Embedded Files
1 Wednesday, 24 June 2009
2 (10.30 am)
3 Opening submissions by MR SEMKEN
4 JUDGE SEYMOUR: Yes, Mr Semken.
5 MR SEMKEN: May it please your Lordship, I appear for the
6 claimant and my learned friend Mr Charles Phipps appears
7 alone for the defendant.
8 JUDGE SEYMOUR: Yes.
9 MR SEMKEN: I hope your Lordship will have received seven
10 bundles comprising bundle A a pleadings bundle, B the
11 claimants' witness statements, C the defendants' witness
12 statements and then four D bundles of documents.
13 JUDGE SEYMOUR: Yes.
14 MR SEMKEN: I hope your Lordship will have also received
15 skeleton arguments from me and my learned friend and
16 a reading list from me.
17 JUDGE SEYMOUR: Yes.
18 MR SEMKEN: I'm afraid the fairly steep task of setting the
19 reading list in the time estimate may have been a little
20 short for the amount that I specified. I don't know how
21 far your Lordship has managed to get with that.
22 JUDGE SEYMOUR: Most of the way through it but not
23 absolutely all of the way through it.
24 MR SEMKEN: I'm very grateful my Lord.
25 Your Lordship will have seen the nature of the case
1
1 is a claim for fees on the part of my client,
2 Baker Tilly, a firm of accountants.
3 JUDGE SEYMOUR: Yes.
4 MR SEMKEN: And that the essential critical dispute between
5 the parties is that my clients contend that the fees
6 arise under three retainers, a reading in retainer for
7 preparation of the report and subsequently for work done
8 after the compromise of the proceedings on
9 3 November 2006 until the last meeting on
10 20 November 2006.
11 The defendant on the other hand contends there was
12 a single retainer, that it was an entire retainer and
13 she has not received her report and accordingly
14 shouldn't have to pay anything.
15 JUDGE SEYMOUR: Yes.
16 MR SEMKEN: The counterclaim is for damages for breach of
17 the agreement and a further point has been added by
18 re-amendment very recently in that the defendant takes
19 a point that there was, she alleges, a conflict of
20 interest which precluded my clients from acting for her,
21 that arising in this way, that in March 2006 there was
22 a meeting between my client and Triad, the company of
23 which the defendant was a director and was and is
24 a substantial shareholder and which was the respondent
25 to the employment tribunal proceedings she brought, and
2
1 she says that meeting gave rise to a conflict of
2 interest that we deny.
3 The trial has been ordered to be a split trial. The
4 order of Master Leslie I refer to in my skeleton has
5 directed that all issues of liability and quantum in the
6 claim be tried, and liability in the counterclaim, with
7 no questions of causation or of quantum in the
8 counterclaim.
9 JUDGE SEYMOUR: Yes.
10 MR SEMKEN: My Lord, it may be convenient if I say at this
11 stage that there is one error which has crept into the
12 amended particulars of claim and into my skeleton, and
13 I think also my learned friend's, namely that the letter
14 which the bill was sent under cover of is pleaded as
15 8 December 2006. In fact it was 13 December 2006.
16 It is in exactly the same form, but the signed letter,
17 which is the one that was sent, is at the bundle at
18 page 620. So that is something we needn't trouble with
19 formal amendment about, it was in fact correctly pleaded
20 in the particulars of claim to which the letter was
21 annexed and I got it wrong on the amendment.
22 I should also say, my Lord, that so far as people
23 are concerned your Lordship may have seen the letters
24 RJW at intervals. That is Russell Jones & Walker, who
25 were the defendants' solicitors in the employment
3
1 tribunal claim until about the beginning or middle of
2 October 2006, after which they were replaced by
3 Burges Salmon, BS in many of the documents, and the two
4 individuals who dealt with the matter there at
5 Burges Salmon are Matt Britton and Katie Knight.
6 I perhaps should have inserted that dramatis personae in
7 the skeleton for your Lordship's assistance. And IM of
8 course as an abbreviation is Ihab Makar, the defendant's
9 brother, and MM is Mira Makar, the defendant herself.
10 Turning to the documents, my Lord, it may be
11 convenient to look first at bundle D3.
12 Before I do that I should say, my Lord, that some
13 issues have arisen in relation to disclosure in this
14 matter.
15 On our side we have been concerned to see certain
16 documents which are in redacted form in the bundle.
17 Those have been identified to Messrs Simmons & Simmons
18 now acting for the defendant and they are D137, 138,
19 139, 140, 141, 142, 143 and 146. We have been
20 requesting for some time to see either complete
21 unredacted copies of those letters or at least to have
22 an assurance that there is nothing relevant to those
23 proceedings which has been blacked out, the problem
24 being that Ms Makar was acting as a litigant in person
25 for some while, and therefore we are a little troubled
4
1 as to whether or not she may have applied the right
2 principles. I'm told by my learned friend this morning
3 we will be provided with unredacted copies of those
4 letters, I've yet to see them but I understand they will
5 be coming shortly.
6 MR PHIPPS: My Lord, that is correct and we don't accept
7 that the claimant is entitled to them. We don't make
8 any broader waiver of privilege, but there is nothing in
9 them I'm instructed so we have no objection to the
10 claimants seeing them on that basis.
11 JUDGE SEYMOUR: Very well.
12 MR SEMKEN: For completeness I should also say that one of
13 the remarkable features of this case is that the files
14 of Russell Jones & Walker and more particularly
15 Burges Salmon have not been disclosed in this case --
16 they plainly are privileged as between the claimant and
17 her solicitors -- but nor has anyone from Burges Salmon
18 been sworn as a witness, so your Lordship will not have
19 the advantage of seeing how the picture looked from the
20 solicitors' side who were in fact conducting the
21 litigation in the employment tribunal.
22 My learned friend I understand has a point he wishes
23 to make on disclosure himself.
24 MR PHIPPS: My Lord, I do. It relates to a single and
25 simple category of documents that has been bandied about
5
1 in the correspondence between the parties now for some
2 time. There was a complaints file created at the
3 claimant by somebody to deal with the professional
4 complaint made by my client back in 2007.
5 Now we have asked for a copy of that file and we
6 have been told that the documents in it are privileged.
7 My Lord, we accept that some of them may be privileged
8 and we have recently had a letter of 22 June 2009 in
9 which it is said that all the documents in that file
10 were privileged and it is said that the dominant purpose
11 of the communications on the complaints file was:
12 "... to seek to obtain evidence or information to be
13 used in connection with the litigation concerned and to
14 a certain extent to enable legal advice to be sought or
15 given in respect of the validity or otherwise of the
16 issues raised by Ms Makar."
17 Now my Lord that causes us some concern and a reason
18 why we are not willing to take that as a final answer is
19 because that doesn't match what we have been told
20 previously about the documents.
21 My Lord there are some additions which I can put
22 into your Lordship's file at a moment that is convenient
23 to your Lordship. Perhaps I could hand up the clip for
24 the time being. My learned friend's solicitors have
25 already been sent this, my learned friend has already
6
1 received these documents. (Handed)
2 My Lord, towards the back of that clip you will find
3 at numbered 698X a letter from Cumberland Ellis LLP to
4 Ms Makar of 16 October 2007. I don't know if your
5 Lordship can see that letter.
6 JUDGE SEYMOUR: I've got a letter of 16 October 2007.
7 MR PHIPPS: It is alpha beta chi delta. I imagine that is
8 some formatting glitch on the word processor.
9 JUDGE SEYMOUR: I see Cumberland Ellis at the bottom, yes.
10 Right.
11 MR PHIPPS: Your Lordship will see in the second paragraph
12 of that letter:
13 "We make some preliminary points. Our client has
14 written to you and continues to write to you only in
15 relation to your complaint to the ICAEW. We are
16 instructed to continue to write to you in relation to
17 the court proceedings. The two matters are separate."
18 JUDGE SEYMOUR: Yes.
19 MR PHIPPS: So there was clearly a separation in place,
20 my Lord, on the claimant's account at that stage of the
21 two different functions and the two different matters
22 which were being considered by the claimant.
23 JUDGE SEYMOUR: Yes.
24 MR PHIPPS: In our submission there must be documents
25 relating to the professional complaint made by Ms Makar
7
1 that are not privileged and we would like to see them.
2 My Lord, it is not a disclosure exercise that
3 requires as it were any search or anything. The file as
4 we understand it is there and available and it is simply
5 a matter of whether or not the documents should be
6 produced.
7 JUDGE SEYMOUR: So your submission, Mr Phipps, I think
8 amounts to this, that there must be some documents --
9 and you cannot identify which obviously -- in this file,
10 which are not privileged.
11 MR PHIPPS: Indeed my Lord.
12 JUDGE SEYMOUR: Perhaps none of them are privileged.
13 MR PHIPPS: Indeed, my Lord. Our concern is that the latest
14 correspondence from Reynolds Porter Chamberlain which
15 I read to you, sorry I don't have a copy for your
16 Lordship, but I read an extract from, my Lord that
17 doesn't seem to square with what was being said
18 previously. That is our concern.
19 JUDGE SEYMOUR: Yes.
20 MR PHIPPS: I'm sorry to interrupt and take up your
21 Lordship's time.
22 MR SEMKEN: My Lord, the position is that our stance is as
23 set out in the letter of 22 June 2009.
24 MR PHIPPS: Perhaps I can hand up my copy of the letter,
25 my Lord, unless there is a spare copy.
8
1 MR SEMKEN: I think we probably have a spare. Sorry we
2 don't. I'm very much obliged to my learned friend.
3 (Handed)
4 The position is that Baker Tilly does have in-house
5 lawyers and an in-house legal team. This matter of the
6 file has been the subject of correspondence over some
7 considerable period, as my learned friend has indicated.
8 That file has been examined by the in-house team and
9 I think by my instructing solicitors,
10 Reynolds Porter Chamberlain.
11 The position is that there are no unprivileged
12 letters on that file. It is perfectly true that there
13 were indeed two strands to this matter in as much as
14 that the defendant was threatening to make professional
15 complaints against Baker Tilly, but that was in relation
16 to the very subject matter of this action, namely the
17 work that they had been doing for her or not doing for
18 her, as she contends. In those circumstances all of the
19 letters which were lawyers' letters, prepared for the
20 purposes of giving advice to Baker Tilly, are privileged
21 as such.
22 There are two questions. One is legal professional
23 privilege and the second is litigation privilege. These
24 letters fall in both, are privileged under both
25 categories. Moreover, the file wasn't in fact opened
9
1 until 12 July 2007, which was the month after the
2 proceedings had been commenced and the date I believe on
3 which a draft defence and counterclaim was served by the
4 defendant so that file is essentially the in-house
5 litigation file in relation to this dispute.
6 JUDGE SEYMOUR: Well, Mr Semken, I can envisage that
7 documents included in the complaints file might be
8 privileged. I can envisage that it is not necessarily
9 the case that all of them or perhaps any of them are.
10 So at the moment the point made by Mr Phipps seems
11 theoretically at any rate potentially a sound one. The
12 question is how to resolve it.
13 MR SEMKEN: My Lord, the file has been reviewed by lawyers.
14 I have not looked at it myself, but I'm told that all of
15 it has been reviewed and there are no unprivileged
16 letters. That is our position. As I say there are two
17 elements to this. The first is that although it is
18 called a complaints file, it is in fact a lawyers' file,
19 the in-house lawyers of Baker Tilly. So it was prepared
20 for the purposes of giving them advice and although
21 it is perfectly true that there are two strands to the
22 complaint that the defendant was then making or
23 threatening, one was a professional complaint to the
24 accountancy regulatory bodies and the other was her
25 defence to this claim, the whole of the subject matter
10
1 is identical, which is the work that Baker Tilly did and
2 didn't do for her in the claim. So the matter must
3 necessarily be subject to a legal professional
4 privilege.
5 I'm instructed that the file has in fact been
6 reviewed by the in-house lawyer Rachel Jones, rather
7 than by Reynolds Porter Chamberlain. But she is
8 a qualified solicitor and she has looked at it and
9 concluded, after being pressed by these very points,
10 that there is nothing disclosable in the file.
11 JUDGE SEYMOUR: How are we going to resolve this? It may
12 well be that the exercise which has been undertaken has
13 been undertaken thoroughly and satisfactorily but what
14 you are able to tell me on instructions doesn't
15 eliminate the possibility that there may perhaps be on
16 the file documents which are not privileged.
17 There are a number of possible ways forward.
18 I understood from what you have just said that your
19 instructing solicitors have not been invited to consider
20 the documents and have expressed no view, therefore, as
21 to the extent to which any documents are properly
22 covered by privilege.
23 You explain to me that you yourself have not
24 considered the documents. I would have thought, subject
25 to any submissions that Mr Phipps may wish to make about
11
1 it, that we perhaps ought to explore the matter a little
2 bit further than has so far happened.
3 MR SEMKEN: My Lord, perhaps the answer may be this, that my
4 instructing solicitors, Reynolds Porter Chamberlain,
5 should have a look at the file. Plainly it wouldn't be
6 appropriate to show it to my learned friend or his
7 solicitors because that defeats the very object of the
8 exercise and equally your Lordship shouldn't see it
9 because your Lordship is trying the case. So the
10 solution would seem to be that if a partner in
11 Reynolds Porter Chamberlain were to look at the file and
12 satisfy herself that nothing is to be disclosed or
13 indeed identify documents which ought to be disclosed,
14 that would be the best way forward.
15 JUDGE SEYMOUR: It certainly is a way forward and in
16 principle it seems to be an appropriate step. I don't
17 know whether Mr Phipps wishes to address me further on
18 this point now, or whether he wishes to keep his powder
19 try until at least the first stage has been completed.
20 MR PHIPPS: My Lord, in the first stage I think as your
21 Lordship says it is a practical problem of how this can
22 be resolved. As a first stage I submit it would be
23 sensible for my learned friend to have a look at the
24 file at some point and to satisfy himself that the
25 claims to privilege are properly made.
12
1 My Lord, there are likely to have been
2 communications with the Institute of Chartered
3 Accountants for example. Is it said that privilege is
4 or can be claimed in respect of those communications?
5 So there are we submit likely to be documents that are
6 relevant and are disclosable and as a first stage, and
7 perhaps I could reserve our position until as it were
8 there is a report back, perhaps my learned friend could
9 satisfy himself of the claim to privilege.
10 JUDGE SEYMOUR: Yes.
11 MR SEMKEN: My Lord that is not a particularly practical
12 approach because I have other functions just at present
13 and I'm told that the files are substantial because
14 Ms Makar writes at very great length. There are I'm
15 told as many as six lever-arch files of material.
16 JUDGE SEYMOUR: Gosh!
17 MR SEMKEN: That is why I suggested that it should be
18 a solicitor's task.
19 JUDGE SEYMOUR: There is a practical problem, plainly, and
20 the extent of the material that you have told me about
21 is another dimension.
22 At the moment I think this trial is estimated to
23 last three days.
24 MR SEMKEN: No my Lord. By the order which was made by
25 Mr Justice Keith on the 12th of this month, which is in
13
1 A at 13, I think, the trial estimate was extended to
2 five to six days, my Lord.
3 JUDGE SEYMOUR: Six days, all right.
4 The point is that in order to be of value, if there
5 is any material in the file which ought to be disclosed,
6 then the task ought to be completed sooner rather than
7 later. It would be unsatisfactory, really, if something
8 along these lines happened, that somebody was called to
9 give evidence, was cross-examined before the documents
10 had been considered, and the cross-examination came to
11 a completion before the documents had been considered
12 but after the documents had been considered something
13 emerged which that witness ought to have been asked
14 about.
15 MR SEMKEN: My Lord, the difficulty is this. As your
16 Lordship sees from the correspondence which your
17 Lordship has been shown, this matter has been live for
18 a year or more.
19 On 12 March at tab 14 of the bundle there was --
20 JUDGE SEYMOUR: Which bundle, Mr Semken?
21 MR SEMKEN: Bundle A, the pleadings and orders bundle.
22 My Lord, there was an application which was heard by way
23 of case management conference in which questions of
24 disclosure and modification of the pleadings, revised
25 trial timetable and so on were addressed. At that
14
1 hearing when Ms Makar was represented by counsel,
2 Mr Hartman of counsel, the question of disclosure on our
3 side was raised and it was made very clear by the
4 learned deputy judge that any application for further
5 disclosure should be made quickly.
6 The position now is that this matter came on again
7 for pre-trial directions as recently as 12 March when it
8 came on before Mr Justice Keith, that is at tab 15 of
9 bundle A, when directions were given for an amended
10 statement of case, and after very considerable argument
11 in relation to disclosure orders were made at
12 paragraph 2, "Further disclosure from the claimant",
13 which didn't address this matter at all.
14 It is now far too late for the defendant to be
15 making a disclosure application, notified to me only
16 after we came court this morning so I have not even had
17 the opportunity to turn out authorities on the point,
18 for massive disclosure, a massive disclosure exercise,
19 so as to hold up the trial.
20 In my respectful submission, at the very least since
21 the 12th of this month when the defendant was
22 represented by my learned friend and Mr Bernard Livesey
23 of leading counsel, disclosure was addressed and this
24 matter was not raised. There has to come a point at
25 which it is simply too late. Whereas we are perfectly
15
1 content to make arrangements for
2 Reynolds Porter Chamberlain to look at the file, any
3 direction which compromised our ability to conduct the
4 trial which would mean taking me out of the action to do
5 it or which involved any adjournment of the trial in my
6 submission would be an unfair burden upon the claimant.
7 There is no explanation given at all as to why this
8 matter is raised on the morning of the trial rather than
9 very much sooner in my submission.
10 JUDGE SEYMOUR: When you tell me that this matter has been
11 going on for a year, do you mean disclosure generally
12 rather than discussion about this particular aspect?
13 MR SEMKEN: And what one might call rumblings about what is
14 disclosable or not.
15 The unhappy fact of this matter is that while
16 Ms Makar was acting in person, although she did instruct
17 counsel on an ad hoc basis to advise and represent her,
18 there was a huge correspondence which runs to very many
19 lever-arch files and has caused the costs of this action
20 to run now to some hundreds of thousands of pounds
21 incurred on our side already largely in dealing with
22 solicitor and solicitor matters. For this matter now to
23 be brought to light without any explanation at all as to
24 why the application was not made sooner, at the very
25 latest on 12 March of this year, in my submission is
16
1 simply unsatisfactory.
2 MR PHIPPS: So far as my learned friend saying the first
3 thing he knew about it was this morning, it is actually
4 flagged up in my skeleton argument as something that was
5 likely to be raised with the court.
6 The problem is that discovery has dragged on over
7 a large number of different areas with which I needn't
8 trouble your Lordship, but part of the defendant's
9 complaint has been that the claimant continually changes
10 the claimant's account of what the position in relation
11 to disclosure is. Simply in relation to this particular
12 point, my Lord, we are astonished that it is now said
13 that there are six lever-arch files making up the
14 complaints file which would have to be reviewed over
15 a number of weeks.
16 MR SEMKEN: I didn't say it would have to be reviewed over
17 a number of weeks my Lord, no.
18 MR PHIPPS: Sorry, my Lord, but it would be impractical to
19 review now --
20 JUDGE SEYMOUR: I think Mr Semken is volunteering as it were
21 a partner at RPC to do it no doubt as soon as it can be
22 done.
23 MR SEMKEN: Volunteering as the trial continues rather than
24 a pause in the trial for it to be done, my Lord, that is
25 the position.
17
1 JUDGE SEYMOUR: I understand that that is the suggestion.
2 MR SEMKEN: One imagines that if it is started promptly and
3 someone burns a bit of midnight oil, the answer could be
4 available by tomorrow morning, but what I wouldn't wish
5 to do is to delay the commencement of the trial for it.
6 MR PHIPPS: My Lord, can I just refer you to, of the clip of
7 correspondence I've handed up, page 698T, a letter from
8 Baker Tilly of 12 October, and it is the last page of
9 that letter which is at page 698W.
10 JUDGE SEYMOUR: Yes.
11 MR PHIPPS: Your Lordship sees:
12 "Having carried out my internal review and set out
13 my findings both in this letter and my letter dated 3
14 October, I do not believe that there are any further
15 steps I can take at present to deal with the matters
16 that you have raised. If you continue with your
17 complaint to our institute I expect they will ask for
18 sight of our complaints file and details of the current
19 position in the proceedings against you. We are
20 prepared to defend our professional conduct and
21 actions."
22 My Lord, what is being talked about there is not six
23 lever-arch files. There is something that was going to
24 be sent to the ICAEW. So we don't accept that it is
25 a massively difficult exercise or indeed should be
18
1 a lengthy one.
2 So far as the deferment of the beginning of the
3 trial until that exercise has been done, in my
4 submission what your Lordship says about it being
5 unfortunate if one particular witness or another was not
6 examined properly on material that was disclosable and
7 indeed should have been disclosed and then wasn't
8 available to be examined on those matters.
9 JUDGE SEYMOUR: So is your concern then, Mr Phipps, that if
10 we proceed as Mr Semken suggests, somebody who has given
11 evidence before there is a report on the inspection may
12 not be available to come back and be cross-examined
13 further?
14 MR PHIPPS: My Lord, yes. I have to say it is a secondary
15 concern. Our primary concern is simply to make sure
16 that the claim to privilege is properly tested and
17 established. But your Lordship raised the question as
18 to whether it might be sensible to defer the
19 commencement of the trial and I would simply echo your
20 Lordship's views in relation to that.
21 JUDGE SEYMOUR: Don't place undue reliance upon what I said
22 when I was contemplating, I don't know, perhaps 50 pages
23 of documents to be looked at, rather than six lever-arch
24 files. What I was thinking at that point was
25 a complaints file, you know, something about that thick
19
1 that might take half an hour to look through. But if
2 indeed it is six lever-arch files that is probably
3 getting on for 2,000 pages and it is likely to take
4 a considerable period to look at.
5 MR PHIPPS: My Lord and indeed it is unlikely in my
6 submission that all of the documents in that file will
7 be the subject of blanket privilege as has been asserted
8 hitherto.
9 JUDGE SEYMOUR: Certainly the bulk of the documentation said
10 to be subject to privilege is perhaps rather surprising.
11 I had imagined that the complaint file would begin with
12 the letter of complaint. And that the letter of
13 complaint at least would not be privileged although it
14 would be a document that your client had seen before.
15 Conceivably other documents in a small complaint file
16 might not be privileged, for example an attendance note
17 of a factual account given by somebody of something that
18 had happened at some point, but if there are, as
19 appears, something perhaps of the order of 2,000 pages
20 in the complaint file, that is rather surprising and it
21 perhaps encourages one to think that there must be a few
22 pages in all of that that are not privileged, otherwise
23 how has the 2,000-odd pages come to be assembled?
24 MR PHIPPS: Indeed, my Lord, indeed.
25 JUDGE SEYMOUR: Subject to hearing further from Mr Semken,
20
1 Mr Phipps, what I have in mind, I think at least at this
2 stage, is to proceed with the trial on the basis that
3 the complaint file will be examined by a partner at
4 Reynolds Porter Chamberlain and there will be a report
5 as soon as reasonably practicable and production of
6 copies of anything which is considered not to be
7 privileged, but on the understanding that any evidence
8 which is heard between now and when there is a report
9 will be the subject of further cross-examination if
10 appropriate once any documents which are disclosable
11 have been disclosed.
12 MR PHIPPS: I'm grateful my Lord.
13 JUDGE SEYMOUR: In other words, nobody to be released until
14 there is a return on the investigation Mr Semken. That
15 is what is in my mind.
16 MR SEMKEN: My Lord certainly that can be put in hand at
17 once. That is the most satisfactory way of proceeding.
18 JUDGE SEYMOUR: It is possible that there may be a more
19 complicated process, I don't know. It may be that in
20 relation to some documents advice from yourself might be
21 sought.
22 MR SEMKEN: That may be so, my Lord, but one doesn't know
23 how it will proceed, but it is one thing to be asked to
24 look at a document and another thing to be asked to look
25 at six files of documents.
21
1 JUDGE SEYMOUR: All right. I think it would at some point,
2 perhaps when the outcome of the investigation is
3 revealed, be helpful to us all to understand why the
4 complaint file is so large. That obviously cannot be
5 explained to us until the partner at RPC has had a look
6 at it to see what is in it.
7 MR SEMKEN: Certainly my Lord, there may be further
8 explanations, but I can tell your Lordship this, that
9 Ms Makar is a formidable correspondent and that there
10 were a number of people as your Lordship will have seen
11 involved in this matter. So there were numerous people
12 who were concerned with it. I think there were at
13 different times as many as five or six members of the
14 firm who dealt with different aspects of this matter.
15 So that it of course all generates paper particularly
16 when A has to comment on what B has to say and documents
17 are passed round in that way.
18 JUDGE SEYMOUR: That is possibly so. I have not really
19 given much attention until now to the complaint so
20 I don't know perhaps in detail what the complaint was
21 but I had imagined it was that your clients didn't
22 produce the report that Ms Makar wanted.
23 MR SEMKEN: My Lord it is entirely right that your Lordship
24 shouldn't have had regard to it because it formed no
25 part of the pleaded case on either side, the complaint.
22
1 JUDGE SEYMOUR: No. But why I mention it, Mr Semken, is
2 that if the complaint was essentially a simple one like
3 "I've not had the report that I commissioned", yet that
4 has produced the volume of documentation which you tell
5 me about, that does seem even more surprising.
6 MR SEMKEN: No, my Lord. As I mentioned at the outset and
7 was mentioned in the letter of 22 June there were two
8 strands to the matter in as much as that Ms Makar
9 contended that not only were there contractual issues
10 between herself and Baker Tilly in relation to the
11 report, but what Baker Tilly had done or omitted to do
12 gave rise to professional complaints as well. That is
13 the two strands to it.
14 Ms Makar is herself an accountant with extremely
15 strong views on the way that accountants should conduct
16 themselves. As your Lordship will have seen, she feels
17 that PricewaterhouseCoopers have been seriously in
18 breach of their professional duties in relation to the
19 audit of Triad. Ms Makar has very strong views on
20 accountants' duties and, as I say, that is one of the
21 elements which has given rise or gave rise to the
22 report.
23 So it is perhaps not surprising that she sought to
24 advance a double pronged attack or defence, namely not
25 only contesting matters of contract between herself and
23
1 Baker Tilly, but also seeking to assert that Baker Tilly
2 were vulnerable in relation to their own professional
3 body.
4 JUDGE SEYMOUR: Yes, but the point which arises, given what
5 you tell me is the bulk of the documentation, is what
6 could that conceivably amount to. I imagine, I don't
7 know, that the complaint that Ms Makar made was that in
8 relation to various identified professional rules your
9 clients had failed in some respect or other to do
10 something.
11 MR SEMKEN: My Lord, I've given your Lordship an outline as
12 I made on instructions. I can't usefully say more at
13 present without much more detailed instructions and
14 without someone having reviewed the files so perhaps one
15 might leave it as your Lordship has suggested and
16 that --
17 JUDGE SEYMOUR: Yes, all right. I think we are all going to
18 be a little bit anxious unless there is some explanation
19 of bulk of the documentation if it is contended that the
20 bulk of the documentation is privileged. Because it is
21 difficult with what one knows at the moment to
22 understand how that could possibly be so.
23 MR SEMKEN: Those behind me hear what your Lordship says and
24 they will take that on board in doing the work my Lord.
25 JUDGE SEYMOUR: Right, okay. Another thing is how long this
24
1 is going to take. As I've indicated, I'm not minded to
2 delay the trial while this happens, but obviously there
3 is the potential for disruption if witnesses who have
4 been cross-examined have to return. So the sooner the
5 exercise is completed the better, as long as it is not
6 done at unreasonable speed. It has to be done properly
7 as well as as fast as possible.
8 MR SEMKEN: My Lord all I can really say is that we will do
9 it as quickly as we can, with a view if possible to
10 completing the exercise before the court sits tomorrow
11 morning, if that can be done.
12 JUDGE SEYMOUR: Yes.
13 MR SEMKEN: I'm told that the file is in Baker Tilly's
14 offices at present but the first thing to do is to get
15 instructions out to get that across to Reynolds Porter
16 Chamberlain's offices so they can start the work.
17 JUDGE SEYMOUR: Is it in Baker Tilly's offices in London?
18 MR SEMKEN: In London, my Lord, yes.
19 JUDGE SEYMOUR: So it is simply a cab ride between that
20 office and RPC.
21 MR SEMKEN: That is why I say with anything -- one hopes
22 that will be able to be concluded before the court sits
23 tomorrow morning, but I can't promise, but that is what
24 we are aiming for. Put it this way, we certainly are
25 not going to conclude it before the court rises today.
25
1 JUDGE SEYMOUR: Yes. I think that is fairly obvious. Might
2 I suggest that if the exercise has not been completed by
3 the time I sit tomorrow we proceed on the basis that
4 anything which is thought to be not covered by privilege
5 by that point will at least be disclosed on a rolling
6 basis.
7 MR SEMKEN: Precisely, my Lord, yes, yes.
8 JUDGE SEYMOUR: And a report of progress be given.
9 MR SEMKEN: Yes, my Lord, indeed.
10 JUDGE SEYMOUR: Thank you.
11 MR SEMKEN: My Lord, I mentioned some useful names and
12 initials that your Lordship might find it worth making
13 a note of for the purposes of looking at the documents.
14 I have mentioned the redacted document which we are
15 hoping to receive -- we have been promised unredacted
16 copies and we hope we will receive them very soon.
17 I was about to take your Lordship to file 3 of the D
18 series.
19 JUDGE SEYMOUR: Just before we do that, perhaps Mr Phipps
20 could help us as to when the unredacted documents will
21 be available?
22 MR PHIPPS: It's simply a matter of getting hold of copies,
23 my Lord.
24 My Lord tomorrow morning they will be available for.
25 MR SEMKEN: I would have hoped to receive them a great deal
26
1 sooner than that. They have been requested repeatedly
2 over the last few days and --
3 JUDGE SEYMOUR: I thought you told me there were only about
4 half a dozen sheets.
5 MR SEMKEN: There are only half a dozen sheets all told.
6 MR PHIPPS: They are in on my client's personal computer
7 which is in Colchester.
8 MR SEMKEN: It is extraordinary. My learned friend is in a
9 position to tell me this morning before the court sits
10 he is prepared to give me these documents and no one has
11 taken the elementary step of having them available.
12 JUDGE SEYMOUR: All right, well, they are on Ms Makar's
13 computer and the computer is in Colchester.
14 MR PHIPPS: My Lord, yes.
15 JUDGE SEYMOUR: Presumably when I rise this afternoon
16 Ms Makar will return to Colchester and she would be able
17 to send these documents electronically.
18 MR PHIPPS: My Lord, yes.
19 JUDGE SEYMOUR: Perhaps I can leave it on the basis that
20 Mr Semken will let you know so you can tell Ms Makar the
21 email address of the appropriate person at RPC so that
22 as soon as Ms Makar gets home she can email these
23 documents to that person.
24 MR SEMKEN: Ms Makar is only too well aware of that. She
25 has been in lengthy email communication with RPC over
27
1 many months, I'm happy to say.
2 JUDGE SEYMOUR: If the email address is already known that
3 makes it even easier.
4 MR SEMKEN: My Lord, yes.
5 JUDGE SEYMOUR: The point is it would be helpful to the
6 claimant to have unredacted copies as soon as possible
7 and some time in the course of the evening is better
8 than tomorrow morning at 10.30.
9 MR PHIPPS: Indeed my Lord.
10 It may be convenient to look at some employment
11 tribunal documents. The claim form in Ms Makar's claim
12 is at page 873 in file D3.
13 JUDGE SEYMOUR: Yes.
14 MR SEMKEN: My Lord on page 881 it is dated 6 March 2006 and
15 there follow many, many pages of the grounds commencing
16 on page 883. It may be helpful to just read "Summary of
17 claims" on page 883:
18 "1. In summary, the claimant's claims are as
19 follows:
20 "1.1 Unfair dismissal:
21 "a. Dismissal was automatically unfair under
22 section 103A of the Employment Rights Act 1996 in that
23 the reason or principal reason for the dismissal was
24 that the claimant had made protected disclosures."
25 This of course is the whistle blowing saving.
28
1 "b. [That her] dismissal was automatically unfair
2 under section 98A.
3 "c. Dismissal was procedurally and substantively
4 unfair under section 98.
5 "1.2 Detriment other than dismissal on the grounds
6 of protected disclosures."
7 So that the essence of the claim arose out of
8 Ms Makar's dispute with her fellow directors which arose
9 out of her complaints and concerns as to the way that
10 the company's accounts had been kept and as to the way
11 in which the directors' governance of the company had
12 been conducted. There was clearly a fragmented board.
13 So that was her claim.
14 There were a number of orders made in the
15 proceedings which are material to these proceedings and
16 they are at tab 3 of file 3. First on page 803 your
17 Lordship sees that there is a document dated
18 1 August 2006. At the foot of the page, "Expert
19 evidence":
20 "2.1 The parties are to agree the identity of
21 a joint expert and the terms of reference for a joint
22 expert by Tuesday 29 August 2006."
23 Then with a proviso:
24 "2.2 If no such agreement is reached both parties
25 must notify the Tribunal and each other of the identity
29
1 of their own expert by 1 September 2006."
2 Then over the page at 2.3:
3 "If 2.2 applies the parties are ordered to serve the
4 report of their individual expert with attach copies of
5 instructions and all letters between the expert and
6 instructing party on the tribunal and the other side by
7 13 October 2006."
8 So that is the first expert evidence directions of
9 the tribunal.
10 JUDGE SEYMOUR: Yes.
11 MR SEMKEN: Those contain nothing more than that as to the
12 expertise of the expert or of the questions that he is
13 to answer.
14 Then at page 808 somewhat curiously this is recorded
15 as a record of the fourth case management discussion of
16 the employment tribunal and dated 19 September. I think
17 it must be the 18 September because there was an appeal
18 against this order on 19 September.
19 But your Lordship will see at 2, orders at 2, "Scope
20 of experts' report":
21 "It is ordered that the expert evidence of each
22 party is not required where the respondent has conceded
23 both a qualifying disclosure and reasonable belief.
24 This does not affect the order for expert evidence in
25 relation to market practice."
30
1 So that again there are certain assumptions as to
2 what matters will be addressed but there is still no
3 precise definition of the expert evidence which is
4 permitted.
5 JUDGE SEYMOUR: Presumably the tribunal was proceeding on
6 the basis that in the first instance it would be for the
7 parties to identify the issue.
8 MR SEMKEN: Indeed my Lord, yes and your Lordship will have
9 picked up that the reference to protected disclosures is
10 that some disclosures were ultimately conceded as being
11 proper for the defendant to have made; others remained
12 in issue until the employment tribunal proceedings were
13 compromised.
14 JUDGE SEYMOUR: Yes.
15 MR SEMKEN: There was then an appeal. Sorry, I should have
16 taken your Lordship to page 810, the consequential
17 direction 5.1 at the top of the page:
18 "It is ordered that the timetable for the expert is
19 varied as follows:
20 "5.1 It is ordered that expert's reports with
21 attached copies of instructions and all letters between
22 the expert and the instructing party are to be served on
23 the tribunal and the appealing party by
24 31 October 2006."
25 I mention these dates because these orders provide
31
1 a sort of framework by which some of the evidence will
2 be tested as to what my clients were instructed to do
3 and when.
4 JUDGE SEYMOUR: Yes.
5 MR SEMKEN: Then there is something of -- the material which
6 was to be addressed is to be found at page 813, at 1.12:
7 "The chairman took the view that these went to
8 reasonable belief which has been conceded for the
9 disclosure in question.
10 "1.12 In these circumstances the decision of the
11 chairman is to limit the expert's report to those
12 disclosures which have not been conceded as qualifying
13 disclosures where reasonable belief has also not be
14 conceded. The expert's report will therefore cover all
15 non-conceded qualifying disclosures. It is made clear
16 that this order does not restrict the need for an expert
17 on market compliance."
18 The essence of the matter thus being that the expert
19 evidence was to assist the tribunal in answering the
20 factual question whether or not the disclosures were
21 reasonable to have been made.
22 Of course whether there was a genuine complaint or
23 not might well be indicative of bona fides or materials
24 to the issue of whether they were made bona fide or
25 whether they were made for trouble-making purposes as
32
1 Triad would have contended.
2 Then your Lordship will see on page 815 an
3 attendance note made by Burges Salmon, who must
4 therefore have taken over from Russell Jones & Walker by
5 that date, of an appeal against that decision. Your
6 Lordship will see it is dated 19 October at the top
7 which is why I say it seems likely that the previous
8 decision was in fact the 18th rather than 19 October.
9 JUDGE SEYMOUR: Except that the previous decision at 808 is
10 19 September.
11 MR SEMKEN: Your Lordship is absolutely right.
12 JUDGE SEYMOUR: And the attendance note is 19 October.
13 MR SEMKEN: Indeed yes, this is 18 October, it would have
14 been a very quick appeal, the next day.
15 So this is 18 October. There was an appeal against
16 that decision on behalf of Ms Makar who wished to extend
17 more widely the expert evidence.
18 Your Lordship will see in relation to case
19 management on page 816, at paragraph number 7 on
20 page 816 there are two features of the order:
21 "It did not identify the area of expert evidence
22 required. There was a debate about this at the hearing.
23 It also does not provide for live evidence to be given
24 but clearly it was envisaged that there would be live
25 evidence from the experts."
33
1 So that those were matters which were concerning
2 Ms Makar as late as 18 October.
3 Then at page 818, "State of concessions",
4 paragraph 20.1, I'll start at 18:
5 "Mr Hochhauser says that the expert evidence has
6 been limited where there is no proper basis for doing
7 so. He also says that the concessions made are unclear,
8 ambiguous and incomplete. He took me to references in
9 the amended response which were arguably inconsistent
10 and to inconsistent answers in the particulars. He says
11 the Chairman made an inappropriate order given the
12 submissions."
13 And then paragraph 20.1:
14 "There are passages in the defendant's pleading
15 [that is Triad's pleading] that sit uneasily with the
16 concessions made."
17 Then he gives some examples and says at 20.2:
18 "In my view, two steps are required:
19 "(a) I think it would be very helpful for Triad to
20 answer the schedule of protected disclosures attached to
21 the list of issues, disclosure by disclosure. This
22 would summarise what was in issue and would be an
23 indispensable tool for the tribunal.
24 "(b) I also think that Mr Downes needs to consider
25 his responses once again. It is clear that he intends
34
1 to make substantial concessions to the end of January,
2 but certain passages in the pleadings sit uneasily with
3 those concessions. There is an exercise to be done
4 there. The admissions are not always clear on the
5 pleadings and it sometimes appears on the pleadings as
6 though admissions were not being made."
7 Then at paragraph 23.2 on page 819, the middle of
8 that paragraph, the fourth line, towards the end of that
9 line:
10 "In my judgment Mr Hochhauser's skeleton correctly
11 states that financial evidence is principally necessary
12 in relation to the question of whether there were
13 reasonable grounds for believing a breach had been
14 committed or would be committed."
15 Perhaps I ought to read the top of that in fact:
16 "It is worth recording the submissions made to the
17 tribunal in July regarding the need for expert financial
18 evidence. It was said that financial expert evidence
19 was principally relevant to the third and fourth
20 criteria -- the existence of reasonable grounds.
21 Mr Hochhauser's skeleton went on to say that that issue
22 and the issue of good faith have some correlation."
23 So as late as October the ambit of the expert
24 evidence was still in issue and pleadings to which it
25 was to be addressed were not yet in satisfactory form.
35
1 JUDGE SEYMOUR: The impression I have at the moment is that
2 as a result of the order of 19 September there was an
3 identification of a sort of core scope of the expert
4 evidence and what the judge was being invited to
5 consider on the appeal was broadening that.
6 MR SEMKEN: My Lord what had happened was that it went by
7 stages. 1 August there is simply an order for expert
8 evidence no doubt in reliance upon argument as to what
9 the value of that expert evidence would be, which would
10 have given some indication as to what the parties
11 contemplated. Triad said no expert evidence was
12 necessary, Ms Makar said it was. Ms Makar won.
13 Then on 19 September there was an order which was
14 more definitive and somewhat restrictive of that
15 opposition. That was the subject of the unsuccessful
16 appeal on 18 October. What did become apparent on the
17 appeal on 18 October was that the pleadings themselves
18 to which of course the expert evidence would need to be
19 addressed for the issues were in unsatisfactory form
20 because it wasn't at all clear what Triad was conceding
21 and what it wasn't because if Triad conceded that
22 a particular item of disclosure was a proper and
23 reasonable one, then of course there would be no need
24 for any expert evidence at all in relation to that.
25 JUDGE SEYMOUR: According to the order of the industrial
36
1 tribunal chairman.
2 MR SEMKEN: There wouldn't my Lord because if it was
3 conceded that what Ms Makar had done was right then she
4 wouldn't need to justify it any further in evidence
5 before the tribunal; it would be a concession. She had
6 made disclosures and had rocked the boat at Triad, Triad
7 had dismissed her and contended that she was
8 a trouble-maker. She said she wasn't, she was serving
9 a public purpose and the company's purposes in bringing
10 matters to light which ought to be brought to light in
11 respect of some disclosures, Triad was conceding that
12 she was right about that, so those issues simply fell
13 away as matters of dispute and therefore wouldn't need
14 to be addressed in any expert evidence.
15 JUDGE SEYMOUR: Wasn't that the point that arose on the
16 appeal to Judge Richardson?
17 MR SEMKEN: That is right, my Lord, that is why I said on
18 the appeal what became apparent, if it had not been
19 apparent before, was never mind the expert evidence, the
20 very pleadings raising the issues which would need to be
21 addressed by the experts were not themselves yet in
22 satisfactory order. That is as late as 18/19 October.
23 And that was something that Triad said it would put in
24 hand.
25 JUDGE SEYMOUR: Right.
37
1 MR SEMKEN: My Lord, another date to be noted is the date of
2 the resignation of PricewaterhouseCoopers as the auditor
3 of Triad and that was 5 April 2006. The letter of
4 resignation is at file D4/1164.
5 JUDGE SEYMOUR: Yes.
6 MR SEMKEN: Your Lordship will note the second paragraph of
7 that letter:
8 "In accordance with section 394 of the Companies Act
9 1985, we confirm that are there are no circumstances
10 connected with our resignation which we consider should
11 be brought to the notice of the shareholders or
12 creditors of the Triad Group plc."
13 JUDGE SEYMOUR: Yes.
14 MR SEMKEN: So they were publicly resigning without a stain
15 on Triad. Ms Makar's case of course was that all along
16 that the accounts were effectively unauditable and that
17 PWC should never have signed off the 2005 accounts. But
18 that was --
19 JUDGE SEYMOUR: As I remember under section 394 of the
20 Companies Act an auditor resigning is required to give
21 a certificate one way or the other.
22 MR SEMKEN: Exactly, my Lord, yes.
23 JUDGE SEYMOUR: In other words, it is a statutory
24 certificate in effect.
25 MR SEMKEN: That is right but it is a clean statutory
38
1 certificate rather than an indication to the world that
2 it has resigned because it cannot do its job.
3 JUDGE SEYMOUR: Yes.
4 MR SEMKEN: That is the point of it.
5 JUDGE SEYMOUR: That doesn't dispose of the question whether
6 Ms Makar's complaints were valid or not insofar as that
7 may be relevant.
8 MR SEMKEN: Absolutely not, my Lord, no, but what meant was
9 that a very well-known large auditing firm had signed
10 off the accounts and resigned on those terms,
11 notwithstanding that it knew of the dispute. So that
12 was if you like the part of the mountain that Ms Makar
13 had to climb.
14 JUDGE SEYMOUR: Right.
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