Langsam v Beachcroft LLP & Ors

Mr Southeran gave detailed advice without reference to counsel on 9 April 2001 and again on 12 July 2001 and 15 June 2005, including advice on quantum. In the last of those letters, he specifically associated himself with the advice given by leading counsel. Mr Southeran clearly thought that it was part of his responsibility to compile loss schedules. When the case was approaching trial, it was clear that, while Mr Langsam was advised that his claim on the basis of the October 1996 start date had a value of some £2.7m, Hacker Young took the view that the correct start date was October 1997 and that the value of the claim was some £1.2m.

In the run-up to trial, it emerged that the main issues between the parties, so far as relevant on this appeal, were: (1) the correct start date (“the start date issue”) ; (2) whether Mr Langsam was truly entitled to non-domiciliary status (“the domicile issue”); (3) whether the partnership could have raised sufficient funds to release £18m to each partner (“the lending issue”); and (4) whether Mr Morton should be called as a witness and if so what evidence he would give (“the Morton issue”).

On the lending issue, there was a difference of view between the parties’ banking experts as to whether the whole of the required £36m could have been raised by the partnership in October 1996. There was a further issue as to interest with which this court is not concerned and with which therefore I shall not deal.

Mr Langsam’s closest associate was Mr Robert Ferrari, Finance Director of Britannia Hotels Group, Mr Langsam’s principal hotel company. The flagship hotel was Britannia International Hotel in London’s Docklands district.

As to the Morton issue, Mr Southeran had pointed out to Mr Ferrari in November 2005 that no decision had been taken as to whether to approach Mr Morton to find out whether he would have agreed to an ERA in October 1996. This had not previously been covered in his statement. Mr Langsam had replied angrily that Mr Morton did not wish to be called. The judge found that Mr Langsam instructed Mr Southeran on 9 December 2005 that Mr Morton’s evidence could significantly damage his case, but not, as Mr Langsam alleged at the trial of these proceedings against Beachcrofts, that he (Mr Langsam) then agreed to Mr Morton being called. I shall need to refer to this matter further below.

On 10 January 2006 Hacker Young made a Part 36 offer in the sum of £500,000 plus costs. At this stage Mr Bartley Jones had received the papers but had not advised. Mr Harald Loeffler, a solicitor with Beachcrofts, produced some calculations showing that the valuation of Mr Langsam’s claim was between £2m and £3m. Mr Loeffler sent these figures to Mr Southeran at 8.33pm on Saturday 14 January 2006. Mr Southeran took it on himself to form a view about quantum when, on Mr Langsam’s case, he should also have made the points available to leading counsel. He had made no calculation of interest.

It was Mr Southeran who initially advised Mr Langsam on the appropriate response to the Part 36 offer. He regarded the offer as derisory.

This was a conference with Mr Bartley Jones, attended by Mr Southeran, Mr Langsam and Mr Ferrari. Counsel had not at this stage studied the figures. This was the first conference with Mr Bartley Jones.

Mr Bartley Jones advised that the Part 36 offer was too low and that Hacker Young were down for the costs anyway. Mr Bartley Jones ran through the issues. On liability Mr Bartley Jones advised that Mr Langsam had a UK domicile of choice before 1959.

Mr Bartley Jones dealt with the other issues. In the course of his advice he referred to the fact that Mr Michael Warburton, Mr Langsam’s accountancy expert, had advised that Mr Langsam had a good prima facie case for showing that by October 1996 he should have established his Austrian domicile with the Revenue. Another issue discussed was the Morton issue. Mr Bartley Jones advised that success was not guaranteed. Mr Bartley Jones advised that on the evidence, Mr Langsam had approximately a 75% chance of succeeding on the October 96 date.

It was decided at that meeting to instruct Mr Warburton as a matter of urgency to try to reconcile the figures on quantum.

It was an important part of Mr Langsam’s case against Hacker Young that Mr Morton would have agreed to an ERA in 1996. By the time of the proceedings, Mr Langsam and Mr Morton were not on good terms. On 10 January 2006, Mr Southeran wrote to Mr Ferrari stating that he was:

“conscious that we have not resolved the position re Mike Morton. I am aware both Alex and you take the view the potential downside of calling him is so serious to outweigh any possible benefit of doing so but I remain of the view we should at least establish his availability.”

Mr Bartley Jones advised that it was important for him to understand what Mr Morton might say. He advised that Mr Langsam would have to show on a balance of probabilities that he would have had the co-operation of Mr Morton. It was known that he had co-operated in 2000 but the difficulty for the court was to find out why the ERA was not achieved earlier. Mr Ferrari agreed that he would go to see Mr Morton, because, as the judge held, Mr Morton did not like lawyers.

Subsequently, at the mediation meeting on 20 January 2006 referred to below, a discount was applied to Mr Langsam’s claim for the Morton factor. The attendance note states that “50% discount” next to Mr Bartley Jones’ initials. The judge found that this was a reference to a discount of up to 50%. It originated in a point contributed by Mr Southeran referred to by Mr Bartley Jones as “Peter’s good point”.

The Morton issue was addressed in detail at a meeting attended by Mr Southeran, Mr Warburton, Mr Ferrari and Mr Loeffler on 23 January 2006. At this meeting, Mr Ferrari stated that Mr Morton “would turn up” and that his evidence would be “suitably vague”, that is, Mr Morton had confirmed to him simply that he would say that he would have agreed to participate in the ERA. This information was relayed to Mr Bartley Jones, who was concerned at the suggestion that Mr Morton’s evidence would be “suitably vague”. On the judge’s findings, Mr Bartley Jones thought that the discount to be applied to this risk for negotiation purposes could be as high as 50%. Mr Southeran states in his statement that he agreed with Mr Bartley Jones’ analysis that a significant discount was possible. He stated “at best, Mr Morton was likely to be a ‘loose cannon’”.

Further difficulties over Mr Morton emerged in the course of discussions between those advising Mr Langsam. Mr Morton had withdrawn money from the partnership when this would be subject to inheritance tax at the full rate rather than at business rate if he left his monies in the business. That factor might make him unco-operative. When Mr Bartley Jones asked why Mr Morton had subsequently withdrawn his money, Mr Ferrari replied that he had been effectively forced to do this by Mr Langsam.

Mr Southeran’s evidence at the trial of these proceedings was that the significance of calling Mr Morton as a witness was stressed to Mr Langsam and Mr Ferrari but that they were unwilling for him to be called for reasons apparently related to the deterioration of Mr Langsam’s business relationship with him and his ability to be generally damaging about wider issues. Mr Southeran advised that not to call Mr Morton meant that counsel would have to submit that the fact that Mr Morton subsequently consented to an ERA was evidence that he would have participated in an earlier ERA. The mediator was told that Mr Morton would be called as a witness. Whichever course was taken, in the opinion of Mr Southeran a significant discount was justified. Leading counsel was of the view that it could have been a very substantial discount.

Mr Southeran did not consider it necessary for a further statement to be filed on behalf of Mr Morton. He had already signed a very short statement. Beachcrofts had taken steps to ensure that he was in the country and Beachcrofts were keeping a careful eye on the timescale for issuing a witness summons. However, according to his evidence, Mr Langsam was not prepared to approach Mr Morton. The most that Mr Langsam allowed was for Mr Ferrari to visit him and sound him out. It was that which led to Mr Ferrari reporting that Mr Morton would be “suitably vague”. No statement was in the end taken from Mr Morton before the date fixed for the trial of the proceedings against Hacker Young.

Mr Bartley Jones, Mr Southeran, Mr Langsam and Mr Ferrari attended the mediation on 20 January 2006. Hacker Young were represented by Mr Bernard Livesey QC and their solicitors.

Hacker Young’s mediation statement took the position on the lending issue that the maximum amount that Mr Langsam could have withdrawn via an ERA was only £6m, derived from an inability of the partnership to raise more than £12m. It also contended for a 10% discount for each of the domicile and Morton issues. In particular, it took issue with the fact that Mr Langsam was entitled to non-domiciliary status. For instance, it doubted whether Mr Langsam’s father (who had left Austria and lived in England during and after the second world war) had resettled in Vienna. He had few assets there. He retained an address in Salford as his address. There was no Austrian will. The father died in England and maintained strong connections with England. Mr Langsam’s advisers recognised that the lending issue was one that could cause Mr Langsam to lose completely.

At the mediation, the mediator, Mr Price, gave a broad-brush view as to the value of Mr Langsam’s claim. Mr Langsam claimed that he would have withdrawn £18m from the partnership. There was, however, a real risk that the right figure was £6m, which in the mediator’s view would lead to damages of under £1m, or possibly £500,000. In Mr Price’s view, one had to factor in that the judge might either be sympathetic or that he might not like clever tax schemes. Mr Langsam expressed the view that his lower figure was “derisible”.

Mr Southeran went on to suggest talking in terms of £1.5m to the other side. Mr Langsam’s case is that this was a marked change in Mr Southeran’s position and that, on the basis of that advice, he was persuaded to make a counter-offer to the Part 36 offer in that sum. Mr Langsam’s case is that the more realistic figure for the value of his claim was £2-£3m. This was shown by the schedules of loss, prepared by Mr Loeffler, which were not shown to Mr Bartley Jones. Mr Southeran had the figures and it was, on the appellant’s submission, easy to build interest calculations into them.

It was suggested at the mediation meeting that the start date for his non-domiciliary status would have been deferred because of the then current investigation by the Special Compliance Office of the Revenue (“SCO”). Mr Langsam’s case was that there was nothing in that point. Mr Warburton was not even asked about it in cross-examination in these proceedings although he had expressed trenchant views about it.

Hacker Young offered the sum of £900,000 in response to the £1.5m offered by Mr Langsam. At the conclusion of the mediation, therefore, there was an offer of £900,000 on the table from Hacker Young.

In the light of the challenge by Hacker Young at the mediation to the ability of the partnership to raise £36m to fund the ERA, Mr Langsam set about obtaining valuations of Britannia International Hotel as at the date when security would have been required for the ERA. Valuations were received on about 23 January 2006 showing that at the relevant time Britannia International Hotel was worth about £52m and was subject to a prior charge for £10m plus interest.

There was a meeting on 23 January 2006 attended by Mr Southeran, Mr Warburton, Mr Ferrari and Mr Loeffler. Its primary purpose was to discuss the figures produced by Mr Warburton.

Mr Ferrari revealed in the course of this meeting for the first time that Mr Langsam had in 1996 had very substantial sums of money on deposit offshore. The significance of this disclosure was that these offshore deposits could have been used as collateral for bank loans to the partnership to fund the ERA, a matter for which there had previously been some doubt and thus some litigation risk. Mr Southeran’s attendance note of 24 January 2006 concludes that the simple point is that if the issue was about secured lending it appeared that Mr Langsam either had the amount unencumbered in an account which would have assisted in raising money if Mr Langsam had been prepared to offer it as collateral. This meant that Mr Warburton had to do some more work on the figures. Mr Warburton did this and advised that the headline figure for Mr Langsam’s claim would be for £2.5m on the basis of an October 1996 start date and £1.8m on the basis of a October 1997 start date.

Accordingly, Mr Southeran concluded in a file note on 24 January 2006 that the practical consequence of this information is that Mr Langsam would be able to show that borrowing £18m was realistic, and that the only issues would be the extent to which Mr Langsam was cross-examined about this figure, the Morton factor and the other issues which really revolved around the approach of the court rather than the lack of any evidence. Mr Langsam’s banking expert, Mr Ruocco, in due course confirmed that cash would have been ideal security for a bank and it would not even be a back-to-back basis. It would simply be security for the lending.

Although the judge’s judgment does not refer to this point, Mr Southeran’s notes also record that Mr Southeran advised at this meeting that the amount offered at the mediation (£900,000) was close to the realistic value of the claim and that, if the claim was not settled, there was a risk of it going “pear-shaped”.

On the following day, while again the judge does not refer to this point, Mr Southeran had discussions with Mr Warburton and others and was able to conclude that, as a result of the offshore deposits held by Mr Langsam there was no longer likely to be any problem in showing that the £18m could be raised by the partnership to achieve an ERA.

Mr Warburton gave evidence that the SCO investigation, which took place into the partnership’s affairs between March 1995 and March 2000, was a red herring. Such an investigation would be instituted because of the size of an amount at issue. It did not of itself suggest wrongdoing.

On 26 January 2006, there was a meeting between Mr Southeran, Mr Langsam and Mr Ferrari to review various issues related to quantum etc. Mr Southeran produced file notes of this meeting, in addition to his handwritten notes of the meeting.

At an early point in this meeting, Mr Langsam announced that Mr Ferrari’s wife was very ill and that he was reluctant to involve Mr Ferrari “in a stressful and difficult action” whilst this was happening. For that reason he was keen to look at whether it could be settled.

Those present at the meeting spoke to Mr Bartley Jones on the telephone. He went through the various discounts with the result that, according to Mr Southeran’s file note, “the amount of the claim came down potentially substantially”. According to Mr Southeran’s handwritten notes, the start date was discussed with Mr Bartley Jones. Mr Southeran noted that the court might consider that it would have taken longer to obtain Revenue clearance. Mr Southeran’s evidence at the trial was that those advising Mr Langsam thought that the arguments for October 1996 were stronger than those of Mr Andrew Lowden, Hacker Young’s accountancy expert, whose opinion was that the correct start date for Mr Langsam’s claim was October 1997, and that they would therefore have a strong case on this point. The October 1997 start date brought the loss down from £2.5m to £1.8m (say £2m). If simple interest were applicable, a further £500,000 should be added, giving a very best figure of £2.5m.

This figure was subject to the discounts. First, the trial judge might, for instance, take the view that the monies released would not have been invested at the earliest opportunity. Second, Mr Bartley Jones thought that Mr Langsam would win on the domicile point. Third, Mr Bartley Jones thought that there could be a 50% discount for the Morton factor. Mr Bartley Jones made the point that he saw the Morton issue as quite significant. It was not clear what Mr Morton was going to say and it was doubtful whether it was really possible to do anything about this. If Mr Morton decided to be difficult, he could cause very significant difficulties. Mr Bartley Jones went over other matters concerning quantum. Mr Southeran’s note states:

“Pointing out that realistically the value of this claim was not too far from the offer made at the mediation and if attempts were made to settle it then we should approach them or put various points to them to see what they had to say.”

Mr Bartley Jones inquired about Mr Langsam’s attitude to risk. Mr Bartley Jones’ view took account of the Part 36 offer, which was already available. Taking all the points into consideration, Mr Bartley Jones thought that an offer to the other side should be pitched between £750,000 and £1m.

After the telephone call with Mr Bartley Jones, Mr Langsam and Mr Ferrari discussed the matter between themselves. They came back to Mr Southeran and stated that they wished to instruct Mr Bartley Jones to seek to get a settlement on the basis that they were keen to achieve an all-in settlement, inclusive of costs, of £1.4m but would take a settlement of £1.1m inclusive of costs.

Mr Southeran made the point that costs had increased since the mediation. Mr Southeran accepted that there was a discussion to be had about the precise figure for costs but nonetheless he advised that Mr Langsam should factor in a figure in respect of Beachcrofts’ costs plus VAT. Beachcrofts’ estimate of their costs and disbursements to date was some £300,000, though Mr Southeran accepted that there could be some discussion over the precise figure.

After that discussion, Mr Southeran called Mr Bartley Jones back. Mr Bartley Jones agreed to speak to Mr Livesey. Later, Mr Bartley Jones reported that he had made an offer of £1.375m to the other side and was awaiting a response. Mr Ferrari contacted Mr Southeran later in the day to ask for news and he stated that Mr Langsam wanted to settle the case and was not looking forward to a full hearing. It was Mr Ferrari’s personal view that Mr Langsam’s bottom line was probably £1m.

The judge held that by the end of this meeting on 26 January Mr Langsam felt that the advice his legal team wanted to give him was negative and that made him pessimistic. The judge, however, found that Mr Langsam had entertained excessive expectations as to his likely recovery. As the litigation approached he realised that more complexities and obstacles were involved. He was therefore surprised and frustrated that Hacker Young were not prepared to make a higher offer. Mr Wardell submits that the judge was unfair in this finding. It was a very human reaction on the part of Mr Langsam to be made pessimistic by what had been said at the meeting.

Mr Langsam’s case is that, although the judge did not refer to this evidence in his judgment, Mr Southeran gave further advice at this meeting, namely that Mr Langsam might not even beat the Part 36 offer and that he should accept the offer.

A meeting was called for 27 January 2006 in order to discuss the questions that Mr Langsam might be asked in cross-examination. It was held at Mr Langsam’s offices and those attending were Mr Langsam, Mr Southeran and (for part of the meeting) Mr Langsam’s then in house lawyer, Ms Sue Ashton.

As there had been no word from Mr Bartley Jones about the offer that had been made to Hacker Young, Mr Southeran telephoned Mr Bartley Jones from the meeting. Mr Langsam told Mr Bartley Jones that he was keen to settle. Ms Ashton’s recollection was to the contrary but the judge accepted that Mr Langsam had told Mr Bartley Jones that he was keen to settle. The judge also accepted that he was keen to settle provided that he could get more than £900,000, which he regarded as derisory. There was a dispute, which the judge did not resolve, as precisely what was said at the meeting but the one point which the judge made clear was that Mr Langsam wanted £1.1m. By implication this was inclusive of costs.

The judge held that in the course of the telephone conference Mr Bartley Jones went over all the issues again. He further held that Mr Southeran was in agreement with this advice although he did not consider that he was asked independently for his advice. Hacker Young agreed to pay £1m, and Mr Langsam agreed to this. The trial judge (Patten J, as he then was) approved a Tomlin order for the dismissal of the claim with the agreed terms being placed in a schedule to the order. The sum of £1m was paid by agreement direct to Mr Langsam.

The judge set out in some detail his views as to the reliability and credibility of the parties and the witnesses. In particular he approached the evidence of Mr Langsam with caution and considered it against the contemporary documents. The judge considered that Mr Langsam was quick to attribute cautious advice on the part of his lawyers to incompetence and defeatism. The judge thought that Mr Ferrari was an evasive witness on the main issues. Mr Morton was by the date of the trial suffering from Alzheimer’s. He did not give evidence and only a short witness statement, signed on 15 January 2006, was available at the trial.

As to Beachcrofts’ witnesses, the judge considered that Mr Southeran was a frank and honest witness and that in general his notes appeared to be a reliable indication of what had occurred. Mr Loeffler, in the judge’s view, also gave “manifestly honest evidence”.

I will next summarise the judge’s conclusions on the advice given to Mr Langsam on settlement at paragraphs 144 to 189 of his judgment. The judge divided the allegations of professional negligence against Beachcrofts into two broad headings. The first was advisory negligence, based on headline figure and the discounts which it was appropriate to apply to the loss which Mr Langsam alleged that he had sustained. The second was evidentiary negligence.

The judge held that the critical advice on settlement was 26 January 2006. The judge held that although Mr Langsam was disheartened by events at the mediation, there was very detailed advice on quantum on 26 January. That led directly to the settlement. The judge therefore analysed the advice given on 26 January in some detail. I will only deal with those matters which are in issue on this appeal.

As to start date, the judge held that Mr Bartley Jones’ view that the court would reject April 1997 as the start date was entirely reasonable. He held that it was, therefore, reasonable for Mr Bartley Jones to take the figures of £2.5m and £1.8m (dependent on the start date) provided by Mr Warburton. The judge recognized that these figures were on the conservative side and that an accurate interest calculation would have been in the range of £3.3m and £2.4 m. But the judge’s view was that:

“this is very much a matter of approach as to which reasonable and competent lawyers may differ; and I do not consider that adoption of an assumption at the more conservative, or alternatively the more generous, point in the range could be regarded as wrong.”

The judge then turned to the discounts. He held that the advice that Mr Bartley Jones had given was that the discount for the Morton factor would be up to 50%, not that it would be 50%. The judge rejected the suggestion that even this evaluation was manifestly wrong. Any form of ERA would have required Mr Morton's consent. The judge held that the report by Mr Ferrari that his evidence would be "suitably vague” was very curious. The judge clearly thought that this threw doubt upon Mr Morton’s ability to give reliable evidence. The judge held that it was understandable that both Mr Bartley Jones and Mr Southeran were concerned about the risk attached to Mr Morton’s evidence. Having weighed up the various factors, including the factor that Mr Morton had agreed to the ERA in 2000, the judge held that it was not inappropriate for Mr Bartley Jones to fix the maximum discount applicable to Mr Morton as not more than 50%. Indeed, the judge clearly thought that, but for the fact of Mr Morton’s participation in 2000, the discount will have been higher. He accordingly held that the advice to apply a discount of up to 50% was not wrong, and certainly not obviously wrong.

The judge had regard to a statement which Mr Morton had signed in 2006. He said in that statement that he would have been willing to participate in an ERA in 1996. The question was what was reasonable in early 2006 when that statement was not available.

The judge regarded the lending issue as the most difficult issue as it involved the assessment of the loss of a chance. The judge considered that the difficulties were exacerbated by the difference of opinion between the experts. The expert for Hacker Young did not consider that the full £36m could have been raised. He noted that Mr Langsam’s case was that the ERA would have been on the same basis as in 2000. It would have therefore involved a temporary back-to-back borrowing replaced after the first year by secured lending, and accordingly it would be necessary to determine the amount of security available. When Mr Bartley Jones advised that it was possible the court would find that Mr Langsam would only have withdrawn £12m, he was advising on the basis of the experts’ reports. The judge found that Mr Bartley Jones advised that in his view the court would be unlikely to find that Mr Langsam would have withdrawn the full £18.7 m. As to this advice the judge held:

“No doubt that advice could have been more precisely calibrated, with the aid of schedules of calculations of the kind prepared for the present trial, and some QCs might have adopted that approach. I think that is partly a matter of style in giving advice on settlement in a situation where an accurate assessment of the likely outcome was difficult and such calculations could give a misleading suggestion of precise prediction.”

The judge also considered that it was possible that Mr Bartley Jones had arrived at the figure of £12m by using a figure midway between the two valuations then available for Britannia International Hotel, and deducting the amount already secured.

As to the offshore funds, the judge held that to have used these funds might have invited a Revenue challenge as an artificial tax avoidance scheme in the way that Mr Brian White, Mr Langsam’s accountant at the time of the ERA in 2000, had then counselled against. The judge noted that the pleaded case against Beachcrofts did not rely on the failure to have regard to the offshore monies. Accordingly, the judge held that he could not see how Mr Bartley Jones could be criticised if it did not take them into account. The judge did not consider that it was Mr Southeran’s duty to point out to Mr Bartley Jones that there were these offshore funds as Mr Langsam and Mr Ferrari had the chance to ask Mr Bartley Jones whether the offshore funds made any difference and they were clients who would be able to come forward with their own points.

The judge also held that, although Mr Langsam and Mr Ferrari had been dismissive in their evidence of any suggestion that the SCO investigation would have delayed the ERA, there was a risk that this was so which had to be taken into account when giving settlement advice.

As to the domicile issue, the judge did not consider that there was a significant risk that the court would find that the Revenue had been wrong to confirm that Mr Langsam had non-domiciliary status. Mr Bartley Jones had always taken the view that Mr Langsam was strong on this issue. Nonetheless, Mr Bartley Jones was right to state that a discount of 20-25% should be allowed for this because of the adverse consequences attached to a withdrawal of non-domiciliary status.

The judge also held that imponderables arise in almost any major case, including the question of how the client will be as a witness. Mr Southeran had concerns whether Mr Langsam would be a good witness. The judge thought that those concerns were justifiable. He considered that:

“That is something that, in my judgment, a lawyer can properly factor in when advising his client on settlement.”

The judge concluded that the approach taken by Mr Bartley Jones on 27 January 2006 was not wrong:

“167.

It follows from the above that, taking all the many considerations together, I conclude that the approach adopted by Mr Bartley Jones on 26 January, that was in effect repeated in summary on 27 January, was not wrong. There were many hypothetical aspects to the case (i.e. what would have happened if Mr Langsam had been correctly advised by HY), and consideration of the likely damages and risks involved a range of possible outcomes. Mr Bartley Jones may have placed more emphasis on the downside than the upside, but that is a matter of style and a cautious approach to litigation with its imponderables. The fact that other counsel might be more bullish or positive does not begin to make this approach erroneous, let alone negligent. Nor is there, in my view, any requirement to present the client with schedules or financial tables, of the kind that were placed before the court in the present trial. What is necessary is that the client is given a sufficient explanation to enable him to make an informed choice as to whether he should accept the sum being offered: Moy, per Lord Hope at [14]. In that regard, the nature and manner of the explanation can, and should, reflect the sophistication of the client. Mr Langsam is a highly intelligent man with experience of commercial transactions and Mr Ferrari is a chartered accountant. It is abundantly clear from the history of all the various meetings and correspondence that neither was remotely reticent or inhibited in raising points or questioning what their lawyers were telling them.

168.

A settlement of £1m, with Mr Langsam’s costs estimated at £300,000, would have meant to the lawyers advising him the equivalent to damages of about, or a little above, £700,000. If Mr Bartley Jones had said that £700,000 was the amount that Mr Langsam would be likely to recover at trial, I think that would have been wrong. But I am satisfied that he did not advise in those precise terms, but on the contrary emphasised that the case involved a number of permutations such that there was a range of outcomes affecting how far the damages would come down from his notional top-line of £2.5m; and that accordingly while Mr Langsam could recover substantially more than £700,000 there was a risk that he would recover less. It in that context that I interpret his advice on 27 January, when the £1m offer was made, that he thought this was close to the realistic value of the claim.”

Turning to the position of Mr Southeran, the judge rejected the submission that he had acted "jointly" with Mr Bartley Jones or that he was under any obligation independently to form a view on all aspects of the case. In the run-up to trial, Mr Southeran was entitled to take the view that he should rely on the advice of leading counsel. Therefore Mr Southeran’s duty was to consider whether the advice that counsel gave was obviously wrong. The judge considered that there was a wide range of views as to quantum, to which counsel could reasonably come. He did not consider that Mr Bartley Jones’ evidence was negligent, “although his view was a cautious one towards the bottom of that range." Alternatively his advice was not clearly wrong.

As to the effect of the advice on Mr Langsam, the judge held:

“I accept Mr Langsam’s evidence that, in effect, by the end of the mediation, or at least the consultation on 26 January, he felt that the advice his legal team wanted to give him was negative and that this made him very pessimistic. But in my judgment that is because he had entertained excessive expectations previously as to the amount he would recover, and as the litigation approached trial he realised that more complexities and potential obstacles were involved. He was therefore surprised and frustrated that HY were not prepared to make a higher offer.”

The judge also held that Mr Langsam was very keen to settle. On the domicile issue for instance, he could be cross-examined on the submissions made on his behalf to the Revenue about his late father and evidence from some of his father's neighbours.

Lastly the judge held that, even if Mr Southeran had given less cautious advice, it would have made no difference. Mr Langsam had already lost faith in Mr Southeran, accordingly, the judge held that Mr Langsam relied on Mr Bartley Jones for advice, and set little store by Mr Southeran’s advice.

Mr Langsam’s case was that Mr Southeran had failed to consider the question of Mr Morton’s evidence in advance of the trial. Ordinarily a solicitor would be negligent for failing to advise that he should take a statement from someone who was likely to be called as a witness. However, the judge considered that this was no ordinary case. Mr Morton did not like lawyers and there was a poor relationship between him and Mr Langsam. Mr Langsam well understood the need for the lawyers to know precisely what Mr Morton was going to say. The judge accepted Mr Southeran’s evidence that:

“The clients were not receptive to that, they did not want to go back to him after the discussion, and the fact that Robert Ferrari had seen him. They didn't want to go back to him again, despite the advice that it might have quite a significant effect on the costs.”

Mr Langsam was clear that Mr Morton would not have been receptive to a further visit to discuss his evidence. In those circumstances, the judge did not consider that Mr Southeran was negligent in failing expressly to advise that a second statement from Mr Morton was required.

As to the property valuations for Britannia International Hotel, these had only been obtained on 10 January 2006. The judge held that, in those circumstances, it was not clear whether the valuations could have been adduced at the trial. He considered that the valuations should have been obtained earlier but he did not consider that they would have had a significant effect on the likely resolution of the claim and thus the level of settlement. There was no pleaded allegation based on the absence of these valuations.

Accordingly the judge dismissed Mr Langsam’s claim.

Both parties made submissions on the test to be applied on an appeal from a judge’s findings of fact. It is well established that, where a finding turns on the judge’s assessment of the credibility of a witness, an appellate court will take into account that the judge had the advantage of seeing the witnesses give their oral evidence, which is not available to the appellate court. It is, therefore, rare for an appellate court to overturn a judge’s finding as to a person’s credibility. Likewise, where any finding involves an evaluation of facts, an appellate court must take into account that the judge has reached a multi-factorial judgment, which takes into account his assessment of many factors. The correctness of the evaluation is not undermined, for instance, by challenging the weight the judge has given to elements in the evaluation unless it is shown that the judge was clearly wrong and reached a conclusion which on the evidence he was not entitled to reach. In other cases, where the finding turns on matters on which the appellate court is in the same position as the judge, the appellate court must in general make up its own mind as to the correctness of the judge’s finding (see Datec Electronic Holdings v United Parcels Service [2007] 1 WLR 1325 at [46] per Lord Mance). Mr Wardell submits that Mr Moriarty takes too narrow a view of the appellate function in this case.

I propose to follow the judge’s division of the issues into advisory and evidentiary negligence. I propose to reverse the order and to take evidentiary negligence first. Under advisory negligence, I will first set out the applicable law, including the principles identified by the judge. Under each head I will deal with the submissions on this appeal and my conclusions on them in turn.

Appeal against the judge’s dismissal of the allegation of negligence by Mr Southeran arising from his failure to obtain a statement from Mr Morton about his attitude to an ERA at an earlier stage: On this issue, Mr Wardell seeks to challenge the judge’s findings of fact leading to the conclusion that Mr Southeran was not in the exceptional circumstances of this case negligent for not having obtained a statement from Mr Morton at an earlier stage. He challenges the judge’s finding of fact that it was clear to Mr Langsam and Mr Ferrari that a statement would be needed.

In my judgment, this challenge must fail. The challenge is based principally on a challenge to the judge’s decision to prefer the oral evidence of Mr Southeran that Mr Langsam and Mr Ferrari were well aware of the need for witness statement over other circumstantial evidence, and on the judge’s failure to give greater weight to evidence of Ms Ashton based on a comment by Mr Southeran in which he accepted that the lack of a statement was a problem. These were clearly matters which the judge was best placed to assess and accordingly an appellate court cannot interfere.

Valuations of Britannia International Hotel: Mr Wardell submits that Mr Southeran did not pass the two valuations of Britannia International Hotel to Mr Bartley Jones until after 27 January. Counsel needed to have this information so that he could give proper advice to Mr Langsam at this and subsequent meetings.

Mr Moriarty submits that Mr Bartley Jones did not advise on the basis of valuation evidence. Furthermore, on Mr Moriarty’s submission, the judge rejected Mr Wardell’s contention on the facts.

I accept Mr Moriarty’s submission that the judge held that Mr Bartley Jones would have been given all this information at the time it was received. There is no basis for setting that finding aside especially as it relied in part on the judge’s assessment of the witnesses. It has not been shown that the judge was clearly wrong.

Schedules of loss and schedules of offshore funds: Mr Wardell makes two further submissions on this appeal about information that Mr Southeran should have sent to Mr Bartley Jones. He submits that Mr Southeran should have sent to Mr Bartley Jones (1) his early schedules as to loss, which were prepared before Mr Bartley Jones advised, and (2) information as to Mr Langsam’s offshore funds. Neither point was taken before the judge, and, in my judgment, as they involve questions of fact, they cannot be raised in this court. As Mr Moriarty points out, Mr Wardell’s submission about the transmission to counsel of the schedules dealing with Mr Langsam’s offshore funds goes beyond the pleaded issues and there was no cross-examination on this point. In any event, on Mr Moriarty’s submission, the communication of these schedules was irrelevant to Mr Langsam’s loss because Mr Bartley Jones advised on the basis that the full £36m could have been funded.

It follows from my conclusions on these issues that Mr Wardell cannot advance any complaint against Mr Southeran on the basis that leading counsel was not properly instructed. If that had been the situation, I would have had to consider the extent to which that raised the duty to be expected of Mr Southeran.

I will start with law relevant to the advisory negligence submissions, and then the specific findings of the judge which the appellant challenges on this appeal.

There is common ground on this matter. The judge recognised that, because the amount of the loss depended on the actions that would have been taken by third parties, such as the Revenue and bankers, the court would have applied the principles applicable to loss of a chance to Mr Langsam’s claim against Hacker Young, as well as to Mr Langsam’s claim against Beachcrofts. The judge held that all the issues in the Hacker Young litigation would have to be approached in the present proceedings on the basis of a loss of a chance. The significance of this discussion in the judge’s judgment for the purposes of this appeal is that the application of the loss of a chance principles introduces a set of variables into the calculation of the sum which Mr Langsam might obtain if successful in his action against Hacker Young.

There is common ground on this matter too. The judge held that a solicitor was not liable for a mere error of judgment on a matter on which opinions of reasonably well-informed and competent members of the profession might differ.

There is also common ground on the answer to this question. Advice on settlement often involves weighing up many different matters some of which will be difficult to predict precisely and are matters on which opinions will differ. The judge cited Moy v Pettman Smith [2005] 1 WLR 581, in which Lord Carswell, with whom the other members of the House of Lords agreed, cited with approval the following passage from Karpenko v Paroian, Courey & Houston (1980) 117 DLR (3^rd) 383, 397-8, a decision of Anderson J in the Ontario High Court. This passage emphasises that lawyers given advice on settlement are not to be judged with the wisdom of hindsight. Anderson J held:

“What is relevant and material to the public interest is that an industrious and competent practitioner should not be unduly inhibited in making a decision to settle a case by the apprehension that some judge, viewing the matter subsequently, with all the acuity of vision given by hindsight, and from the calm security of the Bench, may tell him that he should have done otherwise. To the decision to settle a lawyer brings all his talents and experience both recollected and existing somewhere below the level of the conscious mind, all his knowledge of the law and its processes. Not least he brings to it his hard-earned knowledge that the trial of a lawsuit is costly, time-consuming and taxing for everyone involved and attended by a host of contingencies, foreseen and unforeseen. Upon all of this he must decide whether he should take what is available by way of settlement, or press on. I can think of few areas where the difficult question of what constitutes negligence, which gives rise to liability, and what at worst constitutes an error of judgment, which does not, is harder to answer. In my view it would be only in the case of some egregious error that negligence would be found.”

As to reliance on counsel, the judge held that a solicitor does not abdicate his responsibility when he instructs counsel. He could thereafter advise jointly with counsel. Alternatively he must carry on in what Mr Wardell calls a “whistleblower role”. That means that he must apply his mind to the advice received. The authorities showed that a solicitor will be liable if the advice from counsel is “obviously or glaringly wrong”. This appeared from the three principles laid down by Taylor LJ in Locke vCamberwell Health Authority [1991] 2 Med LR 249, 254 which were approved in Ridehalgh v Horsefield [1994] Ch 205, 237. The three principles were as follows:

“(1)

In general a solicitor is entitled to rely upon the advice of counsel properly instructed.

(2)

For a solicitor without specialist experience in a particular field to rely on counsel's advice is to make normal and proper use of the Bar.

(3)

However he must not do so blindly but must exercise his own independent judgment. If he reasonably thinks counsel's advice is obviously or glaringly wrong, it is his duty to reject it.”

I must here start with the judge’s conclusions, and then turn to the submissions on this appeal.

Beachcrofts accepted that they held themselves out as having specialist knowledge and experience in the field of professional negligence litigation.

As to the effect of this expertise and experience on their duties with respect to settlement, the judge held that a solicitor’s judgment as to whether advice given by counsel is “obviously or glaringly wrong” must be informed by his or her specialist expertise. He relied on the judgment of Lloyd LJ (as he then was) in Matrix Securities v Theodore Goddard [1998] PNLR 290. He held that the decision of the Federal Court of Australia in Yates Property Corporation v John Boland [1999] I Lloyd’s Rep 459 was to the same effect.

I must deal with three submissions of law made by Mr Wardell.

First, Mr Wardell submits that Mr Southeran remained under a positive duty to give advice once leading counsel had been instructed: Mr Wardell submits that Mr Southeran continued to be under a duty to advise and thatthe judge was wrong to conclude otherwise. Mr Wardell develops this submission as follows. Mr Southeran made a positive contribution by his advice. He had formed his own view. Mr Bartley Jones was preparing the case for trial whereas Mr Southeran was consulting with the client on quantum. It was Mr Southeran who advised on the lending issue, the Morton factor and the possibility that the offer might not be beaten. Mr Southeran had, for instance, suggested the discount for the Morton issue to factor in the risk of Mr Morton’s not co-operating. This was the initiative which Mr Bartley Jones had called “Peter’s good point”. On 23 January 2006, Mr Southeran had also spoken of the offer of £900,000 being close to the realistic value of Mr Langsam’s claim and of the risk that the case would go “pear-shaped”. Mr Wardell submits that the judge did not refer to the relevant part of Mr Southeran’s evidence. Therefore, he submits, the judge approached this case from the wrong perspective. Either there was a joint advice or it was a specialist case and therefore Mr Southeran was bound to express a view and not just act as a “whistleblower”. Accordingly, the judge erred in his conclusion.

I do not accept this submission. First, the judge held that Mr Southeran was under a duty to consider whether leading counsel’s advice was glaringly or obviously wrong, and that to the performance of that duty Mr Southeran had to bring his specialist expertise. That was the test that the judge applied. In fact he determined that the advice of Mr Bartley Jones was not wrong, still less glaringly or obviously wrong.

Second, the judge found that, although Mr Southeran agreed with the advice that Mr Bartley Jones was giving, it was Mr Bartley Jones who gave the principal advice and it was Mr Bartley Jones on whom Mr Langsam was in reality relying. It was for the judge to weigh the significance of such matters as the observation about “Peter’s good point” and whether the relationship in this case between instructing solicitor and leading counsel took the case out of the norm. The judge did not find that this was a case where, to put it as Mr Wardell put it in his submissions, a solicitor was using leading counsel to frank his own advice. He found as a fact that this was not a case of joint advice.

The judge was not obliged to set out every iota of evidence. The fact that he did not refer to such matters as the “pear-shaped” comment does not undermine the judgment as it is clear that the judge was well-immersed in the issues.

The court cannot upset these findings except on the basis that the judge was clearly wrong. The court is obliged to review the matter for itself but it must take into account the fact that the question is one on which the judge has the advantage of having seen the witnesses.

The fact that a solicitor gives advice consistent with the advice previously given by leading counsel when leading counsel is not present does not mean that he has accepted an independent duty and that the relationship has changed from what it was when leading counsel gave his advice.

Applying those principles, the judge’s findings on this point are not ones that this court can disturb. There is no basis for holding that the judge was not entitled to make his overall assessment that Mr Bartley Jones was giving the advice and that therefore Mr Southeran’s responsibility was to consider whether it was obviously or glaringly wrong. It was in considering that question that Mr Southeran had to bring his experience in this case, and generally, to bear.

Second, Mr Wardell submits that Mr Southeran owed Mr Langsam a duty to indicate the spectrum of the loss he might recover, not simply, as he did, a figure at the bottom end of the bracket. This submission is largely founded on the observation of Baroness Hale in Moy v Pettman Smith at [28] that the law has yet to work out “a clear set of principles governing the terms in which an advocate’s advice should be given”. Mr Wardell submits that the client needs to know the upside as well as the downside in order to make an informed decision. In other words, the client needs to know the brackets and not just receive advice on a very conservative basis, as the judge found was the position in this case.

I reject this submission. It entails an over-prescriptive approach as to the way in which legal advice is given. I do not consider that, in a case such as the present, a solicitor is in breach of duty if he does not provide a spectrum of figures as to the loss likely to be recovered if the case proceeded to trial. If Mr Southeran’s advice as given was not negligent, it would, in my judgment, be wrong to hold that it was so because it did not give a more optimistic view of what Mr Langsam might recover at trial. In addition, Mr Langsam had previously been given very detailed advice on the computation of loss and had had more optimistic advice from Mr Southeran at an earlier stage. Needless to say, the mere fact that there had been what Mr Wardell called a “marked change of position” by Mr Southeran does not of itself mean that the later advice given in January 2006 was negligent.

Mr Wardell criticises the judge’s reasoning with regard to Mr Bartley Jones’ advice on the headline figure. The judge found that it was not negligent for Mr Bartley Jones to take £2m as his working assumption as to the headline loss at the meeting on 26 January 2006. He considered that it was on the conservative side but that that was very much a matter of approach as to which competent lawyers could differ. He did not consider that the adoption of an assumption at the more conservative point in the scale could be regarded as wrong. Mr Wardell submits that the judge should not have accepted an unrealistic figure and it amounted to building in a second discount. The most realistic figure was £2-£3m as shown by the schedules which Mr Southeran did not show to counsel. It was very easy to build on those schedules with an interest calculation. Mr Southeran did not himself do an interest calculation but it would, on Mr Wardell’s submission, be easy to do.

Mr Moriarty submits that Mr Bartley Jones was not at fault in using the approximate figure of £2m in his advice on 26 January 2006. Mr Bartley Jones was not saying that £2m would be recovered, but was using that as a round figure number. On this occasion, Mr Bartley Jones was not advising Mr Langsam to settle, still less to settle for a specific figure. What happened was that Mr Langsam and Mr Ferrari went away to confer, and they decided that they wanted to settle.

There is an issue whether Mr Bartley Jones advised on 26 or 27 January 2006 that £1.1m represented the sum that Mr Langsam was likely to recover if he went to trial. Mr Wardell submits that Mr Bartley Jones advised on 27 January 2006 that £1.1m represented the realistic value of Mr Langsam’s claim against Hacker Young in the sense of the sum he would be likely to recover at trial and that this advice was wrong.

The judge held that he had not advised in these terms: see paragraph 168 of his judgment set out at paragraph 62 above. The judge drew a distinction between advice given on the basis of likely recovery at trial and advice of a more limited kind, and held that a more limited form of advice was given. Mr Wardell contends that there is an internal inconsistency in this distinction since a layperson would have understood the advice he was getting on settlement the same as advice as to the realistic value of his claim. He goes on to submit that there was no question of rationalising some lower offer. Moreover he submits that there was oral evidence at trial that equated the advice Mr Bartley Jones gave on 27 January 2006 with advice on the prospects of success at trial.

Mr Moriarty emphasises that there is no reference in Mr Southeran’s file note of the conversation on 27 January 2006 (to which it appears the judge was referring in paragraph 168 of his judgment) to Mr Langsam and Mr Ferrari being told that the offer was the realistic value of the claim. In particular, Mr Southeran’s file note of the advice given on that date confirms that Mr Bartley Jones advised that the figure of £1.1m would be a reasonable settlement and that that was a “really sensible offer”. The reason for the settlement was that it was a combination of what was available together with advice that it was not outside any reasonable range. Essentially, Mr Bartley Jones was responding to clients who said they wanted to settle. Mr Ferrari had gradually taken on board the difficulties. Mr Ferrari did not greatly dispute the tenor of Mr Southeran’s file note of the events of 26 January. Mr Moriarty submits that no weight should be placed on Ms Ashton’s evidence that Mr Langsam’s perception of the offer was that it was derisory because he had already told Mr Bartley Jones that he would settle for £1.1m. She did not know that. The judge found that Mr Langsam was keen to settle.

I accept Mr Moriarty’s submissions. In my judgment, Mr Wardell would have to show that the judge’s findings on this point were perverse and that this cannot be shown in the light of the file notes. Furthermore, in my judgment, there is no internal inconsistency when paragraph 168 of the judge’s judgment is read against Mr Southeran’s file notes. On that basis, Mr Bartley Jones did not give advice as to the realistic value of the claim in the sense of what Mr Langsam was likely to recover at trial.

The advice given on 26 January 2006 was not as to the amount he would be likely to receive at the trial, but that the amount of the offer at the mediation was “not too far” from that value. This was a value judgment based on the prospects for settlement out of court.

Moreover, Mr Langsam stated near the start of the discussions on 26 January 2006, and before the figure of £1.1m was discussed, that he was keen to settle. That put a different complexion on the advice that counsel had to give. It had to be advice geared to maximising the opportunities for settlement that existed, not to advice on settlement in the abstract.

In my judgment, on 27 January 2006 Mr Bartley Jones was dealing with the separate point that £1.1m was a reasonable sum at which to settle the case, given all the uncertainties. Self-evidently, if a case is being compromised, a party cannot expect that he will necessarily get all that he would have obtained if the case had gone to trial.

Accordingly I do not consider that the judge was in error. It follows that, since Mr Bartley Jones did not act not in breach of duty, Mr Southeran likewise did not act in breach of his duty in relation to this advice.

The start date affected the headline figure for loss. Mr Wardell submits that there was a very good prospect of persuading a judge to adopt a start date of October 1996. The start date of October 1997 represented the very bottom of the range. Moreover there was no evidence that Mr Bartley Jones and Mr Southeran changed their initial view, which was supportive of the October 1996 start date. In those circumstances, submits Mr Wardell, they should not simply have worked on the October 1997 figures but they should simply have discounted the October 1997 figures appropriately.

Mr Moriarty submits that twelve months should have been allowed for the entire process, giving a start date of October l997. The start date was considered in the course of the telephone conference on 26 January 2006. The opinion of Mr Lowden, the expert accountant for Hacker Young, was that accountants should be allowed six months to form a view that a person may be entitled to non-domiciliary status. They had after all identified that there were offshore sources of income and so it was reasonable for them to look at the question of domicile. Mr Lowden opined that that question of domicile would not have had a material effect on the l995/6 tax return. It was relevant to Mr Langsam’s tax affairs in general since it would affect the taxation of interest being credited to his accounts later. Therefore Mr Lowden’s opinion as to the time when the question of domicile needed to be raised with the Revenue and when it would have been reasonable to expect Hacker Young to deal with it was when Hacker Young became aware of the existence of offshore accounts while preparing the l995/6 return which they could have done through to October 1996. Time had then to be added for obtaining Revenue confirmation of non-domiciliary status. Taking all these factors into account, Mr Moriarty submits that the start date was closer to October 1997 than October 1996. The Revenue approval would take approximately a year to obtain. Then one had to add another 2 to 3 months to do the ERA. So Mr Lowden was closer to a realistic date.

Mr Moriarty submits that there was in any event another reason for deferring the start date, namely the risk that Mr Langsam would not have done an ERA until after completion of a SCO investigation into the affairs of the partnership. This was begun in 1995 and completed in March 2000. The ERA was implemented in October 2000. Mr Langsam’s tax adviser, Mr Grundy, was concerned about the scheme being completed before the Revenue investigation was completed because the Revenue would seek to challenge the tax relief if the partnership had tried to implement the scheme during the enquiry. Mr Wardell submits that the judge was right to reject this point. The point was raised in the course of the mediation but never again. Mr Bartley Jones and Mr Southeran put it out of their minds.

I accept the thrust of Mr Moriarty’s submissions. In my judgment, for the reasons which he gives, the judge was not clearly wrong in his assessment that it was not negligent of Mr Bartley Jones to proceed on the basis that the start date was October 1997. It is not necessary to deal with Mr Moriarty’s submission that there should have been a longer deferral of the start date because of the ongoing SCO investigation.

Mr Langsam needed to show that the partnership could have raised £36m to fund the proposed ERA in 1996. Mr Warburton thought that the necessary security could have been provided by the partners placing the cash withdrawn into accounts that could then be blocked in favour of the lenders. At the mediation Hacker Young took the point that the lending would have to be secured before it was made. This point led Mr Langsam to obtain valuations of Britannia International Hotel with a view to their being adduced at trial. The court’s permission would be needed to adduce this evidence at trial but that risk can be taken as small since Mr Southeran was optimistic that any late evidence on this would be admitted at trial.

Mr Wardell submits that Mr Bartley Jones’ advice was negligent on this issue because it did not take into account the fact that Mr Langsam had the full amount of the cash available in offshore accounts that could be offered as security. Therefore, there needed to be only a nominal discount for the risk of the partnership not being able to raise the loans that it would need to implement an ERA. The judge had rejected that argument at trial.

The judge’s reason for rejecting that argument was that, if this route was used, there was a risk of Revenue challenge on the ground that the transaction was artificial (judgment, paragraph 162). That point had been raised in 2000. In addition, though the judge does not refer to this, Mr Warburton mentioned that risk at the meeting on 23 January 2006 when the offshore funds first came to his legal advisers’ notice: Mr Southeran’s file note for this meeting states that he said that using these funds as security was “less attractive from the tax point of view”. In those circumstances, the judge was in my judgment entitled to find that to use the offshore monies belonging to Mr Langsam would have invited challenge from the Revenue.

It is convenient to deal at this point with another criticism that Mr Wardell made of paragraph 162 of the judge’s judgment. In that paragraph, the judge noted that the experts did not refer to the possibility of using the offshore funds as security and that the reasons for this omission were not explored in evidence. Mr Wardell submits that the judge was wrong to say that none of these points was explained in evidence. He referred to Mr Warburton’s oral evidence, which showed that he placed some weight on the offshore monies. In my judgment, that evidence shows reliance by Mr Warburton only in a very indirect way, namely as further evidence of Mr Langsam’s considerable means which would have provided reassurance to any bank when he wanted to raise money. This evidence does not therefore support Mr Wardell’s submission that the judge was wrong in what he had said in paragraph 162 on this point.

Mr Wardell further submits that the ground on which the judge relied (possibility of Revenue challenge) was not put to the witnesses at the trial. In my judgment, the point was there on the evidence and it was for Mr Wardell to challenge it if he wished to do so.

Mr Moriarty submits the offshore deposits were irrelevant to Mr Langsam’s pleaded case. His pleaded case was that the partnership could have raised £36m out of its own resources, and provided or procured the collateral to enable it to do so. Hacker Young’s expert, Mr Robin Bryant, thought that only £30m could have been raised on this basis in 1996. To show a release of £18m was possible, Mr Langsam had to show that a bank would have lent the partnership some £36m. Moreover, there needed to be security outside the partnership for the repayment of the amount borrowed as the assets in the partnership were insufficient to secure a borrowing of the amount required. Moreover, in the case of the ERA in 2000, the lending had been repaid at the end of the first year. On the pleaded case, therefore, the loss of chance principles applied and the cash in the offshore accounts was not relevant.

In my judgment, Mr Moriarty’s point is correct. In order to have relied on the offshore accounts Mr Langsam would have to have amended his pleading. The loss of a chance principles therefore applied. It would not have been right to proceed on the basis that the discount was purely nominal.

A further submission made by Mr Wardell is that the judge was wrong to hold (at paragraph 161 of his judgment) that the valuations of Britannia International Hotel would not have been sufficient to enable the partnership to raise £36m to fund the ERA. On the evidence, a bank would have lent £24m on the strength of those valuations. However, Mr Wardell submits that the judge failed to take into account his earlier finding that the experts had accepted that £12m could be raised on the partnership’s assets (judgment, paragraph 75). Mr Moriarty submits that this point was not pleaded and was not investigated at the trial. Moreover, as Mr Moriarty points out, it does not follow that the loss of a chance principles do not apply. There was still risk that the banks would not in the event lend monies to the partnership, and some discount therefore had to be made for that.

The existence of the SCO investigation in 1996 also cast doubt on whether Mr Langsam would in the event have relied on the offshore monies. The judge held in paragraph 90 of his judgment that the SCO investigation increased the likelihood that Mr Langsam would have chosen the route of secured lending rather than use his offshore cash deposits. For this reason also the judge was right to reject the argument that only a nominal discount was appropriate for the lending issue.

The issue here is whether the advice on settlement should have proceeded on the basis that there should have been a discount of up to 50% when it was known that Mr Morton had indeed been prepared to participate in an ERA at an earlier stage.

Mr Wardell accepts that the finding that the discount was up to 50% and not 50% cannot be challenged but he seeks to undermine it by arguing that the subtlety of a discount of up to 50% would have been lost on Mr Langsam and Mr Ferrari. There is no finding of the judge to support this submission, and this court cannot infer that two experienced business persons would not have known the difference between a discount of 50% and a discount of up to 50%. Mr Langsam did not have to accept that the calculations be done on the basis that a full 50% discount was given for the purposes of settlement.

Mr Wardell submits that the issue was not whether Mr Morton would attend but what he would say. The judgment proceeds on the basis he was coming. Mr Wardell submits a 50% discount was an overreaction. Mr Bartley Jones’ original advice was that Mr Langsam had a good chance of success on the Morton issue, and that the best evidence was that Mr Morton did participate in the ERA in 2000. The court had to assess the chances of his participating in a ERA in 1996. Mr Bartley Jones gave his advice on the basis that Mr Morton would give evidence. Mr Langsam’s legal team was told that his evidence would be helpful. Hacker Young were aware of the falling out between Mr Langsam and Mr Morton.

Mr Moriarty accepts that there was a change in the advice given to Mr Langsam after the consultation on 18 January. Mr Bartley Jones then stressed the importance of calling Mr Morton. The earlier plan had been simply to rely on making an inference from the fact of his participation in the ERA in 2000. There were obvious snags in taking that approach and it cannot have been negligent of Mr Bartley Jones to change his approach.

In my judgment, there can be no doubt that there were significant risks that Mr Morton’s evidence would be fatal to Mr Langsam’s case. Mr Langsam obviously thought that he had the potential to do great damage to Mr Langsam’s interests. The judge was entitled to take the view that as trial advanced Hacker Young would take the view that the discount of 10%, which they had previously applied to the Morton issue should be increased. The key point is the judge’s finding, which cannot be disturbed on this appeal, that what Mr Bartley Jones said was simply that there ought to have been a discount of up to 50%, not that the discount should be 50%. There was very limited information about what Mr Morton might say, for instance, about the circumstances in which he would have participated in an ERA. There was therefore great uncertainty surrounding this issue, which made the litigation risk here even more difficult to manage.

I would therefore reject Mr Wardell’s submissions on this issue.

Mr Wardell’s case is that this merited only a nominal discount. Mr Lowden, Hacker Young’s expert, essentially agreed with the opinion expressed by Mr Langsam’s expert, Mr Warburton, and did not agree with his clients’ case. He relies on the advice given at the meeting on 18 January 2006. The judge accepted that there was no significant risk that the Revenue had been wrong to confirm that Mr Langsam was a non-domiciliary. Only a 10% discount was put forward by Hacker Young and their skeleton argument simply said that it was possible that the Revenue would have come to a different conclusion.

As it happens Mr Bartley Jones agreed that there was little risk for Mr Langsam on the domicile issue. However, the point was that the risk of its going wrong was potentially very serious to Mr Langsam since he might then lose his non-domiciliary status with the Revenue. Clearly therefore this factor had to be taken into account as a factor on which Mr Langsam should make a financial concession in order to get a settlement.

Causation: Mr Wardell criticises the judge’s finding that even if Mr Southeran had disagreed with Mr Bartley Jones, it would have made no difference to Mr Langsam because he no longer had any trust in him. This was not part of Beachcrofts’ case at trial. It was never suggested to Mr Langsam that he would not have accepted the advice. As Ms Ashton said, he was very interested in the money and had been very bullish. Mr Moriarty seeks to uphold the judge’s finding. Mr Langsam had after all lost confidence in Mr Southeran, and was relying on Mr Bartley Jones’ opinion.

There is clearly force in Mr Wardell’s submission on this point. It presupposes that Mr Langsam would have wholly disregarded Mr Southeran’s advice if differing from that of Mr Bartley Jones. The judge’s finding turns on his assessment of all the evidence in the trial, but, as this was a new point and not one advanced by Beachcrofts, that fact must carry less weight than it would otherwise have done. Had I considered that the judge’s decision rested on this single point, I would have wished to pursue this point further. However, in my judgment there is no need to pursue this point in the light of the other conclusions that I have reached. In those circumstances I propose to leave this point open.

There was a period of six months between the trial and the delivery of judgment. For part of this time, the judge was on parental leave. An appeal may be allowed where, in the light of a delay in delivering judgment, the court cannot be satisfied that the judge came to the right conclusion (see Bond v Dunster Properties [2011] EWCA Civ 455).

Under this head, Mr Wardell criticised the judge’s findings of fact. For instance, Mr Wardell submits that there were weaknesses in Mr Southeran’s evidence that the judge sought to downplay. He also suggests that Mr Southeran was an evasive witness. He further submits that there were inaccuracies in Mr Southeran’s recollection and occasions when on his evidence Mr Southeran had sought to downplay difficulties in his case.

Mr Moriarty submits that there is no substance in the delay argument. It may be true that the standard time for delivering judgment was exceeded in this case but that was not significantly so given the complexity of the case. As to the lapse of time, there was no prejudice because all the witness statements had been obtained. There were also transcripts of evidence and submissions. Delay of the order in this case does not cause the intuitive impression of witnesses to fade.

In my judgment, Mr Wardell’s criticisms amount to a disagreement either with the weight which the judge gave to certain matters over others or with the judge’s assessment of the credibility of witnesses. There is nothing to suggest that the judge’s findings were not findings which on the evidence the judge was not entitled to make, or that his decision to omit to mention certain evidence was the result of any delay.

Mr Wardell makes a further submission based on the judge’s failure to address a number of issues. For instance, the judge did not refer to: (1) the advice given by Mr Southeran on 23 January 2006 that the amount offered at the mediation (£900,000) was close to the realistic value of the claim and that, if the case was not settled, there was a risk of it going “pear-shaped"; (2) Mr Southeran’s conclusion that the lending issue had ceased to be an issue by 24 January 2006; (3) Mr Bartley Jones’ and/or Mr Southeran’s advice on 26 and/or 27 January 2006 that, if the case went to trial, Mr Langsam might not even beat the Part 36 offer; (4) the contemporaneous evidence of Ms Ashton that Mr Southeran never advised that a further statement should be taken from Mr Morton and that he was not even confident that such a statement could be taken or relied upon in time; and (5) the evidence given by Ms Ashton that it was Mr Southeran who told Mr Langsam that it was sensible to accept the offer.

In my judgment, the answer to Mr Wardell’s further submission is that a judge is not bound to set out every piece of evidence. He is only bound to deal with matters that are material to the findings that he had to make. The judge had to decide what advice on settlement given was given on what he held to be the critical date, namely 26 January 2006, and whether that advice was given by Mr Bartley Jones or Mr Southeran. He made detailed findings about the advice given on those and other dates. In the light of those findings, the matters listed by Mr Wardell were not material. For example, as the judge concluded that the lending issue remained notwithstanding the evidence as to offshore funds the fact that Mr Southeran was satisfied about the lending issue because of those funds carried the issues before the judge no further. Accordingly it did not matter what Mr Southeran thought about this on 24 January 2006. Likewise advice on 26 January 2006 that at trial Mr Langsam might not beat the payment in was not merely an additional strand of evidence and was not significant in the light of the judge’s conclusion on the evidence that there was no advice that £1.1m represented the likely recovery at trial.

Accordingly in my judgment there is no basis on which the court could reach the view that the test in Dunster (paragraph 132 above) is satisfied.

I would dismiss the appeal and allow the respondents’ notice in part. There is no issue as to the law. The appellant considers that the advice that he received was excessively cautious to a degree where it became negligent. The judge held that the operative advice was given by leading counsel, and an appellate court is not able to interfere in that finding. In those circumstances, the duty of care owed by a solicitor, even one who is a specialist in litigation, is to consider whether, using his specialist knowledge, the advice given by leading counsel was obviously or glaringly wrong. There was nothing of that nature on the judge’s findings, with which again this court cannot interfere.

It is important to bear in mind the context in which the advice on settlement was given. Mr Langsam had announced on 26 January 2006 that he wanted to settle the case. He could have had many reasons for doing so. From the time when Mr Langsam announced that decision, Mr Bartley Jones and Mr Southeran were obliged to find ways in which they could best give effect to Mr Langsam’s instructions. Mr Langsam had had the experience of going through mediation and that, together with Mr Bartley Jones’ advice, was on the judge’s findings the reason why he had started to feel that he was “in a losing situation” and why he felt as he put it that “the walls had started to cave in”.

The appellant seeks to overturn the judge’s conclusions on matters of evaluation or fact. For that purpose he needs to demonstrate that the judge was plainly wrong. This court has to take account of the fact that the judge’s findings were influenced by his assessment of the evidence of the witnesses, and the fact that his evaluations of the reasonableness were multi-factorial judgments. On both matters the judge was in a better position than this court to form a view. In my judgment, taking those matters into account, I do not consider that the appellant has established that the judge was wrong in relation to the matters alleged.

That leaves Beachcroft’s cross appeal on costs.

Beachcrofts’ appeal from the judge’s refusal to order that Mr Langsam should pay to them the costs of their unsuccessful counterclaim in respect of their outstanding fees, amounting to £252,000 approximately, plus interest, incurred when acting for Mr Langsam in the litigation against Hacker Young. By letter dated 7 May 2008 Beachcrofts had offered to withdraw their counterclaim on terms that the action brought by Mr Langsam was dismissed. The offer included an offer to pay Mr Langsam’s costs up to £100,000. The letter was expressed to be without prejudice but reserved the right to refer to the letter on the issue of costs. CPR 36 did not apply to an offer of this kind. The letter therefore constituted what is known as a “Calderbank offer” (so called after the case of Calderbank v Calderbank [1976] Fam 93).

Mr Langsam did not respond to this offer. A further offer was made on 10 July 2008 on which no reliance was placed by Beachcrofts. On 8 August 2008 Beachcrofts filed their defence and counterclaim.

The counterclaim raised discrete issues that were separate from those raised in Mr Langsam’s claim. Mr Langsam had entered into a conditional fee agreement with respect to the fees in question, and one of the issues was whether this complied with the requirements for a conditional fee agreement. There were several other issues such as election and estoppel.

The judge held that the making of the offer on the terms of the letter of 7 May 2008 was a very different situation from that contemplated by CPR 36. He held that the cost consequences in Part 36 should not apply, even if Part 36 could be applied by analogy. The judge tested this case by reference to what would have happened if there had been a separate action brought by Beachcrofts for their fees. He noted that the general rule was that, where litigation is lost, the loser pays the costs of the successful party. He held that a litigant should not get his costs because he had brought a bad claim. In this instance, Beachcrofts had known the grounds on which the claim for fees would be defended before they issued the counterclaim. He further held that a litigant should not escape liability for costs because he makes an offer on terms that the other party’s claim is compromised. In other words, the letter of 7 May 2008 was not a ground for an award of costs. He noted that Beachcrofts were well aware that the claim would be resisted. He held that the costs were caused not by Mr Langsam’s refusal to negotiate but by Beachcrofts issuing their counterclaim.

Mr Derrick Dale QC, for Beachcrofts, submits that the judge erred in principle by failing to give weight to two factors. Those two factors were, first, the fact that Mr Langsam was worse off as a result of rejecting the offer and, second, that the counterclaim would not have been brought if the offer had been accepted. The judge does not mention those factors. Mr Dale submits that the judge’s reasoning sends the wrong signal to the profession. The message should be that, when genuine offers are made and rejected, and the offer is beaten, the costs consequences should flow. In this case, Mr Langsam lost his claim.

Mr Dale also submits that the judge viewed the matter with hindsight. He also viewed the matter in isolation and failed to consider whether it would be appropriate to order a percentage of the costs to be paid by Mr Langsam. Mr Dale submits that Beachcrofts only lost the counterclaim on a slender basis and the judge found in Beachcrofts’ favour that Mr Langsam had created a deliberate and self-serving file note.

Mr Dale submits that the offer in this case was a genuine offer. He submits that Beachcrofts were trying to settle the whole of the dispute. He relies on The Trustees of Stokes Pension Fund v Western Power Distribution (South West) plc [2005] EWCA Civ 854. This is the leading case on the exercise of the discretion as to costs where an offer is made which does not comply CPR 36 and is not beaten. Dyson LJ, with whom Auld LJ agreed, held at [24] to [26] that such an offer should normally be treated as having the same effect on the discretion as to costs where certain conditions are fulfilled. The relevant conditions were (1) that the offer is addressed in clear terms so that there is no doubt as to what is being offered, (2) the offer is genuine and not (in the words of a previous authority) “a sham or not serious in some way”.

We did not call on Mr Wardell to address us orally on the costs appeal. As Mr Wardell points out in his skeleton argument on the costs appeal, it is not the purpose of CPR 44 that a party should be able to recover the costs of an unsuccessful counterclaim that he has brought to try to persuade the claimant to drop his claim against the defendant. One of the purposes of the rules in CPR 44 as to costs shifting is to discourage parties from bringing claims which are not expected to succeed The appellant’s argument has, on Mr Wardell’s submission, an “Alice in Wonderland” feel about it.

I now turn to my conclusions. The offer of May 2008 by Beachcrofts was not made under Part 36. Had Beachcrofts wished there to be automatic cost consequences, they could have made an offer under Part 36 by offering a small amount of money for the compromise. They could also have paid a nominal sum into court. The offer in this case had very little purpose since, if Beachcrofts were successful in the action, they would obtain their costs of the action in any event.

Therefore the costs consequences of Part 36 do not apply. The judge had to exercise his discretion as to costs. An appellate court does not interfere with an exercise of discretion as to costs unless it is perverse (which is not suggested here) or an error of law is shown. The judge had to take the offer into account, and the judge did so. A judge making an order as to costs inevitably uses hindsight since he is looking at the matter following trial.

The only ground on which it can be said that his discretion was invalidated is that he makes no reference to the two factors formulated by Mr Dale. In my judgment, this ground should be rejected as both factors were obvious. In particular, it would have been obvious to the judge that Mr Langsam would have been better off if he had accepted the order of May 2008. The judge had heard a very substantial action and written a substantial judgment. He would also have been well aware that the counterclaim for fees would not have been brought if the main action had not been brought. Accordingly, in my judgment, his discretion cannot be said to have been invalidated by failing to refer in terms to the factors in terms.

The judge was entitled to treat the counterclaim as a separate matter from the claim. Mr Langsam clearly succeeded on the counterclaim. As Patten LJ observed in argument, what Beachcrofts wanted to achieve was that they should be able to defend the action without risk as to costs on the basis of having brought a counterclaim which itself fails. In circumstances such as these, as the judge pointed out, the policy underlying CPR 36 does not support the bringing of claims that fail.

To accede to the argument of the appellant would in my judgment amount to legitimising an offer made purely as a tactical ploy. The observations of Dyson LJ in the Stokes Pension Fund case apply only in the normal case. They therefore do not govern the situation here.

Moreover, in my judgment, the judge cannot, as Mr Dale also submits, be criticised for not considering whether to award a percentage of costs since Beachcrofts did not suggest that he should make an order for a proportion only.

I would therefore dismiss Beachcrofts’ cross-appeal on costs.