Vellacott v The Convergence Group Plc & Ors

This is an application by the claimant for so-called non-party costs orders against Mr Alan Robinson and his wife, Mrs Gail Farrin Robinson, who were formerly directors of both, but subsequently of only one, of the two defendant companies. The costs in issue total some £5.6m. The application is made under the jurisdiction conferred by section 51 of the Supreme Court Act 1981 (see also CPR Part 48.2). The background is as follows.

The claimant, Chantrey Vellacott (“CV”), is a firm of chartered accountants. The first and second defendants, The Convergence Group PLC (“PLC”) and Convergence Group International SA (“SA”), are former clients of CV (I shall refer to them together as “Convergence”). In May 2001 CV brought separate claims against PLC and SA for unpaid fees: £159,666.73 from PLC and £110,545 from SA. The response of each was to dispute that the fees, or a material part, were due and to counterclaim for damages for alleged professional negligence. The most significant element of the counterclaim was one which, by the time of the trial, was for some €100m said to represent the value of the lost chance of which CV’s negligence had deprived Convergence (the claim had earlier been put as high as about £150m). Convergence had an alternative claim for wasted expenditure of some £15m and an additional, relatively modest, claim for the professional costs of putting CV’s errors right.

The claims and counterclaims were consolidated and their trial commenced before me on 23 October 2006. CV were represented by Mr Richard Jacobs QC, Mr John Taylor and Mr Paul Mitchell. Convergence was represented by Mr Michael Swainston QC, Mr Sean Brannigan and Mr Stephen Midwinter. The meat of the trial was the counterclaim and so Convergence opened the case. The trial was estimated to run until February 2007. Many witnesses were to be called. The documentation was enormous, occupying some 250 files including some 50 files of expert evidence.

In the event, the trial lasted only 14 days or part days. After oral openings from Mr Swainston and Mr Jacobs lasting just over two days, Mr Swainston called Mr Robinson to give evidence. He was the principal individual behind the Convergence group (a group in which he, through a family trust, had the primary beneficial interest) and was Convergence’s main witness. He was the driving force behind, and the decision maker in relation to, the commercial venture the subject of the counterclaim. Mr Jacobs cross-examined him for some nine days. At the conclusion of his evidence, Mr Edward Mercer, a solicitor who had acted for Convergence, was called by Mr Swainston and he was cross-examined for part of a day. At the end of day 12 (Thursday 9 November) his cross-examination was still not concluded, when the trial was adjourned until the following Monday week, 20 November. That break had been arranged some months before.

On Friday 17 November (at the end of that week’s pause) the directors of PLC (who included Mr and Mrs Robinson) appointed Stephen Goderski and Geoffrey Martin as joint administrators of PLC. On Monday 20 November, when the trial was due to resume, the directors of SA (who did not include either of Mr and Mrs Robinson, although they had formerly both been directors) appointed the same insolvency practitioners as joint administrators of SA.

On 20 November I adjourned the trial until 23 November so as to enable the administrators to consider their position in relation to the litigation. Their stance on 23 November, when they were represented by counsel, was that they did not wish to continue with Convergence’s counterclaim.

As a result I made various orders on 23 November. I struck out Convergence’s re-amended Defence and Counterclaim. I gave permission to CV pursuant to paragraph 43(6) of Schedule B1 to the Insolvency Act 1986 to continue their fees claim against PLC and SA. I then gave judgment for CV on those claims against: (i) PLC for £293,529.61; and (ii) SA for £136,304.36, both sums including interest. I ordered PLC and SA to pay CV’s costs of the proceedings, including reserved costs. CV’s costs were then estimated to be some £6m (although the most recent figure I have been given is £5,685,357.68, a figure which includes CV’s costs down to 28 February 2007 but which is also stated not to be a definitive figure) and I declared that PLC and SA were jointly liable to make an interim payment of £2.5m on account of costs. I reserved for later decision the question whether those costs should be assessed on the standard or indemnity basis, the rate of interest on them and whether they should include CV’s costs of a failed mediation in December 2003. The joint administrators did not oppose any of those orders.

The reason for so deferring those further questions was because CV had no confidence of recovering much, if anything, by way of costs from PLC and SA, both by then in administration. They subsequently learnt from the joint administrators that the creditors - of which CV are the largest - would not receive a penny piece. Mr Robinson signed a statement of affairs in respect of PLC on 28 March 2007 showing that he expected it to realise assets of £10,252, with an estimated deficiency as regards creditors of some £4.12m (CV being included as a creditor in the sum merely of some £2.8m). Both PLC and SA were made the subject of compulsory winding up orders on 23 May 2007, and no distribution has been or will be paid to creditors. In the expectation that the corporate cupboard was likely to be fairly bare, if not as bare as that, CV also applied to me on 23 November to add as third and fourth defendants Mr and Mrs Robinson, against whom they wished to apply for a costs order under section 51 of the Supreme Court Act 1981. The basis for that was said to be that Mr and Mrs Robinson had controlled and funded the litigation and stood personally to benefit from it if it succeeded; they had promoted the claim through two companies which now emerged as insolvent; moreover the claim they had so promoted was not just speculative and opportunistic but was advanced dishonestly, as (so they asserted) was shown by Mr Robinson’s cross-examination.

By way of a fuller explanation, CV’s position was that they had admittedly been negligent in the handling of one aspect of Convergence’s affairs. But that would only entitle Convergence to claim the massive damages for which it was counterclaiming if it could prove a causal connection between the negligence and its claimed loss. CV’s position was, so it asserted, that it was apparent after the conclusion of Mr Robinson’s evidence that Convergence’s case on causation was built on lies, being lies to which Mrs Robinson had lent her support in her witness statement. Mr Jacobs invited me at the time to infer that the appointment of the joint administrators of both Convergence companies was a direct consequence of the emergence during Mr Robinson’s cross-examination that Convergence’s case was dishonest nonsense and that Convergence recognised that its further pursuit was hopeless and would fail, with orders for costs against Convergence.

That suggested inference has since received solid support in the shape of an advice on prospects that Mr Swainston and Mr Midwinter wrote during the week’s pause in the trial following the adjournment on 9 November. That advice and certain other privileged material were (with the consent of the joint administrators, the privilege belonging to Convergence) put in evidence before me by Mr Robinson by way of support for his defence of the present costs claim, although CV’s position is that it merely underlines its justification. Its essence was that Mr Robinson’s performance as a witness had been poor, his evidence was likely to be held to be evasive and, on critical aspects, untrue and the case on causation had been shown to be hopeless. The advice was that the case was likely to fail and Convergence would have to pay CV’s costs. The recognition of that costs liability was, so I was told by Mr Stephen Atherton QC (counsel for Mr Robinson), the basis on which the appointments of the administrators were made. He also told me that, had it been perceived that the case was going well, it would probably have been continued. The manifestation by then of its difficulties would not have come as a surprise to Mr Swainston. He had earlier pointed out the problems in a written advice he had provided on 15 September 2006 by way of a summary of his oral advice in three prior consultations. Nevertheless Convergence ploughed on until, on 17 November, it bowed to the inevitable. Mr Robinson chose not to exhibit Mr Swainston’s September 2006 advice in his original round of evidence in response to the application, but CV’s advisers quickly learnt that Mr Swainston had provided such earlier advice and it was eventually produced, along with earlier advice that had also been provided to Convergence since the start of the litigation in May 2001. Much of that material was made available by Davies Arnold Cooper (“DAC”), Convergence’s solicitors in the litigation.

As I say, CV have incurred some £5.6m in costs. They had been unable to obtain security for costs from Convergence, although they tried once (in late 2002) and failed and they had tried again (in 2004) but did not pursue it in the light of further evidence as to PLC’s apparent financial solidity. They did not try again because PLC’s balance sheet (PLC being the main funder of the counterclaim) showed enormous apparent net assets. On the first day of the trial, Convergence produced to CV its audited accounts for the year ended 31 December 2005, showing net assets of some £8m, an asset figure approximating to that shown in management accounts that PLC had produced to CV early in 2006 by way of demonstration of the claimed futility of any further application for security. That ostensibly healthy picture proved illusory. Less than a month after the production of the 2005 accounts PLC and SA entered administration on the basis that they were unable to pay their debts. The massive apparent net assets have evaporated. CV say that the 2005 accounts and management accounts conveyed a bogus picture and falsely averted what would otherwise probably have been a successful application for security. They were accounts for which Mr and Mrs Robinson, as directors of PLC, were responsible.

Having regard to this, and the circumstances in which the trial collapsed, CV say that it would be nothing short of scandalous if they should be expected to be left to bear their own costs of their defence of Convergence’s claim. They say that justice demands that they should be entitled to recover them from Mr and Mrs Robinson. They say that it was they who promoted that claim, being one that was floated, sustained and eventually perished on a bed of lies. At least by 2006 Convergence was being advised that the claim was unlikely to succeed; and on 1 June 2006 CV’s solicitors, Squire & Co (“Squires”), had pointed out to DAC that the claim had no prospect of success and invited its discontinuance. The letter included a warning that if any costs order in favour of CV remained unsatisfied, CV would apply for costs orders against Mr and Mrs Robinson.

Mr and Mrs Robinson chose not to be present in court on 23 November, but I made orders adding them as defendants and gave directions for evidence on the costs application that CV wished to make against them. That required CV to serve their evidence by 29 November and gave Mr and Mrs Robinson until 20 December to answer it. I fixed the substantive hearing to take place on 18 January 2007. As Mr and Mrs Robinson were not present, my order permitted them to apply to vary or discharge those directions, as I expected them to do.

They did so apply, and on 20 December they sought an extension of three months for their evidence in answer. I declined to agree to that but did extend their time until 31 January 2007. In the meantime, CV had indicated that they would seek freezing orders against them, although that became unnecessary when they gave equivalent undertakings. They were originally given over 16 January 2007 but on 15 January were extended until after judgment on this application. Mr and Mrs Robinson also undertook to disclose details of their respective assets to Squires. That exercise gave rise to considerable contention and occupied much time, as a result of which on 1 February Mr and Mrs Robinson sought a further extension for their evidence in answer to the costs application. I extended their time until 19 February and fixed the hearing to take place on 8 and 9 March. In fact, it also required further hearings on 13, 14, 29 and 30 March, largely because of the flow of additional evidence during the course of the hearing. This is my judgment on that application. Mr Jacobs and Mr Mitchell (two of the team of three who represented CV at the trial) represented CV. As I have said, Mr Atherton, instructed by Brooke North LLP, represented Mr Robinson. Mr Sims, instructed by Foot Anstey, represented Mrs Robinson.

The figure of £5.6m for CV’s costs reflects that this was major litigation. Convergence’s costs were, I understand, in the order of £4m. To explain the issues in this application, I must set out the background more fully.

Convergence’s counterclaim arose out of a project known as the Silk Route project (formerly referred to by the code name Marco Polo) by which it intended to design, build, own and operate a broadband telecommunications network centred in Athens and linked to mainland Europe. It was intended to provide capacity for very high speed data, voice and video services in Greece as and when those different services were deregulated. The aim was to have the system in place before the 2004 Olympic Games in Athens.

In the event the project failed and was finally abandoned in 2003 because finance could not be raised for it. Convergence asserted that this was caused by CV’s negligence. It complained that CV’s duty was to advise it as to, and to implement, a suitable international group corporate structure for the project but failed to do so. It says the structure should have been in place by about March/April 1998, but it conceded that it was not practicable for CV to have established it before then. CV did in fact establish, or purported to establish, a structure for Convergence in March and early April 1998 but Convergence claimed: (a) that it was defective from an international tax viewpoint (a defect of which it learnt in September 1998), and (b) that its establishment also suffered from formal defects which were only finally corrected on 14 July 1999. Convergence claimed that from the outset of the purported establishment of the new structure it was in a state of continuing uncertainty as to whether it had been validly established. It said that CV’s failure to deliver an appropriate structure by April 1998 was causally responsible for its subsequent failure to be able to sell the Silk Route project to investors. Its case was that so long as there was no structure – or at least a doubt as to what it was - there was no company in which it could invite investors to invest. That is the line that Mr Robinson asserted in his evidence, which was also to the effect that it was only when the structure was consolidated into a final form in July 1999 that he was able to instruct a financial adviser to raise money for the project; and it was agreed between the experts that any fund raising by way of the type of private placement that Convergence was proposing required the assistance of a financial adviser. It was also Convergence’s case that March 1999 was the latest date for appointing a financial adviser in time to catch the market before its alleged decline towards the end of 1999 and into 2000.

More specifically, Convergence complained, first, that CV’s negligence caused the aborting of a proposed internet placement in April 1998 by which it intended to raise initial funding of some US$5m for the project. The proposal to have such a placing was postponed. No such placement was ever made and by October 1998 Convergence had abandoned the idea. Convergence put all the blame for this on CV’s shortcomings in relation to the corporate structure.

By October 1998 Convergence had learnt of an admitted defect in the new structure from the international tax viewpoint, had lost confidence in CV’s advice on the question of the group’s structure and had instructed PriceWaterhouseCoopers (“PwC”). PwC’s advice was that the structure devised by CV was broadly tax efficient, subject to the defect just mentioned for which they proposed a solution. Convergence claimed, however, that it still remained uncertain as to the structure, whereas an understanding of it was said to be necessary before PwC’s advice could be implemented. The logic of Convergence’s position was that, having allegedly been conscious of uncertainties in the new corporate structure since October 1998 (or, on its internet placing case, as early as April 1998), it took it until 14 July 1999 to put the structure right, during which time it said the taking of its project to the market was held up. One of the features of the case is that throughout that long period there is not one letter in which Convergence mentioned to CV that its allegedly defective structure was the sole cause of the hold up in the progression of the project.

Having said that, and the structure having been put into final form by 14 July 1999, Convergence instructed HSBC (in October 1999) and, later, Eurofin, a Greek company, as successive financial advisers. They made unsuccessful attempts to raise finance for the project. Convergence’s case on that was that, by September 1999, the investment market for telecoms projects had peaked, was in decline and would not support the required fund-raising, which is why the attempts failed. Its damages claim was for compensation for its lost chance to launch the project in Greece. Its complaint was that CV’s negligence had prevented it from going to the market earlier.

CV’s response was that Convergence’s claim was a try-on (and, as I shall explain, was by February 2006 known by Convergence to be so regarded). They admitted they had been negligent in certain respects relating to the structure they had advised and implemented; and Mr and Mrs Robinson made the point that that admission was only made at the beginning of the trial. As regards the complaint that their negligence frustrated the internet placing in early 1998 CV said this was a late thought which only occurred to Convergence long after the litigation started (that part of the claim was only introduced by amendment); and CV’s case was that, for various other reasons, Convergence was never even close to being in a position to launch an internet placing. Convergence was anyway only seeking to raise US$5m by such a placing, which would not have been sufficient to launch the project. That was always going to be dependent on raising further substantial sums from equity investors by way of a private placing. This is what Convergence’s financial advisers, HSBC and Eurofin, later sought to achieve. CV said that there was nothing in Convergence’s assertion that it was their negligence that prevented it from proceeding earlier in its attempt to raise such funding.

As regards the claimed inability to appoint a financial adviser before 14 July 1999, the weakness of Convergence’s case was said to be that it did in fact appoint one, or least considered and discussed the appointment of one, in the spring of 1999, and before the structural problems had been sorted out. CV’s case was that the reason the project was not pursued more positively until after 14 July 1999 had nothing to do with supposed structural problems, but everything to do with the fact that Convergence had not obtained the licences necessary for the project and was not willing or able to proceed further with the project until there was more certainty on that front, which was only achieved in early June 1999. One of the most damning documents in the case was a report to the Convergence board prepared by Mrs Robinson in June 1999 which acknowledged that Convergence’s project problems had been attributable to a variety of factors, which did not include alleged structural problems but did include the failure to obtain licences. CV also said that HSBC’s attempts between October 1999 and May 2000 to raise funds did not fail because the market had changed adversely but because (a) the potential investors recognised that the project was flawed and (b) Mr Robinson was demanding too much for too little. Central to CV’s case in this respect was that a key element of the project presented to investors by HSBC was the inclusion in the system of a 40GHz wireless local loop, whereas Convergence had no licence for it and there were serious problems with the technology. They said that Eurofin’s subsequent attempts between November 2000 and July 2001 to raise funds for a, by then, refined and simpler project only foundered in July 2001 because Pirelli withdrew when it acquired a majority stake in Telecom Italia. Further attempts by Convergence to raise finance in late 2001 and early 2002 also failed.

The litigation raised many factual issues, or would have done had it not collapsed. The central ones can be summarised as follows: (i) were CV negligent and, if so, in what respects; (ii) what was the degree of consequential delay in putting their mistakes right and was the whole of it to be laid at their door; (iii) why did Convergence’s proposed internet placement not go ahead in March/April 1998; (iv) was this caused by any breach of duty by CV; (v) why did Convergence not proceed with a private placement by early 1999 when, as they claim, the market was still hot; (vi) was the failure to do so caused by any breach of duty by CV; (vii) had the internet placing and/or the private placement gone ahead in, respectively, March/April 1998, late 1998 or early 1999, did Convergence have more than a speculative chance of raising the funds necessary for the project; (viii) why did the project fail to raise funds when it did go to the market in 2000: was this because of market conditions and a changed investment climate; or was it because of problems inherent in the project combined with Mr Robinson’s attitude over valuation issues and control; (ix) if the project had succeeded in raising funds, did it have more than a speculative chance of being the successful money-spinner that Convergence asserted? If Convergence established liability against CV under these various heads, then there were questions as to quantum.

CV assert against both Mr and Mrs Robinson that they personally controlled the pursuit of the Convergence counterclaim and stood to benefit from a successful outcome, that benefit emerging via the family trust of which they are beneficiaries and which owns the Convergence group. In addition, it was said that, at least towards the end of the litigation, they both funded the litigation. There is no dispute that Mr Robinson then funded it to the tune of £120,000; and a further £833,000 was provided by Amador Limited, a company owned 60/40 by Mr and Mrs Robinson which owns Coxland Farm in Devon where they live. As I shall explain, the authorities show that control, benefit and funding are or may be relevant considerations in the exercise of the exceptional jurisdiction under which claims for costs may be made against the directors in relation to failed litigation brought by their insolvent companies. There was, however, a dispute about whether, and to what extent, these considerations were made good against Mr and Mrs Robinson.

Apart from these points CV also relied on what they asserted to be the promotion by Mr and Mrs Robinson of a dishonest case from the start. There was considerable debate about that as well, Mrs Robinson asserting that there was no basis for levelling such a claim against her since she was not, she said, in control of it. Mr Robinson faced more difficulty on this front, because he was undoubtedly the key man in this litigation from beginning to end, he was undoubtedly the person giving DAC their instructions and Convergence’s case was wholly dependent on his evidence: without his input, there could have been no case. His original stance in this application, founded on the material he chose to put before the court, was that the Convergence counterclaim had always received positive support from counsel, Mr Brannigan, with the first negative advice being that of Mr Swainston and Mr Midwinter during the November 2006 pause in the trial, in response to which the boards of PLC and SA had then responsibly packed their bags and walked away. The fuller material which emerged during the hearing showed that to be a travesty of the position, although it can be said that there were some positive elements in at least certain of the early advices that were provided by Mr Brannigan. A feature of those advices is, however, that they did not deal with the basic factual question of whether Convergence would be able to prove that its omission to progress the project by instructing a financial adviser and going to the market by March 1999 was in fact caused by CV’s negligence. It appears simply to have been taken as a given that it could do so, apparently on the basis of an assertion from Mr Robinson to this effect, with counsel’s advice focusing mainly on the question of whether, had any such marketing exercise been embarked on earlier than it was, it would have raised funds – a question whose answer was made uncertain by the lack of licences.

By 2004, however, when Mr Anthony Temple QC had been retained to advise Convergence, he flagged up the potential difficulties on the primary causation issue; and by December 2005 he had read documents (contained in CV’s evidence for a forthcoming disclosure application) which were potentially destructive of Convergence’s case and which caused him promptly to advise that Convergence needed to settle it. When Mr Swainston was instructed in his place in May 2006 (Mr Temple had to withdraw because an adjournment of the trial from June 2006 to October 2006 precluded his availability) he spelt out the causation problems in no uncertain terms so that, at the latest by 5 September 2006, Convergence knew that his advice was that the case faced serious difficulties on the facts: the problem was that Convergence’s case was materially inconsistent with the contemporary documents. His advice appears to reflect the first application by any of Convergence’s lawyers of a detailed consideration of Convergence’s own documents (which are as voluminous as documents can come) with a view to seeing whether there was anything in the case it was seeking to make. It is a remarkable feature of the litigation that the Convergence case was pursued from 2001 to 2006 without anyone on the Convergence team reading its own documents in order to see if it could prove its case as a matter of causation – or, perhaps more to the point, to see if it contained anything which tended to disprove it.

That omission is the more surprising because the causation issue, which was at the heart of the cross-examination of Mr Robinson at the trial, was always at the forefront of CV’s defence to the counterclaim. Over four days in October, November and December 2002 there came before me applications by CV for summary judgment on their fees claim, for the striking out of parts of Convergence’s counterclaim and (failing that) for security for costs against both Convergence and SA. Mr Brannigan represented PLC and SA. I entered summary judgment for CV for the modest sums of £1,600 plus VAT against PLC and £5,120 against SA, but otherwise refused CV’s applications. My judgment, delivered on 20 December 2002, records at page 32 the submission of Mr Garland (then counsel for CV) that:

“… there is no realistic prospect of [Convergence] being able to establish the necessary chain of causation at trial. He says that it is unclear that even by September 1998 [Convergence] had any project to sell, and that anyway no company had yet acquired any of the necessary licences for the proposed operations, and he says that the licences were necessary for the obtaining of finance.”

The response to that was that the expert evidence at trial would show that the absence of licences would not have prevented the raising of money for the Silk Route project in the market. But Mr Garland had put his finger on the key point – namely, did Convergence even have a project to sell as at September 1998 which they could take to the market? Mrs Robinson’s June 1999 report tended to show that the answer was no, or at any rate not yet, the problems including the lack of licences. More generally, regardless of what the experts might say on this, there was anyway an obvious factual question as to whether or not Convergence could prove that the claimed structural problems were in fact holding up the progress of the Silk Route project to the market; and the apparently astonishing delay between the claimed awareness of the alleged defects and their final correction might itself be thought to speak volumes. I add that at the time of the summary judgment application the claim in respect of the failed internet placing formed no part of Convergence’s case: that was only introduced by an amendment sought in 2003 (one refused by Master Price and, on appeal, by Lloyd J but which was allowed by the Court of Appeal). The argument turned, however, not on whether it had any factual basis but on whether it raised a statute-barred claim.

CV submitted on this application that, as I heard oral evidence from Mr Robinson at the trial over some nine days, I should make an assessment of the extent to which he was or was not being truthful. CV’s case was that his evidence was, on crucial matters, a pack of lies from beginning to end. If, they said, that assessment was correct, it would be highly material to the discretionary exercise of deciding whether, and to what extent, either or both of Mr and Mrs Robinson should be answerable for CV’s costs or part of them. Mr and Mrs Robinson’s stance was that I should not make any assessment of the soundness of the factual case that Mr Robinson sought to make good in his evidence, or at least that I should be wary of doing so, because he was just one of many witnesses who would, had the trial proceeded, have supported what he said. I cannot, so it was said, therefore fairly come to any conclusion on CV’s assertions at this stage as to the honesty of Mr Robinson’s evidence.

Mr Swainston does not appear to have regarded those last considerations as precluding him from making the critical comments he did on the quality of Mr Robinson’s evidence when he wrote his November 2006 advice; or from advancing the view that, in light of it, the case was likely to fail on causation. He did not suggest that any of the other witnesses whose witness statements showed they were proposing to sing the same tune could save the day for Convergence. Having considered the statements of those witnesses, which (in relation to the causation point) amount to little more than generalised assertions (Mrs Robinson’s witness statement being in particular an essay of inaccurate, loose and unsupported assertions of little apparent evidential worth) it is obvious why Mr Swainston regarded the case as standing (or, as happened, irrecoverably collapsing) on Mr Robinson’s evidence.

In any event I regard Mr and Mrs Robinson’s general point as mistaken. It is true I did not hear from all these other witnesses. That was because, at the conclusion of Mr Robinson’s evidence, and in light of Mr Swainston’s advice, Mr and Mrs Robinson joined in a decision to put PLC into administration, one followed by a like decision by the SA board. Those decisions recognised that the companies would incur costs liabilities they could not discharge. But I fail to see why, now that an application for costs has been made against Mr and Mrs Robinson, I should not make an assessment of Mr Robinson’s evidence, which appears to me to be likely to be relevant at least to the question of whether any costs order should be made against him. He has given evidence, I heard it and I am in a position to assess it. His proposition that, because he chose to pull the plug on the case, I should wash my hands of any attempt to assess his evidence is, in my judgment, wrong. I propose therefore to embark on a review of his evidence, at least as regards the causation issue. I accept that any such review as regards Mrs Robinson will require special consideration, because she did not give oral evidence at the trial or on this application.

In order for the review to be tolerably intelligible I must rehearse the general background to the litigation and travel through the key periods relevant to the question, 1998 to July 1999. Because of the massive documentation and the complication of the story the account is of a length in which I take no pride. But I consider that any review of Mr Robinson’s evidence can only be fairly embarked upon if I relate the story reasonably fully.

PLC is a United Kingdom company. Its main office is at Burgess Hill, West Sussex. Until its recent demise it was ultimately controlled by The Broadband Trust, a discretionary trust of which Mr Robinson was the settlor, life tenant and principal beneficiary; and it was formerly ultimately controlled by Mr Robinson. He is in his 50s and has some 30 years’ experience in the global broadband cable and telecoms industry, his initial experience being gained during some 13 years spent in the USA. He returned to the UK in 1982. This was a time when the Government was considering deregulating the television and telecoms markets. He saw this as an opportunity to put his experience to effect. Deregulation in the UK started with cable television and was furthered in 1991 when cable companies were also permitted to carry voice telephony.

Mr Robinson founded PLC (under a different name) in 1985. It had four main business objectives: (i) bidding for and acquiring a franchise or licences to own and operate a broadband system in particular areas; (ii) system design, construction and installation of broadband cable telecoms systems; (iii) development of television and cable television services; and (iv) provision of advanced telecoms services. It operated as a holding company for subsidiaries in the telecoms industry, and underwent various name changes until it adopted its present name, The Convergence Group PLC, in June 1996. By 1996 it had a track record in these various objectives and had franchised areas in the UK covering more than 2.5m homes, which was achieved through various Robinson companies. By then Mr and Mrs Robinson were directors of PLC.

CV’s retainer by PLC and other group companies dated from about 1991. The partners most closely involved included Ralph O’Beirne, Dapo Ladimeji and Colin Heath. Mr O’Beirne provided corporate and valuation advice in relation to the acquisition of franchises and funding. Mr Ladimeji provided international tax advice. It was primarily Mr O’Beirne’s and Mr Ladimeji’s work which was subject of criticism in the litigation. Mr Heath provided UK tax advice and was in charge of the UK compliance side of Convergence’s affairs. SA was incorporated in December 1996 and also became a CV client.

Convergence’s case was that CV became responsible to PLC and SA for the following tasks: (i) devising a new structure for the Convergence group which would facilitate outside investment in international projects, including - via a new intermediate holding company - investment in the Silk Route project in Greece; (ii) implementing or organising its implementation; (iii) preparing the valuations necessary for the transactions involved in the reorganisation; (iv) advising on the desirability or otherwise and the tax implications of a European Economic Interest Grouping (“EEIG”) structure amongst the group companies engaged in the project; and (v) preparing a report to validate the structure when implemented. The case was that CV failed to perform these duties at all, or only performed them inadequately, so that they came up with a deficient product. The story begins in earnest in 1998, but I must first summarise the events of 1996 and 1997.

As at November 1996 Mr Robinson owned all but one of the issued shares of PLC. PLC in turn owned several UK cable local delivery operator (“LDO”) companies, including: (i) Convergence (Mid Sussex) Limited (“Mid Sussex”), and (ii) Convergence (East Grinstead) Limited (“East Grinstead”). Both Mid Sussex (which was developing a telecoms project at Burgess Hill) and East Grinstead featured in the Silk Route story. PLC also wholly owned Convergence Ventures Limited (“CVL”).

In late 1996 Mr Robinson transferred his personal tax affairs from KPMG to CV. He had a meeting with CV in November 1996 in order to discuss his then Greek project, a forerunner of the Silk Route project. This was when CV first started advising Convergence in relation to Greece. They discussed the need for a group structure for Convergence projects. It was agreed that CV were engaged in 1996 to provide (inter alia) international tax advice to PLC.

Mr Robinson had a meeting on 5 November of which CV made a brief file note, item 4 of which was “Group structure/planning”. Mr Robinson told Mr Heath that PLC would be bidding on 29 November 1996 for a franchise to supply telecoms services to the Union of Greek Shipowners (“UGS”). This was a project PLC had been discussing with Guinness Mahon Holdings Plc (“GM”) since about 1994, and in respect of which in December 1996 SA and GM were to form an 80/20 joint venture. The project involved the building of a broadband data communications network in the Greater Piraeus area of Athens. Mr Robinson explained to Mr Heath that the joint venture would need to be carried out via a Greek company, a bid requirement.

Mr Robinson also explained to Mr Heath that: (i) the Convergence group was undertaking various international projects; (ii) it intended to undertake two specific telecom projects in the near future in Greece and Russia; (iii) both projects would probably require the group to seek outside funding from investors; (iv) the group intended to undertake further international commercial projects as opportunities presented themselves; and (v) it therefore wished to be re-structured in a manner which was so far as possible (a) internationally tax effective in terms of revenue and capital growth, (b) attractive to potential investors, and (c) sufficiently flexible to allow the group to undertake further projects.

Mr Heath wrote to Mr Robinson on 11 November setting out his initial thoughts on the appropriate group structure for the proposed overseas projects. He recorded his understanding that the group’s proposals were first to set up a project in Greece and then to acquire an existing project in Russia. He understood the group intended to engage in further projects world-wide as opportunities arose. He had discussed the international tax aspects with Mr Ladimeji and proposed that the group should set up an offshore intermediate holding company in Cyprus to establish and acquire the offshore companies required to own/run each project as it arose.

On 20 November Mr Robinson told Mr Heath there was some urgency to set up an appropriate offshore structure for the UGS tender and they discussed the possibility of using a Swiss company: Mr Ladimeji was to advise Mr Robinson on the tax implications represented by the alternatives. Edward Mercer, a partner in Taylor Joynson Garrett (“TJG”), solicitors, was advising Convergence in relation to the legal requirements of the tender. On 22 November the Geneva office of Loyens & Volkmaars (“LV”), international lawyers, wrote to Mr Ladimeji in response to his request for advice on the establishment of an off-shore structure, their advice being that the best alternative was a Luxembourg holding company with a Swiss branch. Mr Ladimeji relayed that to Mr Robinson by faxing him a diagram of the potential group structure, the basic theme being a structure in which the Convergence group wholly owned a Luxembourg company, which had a Swiss branch. The Luxembourg company would wholly own an operating Greek company and have (with GM) a joint interest in another Greek telecoms operator. Mr Robinson instructed Mr Ladimeji to arrange for the incorporation of a Luxembourg company that would be owned by PLC and would itself own the Greek companies engaged in the UGS project.

CV then arranged with LV for the incorporation of a Luxembourg company. On 29 November Mr Robinson instructed Mr Ladimeji that it was to be called Convergence Group International SA (i.e. “SA”). By 4 December he had also instructed CV to co-ordinate the setting up in Greece of Convergence Communications of Greece EPE (“CCGE”) as an SA subsidiary.

SA was incorporated as a Luxembourg Societe de Participation Financiere (“Soparfi”) on 12 December. Soparfi companies benefit from advantageous tax rates provided certain conditions are satisfied. One criticism of the revised Convergence group structure that CV later advised and implemented in March/April 1998 was that it involved the use of a subsidiary company whose status infringed one of those conditions and had the potential to prejudice SA’s Soparfi status (this was the defect that was discovered in September 1998). SA’s paid up capital was US$500,000, with 275 (55%) of its issued shares being held by PLC and the remaining 225 (45%) by New World Trustees (Jersey) Limited (“New World”), a Jersey company. New World was the trustee of the Broadband Trust, the trust in which Mr Robinson was a beneficiary, and it held its SA shares as such trustee.

SA’s original directors were New World, Morris Evans (New World’s managing director), Peter Wilton and Mees Pierson Trust (Luxembourg) SA. Mr Evans and Mr Wilton were resident in Jersey, from which SA was to be managed. Paul Nash was an officer or employee. SA and GM submitted their joint UGS tender on 12 December.

On 18 December the Secretary of State for Trade and Industry granted CVL an International Facilities Licence under section 7 of the Telecommunications Act 1984.

On 20 December a board meeting of SA in Jersey resolved to appoint an attorney to see to the incorporation in Greece of CCGE as a 100% subsidiary of SA.

Mr Robinson met CV several times in early 1997 to discuss the group structure and his personal plans for assuming non-resident status. CCGE was incorporated as a 100% subsidiary of SA during January.

On 11 March Mr Ladimeji sent Mr Robinson a two-page advice as to the circumstances in which an individual would be considered both not resident and not ordinarily resident in the UK for tax purposes and advised him that it would be important for him to have an employment contract in place before departing the UK. He advised that “It would be most sensible for the overseas employer to be [SA] even if a new holding company were to be subsequently formed.” He repeated earlier advice that there could be significant advantages in having the offshore company as the ultimate group holding company.

On 21 March Mr Ladimeji produced a “Tax Report” for Mr Robinson, sub-headed “Plans for Going Offshore”. This addressed Mr Robinson’s personal tax status together with the implications for the structure of the Convergence group. It explained what had to be done (and not done) in order to ensure that Mr Robinson would not be regarded as resident in the UK once he had departed the UK, as was his intention. The report suggested, in part D, headed “Business Implications”, that it would probably be most appropriate to re-arrange the Convergence corporate structure so as to make SA the group holding company, which is what ultimately happened. It further there said that “Corporate restructuring will probably be required in order to facilitate the introduction of external investors and the structure will need to be sufficiently flexible to allow the external investor, to some extent, to ‘mix and match’ which companies or activities he/she would wish to invest in.” It proposed that the restructuring might take place in two stages: “an interim stage whereby a new holding company is put in place and which happens fairly soon, and a final stage where there is a wide scale reallocation of companies, would take place shortly after April 1998 and after [Mr Robinson] receives confirmation of his non-resident tax status.” In section E, “Tax Opportunities”, Mr Ladimeji advised that “This would be an appropriate time to engage in major restructuring of one’s business as there would be no tax constraints.”

On 24 March Mr Robinson wrote to Mr Ladimeji thanking him for his recent efforts and recording his understanding that (inter alia) CV were going to complete their papers on the re-organisational structure of the Convergence group “with a view to moving the Master Ownership offshore to facilitate a focus of activities in Greece and the Middle East (and USA)” and with regard to SA’s employment offshore of Mr and Mrs Robinson. Mr Ladimeji was also going to contact DFK Hellas Ltd in Athens (Mr Criton Tzavellas), Greek accountants, with a view to the possible formation of a Cyprus Master company and was to give Mr Robinson his “Advice on critical path actions and list all critical dates/decisions.”

By now Mr Robinson knew informally (it was confirmed in April), that the SA/GM tender for the UGS project had not succeeded and that the contract had been awarded to OTE (the incumbent state-owned and operated Greek telecoms provider that formerly had a monopoly in Greece in the telecoms field). SA and GM (as SA’s financiers) were nevertheless still keen to press forward anyway with a project in Piraeus, which they were free to do.

On 2 April Mr Ladimeji sent Mr Robinson a “first draft of your planning schedule done as a path analysis.” It was directed at showing the steps to be taken to move Mr and Mrs Robinson’s residence offshore and, once this was completed (in April 1998), to implement a new corporate structure (which was to be implemented after 5 April 1998), following which the final step was “to introduce outside investors.” The scheme reflected that the new structure to be so completed was to be decided upon during the tax year ending 5 April 1998. On 3 April Gail Markham of PLC sent Mr and Mrs Robinson draft contracts of employment with SA. Mr Robinson was to be, and became, SA’s chairman and chief executive officer. Mrs Robinson was to be, and became, SA’s Group Operations Director. They were appointed directors of SA at a board meeting held in Jersey on 3 April, when the board resolved to enter into the service agreements. Mr and Mrs Robinson assumed non-UK residence as from 6 April 1997 and remained non-resident until 2004.

The Greek Silk Route project occupied Mr Robinson’s plans following SA’s unsuccessful tender for the UGS project. He also had current projects in the UK. I have referred to PLC’s subsidiary LDO companies, three of which had respectively acquired licences from the Independent Television Commission (“the ITC”) for the provision of cable services to Haywards Heath (the franchise area for which included Burgess Hill), East Grinstead and Yeovil. These services would not simply be telephone voice services, but involved a wider package, including television and interactive services. The licences had been sought on the basis that there would be a build-out in the franchise area by using cable connections. Convergence had, however, become enthusiastic about the concept of instead providing these services by a wireless technology. Use of such technology would save the high cost of installing wire infrastructure, including the cost of digging up roads in which to lay it. The technology required a network of connectivity using a so-called Microwave Video Distribution System (“MVDS”), an industry term for technology also known as a Local Microwave Distribution System (“LMDS”). These terms were generally applicable to systems incorporating state-of-the-art wireless transceivers operating at a frequency spectrum higher than 10GHz, the favoured frequencies being 28GHz or 40GHz. Mr Robinson’s attention was focused on the use of the 40GHz spectrum. The technology could be used for TV, multimedia and telecoms services. By 1997 it was regarded as the modern way for terrestrial delivery of multi-media, including television, data, internet and telephony. Signals from a transmitter mast are converted to the correct specified frequency and transmitted by directional antennae over a defined geographical cell. For two-way systems – enabling the delivery of telephony and internet services - the customer is provided with a transmitter/receiver antenna and a data interface unit. An MVDS or LMDS is to be contrasted with a Multipoint Microwave Distribution System (“MMDS”), the term generally applied to wireless systems operating at spectrums below 10GHZ, typically 2.5GHz, which could be used for television services. These systems had the advantage that they could cover large areas by reason of the combination of the lower frequency range and the higher transmitter power. By contrast, an MVDS or LMDS could only cover smaller areas because of their higher frequency and lower transmitter power.

Mr Robinson’s vision was not just to use this technology in Sussex and Somerset, but also in Greece for the purposes of the Silk Route project. In the event he was unable to achieve his ambitions in Sussex, Somerset or Greece. By 1997, however, 40GHz was an integral part of his vision.

The core of the Silk Route project involved bringing broadband capacity to Greece. Convergence had perceived a growing demand within the Greek market for a method of deploying multiple communications services to business and residential customers that offered both choice and value. The population of Greece was some 10m, with 6m living in greater Athens, the target area. Convergence had by then had some two years’ experience of planning and researching a Greek operation and had established valuable connections there.

The Silk Route project required a source in Greece of international broadband capacity. Under OTE that capacity was limited and expensive. The project varied in its make-up at different stages, but (looking ahead somewhat) by October 1998 it had developed to a concept said to comprise three elements. The first element was international connectivity to Athens via a submarine cable and/or satellite link, with the earliest emphasis being on a cable connection. The second element was the establishment of an International Data Centre, or teleport, serving users of on-site hosted servers, data storage equipment and managed offices and also certain substantial “Access Parties”. The submarine cable would be linked to the teleport, from which Convergence planned bulk sales of the cable capacity it brought to Greece, with the terminal landing station being sited in the basement of the teleport. The teleport would also constitute a self-standing business centre, which could make use of broadband capacity from anywhere. It also constituted a convenient landing point for other cables. The third element involved the distribution of broadband services via a local loop in Athens. The cable and teleport would provide income in themselves but more income could be generated by the distribution within Greece of broadband services. The original plan was for this to be done via a network of connectivity in Athens of an LMDS of state-of-the-art wireless transceivers operating at 40GHz.

On 25 July Mr Ladimeji faxed Mr Robinson advice about his personal residence and the corporate structure. As for the corporate structure, he advised first that there was no need to administer SA from Luxembourg, it was merely necessary for it to have its registered office there. He advised that the most appropriate structure was to have SA at the top, with intermediate holding companies below it: a Cyprus company for all activities in the Middle East and Central and Eastern Europe; another company for European activities; and a third for US activities. He said that “[o]ne of the main benefits is that this will allow outside investors an easier choice of which ventures they want to join and would also allow you greater flexibility in your own capital and borrowing operations. Not least this structure would make tax planning and acquisition and disposals much easier and more effective.”

Mr Robinson had a meeting with Mr O’Beirne on 13 August and followed it with a letter of 14 August. He raised a complaint about CV’s fees, expressing “fundamental concern about the tax bills.” The letter imposed some pressure on CV to progress the plans for the new structure. Mr Ladimeji was away, but he had returned by 29 August when Mr O’Beirne forwarded copies of Mr Robinson’s letter to him and Mr Heath. He said in his accompanying memo that “We need to come up with a detailed plan to complete the group re-structuring including dates and an estimate of costs to complete.”

By 13 October Mr Robinson was interested in participating in Project Oxygen, a venture being promoted by CTR Group Ltd (“CTR”), a New Jersey company. Project Oxygen was a worldwide broadband connectivity project aimed at providing a new type of network to support a super-internet. The plan was to build a global system (“the Project Oxygen Network”) being a high-speed, self-restoring network eventually comprising up to 38 transmission loops with up to 265 terminal points in up to 171 countries and locations, which could be accessed from nearly every country and territory. The project would include the laying of a submarine cable to Athens which would provide the connectivity essential to the first element of the Silk Route project. Mr Robinson registered his proposed attendance at a Project Oxygen Information Meeting due to be held in Las Vegas in December 1997.

On 28 October Mr Rosewell (a non-executive director of PLC) had a conversation with Mr Ladimeji. Mr Rosewell reported that Mr Robinson was “particularly concerned to have some plans for merging [PLC] under [SA].” On 4 November Mr Rosewell had a meeting with Mr Ladimeji, who outlined the steps by which SA could become the group holding company, the further contemplation being the possibility of forming three or more intermediate holding companies (perhaps regionally, for Europe, the Middle East and the USA), which “would offer scope for individual/additional shareholders.”

At about this time PLC gave a demonstration to the ITC of MVDS 40 GHz wireless technology. It carried it out as part of a test programme at Burgess Hill (which was within Mid Sussex’s franchise for Haywards Heath). The ITC was impressed. That test was part of Phase 1 of the Burgess Hill programme and it involved the development of what Convergence referred to as an Internet Protocol Local Multipoint Delivery System (“IPLMDS”) (an alternative description of LMDS equipment) test site. Phase 2 would be a Proof of Concept exercise with revenue producing customers.

On 14 November Mr Ladimeji sent Mr Robinson his advice as to the steps by which SA could become the holding company of PLC. They were as follows: (i) the starting position was one in which Mr Robinson owned 100% of PLC, which in turn owned 55% of SA, the remaining 45% being owned by “an offshore trust”; (ii) a Jersey company (“Jerco”) would be set up and would issue bonds to PLC in exchange for PLC’s 55% holding in SA; (iii) Jerco would acquire Mr Robinson’s shares in PLC in exchange for its own 55% holding in SA plus notes entitling Mr Robinson to further shares in SA to be issued so as to reflect the greater value of PLC as compared with a 55% holding in SA; (iv) Jerco would transfer the PLC shares to SA in consideration of an assumption by SA of the obligation under the bonds; SA would also issue the promised further shares to Mr Robinson; (v) SA would set up an intermediate holding company to which it would transfer the PLC shares in exchange for shares in the intermediate holding company; and (vi) SA would charge PLC a management charge, the value of which would be used to discharge the bonds. The end result would be that Mr Robinson and the trust would own SA, which would own the intermediate holding company, which would own PLC. It is to be noted that step (v) would have the consequential effect of bringing CVL (at that stage a PLC subsidiary) below the intermediate company, of which it would be a sub-subsidiary. Mr Ladimeji’s reference to the “offshore trust” was to the Broadband Trust. He ought more accurately to have referred to the original owner of the 45% holding in SA as New World, the trustee.

An executive committee meeting of PLC was held on 25 November to consider several matters, including “the Group structure and tax planning”. Mr Robinson attended it. He did not give any instructions at that stage for Mr Ladimeji’s advice to be implemented. In its counterclaim Convergence advanced no criticism of CV for not implementing it before April 1998.

CVL signed a Memorandum of Understanding (“MOU”) on 10 December with CTR. It recited that CVL intended to access the Project Oxygen Network from England and to participate with CTR and other like “Access Parties” in the implementation of the network from England. The MOU did not add up to much in concrete legal terms, being essentially a memorandum of the parties’ statements of intention. On the same day CCGE signed an MOU with CTR, CCGE intending to access Project Oxygen from Greece. Mr Robinson went to Las Vegas in December to attend presentations in relation to Project Oxygen.

The story starts in earnest in 1998 when the proposed internet placing was being considered. It was first considered even before the re-structuring of the Convergence group was effected. Mr Robinson said that by early 1998 the technical and practical aspects of the Silk Route project were being advanced. He needed outside funding to go forward. He wanted to involve Greek investors in the project, in particular expatriate Greeks in Canada, South Africa and Australia. He had in mind raising initial funds by way of an internet placing. This involved placing a prospectus on a website controlled by a reputable webmaster, preferably a banking house, which would house and manage the server. He claimed, but CV disputed, that Barclays Bank in Gibraltaragreed to house and manage the server in Gibraltar, the issuing entity for the purposes of an internet placing being treated as resident in the place of residence of the server. There was no evidence that Barclays ever did so agree, and the weight of the evidence was that it never so agreed. The location of the server was the key to regulatory considerations.

Mr Robinson said that it was planned to raise only a relatively small amount of investment by means of the internet placing – perhaps US$5m, which he called “seed money”. Further equity and debt was to be raised as the project progressed. He recognised that the major funding would have to be raised by a private placing and that the proposed internet placing was not critical to the financial future of the project. However, he said it was important commercially, in order to demonstrate third party interest in the project and to stop all the funding being borne by the group at as early a stage as was possible. Mr Robinson said the group foresaw three stages to fund-raising after the initial internet placing. The first involved a listing of CVL on the Athens Stock Exchange (although it appears such a listing was not in fact considered until the spring of 1999). This was to be followed by a private placing or an IPO by the intermediate holding company. This was in turn to be followed by high yield debt and by an overall public listing on NASDAQ or EASDEQ. Of these stages, Mr Robinson conceded that the Athens Stock Exchange listing was not critical to funding, although it was a commercially desirable part of the operation. His position was that he wanted the advice on the international structure to be finalised so that the group could proceed with these fund-raising exercises.

Mr Robinson had a meeting with Mr Ladimeji and Mr Heath on 15 January regarding group structure. He said he brought them up to date with the group’s plans in relation to the project. He told them the group was developing the MVDS technology with a 40GHz bandwidth for the purpose of local connectivity in Athens. He told them about Project Oxygen and the group’s physical point of presence in Athens. He told them the group would be making use of CVL’s UK International Facilities Licence to provide that international connectivity and a landing facility for Project Oxygen’s global fibre network. He explained that this would involve negotiating with OTE to connect to its submarine cable at Crete if Project Oxygen landed in Crete or Cyprus rather than mainland Greece. He said he referred to the Greek end of the group’s project as “Project Farpoint” and to the UK end of it (at Burgess Hill) as “Project Nearpoint”. He told them the group would be seeking funds “this year” and that the target date for securing initial funding was February 1998. He said he asked them to confirm within 10 days what information was outstanding with regard to the restructuring. He explained that funds were to be raised through an internet placing in March/April 1998 and through a larger fund-raising exercise towards the end of the year. Mr Robinson said he also raised with CV the use of an EEIG for the project, which he wanted CV to consider. An EEIG is a vehicle for promoting co-operation between European enterprises. It enables members to benefit from the combination of activities whilst retaining their own legal and economic independence. It owes its origin to EC Regulation 2137/85. An EEIG has the legal capacity to enter into contracts, to act in its own name and to sue and be sued.

Mr Heath’s file note of this meeting consisted of a series of manuscript jottings. They recorded that Mr Robinson referred (inter alia) to (i) the use of MVDS technology in relation to “Nearpoint”, a reference to the MVDS tests being carried out at Burgess Hill, part of a Convergence programme known as WintraNet; (ii) to “Silverstone” being the “only supplier in Europe”, which I find referred to components for the MVDS technology; (iii) to a plan to deliver a bi-directional system by 2000; (iv) to Project Oxygen, a submarine cable, and Greece; (v) to the fact that he was “now planning ? public offering 3/4/98,” which I find referred to the proposed internet placing; and to (vi) the subject of EEIGs. It contained the following: “? Next week – offer; ? resolve by February; ?£1.5m in cash; £? Debt.”

As for the “Silverstone” reference, Mr Robinson raised at this meeting the subject of two companies: Silverstone Electronics Limited and Silverstone Telecom Limited. They were technology and engineering companies based in Milton Keynes which had run into financial problems, but which Mr Robinson had identified as capable of supplying technology crucial to the 40 GHz systems on a commercial basis, namely transmitter and receiver components. Convergence had been dealing with them. It later acquired these companies, or their assets, for what Mr Robinson called a relatively modest amount. In the event the companies could not deliver and they went into liquidation in 1999. But Mr Robinson also said that at no stage was Silverstone the only source of the relevant parts: Philips, Marconi, Ogier, Millitech, Hughes were other sources. Mr Heath’s note continued with various jottings in relation to “Farpoint” but recorded little which afforded any real clue as to what was said about Greece. The note contained no narrative description of what particular advice or instructions Mr Robinson was seeking from, or giving, CV.

Mr Ladimeji also made a note of the meeting. It opened with the heading “Project Nearpoint” (ie Burgess Hill) and referred to the MVDS 40GHz technology being used there. It referred to Project Oxygen’s “global fibre network” and to the proposed use of CVL’s International Facilities Licence. It concluded the “Project Nearpoint” section with the words “Target date:- February.” That appears to be in line with Mr Heath’s note. Under the heading “Project Farpoint” Mr Ladimeji noted simply “negotiate with OTE to connect to submarine cable – seeking funds this year.” He concluded the note by writing “Check what info o/s for restructuring – 10 days – 25 January.”

On 19 January Job Maats produced the first draft for the proposed internet placing. He is Dutch and had a background in financial services, having worked for Citibank in Greece. Mr Robinson had met him in December 1997 at the Project Oxygen presentation in Las Vegas. It is he who had been the inspiration of Mr Robinson’s ideas (a) to have an internet placingand (b) that there were potential benefits by using an EEIG as a structure by which the Convergence group might exploit the Silk Route project.

On 22 January Mr Robinson wrote to Mr Bairactaris, a Greek lawyer acting for Convergence. He said:

“… we now need to move forward and make formal applications for Data and/or CATV [cable television] licences.

We have continued our development work on producing an ‘end to end digital bi-directional MVDS (wireless) network’ and are currently operating a trial/demonstration network in the UK. We now need to move on and acquiring [sic] licences as part of the plan.

I would be grateful if you could investigate the requirements of the above licences such that we can have a meaningful discussion when we return to Greece.”

That records the importance Mr Robinson attached to licences. Without them there could be no project. Throughout his oral evidence, however, Mr Robinson played down their importance, often referring to them as a “process” and conveying the impression that their grant was a matter of formality and time. That was an oversimplification, and whatever Mr Robinson may have said at the trial, at the time he was saying and writing very different things.

On 26 January Mr Robinson had a telephone conversation with Mr Heath. He wanted advice on whether Gibraltar would be a suitable jurisdiction for an intermediate holding company to act as the fund-raising vehicle in a private placing for the Silk Route project. The Gibraltar idea had come from Mr Maats, the then idea being to have an internet placing.Afurther idea was that the Gibraltar company would fund a proposed EEIG, which would itself have contracts with a Convergence company and with another entity, Alcatel, which would be a party to the supply and development of the MVDS.

Mr Heath conveyed the matter to Mr Ladimeji for his comments. His note recorded that, since the meeting on 15 January, Mr Robinson had spoken to Mr Maats about his plans for ‘Farnet’ [sic: on 15 January it had been “Farpoint”]. Mr Maats apparently favoured Gibraltar for the “private placing”, and Mr Heath’s note showed he understood that to be an internet placing. His note recorded that the “Gibraltar coy to fund EEIG which would have contracts with Alcatel, Convergence etc and would have MOU (?).”

On 2 February Robert Clinton of Clintons Medtrust Group Ltd (“Clintons”), a Gibraltar company, wrote to Mr Ladimeji in response to his inquiry, telling him that Clintons could assist in setting up a Gibraltar company. His letter also said that Clintons could assist with “the personal tax residence in Gibraltar”. Mr Robinson had by then been considering establishing a residence there. Mr Ladimeji reported to Mr Robinson on 5 February. He provided comparisons of the tax regimes for companies in Cyprus and Gibraltar and as places to have a personal tax residence. He advised that “One of the major issues for the company would be the fact that Cyprus has a good network of double tax treaties whilst Gibraltar has not.” He explained that each jurisdiction had several types of company for tax purposes, including exempt, offshore and resident companies. On 10 February he sent further fax advice to Mr Robinson. Its essence was that he understood that Mr Maats (whom he referred to as “your banker”) wanted to do the internet placing out of Gibraltar, but he wished to advise Mr Robinson that he did not need to use a Gibraltar company for this and that to do so would not necessarily be cheaper.

Mr Robinson then had various meetings in Gibraltar on 12, 13 and 14 February. On 12 February he met Andrew Haynes, a Gibraltar barrister and partner in the firm of Haynes & Trias, at which he outlined the background to the Convergence group, explained the WintraNet system and (as Mr Robinson later summarised it in a fax to Mr Mercer on 17 February) “our activities in Greece leading up to the establishment of the proposal of Marco Polo [the Silk Route project] and the Internet placing (MPIP) through a Gibraltar plc.” On 13 February Mr Robinson had a meeting with Keith Lawrence, which Mr Haynes had arranged. Mr Lawrence was a former partner of Arthur Andersen and was by then an independent chartered accountant specialising in tax matters in Gibraltar. He was also introduced by Mr Haynes to Guy Stagnetto QC, who was said to be a key figure behind the Gibraltar Government. Mr Lawrence and Mr Stagnetto were both regarded by Mr Robinson as people who could provide assistance in relation to the project. On 14 February Mr Robinson met Michael Llamas, an English and Gibraltarian barrister as well as being a Parisian avocat. Mr Robinson had been advised that Mr Llamas “would be useful in identifying at an early stage the legal battles which may necessarily be required with respect to OTE’s use of dominant position in Greece and inhibiting the progress of Marco Polo’s landing sites for the Karina Cable and Project Oxygen.”

The outcome was that Mr Robinson did not give Mr Haynes any specific instructions at that stage, although Mr Haynes’s understanding was that he might do so later. On 16 February Mr Haynes wrote to Mr Robinson referring to the various meetings, and recording that “Should you wish to proceed our instructions are as follows:” They fell under five heads. The first was to advise on the establishment of “a Gibraltar registered plc to generate investments pursuant to an Internet placing.” The second was to advise “on the establishment of an EEIG to be registered in Gibraltar or elsewhere in the EU.” Mr Haynes described the object of the EEIG as being “to undertake one or all the telecommunications projects identified by your company for realisation in Greece: (a) Submarine cable link Athens, Crete, Venice (b) Project Oxygen (c) Wintranet.” That summary appeared to make no reference to the proposal to establish a teleport in Athens. The third was to “recommend professional advisors to assist both in establishing the above structures [by inference, the Gibraltar plc and the EEIG] and further to provide management and/or board members as may be required.” The fourth was to “plan ‘exit route’ for investors to scheme.” The fifth was to “advise on tax planning advantages available to include prospects for Captive Insurance etc.” He continued:

“In light of your requirement for an early ‘placing’ we propose that all parties work towards preparing the prospectus to be issued by the Gibraltar Plc. This will serve to focus the opinions and advice of the various contributors: Gibraltar: Keith Lawrence (KL), Guy Stagnetto (AVS), myself (AJH) – London/Paris: Ted Mercer (RM), Michael Llamas (MLL) and Convergence.

I note that you have a ‘blueprint’ of the ‘Mems and Arts’ which you would like to see incorporated into the Gibraltar Plc. Please forward as soon as possible.”

Three things are to be noted about that. First, there was apparently no role for CV in what Mr Robinson had been discussing with Mr Haynes. Second, it is obscure how the proposed “Gibraltar Plc” was to fit in with the restructuring exercise upon which CV were advising. Third, that as Mr Robinson had indicated he wanted an “early” placing it was necessary to make a start on the preparation of a prospectus, which would require a multi-party contribution. At no point thereafter, I find, were any steps taken to draft a prospectus for an internet placing. The first draft prospectus ever produced only emerged in October 1998, after the idea of an internet placement had been abandoned.

On 17 February Mr Robinson sent Mr Mercer a copy of Mr Haynes’s letter and explained the background to it. He continued:

“You will note that Andrew [Haynes] is suggesting that the MPIP be a foundation document around which usefully we can determine the relationship of all parties, and to this end, I would like to make a supreme effort to have a more comprehensive draft of the MPIP completed by the end of the week.

Following on from our conversation today, I know that you are very busy preparing the list of activities to be achieved by Silverstone and were also going to cast your mind to the positive arguments for moving the Project Oxygen management centre from Cadiz to Gibraltar. I appreciate, therefore, that you are already extensively committed in matters relating to Convergence (as well as to your other clients) and therefore, Job [Mr Maats], Gail [Mrs Robinson] and I will attempt to progress the MPIP at this stage.

Furthermore, as our legal activities are on the substantial increase, now would be a good time to review the matters relating to fees and future projected costs for this and other projects as we do not wish to fall out over such minor matters as money.”

It is not clear to me that in the first quoted paragraph Mr Robinson accurately summarised what Mr Haynes had said in relation to the prospectus for the proposed placing. But, as I have said, despite his expressed good intentions in relation to its drafting, nothing happened to that end.

On 26 February Mr Maats wrote to Mr Haynes in advance of a meeting with him scheduled for the following Friday (either 27 February or 6 March) to be attended by Mr Robinson, Mr Lawrence and Mr Maats. He raised various regulatory concerns which presented potential obstacles, including ones of timing, to the proposed internet placing. It is worth quoting what he said:

“1)

Is it realistic, within the timetables and the framework set by Project Oxygen for a Gibraltar Plc to comply with the EU Second Investment Directive requirements and thereby being capable of offering the securities of the Gibraltar Plc to EU investors at large? How would Gibraltar’s interpretation of the Second Investment Directive differ from the UK’s interpretation of the Second Investment Directive i.e. the Public Offers of Securities Regulations 1995. (Statutory Instruments, 1995 – 1537, which was made on 14 June 1995). Is it realistic to issue a prospectus from Gibraltar which not only complies with the EU’s SEC type requirements, but also with the Australian Securities Commission and the US Securities and Exchange Commission? (As Alan [Mr Robinson] will have explained, this is critical as we intend to offer securities beyond the EU to certain ethnic Greek diaspora communities. We can procure virtual travel into the EU should this be considered available!)

2)

Is it realistic in view of the early stages of Gibraltar’s desire to assume a more substantial standing in the global offshore community to base a professional team for a project with global first-mover advantages out of Gibraltar? To what extent will it be required to use agents in other jurisdictions? How can control over the team and professional costs be maintained?

3)

What is the current status of Gibraltar’s compliance with the EU telecoms deregulation and the general implementation of the EU’s directives in this arena? Are there any current impediments in the Gibraltar legislation and regulatory climate and or sovereign status, even prior to the regularization of the Gibraltar telecoms regulations, which would inhibit the landing of a submarine cable by Project Oxygen? Are there any impediments to the operation of one of the world’s three control centres for Project Oxygen out of Gibraltar? (rather than Cadiz).

We are looking forward to exploring these issues and then moving forward with due speed, subject to satisfactory answers on the above. …”

On the same day Mr Mercer wrote to Ms Barker, Mr Robinson’s personal assistant. His letter was mainly concerned with the proposed Silverstone acquisition, but he also asked that Mr Robinson should be reminded that he had still not heard from Mr Haynes.

At some point in March the Convergence group formed Silverstone Wireless Communications Plc (“SWC”), which acquired the assets of the two Silverstone companies. SWC was later described in the Directors’ Report on PLC in its Report and Accounts for the year ended 31 December 1997 as “a leading European manufacturer of millimetric transmitters, receivers and associated equipment.”

On 5 March Mr Stagnetto sent Mr Haynes a memorandum summarising his understanding of Convergence’s then plans with regard to the internet placing. It was to be launched from Gibraltar by a Gibraltar public company, whose objects were “to fulfil one or more telecommunications projects in Greece.” The placing was to be directed primarily to expatriate Greeks in Australia, the USA and Canada. Mr Maats “a Dutch financier and an expert in telecommunications” was to “join” Mr Robinson in the Greek venture. Mr Robinson and Mr Maats wanted to establish an EEIG to be formed by the Gibraltar plc, the EEIG to be between that company and the investors in the project. Mr Mercer was advising, and Mr Llamas had also been introduced into the legal team. The Greek project comprised (i) the submarine cable from Athens to Crete to Venice; (ii) participation in Project Oxygen (funding of cable connection to Greece); and (iii) a “Wintranet” wireless system in Athens (again, no reference to a teleport). Convergence proposed to make a full presentation to the Gibraltar Government on about 15 March with a view to knowing that they had its support “before making any final decision.”

On 9 March Mr Ladimeji faxed Mr Robinson asking for his instructions as to where he would like the intermediate holding company to be incorporated so as “[t]o enable the group reorganisation to go ahead which will result in [SA] becoming the ultimate holding company …”. He reminded Mr Robinson that the proposed structure inserted an intermediate holding company between SA and PLC. He said this “could be a Luxembourg company, like SA or you may prefer it to be a Gibraltar company. Please let me know which you prefer.” He said he also needed to value SA and PLC for the purposes of the exercise and that he had asked New World to provide the relevant information as regards SA. It does not appear that Mr Ladimeji had been kept informed by Mr Robinson of the activities he had been pursuing with regard to the proposed placing by a Gibraltar company.

On the same day Mr Ladimeji faxed Mr Evans of New World a message to the effect that the Convergence group was about to be re-structured by making SA the ultimate holding company. To that end he said that CV “urgently need to have up to date financial information relating to [SA] which will permit a valuation of [it] to be made.” He asked for a copy of SA’s latest accounts and management information. He provided Mr Evans with a summary of the steps involved in the reorganisation. On 10 March Mr Nash responded by sending Mr Ladimeji a draft balance sheet as at, and profit and loss account for the year ended, 31 December 1997, explaining that the accounts remained to be finalised. He explained that he was “currently liaising with David Waterhouse in order to assist him with the preparation of consolidated accounts for the Group as a whole.” Those draft accounts showed SA as having net assets of £470,184 and as having suffered a net loss for the trading period 12 December 1996 to 31 December 1997 of £184,507.

Mr Robinson instructed Mr Ladimeji that the intermediate holding company was to be a Gibraltar company. On 12 March he instructed him to carry out the group reorganisation proposed in the November 1997 report. It was to be completed by 16 March 1998. Mr Ladimeji immediately wrote to New World asking it to arrange for a Jersey shelf company to be available for CV by the following day (this was the company earlier referred to as “Jerco”). On the same day he faxed a message to Clintons (in response to theirs of 3 February) asking them to obtain a shelf company in Gibraltar which was to be wholly owned by SA. He gave Mr Robinson a choice of names for the Gibraltar company. On 13 March Mr Robinson chose the name Fergana Holdings Limited (“Fergana”). Clintons carried out the acquisition of Fergana as a Gibraltar company. Their proforma invoice to Fergana (there described as “New Exempt Company Limited”) included a fee of £100 for an application for exempt company status. This status later proved to be a problem.

Mr Ladimeji implemented – or, Convergence would say, purported to implement - the restructuring on 16 March 1998, the first of two stages in the operation, the second being on 6 April 1998. The operation was complicated and it is unnecessary to detail the steps in it, which essentially followed those explained by Mr Ladimeji in his letter of 14 November 1997. They were directed at inverting the group and making SA the top company.

On 18 March Mr Robinson attended a meeting in Gibraltar with Mr Haynes and Mr Stagnetto. The outcome was that a further meeting was to be held “regarding the structure of the Gibraltar Plc and corresponding EEIG” during the following week, which Mr Robinson wanted Mr Mercer to attend. On 20 March Mr Maats sent Mr Haynes what he described as “notes which may assist for the initial briefing” for a meeting Mr Haynes was that day having with Mr Stagnetto and Mr Lawrence. It included a less than immediately comprehensible diagram and a two-page document headed “Marco Polo Contracting with EEIG backed by Protected Cell Trust (read in conjunction with the same titled diagram).” Mr Maats sometimes writes in a style which makes difficult a summary of what he is saying and I do not propose to attempt it in relation to this document. It does not advance the story.

On 24 March Mr Haynes sent a fax to Mr Robinson summarising what they had agreed would be the agenda for a meeting on 26 March. It was to be attended by them, plus Mr Stagnetto, Mr Lawrence, Mr Llamas and Mr Mercer. The agenda was: (1) summary of the project, including (a) legal structure, (b) outline of prospectus, (c) investment targets and description; (2) summary of undecided aspects of the project; (3) assignment of tasks to individual team members and target dates for completion; and (4) remuneration proposals. The agenda showed the proposed internet placing to be still at the earliest of stages.

That meeting took place, although there is no note of it. Mr Robinson’s evidence was that Mr O’Beirne was also there and that its purpose was to identify what had to be done to finalise matters swiftly so that the internet placing could proceed as quickly as possible. He said that whilst they were able to make progress on most issues they could not make a final timetable because the necessary restructuring of the Convergence group had not been completed and there was no report on it. He said in his witness statement that the meeting lasted around five hours and was adjourned with various minor action points but “the key issue to be addressed was the valuation to complete the structure.” He said that CV were instructed to advise, complete the valuations and get the corporate structure in place with documentation and supporting report as quickly as possible so that the internet offer could go ahead in May 1988. He said that CV failed to deliver and thereafter the dates kept being put back, first to June 1998, then to July 1998, and then later until eventually the concept of an internet placing had to be abandoned altogether. The valuations to which Mr Robinson was referring were those necessary to identify the proportions in which he and the Broadband trust were to hold the shares in SA, a matter not obviously critical to the progressing of any internet placement.

On 30 March Mr Robinson wrote to Mr Tzavellas, with copies to Mr Bairactaris and Mr Ladimeji, saying that the outcome was that 31 May had been set for “the completion of the private placing documentation associated with the funding of Marco Polo through the Gibraltar Plc.” His reference to “the Gibraltar Plc” was an odd one. He knew by then that Fergana had been formed, and so named, and that it was not a Plc. There is a question as to whether or not he was in fact here referring to Fergana. He continued:

“Following the meeting at your [Mr Tzavellas’s] office, I spent several hours with George Bairactaris and Christina Gennadopoulos going through in greater detail the background information that I discussed with you and have suggested that either George or Christina contact you directly.

Whilst the timetable of the 31^st May is tight, I believe it is a realistic objective for the specific documentation required to be generated in Gibraltar, however, a certain number of material contracts will be required both out of the UK and out of Greece.

A considerable amount of the documentation associated with the UGS bid can be updated and will be applicable for this Marco Polo placing. However, consideration will now have to be given to transforming [CCGE] into a Societe Anonyme (SA) as previously envisaged and I have discussed this matter with George Bairactaris. It is also highly likely that a further SA will be required to be formed into which the licence applications can be made for the submarine cable to connect Athens with Crete.

A second major component is the purchase/formation from new/joint venture required to establish an Internet Service Provider (ISP) company. To this end, I am most keen to meet with the representatives of Singular as discussed with you at our last meeting.”

That letter showed there was much to be done before an internet placing could be made. It contained no suggestion that progress was being held up by any perceived deficiencies in, or uncertainties about, the structure of the Convergence group, nor did it refer to the matter which Mr Robinson said CV had been tasked to do.

Mr Maats wrote to Mr Haynes on 30 March. He opened by referring to the vehicle for the internet placing being “a Gibraltar Plc in the process of formation.” Either he did not know about Fergana; or did know about it and did not understand it was to be the chosen vehicle. I quote a brief section of the letter by way of a sample of his crisp contributions to the process:

“We believe that our meeting now positions us to focus all our efforts on a repetitive, tap like, structure for funding Marco Polo’s financial and intellectual capital intensive commercial development at ever reducing systemic risk to thereby procure dilution suffered by the principals declines in line with the exponential growth in Marco Polo funding requirements over the next 12-18 months.”

The second stage of the re-structuring of the Convergence group took place on 6 April. It involved the transfer to Fergana of PLC’s shares in Mid Sussex, East Grinstead, Convergence (Yeovil) Limited (the LDOs) and Mainline Television Limited. All were transferred for cash at par.

On 3 April there was a meeting at CV. The file note suggests that Mr Robinson raised a question relating to the legal aspects of EEIGs, a note against which the note-maker added three question marks. On the same day Mr Robinson wrote a letter of complaint to Mr O’Beirne as to the quality of the documentation he had prepared in relation to the re-structuring that had taken place on 16 March. His complaint was that he and Mrs Robinson had been asked to sign minutes of board meetings of East Grinstead and Mid Sussex directed at authorising the registration of Fergana as the successor holder of the shares in those companies formerly held by PLC. The problem was that one board meeting purported to take place in Athens and the other in Reigate – both on the same day. Mr Robinson explained that he and his wife could not be in two places at once and that CV had anyway advised him not to attend board meetings in the UK. He said at the end of his letter “Such repeated mistakes on critical legal documentation is [sic] causing us some considerable concern as to what other details may have been overlooked and not picked up yet.” He again made no reference to the instructions he claimed to have given CV on 26 March.

On 6 April Mr Llamas sent a fax to Mr Maats, Mr Robinson and Mr Haynes. He referred to the meeting on 26 March and attached a 23-page questionnaire to which he wanted answers as a preliminary to proceeding with “the initial draft of the contract for the formation of the EEIG.” The EEIG was intended to be registered in Gibraltar. On 8 April Mr Maats wrote to Ms Barker reminding her that he was still awaiting the questions about EEIGs that Mr Robinson wanted him to answer.

Mr Mercer sent a fax to Mr Robinson on 8 April 1998.It was prompted by Mr Maats’s fax to Mr Haynes of 30 March. It occupied over seven pages and dealt with a mass of matters. Mr Mercer referred to the EEIG proposal and to the proposed internet placing. He raised doubts as to the use of an EEIG as a “pre-formation” entity in relation to what he referred to as the “flotation of a new Gibraltarian Plc.” He was there addressing the question of whether the expenses of such a flotation could properly and lawfully be channelled through an EEIG, which he understood to have been Mr Maats’s proposal. On the other hand he suggested that use of an EEIG in respect of supply in the Marco Polo structure was sensible. As for the proposed internet placing, he did not suggest there were any perceived difficulties arising out of the structure CV had devised, a topic to which he made no reference. He identified three specific areas where, in his experience, prospectuses in internet placings most frequently went wrong, and he added a fourth peculiar to the Marco Polo project. They were (i) inappropriate or wrong wording or content relating to the applicable financial services regulations; (ii) “inadequate verification or poor description, particularly of the regulatory aspects”, the regulatory aspects being, in this context, those relating to telecoms projects; (iii) unsustainable financial projections and assumptions; and (iv) the need to ensure non-availability of the web pages in jurisdictions where no financial services clearance has been sought: in particular, the USA, Australia, Japan and Canada. He explained that, with an end of May target date, it was necessary very quickly to (i) codify the financial services requirements that would need to be made of the web master; (ii) decide what countries the pages should be available in; and (iii) work out what security measures were needed as the internet was notoriously insecure. He added that “I do not think these are going to be provided by the web master (or combination of suppliers) without asking. I rather think it is going to be the other way round and I think the sooner we get on with identifying who is going to do this and getting into contractual negotiations with them the better.” On the same day Mr Mercer sent a further, slightly edited, version of the same letter to Mr Robinson, of which he also sent a copy to Mr Maats. Mr Mercer’s evidence was that he was unaware of any structural problems at this stage. The contents of his letter are inconsistent with the impression sought to be given in Mr Robinson’s witness statement that the only matter which made the timetabling difficult was the question of the outstanding valuations.

Ian Gamse was a financial consultant who had been introduced by Mr Maats in April 1998 and had a brief involvement in connection with the proposed internet prospectus. He entered the stage on 15 April 1998 when he produced (and sent to Messrs Robinson, Maats, Haynes, Woodward and Waterhouse) an outline of the process that had to be gone through to produce the prospectus. He said the first draft of the prospectus needed to be produced by 30 April 1998. He made no suggestion that there was any problem with the structure CV had devised. He said the draft would have to be sufficiently complete to be able to be shown to the Gibraltar and UK financial authorities “and ensure that they will be happy with the final version – which means that it must cover all the points that have to be covered even if the final detail, in the form of cashflow projections or whatever, isn’t yet available.” He said it would be based on the Alternative Investment Market (“AIM”) prospectus prepared by TJG, subject to any amendments suggested by Mr Haynes. As regards the responsibilities for its creation, Mr Gamse proposed that he would be responsible for co-ordinating the information and compiling it; Mr Haynes would provide or procure the legal opinions; Mr Lawrence would provide the auditor’s view; and “[Mr Robinson] and [Mr Maats] as directors of Marco Polo will have final sign-off.” So Mr Gamse understood that Mr Maats was to be a director of the placing vehicle. He then listed a page and a half of matters that would need to be covered in the prospectus, with a suggestion as to who would be responsible for providing the information under the various heads. It covered a wide field and plainly represented the potential for an enormous amount of collective work. Given that not a finger seems by then to have been lifted towards collating the heads of material he listed, the notion that any sort of draft prospectus could be completed by 30 April was probably close to absurd; and no prospectus was ever produced. The burden of the task so identified was plainly brought home to Mr Robinson, who sent a fax to Mr Maats on 20 April. It clearly reflected the time pressures he regarded himself as then under in relation to the proposed placing. He said:

“In these circumstances I have not been able to give the level of attention to the substantial volume of documentation concerning ‘Marco Polo’ that I have received in the week, to enable me to make the critical judgements required to allow matters to proceed beyond this point.

In particular the nature of your various correspondence and dialogue, and that of Ian Gamse, with members of the management team of [PLC], have highlighted the need to now fully address and agree upon such basic fundamentals as proprietary information, confidentiality, references, protocols, objectives, ownership structure, management roles, areas of expertise, commitments, costs and cost controls in our proposed joint venture activities.”

That letter reflected that Mr Robinson was engaged in some joint venture proposal with Mr Maats, although it is obscure what it was. He plainly was not in a position to launch an internet placing within the immediate future: much remained to be done. I find that the reference to “ownership structure” was nothing to do with any suspicion by Mr Robinson that there were deficiencies in the CV restructuring that had just taken place. I also find that he harboured no concerns about this at this stage. Moreover, in the context, he cannot have been referring to any such deficiencies even if he had suspected any: they were not matters he had to “agree upon” with Mr Maats, with whom they had nothing to do. Mr Maats responded by fax on the same day. He referred to “our equity relationship” and “our joint Marco Polo Partners plans”. He expressed concern about the delay in the formation of a “pre-formation” EEIG. He had by then seen Mr Mercer’s fax of 8 April, but appeared not to have been moved by Mr Mercer’s expressed doubts as to the scope for using a pre-formation EEIG in relation to the Marco Polo project. Mr Maats then said that the two-month target “for cranking out a prospectus of Marco Polo’s nature is generally considered to be ambitious”, that it did not allow for many contingencies and that “[t]ime is thus truly of the essence, if we are to secure the requisite commitment of one million euros from prospective, yet unidentified, greek [sic] pre June 1 flotation shareholders.” That suggests there was an additional plan to raise an initial fund ahead of the internet placing.

On 21 April Mr Robinson faxed a letter to Mr Maats, having by then read the material provided to him by TJG. He complained that Mr Maats did not appear to have picked up the message he had conveyed in the two paragraphs of his fax of 20 April (quoted above) He had considered Mr Mercer’s advice and listed 12 commercial and regulatory matters with which he was “not comfortable”. They were (i) the use of a pre-formation EEIG, (ii) “[t]he controls in place or envisaged for the creation of the placing documentation”, (iii) the present ability to comply with financial services regulations, (iv) the then lack of concern “for a formal banking association”, (v) the objectives of the fund raising and the application of the funds raised, (vi) the “non-structured and non-approved use of Convergence resources, i.e. human, physical and Intellectual”, (vii) “[t]he target the diminished and much changed investors” [sic], (viii) the lack of any defined management team and structures, (ix) financial controls pre- and post- offering, (x) the role of the professionals, (xi) the identification and the role of the webmaster, and (xii) the members of the Marco Polo Plc EEIG. That list represents a comprehensive admission by Mr Robinson that – even accepting he had earlier formed a genuine intention to launch an internet placing in the Spring of 1998 - he had realised that by 21 April it had not got beyond the starting blocks. His list did not, it is to be noted, add that “anyway we can’t proceed with the placing until the Convergence corporate structure is sorted out and validated to my satisfaction.” That is a point which appears only to have occurred to him in 2003, when Convergence applied to amend its Defence and Counterclaim so as to blame CV for the non-progression of the internet placing. I find he did not utter it then because it was not then a point.

That list of concerns was not the limit of Mr Robinson’s concerns expressed in that fax. He complained that in two respects Mr Maats appeared to have been acting without authority. He complained that Mr Gamse appeared to think that reliance could be placed on contributions from Mr Woodward and Mr Waterhouse which had not first been cleared by Mr Robinson, Mrs Robinson or Mr Kemp. He complained that Mr Maats had been interfering in the affairs of Silverstone without prior reference to himself, namely by way of meetings with certain individuals. Mr Robinson wanted Mr Maats’s role clarified. He wanted to know how he came to describe himself to Mr Haynes as a “Dutch financier and an expert in telecommunications”. It is plain that Mr Robinson was warming up to a dispute with Mr Maats, saying as he also did:

“We are all very keen to move on in an expeditious and cost effective fashion, but not to the detriment and risk of destabilising our established programme for the Burgess Hill Proof of Concept, the ITC trials, Wintranet and our other affairs to which you are not a party.”

On 21 April Tom Mackay, another TJG partner, sent a fax to Mr Maats. He had had personal experience of participating in an internet placing and so was able to offer particularly useful advice. The thrust of his advice was that Mr Maats’s assumption that compliance with the regulatory requirements of one EC member meant that there would automatic compliance with those of other EC members was unsafe. He explained that EASDAQ companies had found the problems to be insurmountable and that what they were doing was “issuing the prospectus complying with the laws of one or two European countries and thereafter doing private placements in other countries.”

Mr Maats replied to Mr Robinson with a 13-page letter of 22 April. There is no need to detail what he said, although it is material to note that amongst other things he observed that “… to the best of my knowledge we have never seen any business plan, strategy or commercial outline on Marco Polo from your side. Hence in the vacuum and in view of the time constraints repeatedly emphasized by you, we jointly agreed to perform certain activities in parallel. If you are now prepared to relax the time constraints which you previously indicated needed to be achieved, then we can do all activities serially.” It is no surprise that Mr Maats had not been shown any business plan. That is because none existed. Mr Maats’s letter indicated that some deal had been struck between him and Mr Robinson at the Caesar Palace Hotel in Las Vegas in December 1997, although he does not identify it beyond referring imprecisely to “our joint Silverstone Holdings vehicle”, in respect of which he complained that Mr Robinson had “possibly” appointed directors without prior consultation. It was Silverstone that led to the final breakdown between Mr Robinson and Mr Maats.

Mr Robinson responded by fax to Mr Maats on the same day. He said that Mr Maats had failed to address in substance “the critical issues facing our potential joint venture activities.” He said that Mr Mercer’s letter of 8 April had been “very clear about the non-applicability of an EEIG as a pre-formation entity for Marco Polo, but you choose to pass by such warnings with somewhat flowery rhetoric.” He said that “[u]ntil we can sort out some very basic principles there seems to be little point in pursuing further discussion of EEIGs and the Marco Polo placing.”

This bitter exchange marked the end of the Robinson/Maats relationship. Mr Robinson wanted to sever it and on 22 April he sent copies of the recent Maats/Robinson exchanges to Mr Mercer. On 24 April Clare Ferguson, a litigation partner in TJG, wrote to Mr Maats on behalf of Mr Robinson, PLC, SA, Corsaire Limited, Silverstone Holdings Limited and all their associated companies giving him “formal notice determining with immediate effect all and any agreement and/or joint ventures in place between you and any of our clients.” The principal cause of the breakdown was some dealings Mr Maats had had with senior executives at Silverstone. There was a threat of litigation against Mr Maats and of disciplinary proceedings against the executives.

On 27 April a Convergence diagram of the re-structured group was created. So far as material, it showed SA as the ultimate parent and as the 100% owner of Fergana and CCGE. It showed Fergana as the 100% owner of (inter alia) Mid Sussex, East Grinstead and PLC. It showed PLC as the 100% owner of CVL.

Mr Gamse did not produce a draft prospectus by 30 April 1998 or ever, although he had by then at least obtained some limited financial information from Mr Waterhouse. Mr Robinson’s explanations about the production of a prospectus in his oral evidence were as follows. To the suggestion that no prospectus was ever produced, he said that he thought “we were all satisfied that we had the substance of a prospectus.” To the question whether any draft had actually been produced, he said he could not recollect “where we got. We were all comfortable that this was not a problem.” The essence of his evidence was that the required prospectus was a much cheaper document to produce than a prospectus for an AIM or a Yellow Book placing. He said that “we felt we had all of the components for this.” He said it was a very simple document. He said there were drafting meetings with TJG in May 1998. That is not reflected in the documents and Mr Mercer confirmed in his oral evidence that he was not involved in any such meetings at any time before September 1998. The first draft prospectus ever produced was dated 15 October 1998.

By May Convergence was no longer contemplating an internet placing during that month. On 13 May Ms Ferguson had a two-hour telephone consultation with Richard Spearman QC. He was advising Convergence on its dispute with Mr Maats. The note recorded that a placement was still contemplated at that stage and reflected Mr Spearman’s concern as to the impact which any litigation might have on it. In her subsequent letter of 18 May to Mr Robinson, Ms Ferguson recorded her own understanding that the then intention was that the initial placement “may be made” by “late summer”.

On 14 May Mr Robinson wrote a courteous letter to Mr O’Beirne apologising for an omission to pay a £20,000 bill and explaining that he would see what could be done about remedying the omission upon Mr Waterhouse’s return from sick leave the following week. He made no suggestion, let alone a complaint, that any shortcomings on CV’s part in relation to the re-structuring of the Convergence group had been or were holding up progress with the internet placing. If he perceived that CV were holding it up, it is inconceivable he would not have mentioned it: and it would be in character for Mr Robinson to decline to pay any further fees until the work was done.

On 21 May Mr Ladimeji sent Mr Robinson two sets of what he called “the reorganisation documents.” One set was described as “a copy of the original faxed documents which are for your records.” The other was described as “a clean set which needs to be signed again and which will be used for permanent reference purposes and for official records. The clean set has been adjusted for the manuscript emendations.” He added that “we still require a declaration of trust from Huntsmoor.” That was a declaration of trust in favour of Amalfi (ie Jerco) of Huntsmoor’s single share in PLC. On the same day Mr Dutta of CV (who had been involved with Convergence’s affairs in March) had a meeting with Mr O’Beirne. His note of it recorded that Mr Robinson had wanted CV to do some research on EEIGs but that “[Mr O’Beirne] knew nothing nor did he have any books we could refer to on this.” The note does not record the precise nature of the advice on EEIGs (if any such had been identified) that Mr Robinson wanted.

On 22 May Mr Dutta sent an internal memo to Mr O’Beirne summarising what had happened since March. He said the reorganisation of 16 March had been completed subject to the location of (a) the declaration of trust by Huntsmoor, which despite enquiry of TJG and of Ms Barker, was not to hand, and (b) a signed copy of the minutes of an SA meeting of 16 March. The transfers of 6 April had been completed. Mr Dutta recorded that the papers relating to this “were returned yesterday 21 May when [Mr Robinson], [Mr Ladimeji] & I had a meeting.” Mr Dutta listed seven matters he was involved in, including (i) researching into management charges from SA to its subsidiaries, (ii) collating all paperwork for “the three [sic] reorganisations since March 1998” (it is unclear what the third was), and (iii) drawing up the new group structure after re-organisation.

Mr Robinson’s oral evidence was that, following the re-execution of documents on 22 May 1998, he thought that all problems relating to the documentation of the re-structuring had been solved. The only outstanding matter in his mind was the need for valuations to which I have referred. He at no stage wrote to CV complaining that the omission to produce them was holding up the internet placement.

On 28 May Mr Ladimeji sent Mr Robinson some 30 pages of material on EEIGs he had extracted from the EU website, including a copy of the enabling EC regulation, No. 2137/85. The essence of it was to explain that an EEIG was a European creation enabling the formation of a partnership between entities of different member states (and carrying with it the usual liabilities inherent in partnerships) but being one also enjoying separate legal personality. He added that “I have been trying to contact you about the group structure.”

On 2 June the Gibraltar Financial Services Commission wrote to Mr Lawrence on the subject of prospectuses and compliance with regulations. New legislation was about to come into force. The Commission advised Mr Lawrence that it was unlikely that the proposed prospectus could be issued before then.

On 25 June Mr Robinson wrote to Mr O’Beirne. He opened by complaining about the level of CV’s fees being charged in relation to the group reorganisation. He then wrote:

“As expressed at our meeting [on 23 June], I am not satisfied that the international group structure has been completed to best purpose, or properly checked against our commercial needs for Marco Polo, and that the expenditure on establishing a tax efficient auditable structure has been properly and sufficiently documented. We, therefore, propose as suggested and tentatively agreed at our meeting that:-

a)

Dapo Ladimeji will validate the international group structure against the proposed Marco Polo placing and provide a written explanation and opinion as to its functionality and beneficial operation.

b)

Colin Heath provide in conjunction with David Waterhouse, an explanation of how particular activities will be allocated to group companies and the reporting and accounting structure/procedures that will best facilitate the annual audit and tax computation.

We would expect the above to be completed within the next 6 weeks and be available for:-

a)

Inclusion in our planned explanation of the International Group as required for the Marco Polo placing.

b)

The 1996 tax filing and 1997 Audit completion.

We remain concerned that the international structure proposed and executed on our behalf by Dapo and Chantrey Vellacott has not yet been completed to reflect the identified requirements of the Group and yet further substantial charges could yet be incurred to reach a point of satisfactory conclusion.”

Mr Robinson then agreed to pay £30,000 on account, with the balance of £46,000 to be “primarily paid to you upon completion of the Marco Polo documentation with inclusion of the additional work above scheduled for late August/early September.” I do not interpret that letter as reflecting any concern by Convergence that the March/April structural reorganisation had not been validly effected according to its purported terms, but rather as an imprecise expression of alleged concern that the new structure may not have been the best one for the group. Whatever the precise nature of the letter of validation that Mr Robinson was asking for, he wanted it for the purposes of his then proposed placing in late September or early October 1998.

On 1 July Mr Robinson sent Mr O’Beirne and Mr Ladimeji a background to the Silk Route project. He included a diagram Convergence had prepared of the then corporate structure of the Convergence group. It was essentially the same as that which Convergence had earlier produced shortly after the March restructuring but now showed (a) SA as also wholly owning an additional Greek company, Silk Route Systems SA, and (b) Fergana as the direct, 100%, owner of CVL. In the latter respect the diagram was wrong, the error being Convergence’s. Their previous diagram had correctly shown PLC as the direct, 100%, owner of CVL, and nothing had since happened to cause Convergence to understand that the position had changed. A further diagram that Convergence provided to CV at the same time shows the importance of Fergana to their then plans. It was to be the investment vehicle for the Silk Route project. Their then hopes were that it would be funded by equity subscriptions from (i) an internet placing, (ii) institutional funds, (iii) private Greek investors and (iv) SA. A further enclosed diagram, headed “Funding Requirements”, showed that the initial funding to be raised (in “Sept/Oct 98”) was €15m by way of an internet placing, which I understand included the €5m which Convergence had hoped to raise in March/April. This was to be followed by a proposed placement in March 1999, intended to raise €60m, which was to be followed in June 2000 by the raising of €200m.

On 30 July Mr Haynes sent Mr Robinson a fax raising various questions relevant to the placing. Mr Robinson’s response as to its overall timetable was “as soon as possible in Sept/Oct 9^th”. I infer that 9^th October 1998 (a Friday) was the far end of Mr Robinson’s proposed bracket.

On 24 August Mr Dickinson of CV sent a memo to Mr Ladimeji reminding him of the outstanding valuations that still needed to be carried out in order to perfect the March restructuring.

On 26 August Mr Robinson had a meeting first with Mr Mercer and then with Mr O’Beirne. During the morning he sent Mr Mercer a draft agenda for the first meeting, which included what he had separately listed as “Critical Issues to the Placing”. Those were (i) permits/declarations to/from the National Telecommunications Commission (“NTC”), the Greek national telecoms regulator, (ii) CTR landing party and access agreements, (iii) audited accounts for 1997, (iv) CV’s valuations/projections, (v) business plans for the Silk Route systems and for WintraNet (Convergence’s 40GHz technology project), (vi) formation of EEIGs and corporate structure, including management agreements, money transfers and tax work, and (vii) board of directors and banking support.

Mr Waterhouse had a meeting with Mr O’Beirne on 14 September. He summarised it in a memo of the same day which he sent to Mr Robinson and copied to Mr O’Beirne. They had discussed “Progress on Valuations, Business Plans and data for Prospectus.” Mr O’Beirne was working on two sets of valuations – as at 16 March and “now” – but to perform a proper valuation he needed a list of further material from Convergence comprising its business plans. Mr Waterhouse listed them, his list and memo recording that the required plans were not yet complete. Mr O’Beirne was about to go away on holiday and the memo recorded that Convergence must aim to have all the plans and other required information ready for his return on 5 October. He set out a timescale for the course of events, which estimated that CV’s valuations should be completed by 20 October. His timescale did not, however, suggest that the delay until then in the production of valuations would prevent the publication of a prospectus by 9 October, his penultimate entry reading “6-9 [October] Consolidate results for inclusion in Prospectus as ‘Illustrative Projection’”. The accountants’ report for the prospectus was to be based on the 1995, 1996 and 1997 accounts and work on the report was to be started straightaway.

In the event no internet placing was proceeded with. I do not propose to devote more time to the internet placing story. What is apparent from the documentary and oral evidence is that the Convergence assertion that it was prevented by perceived defects in the structure created in March/April 1998 is unfounded. It is apparent from a consideration of the endless material relating to the proposed placing that there were innumerable questions, problems and matters which had to be met and dealt with before any such placing could have been proceeded with, which simply never were; and the evidence provides no support for Convergence’s case that the only – or even the dominant – thing that held up the operation was the perception of structural problems following the reorganisation.

As to the various problems, no prospectus was ever drafted and I have referred to (what I find to have been) Mr Robinson’s disingenuous evidence about that. Financial plans were also required for the placing, but they were not obtained. In order to overcome that omission, Mr Robinson asserted that any prospectus would not need to include such plans, nor even any information about the financial position of the Convergence group. It would, he said, only need to include summary information of the cash required for the project. That evidence was at odds with what Mr Gamse had said in his outline on 15 April of what needed to be included in the prospectus (“financial status at or near 31^st May … financial projections”). Mr Mercer also disagreed with it, saying that any prospectus would have to include financials explaining how it was expected the business would develop. Next Convergence had not even procured the agreement of anyone to act as the webmaster. Mr Robinson’s case was that Barclays, Gibraltar, had agreed. That was untrue. No document was produced that supported it, Mr Robinson’s position in July 1998 was apparently that the matter was still “in discussion” (that was his noted comment on an inquiry as to the position from Andrew Haynes on 20 July). Mr Mercer also confirmed that, so far as he was aware, no agreement was ever entered into with any webmaster. Further problems that had to be solved were the regulatory ones. Mr Robinson brushed those aside, saying that by March/April “we pretty much had resolved what we could do, yes.” I find that evidence to have been untrue. Mr Robinson’s evidence was that this was TJG’s province; and Mr Mercer’s evidence was that at the meeting on 26 March 1998 there was uncertainty about the regulatory framework, and that for concrete advice to be given on it he would have needed to see a draft prospectus and the advice of the Gibraltar lawyers. He was provided with neither, and he did not give any conclusive advice on regulatory problems, with TJG not even getting to the position of advising Convergence in relation to which countries should or might be filtered out of the placement.

Even if, which I do not accept, Mr Robinson in fact had a perception that something remained to be done in the restructuring before any internet placing could be proceeded with, his assertion that this was the cause of the failure of the exercise was untrue; moreover, I find that he always knew it was untrue. Mr Mercer was unaware of any structural problems at the time. If Mr Robinson had considered that something needed to be done by CV in relation to the re-structuring in order to enable the internet placing to go ahead, he would not have hesitated to make the point loud and clear, including in particular to Mr Mercer. There is nocontemporaneous record of any suggestion that any shortcoming on CV’s part in relation to the re-structuring was preventing it from progressing the project, let alone a request to CV to put anything right so that it could be progressed. The first time that Convergence voiced a complaint in relation to the internet placing was five years after the event, when they sought to amend their pleadings to raise it. I find that the case that Mr Robinson sought to make in relation to the internet placing was baseless. The investigation of the relevant material in the course of Mr Robinson’s cross-examination showed this aspect of Convergence’s case to be absurd. The claim should never have been made. It was dead by the conclusion of Mr Robinson’s cross-examination; and Mr Mercer’s evidence buried it.

Mr Robinson’s evidence was that he was uncertain as to the then corporate structure of the Convergence group from at least about the middle of October 1998. It was this, and this alone, that was holding up the ability to market the project. CV’s case was that the main of many difficulties in Convergence’s path was the problem with the licences required for it: the obtaining of licences was the key to investor interest and no-one was going to invest in the project until they were obtained, or at least promised in principle. Convergence’s inability to obtain the required licences of course represented an inconvenient obstacle in the way of its case that the real cause of the failure of the project was CV’s negligence in relation to the corporate structure. I will explain how important Mr Robinson regarded the need to obtain them. But in his evidence he played down their importance, preferring to wrap up the licence problem in language of apparently careful imprecision.

On 2 October Mr Ladimeji sent a fax to Mr Robinson saying he had spoken about EEIGs to a senior inspector in the Revenue’s International Division. Mr Ladimeji said he had quite a volume of documentation on the Revenue’s approach to EEIGs, and he enclosed a copy of the relevant section of the manual. He did not offer any advice. He followed that up on 12 October with a report from a colleague, Caroline Williams, on EEIGs, referring in his fax to her conclusion that “the absence of clear legislation is a major draw back to SME’s [Small/Medium Enterprises] utilising the EEIG as a vehicle to promote cross border trading.” This was one of her three conclusions in her report which were all generally unenthusiastic about the use of an EEIG. Mr Ladimeji went on to add, somewhat enigmatically, “However, with the use of Luxembourg we should have a means of limiting the uncertainty.”

On 14 October Mr Ladimeji faxed Mr Robinson some advice on the Fergana problem, which had been discovered by LV in early September. This was admittedly a defect in the structure created by CV. He explained that SA’s Soparfi status exempted it from income and capital gains tax in Luxembourg on its holdings in foreign companies subject to certain conditions, one of which was that the foreign company must be subject to income tax exceeding 15% on profits. Fergana was at that stage proposed to be used for a public placing in the Silk Route project. It had not yet applied for tax exempt status, but if it did it would follow that SA would not be able to satisfy one of the conditions of its Soparfi status. Mr Ladimeji explained that the problem was not imminent as SA was not expected to dispose of any of its shareholdings in the near future. His first suggested solution was that a new (non-exempt) Gibraltar company be interposed above Fergana as a direct subsidiary of SA and that SA should transfer its Fergana shares to the new company. His second suggested solution was that Fergana should volunteer to pay tax in excess of 15% on its profits. His advice was that the former solution was the one to adopt and that the new Gibraltar company should apply for taxation status at 16%, which is to be compared with the basic tax rate in Gibraltar of 35%. That would not, however, have worked because the assumption of a voluntary tax status by the new company would not satisfy the relevant Soparfi condition. In any event it was said that a competent tax adviser would not have advised a scheme in which outside investors would have to invest in a company which exposed them to a 16% (or a fortiori a 35%) tax liability on profits. I need not consider this further. CV accepted that they were negligent in setting Fergana up without considering its impact on SA’s Soparfi status and that by this stage a solution to that part of the restructuring needed to be found. On 21 October Mr Robinson had a meeting with Mr Roberts, the senior partner of CV, at which he complained about Mr Ladimeji’s and Mr Heath’s work.

On 26 October Mr Robinson faxed to Mr Heath a Business Review of the Convergence group that Mr Robinson had prepared for inclusion in the group’s report and accounts for the year ended 31 December 1997. It referred to the focusing by the group of “substantial resources” on the commercial development of 40GHz systems; that Phase 1 of the Burgess Hill test programme had been completed with favourable results; and that Phase 2 had been commenced “moving the Group towards a full commercial Proof of Concept site with revenue producing customers.” It referred to the award of the UGS contract to OTE in April 1997, followed by the group’s re-examination of its policy and approach to the European telecoms market in preparation for deregulation commencing in 1998. It said that “Special emphasis was placed on the sourcing of IPLMDS components, sub-systems and complete modules for the creation of an End-to-End wireless delivery network.” It referred to the formation in March 1998 of SWC in place of (and with the assets of) Silverstone Electronics Limited and Silverstone Telecom Limited and described SWC as “now a leading European manufacturer of millimetre microwave transmitters, receivers and associated equipment.” Finally the review said:

“Subsequent to the year end, the UK Group of companies completed the planned structural reorganisation to bring the European, non European and American Convergence companies under the ultimate ownership of [SA] to facilitate the international expansion of the Group post 1998.”

That statement, from Mr Robinson’s own pen, recorded his then understanding that the restructuring proposed by Mr Ladimeji in November 1997 had been completed. The review, including the quoted statement, was later incorporated into the Directors’ Report in PLC’s accounts for the year ended 31 December 1997, which Mr Robinson signed as true on 19 October 1998. His evidence at the trial, however, was that at that time he “was far from clear” as to the extent that the restructuring had been completed, or completed properly. If that was true, he was being untruthful in the report he had produced and included in the group’s accounts. If he was being truthful in that report, he was being untruthful in his evidence. Mr Robinson recognised the dilemma and had no satisfactory answer to it, his responses being successively that: (i) he was “hopeful” at the time that the structure was complete, but that he suspected it was not, but had no recollection of this report; (ii) at the time he had just appointed PwC and so he “obviously had concerns over whether the structure was complete or not”; (iii) “clearly from this I believed that that was the case in terms of what I put in the accounts” and (iv) “There is an inconsistency, certainly,” [between my witness statement and the contemporaneous documentation], “I suspect the accountants produced it and that is what we had hoped was the case, but we were investigating it at the time and the documents show that.”

I find that the accountants did not produce the report that Mr Robinson signed but that it was his own work. He asserted in cross-examination that he had given instructions to Mr Mercer of TJG in October 1998 to investigate the restructuring steps that had been taken in March/April 1998. He elaborated this in cross-examination by saying that he later taxed Mr Mercer with why it was taking so long, when he had (so Mr Robinson said) told him it would only take three weeks. He said Mr Mercer’s response was that he could not get all the documentation from CV. Mr Robinson said in cross-examination that throughout November 1998 he had asked Mr Mercer to investigate the current structure, and that he had continually reported back saying that there were difficulties with CV.

There is no documentary support for any of that, whereas it is improbable, indeed inconceivable, that if Mr Robinson had given such instructions to Mr Mercer in October 1998, and had pressed him throughout November, there would be nothing to support it: at the very least there would have been a letter from Mr Mercer, who is plainly a conscientious solicitor, to CV telling them what he needed. On the other hand, it is clear that in early February 1999 Mr Robinson did give Mr Mercer such instructions, and the correspondence at that stage is quite inconsistent with any like instructions having been given four months earlier.

I also find, contrary to Mr Robinson’s evidence in cross-examination, that nor had he given any instructions to PwC in or by October 1998 to review the structure. His evidence was that, following Convergence’s concerns about Mr Ladimeji’s advice (which had become apparent by the time of a meeting at PLC’s offices on about 24 September), he had beauty paraded Ernst & Young and PwC “to get some specific advice about EEIGs and the structure, verification of that structure.” If, as I interpret it, that means that Convergence instructed PwC to advise what the group’s current structure was and to confirm that it had been duly constituted, I reject that evidence.

PwC’s advice was contained in five successive draft reports, none of which suggests that that is what they had been instructed to do. Their first draft report, dated 27 October, reflected that all Mr Robinson had instructed them to do was “to review the international tax structure of [SA] and its subsidiaries.” That is what they did, opening their report by saying that “The existing group holding structure is broadly efficient, save that we recommend that [Fergana] be replaced by a second Luxembourg Soparfi.” Their report assumed that the restructuring was complete, and it set the new structure out in Appendix 1 (a diagram that Convergence had provided to PwC but which in fact wrongly described CVL as a direct subsidiary of Fergana rather than of PLC: that was Convergence’s mistake and no-one else’s. It was repeated in all PwC’s subsequent reports, until eventually Mr Robinson himself pointed it out to them on 11 January 1999). The diagram also showed CCGE and Silk Route Systems SA (both Greek companies) as 100% subsidiaries of SA. As to CCGE that was correct, but there were two errors in relation to the other Greek company, being as to its name and its ownership: it was in fact called Silk Route Telecommunications SA (“SRT”), it had just been incorporated and was owned by SA and Fergana in the proportions of 90% and 10%. These errors, which also flowed from Convergence, were eventually spotted and pointed out to PwC by Mr Waterhouse on 2 February 1999 and I shall come to it in the chronology. Mr Robinson went through PwC’s report and wrote “Yes” against the paragraph which included the reference to the structure as being set out in Appendix 1 (one which also recorded the intention to transfer SA’s two Greek subsidiaries to the direct ownership of Fergana). I find, as his signing of the Directors’ Report confirmed, that he also believed it was complete. He had of course discovered that the inclusion of Fergana in the new structure was a mistake, but that went to the quality of the structure, not to its state of completeness, and PwC advised him as to how to deal with that. I find that what he acknowledged in the Directors’ Report reflected his then state of mind and that his evidence in this litigation that as at October 1998 he believed that the structure was incomplete, or was concerned that it might be incomplete, was untruthful. It was inconsistent with what he was writing and doing at the time.

As regards advice on EEIGs, Mr Robinson accepted in cross-examination that he was not looking to Mr Ladimeji, or CV, for advice on EEIGs after he had been provided with Ms Williams’s report. He said that prior to that he had been looking to Mr Llamas for advice on the formation of an EEIG but to Mr Ladimeji for advice as to the effect of introducing an EEIG into the corporate structure. But by October he had formed the view that Mr Ladimeji was not up to giving the required advice. He said that after that he was looking to TJG for advice on that subject, including who would be the best person to advise on it, and the name of Mr Taplin (of PwC) came up.

PwC’s first draft report also reflected their understanding of the Convergence group’s then plans for fundraising. It recorded that “in the short term the group plans to raise a limited amount of new equity finance via a private placement of shares, that in the medium term it is intended that further finance will be raised by way of a bond issue and in the longer term a wider share placement is possible, perhaps by means of the internet.” Plainly, the idea of an early internet placing had by then been abandoned. By way of resolution of the Fergana problem, the report recommended that Fergana’s place in the structure should be taken by a second Luxembourg company (“Lux 2”).

On 29 October there was a meeting at TJG. Mr Robinson described it in his diary as a “Placing Meeting”. It was attended by Mr Robinson, Mr Nuttall (finance director of Silverstone), Mr Mercer of TJG and Ian Taplin, David Oldknow and Patrick Clements of PwC. The purpose was to discuss the “proposed holding and operating structures set out” in PwC’s draft paper. The meeting note recorded the view that the “double Luxembourg” structure was the way forward and that Mr Robinson intended “in the very short term to bring on board a Greek investor (or small groups of investors). In the medium terms, a bond issue and either trade sale or IPO are likely.” The “double Luxembourg” structure involved the incorporation of Lux 2 as a subsidiary of SA and it was that company in which Greek investors were to be invited to invest. There was a discussion as to whether it would be better to keep Fergana dormant rather than to liquidate it: it was not intended to have any further role in the project. There was a discussion as to whether the company which would own the operating assets in the project would be a Gibraltar company, or a Cypriot one, which Mr Robinson favoured. There is no suggestion in PwC’s meeting note that any point had been raised that the current restructuring was incomplete. Mr Robinson said in cross-examination that he raised that point at the meeting. The note contains no reference to his having done so and I do not accept his evidence. Had he raised any point as to the need to clarify the status of the current structure, it would have been recorded in the list of follow-up issues on the last page of PwC’s note. He also said in his witness statement, and affirmed in cross-examination, that by October he had instructed CV to co-operate with PwC in clarifying what remained to be done by way of the original restructuring and then doing it. I find that he gave no such instructions at all.

On 6 November PwC produced a second draft report reflecting their review of the international tax structure of the Convergence group. They again set out what they understood the current structure to be by reference to a diagram in Appendix 1, which was the same as before. Someone later wrote in manuscript on Appendix 1 “Convergence Group – Current Holding Structure”, which Mr Robinson thought might have been Mr Waterhouse. If so, Mr Waterhouse cannot have been in any doubt at that time as to what the structure was.In this draft PwC revised their reported understanding as to the fund-raising proposals. They now reported that they understood that in the short term the group proposed to raise about £5m of new equity through a private placement of shares in Lux 2 and that

“… this will most likely be with one individual who will be able to provide additional facilitation of the project. At about the same time additional equity will be sought from financial investors such as Advent and DLJ [Donaldson Lufkin and Jenrette]. Subsequently intended that further substantial debt finance will be raised, perhaps by way of a bond issue.”

On 9 November PwC produced their third draft report. They again referred to the current group structure in Appendix 1, but added that although CCGE and Silk Route Systems SA (“SRS”) were both currently owned by SA, it was proposed to transfer SRS to Lux 2 and to convert CCGE into a Greek SA (I have referred earlier to the error in relation to SRS). The summary of PwC’s understanding of the fund-raising proposals was to the same effect as in the prior draft.

On 16 November Mrs Robinson sent a fax to Peter Nuttall on the subject of “Business Plans and Accounts.” Mrs Robinson ran Convergence’s engineering and operations side. Mr Nuttall was the finance director of SWC and had started working as a consultant to the Convergence group generally. Mrs Robinson’s fax was sent in advance of a meeting due to take place the next day at TJG. It recorded her assessment of the then disarray in the state of progress of the Silk Route project. She wrote:

“The group’s most pressing objective is to get a finalised placing document into the market place for the Greek private investors.

To date this document has not be [sic] written in any form which would be acceptable to investors as it does not reflect the precise intentions of the group. We have to date a mismatch of intentions, a confusion of technologies and a highly dubious interpretation of regulatory law as it applied to the Greek market.”

The reference to the “Greek private investors” was to one or more strategic investors whose support Convergence hoped to enlist before the end of 1998. Their support of the project was perceived as likely to lend important clout to the more major fund-raising exercise that Convergence had in mind for the spring of 1999. The remainder of Mrs Robinson’s quoted words speak for themselves as to her assessment as to Convergence’s then achievement in the task of drafting a placing document which was likely to be worth the paper it was written on. Until a proper placing document could be produced, there was, so I find, little or no prospect of Convergence being likely to be able to seduce any strategic Greek investors into supporting the project. Mrs Robinson went on in her fax to propose agreement on “a set of deliverables to include the following items.” They were (i) audit of the relevant companies, (ii) finalisation of models for (a) teleports, (b) Project Oxygen and (c) IPLMDS – Athens, (iii) finalisation of the budgets, (iv) consolidation of the budgets, and (v) finalisation of the placing document. She proposed to Mr Nuttall that there should be an agreed timetable for producing those items. This reflected a lack of readiness on the part of Convergence to parade its project before investors. It showed how aware of that Mrs Robinson was. Yet she supported the Convergence case that the progress of the project was exclusively held up by a supposed structural problem caused by CV.

On 18 November Mr Robinson wrote to Peter Hoole. He had been a director of Mercury Communications and a non-executive director in a company which had carried out one of Mr Robinson’s earlier projects. He had also been helping the Convergence group in connection with Silverstone’s activities. The purpose was to invite him to become part of the management involved at international group level in the Silk Route project. His intended role was that of a non-executive director. The letter reflects (or purports to reflect) Mr Robinson’s then understanding of the state of the project. He wrote:

“Further to your conversation with Katy [Ms Barker] yesterday, I am writing to bring you up to speed on what has been a very protracted work of the professionals in determining the international corporate structure. I apologise for the considerable delay in writing to you, but I somewhat optimistically had believed that the finalisation of the structure was only a few days away – that was in September.

The good news is that we finally gave up on relying on [CV] and at some considerable expense have employed the services of Ian Taplin, the Tax Partner at [PwC] and we are given to believe one of London’s foremost experts in this field. As a result, in the space of less than three weeks, Ian and his team have reviewed the work previously carried out by Dapo Ladimeji at [CV] and have produced the enclosed draft structure which is now version 3, shortly to become version 4, to include VAT effects throughout the international Group.

… I believe we have now reached a much clearer position on this structure with the help of Ian Taplin and all the professionals, both in the UK and Greece, feel reasonably comfortable that this is a workable and advantageous structure for the development of Pan-European connectivity, or what I would like to see as ‘the McDonalds PTT of Europe’.

In conjunction with the structural work, we have now completed the Accountants Report for 1995, 1996 and 1997, a draft valuation of the Group and a series of financial models dealing with the Teleport in Athens, the global link including Project Oxygen, and the backhaul wireless IPLMDS system for Athens and other Teleports. This work has now been substantially brought together in a draft placing document and it is my intention to start initial discussions with the institutions that I have been in contact with in New York in about two weeks time. This is with a view to seeking institutional investment money in February/March of next year, and I anticipate that I will have settled out ‘Political Greek VIP’ investor(s) before Christmas. To this end, considerable work has been going on in Greece for the past three months and we are to have a final licence hearing on the applications for the Teleport before a plenary session of the National Telecommunications Commission (NTC) this Friday, 20^th November.

As you will appreciate from the above, despite my lack of contact with you a considerable number of pieces of the jigsaw have now been put in place enabling us to now address the critical issue of management. This is something I am sure you would wish to have a face to face meeting in the near future to discuss your specific role. To this end, I will telephone you from Greece this weekend as I will be travelling to Athens to attend the pre-planning sessions and a full plenary meeting with the NTC on Friday. ...

I hope the above meets with your approval and gives you some comfort that you are not dealing with vague and undefined proposals for the Group, and that you will find the time and desire to actively participate when the full details are discussed with you.”

I make ten comments. First, the letter records that by October Convergence had given up relying on CV as regards the appropriate international group structure. It was now relying on PwC. One might think that was a reliable statement of the position, but in cross-examination Mr Robinson denied that what he had written represented the whole truth. He said it was only in February 1999 that Convergence dispensed with CV’s international tax advice and that (in effect) all that Convergence had given up was relying solely on CV’s international tax advice. Second, I do not interpret the letter as reflecting any continuing uncertainty as to the current structure of the Convergence group. Mr Robinson’s references to matters of structure and to its finalisation are not, I find, to a finalisation of the restructuring of March/April 1998, but to the establishment of the new structure advised by PwC, in particular involving the incorporation of Lux 2 as a subsidiary of SA. Third, Mr Robinson’s statement that Convergence had “completed” the financial models he referred to is at variance with Mrs Robinson’s admission two days earlier that they had not been completed. He declined to agree that he had exaggerated the position. Fourth, his implied statement that a placing document was in a state of near finality was similarly at variance with his wife’s blunt assessment of the position. Fifth, he nevertheless regarded himself as now in a position to start discussions with financial advisers in relation to a fund-raising exercise that he hoped to make in February or March 1999. He said in cross-examination that the institutions he had been in contact with in New York were DLJ, Paribas, Raymond Rohne and Chart Group LP (“Chart”). Sixth, he intended at the same time (i.e. before the end of the year) to court the support of strategic Greek investors and expected to have one or more such investors on side by Christmas. He confirmed in cross-examination that he considered he was in a position to start that process and that, by Christmas, he at least hoped to have a commitment from one or more such investors. Seventh, “[t]o this end” Mr Robinson plainly regarded it as important to have a teleport licence in place and he referred to the forthcoming “final licence hearing” fixed for 20 November. That observation was plainly intended to impress Mr Hoole as to the viability of the project. In the event the hearing was by no means the last word on the subject of the teleport licence. Eighth, he implicitly accepted that down to this letter, a “considerable number of pieces of the jigsaw” had not hitherto been in place, with the added implication that the group had not yet been in a position to progress the Silk Route project. His wife’s assessment was that key pieces of the jigsaw were still scattered all over the board. Ninth, he recognised that one of those pieces was “the critical issue of management”, which was the reason he was now courting Mr Hoole. He recognised (and confirmed in cross-examination) that good management is always critical to the success of a project. He said it is a “key to a business.” It is a matter which investors will look at carefully. But he also said in cross-examination that the “critical issue of management” to which he was there referring was simply whether or not Mr Hoole wished to join the management team. That is, I find, not the sense of the words he wrote, and I reject that explanation: they reflected the fact that he recognised the need to have in place a sound management team, which he did not yet have. The group did not even have a finance director. Mr Robinson suggested in cross-examination that Mr Nuttall had been acting as finance director, but he was at most a finance director for Silverstone. The group did not engage a finance director until about August/September 1999, when it retained Mr Miller-Jones. Tenth, he recognised by his closing paragraph that at all earlier stages the group’s Greek proposals could fairly be described as “vague and undefined”. Whilst Mr Robinson was not prepared to admit this, I find his choice of words reflected the essence of the comments that Mr Hoole had himself made at an earlier stage when Mr Robinson had approached him as a potential member of the management team. His wife’s assessment two days earlier was that those proposals could still fairly be described as “vague and undefined.”

The draft placing document in existence as at 18 November, the date of Mr Robinson’s letter, was dated 15 November. It was plainly still at a very preliminary stage. The company making the placing was Lux 2. Perhaps a little remarkably, the draft named Mr Hoole as one of its directors. Nowhere in it were the various matters to which Mr Robinson had referred in his letter “brought together.” The draft included a long list of contents and Mr Robinson’s evidence was that there were papers that could be “slotted in” under them. If so, that had not been done – and Mrs Robinson’s then position was that in material respects (in particular as regards the models) there was still nothing to slot. It is to be noted that in this draft the project had in mind that, if Project Oxygen did not work (whether because of timing or price etc), Convergence would build its own submarine cable between Greece and Italy. Mr Robinson accepted that this was not the project’s first choice at this stage – which was Project Oxygen - but said that it was, in effect, a fallback position. He said that by January 1999 “we were very much in the frame of mind that we would build that system.”

Mr Hoole did not accept the invitation to join the management team. Later in 1998 Mr Robinson sent him a draft prospectus for the project but he was still not persuaded. He declined to become a director. He so declined either in late 1998 or in 1999 - Mr Robinson could not remember when.

On 20 November Mr Robinson had a meeting with NTC. This was with a view to obtaining the grant of a teleport licence. He attended it with representatives of Project Oxygen. He explained in cross-examination that the reason for this was the need to show that the Silk Route project would have connectivity all the way to London, which Project Oxygen was expected to provide. The licence applied for was one to provide a teleport with the Project Oxygen cable, not with a Convergence cable. This was to lead to difficulties, because when in June 1999 the NTC indicated that in principle it was prepared to grant a teleport licence, it became a proposed condition of it that the teleport should be linked to Project Oxygen so that if that side of the Silk Route project were to fail for any reason, the licence would be at risk.

On 27 November PwC provided a fourth draft report. That summarised the structure and the fund-raising proposals in the same way as had the third draft. In summary, none of the four PwC drafts suggested that there was perceived to be anything constitutionally wrong with the current structure, or that it was otherwise than it appeared to be in each of the annexed diagrams. Nor at any time during 1998 was any letter written to CV (including by Mr Mercer) suggesting that the structure purportedly set up in March/April 1998 had not been validly set up. The reason for that is that at that stage no-one believed or assumed other than that it had been validly set up. They included Mr Robinson, whose evidence at the trial to a different effect was, I find, untrue. I accept, as I have said, that valuations remained to be obtained for the purpose of identifying the proportions in which Mr Robinson and the Broadband trust were respectively to hold the SA shares, and that Mr Robinson knew that they remained to be produced. Their production had nothing to with the identification of a company in which investors could be invited to invest.

In December Mr Robinson made an informal complaint to the EC about the NTC’s treatment of Convergence’s licence applications.

The reference in the second to fourth PwC reports to the proposal to raise an initial sum of about £5m with (as PwC thought most likely) “one individual” was a reference to Convergence’s intention to establish a relationship with a Greek strategic partner in the project. Support for the project from within Greece was perceived as likely to give added clout for the purposes of attracting wider financial support for the project. By the end of 1998 Mr Robinson had sought such support from certain potential strategic partners. One was Mr Vasilis Apostolopoulos, who owned some medical centres in Athens, which were potential users of high-speed data. Mr Robinson said another was Pericles Apostolopoulos. A third was Theodore Fessas, who owned what became Q Telecom and was interested in connectivity to the UK. Mr Robinson said he also approached others. He gave Mr Vasilis Apostolopoulos a slide presentation about the project in December 1998 and said he probably also gave it to the others. One slide set out the “International Corporate Structure” of the project in which any strategic partner would be investing. It showed a structure in which Lux 2 (there called, as it was when incorporated, Convergence Group Holdings SA) was shown as a 100% subsidiary of SA and as the company in which external investors and bondholders would invest and as the holding company of PLC, of the two Greek companies and of the Austrian holding company. That reflected PwC’s advice as to how the structure should be changed and that was the picture that Mr Robinson was relaying to potential strategic partners. In his evidence, however, Mr Robinson said he was unable to conclude discussions with strategic investors at that stage, or progress them beyond a certain point, because of the uncertainty as to the vehicle in which they would invest.

That last piece of evidence had a loud ring of improbability about it, particularly as the slides identified the proposed vehicle. None of the businessmen whom Mr Robinson approached agreed at that time to invest in the project. Mr Robinson was, however, keen to emphasise that none positively ruled it out. In cross-examination he summarised their response as being “We are interested, can you give us a prospectus when you can? When you are able to give us a document that says this is what we are investing in and this is what we will get in return, we are very interested.” Mr Robinson had not, therefore, apparently been able to provide them with sufficient detail about the project. Drafts of a private placement document had been produced in or by December but had not reached the stage of a final prospectus. Any suggestion that the discussions had to come to a full stop because of uncertainty as to the vehicle is a surprising one. The main image of the picture that Mr Robinson painted was that he could not provide sufficient information about the project. In a letter he wrote to Mr Evans of New World on 25 November 1998 about his presentation to Mr Vasilis Apostolopoulos he made no suggestion that structural problems were holding anything up. He did there refer to the fact that PwC had “worked on the structure, at some considerable cost …” but their advice was as to the incorporation of Lux 2. As explained, they were not reviewing the extent to which the structure had been validly implemented. Mr Robinson’s letter to Mr Bairactaris of 29 November 1998 even said that “[w]e have also now finalised a comprehensive international corporate structure with the aid of [PwC] and there is an 18 page description of this which I have not included at this time. It should be obvious from the above, that we are now progressing with some speed and deliberation. Politics, rather than law, is now the major issue, and we are on a path to securing the appropriate partners in Greece prior to finalising institutions investment by March 1999.” The reference to “politics” was to the licensing problem.

Of some interest is whether at this stage any of these potential investors raised the question of the absence of licences for the project. One of the slides listed the licence applications that Convergence had so far made: (i) in August 1998 CVL had filed an application for a licence to build a teleport/terminal landing station in Athens (but it was only in June 1999 that NTC indicated it was prepared to grant it, the licence then only being granted in March 2000); (ii) in September 1998 SRT had filed an application with the NTC for a licence to test IPLMDS technology and services in Piraeus for two years (this licence was never granted); (iii) in September 1998 SRT had also applied for an IPLDMS full spectrum licence to provide such services in Piraeus and Greater Athens (nor was this ever granted); (iv) in November 1998 CCGE had received confirmation from NTC of its right to operate as an ISP in Greece; and (v) in November 1998 CVL filed applications in the UK and Greece to operate VSAT satellite leased circuits between London, Athens and Thessaloniki.

Mr Robinson was “sure licences were discussed [with the potential strategic partners] because it is part of the whole process” but he denied that any of those approached told him to come back when he had the licences. He said they told him to come back “when you have a proper proposition that is complete and that we can invest in.” He was keen to emphasise that that did not mean “come back when (inter alia) you have the licences” and said that in other projects he had raised funds without licences. Rather later, in 2000, when HSBC was trying to raise funds for the project, Mr Apostolopoulos did raise the question of licences. In particular, on 9 February 2000 Attica wrote to HSBC making a preliminary offer of participation in the project subject to five conditions, of which the first was the obtaining of all necessary licences to the satisfaction of the Attica board. It is, therefore, a reasonable inference that he did so at this early stage as well. No Greek investor was at any stage prepared to be a strategic partner in the project. It is also to be noted that other potential investors (Global Finance and Piraeus Venture Capital) also responded to HSBC in February 2000 making clear that their participation in the project was dependent on the obtaining of licences. Piraeus pointed out in their letter of 9 February 2000 that the project had still not obtained the two most important licences, namely those for fixed wireless and for the undersea cable.

On 21 December Mr Robinson wrote to Mr Reid-Scott of DLJ Phoenix Securities Limited. He referred to a meeting he had had with Mr Stephens on 30 June 1998 and enclosed what he described as a “rough draft of the first 30 pages of the Investment Placing document that we have been constructing over the last few months.” He then wrote:

“It is our intention to seek a further equity investment in the Convergence Group through the form of a new Luxembourg holding company as has been advised by [PwC] during the first quarter of next year. To this end, we are now completing the 1998 audit of the Group which will be completed by the third week of January for inclusion in the accounts report for the period 1996, 1997 and 1998. This accounting report was already prepared for the period 1995, 1996, 1997 and will be updated with respect to the 1998 audit.

As you will seek from the enclosed draft documentation (which of course is subject to completion and verification by the Directors) considerable work has been undertaken and major progress has been made since my last meeting, and I believe we are now in a position to speak seriously with potential sponsors of an Institutional Placing.

To this end, I believe a further conversation in early January is now appropriate as we are starting to assess the interest of a number of potential houses. It is my intention to complete certain contracts with Project Oxygen during the first week in January and, therefore, I will be in New York on the 6^th, 7^th and 8^th of January. I understand that you will not be returning until the 4^th of January and, therefore, perhaps we could schedule a meeting for the week of the 11^th January.”

That letter did not suggest that any perceived problem with the current structure of the Convergence group had held up the progress towards a private placement or was still doing so. The then plan was apparently to launch a placement during the first quarter of 1999. Although he made no mention of it in his letter, Mr Robinson said in cross-examination that he also had in mind that by the end of December 1998 he would have the valuations he regarded as necessary for the completion of the 1998 reorganisation, which would then have allowed the group to proceed to the incorporation of Lux 2. He said (in effect) that by his statement that Convergence was “now in a position to speak seriously with potential investors of an Institutional Placing” he really meant that it would be in such a position once the valuations were obtained. He did not, however, write that and I do not accept that that was the unspoken subtext. He had already been speaking – and making presentations - to potential sponsors, but with no success. To the question why he had not provided them with a copy of the draft prospectus he sent Mr Reid-Scott, he said he thought it dangerous to give half-finished documents to non-professionals. By contrast, DLJ would treat it in confidence and would understand it better than a potential Greek investor. Mr Robinson said he thought he re-approached the same potential strategic partners in 1999 but did not seek to spread his net wider. He said the market for such partners was limited. None agreed to be a partner in the project. He said that when in 2000 HSBC sought to raise funds the Greek investors “came quite solidly behind HSBC but they wanted to see a lead investor.” The problem was that no-one was prepared to take that lead. Convergence’s case was of course that until 14 July 1999 they were hampered in the whole process by the uncertainty of the structure, a problem which was only finally sorted out then. But even if, which is unclear, Mr Robinson then approached particular Greek investors with renewed enthusiasm, he still drew a blank during the remainder of 1999.

An SA board meeting was held in Luxembourg on 30 December. Mr Robinson’s evidence was that it was for the purpose of finalising the group re-structuring. If that meant that it was to finalise the March/April re-organisation, that evidence was (subject to one item) not consistent with the agenda. No item on it in terms reflected that the re-structuring was in some way incomplete. They included a consideration of PwC’s draft report and the matters arising from it, including the formation of (i) Lux 2 in Luxembourg, (ii) a Cyprus company, (iii) a sales company, (iv) Silk Route and WintraNet EEIGs in Luxembourg; and (v) the reorganisation of the group subsidiaries. But the agenda also included the receipt of a CV valuation “at 16^th March 1998”, which I accept was the outstanding valuation to which I have referred.

The board meeting was attended by (i) Mr Arts, representing Mees Pierson; (ii) Mr Robinson; (iii) Mrs Robinson; (iv) Mr Evans; (v) Mr Wilton; and (vi) Mr Nash. The minutes record that each participant attended the meeting “by telephone”. At the time of the meeting Mr and Mrs Robinson were at the offices of New World in Jersey with Messrs Evans, Wilton and Nash. Only Mr Arts was in Luxembourg, where the meeting was treated as being held. Mr Robinson asserted in his evidence that the holding of this meeting caused considerable wasted expense to be incurred because six people had to travel to Jersey for it and in the event, so he claimed (although it was disputed), the meeting was abandoned. Apart from himself and Mrs Robinson, Mr Robinson originally claimed that the “six people” included Mr Mercer, Mr Rosewell and Mr Waterhouse: it is not clear who he said the sixth was. During his cross-examination he asserted that Mr Mercer had “explicitly” come to the meeting for the purpose of completing the restructuring. But he later withdrew the suggestion that either Mr Mercer or Mr Rosewell was at the meeting: he had confused this meeting with an SA meeting held in Jersey in 1997 at which both had been present. He also accepted that he had no direct recollection of Mr Waterhouse having attended the meeting: it was merely his supposition. I find that none of Messrs Mercer, Rosewell and Waterhouse attended the meeting, either by telephone or otherwise. Messrs Evans, Wilton and Nash were of course already in Jersey. Mr Nash was a New World representative who acted in what Mr Robinson described as a “secretarial fashion” at such meetings, and he regarded him as very competent. It was he who prepared the minutes of this meeting which were approved at the next SA board meeting as a correct record.

During the meeting Mr O’Beirne faxed to Mr Robinson and Mr Evans (both in Jersey) “a schedule of notes on the transaction based on the valuations at 16 March 1998.” The document was headed “Convergence Group – Notes re March 1998 Reorganisation” which was followed by a sub-heading reading “Quantification of transactions based on valuations dated 21 December 1998.” One item in the Minutes, headed “Chantry Vellacott Valuations”, read:

“It was noted that valuations had been received from [CV] in relation to the share transactions which took place on 16 March 1998 and that these transactions could be formally recorded. It was noted that the shareholdings of the company [SA] was now 77.49% owned by Corsaire Limited [Mr Robinson’s company] and 22.51% owned by [New World] as Trustee of the Robinson Settlement. Stefan Arts mentioned that he had not received a copy of the [CV] fax detailing how the share holding was calculated and it was agreed that a copy would be sent to him.”

The fax was sent simply to Jersey: no copy was sent to Mr Arts either prior to or during the meeting. It set out calculations against seven identified steps, which obviously required a degree of digestion. Against step 7 was an item reading “[SA] charges [PLC] a management fee of £5.2 million which is used to discharge the liability under the bonds.” Mr Robinson’s evidence was that this item was discussed over the telephone with Mr Arts, who promptly advised that it could have adverse tax consequences for the status of SA and lead to a substantial liability to tax. Mr Robinson said in his witness statement that “[a]s a result of his observation and further discussion the meeting had to be adjourned and we could not progress matters in relation to the placing in any sensible way until this further issue of valuation and tax charge had been resolved.” I do not accept that evidence. The minutes do not record that the meeting was adjourned for that or for any reason, and the quoted note is the only reference in them to the valuations matter. I find that at this meeting Mr Arts made no observations in relation to the management charge that Mr Robinson attributed to him: everything points to its having been only later, on 27 January 1999, that he raised such a point.

Another matter the minutes referred to was PwC’s recommendation to form Lux 2 in place of Fergana. Mr Arts’s advice was minuted as having been that “the Board would need to give careful planning to consider the long term position of the Group as this would have some relevance with regard to how [Lux 2] would be structured on formation.” In view of this a decision on Lux 2 was to be deferred until the next meeting. There was also a discussion at the meeting as to the jurisdiction in which the group sales company should be based: whether Cyprus, Ireland or Switzerland. Further consideration was to be given as to the choice between Cyprus and Switzerland. The Board also discussed the question of the position of Group Finance Director and it agreed that it was most likely that such a person would be employed by Lux 2 and employed in Luxembourg.

On 4 January Mr Robinson sent Mr Mercer an email. It reflects his frustration at the difficulty with regard to obtaining licences for the project. He recorded that Convergence had “made applications for five specific services and only received a positive response to one – the ISP declaration and this contains some questionable limitations.” He continued:

“If you have not already done so you should update Hocepied [a European Union official] (by fax if necessary) of the recent actions of the NTC [the Greek licensing authority] and the last two faxes from MS, indicating the earliest we can expect an ‘advice on the principle’ is in February, some two months after the date given for a response by the Chairman of the NTC, Mr Lambrinopoulos, in open session on 20^th November 1998, and almost six months after the submission of the first TLS/Oxygen [TLS stands for Terminal Landing Station] application. If DGIV [Directorate General IV] could be encouraged to say that Convergence has kept the commission appraised of its activities and aspirations for Greece since the UGS bid in 1995 [sic: it was in December 1996] and specifically with regard to Oxygen since February 1998 (when we met in Brussels with Peter Scott, Augusto De Albuquerque, Leon van Noorden, and Arqylis). That we have not yet filed a formal complaint to DGIV, but for reasons of commercial pressures will have to do so by the end of January if positive resolution cannot be reached.

The reality, which is now accepted by Andreas [Mr Mitsis: a member of the Greek Government who was supporting the project], is that we must gain a clear indication as to the Greek Government position and be able to act upon it or move on to other opportunities/Countries in the region which are more favourably dispossed [sic] to our specific proposals. This opportunity that we/DGIV are being presented with on Friday may be the only way, in the time frame, to send a strong ‘informed’ message from Brussels, before formal action is taken. Inclusion in the briefing notes for the Director-General is therefore most advisable.”

The email went on to say that, by contrast, Convergence was achieving more positive success in Cyprus, where it was told that it would not have the same problems and delays it had so far encountered in Greece. The clear message of the opening sentence of the second paragraph was that the licensing problems that Convergence had met in Greece were such that unless it quickly obtained a clear green light, it would have to give up on Greece. Mr Robinson disagreed with that in cross-examination, but that is what he was saying to his own adviser in this email: and why should he not be telling him the truth? He agreed that the reference to the achieving of a “positive solution” related to obtaining of the licence the subject of the meeting before the NTC on 20 November 1998. He was asked what the “commercial pressures” referred to were, to which he replied that “The honest answer, the absolute honest answer, is I do not remember.” He was not prepared to accept the obvious, namely that it was the fact that without a licence the project could not be funded even though he admitted that at that stage the project needed external finance: down to this point Convergence had been funding the project itself. He referred to the existence of other commercial pressures, including the writing of technical specifications with Project Oxygen. He disagreed that the licence issue was “the foremost and only issue or the most major issue that was going on.”

Mr Robinson’s explanation in his oral evidence of the licence position was illustrated by the following exchange in relation to his attitude as at January 1999:

“Q. Could I ask the question again and maybe you could answer more directly to the question. I said to you that there were an awful lot of problems with this project at the time, in particular the lack of licences, which was a matter that you were focused on at the time. That is right, is it not?

A. Licences are a process. They go on continually. Even after you have been awarded licences, you go through modifications, as you saw with – or you will have seen, if you have read into the documents, we re-license the LDOs. It is a continuous process.

Q. The licences at this point in time, Mr Robinson, were a matter of very considerable importance to you and the problems which you were having in Greece were matters which were foremost in your mind at the time.

A. I do not believe that licences were the foremost issue on my mind at the time.

Q. They were a major problem which at that time in early January [1999] for your project and you recognised that, did you not?

A.

We recognised from the outset, as with many projects, that this would be a process … So parts of the project, the submarine cable, needed a licence process which we knew we would get and we had an entitlement to, but it was a process and it did require going through a process. The other licences at different stages required a process and there were a number of licences, as you know.”

On 5 January Mr Nash sent a fax to Mr Arts commenting on his proposed amendments to the minutes of the SA board meeting of 30 December 1998. In the meantime Mr Nash had re-considered the CV valuations. He said that he had calculated that the consequence was that an additional 500 shares in SA needed to be issued to Corsaire, which would result in the Trust’s holding reducing from 22.51% to 22.5% and Corsaire’s increasing to 77.5%. He asked for Mr Arts’s advice on whether and how this could be done; and also on points 6 and 7 in the CV valuations in relation to Luxembourg law. He made no suggestion that Mr Arts had already expressed a view on either of those points during the board meeting itself.

On 5 January Mr Robinson (in Cyprus) had a telephone conversation with Mr Oldknow of PwC. They discussed changing the current structure of the Convergence group by bringing Lux 2 into the structure as a 100% subsidiary of SA in place of Fergana. On 7 January Mr Robinson emailed Mr Mercer to the effect (inter alia) that following the board meetings on 30 and 31 December 1998 “I have spoken to David Oldknow yesterday to talk through the order and mechanics for the ‘Lux 2’, ‘Austrian Co’, and ‘Cyprus Co’ formations and he will lias [sic] with Stephen Arts at Mees Pierson in Luxembourg to effect these.” There was no suggestion that Mr Robinson regarded any supposed structural problems in the Convergence group as standing in the way of this. In particular, there was no suggestion that Mr Arts had raised any apparent problems at the SA board meeting. To the question why he did not raise this with Mr Mercer he said that if, as he thought, Mr Mercer had been at the board meeting there would be no need to. But he had accepted in cross-examination that Mr Mercer was not at that meeting, and did not participate in it, and I find that he also knew that perfectly well at the time of his email, sent within seven days of the meeting. Mr Robinson’s email is inconsistent with any perception by him that the then state of the Convergence group structure stood in the way of an immediate formation of Lux 2.

Mr Oldknow wrote to Mr Robinson on 7 January (copies to Mr Nuttall, Mr Arts and Mr Mercer) with a summary of his advice. He opened his explanation of the steps involved in the proposed reorganisation by saying that “The present legal structure is, we understand, as set out in Appendix 1”, the same diagram as had featured in the four PwC draft reports from the autumn of 1998. Mr Robinson declined to agree in cross-examination that at that point he too understand the current structure to be as shown in Appendix 1, but it is obvious that he did and I so find. Moreover, he showed it at the time, by responding to Mr Oldknow on 11 January and pointing out to him that in Appendix 1 CVL was shown as a subsidiary of Fergana whereas, as he said, “in fact it is a subsidiary of [PLC].” That letter – particularly the “in fact” – came ill from someone whose position was that for months he had been, and remained, uncertain as to the true current structure. Mr Robinson defended that stance in cross-examination by saying that at that stage valuations for the purposes of the March/April reorganisation had not been obtained and “Without a valuation there was not a way to track who the shareholders were and, therefore, whether the shareholders’ meeting, which is necessary in Luxembourg to move things around, was properly constituted. That was a question. We thought we were going to solve that problem on 30^th December by having a valuation, completing that structure and then moving on to Lux 2. That did not happen on 30^th December.” He also said, however, (and in relation to the same point of time) “We thought we knew what the existing structure looked like. We were not confident it was legally constituted ….” I find that PwC had no such doubts and, if Mr Robinson did, he did not share them with PwC.

That Mr Robinson had no doubts about the then structure is similarly reflected in his fax of 11 January to Mr Arts. It related to the proposed incorporation of Lux 2, the Austrian company and the Cyprus company. He wrote:

“[Mr Tzavellas], whom [Mrs Robinson] and I know very well, both on a professional and social basis is fully aware of the corporate structure as now agreed with [PwC] and in fact contributed directly on a number of the issues concerning the EEIG and its treatment by the Greek authorities. In order that the transfer of shares of Kentavros Trading (Overseas) Ltd, or the formation of a new Cyprus Holding company, be carried out in a proper order and to meet the requirements of the overall structure, I have asked [Mr Tzavellas] to contact you directly to liaise on the finalisation of the Cyprus company. …

Once you have had an opportunity to speak with him, it would be helpful if we could circulate an action list and schedule for the completion of the component parts of the new structure.”

That letter conveyed no concern as to the status of the current corporate structure, nor did it suggest that the tasks Mr Robinson was giving Mr Arts had to be held up pending its clarification or rectification. Mr Robinson’s defence of his position was that he knew that Mr Nash had written to Mr Arts on 5 January asking him for advice under three heads. But the request for that advice did not reflect any concern about structure.

On 15 January PwC produced their fifth draft report on Convergence’s international tax structure. They summarised the structure in the same way as before, having apparently ignored Mr Robinson’s point about the error in relation to CVL. They summarised the fund-raising proposals the same way as before. They explained the proposed new structure, involving the replacement of Fergana by Lux 2, a structure essentially the same as Mr Robinson had shown the would-be investors he approached in December 1998.

On 15 January Mr Robinson wrote to Mr Brady of Chart, referring to a meeting fixed for 19 January. He enclosed extracts from a draft placing document being prepared by TJG. He enclosed a copy of a PwC report on structure, which would have explained about the Lux 2 proposal, but nothing about any alleged current structural problems. He said that “[w]e are now on the point of receiving the various licences we have toiled over”, which was an optimistic exaggeration, although the fact he mentioned their alleged imminence reflected the importance he attached to them. He described the purpose of the meeting as being to gain “some understanding of your potential interest in such a project and what form you would see as optimal to achieve the objectives as perceived today.” The letter reflected no suggestion that any perceived structural problems were holding up the project, let alone that they prevented Mr Robinson’s approach to Chart as a potential financial adviser for a fund raising for the project. Mr Robinson accepted in his oral evidence that he had several meetings with Mr Brady in 1999, at which Mr Brady made the point to him that any fundraising would not take off without licences. At least one other potential financial adviser also told Mr Robinson in early 1999 that licences were the key to fundraising.

On 18 January Mr Ladimeji faxed Mr Robinson a draft seven-page report which he described as outlining “the essentials of a tax efficient structure for the proposed Greek project.” He explained that “[t]here are several technical issues that require further development in order to ensure that all aspects have been fully considered, but I do not expect any material changes to the plan to result.” It gave advice under various heads. The first heading was the “Public Location [Mr Robinson’s] Personal Holding Company.” The second heading was “Appropriate Vehicle for Debt Issue” and reflected Mr Ladimeji’s understanding that what was then proposed was an initial private placement to be followed by a more significant public debt placement. He advised that for the likely investors in such debt “a Luxembourg company below [SA] will be entirely acceptable as a location.” He then considered the “Appropriate Vehicle for Equity Issue into International Private Investor Markets.” He advised that, as between the two choices of Gibraltar and Cyprus, Cyprus was “by far the most acceptable location for equity investors.” He then considered the “Appropriate Vehicles and Locations for EEIG”. He gave some complicated advice on that topic, concluding that the EEIG be located in Luxembourg. He concluded his report with a section headed “Greek Nexus” and two pages of diagrams. It is not entirely clear why Mr Ladimeji was offering this advice. It was put to Mr Robinson that he would not have read it: he disagreed, saying “No, I do not think that is true.”

On 27 January Mr Arts sent two faxes: one to Mr Oldknow and Mr Robinson; the other to Mr Robinson, Mr Waterhouse and Mr Nash. The latter is the more important. It made 13 points. Point 4 recorded Mr Arts’s understanding that 500 additional shares in SA needed to be issued to Corsaire. Point 10 related to the management charge referred to in item 7 of Mr O’Beirne’s valuation faxed to Jersey on 30 December 1998. It read:

“We also suggest to refrain from charging a management fee of GBP 5.2 million by [SA] to [PLC]. This could indeed be a neutral item in [SA’s] books from a cash flow point of view (as the proceeds will be used by [SA] to redeem its debts), but the situation from a tax point of view is completely different: the management fee will have to be recorded as income in [SA’s] profit and loss account whereas the redemption is a balance sheet item: the taxable management fee income will not be reduced by corresponding expenses and [will] thus create a tax liability with [SA] of approximately GBP 2 million! One could also put question marks at the volume of this management fee income with [SA] and with [PLC]. It could also jeopardise [SA’s] status as a holding company (‘Soparfi’).”

According to Mr Robinson, Mr Arts was there doing little more than repeating the advice he had given over the telephone at the board meeting on 30 December, but (on that occasion) without having yet had the benefit of the sight of Mr O’Beirne’s valuation. I reject that evidence, which was an obvious misrecollection. First, it is improbable that, in the circumstances just summarised, Mr Arts would have been in a position to give any such advice on 30 December. Secondly, if he had then given any such advice, it is unlikely that Mr Nash’s request for advice on item 7 of Mr O’Beirne’s valuation would have been expressed in the terms that it was: he would be likely to have referred to the prior advice. Thirdly, if Mr Arts had given any such advice on 30 December, he would also be likely to have referred in this fax to having done so. His fax gives no such indication. Mr Robinson’s evidence to the contrary effect is finally buried by Mr Waterhouse’s fax reaction to Mr Arts’s fax, which he rushed to Mr Robinson on the same day. He said that:

“THE KEY ITEM IS ITEM 10 of his letter: it implies that the £5.2 million management fee suggested by R O’B (Dapo?) as part of the mechanism for the reorganisation will result in a £2 million tax charge in Luxembourg, and could jeopardise [SA’s] status as a Soparfi holding company. I will discuss this with [Mr O’Beirne] and [Mr Arts] early this afternoon (UK time) unless I hear from you. (A copy of [Mr O’Beirne’s] note, with my pencil notes, is attached for ease of reference).”

I have found that Mr Waterhouse was not at the meeting of 30 December, so he would have had no direct knowledge of whether or not Mr Arts had then raised this point. But it is obvious that if Mr Arts had then raised it, Mr Robinson would probably (and promptly) have told Mr Waterhouse about it and would anyway at least have immediately reverted to Mr O’Beirne with Mr Arts’s advice on the tax consequences of his valuation. Mr Robinson did neither of these things. Instead, the Convergence activity from 31 December 1998 down to 27 January 1999 was one of business as usual. Had Mr Robinson feared that it was facing a tax liability in Luxembourg of £2 million pounds, he would have wasted no time in taking steps to investigate the problem. In 1998 Convergence’s cash flow was such that it could not even find £20,000 with which to make an on account fee payment to CV.

Mr Robinson stuck in cross-examination to his preferred position on this. He said the matter had not been the subject of active discussion within Convergence, although it had been discussed with Mr O’Beirne. He made the point that – as happened – Mr O’Beirne sent in a revised valuation within two days of Mr Arts’s fax of 27 January. That does not show that Mr Robinson had discussed the matter earlier with Mr O’Beirne, and I find he had not. Mr Waterhouse had said in his fax of 27 January that he was going to speak about the problem with Mr O’Beirne that afternoon. That is precisely what he did, as he explained to Mr Robinson in his further fax of 27 January. He there said:

“[Mr O’Beirne] does NOT see the management charge issue as a major problem and it is certainly not a deal-breaker if the £5.2 million charge cannot be made. He believes there are other ways to approach this last aspect of the reorganisation and will continue discussions with [Mr Ladimeji] to clarify the best approach.

He also questioned whether Fergana is currently formally owned by [SA]: and if it is not, maybe it would be better to reconsider the sequence of steps to get from where we are, to where we want to be. He will comment further when he and [Mr Ladimeji] have had further discussions.

He was anxious that I reassure you that there are various ways forward and that the serious concern I expressed this morning is unnecessary.”

That shows that the matter had been raised for the first time with Mr O’Beirne by Mr Waterhouse on the afternoon of 27 January. Mr Robinson’s claim that he had spoken earlier to Mr O’Beirne about it is obviously wrong. Mr Robinson, not a man to yield readily to the inevitable, said that Mr Waterhouse’s fax did not show he had only that afternoon spoken to Mr O’Beirne and he said he did not so read it. A reading of Mr Waterhouse’s two faxes to Mr Robinson of 27 January invites an inference to precisely the opposite effect, and I unhesitatingly draw it. I reject Mr Robinson’s evidence on this. He was mistaken as to the course of the events relating to the discovery by Convergence as to the £5.2 million management charge problem. I find that Convergence only discovered it on 27 January. Mr Robinson’s evidence claimed to recall a course of events that did not happen.

A board meeting of SA was held in Geneva on 1 February. It was attended by Mr Arts (representing Mees Pierson), Mr and Mrs Robinson, Mr Evans and Ian Williamson. Mr Waterhouse was in attendance. Mr Williamson represented New World. Mr Arts chaired the meeting. The minutes of the prior meeting on 30 December were approved. The minutes of the meeting of 1 February opened by recording that the meeting felt that “several question marks could be put at some of their advisers” and that Mr Robinson “would express formally on behalf of the Company his concerns to [CV] and that the Company had decided to no longer use the services of this firm in terms of international tax advice. Notwithstanding these concerns, the meeting appreciated their services with regards to UK tax advice and accountancy.” That last sentence suggested that Convergence had no complaints about Mr Heath’s work, although in cross-examination Mr Robinson declined to agree with that. He preferred to say that by then Convergence had lost confidence in CV and, in particular, in Mr Ladimeji’s advice. The concerns were in relation to CV’s international tax advice and the valuations that CV had been expected to produce.

The minutes then recorded what was discussed and resolved about the Convergence group structure. The opening part of the minutes reads:

“The meeting resolved to instruct David Waterhouse to clarify [PLC’s] position in the group, to provide the directors with an update of the present group structure and to investigate its share ownership and to instruct [TJG] to provide the Company with a legal opinion in this respect.”

The minutes then proceeded to record (inter alia) the discussion of the proposal to incorporate Lux 2 as a subsidiary of SA; to incorporate an Austrian holding company as the parent of the Cyprus sales company; and to investigate further the establishment of the EEIG; and to appoint a finance director to the group “who should be competent to attract external investors.” There was a discussion as to whether he should be based in Cyprus or Geneva and how the choice of such a director should be made.

As I have said, Mr Robinson’s evidence was that Convergence’s decision to investigate the efficacy of the March/April 1998 restructuring had been made much earlier. It was put to him that that was not true and that the decision was made at this meeting, evidenced by the quoted resolution. Mr Robinson stuck to his guns and was firm that he had instructed TJG to look into the matter back in October 1998. If so, it would seem that the resolution of 1 February was pointless: it was directed at asking Mr Mercer to do something he had been asked to do over three months before. Mr Robinson said its point was “to very specifically look at all documentation which had been surrounding the reorganisation of March 16^th.” But that is what Mr Mercer would have had to do in October 1998 if he had been instructed to give the group a “legal opinion” on the present group structure.

On 2 February Mr Waterhouse sent a fax to Mr Oldknow, which he copied to Mr Robinson and to Mr Arts. He had seen Mr Oldknow’s fax to Mr Arts of 1 February. His purpose was to put Mr Oldknow right about facts relating to the current structure of the Convergence group: so even though he was at the SA board meeting the day before, he obviously felt sufficiently confident about the current group structure to say what he did in this fax. Mr Oldknow’s diagram had shown SA as holding 100% of “Silk Route Systems SA”. Mr Waterhouse explained that the correct name of the latter company was Silk Route Telecommunications SA (“SRT”), which had been incorporated in October 1998 and of which SA held 90% and Fergana 10%. As, therefore, SRT was a new company, the criteria referred to by Mr Oldknow in his fax could not be satisfied. He also pointed out, as Mr Robinson had earlier, that CVL was a direct subsidiary of PLC, not of Fergana. Mr Robinson did not react to Mr Waterhouse’s fax by pointing out that the whole question of the group’s current structure was a big question mark. But his stance in cross-examination was that at this point he had still been expecting “a valuation to be able to be put in place and deal with the issues of whether the structure was legally in place in December.”

In the meantime Mr Robinson had one or more meetings with Mr Brady of Chart. On 3 February Chart wrote to SA outlining the scope and costs of their services for the next 12 months in connection with “the proposed build-out of an internet teleport system in Greece, Cyprus, the Middle East and North Africa over the long term and a cellular network in Greece in the short term.” Chart indicated that it would assist SA to “complete the business development stage of Phase One (the Greek cellular system), prepare a business plan that reflects the business potential of Phase One and beyond, and access capital from financial and/or strategic partners.” Their estimate was that the various stages involved, which they listed, would take between six and twelve months: in summary, (i) perhaps three months to do the initial due diligence and prepare a business plan; and (ii) perhaps three or four months in which to meet and negotiate with potential investors and to close the transaction. But they specifically added the qualification that “Since Phase One is dependent on approvals from government authorities and potential legal challenges within the Greek business community, Chart assumes that there are no significant delays of this nature. Should any such delays arise, the timetable will be substantially different.” Chart set out their costs.

In cross-examination Mr Robinson accepted that Chart “wanted to see evidence that the licensing process was going to reach a conclusion.” Whilst it is not in Mr Robinson’s nature to express that sort of point more positively, the nub of that was that he accepted that Chart regarded positive intelligence on the licensing front as the key to any fund-raising. It was put to Mr Robinson that Chart was not saying that there must be an actual grant of a licence: it might be sufficient simply to have a formal confirmation from the NTC that the necessary licences would be forthcoming. Mr Robinson said he could not remember Mr Brady saying that.

On 5 February Mr Mercer wrote to Mr Oldknow of PwC, with copies to Mr Robinson and Mr Waterhouse. It was in response to Mr Oldknow’s fax of 1 February to Mr Arts and Mr Waterhouse’s response to it. He asked for confirmation that it was not proposed to liquidate Fergana, which (unless PwC advised otherwise) was to be the employer of Mr and Mrs Robinson. He made some points about EEIGs and asked if Mr Arts could get in touch with him as a matter of urgency “as we are about to give instructions to a Paris-based lawyer with some knowledge of EEIGs (there are not many in Europe) concerning the formation of the EEIG in Luxembourg and I want to make sure that what we propose to do in that regard is not going to cause a problem.” He expressed his agreement with Mr Waterhouse that CVL was a subsidiary of PLC, and he added that he had checked the statutory books. He then wrote:

“As regards matters generally because of the points raised by [Mr Arts] concerning what I would describe as the ‘March reorganisation of the Convergence Group’ and the final stages needed to finish that off and in particular the proposed payment of the management fee of £5.2 million by [SA] to [PLC], there needs to be a brief period while we examine the consequences of the previous reorganisation, its consequences and precise implementation. I should warn you that as a consequence of that review, it may turn out that some aspects of the precise detail of inter-company relationships may turn out to be different from those you are presently assuming and in the circumstances I think it would be prudent if before taking or settling any proposed implementation steps, all relevant parties consulted with me prior to their taking place for the time being.”

It is, I find, clear that that marks the point at which Mr Mercer assumed the duty to investigate the March/April 1998 reorganisation of the Convergence group. As I have said, Mr Robinson disagreed and said he had instructed Mr Robinson to do so the previous October. Were that true, Mr Mercer would have shown a high degree of nerve to write as he did in February 1999 and to copy it to Mr Robinson. Mr Robinson said that all that was now happening was that TJG’s investigation was assuming a different dimension – it turned into a forensic examination, involving looking at every document. He repeated that he had asked TJG to examine the structure back in October 1998 and provide a letter validating it– but he also agreed that they had not given him what he had then asked for. He said in his witness statement that Mr Mercer’s original estimate in late October had been that the task would take a couple of weeks.

Of course Mr Mercer provided no validation at all to Mr Robinson during the period October 1998 to February 1999. Mr Robinson said he had chased Mr Mercer: but he was unable to give any ostensibly coherent answer as to what Mr Mercer’s response was. Eventually his position appeared to be that he had asked TJG to provide a letter of validation in relation to the March/April 1998 restructuring but that once PwC advised that the structure anyway needed to be modified his request had “sort of dropped into abeyance in terms of, you know, it was superseded by PwC.” He accepted in evidence that, once PwC had advised upon the proposed new structure, he did not expect Mr Mercer to provide any validating letter. But he disclaimed the suggestion that from October 1998 to February 1999 he held the belief that the previous reorganisation had been carried out properly. He said “The short answer is no. In the light of everything that was coming to light in September, in October and then PwC, why – since PwC was saying that it did not work, why would I believe that that structure was correct? Why would I not have doubts on it?” The answer to those two questions is that all that PwC had advised was that the incorporation of Fergana into the structure had a potentially disadvantageous effect on SA’s Soparfi’s status and that there was scope for re-designing the CV structure in a more tax-efficient way. But the PwC advice provided no basis for any suspicion that the CV structure had not been validly implemented in the way that it had been purportedly implemented. I do not accept Mr Robinson’s evidence that he instructed Mr Mercer as early as October 1998 to investigate the current structure. I find that he only so instructed him in February 1999.

Having written what he did on 5 February, Mr Mercer wasted no time in getting on with the job. On 9 February he wrote to Mr Roberts, the senior partner of CV. He opened by saying that “there may be significant tax difficulties resulting from the reorganisation proposed and to some extent implemented” by CV in March 1998. He said the difficulties followed “the receipt and acceptance by the group of your valuation which arrived in November [sic: it was provided in December]. He said that one of the steps involved in the reorganisation involved the payment of the £5.2m management fee by PLC to SA, which it was feared might give rise to a tax liability in Luxembourg of £2.6m. He continued:

“The scale of the possible difficulty requires our clients immediately to ascertain the full extent of all steps taken by [CV] so far as concerns implementation of the structure so that they can receive advice from us and independent accountants about how best to proceed to mitigate their possible exposure to this liability. …

… Could you please let us know whether the original of all documents in your possession relating to this matter will be made available to us to inspect or whether it would be more convenient to you if copies of all such documents were provided and if so the likely timescale of that exercise.

Based on your own knowledge, we would welcome your thoughts at this stage about how the various problems can best be remedied but we should make clear that, so there is no confusion, your authority to take steps for and on behalf of our clients regarding international tax matters is suspended with immediate effect in order that a collective view, possibly with the benefit of Chancery tax advice, can be obtained.”

Mr Roberts replied on 10 February explaining that Mr Mercer’s starting point based on the feared tax charge was wrong. He explained that CV had corrected their earlier advice: they had advised that a management charge of £5.2m would be inappropriate. They also understood that no management charge had been paid and so there was no question of a tax liability of £2.6m.

In the meantime Mr Robinson had spoken to Mr O’Beirne. His attitude was that Mr Mercer’s letter had raised the water’s temperature unnecessarily and risked bringing lawyers and insurers into the picture. He wanted a more moderate letter to be sent in its place. Mr O’Beirne expressed embarrassment about Mr Ladimeji’s original restructuring proposals. They agreed that TJG should write a revised letter “which makes sure that the structure is rectified and we and [PwC] are able to review the acts done.” Mr Robinson relayed this to Ms Ferguson of TJG on 11 February, emphasising that “[w]hat is time critical is to put the new structure in place.”

On 12 February, as a result of the Robinson/O’Beirne conversation, Mr Mercer sent Mr Roberts a letter similar to that of 9 February, but one that was slightly toned down. He welcomed CV’s thoughts “about whether there are any outstanding steps which need to be taken [in relation to the March/April 1998 restructuring]” and asked for copies of all documentation including records and any relevant back-up papers. CV made a response on 24 February, which TJG did not regard as sufficient and on 8 March Ms Ferguson made a repeat request for “a complete paper trail.” On 11 March Mr Mercer wrote further explaining that what he wanted were (i) minutes of any Convergence company relating to the March 1998 reorganisation, including draft resolutions sent out and any signed copies of minutes or originals on file, (ii) any step-by-step instruction sheets sent to the Convergence group as to what it should be doing, (iii) any drafts of the whole or parts of agreements between group companies relating to the reorganisation drafted by CV or under their instruction, or the instructions of the Convergence group of which CV had copies, and (iv) any drafts of any documents or minutes on which CV have commented by whoever prepared them. Mr Mercer added that “The object is to examine exactly what has taken place. No item, however small, should be regarded as unimportant in this regard.”

That letter appears to have produced a solid response and on 19 March Mr Mercer wrote to Mr Robinson recording that “[w]e have now received most of the papers we need to do the review of the [March 1998 reorganisation].” He said that Patrick Clark was chasing Mr Ladimeji that afternoon for some SA documents “but [Mr Ladimeji] has now provided what he says is all that he has got – which does seem a fair amount related to the formalities and steps etc. taken.” He explained that over the next couple of days TJG would piece the material together in three stages: (i) have all the steps that Mr Ladimeji thought required taken place; (ii) were there any other unidentified steps that were necessary to perfect the scheme; and (iii) where are we now? On 29 March Andrew Sharpe (a TJG trainee) sent a five-page memo to Mr Mercer which (i) identified six of the steps in the restructuring, and (ii) in relation to each step listed the documents required for it and indicated which of the required documents were missing. Following that flurry of activity by Mr Mercer as from early February, the investigation appears to have gone quiet for a few weeks, apparently because of a billing problem with Convergence. That was not CV’s fault. None of this correspondence includes a complaint that the structural questions were holding up the project. Mr Robinson’s explanation for that was that “… I can put that in context. This was ongoing with TJG. I saw no need to intervene in that.”

By contrast, the apparently crucial importance of licences to the progress of the project was illustrated by Mr Robinson’s approach to the acquisition of a building for the teleport. In March he had in mind purchasing the Marine Plaza building in Athens. On 17 March Ms Stamouli of Gr. J. Timagenis (Convergence’s Greek lawyers at the time) advised him that any offer for it should be conditional on obtaining five particular licences. On 26 March he wrote to its owner, Attica Enterprises SA, expressing positive interest. He said he would be recommending to his board a purchase at a particular sum “subject to the following conditions president [sic] and with an expectation that they can be addressed within four to six weeks.” The second condition was “Positive indication that all requisite licenses [sic] necessary to utilize the building for the purpose intended have been or will be issued by the relevant authority.” He was not, therefore, prepared to commit to the purchase until he had the licences. On the same day he wrote to Mr Bairactaris to explain the position saying that he was:

“… now very confident of our ability to fund the purchase of the building and our intended telecommunications activities, if we are granted the license for the Teleport from the NTC. This transaction can and will proceed with some speed once that position is attained and I was told this week by Andreas Mitsis and Professor John Koukadis that the decision to allow Lambrinopoulos and the NTC to finish processing the license has now been approved by Maridellis. We shall see where we get before Easter, but I fear that Maria Stamouli is out of her depth and the drive to get completion will have to be by my/our innovation not hers.”

In cross-examination Mr Robinson again played down the importance of licences in connection with the acquisition of Marine Plaza. The essence of his evidence was that Convergence did not yet have the money with which to buy, but believed it would shortly have it. He said, in effect, that the purpose of the offer was to show how serious a purchaser Convergence was, in order to head off another buyer. He disagreed that the licence condition reflected that the licensing position remained uncertain, saying that the Minister’s statement had given him comfort that he was now going to get the cable landing licence, which was of course only one of the required licences. But he said that he needed to make the purchase offer conditional on a number of things, including licences, because they did not yet have the cash. I regard that as a wholly unconvincing explanation of what was happening at the time. Licences were obviously critical to the project and until they were available it could not proceed; and Mr Robinson did not want to commit Convergence to acquiring Marine Plaza until he had the necessary licences. That is what he had told Mr Bairactaris.

Whereas the lack of licences was, therefore, apparently holding up the acquisition of a building crucial to the project (and Chart’s advice was that licences were required for fund raising purposes), Convergence’s case at the trial was that it was exclusively its uncertainty about the state of the March/April 1998 reorganisation that had prevented it from appointing a financial adviser as a preliminary to making a fund-raising placement in the market. At no stage, however, from early February (when the questions about the structure were first raised) onwards did Convergence once write to CV and complain that the claimed uncertainty was preventing Convergence from appointing a financial adviser. Mr Robinson’s response was that there was no need to do so, since it was apparent that Lux 2, the proposed placing vehicle, was not yet incorporated and could not be until the current structure was clarified. That was not an answer to the question why in the meantime Convergence regarded themselves as barred from negotiating with, or appointing, a financial adviser; and of course Mr Robinson had approached Chart in January.

Convergence’s case at the trial was inconsistent with what it was doing and saying at the time. There was a board meeting of SA on 30 March. Under the heading “Status of Fundraising”, the minutes referred to the placing document being uncompleted and awaiting the finalisation of audited accounts and that it would anyway not be finalised until a financial adviser had been appointed so as “to allow for their input”. They also recorded that any purchase of Marine Plaza was to be conditional on a licence being granted. Mr Robinson reported on his meeting with Mr Brady of Chart, and the minutes recorded that Mr Robinson would appoint them to act as financial advisers for a period of one month, with no obligation to either side thereafter. They also recorded the possibility that the group might employ Hector Guenther as financial investment representative in New York. One thing they did not record was that perceived structural problems were preventing, and would continue to prevent, the appointment of a financial adviser. Mr Robinson’s evidence in cross-examination was that, as the minutes show, the meeting did consider the appointment of Chart at that stage as financial advisers, one idea being floated that they might be appointed simply for a month “to see where they were.” But his further evidence was that SA in fact decided not to appoint Chart, the reason being, so he said, that “they were expensive and their terms were very extended in terms of the time they wanted to take for a project like this.” He made no suggestion that the reason for Chart’s non-appointment was because of SA’s uncertainty as to the state of Convergence’s current international group structure. Yet that was now, in effect, the reason he gave for not appointing any financial adviser at this stage.

Mr Robinson was, however, by now making some complaint to CV about the problems caused by structure questions. On 8 April he wrote to Mr O’Beirne enclosing copies of recent correspondence from Mr Arts to the SA directors “concerning his continued inability to progress the formation of the various subsidiary companies necessary to complete [the] international group structure.” He said a board meeting had been fixed for 9 April:

“… at which it was anticipated that Lux2 and Austria Co as well as other housekeeping matters could have finally been completed. This meeting is a direct result of the Board’s inability to progress structural matters at its last meeting on Tuesday the 31^st [sic: should be 30^th] of March 1999. As you will appreciate the costs both in time and travel of repeated board meetings is quite considerable and despite the almost continual employment of [TJG] in trying to resolve the historic actions taken to implement the structure, we still appear to be some way from the clarity necessary to enable finalisation.

I thought you should be aware that these problems are still continuing despite the best efforts of all concerned.”

That was, therefore, a letter of complaint related to the claimed consequences of the structural questions. It did not, however, add words to the effect that “in the meantime we have also been unable to approach or appoint a financial adviser as a preliminary to fund-raising by Lux 2 once incorporated.” That is surprising bearing in mind that Mr Robinson’s evidence in cross-examination was that, but for the structural questions, Convergence would have appointed a financial adviser by 8 April. It is by no means apparent that the existence of such questions prevented Convergence appointing such an adviser and getting the proposed placement underway, even if the actual launching of it would have to be deferred until Lux 2 was incorporated. The setting up of a placement was not going to be achieved overnight: it was going to require a great deal of preliminary labour, much of which could be performed even if Lux 2 was not yet in place. Mr Robinson’s evidence was that he had regarded an internet placing as a very straightforward exercise as compared with the type of placing he now had in mind – but his experience of the problems that his proposed internet placing threw up must have informed him that even that was much more complicated than he had imagined, and of course it never got off the runway. In principle, Convergence’s stance that the, still unanswered, structure questions prevented the appointment of a financial adviser was irrational. Mr Robinson had also been provided with Chart’s estimate of the time involved for the necessary work. He may well have regarded that time estimate as excessive: but on no footing was the work involved something that could be knocked off in a weekend.

The plain fact is that Mr Robinson clearly did not regard these questions as the ones that were holding up the forward progress of the Silk Route project. On 8 April he wrote an illuminating letter to Andreas Lambrinopoulos, the Chairman of the NTC with whom he had met on 6 April “to discuss the Group’s various licence applications that have been pending since August 1998.” The applications referred to were for (i) a licence to land the Project Oxygen cable and to build the teleport; (ii) a VSAT licence: until the Project Oxygen cable was in place the Convergence plan was to establish connectivity between London and Greece by satellite, and this licence was required for that; (iii) a licence to test the 40GHz wireless system; and (iv) a permanent 40Ghz wireless licence. None had yet been granted and licences (iii) and (iv) were never granted. The inability to obtain licence (ii) led to a complaint by Mr Robinson to the European Commission in 2000 about OTE, to which I will come. Mr Robinson recorded that he had been surprised to learn at the meeting of the “range and nature of the issues that you regard as still outstanding and that required further documentation before you are able to recommend that our licence applications proceed.” He made this important point in his letter:

“It is also unfortunate that despite my description of the very pressing International deadlines on this project, that you were not able or willing to indicate a date by which we might receive a positive confirmation that the licence to land submarine cable will be issued. In the absence of securing such a date we are presently unable to proceed with the purchase of the 11,000m2 building in Neo Faliro [the Marine Plaza building] and with the placing of the necessary orders for cable with the manufacturers, which, if the project is to proceed, will become critical by late May 1999.”

He then responded to the NTC’s insistence at the meeting that Convergence should provide copies of the contracts with Project Oxygen before the licence application could proceed. He said (in effect) that Convergence could not do so because they were confidential, but that at the previous meeting on 20 November 1998 Convergence had provided a Project Oxygen letter “indicating their position to proceed rapidly with the contract”. He also said that Convergence was prepared to “give a written undertaking to enter into agreements for international capacity and connectivity as a condition president [sic] of grant of the licence.” He concluded by saying that “[w]e believe that all other outstanding matters that you have identified can and will be addressed expeditiously and we hope similarly that the NTC will shortly be able to give us a positive date on which we might expect to receive confirmation that a licence will be granted and in what form.”

This was a letter to the NTC saying that, without at least the cable landing licences, Convergence were “presently unable” to proceed with the purchase of Marine Plaza. In cross-examination, Mr Robinson disclaimed the truth of that statement. As I have said, he said the true position was that Convergence did not have the money to buy the building, and that he was not in position to put it in funds to do so. His evidence was that the point made in the letter was “one of a number of points to try to drive the licensing process.” Put more shortly, his evidence amounted to an assertion that he was lying to Mr Lambrinopoulos that the grant of the licence was a commercial pre-condition of a commitment to purchase Marine Plaza. His evidence in cross-examination was, I understood, that at the time Convergence had sought and obtained offers of mortgage finance for the purchase. But still it did not proceed. I infer, and find, that the true position was that it was not prepared to do so until it first had the cable licence in place. That would make commercial sense and it was also what Mr Robinson was saying to Mr Lambrinopoulos. I do not accept that what he there said was a lie. It was simply convenient to Convergence’s case for Mr Robinson now so to characterise it.

Also on 8 April he wrote to Yannis Stournaras, the Chairman of the Council of Economic Advisers, at the Greek Ministry of National Economy. The point of his letter was to complain about the lack of progress in relation to the application for a teleport licence. Mr Robinson explained that he had had a meeting on 6 April with Mr Lambrinopoulos at the EET/NTC. This had not been a success. He wrote:

“Unfortunately it was not as positive as Mr Loucas Valetopoulos and I would have hoped for and I attach for your information a copy of the response that I have sent to the Chairman of the EET/NTC. As you will see from this very little was achieved other that [sic] to identify yet a further series of documents or amended documents that we require before even an indication of the timing for the issue of a licence will be given.

I do have to say that I went to very great lengths to explain to Mr Lambrinopoulos the degree of the progress we have made on the project since our last meeting, even in the absence of positive support from the EET/NTC and the nature of the deadlines we [are] now facing on the international front.

Despite the statement from Mr Lambrinopoulos that the EET/NTC has a policy of positive encouragement of investment in Greek telecommunications by companies external to Greece, I see little evidence in reality that this is the case and the level of frustration is very high.

Other than providing yet more documentation to the EET/NTC and attempting to create a wider understanding in government of the importance to the economy of such infrastructure projects as these, there seems to be a limited amount that we can do, but just watch deadlines pass with attendant consequences to all. …”

These letters give the real explanation of why no financial adviser had been appointed. The problem was that Convergence had not yet obtained the all-important teleport licence, without which it had no project to sell. Moreover, if Mr Robinson’s chosen words are to be taken at face value (and often they are not), the licence problem had caused Convergence to miss various unidentified “deadlines”. In cross-examination he explained that those “on the international front” were “the necessity to meet the schedule for the Olympic Games in 2004 and the testing programme that was to start in the summer of 2003.” They also included a commitment with Project Oxygen and, as an alternative, the buying and laying by Convergence of its own submarine cable. The lack of any indication of the grant of a licence plainly was not simply a run-of-the-mill course of events. It was holding the project up. Mr Robinson’s frustration over the problem caused him, on the same day, to write in like terms to (i) Tassos Giannitis at the Prime Minister’s Office; he was Head of the Economic Office; and (ii) Dr George Papaconstantinou at the Prime Minister’s Office; he was the Adviser on Information Society Issues.

It was of course put to Mr Robinson that this clutch of letters, and the near nil rate of progress with regard to the licence applications, reflected the real reason why at that stage Convergence had not approached financial advisers for the purpose of a fund-raising exercise. The point made was that, without licences, it would be difficult to get the requisite fund-raising off the ground. Mr Robinson disagreed. He said that whilst licences were necessary, fund-raising always comes first: “how,” asked Mr Robinson, “would you make the licence applications?” The answer would, at least in this case, appear to be that Convergence had had no difficulty in making the licence applications without the prior injection of outside finance: it had simply failed to obtain them.

Mr Robinson’s letter to Mr O’Beirne of 22 April provides a tolerably clear admission that any delay in the fund-raising process was nothing to do with structural problems but everything to do with the lack of licences. He said that he had heard from Chart that they would take on the raising of equity for the group and their assessment of the position was that (i) a placing memorandum cold be produced in three/four weeks, (ii) there was a strong interest in the US market for such a project, (iii) it would take two months from completion of a memorandum to raise the funds, and (iv) “[t]he trigger for commencement of this process would be the confirmation from the NTC that a licence will be issued and resolution of the source of international submarine interconnection i.e. Project Oxygen or Global Crossing.” Mr Robinson said he had arranged for Mr Tzavellas to meet Alpha Brokers in Athens to discuss the possible listing of CVL on the Athens Stock Exchange and he added that “both your final letter to the NTC and your paper on the ‘mechanism to list CVL and possible consequences’ are now needed as a matter of urgency.” He said nothing about the resolution of structural problems as being a matter of urgency. That letter reflected that in Chart’s view the key to fund raising was the obtaining of the necessary licences.

That was also Mr Robinson’s view. On 24 April he wrote to Attica about the purchase of Marine Plaza making a conditional offer to purchase. The second of three conditions was “[p]ositive indication, in a form satisfactory to the board, that all requisite licenses necessary to utilize the building for the purposes for which we have made application to the Greek Government, have been or will be issued by the relevant authorities.” He described this “as the most problematic in determining the time frame by which this transaction can be completed.” I find that those words meant what they said.

The evidence was filled with documents directly inconsistent with Convergence’s case that the sole cause of the hold up of the progress of the project was the perceived structural problem in the Convergence group. Among the more striking were various draft reports to the PLC board produced by Mrs Robinson between June and September 1999. The reports were about the WintraNet project, the 40GHZ system that Convergence was hoping to install in Athens. In her report Mrs Robinson identified five “major factors affecting the progress of the programme.” The last two were “(d) the delay and difficulties experienced in the licensing process in Greece” and “(e) the delay caused to the fund raising for the Group due mainly to (d) above perceived as critical by some financial institutions.” Mr Robinson advanced a series of answers by way of attempted escape from the difficulties this presented to Convergence’s case, opening with the assurance that he was not trying to be evasive. He said, first, that he had probably not seen the various drafts, but only the final version, but I find he was closely involved with the progress of the drafts. He sought to say that there were two fund-raising operations in place at the time, whereas I find there were not. He said he could not know what was in Mrs Robinson’s mind – although her report made that clear enough. As to why she did not also refer to the alleged structural problems, he said it would have been “very inappropriate” in a technical document of this nature (the lack of licences being, by inference, an appropriate reference to make). Mr Robinson had no answer to this document, which was destructive of his evidence and Convergence’s case. When Mr Anthony Temple QC, leading counsel for Convergence, saw this document in December 2005 (Convergence’s lawyers had not previously reviewed the documents in the case, but it was being used by CV in a forthcoming specific disclosure application) he described it as showing the opposite of the Convergence case and promptly advised that Convergence should try to settle the litigation. Absent good answers to it, and there were none, he saw it as likely to prove terminal, as did Mr Swainston when he took over Convergence’s case.

Several other areas were covered during Mr Robinson’s comprehensive cross-examination, but it is not necessary to review them all. I will refer to just two other matters. The first was that in February 2000 Convergence made a complaint to the European Commission about the OTE’s refusal to enter into an agreement with Convergence for the provision of satellite capacity. The thrust of the complaint that OTE’s intransigence was potentially fatal to the Greek project. It was spelt out in no uncertain terms. It read:

“Timing is critical. A number of key elements of The Convergence Group’s proposal depend on the grant of access to satellite capacity. Without access to capacity, the NTC will not grant a licence. Without a licence, The Convergence Group is unable to enter into a contract for the Teleport, because it relies on the cash flow from the VSAT services to fund the building. Without a definite address for the Teleport, it cannot finalise the Oxygen arrangements, because the costing is dependent on the location of the cable landing site. OTE’s failure to provide INTELSAT access has already lost The Convergence Group one potential site.”

The site referred to was Marine Plaza, which had by then been sold elsewhere. According to Mr Robinson’s earlier evidence (and despite the conditionality of his offers) the only thing holding up the purchase was the lack of money; and the lack of licences had nothing to do with. According to this complaint, the loss of the building was everything to do with the lack of licences and nothing to do with a lack of money. To the question whether the statement in the complaint that it was OTE’s failure that had lost Convergence Marine Plaza was untrue, Mr Robinson’s reply was “In the strict sense of the word, I believe in this context I think it must be yes.” He was therefore saying he had lied to the Commission; although what he had said to them was consistent with what he previously been telling everyone, namely that the obtaining of the requisite licences was a condition of proceeding with the Marine Plaza purchase. Had he admitted that he had told the truth to the Commission, he would have had to accept that he had been lying in his evidence at the trial.

The final matter is that on 4 May 2001 Convergence proposed a settlement on a “without prejudice save as to costs” basis, namely that CV gave them a credit note for all unpaid invoices and paid them £90,000. In that letter TJG attached a schedule purporting to show the breakdown of Convergence’s loss. It included £179,450 for the professional work involved in correcting CV’s alleged errors; and a figure of £202,000 for costs occasioned by the failure to complete external funding down to January 2001, with an added explanation that this figure was calculated on the basis that CV’s alleged negligence was only 10% responsible for the delay in raising finance up to January 2001. Put another way, 90% of the cause of that problem was conceded as being attributable to other factors and so on the face of Convergence’s own concession it had no case against CV for any of that loss, which would have been suffered anyway. How, it might be asked, could Convergence then conscientiously proceed with a claim against CV that it was the sole cause of all Convergence’s problems?

That offer was made on Mr Robinson’s instructions and shows that which was apparent during his cross-examination, namely that Convergence had no case on the facts against CV that its shortcomings in relation to the re-structuring of the Convergence group in the spring of 1998 had any causative effect on Convergence’s failure to go to the market with its project earlier than it did. In the meantime Convergence had pleaded a case against CV which imposed on CV 100% of the blame for Convergence’s failure to bring its project to the market by March 1999 and claimed damages of some €100m.

After some debate, it was agreed that the offer was admissible in evidence at the trial and Mr Robinson was cross-examined on it. He explained it away as being “an expedient”, to enable Convergence to get on with its business and also said it was just “an arbitrary number”. The assertion that CV were responsible for just 10% of the delay was inconsistent with Convergence’s case and Mr Robinson’s evidence.

During the pause in the course of the trial following the first part of Mr Mercer’s evidence, Mr Swainston and Mr Midwinter produced a joint written advice on prospects. This advice was deployed by Mr Robinson in his evidence in answer to this application (the joint administrators of PLC and SA having waived privilege, the privilege in the advice belonging to the companies). Counsel opened their advice by pointing out that Convergence’s case that CV’s structural negligence had caused a funding problem was restricted by the facts that Convergence had conceded that a structure could not have been in place before March 1998; that the experts were agreed that to raise significant money through a private placement required the services of a financial adviser; and that Convergence’s own expert evidence was that March 1999 was the latest time a financial adviser could be appointed in order to catch the market before it declined at the end of 1999 and into 2000. Mr Robinson’s case was that he felt inhibited from appointing an adviser before 14 July 1999, because of his claimed perception of problems with the structure.

Counsel then reviewed the Convergence case on the evidence so far and pointed out that they had previously identified that the case, and Mr Robinson’s evidence, faced a number of challenges. They explained in particular that the case was inconsistent with the contemporary documents, in particular because they showed (a) that factors other than structural problems, in particular licence problems, were key in the delay, and (b) that Mr Robinson was happy to engage a financial adviser in the spring of 1999, ie before the structural problems were resolved. Pausing there, it was apparent that that prior advice referred to must have been given at least by September 2006, since one of the inconsistencies referred to in paragraph 279 of Mr Robinson’s main statement was corrected in a further Robinson witness statement made in September. Mr Swainston was instructed in May 2006.

The advice was that the evidence showed that Convergence was not ready for an internet placing in the spring of 1998 irrespective of structural problems, those other problems not having been resolved; that the documents showed that in early to mid-1999 Convergence regarded the need for some assurance of licences as the critical trigger of any fund-raising exercise by way of a private placement; and reference was made to Mrs Robinson’s damaging report of June 1999. As regards Mr Robinson’s claimed concerns about the structure, his evidence had been that he believed that the structure was in place by 22 May 1998 (that is, with SA being the holding company, with Fergana below it and PLC below Fergana) and his only continuing concern was as to the delay in the production of valuations necessary to complete and formalise it. That was an area of continuing doubt, but there was no expression of concern when CV indicated that they would do those valuations alongside the valuations they would do for a placing in mid-September; and in any event any concern about the absence of valuations – which only went to the extent of the respective beneficial interests of Mr Robinson and his family trust in the Greek venture – was difficult to reconcile with Mr Robinson’s evidence that he believed that the basic restructuring, including the inversion of the group, had been completed by 22 May 1998.

As for the appointment of a financial adviser, there were meetings before 14 July 1999 with such advisers, including during 1998, and there was no documentary support for the view that the perceived structural problems were holding up the operation. The advice was that the court was likely to reject Mr Robinson’s account of the meeting of 30 December 1998, and in January 1999 Mr Robinson met Chart and engaged them. Phase 1 of the fund-raising operation was said by Chart to be dependent on licences and was likely to take 6 to 12 months. Counsel referred to the further Convergence documents that made progress in the project conditional on licences. The picture created was that Mr Robinson was generally untroubled by supposed structural problems, but rather more by licensing problems. The advice was that the court was likely to find that his evidence was evasive and, on major aspects of the case, untrue. In particular, the court was likely to reject his evidence that structural problems prevented the internet placing in March/April 1998, that the project was substantially ready by then, his account of the 30 December 1998 meeting and his claims that licences, or their lack, were not an obstacle to the engagement of a financial adviser and fund-raising from early 1999. It followed that:

“… the merits of Convergence’s position on causation are very weak indeed. Whilst CV (and Mr Ladimeji in particular) clearly did a very poor job, it is difficult to see the Court concluding that Mr Robinson was really minded to engage a financial adviser, and that the project was otherwise ready to raise finance, in light of various problems apart from structure. … We consider that the counterclaim is very likely indeed to fail on causation grounds”

The result of that advice was that PLC and SA both went into administration and proceeded no further with the counterclaim; and I made the orders I have earlier summarised.

In my judgment that advice was a sound summary of the comprehensive inadequacy of Convergence’s case. The true position was that the internet placing failed to proceed for a number of reasons, none being because of a perception that there was something wrong with the structure created by CV in March/April 1998. Whilst Mr Robinson knew that certain valuations remained to be obtained to finalise one element of the restructuring (one not relevant to the identification of a company in which investors might invest), he believed by 22 May 1998 that the structure was otherwise in place; and there was no evidence supporting any conclusion that the outstanding valuations were a feature which was holding up the progress of the internet placing. The fact is that precisely nothinghappened with regard to its forward progress. It was all talk and no do. I find that Mr Robinson’s evidence that anything CV had done or failed to do had caused the failure of the proposed internet placement was untruthful.

So was his evidence that perceived shortcomings in the structure, which (outstanding valuations apart) I find he did not discover until February 1999, had any effect on the progressing of the project to a private placement. There was a myriad of difficulties with the project which prevented its forward progress and there is no need to look beyond Mrs Robinson’s June 1999 report for confirmation of that. The real problem was the absence of licences, the evidence showing that these were regarded as critical by Mr Robinson to the progression of the project, Chart’s position, as explained in early 1999, being that they were the key to a successful fund-raising exercise. I find that Mr Robinson’s evidence that it was the perceived problems with the structure that prevented him from instructing a financial adviser was also untruthful; and his attempt to make good that case during the course of his oral evidence was dishonest. In relation to the key issues in the case I found him to be an evasive and untruthful witness. I find that he knew from the outset that CV were in no manner the cause of the failure of the Silk Route project.

I summarised at the beginning of this judgment the issues raised by this application. CV’s applications are for orders (i) that the costs I have already ordered against PLC and SA should be assessed on the indemnity basis; (ii) that they should include the costs of the failed mediation held on 5 December 2003; and (iii) that orders to pay those costs should be made against each of Mr and Mrs Robinson pursuant to the jurisdiction conferred by section 51 of the Supreme Court Act 1981.

CV submitted that they should have their costs on the indemnity basis. The applicable principle was summarised by David Richards J in Ghafoor and Others v. Cliff and Others [2006] 2 All ER 1079, at paragraph 72:

“… The leading authorities make clear that, while the court has a wide discretion as to whether to order costs on the standard or indemnity basis, there must be something in the conduct of the proceedings or the circumstances of the case which takes the case out of the norm in a way which justifies an order for indemnity costs. Where, as in the present case, it is the conduct of the paying party which is relied on, there must be some element in his conduct of the case which deserves some mark of disapproval: unreasonableness to a high degree may be sufficient. (See Excelsior Commercial & Industrial Holdings Ltd v. Salisbury Hammer Aspden & Johnson (a firm) [2002] EWCA Civ 879, [2002] All ER (D) 39 (Jun).)”

In Three Rivers District Council and Others v. The Governor and Company of the Bank of England [2006] EWHC 816 Comm, at paragraph 25, Tomlinson J explained how the authorities illustrate a list of principles that should guide the court’s determination as to whether an order for indemnity costs should be made against an unsuccessful claimant (for present purposes, as the case turned on Convergence’s counterclaim, Convergence can be regarded as the claimant). I do not propose to re-list all the factors to which Tomlinson J referred. But they include considering the claimant’s conduct before and during the trial; whether it was reasonable for the claimant to raise and pursue particular allegations; and whether the claim being made was speculative, weak and opportunistic. In a case in which the claim has been discontinued at a late stage, it is also relevant to have regard to whether the claim was irreconcilable with the contemporary documents; and to whether the claimant has commenced and pursued large-scale and expensive litigation in circumstances calculated to exert commercial pressure on a defendant and, during the course of the trial, has resorted to advancing a constantly changing case in order to justify the allegations made, only then to suffer a resounding defeat.

Mr Jacobs’s submission was that Convergence’s conduct of this litigation was throughout unreasonable and disproportionate. This was litigation on as large a scale as it comes, involving the generation of some 250 files of documents and with total costs on both sides of some £10m. By the time of the trial, Convergence was making multi-million pound claims against CV. This is to be contrasted with Convergence’s own perception of the value of its claims in their solicitors’ letters in January and May 2001. On 2 January 2001 TJG proposed a settlement on the basis that CV waived its fees and paid Convergence £300,000. On 4 May 2001 Convergence proposed a settlement on the basis I have referred to, namely a write off of the CV fees and a £90,000 payment to Convergence – the offer accusing CV of having been 10% to cause for the delay, an offer on which I have already commented. I record that, in one of his consultations with Counsel, Mr Robinson is noted as having explained the 10% offer as being motivated by a desire to avoid litigation since he was on the brink of some other transaction and did not want any litigation to get in its way. I am not prepared to accept that as an explanation (which anyway makes no sense: why make an offer on terms reflecting that Convergence recognised that it had no case?) since I am not prepared to accept anything Mr Robinson says without solid and reliable corroboration. As I shall explain, in addition to the untruthful evidence he gave at the trial, he has also sought to mislead the court in the course of the present application.

In my judgment, this is a clear case for indemnity costs. I found Mr Robinson to be an evasive and untruthful witness who has sought throughout these proceedings to support a case that was advanced on a false basis. It became obvious during the long course of his evidence that (a) there was no question of CV’s shortcomings having frustrated the proposed internet placing, which was not proceeded with simply because Convergence was not ready to do so for a multitude of reasons; (b) by 22 May 1998 he believed the structure to have been formally completed apart from the obtaining of valuations relevant only to the essentially immaterial matter of the division of the ultimate beneficial interest in the project; (c) he learnt of the Fergana problem in September 1998 and PwC promptly advised him how to sort it out, but no pressure to implement their advice was manifested; (d) he had no difficulty in approaching Greek investors about his project in December 1998, the only problem being that they were not interested; (e) his account of the board meeting of 30 December 1998 was untrue in material respects; (f) he did in early 1999 learn of structural problems which were eventually sorted out on 14 July 1999, but they had no impact on his ability to instruct financial advisers, and he was anyway minded to instruct Chart in the spring of 1999, before those matters had been sorted out; and (g) the real problem with proceeding with the project at that stage had nothing to do with structure, but everything to do with the slow progress on licences, as Mrs Robinson explained in her June 1999 report, as is also reflected in Mr Robinson’s own documents written at the time and because anyway licences were needed for fund-raising purposes, as Chart had made clear. His attempt to portray the picture that the whole problem was created by CV, who had thus caused Convergence the massive losses claimed by the counterclaim was untruthful, as he knew. Back in May 2001 he had sought to pin no more than 10% of the blame on CV.

This was, therefore, a counterclaim which should not have been brought because it had no prospect of success. As regards causation, it was not a case in which the court was going to find itself faced with a version of facts advanced by one side, a different version advanced by the other and in which the outcome would depend on a finding on disputed evidence. It was a case in which the facts were all exclusively within Convergence’s knowledge, being facts which, once full disclosure of Convergence’s documentation had been given, all pointed one way and in which all that CV had to do at the trial was to expose them, as they did. Convergence’s pursuit of the claim was irresponsible; and the matter is of particular concern bearing in mind the huge costs to which that pursuit put CV. I have no doubt that this is a case in which I should order that PLC and SA should pay costs on the indemnity basis, and I so order.

Quite apart from these considerations, CV also rely on the fact that from 21 September 2000 they made increasingly generous offers to dispose of the litigation, all of which were refused. On 21 September 2000 they made an open offer to settle the litigation for a payment of £250,000 to CV (a reduction of over £41,000 on the total fees being claimed). On 6 December 2001 CV made a Part 36 offer to settle for a payment to CV of £194,386.80 including interest. By contrast, on 23 November 2006 I gave judgment for CV for £231,344.23 plus interest. On 15 September 2003 CV made a Part 36 payment into court of £250,000 in settlement of the counterclaim. On 11 November 2005 CV made a further payment into court of £1m, bringing the total in court to £1.25m. Convergence, for its part, made a Part 36 offer on 30 December 2005 to accept £15m plus costs; and, on 16 February 2006, to accept £7m plus costs. If, contrary to what I have already held, CV are not entitled to indemnity costs on the basis that I have explained, I would anyway hold that they are entitled to indemnity costs as from 28 December 2001 under CPR Part 36.21.

Section 51 of the Supreme Court Act 1981 provides that the court has the power to award “the costs of and incidental to the proceedings.” The sense of the words “and incidental to” is to extend rather than restrict what the receiving party is entitled to recover (In re Gibson’s Settlement Trusts, Mellors and Another v. Gibson and Others [1981] Ch 179, at 184G, per Sir Robert Megarry VC). In applying the overriding objective of the CPR the court is nowadays required to manage cases actively, which may include encouraging the parties to have recourse to an alternative dispute resolution procedure and facilitating such procedure. The court may decide to facilitate such procedure by staying the proceedings, as it did in this case on 22 May 2003, a stay which was continued on 20 October 2003 expressly for the purpose of permitting the parties to mediate. CV submitted that the costs of that mediation were squarely in the nature of costs incidental to the proceedings: the proceedings had identified the issues and they were stayed in order to enable the parties to resort to a procedure which might avoid the need for further proceedings. In the event, however, the mediation failed and so the proceedings continued.

CV submitted therefore that in principle there is no reason why the court should not, if otherwise satisfied that it would be just, order the costs to be paid by PLC and SA to include the costs of the failed mediation. Paragraph 17.3 of the Chancery Guide, 2005, recognises that the court may make costs orders in respect of any recourse the parties may have to an alternative dispute resolution procedure; and the costs order made by the Court of Appeal in Eagleson v. Liddell [2001] EWCA Civ 155 included the costs of a mediation. CV submitted, and I accept, that the court has a jurisdiction to make an order in relation to the costs of the failed mediation. Mr Atherton accepted that the court had such a jurisdiction and I did not understand Mr Sims to disagree.

There was, however, a dispute as to whether, as a matter of discretion, it would be right to order the costs of the mediation to follow the event. Mr Atherton submitted that I would first need to know much more about it and how it was conducted. The parties agreed that I could be told what was going on behind the “without prejudice” curtain that would ordinarily be drawn across a failed mediation. Convergence’s position was that it would accept £15m in full satisfaction, a figure approximating to the wasted costs of the Greek project, plus indemnities in respect of certain potential tax liabilities. CV’s position was that they were prepared to pay Convergence some £500,000 but declined to offer any indemnity. But it is said that on the eve of the trial CV admitted negligence in respect of the tax issue to which the requested indemnity related. The position at the mediation is that Mr Robinson (accompanied by Mrs Robinson) was asking for just under £20m. CV was offering about £1m. Neither side was prepared to accept the other’s proposal and the matter proceeded to trial, when CV achieved a result which demonstrated that what Mr Robinson had been holding out for at the mediation was unreasonable.

In my judgment it would be just to include as part of the costs I have ordered PLC and SA to pay the costs of the mediation. Convergence was then pressing for far more than it could by any rational judgment have been entitled to and CV were making an offer which generously exceeded that entitlement. Convergence was ill-advised not to take the money. They must now pay the costs wasted by the mediation in which they turned the offer down.

The authorities show that the jurisdiction to order costs against non-parties is an exceptional one. It will be even more exceptional for an order to be made against such a party in a case in which the applicant has a separate cause of action against that party and could have joined him in as a party to the original proceedings, but that consideration does not arise in this case. As to what “exceptional” means, the question is whether the features relied upon are extraordinary in the context of the entire range of litigation that comes before the courts, that is whether the circumstances are outside the ordinary run of cases in which parties pursue or defend claims for their own benefit and at their own expense. Ultimately, however, the relevant test is whether in all the circumstances it is just to exercise the jurisdiction conferred by section 51 of the Supreme Court Act 1981. The exercise of the jurisdiction is a particularly fact-sensitive one. The discretion will not usually be exercised against “pure funders”, being those who have no personal interest in the litigation, who will not benefit from it and do not seek to control its course. But the position will or may be different in cases in which the non-party not merely funds the proceedings, but also controls or is to benefit from them, and in such cases it may be appropriate to make an order against such a person. In such cases that person is or may be regarded in this context as “the real party”, although that does not mean that he would himself have been the proper party to the proceedings. It simply reflects that the court endeavours to identify the substance of what underlies the litigation from the perspective of the non-party against whom the order is sought; it is not directed at identifying the person in whom the cause of action was vested. A further consideration relevant to whether an order may be made against a non-party is whether he was promoting the claim or its defence in some improper way, or was advancing a speculative claim. If a speculative case is pursued, or a claim or defence is pursued with impropriety, that too will or may by itself be a ground for a costs order, regardless of questions of whether its promoter was benefiting from or funding the litigation; and the pursuit of speculative litigation is itself regarded as a category of impropriety. In addition, however, it is also necessary to show that the incurring of the relevant costs was caused by the conduct complained of. These principles are to be found reflected in Globe Equities Limited v. Globe Legal Services Limited and Ors [1999] Building LR 232; Dymock’s Franchise Systems (NSW) Pty Ltd v. Todd and others (Associated Industrial Finance Pty Ltd, Third Party) [2004] 1 WLR 2807, paragraphs 24 to 29, 33; Goodwood Recoveries Ltd v. Breen [2006] 1 WLR 2723, paragraphs 44 to 59. They permit, in an appropriate case, the making of a costs order against directors who have pursued or defended a claim upon behalf of an insolvent company.

CV submitted that this was just such an exceptional case in which the jurisdiction could and should be exercised against each of Mr and Mrs Robinson. They say that all the criteria for the making of an order are satisfied. They say that it would be a scandal if such an order is not available to them. The stark facts are that they were brought to court on a massive claim by Convergence for alleged negligence, the costs of its defence coming to some £5.6m. CV kept their eyes wide open throughout the litigation to the thought that security for costs should, if possible, be obtained; and they did seek such security in 2002 only to have their application refused because, on the face of it, both PLC and SA looked to be good for any costs. They made a further attempt in 2004 and kept this question under continuing review, including into 2006, when they were fobbed off with the production of management accounts showing net assets in PLC of over £8m, a picture endorsed in the 2005 group accounts for PLC produced on the first day of the trial and signed three days before. Those accounts proved worthless, when less than a month into the trial both companies went into administration, with the prospect of not a penny for creditors. Those accounts were the responsibility of Mr and Mrs Robinson, as directors of PLC, and absent a good explanation from them as to what happened in 2006 so as to cause the incredible reversal in PLC’s apparent fortunes, it is said that justice demands that they should personally pick up CV’s costs bill, which - but for the apparently false picture painted in the management accounts - would probably otherwise have been secured. CV submitted that no such explanation has been forthcoming from Mr and Mrs Robinson. All that has been said is that because the parent company has collapsed, it is not surprising that its trading subsidiaries have collapsed as well. As a general proposition, I do not accept that.

In addition to this CV submitted that this was litigation which was funded to a material extent by Mr and Mrs Robinson. It is also said that they controlled it throughout. It is also said that its pursuit was for their benefit and that of their families. Above all it also said that its pursuit was a disgrace. It was built on a raft of lies from Mr Robinson, being lies that Mrs Robinson supported in her witness statement. The reality, it is said, is that Convergence never had a case, and its pursuit was from the outset highly speculative. By the end of 2005 it was apparent to Convergence’s legal team, and at least to Mr Robinson, that there were serious problems with the case; and when Mr Swainston took over in May 2006 he later spelt out in no uncertain terms that the case simply did not stack up with the documents and would be likely to fail. By 5 September 2006 Mr Robinson knew that; and Mrs Robinson knew it by 15 September 2006 at the latest. Convergence nevertheless continued with it until, following Mr Robinson’s evidence, it recognised the hopelessness of the cause and abandoned the litigation. It then simply walked away from it, leaving Convergence, to use the usual phrase, hopelessly insolvent; and Mr and Mrs Robinson now want to walk away from it as well. CV submitted that this is a case which cries out for an order for costs against them.

Mr Atherton, for Mr Robinson, and Mr Sims, for Mrs Robinson, both submitted that no order should be made against either. Their submission is to the effect that this was ordinary litigation, bona fide pursued by PLC and SA for the benefit of those companies respectively, and there was no question of the case crossing the threshold beyond which the section 51 jurisdiction can arise.

In order to assess the respective positions, I will first consider certain matters under the following subheadings.

It is relevant first to consider the relationship between the group companies and the extent of the respective interests of Mr and Mrs Robinson in them. The basic position is explained in Mr Robinson’s witness statements. The ultimate owner of the group is The Broadband Trust (“the Trust”). The Trust was established in August 1999 and is said to have “replaced” a trust known as the Orbis Trust which Mr Robinson had established in February 1991. The Trust was originally administered by New World Trustees Limited (“New World”) and now by JTC Trustees Limited.

The Trust owns 45% of SA. Corsaire Limited (“Corsaire”) holds the remaining 55%. The Trust owns 100% of Corsaire. It also owns 100% of Fergana, which in turn owns 100% of PLC (Mr Robinson’s and Mr Waterhouse’s shareholdings in PLC are held as nominees for Fergana). The Trust also owns 100% of Convergence Aviation Limited and 94% of Convergence Aviation and Communication LLC. It follows that the key companies in the group are all ultimately wholly owned by the Trust.

Under the Trust, and so far as material, Mr Robinson is the principal beneficiary and Mrs Robinson is a named beneficiary. The beneficiaries also include their children or remoter issue. The essential terms are that the income is paid to Mr Robinson for life, with remainder to Mrs Robinson for life (with wide powers of advancement in their respective favours with the protector’s consent), but on terms that, with Mr Robinson’s consent (or that of the protector after his death), the trustees may make discretionary payments of capital and income elsewhere. The trustees have wide powers of investment.

By 23 August 1999 the Trust had been funded with some £8.3m deriving from the Orbis trust, itself derived from settlements made by Mr Robinson following sales by him of shares in his companies. Between 2000 and 2004 he paid further sums to the Trust, bringing the total payments to it, including the £8.3m, to £11.069m. The details of those further payments are: (i) 2000, £262,000; (ii) by July 2001, £717,000; (iii) between August and December 2001, £1.534m, which was advanced to SA, which remained involved in the Silk Route project until 2003; (iv) 2002, £235,000, also advanced to SA; (v) 2003, £2,000, for a deposit on a property purchase which did not go ahead, with the consequence that the deposit was forfeited; (vi) 2004, £25,000, for the payment of the trustees’ fees. The remaining balance was paid out, prior to the litigation, to SA or to other operating companies in the group.

It is not disputed that the Trust has never made any income payments or capital distributions to either Mr or Mrs Robinson. That is because the Trust has simply used all the money settled upon it by way of loans or other investments in Mr Robinson’s business ventures, including in particular SA, which was the primary claimant in the litigation. I should record Mr Jacobs submitted that it is not accurate to regard Mr and Mrs Robinson as having had no direct benefit from the Trust, since he said that New World had in fact paid them substantial salaries and pensions on behalf of group companies which it was said were not in a financial position to pay them themselves. The response to that proposition was that it reflected a misunderstanding of the New World’s role in relation to the payments, which was not in its capacity as trustee of the Trust but as the administrator of the paying companies. I am not in a position to resolve that difference on this application, and I propose to proceed on the basis that Mr and Mrs Robinson have not received any payments as beneficiaries of the Trust.

I was referred to such PLC board minutes as are in evidence, which are relevant in part to the manner in which the litigation was conducted, and by whom, and in part to its funding.

At the board meeting on 20 November 2003 Mr and Mrs Robinson were present, with Mrs Robinson taking the chair. Mr Woodward and Mr Rosewell attended by telephone. Mr Rosewell was a director throughout but never attended meetings and was not to be a witness at the trial. Mr Alan Hindley sent his apologies. He had become a board member in about May/June 1999, and so only joined at a very late stage in the relevant history and appears never to have attended any meeting. The minutes recorded that Mrs Robinson referred to the litigation and that a mediation was to be held on 5 December 2003. She reminded the meeting that the advice received from PLC’s advisers was favourable to PLC and SA. Mr Robinson was appointed to represent PLC at the mediation and to give instructions as to the basis on which PLC would be willing to settle. If the matter was not then settled, his authority to settle it should extend to 31 March 2004, even if he should cease to be a director in the meantime. He was to report back if the litigation was not settled. The mediation took place on 5 December 2003 and was unsuccessful. Mr and Mrs Robinson both attended it. Mr Robinson resigned as a director of SA in the same month. Mrs Robinson ceased to be a director of SA in April 2004.

The board meeting of 10 February 2004 was held at Mr and Mrs Robinson’s house at Coxland Farm in Devon. The farm is owned by Amador Limited (“Amador”), a company owned by Mr and Mrs Robinson in the proportions 60/40. Mrs Robinson chaired the meeting. Mr Robinson and Mr Woodward both attended by telephone. There were apologies from Mr Rosewell and Mr Hindley. Mr Robinson reported that the mediation had failed and that DAC had advised that Mr Anthony Temple QC should be instructed for the trial. He had in the meantime been so instructed and was reading into the case, and there had been meetings with him, Mr Brannigan and DAC. Mr Robinson reported that the advice was that CV had been negligent and that damages “should be recoverable”. He recommended that the litigation should be pursued. The board noted that Mr Walker on behalf of SA had asked PLC to manage the litigation for it, and Mr Robinson’s authority to act also for SA was to be renewed. PLC would fund the litigation, but would re-charge 80% of the cost to SA. SA had asked to be kept informed of progress. At this stage SA’s only activity was the pursuit of the CV litigation. The minutes recorded that DAC were holding about £2.3m of PLC money in its client account. The board resolved that Mr Robinson, who “was intimately aware of the circumstances surrounding the litigation”, should continue to represent PLC during the litigation. He was given an indefinite extension of his authority to settle the case but was to report to the board on a regular basis. Mr Woodward resigned from the board at this meeting. I comment that PLC’s position was critical to the question of security for costs since, whatever SA’s position, PLC was ostensibly a solid company that was good for costs, a factor which for practical purposes precluded CV from obtaining any security.

There was a further board meeting on 26 June 2004. Mr and Mrs Robinson attended in person. Mr Orr, the protector of the Trust, was present. The meeting was told of a discussion that Mr Robinson had had with Mr Temple on 25 June and resolved that Mr Robinson should instruct DAC to appeal to the Court of Appeal against Lloyd J’s refusal to permit an amendment to plead the internet placing case. The minutes recorded that further meetings were to take place with Mr Temple and DAC in order to progress the litigation. At the board meeting on 30 September 2004 (attended by Mr and Mrs Robinson, with Mr Rosewell on the telephone), Mr Robinson reported that the appeal was proceeding and that the advice of Mr Temple and Mr Brannigan as regards its prospects remained positive.

There was then a gap in the board minutes until those of a board meeting on 21 July 2006. Mr and Mrs Robinson were present (with Mr Robinson in the chair), and Mr Waterhouse and a Mr Vaughan Johns were in attendance. There were the usual apologies from Messrs Rosewell and Hindley. This meeting did not concern the litigation, but related to the making of an outline bid for Exeter and Devon Airport Limited by SouthWest Regional Airports Limited (“SRAL”), PLC owning 40% of SRAL (a project known as “Project Urn”). The board resolved that PLC would procure or provide working capital funding by way of a loan to SRAL, and noted that this was likely to be supported by a facility from Lloyds TSB.

On 18 August 2006 there was a board meeting at Coxland Farm. Mr and Mrs Robinson were present. Mr Waterhouse was in attendance. There had been discussions between SRAL and Lloyds for a facility for Project Urn, but the board noted that neither SRAL nor PLC could provide the requisite security to Lloyds and so the application had not proceeded. Mr Smith of Lloyds had, however, indicated that a loan structure via Amador would be acceptable. The board noted that Amador was prepared to enter into an arrangement with Lloyds, provided that PLC entered into a loan agreement with Amador. The board then resolved to enter into the latter loan agreement, the agreement being tabled. The minutes noted that the funds from Amador would enable PLC to provide the working capital funding required by SRAL for the purposes of Project Urn. On 25 August 2006 Lloyds offered Amador a sterling overdraft facility of up to £750,000 on the provision of security under four heads, including a charge over Coxland Farm.

On 6 September 2006 a board meeting held at Coxland Farm was attended solely by Mr and Mrs Robinson. There were apologies from Mr Hindley and Mr Rosewell. The minutes recorded Mr Robinson’s explanation about the litigation to Mrs Robinson. There had been a recent consultation with Mr Swainston, Mr Brannigan and Mr Highley (of DAC). The total DAC cost estimate for the trial was now some £6.6m, the original estimate having been £2.2m. DAC was proposing to present invoices for some £1.2m in respect of the July/August period. Mr Highley had indicated that if DAC were paid £1m in September, they might work on the basis of carrying £0.6m on their sales ledger. The minutes continued:

“3.4

It was noted that until the latest set of charges from DAC, [PLC] had been able to fund the on-going cost of the Litigation entirely from its own group resources and cashflow.

3.5

Advice from the legal team remained positive: [CV’s] negligence would be proven and damages and costs were likely to be recovered.

3.

6 It was resolved that [PLC] would continue the litigation at least until the court break scheduled for a week in early November.

3.7

DAC would be authorised to initiate settlement discussions with [CV] at the earliest opportunity.”

The minutes turned to the funding of SRAL for Project Urn. In view of “the immediate short-term funding drain on [PLC],” Fergana (PLC’s shareholder) was to be approached with a view to its ability to accelerate repayment of its long-term loan from PLC and as to whether it would fund SRAL’s need for working capital. The minutes reflected that PLC was running out of money and needed to find £1m quickly. By that stage the proposal was that, because of PLC’s straitened circumstances, recourse was to be had to Fergana to fund Project Urn. The proposal that Amador would raise the money for that project appears to have been shelved. I will come later to the advice given by counsel to Convergence (which was represented at a consultation the day before by Mr Robinson), which shows that the summary of it in paragraph 3.5 was untrue.

On 11 September 2006 DAC wrote to Mr Robinson, with a copy to Mrs Robinson. The letter recorded an agreement that Convergence had made to pay a total of £1.1m in instalments between 12 September and 9 October. The payments were in respect of past fee notes and on account of future costs.

On 12, 19 and 26 September Amador paid a total of £735,000 to PLC, which in turn paid DAC. On 27 October Amador paid a further £98,000 to PLC, which in turn paid it on to DAC. Amador therefore provided £833,000 towards the costs of the trial. Mr Robinson’s case is that these were Amador payments and so nothing to do with him. Mrs Robinson says she knew nothing of the money having been applied in the payment of costs until afterwards. She claims that she believed they went towards Project Urn.

On 16 October 2006 there was another PLC board meeting. Mr and Mrs Robinson were present, with Mr Robinson in the chair. Mr Rosewell was present by telephone. The board approved the 2005 accounts. Paragraph 5 of the minutes noted that PLC had been providing financial support to CIAO and its subsidiary, SRAL, for Project Urn. The note continued “To continue to provide this funding, [PLC] had entered into a Loan arrangement with Amador Limited in August and the first draw-downs against this arrangement had taken place on 12 September 2006. The new funds had been utilised to assist CIAO and to continue funding for the law suit between [PLC] (and [SA]) and [CV].” Paragraph 5.2 noted that DAC required payments of £100,000 a week to fund the trial. If those minutes are an accurate record of what happened at the meeting – and they were later signed so as to signify that they were – the quoted words told Mrs Robinson that Amador had been funding the litigation (it also made its £98,000 payment on 27 October, which was after this meeting). Mrs Robinson, however, denies that she knew that. The directors’ report in the 2005 accounts referred to the current litigation with CV and noted that “there are risks associated with any litigation, but the company is confident of its case.” It cannot be said that Mr Swainston was so confident, whatever view the others in the legal team may have had, and Mr and Mrs Robinson both knew that. It can, however, I suppose be said that they were entitled to think they knew better than Mr Swainston.

On 18 October 2006 Mr and Mrs Robinson, and Mr Vaughan Johns, purportedly held a board meeting of Fergana, although there is some question as to whether they had ever been appointed directors. Mr Robinson reported that PLC had requested funding from Fergana to fund the litigation. It had also been providing financial support for Project Urn. In the event the Project Urn bid had failed, resulting in the incurring of £700,000 irrecoverable costs. PLC is said to have suggested that Fergana could take over the debt due to PLC from Corsaire. All options to assist PLC would be explored.

On 20 October 2006 Mr and Mrs Robinson held a board meeting of PLC, with Mr Rosewell attending by telephone. Paragraph 4.1 of the minutes noted that Fergana had offered to take over PLC’s liability to repay its debt to Amador, which was stated to be about £745,000, but was in fact £735,000. PLC resolved to accept Fergana’s offer and paragraph 4.2 resolved that “the loan balance was now to be treated as an interest-free debt payable to Fergana by [PLC].” The effect of that was that Fergana was to pay Amador and PLC was to reimburse Fergana.

On the same day there was a board meeting of Fergana, attended by Mr and Mrs Robinson and Mr Vaughan Johns. Paragraph 2.2 referred to Mr Robinson’s recent discussions with Mr Brannigan and DAC to the effect that they were both positive that the case would be won and that damages would be recovered from CV. There was no reference to Mr Swainston’s view on the prospects, and his views were not positive. The minutes record resolutions on various matters. Fergana was to provide immediate cash of £400,000 to PLC and would assume the PLC liability to Amador, the current balance being put at £800,000. In addition, Fergana would seek to increase its borrowings from directors when possible.

This was the hearing at which Mr and Mrs Robinson sought a three-month extension to answer CV’s evidence. CV had asserted in their evidence that Amador had funded the litigation. They knew that on 26 October 2006, close to the beginning of the trial, Amador had mortgaged the farm and they inferred that that was for the purpose of raising money to fund it. Both Mr and Mrs Robinson were in court. In relation to the Amador role their instructions to counsel then appearing for them in relation to that matter were relayed as being that “The mortgage on the farm was taken in order to provide funding for another company’s project. It was not taken out in order to provide funding for this litigation.” There is no dispute that the mortgage was dated 26 October 2006, and the inference is that the earlier drawdown on the Lloyds overdraft facility was permitted because Lloyds’s other security was sufficient. The explanation that Mr and Mrs Robinson gave to counsel was at best a half truth: it may be that the mortgage was granted in pursuance of a prior commitment and that its original purpose had been to raise money for a purpose unconnected with the litigation. But by 20 December 2006 there is no doubt that Mr Robinson knew that the Amador money raised on the security of that mortgage had been used for the litigation; and, despite her assertions to the contrary, it is not easy to see how Mrs Robinson did not know that as well because she had been at the relevant board meetings, including in particular that of 16 October 2006. Nevertheless she denies that she had learnt of the application of the Amador money until after the event. Those instructions to counsel were therefore less than frank, at least insofar as they came from Mr Robinson. That is not the first time he has given misleading instructions to counsel. He also did so in relation to a matter that arose in the course of the case management conference held before me in February 2006. I make it plain that on neither occasion was there any question of counsel being aware of the falsity of, or lack of candour in, his instructions. He also advanced a misleading case to the court in support of his defence of this application.

Following that hearing CV asked questions of Mr and Mrs Robinson about why Coxland Farm was mortgaged and why the Amador overdraft arose. Mr Robinson made a witness statement in January 2007 by way of an asset disclosure, including an answer to those questions. He gave lots of information about Project Urn and described the completion of the charge on 26 October 2006 at the commencement of the trial as “an unfortunate coincidence in timing.” No-one reading his explanation would know that the Amador money raised from the mortgage was not applied towards Project Urn, but towards funding the litigation, and the inference is that the intended sense of the “unfortunate coincidence” point was that this was nothing to do with the litigation. A candid answer would have explained that £833,000 raised on the security of the mortgage was used to fund the litigation, whatever may have been the original purpose of the Lloyds overdraft. Mrs Robinson answered the like question by reference to Mr Robinson’s answer and her explanation was exclusively Project Urn orientated.

CV’s solicitors were quick to divine that the Amador money was not used for Project Urn and asked Mr and Mrs Robinson’s solicitors to explain the position. They admitted, on behalf of Mr Robinson, that some of the Amador money was used to pay DAC. This was the first time that admission was made. They did not make a like admission as regards Mrs Robinson. All they said on her behalf was that she remembered consenting to the mortgage for the purposes of the airport bid. The essence of what they said was that she was unaware of any use of the Amador money for the purpose of funding the trial.

PLC’s year end was 31 December. The group’s 2003 accounts showed £74,939 of turnover, and included £4.75m operating income received as a result of some litigation. The profit for the year was £4,181,087. The 2004 accounts showed turnover of £294,485 and a loss of £1,764,765. Turning to the balance sheet, the shareholders’ funds at 31 December 2003 amounted to £4,189,080. The like funds at 31 December 2004 were £7,946,253, mainly represented by £7,076,036 of intangible assets. That reflected the acquisition by PLC of two LDO subsidiaries in 2003. That acquisition reflected the obtaining of goodwill which has to be written down each year. Given those figures, CV had no practical basis for applying for security for costs.

During early 2006 CV asked for management accounts, because the 2005 accounts were not yet available. They were produced and showed an improved net asset position as at 31 December 2005, with net assets of £8,891,483. They were provided under cover of a letter from DAC asserting that there “were no grounds upon which a court should make an application [sic] for security for costs.” Squires were not convinced and wrote to DAC on 15 February 2006 asking for details of what was comprised within the £6.3m figure for intangible assets and a £4.66m figure for debtors/prepayments. The reply on 3 March was that the balance of £6.27m at 31 December 2005 represented goodwill on consolidation relating to two operating subsidiaries “that are trading profitably and involved in the Group’s ongoing business.” They said the breakdown of the other figure was £29,040 prepayments and £4,629,816 debtors, of which £2.784m had been paid by 17 February 2006. They said PLC would “strongly contest any application you may make for security for costs, as it would be unjustified and inappropriate.” Squires sought further details of the debtors/prepayment figures, which were provided on 24 March, when DAC once more indicated that any application for security would be contested. CV recognised that, in the face of the management accounts so provided, they could not depose to the belief that PLC would be unable to pay the costs of the proceedings as would be necessary on any such application. Mr Atherton submitted that the security application that CV made in 2002 against PLC was rightly rejected and that the accounts showed, and fairly showed, that there was no basis for any subsequent such application against PLC. He accepted that no application could or should have been made in relation to SA (in fact such an application was made to me in 2002, but was rejected on the basis of SA’s apparently healthy, albeit unaudited, balance sheet).

PLC produced its 2005 group accounts to CV on the first day of the trial, 23 October 2006. They had been signed on 20 October 2006. They showed a profit for the year of £603,687 compared with the previous year’s loss of some £1.2m and compared with the profit of £945,230 shown in the management accounts. The group balance sheet showed shareholders’ funds of £8,645,004, including net current assets of £2.242m. One of the trading subsidiaries (Convergence Aviation and Communications Limited, formerly Convergence (Mid Sussex) Limited) had turnover for the year of £1,287,020 and a profit of £747,380, although its retained loss carried forward was some £3.5m and it had net current liabilities of approximately the same figure. The other trading subsidiary was Convergence Airport Design Construction & Technologies Limited (formerly Convergence (East Grinstead) Limited). That company had a profit for the year of £362,452, but a retained loss carried forward of £3,229,243 and net current liabilities of about the same figure.

Within four weeks both PLC and SA entered into administration and the information from the administrators was that there would be no dividend for unsecured creditors. The first meeting of creditors of PLC was on 26 January 2007. The administrators provided a progress report on 20 February 2007. It revealed a depressing picture. £6,752 at the bank was recovered in full. There was furniture, equipment and a car perhaps worth £3,500. £8,033,111 was owed to PLC by group companies, including some £3m by SA, also in administration. The balance was due from Fergana. The administrators’ assessment was that none of this would be recoverable. A further debt of £111,350 was disputed and unlikely to be recovered. Four subsidiaries were shown in the accounts as having a value of £811,006, but were all apparently balance sheet insolvent. No distribution to any class of creditor would be possible. I have earlier referred to the statement of affairs that Mr Robinson signed on 28 March 2007 and to the fact that both PLC and SA went into compulsory winding up on 23 May 2007, on petitions of the administrators. The inference is that the intangible assets had been very materially overvalued. CV submitted that this turn of events raises serious questions which require answers. These accounts were the responsibility of the directors, who include Mr and Mrs Robinson. No evidence has been produced as to why these intangible assets are worthless.

There was a good deal of accountancy evidence as to the justification or otherwise of those accounts. For CV, Mr O’Beirne made a witness statement on 29 November 2006. He reviewed PLC’s 2005 and prior accounts and expressed the view that the picture created in them as a company with substantial net assets and in a position to pay costs appeared misleading and false. The accounts were bedevilled by connected party loans and the principal asset appeared to be the goodwill resulting from the acquisition of the two subsidiary LDOs. He questioned how they were so highly valued and expressed the view that the goodwill should have been written off, which would have reduced the net assets and shareholders’ funds shown in the balance sheet. He referred to the moving of assets between various companies, but with no explanation for them. He identified unexplained and significant differences between the 2005 management accounts and the subsequent audited accounts. He identified various questions and concluded by saying that, absent a full explanation, it appeared that PLC and its directors had produced misleading accounts during the litigation.

Mr O’Beirne’s evidence was answered by Christopher Whitley-Jones, a chartered accountant. He is the audit partner of PRB Martin Pollins LLP, which audited the relevant accounts of PLC. I do not propose to detail that response. It deals with the appropriate accounting treatment of goodwill and expresses Mr Whitley-Jones’s view that the audited accounts were fairly stated. He made the point that he regarded as extraordinary CV’s assessment that, because of the value attributed to the intangible assets, they could not depose to the belief (on any security application) that Convergence would be unable to pay costs. He said any consideration of that should have focused on the net current assets position. Mr Waterhouse, the financial controller of the Convergence group during the period of the relevant accounts, also made a witness statement in answer to Mr O’Beirne’s evidence, which also defended the audited accounts, although he did make the point that when the 2005 accounts were signed (on 20 October 2006) the legal advice “indicated clearly that PLC and [SA] would win the case against CV”, whereas I do not know to what or whose legal advice Mr Waterhouse could there have been referring. The inference from his statement is that the solvency of PLC was dependent on a successful outcome of the litigation, since once it realised in mid-November 2006 that it would lose the case it went into administration.

Mr O’Beirne replied to that evidence with a witness statement of 2 March 2007. The essence of it was that when making his first statement he had only limited information about the detail of the figures in the accounts, and could only draw attention to apparent anomalies. Although Mr Whitley-Jones and Mr Waterhouse had now commented on some of his points, he regarded as still not possible to reach a concluded view on the extent to which the audited accounts and the management accounts complied with generally accepted accounting practice and gave a true and fair view of the state of the Convergence group and its profits and losses over recent years. He did, however, make the point that the accounts produced at the trial on 23 October 2006 were in fact misleading since, for example, they did not disclose that PLC’s finances were such that it had had to resort to borrowing from Amador and that its continued solvency depended on success in the litigation. All that the accounts said about the litigation was that, after referring to the litigation, “there are risks associated with any litigation, but the company is confident of its case.” His overall conclusion, after dealing with a number of matters, was that “[a]t this stage, CV simply does not know enough about the position of [PLC] (and the manner in which it was being run) to say for certain whether the audited accounts were prepared in accordance with generally accepted accounting practice. It may be that such matters will only become clear from a detailed investigation during the winding-up of [PLC] (which, along with SA, is now being put into liquidation).”

In the light of that conclusion, and the defence of the accounts advanced by Mr Whitley-Jones and Mr Waterhouse, I do not consider that I can or should attempt to make any finding on this summary application (which, despite the length of this judgment, is what it is) as to whether there was any impropriety in relation to the preparation of the audited accounts, or the management accounts that preceded them; and nor did I understand it to be suggested that I could or should. It does, however, appear to me, as I shall explain, that there is at least a real question as to whether, by the time the 2005 accounts came to be signed in October 2006, the directors could properly assert, as they did, that they were “confident of [Convergence’s] case.”

The privilege in the advice given by DAC and counsel in relation to Convergence’s case belongs to the PLC and SA. Mr Robinson wished to deploy a selection of that advice in support of his defence of this application and obtained the authority of the joint administrators to do so. The deployment was selective and resulted in Mr Atherton advancing the submission on day 2 that counsel’s advice had throughout been positive (reliance also being placed on the reference to that still being so in the minutes of the PLC board meeting on 6 September 2006) and only became negative during the pause in the trial following Mr Robinson’s cross-examination. Thus, it was said, the picture was that of a responsible board pursuing a claim which had the support of counsel; and of the same responsible board abandoning the claim when counsel advised that it would fail. That was not, it was said, a background against which a section 51 application ought to succeed. I record that Mrs Robinson echoed the same point in her fifth witness statement, namely that all the advice of which she was told and which she saw was positive and was to effect that the case was a good one that would succeed; and Mr Sims made a submission along the same lines as Mr Atherton.

In the subsequent course of the hearing a substantially fuller picture was provided as to the advice given by counsel, which showed that that picture was a misrepresentation of the advice that Convergence had received before the trial. It showed that Convergence was always advised that its claim was speculative; and that by 5 September 2006 (the day before that board meeting) it had been advised that its case was impossible to reconcile with documents. May I make clear, for the avoidance of doubt, that Mr Atherton and Mr Sims did not have this further material when they made their original submissions, and I do not question that, on the basis of what they did have, they did other than advance perfectly proper submissions on behalf of their respective clients. It is, however, regrettable that Mr and Mrs Robinson, who attended the hearings throughout, were prepared to allow them to advance such submissions, when they knew that they were built on a false foundation. As regards Mr Robinson, this was, I regret to say, another example of his dishonesty. As regards Mrs Robinson, I say no more than that I cannot understand on what basis she felt able to make the assertions in her evidence as to the prior advice that she did. I have of course not had the benefit of hearing any oral evidence from Mrs Robinson.

I will summarise the course of the advice which was given, since it is relevant in the context of the consideration of the extent to which Convergence was advancing a case that was known to be speculative.

On 4 August 2001 there was a meeting between Mr Robinson, Mr Waterhouse, Mr Brannigan and DAC. It was held within three months of the May 2001 “10% letter”. The purpose was to consider whether Convergence might plead a so-called “delay claim” in answer to, and by way of defence of, CV’s fees claim. The proposed claim was one to the effect that CV had caused the project to fail. The attendance note recorded the concern there was as to whether such a claim should be pleaded, since it would have no impact unless CV believed Convergence would take it to trial; and its pursuit could be expensive (how true: the total costs to date are some £10m). Mr Brannigan’s advice was to plead it since otherwise there was no defence to the full sum claimed by CV. He advised that Convergence could not bank on making a major recovery but to plead the claim provided an opportunity to settle the fees claim. The motive for pleading it was, therefore, tactical, with a view to facilitating a settlement of the fees claim. Its motive was not to pursue CV for €100m. It was purely defensive.

Mr Brannigan gave a written advice on 17 May 2002. It was his second advice. He referred to his earlier advice given in February 2002, when he outlined the issues raised by the counterclaim. In paragraph 18 he advised that it would be necessary to prove that CV’s negligence caused Convergence to suffer loss. In relation to the case that it caused Convergence to lose the opportunity of funding the project he pointed out that he had previously advised that CV would say that Convergence could have corrected the errors earlier than they did and that anyway there were other reasons why the project did not get to the market before January 2000. He remained concerned about this. His view on the basis of his instructions was, however, that Convergence would be able to prove the relevant causal connection, but that the case had worrying features about it and that CV might be able to show that Convergence was the author of its own loss. In paragraphs 30 to 32 he focused on the question of whether the delay caused Convergence to be unable to obtain funding. He recognised that as being the key issue and said that, having considered the documents and his instructions, he was very troubled by it. He focused on the problem that stood in the way of the case. Two of the three necessary licences were not obtained until 2000. The third licence was not yet obtained. The case involved proving that funders would back the project in 1999 without licences yet in place. That made a speculative claim yet more speculative. Secondly, did Convergence yet have the technology available to initiate the project? He understood it did not, which would again not be attractive to funders. After considering other matters he said he was far from convinced that Convergence would be able to convince the court that the delay had caused it to lose at least a substantial chance of obtaining funding. He said the court would be likely to regard the claim as simply too speculative. He put the chances of success at between 30% and 45%. He advised that Convergence would “probably not” succeed on such a case. The conclusion was overall negative. What, however, the advice did not focus on in any detail was why the project did not go to the market earlier. There appears to have been an assumption that it was prevented by the structural problem, but no consideration was given to what had actually happening during the crucial period. The instructions that Mr Brannigan had are not before the court, although his earlier advice had reflected that he had been instructed that the structural problems had caused the delay; and he appears to have taken that at face value.

On 24 May 2002 there was a meeting between Mr Robinson, Mr Waterhouse, Mr Highley (DAC) and Mr Brannigan to discuss that advice. Mr Robinson is recorded as being concerned as to Mr Brannigan’s understanding of certain issues and as saying that he and Mr Waterhouse were agreed that CV had been negligent and had caused Convergence loss. Mr Robinson therefore appears by now to have been keen to pick up and run with the ball. The note recorded various things said by the attendees, which include statements which appear to reflect confusion as to what had actually been happening and when (for example, in relation to the internet placing). I do not regard it as constructive to identify what was said. Mr Brannigan remained of the view that the claim was a speculative one and that it was unlikely to succeed. There was then some discussion about licences, and reference was made to correspondence showing that investors were troubled by the lack of licences. Mr Brannigan remained of the same pessimistic view, but advised that expert advice be obtained that funding would not have succeeded in 2000, whereas it would have succeeded nine months earlier. That was relevant advice, but there also remained the same prior question as to whether the failure to go to the market earlier was, as a matter of fact, caused by the defects in the structure. The answer to that question again seems to have been assumed to be in Convergence’s favour without any express consideration. The trial showed that any such assumption was wrong, as Mr Robinson knew.

There was a conference on 28 February 2003 attended by Mr Robinson, Mr Waterhouse, Mr Highley and Mr Brannigan. This followed the summary judgment hearing before me at the end of 2002, which Convergence regarded as having been something of a forensic success. There was a discussion as to whether to go for a settlement of between £500,000 and £1m or to invest more in the counterclaim and go for more. Mr Highley is noted as having admitted he had not read all the documentation, the note also recording that he was comforted by an assurance from Mr Robinson and Mr Waterhouse that all relevant documents had been disclosed (there having been considerable disclosure by then). That assurance was worthless. Convergence’s disclosure in the case was lamentable and its remedying required the making by me of a wide-ranging order in February 2006. That generated so much material that, in order for CV to have time to digest it, the trial by then fixed for June 2006 had to be adjourned to October 2006.

On an uncertain date (probably March 2003) Mr Brannigan wrote a further advice. Under the heading “The Merits of the Case”, he said the summary judgment hearing at the end of 2002 had “given us renewed cause for optimism in relation to the essential features of our case.” He considered it very likely that Convergence would establish that CV carried out the structural reorganisation of the group negligently and that “[a]s a result delayed the offering of the Marco Polo project to the market for funding.” That went to the key issue of causation, about which he said no more and so it is unknown upon what it was based. What he also said, which was a relevant matter to raise, was that “there is some capacity for CV to argue that we took too long to put right the structure of the Group once [PwC] took over.” He was there referring to the period October 1998 to 14 July 1999. Causation had been in issue at the summary judgment hearing, yet the matter still received no detailed consideration. It again appears to have been assumed that Convergence could establish the necessary link between the structural problems and the inability to seek funding for the project. Mr Brannigan remained of the view that the claim was a speculative one, the speculation involving both whether or not the project would have been funded had it been offered to the market prior to 2000 and as to whether or not it would have been successful. It was, however, a more positive opinion and would have been so read by Mr Robinson.

Mr Brannigan wrote a further advice on 23 November 2003, just before the mediation. He again identified the key issue of causation, but did not identify expressly that the first question was whether Convergence’s omission to go to the market earlier than it did was caused by the structural defects: ie, would it have gone to the market earlier even if there had been none? That was assumed, and Mr Brannigan appears to have regarded Mr Robinson’s then statement as having made the point good. Mr Brannigan’s conclusion was that Convergence had a very good chance of establishing negligence. Quantum was discussed under various heads. He identified the key issue as being whether, as a matter of causation, Convergence could show that it had suffered losses under various heads, including that it had lost the funding opportunity. He put this as having a success rating of around 60% to 65%, but that the percentage chance of a substantial recovery under this head was around 40%. His advice was that this head of claim was one that should be used as a bargaining tool, but that Convergence should recognise that it would not wish to fight the case on the basis of this claim alone. He did not focus on the first question I have earlier identified; once again, it appears to have been assumed. This was a full and detailed advice, discussing a number of questions, but I do not consider it necessary to summarise it further. I accept that it would probably have given comfort to Mr Robinson on the main claim in the litigation. The mediation took place in December 2003 and failed.

On 8 January 2004 there was a consultation with Mr Anthony Temple QC, who had by then been instructed, and Mr Brannigan. It was attended by Mr and Mrs Robinson, although she arrived late and apparently after the main discussion of the merits. Mr Temple advised that the basic case was that it was CV’s fault that Convergence lost the project. He said that the defences to that claim were “legion”, including that the project would not have worked anyway and that CV were not responsible for its not going ahead. Paragraph 19 recorded Mr Temple’s view that he was “absolutely certain” that of the eight or nine criticisms of the claim that were being run, some would succeed. He advised that “there are some very difficult milestones to overcome in establishing why what [CV] did caused the delay.” He is recorded as advising that he could “see a lot of problems and a good team could turn all these problems in their [sic: our?] case into a real quagmire for us.” It appears that he had not yet delved into the documents but his opinion as to the key issue of causation was anyway a reserved one. Overall, it reflected a more cautious approach than Mr Brannigan had favoured. It is to be noted that certain tasks were assigned to Mrs Robinson by way of investigation of factual matters necessary for the forward progression of the litigation. Mrs Robinson’s expertise in the Convergence group was on the technical/operations side.

On 11 February 2004 Mr Temple expressed a view that it was impossible to predict with confidence how the claim would develop or what attitude the court would take to it. But he said there were reasonable grounds to believe that Convergence would at least recover more than £90,000 and the value of the CV bills (a reference to what Convergence had proposed in its letter of 4 May 2001). The point was relevant to costs. That offered no comfort for a view that the main claim for the loss of the whole project would be likely to achieve any major recovery.

On 19 May 2004 there was a consultation with Mr Temple, Mr Brannigan and the solicitors. Mr Highley is recorded as expressing the view that “if we were not sufficiently confident that we were going to get something back in the main claim we would not be sitting round the table now.” That can be said to reflect a positive approach to the main claim. It is not, however, easily reconcilable with Mr Temple’s reserved view expressed on 8 January 2004.

A further consultation on 24 May 2005 (just over a year later) revealed a perhaps surprising feature of the Convergence claim. For the first time advice was given, by Mr Temple, that Convergence needed to ascertain that the documentation in the case was not inconsistent with its case that CV’s negligence had delayed the project; and that, to the extent that it was, the inconsistency could be explained. Mr Temple pointed out that CV would be examining the documents carefully. The note of the consultation reveals that no-one on the Convergence team had yet carried out any detailed analysis of the documentation. Mr Highley’s view appears to be that Convergence could proceed to trial without its team first reading the documents. That reflected a remarkable approach to the (or any) litigation. By this stage in the proceedings Convergence had provided four tranches of disclosure, although there was a good deal more to come.

On 4 November 2005 there was a consultation, attended by Mr Robinson, to discuss the increase of CV’s Part 36 offer to £1.25m. The essence of Mr Temple’s advice was that the outcome of the claim was completely uncertain. He said it was a “big and difficult case”. There were aspects of the documents that Mr Temple had seen that he did not like, in particular those to the effect that Mr Robinson was a serial litigator. He said that if Mr Robinson wanted to take the £1.25m and get on with his life, “no one here would say go on.” Mr Robinson’s decision was to reject the offer. The offer does not appear to have been referred to, or considered by, the PLC board.

On 20 December 2005 Mr Temple wrote an advice on the then forthcoming disclosure application brought by CV. Its writing followed what must have been a distinctly uncomfortable discovery for Convergence’s legal team, namely Mrs Robinson’s June 1999 report to the PLC board, exhibited to CV’s evidence for that application. The thrust of it was that the project had been held up by a variety of factors, including the licensing problem, which in turn had had a knock-on effect on the fund-raising ability: but of course it said nothing about structural problems, which were now being advanced as the sole cause of the hold up. As Mr Temple put it, that was the opposite of Convergence’s case. He advised the report posed serious problems for the merits of the case, specifically on causation. He regarded this and other documents as depressing and emphasised the urgency of sorting out the disclosure, also saying that “If this requires Counsel to commit to reading the relevant material that is what heavy litigation requires.” This again reflects the same remarkable fact that there had been no consideration of Convergence’s documents in order to identify any potential problems. Mr Temple added that the documents “also call into question the need for rapid settlement of the case.” It is plain that he saw Mrs Robinson’s report as a show-stopper, as it was (together with all the other documents destructive of Convergence’s case, which its advisers had apparently not yet seen or considered).

There was a consultation on the same day between Mr Temple, Mr Brannigan and Mr Harrison-Hall of DAC. Mr Temple described Mrs Robinson’s report as “seriously bad news for us”. It is unclear whether Mr Harrison-Hall had seen it before but he is noted as making the surprising remark that he “expected that there were any number of documents like this in the disclosure.” Given that he does not appear to have read all the documents, he is then noted as making the equally surprising comment (although one which is 100% accurate) that “The one thing that the documents did not reveal is documents to the effect that everything is ready and the only thing we are waiting for is the structure. The whole thing is very much more amorphous than that. In other words there is no completed PPM simply waiting for a structure and the project is evolving.” Mr Harrison-Hall “accepted that a judge might not like it” and moved on to the question of settlement. Mr Highley was then telephoned, and agreed it was a case to settle. He had not read Mrs Robinson’s report either, and so it was read out to him, to which he responded that “it was concerning and we would need to find out from [Mr Robinson] what his answer was”. The trial showed he had no answer: and he chose to deal with it in his witness statement for the trial by not referring to it at all. The note continued: “[Mr Highley] said that there could be any number of documents like this. [Mr Robinson] had not let us review the documents in any detail. [Mr Temple] said that he and [Mr Brannigan] would need to review them at some stage soon…. [Mr Temple] will do an email to [Mr Robinson] about the document so that he can read it.”

If what is there attributed to Mr Robinson is correct, that reflects an extraordinary approach to the case. I record that Mr Atherton told me, on instructions, that Mr Robinson had not given any instructions to DAC that they should not review the documents (or at any rate those other than ones of a technical engineering nature). For reasons given about instructions flowing from Mr Robinson, I am not prepared to accept what he said as fact, but it is anyway unnecessary to assess it further. What, however, leaps from the pages of these notes is that Convergence’s advisers could see that Mrs Robinson’s report had the potential to kill the main Convergence claim. Mr Robinson’s response to Mr Temple’s proposed email is not in evidence. A meeting was fixed for two days later with Mr Robinson, although there is no evidence as to whether it took place or, if it did, what happened at it. Mr Atherton submitted that the probability is that Mr Robinson’s response to Mrs Robinson’s report would have been the same as it was when taxed later with the same document by Mr Swainston – namely, that his recollection of the events was different and he could not change that. He may or may not be right about that. I simply do not know.

There was an application before me on 1 February 2006 for specific disclosure and I ordered further disclosure by Convergence. In the course of the hearing Mr Robinson gave instructions to Mr Temple about a particular aspect of the disclosure sought, which turned out to be untrue (I make clear that Mr Temple could not have known that it was untrue).

On 16 February 2006 Convergence made an offer to settle for a payment of £7m plus costs. It was not accepted.

On 28 February 2006 there was a consultation between Mr Temple, Mr Brannigan, Mr Harrison-Hall and Mr Highley. The picture which emerges from it is that the legal team could see the writing on the wall for the Convergence case, and Mr Temple had assessed the emails that CV had managed to obtain from third parties as serving to build a picture as to the problems about the project which showed it had nothing to do with structure but everything to do with other things. He commented, perhaps a little forlornly, that Mr Robinson would “have to overcome these.” The main discussion was as to how to try to settle a case which looked doomed to failure and which, so the legal team assessed, CV regarded as a “try on”. They were also concerned that, as the trial judge, I would take an orthodox approach (as I hope I did: what sort of judge were they hoping for?). There is no doubt that at this stage Mr Temple viewed the outcome of the claim with the greatest pessimism. One inference from the note of the meeting is that it was only by this stage that Mr Robinson discovered that his advisers had learnt of the June 1999 report, although there is no reference to it in the note. The tiny clue to that effect is Mr Robinson’s noted remark that he was “concerned and disappointed to hear an emotional sea change pre and post Christmas.” There is no doubt that by now the advice was negative.

The next attendance note followed an order I made on 31 March 2006 adjourning the trial from June to October 2006. Mr Robinson was present. There was discussion about the replacement of Mr Temple as a leader, as he was already booked for October. There was a discussion about bundles. The deep pessimism of the prior notes is not reflected in this one, with Mr Temple saying that the case was “still a very winnable” one – even apparently in front of me - “but it would just be harder.” That advice does not appear to have been based on any reasoned analysis of the case, and is not obviously reconcilable with Mr Temple’s prior advice. What had changed?

On 7 April 2006 Mr Brannigan gave a written advice on whether it was possible to have a fair hearing of the trial in front of me. He advised that it was but that I was the sort of judge who would examine the evidence “with a microscopic precision” to see if it proved what was being alleged, an approach which would make Convergence’s task harder. Equally, he said it would work against CV as well. His advice was that Convergence should instruct a leader who was similarly a “pernickety” rather than a “broad brush” advocate; and Convergence’s evidence also needed to be precise and detailed. Mr Brannigan remained of the view that the £1.25m in court did not fairly represent the true value of Convergence’s claim.

On 18 May 2006 Mr Robinson sent an email to Mrs Robinson, Mr Waterhouse, Mr Highley, Mr Swainston and Mr Brannigan. Mr Swainston had recently been instructed in place of Mr Temple. Mr Robinson was taking a “hands on” approach with regard to the finalisation of witness statements. He asked Mr Waterhouse to liaise with Mrs Robinson to “resolve a plan with meetings …, timetable and deliverables to get the Project Plan Timeline completed and ready for use in Court.” He said it was essential that this tied in with the expert reports at each phase. Mrs Robinson was therefore being engaged in connection with the preparation for the trial.

On the same day Mr Swainston sent an email to Mr Robinson, Mr Brannigan, Mr Harrison-Hall and Mr Highley saying he was not sure what the Project Plan Timeline was, but that certainly a way must be devised to explain to the court what was going on in the project over time. He also, and immediately, made it plain that what was all-important was to have mastery of the documents. He understood that CV had scanned and indexed all the documents and he pointed out that, on causation, they only had to score with one strike. If feasible, he wanted the documents scanned in searchable format. In the meantime he wanted access to a chronological run of what Convergence regarded as the core documents. Mr Swainston recognised that the case was one which would turn on the documents.

On 22 June 2006 Mr Swainston emailed all interested parties, including Mr and Mrs Robinson. It reflected that Convergence’s then state of preparation for the trial as regards bundles was chaotic and showed the absurdity of its earlier opposition to CV’s application for an adjournment of the trial. Mr Swainston noted that CV had a chronological run of 207 bundles, whereas Convergence had a run of merely 35. He was bemused that the Convergence team had not read all the disclosure. He was concerned as to whether there would be time to master all that was in CV’s 207 bundles. Point 8 reflected that Mr Swainston foresaw a likely application for security for costs, although on what basis he did so is unclear. The essence of the email was a cri de coeur for the preparation of comprehensive set of bundles and their provision to counsel as soon as possible.

On 27 June 2006 there was a consultation between Mr Swainston and Mr Highley. The sense of the note of it is that Mr Highley was persuading Mr Swainston not to advise Convergence on the merits “so much as provide comfort that the process we were following was not one, in his view, doomed to failure.” Mr Swainston said there was a presentable case on negligence but he could not advise whether CV was liable for the failure to get funding without first seeing the documents. That was a sound approach and it is something of a miracle that the case had been on the stocks for five years without that advice having been given before. He repeated the advice he had given at his first consultation, namely that the critical issue was causation. One of the three questions he posed was “Would [Convergence] have actually gone to the market had it not been prevented from doing so by [CV]”. Another was whether Convergence had a product to sell. His view was that the answers would lie in the documents. Mr Highley asked whether Mr Swainston could “guarantee that the claim were not knocked out by harmful documentation we were not previously aware of.” It is a tribute to Mr Swainston’s patience that he answered that question. There was discussion of the history of the decision on the Convergence side either to review, or not to review, the documentation. Mr Highley sent a copy of the attendance note to Mr and Mrs Robinson.

On 14 July 2006 Mr Highley sent an updated fees schedule to Mr and Mrs Robinson.

On 28 July 2006 there was a consultation with Mr Swainston attended by Mr Brannigan, Mr Midwinter, Mr and Mrs Robinson, Mr Waterhouse and Mr Harrison-Hall. Mr Swainston opened by referring to various matters under the heading “Difficulties” (the first reference being “Opportunistic: credibility: look at carefully as possible” and the second being “Considerable due diligence on documents. Suggests other problems out there”) although the nature of the note leaves it unclear whether and to what extent he identified any such problems. The consultation appears primarily to have been an investigation exercise by Mr Swainston. There is nothing in the note to indicate that he gave any positive advice about prospects. The note appears to end with a list of things to do, item 5 asking “What are the answers?”

On 21 August 2006 Mr Harrison-Hall emailed Mr and Mrs Robinson in connection with putting a chronology together in relation to Marine Plaza. It is apparent that Mrs Robinson had made suggestions as to how Mr Harrison-Hall might track down the information he was looking for, and had provided him with information about Greek mortgaging procedures.

On 25 August 2006 Mr Highley emailed Mr and Mrs Robinson and others with regard to the witness statement recently provided by Mr Brady of Chart. He recorded that he had sought Mrs Robinson’s views on it the previous night. He also expressed the view that he was not himself “clear yet on your evidence that we can successfully put all of the blame for the structure taking so long at the door of CV although I would be happy to be convinced that we can.” So Mr Highley was doubting Mr Robinson’s evidence.

Between 26 and 29 August 2006 various emails were exchanged between DAC and Mrs Robinson in relation to the budget for the proceedings and asking for fee payments.

Reverting to 4 August 2006, on that day Mr Swainston sent an email to Mr Midwinter. Mr Highley forwarded it to Mr and Mrs Robinson on 4 September. It was a careful analysis of the key issues in the case and focused in particular on causation. Mr Swainston explained in paragraph 7 that the case depended on proving that there was always something to sell and, critically, “that no financial adviser could be approached before July 99 when the structure and/or future path was clear, and that it was then too late. Only if we succeed on this do we get off the ground in arguing points of principle about whether loss through delay and the market falling was within CV’s responsibility.” In paragraph 8 he described that as the major focus of the case. He pointed out that “one focus of enquiry may be why Mr Robinson did not engage such an adviser before September 1998 during a period of what may be argued as apparent satisfaction with CV’s structure, before defects in it emerged. Another may be why not much seems to have happened between April 1999 and July 1999 so far as TJG are concerned, if there was then something to sell, and an urgent desire to get to market.” In paragraph 9 he made it clear that “one only gets to loss of chance territory if we can show on a balance of probability that but for CV’s negligence, Mr Robinson would have done all things which may be found necessary for the raising of money, eg engaging a financial adviser.” That advice again put the finger on the key to the causation issue. It is not clear whether Mr Swainston had at that point realised that part of Convergence’s case was that the proposed internet placed was frustrated by the structure problems: but his own understanding of the position was that no defects in the structure had emerged prior to September 1998. If so, that was also the end of the internet placing case.

Mr Robinson responded to it to Mr Highley, with some apparent fury, in the early hours of 5 September. He displayed depression at what he asserted was Mr Swainston’s “less than clear grasp of the events”. He responded at some length but cannot be said to have provided answers to the points raised by Mr Swainston. It is, however, fair to note, as Mr Atherton emphasised, that the response reflected what purported to be a continuing belief by Mr Robinson in Convergence’s case. There was at this stage plainly a degree of dissension within the Convergence camp. Mr Swainston cannot be read as expressing the opinion that the case against CV was likely to succeed. He was raising fundamental points which raised a serious question as to whether it could.

On 5 September 2006 Mrs Robinson emailed Mr Highley to say that in Mr Robinson’s absence, and with Mr Waterhouse’s help, she had transferred £225,000 from PLC to DAC. That was the last fee payment before those coming from Amador. On the same day Mr Harrison-Hall emailed Mr Robinson to draw attention to another problem that Mr Swainston had identified. That was that Chart’s advice in January 1999 had been that fund raising was dependent on licences, after which there was no real attempt to appoint a financial adviser until June 1999 following the receipt of a letter from the NTC that a licence would be issued. His view was that it looked as if the approach to a financial adviser was linked to when the licence assurance was given. That meant that the delay in approaching a financial adviser was not because of structural problems but because of licence problems. Mr Swainston wanted a meeting with Mr Robinson to discuss this.

On the afternoon of 5 September 2006 there was a conference call between Mr Swainston, Mr Brannigan and Mr Midwinter, of which there is a two-page manuscript note by Mr Midwinter. This was followed by a meeting at 3.15pm between Mr Swainston, Mr Brannigan, Mr Midwinter, Mr Highley, Mr Harrison-Hall, Mr Robinson and Mr Waterhouse, of which there is a four-page note as well as an attendance note prepared by DAC. The latter opened by recording that Mr Swainston had been concentrating on working out whether Convergence had a case. The subject of documents was raised, with Mr Swainston advising that they showed that it was the problem with licences, not structure, that was holding up the process, and he advised that this was how the judge would read them. Mr Robinson’s response was that these documents needed to be put into context and that his recollection “does not follow the documents.” Mr Swainston explained that the documents simply did not support the Convergence case. He pointed out that the approach to Chart in June 1999 followed the Ministry’s letter of 7 June 1999 that the landing station licence would be issued, and he referred to Mrs Robinson’s June 1999 report, which he plainly regarded as very damaging. The delay in progress until June 1999 was consistent with Chart’s earlier advice that licences were required for fund raising. Mr Swainston referred to the apparent inactivity by TJG between 31 March and July 1999 in relation to the question of structure, for which the explanation was that there was a billing problem with unpaid fees: that, it might be said, was not the fault of CV. Mr Robinson’s general response was that “documents might be written for any number of purposes, each of them aimed at different things. For instance, you do not tell a bank you are full of problems and you do not tell the staff they are doing a good job if you want them to hurry up.” His stance appears to have been that nothing is to be read as meaning what it says: there is always a hidden agenda. One wonders what Mrs Robinson’s hidden agenda was in her June 1999 report to the board. Mr Swainston’s advice was that Mr Robinson had to review the documentation and his statement with a view to ensuring they were consistent. His advice was that the documents showed that, because of the licence problem, the project would not have been taken to the market earlier even if there had been no structural problems. The substance of his advice was that that was potentially fatal to the case. That must have been obvious to Mr Robinson.

This meeting was followed on 6 September 2006 by a meeting between Mr Robinson and DAC, in which there was further discussion of the merits, and a reference to Mr Swainston’s “generally pessimistic” approach. There was, in particular, discussion of the problem for the case represented by Mrs Robinson’s June 1999 report.

It is convenient now to refer again to the board meeting of PLC held on 6 September 2006 at Coxland Farm and attended by Mr and Mrs Robinson. The minutes recorded that Mr Rosewell had been delayed in reaching the meeting and would be briefed subsequently. Mr Rosewell was, I was told, on his way to the farm from Oxford, on his way to Cornwall to do some research for a book he was writing on churches. In circumstances which the evidence does not explain - and nor was I given any credible explanation on instructions - Mr and Mrs Robinson decided to proceed with the meeting in advance of Mr Rosewell’s arrival. Why could they not wait for him? The minutes also record that Mr Hindley was unable to attend the meeting – not even by telephone. Why not? Paragraph 3.5 of the minutes recorded that “Advice from the legal team remained positive. [CV]’s negligence would be proven and damages and costs were likely to be recovered.” That was, I find, untruthful. Mr Swainston was the key part of the legal team – he was leading it – and his advice was that, unless a credible explanation of the inconsistent documents could be found, the case would fail. There might perhaps have been a modest recovery in respect of the costs of putting the negligence right, but that was more than covered by CV’s Part 36 offer and so would not enable the recovery of costs, and by this stage the case was not about that. It was about the major claim upon which Mr Swainston had been advising. The importance of the advice given on 5 September is, so it is said, that it became plain to Convergence and Mr Robinson that this litigation was speculative and known to be so. I was told by Mr Atherton that Mr Robinson drafted the note of that meeting, from which Mr Waterhouse later drew up the minutes. Mr Robinson’s explanation of paragraph 3.5 of the minutes was that, following the meeting with Mr Swainston, he was given encouraging advice by Mr Brannigan and Mr Highley, and it was that which was reflected in the board minute. That may be so but paragraph 3.5 was nevertheless a misleading and unjustifiably selective approach to the legal advice he had been given on 5 September. It is unclear whom Mr Robinson was intending to mislead by including that statement in the minutes. In particular, I do not know if he was also lying to Mrs Robinson about the advice given the day before. If so, however, Mrs Robinson learnt the true position on 15 September 2006, when Mr Swainston produced a written summary of his prior advice.

On 11 September 2006 DAC sent a schedule of expected costs payments to Mr Robinson, with a copy to Mrs Robinson.

On 15 September Mr Swainston made a note summarising his prior advice. Under the heading “Uncertainty Re Investment Intentions Over Time” he referred to the timing of a considered flotation on the Athens Stock Exchange, a point relating to the inconsistency between Mr Robinson’s evidence and the documents as to when he was in fact considering this (whether, as Mr Robinson said, it was in the autumn of 1998 or, as the documents showed, only in April 1999). He then referred to other uncertainties as to investment intentions over time; and the evidence at the trial reflected this as being concealed within a mass confusion. Mr Swainston then turned to the causation problem in relation to licences. He listed some 19 documents relevant to this question and wrote that:

“The suggestion on the face of these documents is that Mr Robinson accepted Chart’s advice and regarded the obtaining of at least a formal assurance re licences as a trigger for the investment process, and that Mrs Robinson subsequently analysed that the raising of funds for the Group had been delayed by the licensing process in Greece.”

Mr Swainston explained that Mr and Mrs Robinson would have to deal with these documents in cross-examination and that “[a]s explained in conference the criticality of this point cannot be overstated. If licences were a parallel cause of not engaging a financial adviser to raise money, and if such engagement was a necessary step as apparently assumed by Nabavi [a Convergence expert], then apart from all the other issues in the case, the claim would not succeed.” He further explained that a difficult point that needed to be addressed was that “when Chart come in, as the only or principal financial adviser providing significant advice on the point (at least according to the documents we have seen and pending the fuller Purchas exercise [Mr Purchas was doing a trawl through documents]), they appear to have said that licences were the trigger.” Mr Swainston next referred to the difficulty posed by the apparent readiness, shown by the documents, to engage Chart before the Convergence group structure was finally resolved.

It is obvious that that advice was not positive. It was to the effect that the documents raised inconsistencies with the case being made and undermined it in at least two respects, namely (i) that licences were crucial to the funding exercise and (ii) that the absence of a finalisation of the structure was not a pre-condition of an approach to a financial adviser, because Convergence made just such an approach. It was to the effect that, as matters stood at that stage, Convergence would be likely to lose the case. Mr Swainston emailed that advice to Mr Robinson on 15 September 2006. Mr Robinson’s reaction to that was summarised in an email to Mr Waterhouse and Mrs Robinson on the same day saying that it was “Just more of the same fixed criticism from MS as to his interpretation of the documents and now Charts supposed key role to all of our activities.”

On 16 September 2006, at 1.13 am, Mr Robinson sent an email to various people, including Mrs Robinson, Mr Highley and Mr Brannigan. The thrust was that he was deeply disappointed with Mr Swainston, whose contribution to the case he regarded as negative rather than constructive and amounted in effect to calling him a liar. Mr Brannigan sent an email to Mr and Mrs Robinson at 4.06 am saying that he thought the case was winnable and giving his word that he would do everything in his power to ensure that it was fought to the death (what answer did he think Mr Robinson had to Mr Swainston’s points?). Convergence did not, however, give Mr Brannigan the opportunity of doing so, recognising by November 2006 that it could not succeed in the litigation. Further emails that Mr Robinson sent to Mr Brannigan and Mr Robinson (and even to Mr Temple) show that he was despairing of Mr Swainston. Mrs Robinson adopted a more measured approach to Mr Swainston’s advice. She sent an email to Mr Robinson on 16 September 2006 explaining that Mr Swainston was not making any attack on him or suggesting his evidence was untruthful. She correctly perceived that Mr Swainston was simply identifying issues where the Convergence case was weak and in respect of which he wanted help, and she made a suggestion in respect of at least one point. Mr Robinson’s difficulty appears to have been that he was not prepared to face the adverse facts which Mr Swainston pointed out to him. His complaint at this stage was that he did not know how Mr Swainston was going to present Convergence’s case. Mr Swainston’s position was that the state of the documents was that, absent the urgent provision of some explanations about them from Mr Robinson, he lacked the straw required in order to construct the basic bricks of any case at all.

An email from Mr Harrison-Hall to Mr Swainston and others on 18 September 2006 attached a further report from Ms Nabavi, one of Convergence’s expert witnesses, the message reflecting that the report had had input also from Mrs Robinson.

Mr Robinson produced a supplemental witness statement attempting to meet Mr Swainston’s concerns, and he received the comfort of an email from Mr Highley on 21 September 2006 saying that in his view it met Mr Swainston’s main concerns. It did not. That statement, after some subsequent tinkering, was served for use at the trial and it became part of Mr Robinson’s evidence.

On 27 September 2006 Mr Swainston produced his draft opening skeleton argument, which was passed to Mr and Mrs Robinson. He explained that the draft had deliberately sidestepped some of the merits issues he had raised and “that a forceful presentation of our case should not be taken as revising my objective assessment of the difficulty of a number of these points.” On 14 October 2006 Mr Robinson emailed certain comments on it, or perhaps on a later draft, to Mr Harrison-Hall, saying that he and Mrs Robinson would be going through it “on Saturday night”. He wanted to know if another version was about to appear.

The opening skeleton arguments were exchanged on 17 October 2006. Mr Swainston prepared a note on the CV opening, which was forwarded to Mr and Mrs Robinson, in which he explained that CV focused on areas of difficulty that he had identified. He added that the adverse points raised were not answered in the Convergence evidence and he advised Mr and Mrs Robinson to consider further what they would say in response to the central documents on which CV would be relying. He said his advice on the merits remained unchanged.

On 20 October 2006 there was the board meeting of PLC to which I have referred, including a reference in paragraph 5.1 to the point that DAC and Mr Brannigan both felt positive that the case would be won and damages recovered. Whether and to what extent that was accurate is unclear to me; but what is clear is that Mr Swainston and Mr Midwinter had a profoundly pessimistic view of the outcome of the case. The omission to refer to that in the minute was disingenuous and misleading.

CV’s case against Mr Robinson can be put as follows. He knew from the outset that there was no factual basis on which to blame CV for the failure to take the project to the market earlier than it was. He knew that there was similarly no basis on which to blame CV for the failure to process the yet earlier internet placing proposal. Despite this, he instructed the making of the counterclaim against CV. It was originally only so made by way of a tactical defence of CV’s fees claim. He then, however, appears to have swept himself up in misguided self-belief that there was actually something in the counterclaim and positively supported its forward progress, even though he knew that its factual basis was unfounded. Mr Brannigan’s early advices cannot have given him much comfort, emphasising as they did that the claim was speculative. But to the extent that they did give him any comfort, they did not focus on the critical point of causation, namely that the real problem was licences, not structure. They assumed that point in Convergence’s favour, presumably on the basis of instructions from Mr Robinson which the court has not seen. Mr Robinson may well have read Mr Brannigan’s November 2003 advice as being more encouraging. But when Mr Temple came on the scene in January 2004, he appears to have advised that the claim was highly speculative and that there could be various answers to it on the facts. By December 2005 Mr Temple had seen Mrs Robinson’s June 1999 report, could see the writing was on the wall and advised early settlement. It is not clear precisely when that was conveyed to Mr Robinson, but he appears to have sensed a drop in the temperature in early 2006. In May 2006 Mr Swainston came on the scene. He was the first adviser who insisted on reading all the documents (he had to since he was going to represent Convergence at the trial) and quickly saw that Mr Robinson’s evidence and the documents did not fit together. The latter showed that the delay in getting to the market was all about licences and not about structure. Absent some good answers from Mr Robinson, the case would fail. Mr Swainston made that clear by, at the latest, 5 September 2006 when he had a consultation with Mr Robinson and he summarised it in writing on 15 September.

This, therefore, was a case in which Mr Robinson gave all the instructions from the outset, and of which he was in practice in de facto control from the outset. He stood to benefit from the case, since the ultimate beneficiary of any success was the Trust, of which he is the primary beneficiary. His personal interest in the litigation was reflected in the fact that towards its end he applied £120,000 of his own money towards its cost; and he can also be regarded as providing, through Amador, 60% of Amador’s contribution to the funding, or £499,800 (a contribution he sought to conceal from the court by giving misleading instructions to counsel). He knew the case was factually unfounded, yet despite that and all the negative advice he had received, he chose to pursue it to trial. During the trial he was exposed as an evasive and untruthful witness who devoted himself to an endeavour to make good a groundless case. To cap it all, he had for all practical purposes prevented CV from obtaining security for costs, being responsible for the promulgation by PLC of management accounts and, later, audited accounts which presented a financial position which turned out to bear no relation to the true position and in respect of which he has since vouchsafed no explanation. All these circumstances collectively made the case an exceptional one within the meaning of the authorities, and one in which the court could and should consider whether, as a matter of discretion, it would be just to order Mr Robinson to pay CV’s costs. Why, CV submitted, in all those circumstances should someone such as he, who has been personally responsible for the prosecution of a false and dishonest case, and who has therefore caused CV to incur the costs they did in defending the case, not be personally responsible for payment of those costs?

Turning to Mr Atherton’s counter-argument, I have explained that his original submission, based on Mr Robinson’s evidence and the selection of the material he chose to put before the court, was that the legal advice had always been positive, with the first negative advice being Mr Swainston’s November 2006 advice given during the pause in the trial. Once the fuller picture was obtained, Mr Atherton could not maintain that submission, and the case then became one in which, although the pre-trial advice was, or became, negative, it also at least included some positive elements. Mr Robinson was anyway a man who nevertheless passionately and genuinely believed in the truth of his case, and was not prepared to be deflected from that belief by the cold water poured upon it by the lawyers. Mr Atherton submitted that, whatever view I might form of Mr Robinson’s evidence at the trial, the picture that emerged was that, whether misguidedly or not, Mr Robinson obviously believed in the soundness of the Convergence case; and he made the point that the critical issue on which the case foundered was causation, which he said was a difficult concept of mixed fact and law and that it would therefore be wrong to attribute to Mr Robinson any recognition of the fundamental problems in relation to causation that in fact arose.

Mr Atherton also submitted that Mr Robinson could not be said to have been an intended beneficiary of the litigation and could not therefore be regarded as one of the real parties to it. SA was the main claimant, with PLC’s only interest in the project being as a supplier. At the time of the trial, SA owed about £59m to Fergana. PLC’s subsidiaries also owed £5m to Fergana. Fergana owed £5m to PLC. Fergana owed the Trust about £12m. SA owed PLC 80% of the legal costs of the litigation. He said that the Trust had never made any distribution to any beneficiary and that Mr Robinson would not have benefited personally from any recovery in the litigation by SA from CV.

That submission is not self-evidently correct since had SA succeeded in the litigation to the huge extent it had hoped, there is no reason in principle why it could not have discharged its debt to Fergana and enabled Fergana to repay the £12m to the Trust. Mr Atherton responded that whilst that was theoretically possible, that was simply not how this group of companies works. It is a trading group, which has now moved from telecoms to aviation. The reality is that anything recovered in the litigation would have been used for existing and future projects. There was no expectation by Mr Robinson that any recoveries would float up to the Trust and feather his and Mrs Robinson’s retirement.

Mr Atherton also disputed that Mr Robinson had any relevant control of the litigation. In August 2001, when the counterclaims were launched, there were six directors of SA, including Mr and Mrs Robinson, and five directors of PLC, including Mr and Mrs Robinson. Mr Robinson resigned from the board of SA on 22 December 2003. By reference to the board minutes of PLC, it is accepted that he was, first of all, given authority to represent PLC at the December 2003 mediation. But somebody had to do so, and it was a proper delegation of the board’s authority. It was a principled delegation of authority. The minutes reflected that the board, not Mr Robinson, was in control of the litigation, a matter which was simply delegated to him. There was a like delegation to Mr Robinson of the conduct of the litigation by SA. Similarly, when the proceedings were abandoned, it was following a decision by the board of PLC, which included directors other than Mr and Mrs Robinson, a decision followed by a separate decision of the board of SA, which did not then include either Mr or Mrs Robinson.

Mr Atherton also put in issue whether Mr Robinson made any material contribution to the funding of the litigation. It is accepted that he provided £120,000 of his own money by way of funding, with £70,000 being paid on 23 October 2006 and the remaining £50,000 on 6 or 11 November. The payments were in fact by way of a loan to Fergana, but it is accepted that the substance was that they represented a late contribution by Mr Robinson. It is also accepted that Amador funded the litigation to the extent of £833,000. But Mr Atherton submitted that this should be left out of account since Amador is outside the Convergence group. It is owned by Mr and Mrs Robinson in the proportions 60/40, it has its own business, namely an operating farm, and it also acts as a landlord in respect of buildings at the farm which are used by Mr and Mrs Robinson and the Convergence companies. The point was made that it was therefore a loan made by a separate entity on commercial terms, namely at an interest rate of base rate plus 2%. Alternatively, it was said that it represented at most a further £499,800 of late funding by Mr Robinson (60% of £833,000), paid at a time when the bulk of CV’s costs would already have been incurred. It could not be said that his late contributions to the funding caused CV to incur their costs, or at any rate more than a modest part of them.

Persuasively though Mr Atherton advanced his submissions, I was not persuaded by them. I have come to the conclusion that this is a case in which Mr Robinson should be made personally liable, jointly and severally, for the costs I have ordered to be paid by Convergence.

First, I am satisfied, for all the reasons submitted by CV, that the present case is an exceptional case in which the court can and should consider whether it is just to order costs to be paid by Mr Robinson. I regard him as in substance the (or at least a) real party to the proceedings. The Convergence group was established by him and financed by his money. True it is that that money was channelled into the group companies through the Trust, but it is obvious that this was all part of his scheme and I would not for a moment be prepared to accept that the Trust’s investments in the Convergence companies flowed from an independent exercise of discretion by the trustees that they could not do better by way of an investment of the trust funds than by putting the entirety of them into the Convergence companies. The Trust was obviously a mere conduit pipe into the companies, although I make it clear that I am not suggesting or holding that the Trust is to be regarded as a sham. But Mr Robinson is of course the life tenant and primary beneficiary of the Trust and to the extent that the companies thrive and are ever in a position to repay the Trust’s loans or make distributions to it by way of dividend, that will be to his benefit and those of his family. Mr Atherton is no doubt right that Mr Robinson is a serial entrepreneur and he may well also be right that any recovery in the litigation might well have been applied by one or other of the companies in some grand new venture. But the Convergence group is not a charitable organisation run for the benefit of its employees and the greater good of mankind generally. It is a commercial organisation whose objectives, so I find, include the creation of wealth for those beneficially interested in it, and the primary person so interested was and is Mr Robinson. His personal interest in the litigation, and his personal anxiety that it should be brought to trial, is illustrated by the fact that at a late stage, when funds for the litigation were drying up, he was prepared to fund it personally (including through Amador) to the tune of £619,800. That may well have represented only a small proportion of Convergence’s overall costs, but it was by any standards a substantial sum of money and reflected his personal interest in the litigation. Mr Robinson was obviously sufficiently sensitive about this aspect of the case to attempt to conceal from the court that the Amador money was used for the litigation. I reject Mr Atherton’s submission that I should treat Amador as an independent lender, who should not be treated as associated with Mr Robinson. At the stage Mr Robinson was using the Amador money, I doubt if there was anyone else who would have been prepared to fund the litigation except on the basis of a fully secured loan. The Amador money was, however, there for the using and so Mr Robinson used it. It is obvious that 60% of it should be viewed as representing part of his personal contribution.

Then there is the question of the control of the litigation. Mr Atherton submitted that its control was in the hands of the boards of PLC and SA and that Mr Robinson was merely the agent delegated to conduct it. The modest selection of PLC board minutes in evidence supports that submission, namely that PLC and SA went through the right constitutional motions. They had to do so because although Mr Robinson was the human personification of the Convergence companies, he did not have a formal role within them which entitled him to give instructions in the case except under the authority of the respective boards. Having said that, I regard Mr Atherton’s point as one of form over substance. There is no suggestion at all that the boards ever actually exercised any judgment over the pursuit of the litigation. Where is the evidence that they reviewed counsel’s advices? It is obvious that from beginning to end the pursuit and conduct of the litigation was carried out on Mr Robinson’s instructions and that the boards of PLC and SA simply let him get on with it. He provided the factual instructions on which it was based and he gave all the instructions for its pursuit. It is artificial to pretend that the decisions were being made by the PLC and SA boards. I find that the pursuit of the proceedings was, from start to finish, controlled and managed by Mr Robinson. It may, however, be that the eventual decision to stop the litigation can be regarded as a decision of the respective boards of PLC and SA.

Next, and in my view most important, I find that Mr Robinson’s instructions to DAC were, from the outset, instructions for the pursuit of a false case. I have found that Mr Robinson knew that CV were not to blame for the failure of the project yet he pursued a case based on the assertion that they were. No detailed advice was given about the soundness of that case until 2006, when Mr Swainston arrived on the scene. Until then it appears to have been based on an unquestioned acceptance of assertions made by Mr Robinson. Mr Brannigan appears to have taken them at face value, although he regarded the case as anyway speculative. Mr Temple initially appears to have regarded CV as having lots of answers to the causation case, although it is unclear on what basis because it appears no one on Convergence’s side had yet read the key documents. When Mr Temple saw Mrs Robinson’s June 1999 report, he could see the writing on the wall and advised settlement. Then Mr Swainston came on the scene and I have summarised his advice. That advice was negative because it was to the effect that, absent answers from Mr Robinson on the documents, the case would fail on causation. Mr Robinson had no answers. Despite all this he insisted on ploughing on with the case, one which I find to have been a dishonest one.

Mr Atherton made the point that causation is or can be a difficult issue, often involving mixed questions of fact and law. He is right, but I do not see how that can be of any help to Mr Robinson on the facts of this particular case. He knew that the reason he did not go to the market earlier than he did was because of the licence problem, not because of any perceived structural problem. His attempt in this litigation to paint a reverse picture and pin the whole blame on CV was an attempt to make a case he knew to be untrue; and he did not need to be a lawyer to know that. His effort to maintain that case at trial presented an unimpressive spectacle, about which I have said enough.

There is, however, this mystery. If, as I have found, Mr Robinson knew the claim to be based on a false basis from the start, why once he learnt that its fatal flaws would be exposed at the trial did he press on with it? I have no clear answer to that. It is possible that he had at some point convinced himself of the truth of his own untrue case and had actually come to believe in it. If so, that may be because it appears to be so much part of his own personal agenda to say and write things which he is later ready to disclaim as having misrepresented the truth at the time that, after a lapse of seven years from the events as they had happened, he was unable any longer to identify the true from the false. Mr Robinson’s difficulty is, I regret to say, that he is a dishonest man. I do not, however, propose to consider this further. I find that this was a speculative, opportunistic case that was pursued to the lengths that it was on Mr Robinson’s instructions, who sought from the beginning to make a case he knew to be false, whatever (if any) different views about it he may later have convinced himself of. I find that the case was improperly brought and pursued, and its pursuit on Mr Robinson’s instructions caused CV to incur the costs they did in its defence. Overall I regard this as a plain case for the making of the requested order for costs against Mr Robinson and I will do so. The circumstances relating to the production of the 2005 management and audited accounts merely underline the justice of such an order.

Mrs Robinson ceased to be a director of SA in April 2004. She was an executive director of PLC until November 2002, during which time she worked under the overall leadership of Mr Robinson as CEO. She was principally involved in PLC’s technical operations. From November 2002 onwards she was a non-executive director of PLC, receiving neither salary nor remuneration. She disputes having had any involvement in the management or control of the litigation, save to the extent that she participated in board meetings (with the other non-executive directors, Mr Rosewell and Mr Hindley) which made decisions about it. She was never a shareholder of any Convergence group company. She is a beneficiary of the Trust, enjoying a reversionary life interest; but during Mr Robinson’s lifetime she is not entitled to any benefit from it save (with Mr Robinson’s consent) at the trustees’ discretion. She has not in fact received any benefit from it as a discretionary beneficiary. Her evidence is that her and Mr Robinson’s finances are kept separate.

The case against Mrs Robinson is that she supported Mr Robinson in his prosecution of the claim. She was, it was said, a co-venturer. She was said also to have been in control of the litigation, at least from 2006 when the documents show she was playing a material part in the preparation for the trial and was being copied in on various emails from DAC and the advice from counsel (and it can be added that she was tasked with certain duties at the January 2004 consultation with Mr Temple). It was said that she knew that the delay in the project was nothing to do with alleged structural problems, as she had recognised in documents she created in 1998 and 1999, the latter being the June 1999 report to the PLC board. Yet she made a 60-page witness statement for the trial on 16 May 2006 which adopted and supported the false case made by Mr Robinson in his statement.

In that statement she said she had been a director of PLC for 15 years and was active in, as she said, “nearly every aspect” of its business in her successive capacities as Personnel and Human Resource Director, Operations Director and Managing Director. She said that, as CEO of PLC, Mr Robinson was more actively involved with CV than she was, including with the various corporate structure issues, and he was also much more involved on a day to day basis with the issue of third party funding. She said, however, that “Nonetheless I was involved in and aware of those issues and spoke to Alan about them at the time.” She said she was much more heavily involved in the issue of licensing for the project and the development of the operations and technology necessary for it. She said she had read Mr Robinson’s witness statement (as well as those of others) and said that “whilst I do not claim to have been party to all of the meetings and correspondence which those witnesses (and particularly Alan) were involved in during that time, I can say that their recollection of those events accords with my recollection of what was going on at the time during 1996 to 2003.”

In paragraphs 78 to 83 Mrs Robinson dealt with the inability of the project to obtain a building. The thrust of what she said (with various inaccuracies as to dates and other matters) was that Convergence’s inability to finalise any deal to acquire a building was because of a delay in the funding of the project. What she does not say is that Convergence was only prepared to make an offer for Marine Plaza on condition that it first obtained the necessary licences, an exercise which had nothing to do with CV. That omission involved the presentation of a misleading picture. In paragraph 83 she made the false point that it was the lack of structure “which led to the inability to close the deal on the Marine Plaza [and which] caused damage to the project in several ways.” That was untrue.

Mrs Robinson returned to the question of structure in paragraphs 95 to 97. Her evidence reflected the same imprecision and inaccuracy as does Mr Robinson’s, but, again, the thrust of it was that CV’s defaults in relation to the structure had caused a need for a constant updating of business plans. She asserted, inaccurately, that Convergence had the necessary licences “or were about to receive them” (some were never received) but she continued that “substantial elements of the project were being held back because of the delay in seeking funding and we were in danger of losing the building which would mean having to substantially re-work the project.” In paragraph 97 she said:

“It was a huge cost and gradually the group structure became a separate project in its own right that had to be managed. It should never have come to this and it was a huge diversion of time and resources. It meant that all other elements of planning were held back.”

That was again untrue. It amounted to an assertion that it was CV’s fault that the project could not be progressed. She said the same in paragraph 105, when she asserted that Convergence was “unable to turn the interest into investment due to the lack of structure. We found ourselves in the position of having to release our business plan to prospective investors without being able to close the funding.” She repeated the point in paragraph 109. At paragraph 119 she purported to describe the state of the project as at the end of 1998 and the first quarter of 1999. She asserted that Convergence had applied for licences and obtained the comfort that they would all be available. Mr Robinson’s email to Mr Mercer of 4 January 1999 showed the true position, namely that the delay on the licence front was threatening the whole project. She said that Convergence had obtained the necessary building for the project. No doubt they had identified it, but in the spring of 1999 they were only prepared to make an offer for it conditional on licences being obtained.

At paragraph 124 and following Mrs Robinson sought to gather together her assessment of CV’s defaults. She said that although Mr Robinson was dealing with CV, she knew what was going on, was party to Mr Robinson’s alleged frustration and felt much the same frustration herself when “it kept appearing impossible to get the corporate structure sorted out.” She said that (as I read it) she and he were hoping to make a long term capital gain from the project and so needed a structure that was appropriate, that worked and was tax efficient. She recalled that in March 1998 Mr Robinson was “desperate to get the structure sorted.” If he was, and there is some support for the view that he had been exerting pressure in that direction, I repeat that it was no part of Convergence’s case that the structure should have been “sorted” any earlier than that, and the inversion of the Convergence group was effected by a two-stage operation in March and April 1998. Mrs Robinson, without condescending to detail, asserted that “board meetings in Jersey were called and adjourned because documentation had not come through.” I do not know to what meetings she was there referring. She said that Convergence could not approach investors on a formal basis without the group structure or the valuations. “Each time we had to correct it, it resulted in another level of complexity.” In paragraph 134 she said that “Over time the delay in funding prevented the project from going ahead. Had we received CV’s advice in a timely manner we would have received funding.” Mrs Robinson then even advanced a case that was no part of Convergence’s case at the trial, namely that the structure finally consolidated on 14 July 1999 was anyway too complicated and difficult to understand. In paragraph 138 Mrs Robinson bravely referred to her June 1999 memorandum, which she acknowledged was relevant to the project. She did not, however, deal with its most damaging elements, presumably because she had no answer to them.

In paragraph 146 Mrs Robinson referred to licences. She said, correctly, that all had been applied for by September 1998. She said they could have been applied for earlier. “Indeed they would have been had we ever been in a position where we were able to seek substantive funding for the Project: it simply wasn’t necessary to do so until funding was imminent.” In paragraph 147 she said Convergence was confident, with good reason, that it would receive each necessary licence. In the event it did not and I have referred to the frustration that Mr Robinson manifested in relation to the delay in obtaining them and to the fact that it was that delay which was the main reason why the funding was not proceeded with earlier than it was.

Mrs Robinson concluded her witness statement by saying in paragraph 232 that:

“We lost this Greek project because we simply ran out of time to get the network constructed before the Olympic Games and could not hold all the ends together without substantial finance. The lack of finance was owing to the absence of a structure that could be valued and sold to investors in 1998 and 1999. This was entirely due to Chantrey Vellacott and the monolith they produced and the delays associated with understanding and sorting out the structure they had part implemented, and, at the time and later, in getting them to produce related valuation.”

It was said, therefore, that Mrs Robinson was at the heart of Convergence’s actions and had a particular role in relation to licences. She knew all about the progress of the Greek project, because she wrote the memoranda about it that she did. She was a member of the PLC board which authorised the proceedings and she made a witness statement that supported the factual case advanced by Mr Robinson. In addition, by 2006 it is apparent, it is said, that she had a “hands on” approach to the conduct of the litigation.

Mr Sims, for Mrs Robinson, identified the case against her as involving the assertion that, together with Mr Robinson, she was “the real party”; that she had knowingly involved herself in the running of a false case in concert with Mr Robinson; that she was a party to the production of misleading accounts which had the effect of holding off an application for security for costs; and that she had provided funding for the litigation by her 40% of the Amador loan (£333,200).

Mr Sims submitted that there was no question of Mrs Robinson being either a or the real party and that in practice there was no question of her benefiting from the litigation. She is not a shareholder in any group company, and although she has a reversionary life interest in the Trust and is a discretionary beneficiary of it, she has never received any benefit from it as a beneficiary. The only element of funding levelled at her was her share of the Amador contribution, whereas her case is that she did not know that the Amador money had been so diverted until after the event and disputes that she would have agreed to its diversion, a point which I cannot decide against her on this application, on which there has been no cross-examination. As for the point about the accounts, Mr Sims said that it was not enough to show that they had emerged as being apparently incorrect: it was necessary to prove an element of bad faith or dishonesty on Mrs Robinson’s part in relation to them, which has not been done. He made the point that if the allegation against Mrs Robinson is that she dishonestly concocted the running of the Convergence case and/or the promulgation of false accounts, those were allegations that could and should be made in separate proceedings against her, in which she would have a full opportunity to defend herself. They could not fairly be made in a summary application such as the present one.

As for Mrs Robinson’s alleged control of the proceedings, she admits that, together with the other PLC directors, she was party to a PLC board decision to delegate their conduct on behalf of PLC to Mr Robinson. It can also be said, although I am not sure that Mr Sims did, that (at any rate after April 2004) she was not party to any like delegation from SA, of which she was no longer a board member. Her position is that the proceedings were then controlled solely by Mr Robinson under that delegated power and Mr Sims submitted that there is no evidence that she ever played any part herself in its control or management, which she denies.

The chronology I have described identifies the limited role she was playing before 2006, although she admits that by 2006 she was assisting in aspects of the preparation of the case, as well being kept copied in on counsel’s advice and emails etc from DAC. But the 2006 documentation does not show that she was controlling or managing the case, nor was she. Mr Sims submitted that assistance in the preparation of a case is not a factor which should justify the exercise of the exceptional jurisdiction case, the focus of the authorities being that it is the people responsible for the management of the case against whom such orders may ordinarily be made. It is not those who assist in its preparation who cause the opposition to incur costs: it is those who are responsible for the prosecution of the case. Mr Sims emphasised that Mrs Robinson disputed that she had any control over its prosecution at any stage, and he said there was no contrary evidence. She admittedly was a board member of PLC which made a decision to delegate to Mr Robinson the prosecution of the case, who did run it. So were Mr Rosewell and Mr Hindley, but no one was suggesting that they should be answerable for costs. Her knowledge of the case was obviously based on what Mr Robinson thought about the case, and his stance was apparently that it was a good case. She had no meetings with DAC or counsel until January 2004, her first appearance in relation to the claim being at the December 2003 mediation.

Mr Sims submitted, therefore, that there was no basis for finding that she was running a false or speculative case, because she was not running or pursuing it at all, either alone or in concert. Mr Robinson had the sole conduct of the litigation.

Mr Sims recognised that Mrs Robinson had prepared a witness statement which was supportive of the case made by Mr Robinson, and that had the trial proceeded as originally planned she would have given oral evidence. But he said that was no basis on which to justify the invocation of the exceptional jurisdiction under section 51. The basic principle is that, according to well settled principle, witnesses are immune from suit in relation to their conduct as witnesses (see Palmer and Another v. Durnford Ford (a firm) and Another [1992] QB 483, at 487A to C); and even if, which Mr Sims questioned, there is any exception to that principle for the purpose of the making of costs orders against a witness under section 51 (such a suggestion is made in Symphony Group Plc v. Hodgson [1994] QB 179, at 193H), this is a case in which Mrs Robinson did not in fact give evidence or therefore become a witness. All that she did was to produce a statement of evidence that that she would have given, but which in the event she did not give, and on which she was not cross-examined.

Mr Sims also submitted that, whilst it is true that Mrs Robinson’s witness statement for the trial broadly supported the Convergence case on causation, it was expressed in generalised and imprecise terms (I paraphrase Mr Sims) and could not be regarded as critical to the determination of those issues. He said that, if for any reason Mrs Robinson had been unable to give oral evidence at the trial, it would be unlikely that it would have made any material difference to the court’s ability to assess those issues. Nor is there any suggestion that CV had taken steps to obtain any evidence in rebuttal of anything that Mrs Robinson said in her statement.

Mr Sims further pointed out that the general points made by Mrs Robinson in support of the proposition that structural problems had held up the financing of the project were not ones made exclusively by her and Mr Robinson, but were supported by the evidence that would have been given by other Convergence witnesses had the trial proceeded. Mr Sims referred me to (i) Mr Hindley’s witness statement, of which it appears to me that only paragraphs 35 and 68 are of direct relevance, but they are also very generalised assertions (the former apparently based on hearsay) and do not advance the matter much; (ii) Mr Evans’s statement, of which only paragraphs 32 and 34 appear to be material, but they are also of little evidential value (the former is a generalised assertion that structural problems prevented both the internet placing and a private placement, and the latter appears to reflect that this assertion is based on a hindsight assessment made over six years later); (iii) Mr Woodward’s statement, which does not appear to add anything to the case based on alleged structural difficulties; (iv) Mr Waterhouse’s statement, of which paragraphs 55 to 59 support the assertion that structural problems prevented the appointment of a financial adviser (and other paragraphs make generalised related points) but it is difficult to see how this evidence could have overcome the difficulties in the causation case that had emerged from the detailed investigation of the history during Mr Robinson’s cross-examination; (v) Mr Happy’s evidence, which does not appear to me add anything potentially crucial to the causation story; and (vi) Mr Paddison’s statement, which also appears to add nothing.

As regards the funding of the litigation, the only allegation against Mrs Robinson is that she participated in the Amador loan, one made right at the end of the story and which could not have been materially causative of any costs having been incurred by CV. Her evidence is anyway that she did not know that the Amador money was being used for the litigation and that she only learnt of it after the event from Mr Robinson and Mr Waterhouse. She said that had she known that her home was to be used as security for what turned out to be a loan in order to pay DAC’s fees she would not have agreed to it. The essence of her evidence is that she had no intention of funding the litigation and did not do so.

Mr Sims emphasised that causation is a necessary part of the making of a case for a costs order under the section 51 jurisdiction; and that, collectively, it could not be said that her contribution to the litigation caused CV to incur the defensive costs that they did.

Coming to my conclusion on the case against Mrs Robinson, I have found this more difficult than that with regard to Mr Robinson. I find, however, that even though she has a reversionary life interest in the Trust and is a discretionary beneficiary under it, it would be unreal to regard her as either the or a real party to the litigation. The real party is Mr Robinson. I have also concluded that, on the evidence, I cannot safely find that she was playing any part in the management or control of the litigation or, therefore, that she ever gave instructions in the matter to DAC. This had been delegated by the boards of PLC and SA to Mr Robinson and he was the individual who was managing and controlling it. She was certainly playing a part, particularly in 2006, in assisting with its preparation for trial, but I do not regard that as a feature which should, by itself, have the consequence of a section 51 order being visited on the assister. As for the funding of the litigation, whilst, for like reasons as in relation to Mr Robinson I find that 40% of the Amador money should be regarded as coming from Mrs Robinson, it was also so paid only at the very end of the litigation; and in any event there is a dispute on the evidence as to whether Mrs Robinson knew about the Amador payments at the time; and she also said that, if she had known that it was to fund the litigation, she would not have agreed to it. CV point to certain board minutes as reflecting that Mrs Robinson must have known the position. But PLC’s board minutes are not documents I would regard as models of reliability as to what actually happened at any particular meeting; and I take the view that I simply cannot decide this factual dispute against Mrs Robinson on the documents alone.

As regards her witness statement for the trial, it is true that this supported the false case that Mr Robinson had also sought to make. I consider, however, that it is necessary to exercise care before jumping to the conclusion that because (for example) Mrs Robinson wrote the report she did in June 1999, she knew that the counterclaim was itself a bogus claim from the start, and that by her witness statement she was knowingly supporting such a bogus claim. She may perhaps have known that, but since she has not given oral evidence and has not been cross-examined, the court should at least be wary about making conclusions as to what she did know and when. She was not the person primarily concerned in the story giving rise to the litigation: that was Mr Robinson. I do not know how she would have explained herself under cross-examination, and if one thing is certain about litigation it is that little is predictable in it; and I note that her witness statement of 19 February 2007 advances an explanation of the June 1999 memorandum directed at minimising its apparent relevance to the Silk Route project. I record, however, that I take a poor view of Mrs Robinson’s evidence (in paragraph 63 of her witness statement of 19 February 2007) that “the advice I saw strongly advised that the case was a good one and should succeed. On the occasions I attended meetings with counsel it was always stated to be a good and proper case.” Mr Swainston’s advice of 15 September cannot reasonably deserve the description in the former sentence. It is plain that it was not positive advice.

Overall, therefore, I decline to find that Mrs Robinson was the real party to the proceedings, or that she can be said to have knowingly funded it, or that she can fairly be regarded as having been responsible (jointly with Mr Robinson) for the pursuit of the counterclaim. I also decline to find that anything she did (including the making by her of her witness statement) can fairly be regarded as having caused CV to incur the costs they did in defending the counterclaim, or more than a probably tiny proportion of them (for example, any preparation that Mr Jacobs had made for her cross-examination). I record that CV submitted that at least by 15 September 2006 she knew enough about the problems in the case to take steps to ensure that the proceedings were stopped; and it was said that her failure to do so ought therefore to be regarded as causative of the costs thereafter incurred. I regard that as a somewhat unrealistic submission. I simply do not know whether, as at 15 September (following the receipt of Mr Swainston’s written advice), she regarded the case as doomed to fail. Again, I have not heard her evidence. Her response to that advice was (as compared with that of Mr Robinson) sensible and constructive, namely that Mr Robinson should endeavour to deal with the points raised by Mr Swainston. That reflects that she thought he might be able to do so, and is inconsistent with a view that she knew that the case was hopeless. It is important not to assess her conduct as at that date by reference to what CV knows subsequently happened at the trial: at that stage Mrs Robinson did not know what was going to happen at the trial. In any event I regard as wholly improbable that if Mrs Robinson had proposed to Mr Robinson that he should halt the litigation and submit to an order against Convergence for all the costs to date he would have agreed to it. Of course he would not. This litigation was his idea, he was not prepared to be told by a lawyer such as Mr Swainston that there were problems in his case, and he was going to tell his story at the trial. He did just that.

The one remaining feature of the case against Mrs Robinson is her participation, by virtue of being a director of PLC, in the promulgation of the management accounts and audited accounts produced in 2005. I do not know what personal role she played in the preparation of either, but it does appear that they presented a picture which, as events turned out, bore no relation to the true one. The conflicting evidence from the accountants as to their justification at the time they were prepared does not enable me to decide that there was any bad faith or negligence on the part of the directors in the preparation of those accounts, although I accept that they raise various questions. I do, however, have a concern that Mrs Robinson must be taken to have lent her name to the assertion in the directors’ report in the 2005 accounts (signed on 20 October 2006) that PLC was confident of its case against CV, success in the litigation by then being perceived as essential to PLC’s continued solvency. Given the history of the advice given to Convergence, particularly Mr Swainston’s recent advice, I question how that view could properly have been formed, or even whether it was genuinely held. I have, however, come to the conclusion that I ought not to find on this summary application, on which I have not heard any oral evidence, that that view was not genuinely held by Mrs Robinson. In those circumstances I am not prepared to hold that on this ground alone, all others being in my view insufficient, Mrs Robinson should be made personally answerable for CV’s costs, or at any rate a part of them: by 20 October 2006 there was probably no question of PLC being able to give security for the entirety of CV’s past and future costs; and had a different course been adopted in relation to the 2005 accounts it might be that it would at most have resulted in a saving of CV’s future costs of the trial.

I propose, therefore, to make no order against Mrs Robinson.

I will order that the costs I have ordered against PLC and SA be assessed on the indemnity basis, to include the costs of the failed mediation. I will order Mr Robinson personally to pay those costs. I make no order against Mrs Robinson to pay any of those costs.