Harding Homes (East Street) Ltd & Ors v Bircham Dyson Bell (a firm) & Anor

The second to fourth claimants are builders who were liable under a guarantee (“the Guarantee”) of the company claimant’s liabilities in relation to a development (“the Development”) in Colchester to a bank, GMAC-RFC Property Finance Limited, known as GMAC. The defendants are firms of solicitors. It is common ground that the proper defendant is the second defendant, so when I refer to the defendant it is the second defendant that I mean.

The defendant, through its property partner, Mr Michael Parker, was responsible to the claimants, in particular the second to fourth claimants (whom I shall, where the context admits, call the claimants) for the Guarantee.

The defendant admits breach of duty. By mistake Mr Parker included an all monies clause in the Guarantee, which should have been limited to interest shortfall and cost overruns. The defendant also now admits that it owed duties to the other claimants as well as the claimant company, although it did not send a letter of engagement to them or indeed to any of the claimants.

The claimants say that they have lost the opportunity to obtain a more favourable outcome from their negotiations with GMAC, both as to the sum to buy GMAC out and as to the profit on the Development. The defendant however denies that the existence of the all monies element of the Guarantee had any material effect on the claimants’ negotiating position or on the profits earned from the Development.

The only issue is therefore whether the defendant is liable to the claimants in damages and, if so, the quantum of such damages. Damages (if any) fall to be assessed on the basis of loss of a chance as expounded by the Court of Appeal in Allied Maples Group Limited v. Simmons & Simmons [1995] 1 WLR 1602. The causal link between the defendant’s negligence and the claimants’ alleged loss depends on what (a) the claimants and (b) GMAC would have done in events which did not in fact happen. Accordingly the claimants are entitled to succeed if they can show that, had there been no breach of duty,

Moreover, if all such matters are established, the court will have to evaluate the chance so as to quantify the damages.

I have had the advantage of representation by Mr Justin Fenwick QC and Mr Benjamin Wood for the claimants and from Mr William Flenley QC and Ms Niamh O’Reilly for the defendants.

In April 2007, the claimant company, in which the other claimants owned all the shares and of whom the second and third claimants were the directors, wanted to borrow £9,458,000 from GMAC. On 2 April 2007 Mr Andy Blenkinsop of GMAC sent the claimants a document called Headline Terms and Conditions for the proposed loan. Those terms included a provision that, “Cost overrun and interest shortfall guarantee to be provided by Mark Harding, Jason Harding and Peter Williams.” However, owing to the admitted mistake of the defendant, the Guarantee in its final form contained an all monies clause. The claimants are therefore entitled to be put in the position they would have been in but for the breach of duty.

The second and third claimants are brothers, involved in property development. Mark Harding (whom I shall call “Mark” without intending any disrespect but purely for reasons of convenience) is the elder brother. He left school at the age of 19, went to work in a bank and then turned to estate agency. During the mid-1980s he bought and sold flats with his father, giving up his job as an estate agent so as to work full-time with his father. The recession of the late 1980s hit him hard and I shall refer to the following events as his history. He and his father had signed a personal all monies guarantee with a bank which they thought was limited to £30,000 but in fact secured ten times that amount. He lost his home and was divorced from his then wife and attributes the breakdown of his marriage directly to the guarantee.

He took up his job as an estate agent again and then in about 1994 went into business with his brother Jason Harding (“Jason”, for similar reasons). Jason left school at the age of 16 and worked as a self-employed builder. From about 1994 Mark and Jason bought and sold properties for two or three years using high street mortgages.

Mark and Jason were then introduced to the fourth claimant Peter Williams, who had a background in corporate finance and who acted for them by arranging loan facilities for their deals which did not rely on high street mortgages. Mr Williams is undoubtedly an exceptionally shrewd and effective negotiator, relying on a technique of “constant negotiation”. In the words of Mr Parker,

“…the fundamental key to his success was to keep on talking to the funder to offer up differing solutions which they could be persuaded would produce a result that was more beneficial to them than enforcing their security against the borrower”.

In about 2000, Mark, Jason and Mr Williams went into business together. Rather than paying Mr Williams a fee for securing finance, he would raise the necessary finance taking a third of any profits. There was a strict demarcation of duties: Mr Williams would be in charge of all financial and also (according to his first witness statement) legal matters and Mark and Jason would be in charge of finding the properties, the development and building side and the sales.

As the business developed, the claimants undertook their developments using Special Purpose Vehicles, of which the claimant company was one. They also began to instruct Mr Parker who was Mr Williams’s longstanding property lawyer of choice. The claimants say that they put Mr Parker on a pedestal and would do anything he told them to.

At the back of some land that the claimants had already developed was the Old Mill Site, East Street, Colchester (the Development) which the claimants purchased through the claimant company for £2.325m, funded by £1.8m from Bank of Scotland and £0.55m from Gladstar Limited (“Gladstar”). On 12 May 2006, the claimant company obtained planning permission for 23 houses, increased to 24 houses in November 2006. On 1 February 2007 (for the purposes of a possible loan from Bank of Ireland Plc which did not materialise) King Sturge LLP valued the Development site at £4.025m.

However by 15 February 2007 Mr Williams had received a loan appraisal from Mr Blenkinsop on behalf of GMAC. Mr Blenkinsop had been introduced to Mr Williams by Mr Parker as Mr Parker had acted for GMAC, “about six or seven times” in other unrelated transactions. GMAC was willing to lend £9.376m in tranches at 2.5% over LIBOR to refinance the existing debt and finance the construction. However as a term of the lending GMAC required (as I have said) interest shortfall and cost overrun guarantees from Mark, Jason and Mr Williams. The GMAC precedent used was supplied to GMAC’s solicitors by Mr Parker. He explained this in oral evidence as follows,

“…these were GMAC’s standard documents, so I sent him [Jeremy Butler of Howard Kennedy] all the standard documents we had, rather than start to second guess what he would want to do with them. Jeremy was a contact of Peter’s, and Peter had persuaded GMAC to appoint him to act for them on this deal…he had no prior dealings with GMAC, so he was starting with a blank sheet of paper.

Q. So as between you and Howard Kennedy it was your firm that had the familiarity with and copy standard form documentation from GMAC, rather than Howard Kennedy?

A.

Correct.”

Mr Parker described the draft Guarantee as a “portmanteau” document, by which he meant that it contained a selection of clauses some of which he said needed to be deleted according to the type of guarantee required. The Guarantee is entitled: “INTEREST SHORTFALL AND COST OVERRUN GUARANTEE” but in its final form contained all of the following three clauses:

“2.1

Interest shortfall guarantee

The Guarantor irrevocably and unconditionally:

2.1.1

guarantees to GMAC punctual performance by the Borrower of its obligations:

(a)

to pay interest under the Loan Agreement; and

(b)

to pay any additional payment due under the Loan Agreement in the event of a deduction or withholding from interest to ensure that it receives a net sum equal to the amount it would have received had no deduction or withholding been made; and

2.1.2

undertakes with GMAC that whenever the Borrower does not pay any such amount, when due under this Guarantee, it must immediately pay that amount as if it were the principal obligor.

2.2

Cost overrun guarantee

The Guarantor irrevocably and unconditionally:

2.2.1

guarantees to GMAC prompt performance of the Borrower’s obligation to fund Cost Overruns under the Loan Agreement; and

2.2.2

undertakes with GMAC, if the Borrower is required to ensure the prompt payment or funding of a Cost Overrun under the Loan Agreement and has not done so, to fund or procure the funding of that Cost Overrun within five Business Days of demand by GMAC.

2.3

Financial guarantee

The Guarantor irrevocably and unconditionally:

2.3.1

as principal obligor, guarantees to GMAC prompt performance by the Borrower of the obligations of the Borrower under each Finance Document and prompt performance by the Developer of its payment obligations under each Finance Document; and

2.3.2

undertakes with GMAC that whenever the Borrower does not pay any amount when due (or, if later, at the expiry of any applicable grace period) under any Finance Document, the Guarantor will immediately pay that amount as if the Guarantor instead of the Borrower were expressed to be the principal obligor.”

Mr Parker insists that the inclusion of all of clauses 2.1, 2.2 and 2.3 was wrong and that clauses 2.1 and 2.2 would be otiose if 2.3 were included. The claimants do not go so far, saying (as I understand it) that it was belt and braces to keep all three clauses in and that GMAC intended to do so. Mr Fenwick said that the standard approach would be to use the full version and “see what comes back”. He said that one only calls an all monies guarantee as a last resort in any case. GMAC had three objectives from the start of the negotiations in mid-1998, said Mr Fenwick, (i) not to put any more money into the development than absolutely necessary, (ii) to finish Phase 1 and (iii) to retain the borrowers’ cooperation so that they helped to build the development and then to dispose of it.

Interestingly, Mr Parker said in oral evidence that mistakes have been made by GMAC before by keeping in all three clauses. He did not specify those mistakes because he did not want to breach GMAC’s confidence. He explained why he simply sent the draft guarantee to Howard Kennedy without either removing clause 2.3 or drawing attention to the fact that clause 2.3 was incorrect by saying,

“I wasn’t acting for GMAC. It wasn’t appropriate for me to start amending GMAC documents. All I was doing, because of the speed required, was putting the documents in Howard Kennedy’s hands for them to…prepare them in accordance with the term sheet.”

The fact that Mr Parker made a mistake is shown by an email dated 16 April 2007 which he sent to Elizabeth Bailey of Howard Kennedy, pointing out that the draft Guarantee should not contain clause 2.3 which should accordingly be deleted. However he did not notice that the draft in its final form still contained clause 2.3. At all events, clause 2.3 was not removed and Mr Parker did not again challenge its inclusion.

There is an email from Elizabeth Bailey dated 9 May 2007, saying,

“As regards the share charge and guarantee, I note that the first draft has been signed and not the version sent to you yesterday. Therefore the addresses of the guarantors are not completed. Please confirm [Mr Parker did] that you are happy for me to substitute this page…”

At all events the loan Facility Agreement completed, and was dated 14 May 2007 (incidentally Mr Williams was away on 14 May 2007), and the Guarantee apparently bears the same date.

Work continued on the Development. But the credit crunch had intervened and the claimants did not comply with one of the “milestones” under the terms of the facility, namely that ten sales had to be achieved within 12 months of the first drawdown. Through no fault of the defendant this constituted a default under the Facility Agreement and on 11 June 2008 GMAC served a Notice of Default, as it was entitled to do. There was then protracted negotiation between Mark, Jason and Mr Williams on the one hand and GMAC on the other. A forbearance agreement was discussed although there is some dispute as to whose idea it was.

In about the summer of 2008 GMAC told Mr Williams that its current objective was to leave the UK’s residential mortgage market and concentrate on its lending in the United States, creating liquidity and reducing exposure wherever possible. Nevertheless, GMAC wanted to work with the claimants to finish the building programme. GMAC subsequently filed for bankruptcy as part of a Chapter 11 liquidation in the United States, but that is irrelevant for present purposes.

On 23 December 2008 Mr Williams had a meeting at GMAC and then on 6 January 2009 he had a meeting with Mr Parker, the purpose of which was, according to Mr Parker’s notes and the notes of his assistant, to discuss a forbearance agreement by which GMAC was to agree to forbear on the Notice of Default.

On 23 January 2009 Mr Parker wrote to Andrew Flemming of GMAC’s then lawyers (Berwin Leighton Paisner LLP) saying,

“The problem area revolves around the guarantee. I do not have a complete copy of that. Could you forward a pdf of the executed copy please.”

A scanned copy of the executed copy was sent to Mr Parker within the hour.

On 16 February 2009 the claimants received a demand from GMAC, not for the amount due under an interest and cost overrun guarantee, but for the full sum owed by the claimant company of £8.9m, based on the all monies guarantee clause.

On 20 February 2009 GMAC’s solicitors sent a draft Deed of Forbearance through by which,

On 23 February 2009 Mr Parker wrote to Mark, Jason and Mr Williams (followed by a letter containing more detailed advice on 21 April 2009) in which he said,

“I write further to our various recent telephone conversations to formally record the conversation that I have had with you with regard to my firm’s position in respect of your dealings with…GMAC and specifically the costs and interest overrun guarantee held by that funder from yourselves…

You have been in negotiation with GMAC with regard to an agreed proposal for the best realistic prices of the development and in the course of those discussions GMAC have raised with you the terms of the costs and interest overrun guarantee given by you. In particular, they have asserted that the guarantee is an all monies guarantee rather than one limited to costs overrun and interest shortfall guarantee.

You are aware that I have referred Berwin Leighton Paisner…to the exchanges of correspondence that I had with Howard Kennedy (Elizabeth Bailey)…Specifically my request that clause 2.3 of the draft be deleted as going further than had been requested or offered by the parties…

As you are aware I have referred this circumstance to my firm’s professional indemnity insurers and have advised you that you should consider obtaining independent legal advice.

You are engaged in negotiations with GMAC for the entry into a forbearance agreement which I understand is for the orderly disposal of the development assets in such a way as to allow for a payment in full and final settlement of the GMAC claims. You have confirmed to me that you wish my firm to continue acting for you in negotiating the forbearance agreement…

As I mentioned to you, I believe there are strong grounds to resist the opportunistic claim by GMAC in respect of the guarantee and you have indicated that verbally at least they acknowledge that their position is untenable in respect thereof but nevertheless it is something that I need to formally raise with you to ensure that you are fully aware of the position and allow you the opportunity to take such independent legal advice.”

Behind the scenes Mr Parker was (as his daybook shows) working hard on the Deed of Forbearance, which was completed on 26 February 2009 (having been signed by the claimant company, Mark and Mr Williams on 23 February 2009 and only by Jason on the following day) with a side letter signed by Mark, Jason and Mr Williams. Under the Deed,

The 13 houses on Phase 1 were sold between April and December 2009 for between £240,000 and £375,000 each, giving rise to total proceeds of £3.73m, which sum was remitted to GMAC net of costs.

By an agreement dated 23 February 2010, the claimants reached a settlement with GMAC, resulting in a further £652,034 being paid to GMAC, in full and final settlement of the debt standing at that date at £5,921,903.

The claimants then received a facility from Close Brothers Limited, enabling them to complete the building works. They sold the remaining houses in Phase 2 between April 2011 and October 2012 for between £275,000 and £370,000 each, resulting in an overall total of £3.56m.

Mr Fenwick relied on the principles enunciated by Simon Brown LJ in Mount v. Barker Austin [1998] PNLR 493 at 510 and followed in Browning v. Brachers [2005] EWCA Civ 753; [2005] PNLR 44, Dixon v. Clement Jones Solicitors [2004] EWCA 1005; [2005] PNLR 6 and Levicom International Holdings BV v. Linklaters [2010] EWCA Civ 494; [2010] PNLR 29, to show that the evidential burden is on the solicitors to prove that there is no causal link between the negligence and the loss as follows,

“1.

The legal burden is on the plaintiff to prove that in losing the opportunity to pursue his claim…he has lost something of value i.e. that his claim…had a real and substantial rather than a merely negligible prospect of success. (I say “negligible” rather than “speculative”- the word used in a somewhat different context in Allied Maples Group…- lest “ speculative may be thought to include considerations of uncertainty of outcome, considerations which in my judgment ought not to weigh against the plaintiff in the present context, that of struck-out litigation.)

2.

The evidential burden [which Simon Brown LJ had earlier described as altogether more significant] lies on the defendants to show that despite their having acted for the plaintiff in the litigation and charged for their services, that litigation was of no value to their client, so that he lost nothing by their negligence in causing it to be struck out…

3.

If and insofar as the court may now have greater difficulty in discerning the strength of the plaintiff’s original claim….than it would have had at the time of the original action, such difficulty should not count against him, but rather against his negligent solicitors…

4.

If and when the court decides that the plaintiff’s chances in the original action were more than merely negligible it will then have to evaluate them. That requires the court to make a realistic assessment of what would have been the plaintiff’s prospects of success had the original litigation been fought out. Generally speaking one would expect the court to tend towards a generous assessment given that it was the defendants’ negligence which lost the plaintiff the opportunity of succeeding in full or fuller measure. To my mind it is rather at this stage than the earlier stage that the principle established in Armory v. Delamirie (1722) 1 Stra 505 comes into play.”

Mr Flenley denied that they are applicable on the basis that all three cases are ones where the solicitors’ negligence led to the loss of litigation (in the last case, arbitration), as opposed to the present case where the loss of a chance is in commercial negotiation. He said that the two are different concepts, since, where the negligence occurred in relation to commercial negotiation, there is no presumption that the client could achieve a better result in negotiation than was in fact achieved. In other words, there is no implication from Mr Parker’s behaviour that he thought that GMAC would accept more than they in fact accepted if there were no all monies guarantee. In litigation cases on the other hand, by acting for the client in the litigation and not advising that it was hopeless, the solicitors impliedly believed that the litigation had value. Therefore the evidential burden is on the solicitors to prove that it did not. Mr Flenley did not know of any decided cases, other than loss of litigation cases, applying the Mount v. Barker Austin principles and therefore submitted that I was being invited to make new law.

It is true that Simon Brown LJ referred to the word “negligible” rather than “speculative” and “the rather different context” of Allied Maples. However I note that (at 497) Moore-Bick J, with whom Simon Brown LJ agreed (at 509C), elided the situation of negligent advice with the striking out case.

“However, in order to recover for the loss of that kind the court must be satisfied that the plaintiff had at least a “real” or “substantial” chance that he would have succeeded in the primary action, not merely a speculative one: see Allied Maples...”

He also cited the judgment of Diplock LJ in Allen v. Sir Alfred McAlpine & Sons Ltd [1968] 2 QB 229 at 256F-257B, applying the principle of Armory v. Delamirie (above) to the effect that the onus is imposed on the solicitor of satisfying the court that the plaintiff’s claim in the dismissed action would not have succeeded had it been prosecuted with diligence, concluding that, “[t]his would be a heavy onus to sustain after so great a lapse of time.” Armory v. Delamirie was not a case about a lost chance leading to the loss of litigation but is of more general application, although it is applied at the later stage of evaluation rather than at the earlier stage of deciding that the claimant’s chances are negligible.

Accordingly I find that Mr Fenwick is right in this instance.

The second question arises out of the first instance decision of Floyd J in TomHoskins PLC v. EMW (A Firm) [2010] ECC 20. Mr Fenwick relies on the passage at [133]-[134], as follows,

“Although there are multiple contingencies…I think it would be wrong to apply percentage upon percentage. For example if I thought there was a 20% chance of ISL agreeing to provide the director’s guarantee as a requirement of the contract and an 80% chance of completion occurring at the end of October, a simple multiple of these two percentages (to yield 16%) would not reflect the true chances of the deal being done. That is because the contingencies are not independent. ISL might well have resisted the guarantee so as to prevent exchange of contracts until much later, and then agreed to it when their funding was in place. Or they might have agreed to it at once but with a longer completion date.

I think it right to ask what were the overall chances that TH and ISL would, absent negligence, have negotiated and agreed a contract for the sale of all five pubs, on terms requiring a guarantee, with completion occurring at the end of October 2000?”

The judge concluded at [135],

“I would evaluate the overall chances of a completion at the end of October as 50 per cent. As the damages have been calculated on the basis of the original completion date I will have to make a further reduction to the overall figure in due course.”

Mr Flenley submitted that if the contingencies were however truly independent so that the chances of one contingency happening were unrelated to the chances of the other contingency happening, then the court should apply percentage upon percentage. Thus, assuming that there is a real and substantial chance of loss, and not a merely speculative one, there ought to be separate discounts for the chances of GMAC agreeing a deal and of funders agreeing to fund it in the assessment of any chance that may have been lost.

However, again I agree with Mr Fenwick. It seems to me that I should look at the chances of the various contingencies happening in the round, rather than mechanically applying percentage upon percentage.

I was not impressed by the evidence either of Mr Parker or of the claimants. While I find Mr Parker to be on the whole an honest witness, he was ashamed of his mistake and thus sought to minimise it, and he plainly cut corners all the time in his practice. I suspect, although there was no evidence about this, that he regarded himself as a man of commerce rather than a typical solicitor. He did not take full notes of meetings. He was sloppy in dating documents. He did not explain documents, on the basis that the guarantors were “experienced investors/developers”, despite the fact that the claimants waived their right to independent legal advice by emails dated 11 May 2008. He saw nothing wrong in getting witnesses to sign only the signature page of documents, so that I can only assume this was habitual with him. He also saw nothing wrong in asking clients to sign documents subject to amendment. While this may be technically possible in circumstances where the solicitor has authority to amend the draft, it is obvious that such practice constitutes an accident waiting to happen and that the accident did in fact happen in this case. Mr Parker did not send out formal letters of engagement to all his clients, despite acknowledging that this would have been “best practice”. He did not provide executed bibles of documents which his clients had signed. Mr Williams said in his first witness statement that Mr Parker never provided them.

The claimants for their part often misled GMAC and others, as will become apparent, regarding lies as part of regular negotiation practice. This meant that as untruths were such a part of the claimants’ lives I was not able to tell whether and when they were telling me the truth either. I have no doubt that they were so appalled by Mr Parker’s admitted mistake that they convinced themselves of various matters which did not happen.

I have to resolve the following factual disputes,

There is a major difference in the evidence as to the place and circumstances in which the Guarantee was signed by all the claimants except Mr Williams, who it is accepted signed at a later date. This matter goes to reliability and credibility.

The claimants say that the Guarantee was signed at the defendant’s offices and that Mr Flitter (the chartered accountant, partner at Goodman Jones LLP, who attested the signatures) was not in attendance for the signing.

Mr Parker says (although he does not have any independent recollection of writing emails or of the incident) that the Guarantee was signed at Mr Flitter’s offices on the occasion of a board meeting which took place there. The matter is complicated by (a) the fact that Mr Parker hand-wrote the wrong date, namely 4 May 2007 rather than the 3 May 2007 which he accepts was the correct date (and also the wrong time and an inaccurate address) in his draft meeting note and resolutions approving the GMAC documentation and (b) the fact that there was only one meeting of the Harding Homes Group which included the meeting of the claimant company.

Mr Fenwick has pointed out that it is impossible to see when such signature and witnessing could have happened if Mr Parker’s account is correct. There is also a curious letter written by Mr Parker to Mr Flitter dated 4 (not 3) May 2007 in which he said,

“I enclose herewith the signature pages for witnessing and return to me as soon as possible.”

Mr Parker said that he thought that Mr Flitter had not signed the Guarantee as attesting witness on 3 May 2007 and that he, Mr Parker, sent it back for signature. He said he had not really addressed the point at all until Mr Fenwick’s opening, when he realised for the first time that it was significant.

On 3 May 2007 Mr Parker had sent an email to Mr Flitter. The email is headed “Harding Homes Waterside Place”, attaches copies of the documents and says,

“Julian I attach

1

Board minutes Please have Mark sign twice and then Mark and Jason give specimen signatures

2

Facility agreement- Have Mark sign

3

Debenture Mark and Jason sign

4

Drawdown notice Mark sign

5

Cost and interest overrun guarantee Mark Jason and Peter sign and independent witness for each signature

6

Share charge ditto

7

Bank transfer each sign as transferor

All undated please and then send back asap

If you need to call me to go through the documents please feel free to call from the meeting”.

Mr Flitter gave evidence under a witness summons and he adamantly said that he would not have witnessed the Guarantee if he had not seen the Hardings sign it, “I would only have signed that I had witnessed the signatures if I had seen the signatures being written.” He said he simply could not remember something that happened eight years ago. He also said that he could not remember it ever happening that a day later he appended his signature as a witness.

Mr Fenwick suggested that the Guarantee must have been “witnessed” in accordance with the letter without Mr Flitter seeing the Hardings sign, but,

Mark and Jason say that they have a clear recollection of signing the Guarantee at the defendant’s offices. They say that the Guarantee was signed last of the bible of documents and they remember Mr Parker saying, “This is where you sign your life away”. Mark says that he and his brother had to point out to Mr Parker that the Guarantee was not supposed to be an all monies guarantee. He referred to this as a “hoo-ha” but there could have been no such hoo-ha as Mr Parker was well aware that the Guarantee was supposed only to be an interest and cost overrun guarantee. As recently as 16 April 2007 Mr Parker had said that clause 2.3 was included in the Guarantee in error so that he could not have believed that it contained clause 2.3.

Mark and Jason said that they were happy to sign the Guarantee in the terms in which they believed it to be as they understood their liability to be within their control, as Jason put it, “within their own destiny” to comply with the facility. However they did not at first mention the interest shortfall aspect of the Guarantee which would not have been under their control, although under cross-examination they accepted that they were aware of the interest shortfall element.

Again, Mark said at first that he had never asked Mr Flitter about the circumstances in which he signed the Guarantee but then said, immediately afterwards, that he had done so on one occasion. Both Mark and Jason said in oral evidence, for the first time, that maybe the Guarantee was signed with Julian Flitter subsequently. Jason said, “Maybe…there was more stuff to sign.”

This was the first time that they had ever suggested that there might have been two separate meetings and the haziness of their recollection sits ill with their firm evidence that the Guarantee had been signed in front of Mr Parker.

I can only assume that they confused the occasion with another one. Jason said that he had never previously signed an unlimited all monies guarantee but then accepted that he had done so when he obtained a loan from Gladstar.

Mr Williams’s account of the alleged meeting with Mr Parker (and indeed of the Board Meeting at the offices of Goodman Jones LLP) was similarly inconsistent. He started his evidence by changing the dates when Mark and Jason signed the Guarantee from 9 May 2007 to 3 May 2007, and when he himself signed it from 19 May 2007 to 8 May 2007. While I of course accept that at such a distance it would be strange if the parties remembered exact dates, he was clear in his first witness statement that the documents were couriered to him the day after signature by Mark and Jason. In describing the board meeting he said that he could not recall what happened at the meeting or whether the Guarantee was dealt with but nevertheless he felt able to recall with certainty the negative that the Guarantee had not been brought into the meeting by Mr Flitter.

His account of his own signature on the Guarantee also does not appear anywhere in his witness statements. He said that Larry Phillips was present when he signed the Guarantee but he had a clear recollection that although the signatures of Mark and Jason were there, they were not attested and Mr Flitter then signed as an attesting witness to all three. He then said that before he signed he telephoned Mr Parker from Goodman Jones’s offices telling him that he had only agreed to an interest shortfall and cost overrun guarantee whereas he had noticed clause 2.3. Mr Parker’s evidence was that this did not happen and, if it had happened, he would merely have told Mr Williams to cross out clause 2.3 and initial the crossing out before signature. Mr Williams said that Mr Parker did not do this, but it is impossible to see why not as it was not too late at that point to recover the situation.

Importantly, the Particulars of Claim simply state that the claimants signed the Guarantee and returned it.

Mr Fenwick relies on an email sent by Mr Blenkinsop on 18 April 2008 referring to “significant consequences if we request you meet any shortfalls from your interest and cost overrun guarantee”, saying that although Mr Williams accepted that Mr Blenkinsop only appeared to have the interest shortfall element in mind, what could be more natural, bearing in mind Mark’s history, than that Mark and Jason would want to know what the Guarantee meant for them. He said,

“If Mr Parker had acted as a remotely competent solicitor and had either produced a report on the documents or at least the bible to them, so that they could go into the office, look it up and see what they had, then perhaps they might not have had to ring him up. So entirely plausible that they would have done so.”

However, the issue is not as to Mr Parker’s competence, but as to what actually happened.

The claimants also say that Mr Parker explained the terms of an interest shortfall and cost overrun guarantee to them in some detail. He denies this, saying that he gave no such explanation, none being necessary as the claimants had signed many guarantees in the past and he relied on Mr Williams to understand and explain the documents.

In my judgment the Guarantee was signed by Mark and Jason at Mr Flitter’s offices. But I do not think much (other than the reliability of the claimants’ memory) turns on this as I find that Mark, Jason and Mr Williams were simply mistaken about the circumstances.

One of the major disagreements between the parties is the claimants’ insistence that they raised the subject of the Guarantee being an all monies guarantee with Mr Parker at an early stage whereas Mr Parker says that he only discovered his mistake on 23 January 2009. There is no reference in Mr Parker’s day book to the conversations said by the claimants to have occurred and he says they simply did not happen.

Apart from the date when the Guarantee was signed, the claimants insist that there was a telephone call on speakerphone at which the claimants raised the subject and asked for a copy of the Guarantee in about May or June 2008. The claimants say that this was after a conversation with Mr Blenkinsop in which Mr Blenkinsop is said (although at first Mr Williams denied any conversation as to clause 2.3 prior to 22 July 2008, saying that the pleadings were incorrect) to have alluded to an all monies guarantee.

There is doubt about the date of the alleged phone call, if it took place at all. Mr Williams’s evidence was that the conversation took place with Mr Blenkinsop on 4 June 2008 so that the telephone conversation would have to have been later than that. The Particulars of Claim plead that the conversation took place in the first week of May 2008, but the Further Information initially said that the conversation with Mr Blenkinsop allegedly preceding it had taken place in June or July 2008 and in any event before 15 August 2008. This was then amended to say that the conversation with Mr Blenkinsop had taken place in May 2008, but Mr Williams said in evidence that it had taken place on 4 June 2008. The claimants rely on a day book entry by Mr Parker which reads “Mark Harding send 21 May”, but this is ambiguous and anyway is dated 22 May 2008 which apparently predates the meeting with Mr Blenkinsop.

Mark says that the reason for the call was the “hoo-ha” in May 2007, but, as I have found, there was no such hoo-ha. Mark says that Mr Parker indicated in the course of the telephone conversation that he was “pretty sure” that the claimants had entered into an all monies guarantee. Jason described the call in his witness statement as short and “very casual”. It is implausible that the fact that the claimants could be liable for the full debt would have been dealt with in such a very casual manner. Mark says to the contrary that he was extremely alarmed, as he would have been owing to his history.

Again, Mark said in oral evidence that he remembered that they asked for a copy of the security documents during the course of the call. However, in his first witness statement he said something slightly different:

“I think Peter also asked Michael for a copy of the security documents either then, or soon afterwards (either I heard him say it or he told me he had- I cannot now remember which it was).”

The claimants all say that they continued to press Mr Parker for a copy of the Guarantee, in order to achieve “clarity”. For example Jason refers in his witness statement to a meeting with Mr Parker after service of the Notice of Default. “I did most of the talking, with Mark chipping in.” I accept Mr Parker’s comment that,

“He says, ‘He introduced somebody to take a note. He introduced him as something like a graduate or YTS or student…’ That is absolute nonsense, isn’t it, that they are in there shouting at me about a guarantee that I had negligently allowed them to sign and I had brought along a graduate or YTS person to sit there. It is ridiculous.”

There was no reason during the course of 2007 or 2008 for the claimants to ask for a copy of the Guarantee. The claimants were in possession of the Heads of Terms, Mr Blenkinsop had recently described the Guarantee in emails as relating to interest shortfall and cost overrun only, and the demand under the Guarantee had not been served.

The fact that I find hardest, indeed impossible, to accept is that if the claimants’ evidence is correct the claimants would have left it so long to clear the matter up, particularly as they say that Mr Parker said that he believed the Guarantee to contain an all monies clause. Mark says that he had many meetings with Mr Parker between May 2008 and December 2008 at none of which the Guarantee was produced. He said that he was extremely alarmed at the prospect of an all monies guarantee but there is no evidence, other than the claimants’ word, of the claimants having applied any pressure, either to Mr Parker or to Mr Williams, to obtain a copy of the Guarantee, despite Mark contending that they did so. He accepted that he himself did not have any direct conversation with Mr Parker in which he complained about the terms of the Guarantee. This is in contrast to copious evidence of pressure relating to payment of subcontractors. Mark says he was happy to leave the issue of the Guarantee to Mr Williams, but it is improbable that he would have done so bearing in mind his history and the ever present threat of personal bankruptcy.

The claimants explained this by saying that “it was possibly out of respect”, as they put Mr Parker on a pedestal owing to his thinking “outside the box” and his “commercial angle”. Mr Fenwick says that the fact that the claimants did not commit their request to paper is entirely understandable. It is consistent with their trust in Mr Parker (Mr Williams described the relationship as “profound”), their desire not to destroy their longstanding commercial and personal relationship with him until absolutely necessary, the fact that Mr Williams was in the middle of commercial negotiations on a number of sites, and, not least, that Mr Williams’s wife was dying of cancer at the time.

However, to my mind it is incomprehensible, whatever else was going on, that the claimants would not have raised the question of the Guarantee with Mr Parker directly and in writing for such a long period, particularly bearing in mind Mark’s history. As Mr Parker said,

“The idea that Peter Williams and to a certain extent the Hardings would be fobbed off by me for the thick end of nine months is nonsensical.”

Mr Williams’s evidence was that he would have left the issue of the all monies Guarantee if it had not been for Mark and Jason’s panic about it. Under cross-examination Mark agreed, contrary to the implication in his previous evidence, that he did not complain to Mr Parker about the Guarantee at any time before January 2009. Again in the circumstances this is wholly improbable. Mr Williams said in oral evidence that it was critical to his strategy, known to Mark and Jason, that he saw the Guarantee before any serious negotiation with GMAC.

Mr Parker on the other hand said that he only discovered his mistake on 23 January 2009 when he bespoke a copy of the completed Guarantee from GMAC’s solicitors. Mr Fenwick and Mr Wood pointed out that Mr Parker’s original file (with the correct number and clearly labelled with the correct name and thus easily discoverable and identifiable) contained a copy of the Guarantee (with the word “COPY” stamped in blue over the space for the date) amongst other executed but undated documents.

However, Mr Parker said that he did not have a copy of the executed document, for which he had to ask Berwin Leighton Paisner LLP. It rings true that he would want to see a copy of the executed document as he had told Ms Bailey of Howard Kennedy that the unexecuted version contained the rogue clause 2.3 and he had apparently only sent signature pages to Mr Flitter.

Nevertheless, I note that paragraph 40 of the Defence puts the date at which Mr Parker realised he may have made a mistake at 6 January 2009, not 23 January 2009 and this seems to me to be correct. I say this for the following reason. By an email sent by Mr Parker to Mr Williams on 9 January 2009, he said,

“The (forbearance) agreement provides for you to pay or give security for payment of £4.4m in stages. If you do not then they can rescind the agreement and rely upon their original claims. I understand this is accepted by you but that you also require a confirmation that by entering into the agreement you do not surrender the arguments you have made opposite GMAC as to the true construction of the guarantee.”

In paragraph 29 of the Defence the defendant’s case is put that Mr Williams asserted during the summer of 2008 that the Guarantee covered only interest on cost overruns, so that if there were no cost overruns there would be no money due under the Guarantee. The Defence says that Mr Parker told him this was incorrect: when the costs overran the claimants would be liable for them under the Guarantee and when the claimant company did not pay interest, the Guarantee would require the claimants to pay the shortfall of interest.

Mr Fenwick says it defies belief that Mr Parker would have given such advice without reviewing the Guarantee, but I do not think this is correct. Mr Parker was familiar with guarantees of this nature and such a construction (as Mr Fenwick himself said) is absurd. Mr Parker said that Mr Williams wanted as a matter of negotiation to “preserve a position opposite GMAC” that there was no interest due under the Guarantee so that GMAC would not make an interest claim under the Guarantee. Mr Williams himself did not deny that he had this conversation, he merely said that he did not recall it.

Mr Parker’s evidence was that if he was advancing an argument of construction and then entered into a forbearance agreement, it might imply that he had abandoned the argument of construction. Mr Flenley points to the fact that the word “construction” is used whereas the inclusion of an all monies clause could not be considered a question of construction. He also says that for somebody who is not used to construing documents, a transactional lawyer such as Mr Parker, it is entirely plausible. He then says that the email to Mr Flemming of 23 January 2009 amounts to the same thing (“the same point”) and it is understandable that Mr Parker should change his mind about events which occurred years ago.

However that email of 23 January 2009 (a date on which on any basis Mr Parker will have realised his mistake) says,

“My understanding is that if the proposed settlement fails then your client is entitled to pursue its remedies under the security in the same way as before the forbearance. My Client is also entitled to assert the same arguments as have been made prior to this point. The problem with the forbearance agreement is that it seems to attempt to strengthen your clients [sic] position by having my clients reaffirm the contents thereof so potentially waiving any such arguments.

It is not the intent that the deletions should not be a problem. The alternative is that we insert words into the forbearance to record the above position. ”

It seems to me that both emails plainly refer to the inclusion of clause 2.3. Entry into the Deed of Forbearance could not have had any effect on a question of construction as the Guarantee means whatever it means. Therefore it is my view that the Defence is correct and Mr Parker realised his mistake at the meeting on 6 January 2009, after Mr Williams had complained to GMAC about the all monies nature of the Guarantee on 23 December 2008, although Mr Parker was concentrating on the Deed of Forbearance and may not have understood the full import of the Guarantee until he had obtained a copy of the executed version on 23 January 2009.

Mr Williams had been told by GMAC that it was unlikely to rely on the Guarantee (see below) and he did not believe that the all monies element was a serious matter. He too was therefore more concerned with the Deed of Forbearance at that stage.

Mark, Jason and Mr Williams all say that they remember a meeting with Mr Blenkinsop and Mr Anas Abuzaakouk (“Anas”) on 22 July 2008 very well. This was the only meeting with GMAC at which all three of the claimants were present inside the meeting room as Mark and Jason typically left it to Mr Williams to conduct meetings with GMAC. They say that Anas waved around a piece of paper saying that it was an all monies guarantee that they had all signed and that GMAC would be relying on it. According to the claimants Anas was effectively saying that Mark, Jason and Mr Williams were going to have to pay millions of pounds and be bankrupted. Yet none of them asked Anas to see it.

Mark says that he is certain that Mr Williams must have told GMAC in an email that they disagreed with Anas’s assertion, but there is no evidence of any such email. Jason says on the one hand that he fully expected GMAC to enforce the Guarantee, but then on the other that he was shocked and surprised when the formal demand was served on him.

I also note Mr Williams’s assertion that he did not use email, but the bundles are full of emails to and from him. Doubtless his assistant sent them for him, but it is disingenuous for him to say that he never used emails as a reason for not asking in writing for a copy of the Guarantee.

Mark claimed that GMAC “kept writing” to him, Jason and Mr Williams, and “always mentioned about the 9 million, the 9 million.” However there was no letter other than the formal demand and liability at an earlier stage would not have been as much as £9m.

There is also an inconsistency between the pleadings (including the Further Information) and the oral evidence. Mr Williams said orally that the first reference to an all monies guarantee was at the meeting at the end of July 2008. However, the Further Information said,

“During the initial negotiations, GMAC’s Mr Blenkinsop agreed to put the question of the personal guarantee to one side. However, as negotiations progressed he made it clear that GMAC would call in the Guarantee.”

Mr Williams said that Mr Blenkinsop had mentioned the Guarantee in their first telephone conversation, although the first time the Particulars of Claim mention GMAC referring to an all monies guarantee was in December 2008. Mr Williams said that the Particulars of Claim were was wrong where it said that GMAC suggested for the first time in December 2008 that it could enforce personal guarantees against the claimants. However, when asked to explain why, if the threat had indeed been made in July 2008, the meeting of 28 October 2008 was a “game-changer” for Mark and Jason, he merely said that it was a matter of “non-clarity” of the Guarantee. He said,

“I carried on with my strategy, but it had an influence in my thinking because I needed clarity on whether it existed or not.”

On the third and fourth days of the hearing Mr Williams repeated on a number of occasions that GMAC’s first mention of the all monies Guarantee was at the meeting of 22 July 2008.

No mention is made in the Particulars of Claim of the meeting of 22 July 2008. Indeed, neither Mr Williams’s email of 26 July 2008 summarising the meeting nor his note of the meeting, nor, importantly, his email contact with Mr Parker soon after the meeting contains any reference at all to the incident, nor does the email ask for a copy of the Guarantee. Mr Williams said in his first witness statement that it was at a meeting on or around 28 October 2008 that for the first time GMAC suggested that it might seek to enforce personal guarantees against the claimants and, “This was the first time that I began to wonder what GMAC were in possession of”.

Again the Particulars of Claim allege that GMAC first referred to an all monies Guarantee in early December 2008, and the instructions given to Mr Leslie, the claimants’ funding expert, seems to have been to the same effect,

“As 2008 drew to a close we understand that the all monies nature of the Personal Guarantees of the Shareholders also came to light.”

I therefore do not accept that any such incident occurred at the meeting on 22 July 2008.

The Particulars of Claim say that Mr Williams was actually shown a copy of the Guarantee on or about 23 December 2008 and (whether or not that was the case) it seems to me that it was at about that time that the claimants realised that they may have signed a guarantee in the wrong form. I do not believe that any mention was made of the all monies aspect of the Guarantee to Mr Parker until 6 January 2009 (see below).

Mark agreed that when he told Kevin Loveridge then of NatWest Bank (“RBS”) that a deal had been agreed with GMAC in February 2011, “taking £2m for full and final settlement in a one-off payment” in order to obtain financing, this was false. To be fair to him, he said that Mr Williams was the principal negotiator with RBS but when taken to four emails addressed to him from Mr Loveridge, referring to a meeting and a phone call with him, Mark agreed that he must have been aware of the negotiations. Mr Williams denied that he had made such a statement, but I found his protestations unconvincing.

Again, Mark had represented to the lenders on buy-to-let mortgages that he was providing the deposits from his own resources and that the total value of all cash incentives was “pounds zero”. These statements were untrue.

Again, Mark conceded (although he said it was Mr Blenkinsop’s “game plan”) that he had intended to encourage people to pay more than their market value by showing that he, Jason and Mr Williams had paid deliberately inflated values for their own purchases.

Mr Loveridge also noted that Mark, Jason and Mr Williams intended to sell the units as quickly as possible. Mr Williams said this was not their stated intention but merely an option. He gave this evidence unconvincingly.

Mr Williams also lied to Mr Blenkinsop on 1 October 2008 and on 22 October 2008 saying that he had support from RBS when he did not.

Mr Williams accepted that his strategy was deliberately to keep prices high so that there would be no sales, saying that GMAC was aware of this. However this is contrary to his witness statement which said that Mr Blenkinsop was surprised at the lack of sales.

In an email of 18 June 2008 he said that the claimants were “fully committed to reaching a successful completion of the selling and building programme”. This was untrue as Mr Williams wanted the programme to fail so as to put pressure on GMAC. Again, on 15 August 2008 Mr Williams said that once sales were forthcoming Phase 2 would be constructed. Again however, he wanted to set too high a sales price so as to frustrate sales. He said in the same email that he was optimistic of achieving replacement finance “next month”. However, he admits in his first witness statement that in fact he made no real efforts “whatsoever” to procure finance. Yet again, without any such efforts, on 22 August 2008 he said that it would be possible to obtain a restructured finance and was “happy to allocate whatever time is needed to achieve this.”

On 8 October 2008 he said that he was happy to go down the Deed of Forbearance route but in his witness statement he said he had absolutely no intention of signing such a Deed. He accepted that he was misleading GMAC in order to improve his negotiating position.

Mr Williams then gave a misleading impression of what he meant by ‘playing the game’. He had given evidence that he was playing the game, (a) to mislead GMAC in negotiations in order to gain a commercial advantage, saying that GMAC could do whatever they chose (“They could have challenged anything we put forward to them and they didn’t. That is a matter for them, not us”) and (b) in saying in an email of 1 October 2008 that he could then pay £2.7m for the completed units, “mixing the mortgages with support from Nat West”, “an amazing step forward given current market conditions”, at a time when funding had not in fact been procured. Then he told me that by “playing the game” he merely meant, “being cooperative with the bank”, whereas it is plain that he was in fact misleading GMAC, a fact that he was trying not to admit.

He said in an email of 28 November 2008 that he had “achieved funding” of £3m, but had achieved no such funding.

In an email of 3 December 2008 he said “I am not entirely sure whether you appreciate the lengths I have gone to in order to get to this stage- believe me they are extraordinary”, and “The additional sum of £400,000 is an unconditional payment in 18 months time and will be provided by NatWest Bank”. No such offer had been made.

He accepted that an email of 5 December 2008 from Mr Blenkinsop offering to use £1.5m from NatWest and £1.5m from “a private investor” reflected his own offer, and that there was no funding from NatWest or any private investor.

Mr Williams told Mr Blenkinsop by email of 8 December 2008 that he had managed “with considerable effort” to persuade “the funding supporters to release a further GBP 400,000, albeit in 18 months time but nevertheless supported by a Bank Guarantee from a UK clearing bank, probably Barclays Bank.” However this was untrue and simply part of Mr Williams’s negotiating technique.

By an email dated 26 November 2009 Mr Williams wrote to Mr Lersch, a mortgage broker, for the purposes of obtaining the loan from Close Brothers Limited. In that email he said that GMAC would sell Phase 2 for a total consideration of £800,000, whereas in fact the sale price had been agreed at £650,000. Mr Williams attempted to explain this by saying that the £800,000 included transactional costs. However there is no reference anywhere to the amount of such costs and I find that Mr Williams was misrepresenting the matter in order to get a better deal with Close Brothers.

I am also unhappy about the evidence which the claimants gave to me. Thus under cross-examination about what assets he could use to pay £2m to GMAC, Mark said that there could have been recourse to company assets for the purpose of paying out GMAC. He said that there was a £500,000 charge on a block of flats known as Diamond Place, Malden Road, Colchester on which Mark put a value of £1.2m. (There had been a Knight Frank valuation on 9 July 2008 at £1.695m, but the market had fallen significantly since then). Mark also said in his witness statement that he that he could have raised £500,000 by selling the shops at a development called The Willows.

Mr Fenwick insisted that there was equity in the properties as the full loans had not been drawn down and it was reasonable for Mark to have given such evidence.

However, Mark said that he would have got money from the sale of Diamond Place mortgaged for £500,000. But the mortgage was for £1.2m. Mark said that the claimants could sell shops at the Willows for £500,000 and get £500,000, without mentioning any mortgage over the property.

Jason also had given evidence that the outstanding liability on Diamond Place was £500,000. He admitted in cross-examination that his statement that he owned a 140 acre site at Harwich was incorrect as he merely had an option over the site.

One cannot help but suspect that Mark and Jason were simply casting around for assets to back up their claim that they would have used their own resources to fund any settlement with GMAC.

Mr Williams alleged that Gladstar had agreed to provide £1.5m in the course of a telephone conversation, but such conversation was not only undocumented but never previously mentioned either in Mr Williams’s witness statement or in the pleadings. He said in an email of 9 November 2009 that he had been able to obtain an offer of funding of £600,000 from a private investor, which he had managed to increase to £650,000. Again, he said this offer was from Gladstar, but there is no documentary evidence to support the allegation which again I reject.

Mr Parker’s letter of 23 February 2009 to Mark, Jason and Mr Williams says that they indicated that “verbally at least [GMAC] acknowledge that their position is untenable in respect of [the Guarantee]”. That statement was never contradicted by Mark, Jason or Mr Williams and indeed it is corroborated by a contemporaneous entry in Mr Parker’s daybook and by an email to Mr Flemming of 25 January 2009.

Indeed when they were being cross-examined about the matter they gave evidence evasively about GMAC’s position. Mark’s demeanour was uncomfortable. I asked him whether GMAC had admitted to him that they could not rely on the Guarantee. He said not directly to him, but was unsure whether they had said it to Mr Williams. I find that evidence unconvincing. Jason simply said that “I wouldn’t have got involved in this because this is under Peter’s banner, isn’t it, this is all legals and finance again.”

At first Mr Williams said that he did not say what Mr Parker’s note recorded him as saying, and then he merely said he “couldn’t recall that conversation” meaning either the conversation with Mr Blenkinsop of GMAC or the conversation with Mr Parker. However in his first witness statement Mr Williams acknowledged that he thought about whether the claimants could challenge GMAC’s ability to enforce the Guarantee: “I continued to take a robust attitude to the guarantees”.

Again, on 16 February 2009 Mr Parker’s daybook records a telephone call with Mr Williams in which the latter said that a formal demand notice had been served for £9m but that this was a “Game for Andy B” and a “Jorkins routine” (referring to David Copperfield), showing that GMAC was pretending to rely on the all monies Guarantee when it had orally conceded that it could not do so. Mr Williams denied that he told Mr Parker, as Mr Parker’s note records, that Mr Blenkinsop accepted that the Guarantee went outside the parameters of what was agreed.

There seems little doubt that GMAC used the demand which it served under the Guarantee on 16 February 2009 for £8.9m as a negotiating tool in relation to the Deed of Forbearance. Mr Flenley points out that the figures in the draft deed sent on 20 February 2009 were higher than those in the deed that was executed. He submitted that the climb down from asserting that £8.9m was payable immediately to the vastly weaker terms even of the draft must have made clear to an experienced negotiator such as Mr Williams that reliance on the all monies guarantee was simply a bluff. Indeed Mr Williams accepted in his witness statement,

“If it had not been for Jason and Mark, then I believe I would have taken my chances and told GMAC to sue me on the basis that I did not believe there was an all monies guarantee.”

Mr Flenley submitted that when Mark and Jason spoke to Mr Williams about the demand under the Guarantee, he would have said to them,

““Don’t worry, this is just a joke, it is a Jorkins routine and they are playing a game; they are not actually going to enforce this guarantee and we will negotiate our way out of this”, as in fact happened, because the call on the guarantee was made on Monday, asking for £8.9m, and by Friday, GMAC,…with practically, on the documents, no interference from Mr Williams in the meantime, had served an agreement…which ended up at a figure of something like half of £8.9m…

You don’t ask for £8.9m on Monday and then say “We will settle for a figure that will give us something like £4.9m at the most” on Friday, if you are seriously going to enforce the guarantee against someone you know has £20m…They are simply caving in and, as I say, they caved in further.

…the likelihood is that they followed Peter Williams’s advice, and we know, as I have already indicated, what his view was about the guarantee.”

However I accept Mr Williams’s evidence to the following effect,

“…the demand was issued on February 16, and what that did was crystallise the position for GMAC, because the time was over for negotiation, and…it was a master stroke…just after the fact that we had had a credit approved facility from NatWest.

But what GMAC didn’t really encounter is the impact it had on Jason and Mark. By that time there was no discussion. They were having to prepare themselves or had prepared themselves to sign whatever was before them. That is what happened.”

Mr Fenwick says that the claimants could not have been certain of success in pursuing a claim for rectification. Mr Flenley says that they could. However I do not believe that the possibility that Mark and Jason might be liable for the company claimant’s liability of £8.9m, particularly bearing in mind Mark’s history, had no effect on them, even though they may have realised that GMAC was bluffing and even though rectification might objectively have succeeded.

The claimants’ case is that, if there had been no negligence, they would, on the balance of probabilities, have pressed for final settlement with GMAC at between £2m and £3m since they were in a different position from one where the claimant company alone was liable to GMAC for the £8.9m. They must however show a real and substantial chance that GMAC would have agreed to sell the site to them for between £2m and £3m. They also would have to show that there was a real and substantial chance that but for the Deed of Forbearance they would have made a greater profit on the Development.

Mr Fenwick submits that in the early stages the claimants were in a better position than GMAC to market Phase 1 of the Development so that the Guarantee was unimportant at that stage. GMAC became increasingly keen to leave the UK and to improve its liquidity so that when the market collapsed and lending became almost impossible to obtain the Guarantee assumed importance. He submits that the claimants would have agreed a better deal than they in fact did if the Guarantee had not contained clause 2.3. One is therefore looking at the later period, rather than the earlier period. This seems to have been a new allegation by Mr Fenwick, but I place no reliance on this fact.

I must first deal with the claimants’ alternative case that they would have negotiated a moratorium with GMAC. The problem with this case is that the claimants have not asked their expert accountant, Mr Thompson, to undertake any calculation of loss based on it. Mr Griffiths, the defendant’s funding expert, considered that a moratorium in June 2008 followed by mothballing until 2010 was “the least likely strategy for GMAC to have pursued” and Mr Leslie said,

“I wasn’t asked to consider- my instructions do not consider mothballing of the site. I regard that as more a question for the valuers and indeed for the lender.”

I am accordingly unable to consider this alternative case and I disregard it.

The first question is whether the claimants themselves would, on the balance of probabilities, have conducted the negotiation differently. I have decided that they would. Mr Williams was hamstrung in his negotiation by Mark’s history and Mark’s and Jason’s worries about the demand under the Guarantee.

Mr Fenwick submits that GMAC were so desperate to leave the country untrammelled by developments, and Mr Williams was such a good negotiator, that GMAC would have agreed to be bought out for as little as £2m. Mr Williams said in his second witness statement,

“I was working on a strategy with GMAC of protracted negotiations on the basis that the longer it took to find a settlement, the more willing they would be to actually settle.”

Mr Fenwick says that the alternative to settlement would have been for GMAC to appoint and fund an LPA Receiver, which course would inevitably have increased GMAC’s losses. Those losses would have been the possible blight associated with a receivership sale, the costs of the Receiver such as fees and commission, and costs such as site security.

Terms had been agreed in draft in December 2008, present in all the drafts in January, providing for the claimants to buy GMAC out for £4.4m. In February 2009, the claimants withdrew their offer to buy out GMAC for £4.4m and replaced it with an offer to buy out GMAC for £2m. This proposal had nothing to do with the all monies nature of the Guarantee, but arose out of the fact that Mr Williams had led GMAC to believe that he had funding in place for the £4.4m, whereas he had not. RBS, in the person of Mr Loveridge, had declined to fund the Development at £4.4m (see his email of 29 January 2009) despite being pressed throughout January 2009 to do so and eventually by email of 12 February 2009 offered £2.25m. It was only after this, on 16 February 2009, that the demand under the Guarantee for £8.9m was served.

On 9 February 2009 Mr Williams met Mr Blenkinsop and tried to persuade him that impediments to title reduced the value of the site, asserting that it was only worth some £1.5m. He said in his first witness statement,

“In the absence of cooperation from us over the access issues, we would have been the only likely buyers at more than a deeply discounted value. In other words, the issues of the personal guarantees and control of the site were inextricably linked, because I believe that GMAC would have had to recognise their need to keep Jason, Mark and myself in control because of the ransom position that Harding Homes (East Anglia) had, which ransom position fell away if we three were (or were potentially) liable under an all monies guarantee in the event that the development realised a significant shortfall.”

However, this is inconsistent with Mr Williams’s request to RBS for £4.4m. Further it is also inconsistent with a valuation produced for RBS by Knight Frank LLP on 20 January 2009. Knight Frank considered that the 13 houses in Phase 1 were ready for occupation, and valued them at £4.621m (the product being of high quality) and Phase 2 at £300,000. The claimants told them that all the services were connected, although they now say that the foul drainage was not.

I do not accept that the site impediments would have reduced the value of the site significantly. Mr Nicholls, the defendant’s valuation expert, said that Anas’s reaction, (assuming him to be the type of person described by Mr Williams) would be not to give a discount for things which the claimants had failed to do. Mr Rhodes, the claimants’ valuation expert, opined that there were only two impediments (thus not the question of the NHBC certificate) which might have affected value, although Mr Griffiths said that the absence of an NHBC certificate for the Development “would be a problem which would have to be resolved, but it would be no more than that.”

First there was the absence of a revised easement to permit increased traffic (or place service media) over a sluice bridge. This easement was required from the Environment Agency and Mr Rhodes expressed the view (in effect confirmed by the Environment Agency itself in a letter of 17 May 2010 from the Principal Estates Surveyor) that the Environment Agency would not seek to gain financially from this position in circumstances where they would not be incurring any loss. I note that the site has now been sold without any extension easement being granted.

Mr Rhodes concluded in his report that the issue of the sluice bridge would,

“not be sufficient to make any material impact on value, but…may have caused uncertainty for any third party.”

However presumably no conveyancing solicitor dealing with the purchasers of any of the 24 houses considered the sluice bridge a problem and I do not believe that GMAC would have reduced its price as a result.

I therefore turn to the second site impediment, namely the need for a right to connect to services on Grosvenor Place, which was owned by another Harding company. The claimants make much of this, saying that it was a matter within their own gift whether to connect to services. When they were in charge there was no problem; however, when subject to threat, they could hold out for a reduction in value. However this does not take account of the fact that they apparently told Knight Frank that the services were already connected, suggesting either that the other Harding company had already consented to the connection or that the claimants were misleading Knight Frank. Mr Nicholls said that water and electricity would have to be connected for construction purposes. Mr Rhodes said that,

“in order to simplify matters, the valuer removes uncertainties…and therefore makes statements like this to therefore ensure that the values they provide are actually the completed values…So in order to ensure that the client, the bank here in question, is able to determine a clean value they make these sort of statements.”

In any event, however, Mr Rhodes himself said that the cost of reaching agreement on this issue would have only been some £20,000-£40,000.

Thus the true cause of the change in Mr Williams’s negotiations was not clause 2.3 of the Guarantee but the fact that RBS would not fund the £4.4m. As Mr Blenkinsop said in an email of 5 February 2009,

“I didn’t understand your email but you now appear to be saying that the only facility you can negotiate is £2M from Nat West and the equity partner is no longer available, in addition all future costs would have to come from ourselves.

Frankly this is unacceptable and very disappointing given your assurances that this would be concluded within 10 days i.e. 16^th.”

The claimants say that if GMAC had been able to rely only on a guarantee as agreed, and did not have the Guarantee, GMAC would have acceded to Mr Williams’s requirement that they buy out the claimants for only £2m. However, a personal guarantee of interest shortfall was a pre-condition of the facility being offered and Mr Leslie’s expert report said (as indeed I find) that he would expect lenders to insist on such a guarantee, “…given the outstanding development risk and especially as this remained very much a lender’s market.”

The liability for interest had accrued either in the sum of some £504,000 (the claimants’ figures) or some £939,000 (the defendant’s figures) by the end of January 2009 and GMAC knew that Mr Williams at least was good for the money. However the liability was not only the current interest but also future interest in perpetuity on the principal, which could have been as much as £500,000 per annum. Thus Mark and Jason would have regarded this too as likely to lead to their bankruptcy.

GMAC had a valuation report from King Sturge LLP dated 10 July 2008, commissioned presumably for the purpose of the Notice of Default of 11 June 2008. That valued Phase 1 at close to £6m. By February 2009 the market had fallen so that the then current market price was probably about £4.46m, close to Mr Rhodes’s own undiscounted figure. Knight Frank valued the Development on 20 January 2009 for RBS at £4.921m Gross Development Value (“GDV”), including £300,000 Market Value for Phase 2. However (see below), the experts from whom I heard oral evidence did not ascribe any value to Phase 2.

King Sturge LLP in July 2008 and also Allsop LLP on 29 October 2008 warned that the market for part-built developments was difficult. The formal valuations are moreover of the GDV and do not take into account either any impediments or the uncertainties attendant upon the appointment of an LPA Receiver.

Mr Rhodes agreed with Mr Nicholls that Phase 1 of the Development was worth £3.8675m (GDV) and so lower than the mid-point of their two earlier valuations, some £4m. They have also agreed that Phase 2 had a nil or negative value. I accept these agreements.

The important matter is the discount resulting in the experts’ assessment of open market value as opposed to GDV. Mr Nicholls thought a 20% discount to GDV was applicable. Mr Rhodes applied a discount of more twice that amount to the £3.8675m reflecting what in his view was what a third party would have agreed to pay for the Development in February 2009. He said such a third party would pay £2.275m. He mentioned specific figures which did not appear in his report, allowing a 20% discount to GDV, increasing construction costs by 15-20% and a 35% profit on costs. The increase in construction costs is because, “taking over a part-completed scheme, one doesn’t know exactly the nature of the works that has been done previously”. He said that,

“…ultimately, in deriving market value, one has to consider here how would the market respond to the opportunity and therefore how would they assess their bid to determine market value and therefore the level of any bid they are prepared to make.”

His view was that the valuer needed to,

“…step back from the whole thing and look at everything in the round. So rather than wishing to look at the individual elements one needs to look at the whole picture and the whole picture here, therefore, encompasses the site impediment issue as well.”

He also said, “Different valuers would approach this in different ways”, especially in the situation, as here, where there were no comparables. He referred to his expertise as a valuer for over 26 years and said that part-completed development schemes are more costly to take on and “notoriously difficult to sell, because of the uncertainties that come with them.”

He said about Knight Frank LLP,

“Knight Frank…are…well-known residential estate agents and in a way there is a desire for them to protect their transactional business by ensuring that what the market sees in terms of the advice they are giving is a more positive outlook rather than a negative outlook.”

It is evident that he did not think much of Knight Frank, who did not mention any level of discount. Mr Nicholls said,

“I still think my 20 % is right and there is some- under those circumstances [put to him in cross-examination] you have got one or two additional costs. But…I don’t think you are going to run up £1m worth of costs by the things you have just mentioned.”

The value of the Development on GMAC’s balance sheet is unknown. However, on any basis GMAC had an interest shortfall and cost overrun guarantee from Mr Williams. In order for a valuer to consider that the Development in February 2009 was worth only £2m, he would have to apply a huge discount either in order to get shot of the Development or on account of the matters mentioned by Mr Rhodes.

I turn to the figures for sales contained in the Deed of Forbearance. The claimants had to pay GMAC £225,000 per unit for the first three Phase 1 sales, a total of £675,000, and £290,000 per unit for the rest. Thus the lenders would provide mortgages on the basis of an assumption of a value of £345,000, assuming a loan to value ratio of 65%. Even on the assumption that the remainder of the properties was valued at too high a level, 13 units would be worth at least £3.51m. So the question arises as to why GMAC would have agreed to sell for £2m units worth considerably more? In order for GMAC to have been prepared to accept a buy-out at even £3m, it would need to have had valuation evidence that the value of the site was only some £2.055m and it is speculation to suggest that there was such evidence.

There is a further problem for the claimants and in my view it is absolutely crucial. One must assume that GMAC knew of the all monies clause in the Guarantee before the claimants became aware of it (as I have found) on or about 23 December 2008. However it is unlikely that it affected the mind of GMAC at all as far as the negotiations were concerned.

On 8 October 2008 Mr Williams met Mr Blenkinsop. It is important that Mr Williams admitted that GMAC were not relying on the all monies element at that meeting,

“Q At this stage [GMAC] were not relying on the all monies guarantee to negotiate with you?

A Not at this time of 8 October 2008, correct.”

Mr Williams’s note of the meeting of 8 October 2008 shows that the claimants offered to pay £840,000 to GMAC for the three plots which they were to buy on mortgage, a sum which Mr Williams managed to negotiate down in the Deed of Forbearance as ultimately signed to £675,000. On 28 October 2008 there was a meeting, recorded in Mr Williams’s email of 3 November 2008 and confirmed in his email of 28 November 2008, at which he said various matters were agreed. On 4 November 2008 Mr Blenkinsop made another offer and Mr Williams agreed that £675,000 would be paid to GMAC on the sale of the first three units with the sale of the other ten units in Phase 1 by July 2009 with a target price of £300,000. The claimants were prepared to agree these terms regardless of any all monies provision in the Guarantee.

On 27 November 2008 Mr Blenkinsop apparently denied (according to Mr Parker’s daybook note of a conversation Mr Williams had with Mr Blenkinsop) that he had instructed Allsop LLP to value the site and said he did not want to instruct Allsop LLP to act as Receivers. However Allsop LLP valued it (according to Mr Williams) at £8m. Allsop LLP is well-known for acting as LPA Receivers for banks.

The next day Mr Williams reiterated the agreement reached on 4 November 2008. He offered in the alternative to buy out GMAC for £3m. However at a meeting on 1 December 2008, Mr Blenkinsop rejected the £3m, not on the ground that he was relying on an all monies guarantee (which was not raised- Mr Williams accepted that the Guarantee had not been discussed at that date) but because it was below “your stipulated sum of £3.65m”. Mr Williams then offered £3.4m.

On 3 December 2008 Mr Blenkinsop offered £3.5m, £3m being paid by 31 December 2008 and the balance by September 2009, with an option to purchase Phase 2 for £1.5m. Mr Williams rejected this offer, so by email dated 5 December 2008 Mr Blenkinsop offered £3.4m for Phase 1, with 9 months for the claimants to pay the final £400,000. “We understand that £1.5M is from a refinance by NatWest and £1.5M is sourced from the private investor.” It was a term that NHBC certificates be produced “within the next 7 days” and “Legal title to the back units to include access, services, etc.”

But on 8 December 2008 Mr Williams again rejected the offer. His objection appeared to be to making payment in nine months rather than 18 months in respect of the final payment of £400,000.

On 16 December 2008 Mr Williams met Mr Blenkinsop. Mr Williams’s note of the meeting says that Mr Blenkinsop accepted £3.9m for the whole site, if £3m was paid by 16 February 2008, £400,000 nine months later and the final £500,000 by 16 February 2010. Guarantees were to be cancelled, but there is no reference to the type of guarantee. Mr Williams accepted that GMAC was in a weak bargaining position, which sits ill with his allegation that GMAC was relying on the all monies Guarantee.

Thus GMAC was agreeing to sell Phase 1 for £3.4m without any reference to the all monies guarantee. Mr Williams came back on 19 December 2008 with an offer of £3m by 31 January 2009 and £400,000 by 30 September 2009. On the same day Anas counter-offered the sale of Phase 1 for £3.4m, payable as promised by Mr Williams, an option to purchase Phase 2 for £1.5m, and forbearance on the Guarantee.

On 24 December 2008, GMAC’s solicitor sent the draft Deed of Forbearance to the claimants. Mr Flemming said that the Guarantee should remain in force. The sale was for £4.4m (including Phase 2), £850,000 payable by 15 January 2009, a further £2m by 31 January 2009, £1m by 14 February 2009 and the balance of £550,000 by 30 September 2009. Thus GMAC came down in price to £4.4m for the whole Development in the course of five days.

The next meeting of 6 January 2009 is the one at which, according to my finding, Mr Parker discovered his mistake. However in my judgment the negotiation of the Deed of Forbearance was unaffected by it. Mr Williams had told GMAC that RBS was to lend the claimants £4m, and RBS that GMAC was to buy them out at £2m, but these statements were untrue. Mr Blenkinsop discovered the truth and GMAC was, as I have said, annoyed, even angry. The demand under the Guarantee was served to put pressure on Mark and Jason, but GMAC had no intention of relying on it. That is clear from the fact that the terms of the draft Deed of Forbearance sent on 20 February 2009 were weaker than those of the demand as Mr Williams, if not Mark and Jason, realised. And the Deed of Forbearance as executed on 26 February 2009 was weaker still.

What were therefore the overall chances that Mr Williams would, without the spectre of an all monies guarantee hanging over the heads of Mark and Jason, have negotiated and funded a settlement at a much lower price than in the Deed of Forbearance? What therefore were the chances that, again without negligence, the settlement would have allowed the claimants to sell the properties comprised in the Development in their own time and therefore at a higher price?

I take into account in particular the following,

Although I do think that on the balance of probabilities the claimants would have acted differently if the error had not been made, I do not think that they have succeeded in demonstrating that they have lost a real and substantial chance to negotiate a different resolution with GMAC which would have resulted in more profit for the claimants.

I note the decision of Morgan J in Thomas v. Albutt [2015] EWHC 2817 (Ch); [2015] PNLR 29 at [461] where he summarises the authorities as follows,

“The authorities in this area of the law direct that if I found the prospects were nil or negligible then I should disregard them and I do not need to assess them further. The cases also say that if I thought the prospects were 10 per cent or less, then I should regard them as negligible….In law, such an enhancement of the prospects of success is negligible and is disregarded for the purposes of awarding damages.”

It seems to me that the prospects of success are negligible and causation is not therefore made out.

In case I am wrong (although I do not think I am) I go on to consider whether the claimants could have obtained monies to fund such a buy-out. I permitted the claimants to amend their particulars of claim on the first day of the trial. The amendments related to three sources of funding on which the claimants rely to show that they could have bought the Development from GMAC. The amendment was ultimately only opposed in relation to one source, namely that the claimants could (they allege) have used their own funds or those of associated companies.

The claimants must show that there is a real and substantial chance that they would have obtained funding from a third party (or that on the balance of probabilities they would have funded any shortfall themselves) to make such an offer.

To my mind they have not made this out. Mr Williams had strong evidence as to available assets. However I find that it was not his policy to use them, for the reason given in his second witness statement, namely that,

“I believe I could have raised £1 million of my own money although I chose not to as I did not want to fund the deal on behalf of all three of the shareholders.”

He had the opportunity to invest his own funds in February 2009 when RBS offered to fund £2m at a time when GMAC offered to sell for £4.4m. Neither he nor any of the claimants took any steps showing that they considered the option of looking to their own sources to meet the £2.4m shortfall.

As to Mark and Jason’s alleged assets, they never in fact provided assets from their own resources. RBS summarised their position as follows,

“Mark Harding matrimonial home estimate at £900k with mortgages £300k. Jason Harding property estimated value also £900k with mortgages £300k. Between them the brothers also own 6 rental properties with a value of circa £1.2m with mortgages outstanding thereon of £950k.”

Thus (apart from the assets mentioned above, namely Diamond Place and the Willows, which they never had any intention of using, even if they could) Mark and Jason’s assets comprised matrimonial homes and heavily mortgaged rental properties. It is hardly surprising therefore that they did not want to put their own money into the Development. Indeed Mark said that he would earnestly have sought to avoid using his own money as funding for the Development.

I therefore turn to the amendment relating to buy-to-let mortgages. There was no reference to funding on this basis either in Mark’s or Jason’s witness statements or in the pleadings prior to amendment. Jason accepted that he did not have such funding in mind when he prepared his witness statement and in any event it was a matter for Mr Williams.

Mr Rhodes accepted that he would have reported concentration risk to the lender, meaning the risk of all Phase 1 properties being mortgaged at once, possibly to the same lender. Mr Leslie (unlike Mr Griffiths who had experience of buy-to-let funding when he had worked for Bank Leumi) said that (although he disagreed on the basis that the buy-to-let market was buoyant at that time) he was unable to comment on this form of lending as it was a matter for a mortgage broker. Mr Griffiths said in his report dated 30 June 2015 that where there was concentration risk he would expect only 50% of the Phase 1 properties to be let on buy-to-let mortgages. Moreover lenders would only lend 60% of the value of the properties.

However I find that it is also likely that lenders would not lend at all since their solicitors would tell them that they were all sales by the company to its own directors so that the funds were coming from the seller. Mr Griffiths said,

“It [the lender] would instigate a very close inquiry. If, as [Mr Fenwick] suggested, there was money owing from the company to the buyer and this was justified in that way, then that may well have been acceptable. But the mortgage lender would have needed to know all about it and would have made extensive enquiry to make sure it was an arm’s length sale and the price being paid was genuine.

If it were found that the money was going around in a circle and this was some kind of discount or some kind of cashback, then the lender may well have regarded that as a mortgage fraud and they would certainly have withdrawn it.”

As a matter of fact, Mr Williams did not try to obtain more than three buy-to-let mortgages but instead tried to obtain funding from RBS. RBS would have required a first legal charge so that there could be no buy-to-let funding.

Mr Williams did not go back to Mr Roland Gaymer of Connells, the valuers who had previously suggested buy-to-let, asking them to come up with the 13 buy-to-let mortgages they had mentioned on 16 September.

I therefore find that the possibility of buy-to-let finance was speculative.

The third possible source of funds was RBS. Mr Robert Moore gave evidence about this under a witness summons. He was an honest witness but did not have any direct involvement in the events of 2008. Instead, he reviewed and commented on the RBS notes taken from the Relationship Manager Platform.

RBS undoubtedly offered funding of £2.25m for 1 year in February 2009. However, that offer was made for the purpose of buying out GMAC at £2m, an offer which had not been made and was simply untrue. The untruth was perpetrated by Mr Williams as part of his negotiating strategy.

Mr Williams insisted that the loan would have been extended from 12 months to two years, which is what he originally asked for. Mr Moore was cross-examined on the basis that referral to the SRM forum (the credit committee) was a condition of extending the loan. Mr Moore confirmed that it was not, despite the fact that Tony Conroy, the Deputy Head of Commercial Credit for London and the South said that,

“…given the exposure and nature of our support this would appear appropriate-”

Mr Dave Lambert, the RBS Risk Manager, said on 28 January, after receiving the Knight Frank valuation,

“I feel we should step aside from being involved in this development and it is difficult to see a structure we will get comfortable with.”

And Mr Conroy said on 29 January 2009,

“I have no appetite to support this deal as now structured. I do understand your wish to support these customers [which led to the offer of £2m] however, as previously outlined, the overall picture appears highly leverage [sic] with visibility over liquidity poor.

This latest proposal would appear to be asking the bank to assume more risk which for a development with significant sales risk is asking too much.”

Mr Lambert said on 11 February 2009,

“Group remains tight on liquidity…

Recommendation

•

Even at this level, this remains a stretching request through an SPV, where the rest of the group is highly leveraged on a liquidity basis.

•

We have a longstanding relationship with this company and the high leveraged assets here are a reflection of the historic support we have given them and the management team.

•

If the development sales start to falter anywhere within the group their ability to meet interest costs is helped by the current low interest rates but against any form of sensitivity this becomes unproven.

•

Request for two year commitment is understandable against the valuers [sic] comments to allow an extended period for sales. That said the customer is looking to repay the debt in the short term and my preference would be to limit the term to 12m with a 6m interim to review sales/lets. Also Cuckoo [P]oint should be completed and sales flowing within 6m and debt burden across the group…

•

We already have personal guarantees across the group of £835k. Whilst additional PGs, in terms of net means (liquidity is potentially an issue here). If these sales stick and other developments unwind, with PG reliance removed from those entities, some personal recourse is applicable. The original deal with GMAC appears to have been highly leveraged and so customers [sic] actual cash in the deal here remains unproven.

•

Therefore recommend facility but 12m commitment only and J & S PG to be taken at £250k.”

Mr Conroy, who sanctioned the lending, noted on 12 February 2009,

“…I remain supportive of what is now being proposed but as supplemented in David’s recommendation. I would see no reason to provide any flexibility- this should be seen as our best offer…

I would wish to retain the annual review for March and therefore the review date for the facility has been amended to coincide with this date; a brief update of progress would be helpful at that time…”

The terms of the loan appear in an email dated 12 February 2009 from Mr Loveridge, which confirmed the term of the loan, that repayment was to come from sales of units, that there was an exit fee of £520,000 to be paid by 28 February 2010, that there should be an up-to-date report from the quantity surveyors Davis Langdon to confirm costs to date and development progress and that a Bank appointed solicitor was to confirm not only clear title but also “full and final settlement at £2 from GMAC”. Mr Loveridge also said,

“Can you email me back confirmation of GMAC settlement so that I can push the button at this end.”

Thus (1) it is improbable on the basis of this letter that the money would have been lent by RBS at all, (2) it is likely that Mr Williams’s untruth about GMAC would have slowed the process down and the March 2009 review would have placed the claimants’ companies on a watch list as by that stage it would have been clear that RBS would lose money on Cuckoo Point and (3) it is likely that any sum lent by RBS would have had to be repaid within the year in any event. Accordingly, Mr Thompson’s expert accountancy evidence cannot be right as it assumes that the exit fee is payable at the end of the financial year 2013, rather than February 2010.

Thus,

There is no reference to contributory negligence in any of Mr Flenley’s closing remarks. However, if I am wrong as to the above I should make it clear that I do not consider that any contributory negligence is made out. Mr Parker accepted that he should have advised the claimants as to the legal significance of the Guarantee.

“The implication on me was that if I was giving them the documents to sign that it accorded with the obligations they expected to undertake.”

He said he did not do so. He made no attempt to identify which parts of the draft document required amendment. As a general rule, applicable here in my judgment, clients are not held to be contributorily negligent for failing to notice clauses that a solicitor has failed to bring to the client’s attention.

Again, assuming I am wrong, there is the question of the rate of interest. Here I agree with Mr Flenley that the rate is the investment rate, not the borrowing rate. It is not the claimants’ case that as a result of Mr Parker’s negligence money was removed from them; rather that if there had been no negligence they would have got in extra money.

The claimants are entitled to judgment and nominal damages on account of the defendants’ breach of duty. Otherwise I find for the defendants.