leaving aside

any further

questions

about

this,

the object

of this

transaction

had

not been,

had

it, that Mr

Wilson should

be buying

a

compilly which was

worth

significantly

less for

a

price

that

he could

not

afford

and

which would

threaten

the

viability

of

the company

and

his interest

in

it. That was not the

object

of

this

fransaction,

was it?

A. Not

at

all.

ln his witness

statement

Mr

Gander said that,

o'This

loss of Powergen

revenue

would

have

a devastating

effect on

the

new

companyos cash flow

and

endanger

its ability

to

meet financial

commitments

under

its

proposed

new borrowing

arrangementso'.

He

was

asked about that in

cross examination:

a.

For want

of

a

better

word,

you

believed

what

Mr Wilson was telling

you?

A.

Yes

7/23/2019 Att_1447620820391

http://slidepdf.com/reader/full/att1447620820391 20/36

THE

HON

MR JUSTICE

BLAIR

Approved

Judsment

If

what

he

was

telling

you

represents your

view

of what

be ...

?

Yes.

was correct,

fyour

the

likely

effect

on

Thomas

and Gander -v-

BPE

Soliciton

witness

staternent]

the company

would

a.

A.

a.

And

if

the new

company's

cashflow was

endangered

and

unable

to

meet

its

financial

commitments,

it

could

possibly

liquidation?

Yes.

So

that

was

a

very serious

financial

possibility?

Very

serious indeed.

it was

go

into

A.

a.

A.

a.

And

meant

that

from

possibly

be

expected

to

of view.

Yes.

And

you

accepted

that?

a

commercial

point

of

go

on

with

the deal,

from

view he

could

not

a

cofilmercial

point

Commercially

-

A.

Commercially

he

would

not

want

to

proceed

with

the

deal.

Definitely.

And

couldn't reasonably

commercially

proceed

with the deal?

Commercially,

correct.

He

accepted that

as of 25 August,

things looked

very

dire , which was

why Mr

Wilson

could not

possibly

contemplate

carrying on with the deal. By October 2007,

he

said

that they

were talking

about

the

possibility

of

putting

PDP

into

voluntary

administration,

oothat's

how

bad

it

was .

That

was

without

the burden

of

the

bank

lending.

At

this

point,

I

should record

that the evidence

is to the effect

that the loss

of

the

Powergen

business

was

not

in

the long

nrn

as devastating

as

was

feared, and the

company

is nearly

back

to where

it

was-but

it is

common

ground

that

I have

to

look

at the

matter

as it was

at the

time.

Having

spoken

to

Mr

Wilson

at

lunchtime,

and

dissussed

the matter

with his wife,

at

16:29,

Mr

Gander sent an

ernail

to

Mr

Ward

(copied

to

Mr Dew)

stating:

 I

have taken

an

urgent telephone

call this

afternoon

from

Peter

Wilson to

tell

me

that, for

reasons

beyond

my

control and of which

I

was

previously

unaware,

the

Communicator deal

will

now

NOT go

through and

is

cancelled.

A.

a.

a.

A.

53.

54.

7/23/2019 Att_1447620820391

http://slidepdf.com/reader/full/att1447620820391 21/36

THE HON

MR

JUSTTCE

BLAIR

Aooroved

Judqment

Thomas

and

Gander

-v-

BPE

Solicitors

Had I not

already

pre-paid

all

the

costs,

I would

now be cancelling

our

30th

wedding

anniversary

holiday to

help

Peter

Wilson

sort

things

out,

however, to

practical

intents

&

purposes

there

is nothing

I can

do until

I return

to

the

office

on

I

I Septenrber

when I shall contact

you.

In

the

meantime,

please

refer

to Ken

Elrick,

Rickerbys

and/or

Peter

Wilson

Mr

Ward's evidence

was that

he

did not see the

email until

he returned

to

the

office

on29

August

2A07 .

55. Mr

Gander

did

not try to speak

to

Mr

Ward about

this,

nor did

he speak

to

Mr

Thomas.

When

asked why he did

not

seek advice

from

his

solicitor,

his explanation

was that he

was

under

great

stress, and

in any

case had

no

choice,

since the

money

had not

arrived

in his

account,

and

he

understood

that

the

transaction

had

not

completed.

In

particular,

he

strongly believed

that

the

Bank

had

to

be advised

immediately

of

the

adverse developments,

ffid

that

it

would

have

been

fraudulent

not

to

have done

so.

I

have

set

out

in

paragraph 12

above

the material

adverse

change

warranties.

In his

evidence, Mr Gander

said

that

he believed

at

the

time

that

he

would

have

risked

committing

some kind of fraud

had disclosure

to

the

Bank not

happened,

irrespective

of

what the

warranties

said.

56.

Mr

Thomas rang

Mr Wilson

on

Saturday

at

about

18:45,

Mr

Thomas having

been

out

during

the

day.

He was shattered

by

the

news.

He

did

not

speak to Mr

Gander,

and

he

did

not

try to

get

in touch with Mr Ward to

ask

his

advice

either,

since

in

his

view

the hansaction had

not closed, and

he had

no

choice,

and

firther,

he explained,

he

did

not wish to trouble his solicitor at

the

weekend. As

with

Mr Gander, the

obligation

to

disclose

the

changed

position

to

the Bank

was

lying

heavy on his

mind,

and

he had

a

duty,

he said,

to

join

with

his

co-directors

in

relaying this

information.

He

also made

it clear

in

his evidence

that

he was

concerned

about

the transaction

fees

that

might

be

payable

to the

bank.

He

thought

(and

this

is not

in dispute)

that

there

was

an

arrangement fee

payable

in

respect

of

the loan in

the region of

f,l00,000.

57.

So far

as

the

evidence before the

court is

concerned,

the

next

thing

that

happened

was

that

at 17:05

on Monday 27 August

(i.e.

bank

holiday

Monday),

Mr

Wilson emailed

Ndr Knight and

Mr

Cusack at

Rickerbys

saying:

 Following

a

very

recent

change

in

circumstances

I am afraid that

the

directors of

PDP

have decided not to

complete on the

deal

and to cancel

the

transaction.

Can

you please

notiff all the relevant

parties

concerned

as

early

as

possible

on

Tuesday

and

instruct that no

drawdown

under the

proposed

facilities

be

made

nor any

payments

out

to

the

existing shareholders.

I understand

that

Peter

Gander

has

already

issued instructions to

Tim

Ward

in

respect

of this

change.

I

will

try

to

talk

to

you

as

early as

possible

on Tuesday

but

please

do

give

me

a

call on my mobile

(0771

724225) if I don't catch

you

first.

7/23/2019 Att_1447620820391

http://slidepdf.com/reader/full/att1447620820391 22/36

THE HON

MR

JUSTICE

BLAIR

Aoproved

Judsment

Thomas

and

Gander

-v- BPE

Solicitors

Tuesday.

28

August

2007

58.

Though

the

deal

had

been

called

off, it

is

plain

that the

parties

appreciated

that

the

position

was potentially

messy.

High among

their

concerns, I

find,

was the

possibility

that

an

arrangement

fee

might

be

due

to the Bank

(I

have

already

referred

to Mr

Thomas'

concerns

in

that

respect).

At

any rate,

they did not want anything firrther to

happen

that

might

trigger

that outcome.

At

08:01

Mr

Elrick emailed

Mr Cusack

and

Mr Knight

at

Rickerbys

saying:

 Re

PDP,

Would

you

please

let

me have

in

the

post

today copies

of

the

signed

PSA

and

both

Bank

Facility

documents.

Please

do

not

under

any

circumstances

draw down the

capital

funding

from

Knight

&

Co today

Tuesday

until

we have

talked

59.

Mr Cusack

saw

that

email

when he

got

into the office,

along

with

the

ernail

sent

by

Mr

Dew

at

18:00

on Friday,

and

the ernail

sent

by

Mr

Wilson

the

day

before. At

08:50

he took

a

call

from

Mr

Wilson, which

he noted as

follows: Call

from

Peter.

Biggest

client

-

less

work

to

PDP

therefore

financially

not

good.

RBS

[i.e.

the

Bank]

notified

this

morning.

Deal

stopped.

60.

Mr

Ward,

who was

on

holiday,

says

that

he

checked his

mobile

phone

just

after

10:00,

and

retrieved

a

message

from

Mr

Gander.

He

called

Mr

Gander

at l0:L2,

and they

spoke

for

between

6

and

7 minutes.

He

says

that

Mr

Gander asked him

what

they

would

have

to

do

to

call

off the transaction,

and he said

that in

relation

to the SPA it

would

largely

be a case

of ripping

up

the

documents.

For his

part,

Mr

Gander

says

the

discussion

quickly

moved

to discuss

his

concerns

as

to

some

f100,000 in fees

payable

to

the

Bank.

According to

Mr

Gander,

Mr

Ward

said

that,

if

he

was speaking

as

a lawyer

for

the Bank,

he would

argue

that

the

transaction

did

complete.

N{r

Gander

says

that Mr

Ward

proposed

a

solution

that,

provided

Rickerbys

agreed, he

would

be

prepared

to

say

that

completion

still

awaited

a

phone

call between the

solicitors.

Mr

Gander

accepted

in cross-examination

that

Mr

Ward had

not

told him

that

completion

had

taken place.

He said

that

Mr

Ward

was

trying

to be helpful.

At

one

point

in

his evidence,

he

accepted

that his understanding

from

Mr

Ward

was

that

the transaction

had not

completed.

However

he

went on

to

say

that though

he never

said it

had

completed,

he

didn't

say

it

had

not completed.

He said

that

he had

realised

a

long

time

afterwards

that

Mr

Ward would not have

had

to invent

this

scenario if

completion

had

not

taken

place.

61. At

10;34,

Mr Ward

called Mr Thomas,

the

call lasting

approximately 5 minutes.

He

says

that Mr

Thomas

confirmed

that

the

transaction

was

to be

cancelled.

Mr

Thomas

says

that

he

told him it

was

largely a case

of

o'tearing

up the

documents ,

but

that

he

needed

something

in

writing

from him. Mr Thomas was

out

of the office at

this

point

with

a client,

and

said

that

this

would

have

to follow

later in

the

day. Mr

Ward did

not mention

to either

Mr

Thomas

or Mr

Gander

that

any undertakings had been

glven

the

previous

Friday.

62.

Mr Ward says

that

at 10:42

he

called Rickerbys,

as

is

demonstrated

by the

iternised

fphone]

bill. This

call

lasted

approximately

1

minute .

I

do

not

think

timing of

the

call is

courmon ground,

but equally

I

do

not

think

that

his

evidence was challenged

in

this respect.

He

spoke

to

Mr

Cusack,

who made an

attendance

note

(erroneously

7/23/2019 Att_1447620820391

http://slidepdf.com/reader/full/att1447620820391 23/36

THE HON

MRJUSTICE

BLAIR

Anrroved

Judsment

63.

64.

Thomas andGander-v-

BPE Soliciton

timed

at

10:00

am). This is

an important

document

in

the claimants'

case. It

read as

follows:

 TW

[Mr

Ward] called zuC

[Mr

Cusack]

in

respect

of

a

message

he

had

received

from

Peter Gander saying that

the deal

had fallen

through.

RIC said that he had the

same

email

confirmation

from

his client

in the

morning.

zuC explained the

reasons

for

this,

and

explained

that

he understood

all the

parties

were

in agreement to this.

RJC

and TW

agreed that

if all the

parties

were in

agreernent,

then the documents

would

be

simply

ripped

up,

and

the

deal

would not

go

ahead.

zuC

queried

his undertaking

to

send

the

money,

and

TW

confirmed that

RIC

should

hold this

money

until he

had firttrer

instructions, and

not send

it

to

BPE

pursuant

to

the undertaking.

TW

said

he would

speak to

his clients,

and

get

back

to RJC

as to

how

to

proceed.

TW

noted

that

if his

clients were

not

in

agreement

to stop the

deal,

then completion had actually

taken

place,

and

the parties

should

therefore sit

down

and

decide

the best way forward

with this.

TW

said he

would call his

clients

now,

and

get

back

to RIC

at some

point

during

the

morning.

The

defendants'

pleaded

defence

originally

asserted

that

the

attendance

note

was

inaccurate,

and

that the last

sentence

should

read

completion

had not

acfually

taken

place .

That was later

deleted by amendment, and

in

Further

Information served

on

18 June 2009,

the defendants

state that,'oupon reviewing

the

documents disclosed

in

the

case, Mr

Ward

is no

longer confident as to

whether the

attendance

note

is

accurate

or

not.

At

the

time

of

the

telephone conversation between

Mr

Ward

and

Mr

Cusack

on 28

August

2007

Mr

Ward

was

on

holiday and did

not

keep

an

attendance

note

of

the telephone

conversation . Mr

Ward's

evidence at

trial was that he was not

in

a

position

to

say

whether

the

contents

of the

attendance

note

were true

or

not, but

that

he

did

not

believe that completion

had

occurred.

He was asked,

Is

there any sensible

explanation

that

you

can

glve

for

why

you

miglrt

have said

to

Mr

Cusack on

28

August

that

completion had

actually

taken

place?

He said that there

was not.

Mr

Cusack,

who

was

the author

of

the

attendance note,

said

that confronted

with the

emails

that

came in

on Tuesday

morning to the effect that the deal should

not

go

atread,

he was

confused.

He

said that

he may

have

written the last

sente,lrce

in 'oa

mistake,n

belief

that was what was said

by

Mr Ward.

The claimants submit that

it

defies

corrmon

sense that a solicitor

could

have been so confused

as to make

a note

recording Mr

Ward's acknowledgement

that

completion

had

occurred,

when

it

had

not.

They

submit

that the

attendance

note records an admission by

Mr

Ward

that

completion

had

taken

place.

I agree

that the

best

evidence of

what was

said by

Mr

Ward

to

Mr

Cusack is

that

set

out in the

attendance

note. I shall have

to

come

back

to

the

question

of the

admissibility

of Mr Ward's

views

in

this

respect. But in its

terms,

I do

not

regard the

attendance

note

as

recording an unequivocal admission

by Mr

Ward

that

completion

had taken

place.

I

am satisfied

that at this

time,

his

understanding

of his clients' concern

was

as

to

potential liability

to

the Bank.

At

10:33

following their

conversation,

Mr

Gander emailed

Mr

V/ard (copying

Mr

Wilson

and

Mr

Thomas)

as follows:

65.

7/23/2019 Att_1447620820391

http://slidepdf.com/reader/full/att1447620820391 24/36

THE HON

MR

JUSTICE

BLAIR

Anproved

Judsment

Thomas

and

Gander

-v- BPE

Solicitors

 I

sent

you

an

email

on Saturday

explaining that Peter Wilson's

MBO

of

mine

and

David's

shares

had fallen

through for last

minute reasons previously

unknown

to me

and outside

my

control.

Peter

has

telephoned

me

this morning to

say that Ken

Elrick

has

advised

him

that

completion

progressed

further than

anyone

had

realised,

that

legal

 unravelling

was

now

required

and

that

both

David

and

I

(especially

as

I

am

in

Italy

from

Thursday

30

August) need

to

give you

instructions to

do this in

conjunction

with

Rickerbys.

This

apparently

has come

from

the

Bank's

solicitors.

If

this is necessary

and

unavoidable

then

you

must do

so and I

authorise

you

to do

so

whilst

obviously

minimising

costs

as

much

as

possible

However,

I

am confused

as

to

what

may

need

unravelling as

it

seems to me

that, without

my

having

received

funds

yet

and

I

will not now

do

so,

completion has

not

taken place.

Furthermore,

you

tell

me that

Rickerbys

haven't

received

the

funds

from

the Bank

or

the

Bank's

solicitors

so

I don't

see how the

Bank's

solicitors

can say that

completion

has

taken

place.

I

would appreciate

your

advice

as

to what

needs

unravelling but

if

it

needs

to

be

done

then

please

do it.

You

asked

me to

contact

David

to

get

him to telephone

you

as

you

need

to

speak

to

him

personally.

He is

at an

IFA

meeting

this

morning

and

I

cannot

contact him,

however,

I have

told Peter

Wilson who will talk to David

at

the

earliest

opportunity

and I

am

copying David in on this

email.

Mr

Ward

did not

see

this

ernail until

his

return

to

the

office on 29

August.

On

the

face

of it,

it

gives

him

clear

instructions

to

unravel

the transaction,

if

it needed

unravelling.

It

was

correct

(as

the ernail records) that

at

the

time

of

the

call

Rickerbys

had

not

received

the funds from

Knight

&

Son.

Funds

appear to

have

been

received

shortly afterwards,

and returned

by Rickerbys

later

in the morning.

66. At 10:44,

Mr

Ward

called

Mr

Elrick,

who

sought

to

ensure

that

I

had

instructions

from

the

claimants not

to

proceed

to complete the

transaction . He

then called Mr

Gander at

10:52,

and

recalls

that

he

was

adamant

that the

transaction should not

proceed.

He

then made

a second call to

Rickerbys

at 11:05,

presumably

to

pass

that

on.

By

the

afternoon,

Mr

Thomas

had returned

to

the

office,

and

at

14:01 sent the

ernail

he had

promised

to

Mr

Ward

(copying

in Mr

Wilson, Mr

Gander and Mr

Dew).

It

said:

'oFurther

to

our telephone

earlier

today

I

write to

eonfirm,

vtry

sadly,

due

to

circumstances

which

came

to

light

on

Saturday

morning,

I

confirm

that

the

sale should

now not

proceed

of my

shares.

It is my understanding

that

Peter

Gander

has

already

written

to

you

confirm the

same

regarding his

shareholding.

You

informed

me

this

morning that

it

should largely be a

case

of

tearing

up

the documents,

but I

appreciate

that

you

need

to

take

account of

the

other

parties

in

the

transaction.

7/23/2019 Att_1447620820391

http://slidepdf.com/reader/full/att1447620820391 25/36

THE

HON

MR

JUSTICE

BLAIR

Auoroved Judsment

Thomas and

Gander

-v- BPE Solicitors

I

understand that the

funds

had

not

been

released

to

Rickerbys,

just

held

to

order under an

undertaking

at

this

stage

at

RBS,

so

technically

the sale

had

not

been

concluded.

Having now

just

arrived

back

in the

office

and

had the

opporhmity

to

read

a

copy

of

Peter Gander's

email to

you

on

the same

subject,

I

also

echo

his

sentiments

regarding fees.

We

will

now

have to fund

these out

of

our own

resources

without

the

benefit

of

the

share sale

proceeds.

If

you

could

look

sympathetically

at the

total amount,

taking

account

of the

circumstances, it

would

be

very

much

appreciated.

As

regards fees,

the

defendants

in

due

course rendered

a bill in

the

sum of

f,11,500

plus

VAT,

which

was

paid.

Subsequent

eve,nts

67.

At

16:09

on 28 August, Mr

Elrick emailed

Mr

Thomas saying,

o''We

commiserate

on

the

totally unexpected

outcome but

up

and at

it

for

tomorrow and the

new

dawn

of

PDP

which

we

will

help

with in

any

possible

way''.

However

just

a

few

days

later, on

31

August

2007, the three

directors were

shocked

to

receive invoices

from

Mr

Elrick

in the

sum

of f,146,000

in

respect

of

his

services.

Payment not having

been

received,

on

I

October

2007 Mr

Elrick

wrote to them

demanding

payment.

The

letter

states,

o''We

do

appreciate

the unfortunate

circumstances that

have

conspired to

cause

your

instnrctions

to

abort

the

case

after completion .

This

prompted

Mr Thomas

and

Mr

Gander

to

take advice

from new solicitors. Following

that,

Mr Gander explained

that

he

purchased

a

solid state

electronic

recording

device.

He

fiUed

it

up at his

home,

with

the intent

of

calling

Mr

Ward and

recording

the

conversation.

He

said that

the

purpose

was

to

confirm

whether

the

transaction

completed

or

not. The claimants'

case is

that he confirmed

that

it

did,

and

that,

it is

submitted,

is

compelling

evidence

and

amounts

to

an

admission.

68.

It

was

on the

morning of

5

October 2007 that Mr Gander called

Mr Ward.

He

did not

disclose that he

was recording

the conversation. Mr

Gander

carefully devised

the

conversation, the

defendants

submit, to

put

Mr

Ward on

the

horns

of

an

apparent

dilemma-how

to explain

that Mr

Elrick

was entitled

to his arrangement

fee if

the

Bank

was

not

entitled

to its arrangement fee. Mr

Gander's

evidence

was

that

he

regarded

Mr Elrick's

claim

as

a

o'tr5/

or ,

and

Mr

Elrick

Ers a man of

weasel

talk ,

but

the

defendants

submit,

in

my

view rightly,

that

in the

course

of

the

call

he encouraged

Mr Ward

to think

that

the directors

wanted to

do the

decent

thing

by

Mr

Elrick. Mr

Gander

said,

o'Now

we

regild

Ken

entirely differently

to

[the

Bank] who did not

do

much

and

did not

advance

the funds anlnilay

and

Ken

[Elrick]

we

had

worked

with for

a long

time

so I

just

want

to

make

sure

that we do

whatever

is

completely

right

and

I

just

want to

check in

my own mind, I'm right in

saying that technically completion

did

take

place.

Ken

therefore

has

done

all of

his

job

and

we

just

pay

him

and

that

orn

approach

to

[the

Bank]

is an

entirely separate

issue .

69.

This went

back to

the

conversation

about

the

Bank's fees that they

had had

on

28

August 2007.

To make

sure

that the claimants

did

whatever

is completely

right , Mr

rWard

was

invited

to

agree that technically

completion

did

take

place .

Mr

Ward

responded,

'Yes

-

I would

agree

with

you .

He went

on to say,

o'I

know we

say

contradictory

things to an extent,

but

I

think with regard to Ken and

what

he did the

deal had

been completed

to all

intents

and

purposes

and

technically

and

legally

I think

it

has

been. My

conversation

to

you

was

that I thought

there was an angle

to try

and

7/23/2019 Att_1447620820391

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THE HON

MR

JUSTICE

BLAIR

Aporoved

Judqment

Thomas

and

Gander

-v-

BPE

Soliciton

reduce

[the

Bank's]

fees

and

it

just

did not

seem right to

pay

thern a

whole

load of

money

for

money

they advanced

to

you

that

they returned the

same

dat''.

70.

Apparently

coincidentally (as

the

defendants

put

it),

Mr

Elrick

rang Mr

Ward

later

that

morning

saying

that

the

directors

were

not

paytng

his fees.

Mr

Ward then rang

Mr

Gander,

and

that

call

was also

recorded.

Again,

Mr

Ward

appears

to

draw

a

distinction

between

the

position

as regards

Mr

Elrick and the

position

as regards

the

Bank.

He

explains

that Mr

Elrick

had asked if

his firm

could

get

involved

to

act

for

him in

helping

out.

He

says

at

one

point,

oothe

deal

did

complete

and

therefore

whatever

is

due under

that

contract

with

Ken

is

payable .

He

goes

on

to say,

as

was

obviously

the

case,

that

there

would

be a conflict if

he

acted for

Mr

Elrick,

and he

would

not

want

to

get

involved.

He

says, 'oI

have

always said that

I

believed that

completion

had

occurred

it

was

just

purely

a negotiation

tactic

with

[the

Bank] to say

that maybe

it hadn't

occurred .

The

recording

device

catches

Mr Gander

saying

after

Mr

Ward had

rang

off,

Oh shit

did

he

just

drop

himself

in

it . At

no stage

in

the

conversation

however

did

Mr Ward

say that the

Share

Purchase

Agreement

had

completed,

nor

was

he

asked

whether

it

had

completed. The

conversation,

the

defendants

submit

in

my

view

correctly, had

to

do with

whether

Mr

Elrick had

earned

his

fees.

Mr

Gander

did

not suggest

that, on

the basis

that completion had

occurred,

Mr

Wilson

was

liable

on

the

SPA,

and that in my

judgment

was

not

the

subject

of the

conversation.

The

defendants

say,

again in my view rightly,

that

as

maffer

of

fact Mr

Ward

had

not always

said

that

I

believed

that

completion

had

occurred . To

the

extent

that he

did

so,

I

shall

have

to

consider whether

his

opinion is admissible

in

this

respect.

7l.

There

is one final

matter

relied

upon

by

the claimants with

which I must deal.

Without

(it

seerns)

prior

notice

that

there was

a

potential

dispute

between

thern,

on

13

December

2007

a

Letter

of

Claim

under

the

Professional

Negligence

Pre-action

Protocol

was sent

to the

defendants,

alleging that the

defendants

had failed

to

advise

the

claimants

that the

sale

of

PDP

had

completed,

and that

it

would

have

been open

to

the

claimants

to receive

the

moneys

due

to

them. Mr

Ward

says

that he

was

dumbfounded,

and overlooking

the fact

that

he

should

not at that time

have

been

contacting

the

claimants personally,

on 17 Decemb

er 2007

he

made

a

call to

Mr

Thomas.

Mr

Thomas

did not record

the

call, but

made

a

note

of

it

afterwards.

It

was

described

by the

claimants

in

closing, as the

oomost

telling

of

all

the conversations.

72.

The

note reads

that

Mr

Ward

oo...explained

that he tried to assist

the situation

on

Tuesday

[28

August],

to

unravel

the situation

and

mitigate the

cost

to

the

bank, that

we

requested.

I

[Mr

Thomas]

said,

yes

that

it

true

Tim, but

the

fact

of

the matter

was

we

had completed

on the

Friday

and

he had

not

told

Peter

or

I

this,

ffid in

fact

the

completion moneys

were

ours

to keep. He

said

it

was late

in

the

afternoon on the

Friday,

but

he

admitted

he

did

not

telephone

either Peter Gander

or I

on

the

Friday

to say

completion

had taken

place

and the money was

ours .

The

claimants

submit

that the inference

to

be

drawn is

that

Mr Ward

thereby

accepted

that

completion had

taken

place.

However, the

note

does not say

so,

and

Mr

Ward says

he

did not

do

so, and

even if

admissible,

this conversation

does

not

appear

to

me

to

take

the

matter

any

further.

The issues

between

the

parties:

discussion

and conclusions

(1)

The

completion issue

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THE

HON

MR

JUSTICE

BLAIR

Aooroved

Judgment

Thomas

and

Gander

-v-

BPE Solicitors

73. The

claimants'

case

is

that

completion of

the transaction

occuffed

on24

August

2007,

and

the defendants'

case

is that

it

did not,

and

this

is

the

first, and

most

conte,ntious,

issue

which

I

have

to

decide. A convenient

starting

point

is

the

Share

Purchase

Agreement

(it

was

never

dated)

which

was the

principal

constituent of

the

fransaction

so

far as

the

claimants

were concerned.

It

provided

for completion

as

follows.

Clause

I

defined:

(i)

Completion as

completion

of

the sale and

purchase

of

the Sale Shares

in

accordance

with

this

agreement ;

74.

75.

(ii)

Completion

Date as the date

of

this

agreernent

Clause 2

of

the SPA

provided

as

follows:

 2.1 On

the

terms of

this

agreement,

the Sellers shall sell

and

the Buyer shall

buy,

with effect from

Completion,

the

Sale

Shares...

Clauses

3 and 4

of

the SPA

provided

as

follows:

..3.

PURCHASE

PRICE

3.1

The Purchase

Price is f,3,000,000

payable

as follows:

3.1.1 On

Completion

the sum of f1,300,000 shall be

paid

in cash to the

Sellers

Solicitors

('othe

Initial

Consideration );

3.1.2

f,700,000

( the

Deferred

Consideration) by

the

issue

by

the

Buyer of

the Loan

Notes;

and

3.1.3 969 A

ordinary

shares

of

one

pound

each

in

the

Buyer

3.2 The

Loan Note

Instrument

shall be

issued

at

Completion

in

accordance

with

Clause

4....

4.

COMPLETION

4.1

Completion

shall

take

place

on the

Completion

Date at a

place

agreed

by

the

Sellers

and the Buyer.

4.2

At

Completion the Sellers

shall:

4.2.1

Deliver

or

cause

to be

delivered

the documents and evidence

set

out in

Part 1

of

Schedule 3;

4.2.2

Procure

that

a board

meeting

of

the Company is held

at which

the

matters

identified in

Part 2

of

Schedule

3

are

carried

out;

and

7/23/2019 Att_1447620820391

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THE

HON

MR

JUSTICE

BLAIR

Anoroved

Judement

76.

77.

Thomas

and

Gander

-v-

BPE Soliciton

4.2.3

Deliver

any

other

documents referred to

in this

agreement as

being

required

to be delivered

by

them.

4.3

At

Completion

the

Buyer

shall:

4.3.L

Pay

the

sum

of

f,1,300,000 by

telegraphic transfer to the

Sellers'

Solicitors

(who

are

irrevocably

authorised

to receive

the

same) and

otherwise

in

accordance

with clause 3.1.1 . Payment

made

in

accordance

with

this clause

shall

constitute

a valid

discharge

of the

Buyer's

obligations

under clause 3.

I .

1

;

and

4.3.2

Deliver

a

certified

copy

of

the

resolution

adopted by the board of

directors

of

the Buyer

authorising

the Transaction

and

the execution

and

delivery

by the

officers

specified in the resolution

of

this

agreement,

ffid

any

other documents referred to

in

this agreement

as

being required to

be

delivered

by

it;

4.3.3

Issue

the Loan

Notes;

4.3.4

Deliver

a

share

certificate for

969

A

ordinary

shares

of one

pound

each

in the

Buyer

in the name

of

Mr Peter

Brian Wilson;

4.3.5

Execute

the

Debenture;

and

4.3.6

Procure

that

Close

Brothers

issues

letters

in

the

agreed

form

releasing

Mr

Gander

and

Mr

Thomas

from the

personal

guarantees given

by

them in respect

of the existing

Close

Brothers facilities

granted

to

the

Company.

Under

the

SPA

therefore,

completion

was to take

place

on the

Completion

Date'o

[being

the

date

of

the

Agreement]

at

a

place

agreed by the

sellers

and the

buyer.

At

completion,

the

sellers

had

(among

other

things)

to deliver

specified documents. On

its

part,

the

buyer

(among

other things)

had

to

pay

the

sum of

f1,300,000 by

electronic transfer

to the sellers'

solicitors

(i.e.

the

defendants). The

SPA therefore

envisaged

a

completion meeting,

ffid

as I have explained,

Mr

Cusack

arranged such a

meeting

for

the afternoon

of

Thursday 23

August

2007.It

could not

go

ahead

because

of

the

problern

that

emerged

that

morning

as regards

the

company's

cash

flow.

The

question,

therefore, is

what

alternative

affangements as to

completion

were

agreed,

and whether they

took

place.

The

defendants

submit,

in my

view with

justification,

that

the

claimants

have

advanced

different

and inconsistent

suggestions

as to how completion might

have

occurred. The

way

it

was

put

to

Mr

Ward

at the

end

of his

cross-examination was that,

 whatever

was necessary

to bring

about completion

that

afternoon was

in

fact

done .

The claimants

point

out that completion

was handled by

the solicitors, ffid they

were

not a

party

to

that

process.

What

there

is, it

is submitted,

is

the

most

compelling

evidence that

completion took

place contained

in

the

telephone conversations between

7/23/2019 Att_1447620820391

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THE HON

MR JUSTICE

BLAIR

Aonroved Judsment

78.

79.

80.

Thomas

and

Gander

-v-

BPE Solicitors

Mr

Ward

and

three

other individuals

after the event,

namely

Mr Cusack

on

28

August

2007

,

Mr

Gander

(twice)

on 5 October

2007

,

and

Mr

Thomas on

I

7

Decemb

er 2007

.

It is

correct that completion was handled

by the

solicitors,

but

the

claimants

have

brought this case

asserting that

completion

took

place

on

24 August

2007

,

and

that the

defendants

were negligent

in

failing to inform

them

of

this,

and

with

the

benefit

of

evidence

gathered

in the

trial

process,

it is up

to them

to

establish

that

it did

take

place.

As I have

said,

they lay

great

emphasis

on what they

characterise

as

admissions by Mr Ward in the forn

telephone

conversations,

all of

them

after the

event.

I

have

set out my

factual

findings as

regards

each such call

above, and

will not

repeat

them. In my

view,

when

put

in context,

these

do

not

amount

to

admissions

by

Mr

Ward

that

completion

took

place.

He

seems to

have

adopted the

mistaken

ap'proach

that

this

could

be

tailored

to

the

outcome

his clients wanted

to

reach

with

the

other

parties

to

the transaction.

On

the other

hand,

an

unfortunate

feature

of

the

first

of the conversations

on

5 October

2007

is that

it was

set up,

as

the

defendants

submit

in my view rightly, as

a

trap for Mr Ward,

who

was

not aware that

he

was

being

recorded.

Be that

as

it

may,

the

point of principle

that

applies

to

these

after the

event

conversations in my

judgment

is

as follows.

The

question

whether

a

transaction

has completed,

or a

contract

has

been

entered

into, or similar,

must

be determined

objectively.

Evidence

from the

parties'

lawyers

as to

whether

particular

steps

were

take,n,

or

particular

events

occurred,

are

admissible.

But the subjective

views of the

parties'

lawyers as

to

the

conclusions to

be drawn

from the

facts in

question,

in the

present

case

whether completion

occurred,

are

neither

relevant

nor admissible.

I

agrce

with the defendants

that,

taken

at the

highest,

Mr

Ward's comments

in the

various

conversations

to which I have referred,

state

his

opinion

as to

whether

completion

had

occurred.

As

Mr

Michael Douglas

QC

for

the defendants

put

it, if the

court

concludes

that

completion did

not

occur

on 24 August

2007,

then

nothing

Mr

Ward

says can

retrospectively

have made

it

occur.

The

contrary

is

also

tnre.

In

my

judgment,

the completion issue

has

to be

decided

by

an

objective

consideration

as

to

what

happored

on

24

August

2007.

In

its

oral closing, the claimarrts

put

their case as

to

completion

as follows. The

court

should infer

that

there was

a

telephone conversation

between

Mr Ward and Mr

Cusack

at about

4pm

on 24

August

2007

when a

pafu

of

undertakings was discussed.

The

claimants say

that it

was agreed between

them that

a

pair

of

undertakings

in

the

form

in which

they

were

actually submitted

would

suffice to

complete the transaction.

Upon receipt,

completion

would

happen.

Alternatively,

it is

submitted

that

the

solicitors

might

have arranged that

there

would

be confirmation on

the

part

of the

defendants that the submitted undertakings

were

accepted,

ffid

that completion

would

occur

upon

that

confirmation.

I have

set

out my factual

findings

(on

the

balance

of

probabilities)

in

this

regard

above,

and will

not

repeat

the detail. In

suilrmary, contrary to

the claimants'

submissions,

I do not infer

that a

conversation

took

place

as contended. The

contemporaneous

material

shows that

what

was agreed was

an

undertaking

to

transfer

the

funds to

the

defendants' account

on

Tuesdry,

and

that

thereafter,

a

call between

Mr

Cusack

and Mr Ward

was

required to

complete

the transaction. I reject

the

submission

that

completion

occurred

on receipt

of

the

r:ndenaking

(or

pair

of

undertakings)

since

Mr Ward would not

know

until he

got

them whether

the

undertakings

were

adequate

or

not. I

conclude

that

Mr

Ward thought that they

were

7/23/2019 Att_1447620820391

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THE

HON

MR

JUSTICE BLAIR

Approved

Judpment

Thomas

and

Cander

-v-

BPE

Soliciton

not

adequate

because

they

did

not

provide

for

interest

over

the

weekend. I

further

conclude

that no

call

took

place

between

Mr Ward

and Mr

Cusack

at

17:44

or

later

that

evening

as regards

completion

or

otherwise.

Fifteen seconds

(the

duration

of the

17:44

call)

would

not have

been

sufficient

even

for

the

briefest of

completion

calls,

and

I

conclude

that Mr

Cusack

did not

pick

up the

phone,

having

(as

he

said)

gone

home

by

that

time. It

follows

that,

in

my

judgment,

the transaction

did

not

complete

on 24

August

20A7

.

The

failure

to advise issue

81 .

Were

the

defendants

negligent

in failing

to

advise the claimants

of

the fact

of

completion,

and

of

the

rights

arising

in that regard in respect

of an

undertaking

by

the

purchaser's

solicitors

to

transfer

the

completion

money?

I

do not think

that it

is

disputed,

ffid in

any case

hold,

that

if

the transaction completed

on

24 Augu

st 20A7

,

the

defendants

were

negligent

in failing

to

advise

the

claimants

of

that

fact. For

completeness,

I

note

that

in

opening,

the

claimantso

case

was

that such advice

should

havebeen

gtven on 28

August

2007.

It

was

said

that

as a

counsel of perfection ,

Mr

Ward

should

have

made

efforts

to

get

through

on

Friday to say it

had happened,

but

what

really

matters

is

what

happened

on the 28th because

no harm was done

on

the

Friday

afternoon .

There

was,

in my view, no

separate negligence

in

respect

of the

solicitors'

undertakings.

Though

the undertakings

provided

for

the transfer

of

funds

on

Tuesday

28

August,

this was

on the

basis that

completion

occurred,

ffid

clearly

the

funds

would

be held

to the

purchaser's

order

pending

completion.

The

non-acce,ptance

of

undertaking

issue

82.

If

completion

did not

occur

because

of

the

non-acceptance,

or

rejection

of the

purchaser's

solicitors'

undertaking,

was

this negligent on the part

of

the

defendants?

The

claimants'

case

is

that

completion

had

occurred

before

Mr Dew's

email

of

18:00

was

sent,

ffid

that

the

request

for interest

was an afterthought and

was

incapable

of

amounting

to

a

rejection

of the

undertakings. For

reasons

set

out

above,

I have

rejected

this

submission

on the

facts. Though the

language

of the

ernail of

18:00 is

open

to

interpretation,

in

my view

the

defendants are

right to submit

that

it

amounted

to

a

rejection

of

the

undertaking.

83.

On that

basisn

the

claimants

submit that

if, contrary to their

case, the

email

constituted

a

rejection, then

this was

as a result

of negligent drafting

on the

part

of

the defendants

who rejected

the

undertaking

without

instructions.

They

submit

that ie

contrary to

their

case,

the undertaking was

rejected,

or

not

accepted,

then

this

was a

step taken

without

their

authority. Authority

should

have been sought,

it

was submitted,

because

of

the risk that

what otherwise

would have been an

effectual

and

beneficial

completion

of the

transaction

would

be lost by virtue

of

seeking

to

improve

upon

the

undertaking

already

given.

As

I

have said,

the

claimants'

witness

staternents

are

to

the

effect

that they

would

have

instructed the defendants

to

accept the undertakings as

proffered

had

they

known about

thern.

84. ln

my

view,

there was

no negligence on the defendants'

part

in requiring the

payment

of interest over

the

weekend without reverting to the claimants for

express

instructions.

The

amount

involved

was

not

insubstantial, and

at that

point

in

time,

neither

party

had any

reason

to

anticipate the

events

of

the

following

morning.

But

in

any

case, whilst a

satisfactory

undertaking

was

required

for

completion,

a

completion

7/23/2019 Att_1447620820391

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THE HON MRJUSTICE

BLAIR

AnorcvedJudsment

85.

86.

Thomas

and

Gander

-v-

BPE

Solicitor:s

call between Mr

Ward

and Mr Cusack

was

(as

I

have held)

also

required.

That

did

not

happen

that

evening, and

could

not

in the event

have

happened,

Mr

Cusack

(as

I

have

held) having left

the office

by

17.45 on

Friday

evening.

The

claim

on

this

basis

fails

in

any event

on

causation

grounds.

The claimants also submiued that the defendants ought

to

have accepted

the

proffered

undertaking

off

their own

bat without

going

to

the

claimants

for instructions,

and

that

it was

negligent

not

to

craft their

response

in

a

way

that accepted

Rickerbys'

undertaking. For the reasons

set

out

above,

I

do

not consider

that

the

course

the

defendants

took

was

negligent, nor in the circumstances

as

they were understood

to be

on

24

August

2A07,

was there a

foreseeable

problem

which

would

be

visited

on

the

claimants

by

stipulating that

interest should be included

in

the

undertaking.

I

should

nevertheless

deal with an issue between the

parties

as to

the

time

at which

Mr

Dew's

email

of t8:00

would

have been

effective

as

an acceptance

of the undertakings,

had it

been

drafted as such. The

question

is, had the defendants

drafted the email

in

such

a

way as to accept

the undertakings,

as

a matter

of

law, would

such

acceptance

have

been

effective upon

the

sending

of

the

ernail

at

18:00, as

the

claimants argue

by

analogy to

the

postal rule ? Or should

acceptance

by ernail be

treated

in the same

way as

other

instantaneous

communications,

as

the

defendants

contend?

If the

defendants

are

correct in

this

regard, at

what

point

in time did

acceptance

by

email

occur,

gtven

my finding

that the

recipient

(Mr

Cusack)

had

left the office by

17.45

that

evening? The

defendants

say

that the ernail cannot

operate as

an

acceptance

because

it

was

not

seen by Mr

Cusack until

the

following Tuesday

(he

did

not

have

a

BlackBerry),

by

which

time the

parties

had

decided

not to

proceed

with

the

transaction.

The claimants'

submission is

that

acceptance

by email

does

not de,pend

upon the message

being

read

by

the

intended recipient. As with

the postal

nrle ,

it

is

effected

(it

is

said)

at the

moment of despatch, or at

latest, the moment by

which

the

sender

would

receive,

but

does

not receive,

a

non-delivery notification.

The

general

rule is that the acceptance

of

an

offer is

not

efflective until

communicated

to

the

offeror. The

postal rule is an

anomalous

exception to

the

ge,neral

rule,

which

is

limited to its

particular

circumstances.

It does

not apply

to acceptances

made by

some

instantaneous mode

of

communication

(Chitty

on

Contracts,

30th edn,

paragraph

2-050).

This

was

decided in Entores Ltd v

Miles

Far

East

Corporation

[1955]

2

QB

327

as

regards communications

bytelex.

Atpage 334, Denning

LI

said

that in

such a

case,

The contract is

only

complete

when the acceptance

is received by

the offeror .

Contrary to

the claimants'

submissions, in

my view

the

same

principle

applies to

communication by

email,

at

least

where

the

parties

are

conducting

the

matter

by

email,

as

the solicitors were

in

this

case. However, that

does

not

conclude

the

question,

because

issues

may remain

as

to when the email in

question was

received

(and

also whether

it

was

received). As Lord Wilberforce

put

it in Brinkibon

Ltd

v

Stahag

Stahl

G.m.b.h.

[983]

2

AC

34

(another

telex case

in

which Entores

was

approved)

at

page

42:

*Wh€re

the

condition

of

simultaneity

is

met,

and

where

it appears

to

be within

the

mutual

intention

of

the

parties

that

contractual

exchanges

should

take

place

in

this

woy,

I

think

it

a

sound rule,

but

not necessarily

a

universal rule.

...

. The senders

and

recipients

may not be

the

principals

to the

contemplated

contract.

They may be

servants

or

agents

with

limited

authority.

The

message

may not reach,

or be

intended

to

reach,

the

designated

recipient immediately:

7/23/2019 Att_1447620820391

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THE HON

MRJUSTICE

BLAIR

Aooroved

Judqment

87.

88.

89.

90.

Thomas

and

Gander

-v-

BPE

Soliciton

messages

may

be

sent

out

of

office

hours,

or

at

night,

with

the intention, or

upon

the assumption,

that

they will

be

read

at

a

later

time.

There may

be

some

elror

or default

at

the

recipient's

end which

prevents

receipt

at

the

time

contemplated

and

believed

in

by the

sender.

The

message

may have

been

sent

and/or

received

through

machines

operated by third

persons.

And

many

other

variations may occur.

Similar

issues

arise

when

the

medium

of communication is by ernail. ln

Brinkibon,

Lord Wilberforce's

conclusion

was

that:

 No

universal

rule

can cover

all such

cases:

they must

be

resolved

by

reference

to the

intentions

of

the

parties,

by

sound business

practice

and

in

some

cases

by a

judgment

where the

risks should

lie.

In Bernuth

Lines Limited

v

High

Seas Shtpping

Ltd

120061

1

Lloyds

Rep

.

537

,

it

was

held

that

notice

of

arbitration

was validly

served

by

email

notwithstanding that

it

may

not

have

reached

the

relevant managerial

or

legal

staff

in

the recipient

company.

Christopher

Clarke

J said

at

p.

541-2:

*129)

That

is not

to

say

that clicking

on the'osendo' icon

automatically amounts

to

good

service.

The

e-mail

must,

of

course, be despatched

to what is,

in

fact,

the

e-mail

address

of

the intended

recipient.

It

must

not

be

rejected by

the

system.

If

the

sender

does

not require

confirmation

of

receipt he may not be

able

to

show

that

receipt

has

occurred. There may be circumstances where,

for

instance,

there

are several

e-mail

addresses for a number of

different

divisions

of

the

same

company,

possibly

in different

countries, where

despatch to a

particular

e-mail address

is

not

effective

service.

These

particular

considerations

do

not

apply

in

the

present

case.

It

is not

in

dispute

that

the

email was received

in

Mr Cusack's mailbox

at

or

close

to

18:00 on24 August

2007,

and

was available

to be

read

by

him.

The

question

is whether the

defendants

are

correct

in their

submission

that

acceptance was

not effective from

the moment the

email was received

because

it

was sent

after working

hours.

In

those

sircumstances,

it

is

submitted, relying

on

the

passage

in Lord Wilberforce's

judgment

that

I have

quoted,

acceptance

by the 18.00

email

could

not

in any

event

have

been

effective

until

it

came

to

Mr

Cusack's eye

on

Tuesday

morning.

Once

one

sets aside

the

postal

rule as

inapplicable

to

email

communications,

the

question whether

an

ernail

acceptance

is

effective

when

it

arrives,

or

at the

time

when

the

offeror

could

reasonably

be

expected

to

have read it,

is not

a

straightforward

one,

and

does

not

appear

to be settled

by authority. On

the basis

that

it

must be resolved

by reference

to the intentions

of

the

parties,

by sound business

practice

and

in

some

cases

by

a

judgment

where

the risks

should

lie

(Brinkibon

at

page

42),

the

answer

does however

appear

to

me to be clear

in

the

present

case.

In

the context

in

which

the

18:00

email was

sent-that

is a transaction which

(as

the earlier

emails show) could

have

been

completed

that

evening-I

do not

consider

that

18:00

was

outside

working

hours.

The

email

was available

to

be

read

within

working

hours,

despite the

fact

that

Mr

Cusack

had

in fact

gone

home.

For

that

reason,

I

would

have held

that

were

the

defendants

to

have accepted

the

Rickerbys

undertaking

by

Mr

Dew's

email,

then

as a

matter

of law

such acceptance

would

have been

effective

upon

the

receipt

of

the email

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'THE

HON

MR JUSTICE

BLAIR

Aooroved Judement

at

or

about

18:00. However,

negligent

in

that regard.

Thomas

and Crander

-v- BPE Solicitots

as

I

have

held, they

did

not do so,

nor were

they

The causation

issue

91.

On the

assumption

(contrary

to my

above

finding) that

the transaction

completed

on

24

August 2007, in the light of the

information

which emerged

the

following

morning,

would the

claimants in any

event

have

agreed

voluntarily

to

rescind,

or

as

the

defendants

prefer

to

put

it, not to

proceed

with,

the transaction

despite

completion? Would

any attempt to

adhere to

completion

have

foundered

because

of

the

complexities

and expense of

litigation?

92.

The

defendants have

a

formidable case

in

this

regard.

This

was

a situation

in which

the

parties

to

the SPA

were

the

founders

of the

company.

The

position

as

relayed

to

the claimants

by

Mr

Wilson

on 25

August

2007

was

that the company

was

to

lose one

third of its

turnover.

As

Mr

Thomas

put

it,

all

was

in

jeopardy

at that moment .

IvIr

Gander spoke

of

the

devastating

effect

of

the loss

of

the Powergen revenue.

From

a

commercial

point

of view,

he accepted

that

Mr

Wilson

could

not

possibly

be

expected

to

go

on

with

the

deal.

Had the

transaction

gone

forward, the business

would

have

had to

carry

the

cost

of

the bank lending on

much diminished revenue.

In those

circumstances,

it is not

surprising that

both

claimants

decided on that

Saturday

there

and

ther

that

the transaction

could not

go

ahead.

Neither claimant

souglrt

Mr

Ward's

advice.

On

the

contrary, Mr

Gander

sent him

an

unequivocal

email

to

the effect

that

the deal would not

go

through and

was

cancelled. The

only

realistic

conclusion,

the

defendants

submit,

is

that whatever the

technical legal

status of

the agreement

and the

obligations

of the

parties

under

it,

the

parties

were

not

going

to

proceed

with the

transaction.

Mr

Thomas

and

Mr

Gander would

not

have

conternplated

leaving

Mr

Wilson

or PDP

facing ruin.

Furthermore, the defendants

point

out that the

lion's

share

of Mr

Thomas's

consideration was

by

way

of loan

notes,

which were

subordinated

to

the

bank lending.

His

deferred consideration

would

have

been

at

substantial

risk,

whereas

most

of

the loan

proceeds

would

go

to

pay

Mr

Gander,

who

would receive

his

full

amount

in

cash straight away.

Finally, the

defendants

point

out

that

the

evidence is

that Mr Wilson

was

firmly

of the

opinion that completion

had not taken

place.

Neither he

nor

the

Bank, it is

submitted,

would

have

stood by

without

a

fight.

A

dispute

would have ensued,

during which the directors would

be forced

to

continue

to

work

together

in

a

poisonous

and

hostile atmosphere.

The

defendants

accordingly

invite

the

court to find

as

a

fact that if

the transaction had completed

on

Fiday 24

August

2007, and

the

claimants had been

advised this

was

the case

and/or

that

the

Rickerbys'

undertaking was

enforceable,

the

claimants

would

have

agreed

with Mr

Wilson

and/or

PDP

to render the

transaction of

no

effect

andlor

not

to

enforce

the

undertaking.

Hence, it is

submitted,

the

alleged negligence

even

if

proved,

did

not

cause the claimants

any loss.

93.

The

claimants'

case

in

this respect was as

follows.

The

difficulties in

relationships at

PDP,

Mr

Gander's

very real

personal

hardship

in

continuing involvement

in

PDP,

and

the desire

of both

claimants

to take

their

money

out of

the business was unchallenged.

Further,

it

is

submitted,

this

was

a

life-changlng

transaction

for

the

claimants.

It

offered an

escape route from

financial

constraints and a

difficult

situation.

Whilst

they would

not

have

wished hardship

upon Mr Wilson, they could

hardly be expected

to

shoulder

the burden

of

the

changed circumstances

when they were

not

obliged to

do

so,

gtven

the

implications

not

only for

themselves

but their

families.

Mrs Thomas

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THE

HON

MR

JUSTICE

BLAIR

Approved

Judsment

Thomas and

Gander

-v-

BPE Solicitors

spoke

of

what

happened

as

a

oocrushing

blow .

In Mr

Gander's case,

he and his wife

were

distraught

when

the deal

fell

through.

Mrs

Gander says that they were

devastated.

She

had

to sell

her

car, and

the

couple had

to

remortgage their

home

rather

than

extinguish

the

mortgage

as

they had

planned.

Considerable financial

hardship

has

thus

been

caused.

The

evidence

of

Mr Thomas

was

that

the

news

from

Mr

Wilson

shattered

him,

and

caused

his

world to

fall

apart.

He

also

spoke

of

his

desperation

to

get

out

of PDP.

Rickerbys and Knights

were

professionally

committed

to

honour

their

undertakings,

and

would

have

been

obliged to do so.

The evidence, it

is

said,

is

that Mr

Wilson is

a

man

who faces reality and he

not would

have

sought

to

run

an ill-founded

case. The

Bank

had no

basis

for

involvement

in

any

dispute, since

its

solicitors

had released

the

funds

pursuant

to an unqualified undertaking. In

sunmary,

the

claimants

would not

have been

prepared

voluntarily

to

unravel the

transaction

had they

known

that

completion had occurred.

They

and their families

had

too

great

an interest

in

seeing

it

through.

94.

I have

found

this

a

particularly

difficult

issue

to

resolve. On the

one

hand,

I

fully

accept

that the news conveyed

by

Mr

Wilson

on 25

August

2007 was

a

crushing

blow

to

the claimants

and to their

families,

for all

the

reasons

explained

by

thern

and by

Mrs

Thomas

and Mrs

Gander

in their evidence. But

I

am

sceptical

of the

claimants'

claim

that

they

agreed

to

the

deal

going

off

because, in

the

absence

of

completion,

they felt

they

had

no

option.

These

are

both

experienced business

people,

and

in

my

judgment,

the reason

they agreed

that Saturday

to

the cancellation of

the transaction,

without

apparently

investigating

whether some

renegotiated

deal

might

be

possible,

and

without

seeking

advice

from

their lawyer,

was that they

realised

immediately that,

on

the reduced

turnover,

the transaction was

simply

not

viable.

That

said,

it is

a

fact

that

they

did believe

(the

money not having

reached

their bank

accounts)

that

the

transaction

had

not

completed,

and

I

accept

their

evidence

to

the

extent

that this

was

an

important factor

that

governed

their reactions.

What

has weighed

with

me

most is

that

if,

as

is

their

case,

the transaction

completed

on the evening

of

24

August

2007 by

way

of the

receipt

of

undertakings and a

confirmatory

phone

call,

then

the

claimants

were

entitled to

know

about it.

If

they

had, the dynamics

of the situation would

have

been

different. Equipped

with

that knowledge,

however unpalatable it

might appear,

they

might

have insisted

that the deal

went forward,

and

taken the

risk

of any ensuing

legal dispute.

At

any rate,

I

have come

to the on balance conclusion

that

I

cannot

conclude

to the contrary,

ffid

that

I should determine

the

causation

issue in

favour

of

the claimants, though

it

does

not

affect the

ultimate

result.

Ouantum

95.

96.

Given my

conclusion as

to liability,

the

question

of

quantum

of damages

does not

arise. But

I should

nevertheless set

out

my conclusions

in that respect. The

parties

were

broadly

agreed

as to the

approach.

Had the

deal

gone

ahead,

Mr Thomas would

have received f,350,000

in

cash and a funher

f700,000

in

loan

notes.

Mr

Gander

would have

received

f950,000 in cash.

The claimants

accept

that

they

have

to

give

credit for

the value

of

the shareholdings

which

they

retained

in PDP,

it being

common

ground

that

valuation

is

to

be

as

of

28 August

2007.

A

further

valuation

issue arises

as

regards

the loan

notes

which

Mr Thomas

would have

received

had the deal

gone

ahead.

Both

parties

called

valuation evidence. In

the

case

of

the claimants

it

was

glven

by

Mr

Anthony Hindley,

ffid

in

the

case

of

the

defendants

it was

glven

by Mr David

Cook.

7/23/2019 Att_1447620820391

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THE

HON

MR JUSTICE BLAIR

Apnroved

Judsment

Thomas

and

Gander

-v- BPE Soliciton

Both

are

well

qualified

and

produced

clear

and

helpful

reports.

The

issues

were

narrowed

foliowing the

experts'

meeting

prior

to

trial,

and

further

nalrowed

in the

course

of

the

trial

prior

to their oral

evidence.

I

should

record

my

appreciation

of

their

work

in

that

respect.

In the

event,

most

issues

were

agreed.

97.

As

regards

the value

of Mr

Thomas's loan

notes,

the

experts agreed

before

the

trial

that

although

the

face

value of

the notes

was

f,700,000,

taking

into account

the

company's

prospectso

the value

on

24

August

20A7

was

in

fact

only

9525'000.

Reflecting

the deterioration

in

the

company's

prospects

following

news

of

the

withdrawal of

the

Powergen business

on 25 August

2007

,

the

experts

valued

the

notes

at f305,000

as

at

28 August

2007. During the

trial,

the defendants

suggested

that

these

figures

did not

take

into account

the f1,010,000

debt

which

would

have been

due to Royal

Bank

of Scotland,

and which

might

have

brought

the

company down

had

the deal

gone

ahead

in the

changed

circumstances.

So,

it

was suggested,

Mr

Thomas

might not have

recovered

anything

from

his

loan notes

at

all. However

both

Mr

Hindley and

Mr

Cook said

that

they

had taken

this

into account,

and these valuation

figures

are

now

cofirmon ground.

98.

So

far

as

the

valuation of the claimants'

respective

one third

shareholding

in

PDP

is

concerned,

the

experts

agree that the

value

of

the

retained shares

is to be calculated

by

reference

to the value of

the

company, and

that the

appropriate

way

to value

the

company is by

reference

to

its

maintainable

post

ta:r

earnings

multiplied

by

an

appropriate

multiple,

namely the applicable

price/earnings

ratio.

As

regards

post-ta:r

profit (allowing

for

tax at

22.5o/o) the

experts

have

helpfully

agreed

an annual

figure

of

f132,000,

and

it is

consequently unnecessary

to

describe

the differing

considerations

that

each

took

into account

in

agreeing that

figure.

Nor

is it

necessary

to resolve

issues within their calculations

that would

otherrvise

have

risen had

agreement

on

this figure

not

been reached.

99.

However the

experts are not

in

agreement

as

regards the

multiple.

The

price/

eamings

ratio

is

determined

(in

simple terms)

by

reference to

the

return

a

purchaser

would

seek

from

his investment.

It reflects the investor's

assessment

of

the number

of

years

required to

enable

him to

recover

his outlay out

of the

company's earnings.

The

formula

as

expressed

by Mr Cook

is,

maintainable

profits

x P/E

:

valuation.

In

seeking

to assess the PIE which a notional

purchaser would

apply, one

looks for

closely comparable deals and

other market

evidence

or indices.

100.

Mr Hindley's

opinion

is

that

4 is

the

applicable

PIE ratio

in

the

case of PDP.

Mr

Cook's opinion

is that

l0

is

the

applicable

P/E ratio. The

difference

between them

depends on

a

number of

factors.

Mr

Hindley

has

used the ratings

provided

by

the

London Business

School

Risk

Management Service

materially

adjusted downwards

to

reflect

the

difference

between

small

private

companies and

the

far

larger and

more

diverse

concerns

in the

quoted

sector.

Mr

Cook

notes that the Financial

Times

Share

Indices

show

forthe

FTSE

listed companies

aPlE of

23.71 and

for

Support

Services

a

P/E

of

22.88

around

the material time.

These

P/Es are

for

listed companies,

and

should be

discounted

to

reflect

the differences

in market

ability

and

size between a

listed

and

a small

private

company like PDP. On

that

basis,

he

arrived at aP/E of

10.

101.

Mr

Cook

was

not aware of

the

sale

of similarbusiness

in2007 which

might

provide

comparable transactions.

Mr

Hindley

(while

pointing

out

there

is

little

available

information

within the

public

domain) did

find

some deals

involving small

7/23/2019 Att_1447620820391

http://slidepdf.com/reader/full/att1447620820391 36/36

THE

HON MR

JUSTICE BLAIR

Anoroved

Judement

Thomas

and

Gander -v-

BPE

Soliciton

companies,

although

the

activities

were

not directly

comparable.

These

showed an

average

multiple

of

3.

However

it

is

clear

that

the

primary

factor that

influenced

his

opinion

was

the

prospective

effect

on the

company's

business of

the

loss

of

Powergen.

As he put

it,

the company

only

had

two major

customers,

and if one

was

to

go,

the business

could

be

in

serious

trouble.

Mr Cook

also accepted

the

serious

effect

of

the

loss

of

the

Powergen business,

but

maintained that

he had

reflected this

within

his

own

methodology

in

reaching

the

agreed

post

tax

profit

nurnber

of

f132'000.

His

view

was

that

the most serious

risk

of

insolvency would

have arisen

had

the deal

gone

through.

L02.

The parties

are

in

agreement

that

Powergen

accounted for

34% of

the

company's

turnover

in

the

year

ending

31 March

2007 . The loss

of this

customer

was

plainly

therefore

a

most

material

factor

in

assessing

its

future

profitability.

As

it

happens,

matters

have

not

turned

out

as badly

as

was feared,

but

the

position

has

to

be

judged

as

at 28

August

2007.

On the

other hand, Mr

Hindley's

opinion

leads

to

a

total

valuation

of

the

company

at

f628,000,

as

opposed

to

the f3

million

agreed in respect

of

the

sale

of

the shares. Even

allowing

for

the

changed circumstances,

that

is

a

big

difference.

Also

significant,

is

the

fact

that his valuation

of

PDP

on 24

August

2007

was

only

between

f860,000

and

f,1,040,000.

I

agree

with

the defendants

that this is

unrealistically

low

at a

time

when

the Bank

was

advancing

over

f 1 million

after

due

diligence.

That said,

I

see no

reason

not

to

take

at

face

value the

claimants'

evidence

that,

as

it

appeared

at the

time, the loss

of

the

Powergen

business left

the

company in

a dire

position.

I

also

accept

Mr

Hindley's

evidence

that there is

a

very

significant

reduction

in

the

level

of

multiples

paid

for

small companies

as

opposed

to larger

companies.

Whilst

I

consider

Mr

Hindley's

valuation to be

on the

low side,

I

consider

that

(all

things

taken

into

account)

Mr

Cook's

is

considerably

on the high

side.

Valuation

as the

witnesses

explained is

not an exact science,

but

my conclusion

is

that

aPlE

of

6

is

applicable

as

of

28

August2007, which

when a sum

of

f100,000

is

added

(as

the

experts

agree) to reflect

the company's

cash

balance,

gives

a total

valuation

of

[892,000.

103.

That leaves

the

question

of

whether

and

if

so

by how much the value

attributable to

the

claimants'

shares

should

be

discounted to

reflect

the

fact

that

the entire

share

capital

would

not

pass

to

a

prospective

purchaser.

I do

consider

that

it

is

correct

to

apply

a discount.

In that regard,

the claimants

submit that the shareholdings

should be

valued

as individual

holdings,

ffid therefore

subject

to a

discount

of

37.5%. I

consider

it much more

likely

that

their shareholdings

would

be sold

as

a

block.

As the

defendants put

it, the

most

likely

sale

was of

the

company as

a

whole.

The

next most

likely

sale

was

of

both

interests

to Mr Wilson. The next most likely

sale

was

of a

single

interest

to

one

or

other

share holders.

The

least

likely

sale was

to

an outsider

seeking

to buy a one

third

interest in

a

private

company.

I

prefer

the evidence

of Mr

Cook to

that

of Mr Hindley

in this respect.

On

that

basis,

the

experts are

agreed that

the appropriate

discor:nt

for the sale

of a two thirds

interest is 12.5o/o.

Conclusion

104.

Whilst in

some

respects

I

have

acce'pted

their

submissions, the

overall outcome

is

that

the claimants

have

not

established

negligence

on

the

part

of

the defendants.

I should

express

my

appreciation

to the

parties

for

the manner

in which

the

case

was

presented