Baker Tilly (a firm) v Makar

The claimants in this action, Messrs. Baker Tilly (“the Firm”), were, at all material times, a firm of chartered accountants. As from, I think, 1 April 2007 the practice of the Firm has been taken over by various limited liability partnerships, but that is not material to any issue in the action.

Miss Mira Makar, the defendant, is a chartered accountant. She was formerly the Chief Executive Officer and Finance Director of Triad Group plc (“Triad”). On 4 February 2005 Miss Makar was purportedly suspended as Chief Executive Officer of Triad following her causing to be undertaken an investigation into a fairly dramatic reduction in the cash available to Triad and seeking to report the results of that investigation to Triad’s stockbrokers. On 8 December 2005 Miss Makar was dismissed as Chief Executive Officer and as a director of Triad.

The accounting year of Triad commenced on 1 April each year. In the year ended 31 March 2005 the auditors of Triad were PricewaterhouseCoopers LLP (“PwC”). On or before 26 July 2005 PwC informed the board of directors of Triad that its report on the financial statements of Triad for the year ending 31 March 2005 would include a statement that, in its opinion, proper accounting records had not been kept in all respects. That prompted the Chairman of the board of directors of Triad, Dr. John Rigg, to announce to the world, via the London Stock Exchange Aggregated Regulatory News Service, on 26 July 2005 the expected qualification to the accounts of Triad. The material part of the announcement was in these terms:-

“The reduction in cash during the period reflects the increase in working capital requirements created by the rapid growth from the resourcing business, together with slippage in credit collection performance. The auditors have indicated that they are likely to issue an unqualified opinion on the financial statements. Their report will however include a statement regarding accounting control issues in the sales ledger function of the resourcing business for a period of several months during the year and therefore that, in their opinion, proper accounting records as required by section 221 of the Companies Act 1985 have not been kept in all respects.”

However, in fact, in its auditors’ report dated 29 September 2005 PwC approved the accounts of Triad for the year ended 31 March 2005 without any qualification.

By a letter dated 5 April 2006 to the directors of Triad PwC resigned as auditors. However, the letter of resignation included:-

“In accordance with Section 394 of the Companies Act 1985, we confirm that there are no circumstances connected with our resignation which we consider should be brought to the notice of the shareholders or creditors of Triad Group plc.”

Following her dismissal, Miss Makar, by a claim form dated 6 March 2006, commenced proceedings (“the ET Proceedings”) against Triad in an Employment Tribunal claiming compensation for unfair dismissal. Attached to the claim form were lengthy “Grounds of Complaint”. They ran to some 104 paragraphs set out in 38 single spaced A4 pages. For present purposes it is sufficient to set out the sections of the “Grounds of Complaint” entitled “Summary of claims” and “Overview”:-

“Summary of claims

1.

In summary, the Claimant’s claims are as follows:

1.1

Unfair dismissal;

a.

Dismissal was automatically unfair under section 103A of the Employment Rights Act 1996 (“ERA”), in that the reason or principal reason for the dismissal was that the Claimant had made protected disclosures.

b.

Dismissal was automatically unfair under section 98A ERA.

c.

Dismissal was procedurally and substantively unfair under section 98 ERA.

1.2

Detriment other than dismissal on the grounds of protected disclosures (s.47B ERA).

2.

For the avoidance of doubt the claim does not include a claim of breach of contract, and the Claimant reserves the right to claim in respect of breach of contract in another forum.

Overview

3.

By way of overview, the Claimant was the Chief Executive Officer (“CEO”) of the Respondent company.

4.

Towards the end of 2004 she became aware of certain apparent financial irregularities, and engaged two professional firms, including a firm of accountants, to investigate.

5.

Shortly after these firms came across evidence of irregular accounting, they were stood down by the Respondent, and the Claimant was suspended in the midst of her investigation.

6.

Although the Claimant continued as a main board director, she was denied access to any of the underlying financial accounts.

7.

Upon hearing evidence of the problems she had prepared reports for the Respondent’s Audit Committee, who failed to pursue matters appropriately.

8.

Consistent with her fiduciary obligations as a director towards shareholders, she sought to brief the Respondent’s stockbrokers so that they could advise the board on whether there was an obligation to communicate the financial uncertainty to the market.

9.

During the course of this meeting, she was suspended as Chief Executive and was removed from the room.

10.

At the time of her suspension, no specific reason was given for her suspension.

11.

She remained suspended for over ten months. Disciplinary hearings were commenced over nine months after she was suspended.

12.

Two months after she was suspended, she was told an investigation had been concluded into her suspension. She was not fed back the results of this investigation, and continued to be suspended. No reason was given for her continuing suspension.

13.

Because of her continuing legal obligations as a director, the Claimant continued to seek access to underlying financial accounts of the Respondent, without success. Finally, when she commenced litigation seeking an Order for disclosure of documentation to which she was entitled, she was dismissed as an employee and a director. The grounds of dismissal expressly included the fact that she had made disclosures which amount to protected disclosures.”

The effect of the summary of the claims of Miss Makar set out in her “Grounds of Complaint” seems to have been that she was contending that she had been dismissed because she had disclosed outside Triad matters which it was asserted it was in the public interest to disclose – what is popularly called “whistle-blowing”.

In those circumstances the issue arose in the ET Proceedings whether it was appropriate for the parties to be permitted to adduce expert evidence from an accountant in relation to the questions whether there had in fact been financial irregularities in the affairs of Triad, whether Miss Makar had had good grounds for her belief in such irregularities, what were the obligations of a director of a public limited company listed on the London Stock Exchange who suspected financial irregularities in the affairs of the company of which she was a director, and what steps it was appropriate to take to bring the existence of the director’s suspicions to the attention of the relevant share market.

By an order dated 1 August 2006 made on the occasion of the Third Case Management Discussion the Employment Tribunal gave permission for expert evidence from an accountant in the following terms, so far as is presently material:-

“2.1

The parties are to agree the identity of a joint expert and the terms of reference for a joint expert by Tuesday 29 August 2006.

2.2

If no such agreement is reached both parties must notify the Tribunal and each other of the identity of there [sic] own expert by 1 September 2006.

2.3

If 2.2 applies the parties are ordered to serve the report of their individual expert, with attached copies of instructions and all letters between the expert and the instructing party, on the Tribunal and the other side by 13 October 2006.

2.4

It is ordered that, in the event of there being two experts, they should meet on a without prejudice basis by 20 October 2006 to agree a schedule of agreed and disagreed points.

2.5

The two experts are to agree the schedule of agreed and/or disagreed points in the experts reports by 27 October 2006.”

Following a further hearing in the Employment Tribunal on 19 September 2006, recorded on the order of the Tribunal as the Fourth Case Management Discussion, an order was made limiting the scope of the expert evidence to be admissible at the substantive hearing. That order was:-

“2.

Scope of Experts’ Report

It is ordered that the expert evidence of each party is not required where the Respondent has conceded both a qualifying disclosure and reasonable belief. This does not affect the order for expert evidence in relation to market practice.”

On the same occasion the orders made on 1 August 2006 in relation to the timetable to be followed in respect of the production of expert evidence was varied to this effect:-

“5.1

It is ordered that expert’s reports with attached copies of instructions and all letters between the expert and the instructing party are to be served on the Tribunal and the opposing party by 31 October 2006.

5.2

It is ordered that the experts should meet on a “without prejudice” basis by 7 November 2006 to agree a schedule of the agreed and disagreed points.

5.3

It is ordered that any further expert’s report should be served on the Tribunal and the opposing party by 14 November 2006.”

Notwithstanding that the revised order for directions in relation to expert evidence contemplated that supplementary expert’s reports be served by 14 November 2006, the hearing of the ET Proceedings was listed to commence on Monday, 6 November 2006, with an estimated length of 34 days. Thus the directions, perhaps rather oddly, envisaged that the experts’ meeting to seek to reach agreement on matters in difference between them might take place after the start of the hearing, with supplementary expert evidence only becoming available a week after the start of the hearing. That does not exactly seem conducive to the efficient conduct of the hearing or early clarification of the technical differences between experts.

On behalf of Miss Makar an appeal was made against the limitation of the extent of the expert evidence to those matters in respect of which Triad had not conceded both a qualifying disclosure and reasonable belief. From the decision of His Honour Judge Richardson on the hearing of the appeal on 18 October 2006, as recorded in an attendance note of the solicitors at that time acting on behalf of Miss Makar, Burges Salmon LLP (“BS”), put before me, it seems that the real issue in the appeal was whether, on the pleaded case of Triad, it was possible satisfactorily to identify what qualifying disclosures Triad had admitted which it also accepted were based on matters which Miss Makar reasonably believed. The appeal was unsuccessful, but Judge Richardson in effect invited Triad to clarify its case in relation to protected disclosures and reasonable belief.

I think that it must follow from the making of the appeal that until the appeal was decided the precise scope of permitted expert evidence was unclear.

In the course of his judgment, as noted by BS, Judge Richardson did make these observations:-

“7.

There are two features of the order. It did not identify the area of expert evidence required. There was a debate about this at the hearing. It also does not provide for live evidence to be given but clearly it was envisaged that there would be live evidence frm [sic] the experts.

…

23.2

It is worth recording the submissions made to the Tribunal in July regarding the need for expert financial evidence. It was said that the financial expert evidence was principally relevant to the third and fourth criteria – the existence of reasonable grounds. Mr. Hochhauser’s skeleton [on behalf of Miss Makar] went on to say that that issue and the issue of good faith have some correlation. In my judgment, Mr. Hochhauser’s skeleton correctly says that financial evidence is principally necessary in relation to the question whether there were reasonable grounds for believing a breach had been committed or would be committed. That does not mean that that is the only area that is relevant. Financial evidence is plainly relevant to other issues but once a concession has been made as to the reasonableness of belief in the truth of certain facts, it is plainly right to reconsider the ambit of expert evidence. The Chairman took the view that the evidence could, to a certain extent, be circumscribed. In my judgment, the Chairman did not err in law in taking that view. I do not think that the Chairman’s reasons betray any error. I do not believe that she misunderstood or thought that reasonable belief was the only issue. It must be borne in mind that the focus was on financial matters.”

At a further hearing in the Employment Tribunal on 27 October 2006, on the occasion of the Sixth Case Management Discussion, time for service of an expert’s report was further extended, on the face of the order, to 8 November 2006. There is some reason to suppose, from the views expressed contemporaneously by the solicitors acting on each side, that the order as drawn was in error and that the actual extension had been to 6 November 2006. However, even if that is so, the order seems unusual, for it had the consequence that the views of the experts on each side would not be known, at least to the opposite party, and perhaps to his own side, until the day the case of Miss Makar had to be explained to the Tribunal.

In the event the ET Proceedings were settled on terms agreed shortly after midnight on 4 November 2006. Thus the hearing of the ET Proceedings never took place and no expert accountancy evidence in relation to those proceedings was required.

The case of the Firm in this action was that it was instructed by, or on behalf of, Miss Makar to provide professional services in connection with the expert evidence required in the ET Proceedings, it embarked upon the work in question, but then ceased work following notification that the ET Proceedings had been settled. However, thereafter, at the request of Miss Makar certain other work was undertaken up to, and including, a meeting on 20 November 2006. At that meeting, so it was contended on behalf of the Firm, it was agreed that the Firm would undertake no further work for Miss Makar unless specifically required. No further work was specifically required, so the Firm presented its bill for work done. Miss Makar did not pay that bill. The sum claimed in this action, £35,250, calculated as £30,000 plus Value Added Tax of £5,250, was the amount of the unpaid bill.

Miss Makar denied, on a number of grounds, liability to pay the Firm the sum claimed. The principal ground was that, so she contended, it had been agreed that the Firm would produce a report on Triad for the sum of not more than £30,000 plus Value Added Tax, and no report ever was produced. This was not, so it was contended, simply a technical matter because Miss Makar required the report, she said, not only for the purposes of the ET Proceedings, but also to present it to the regulatory authorities with a view to inducing those authorities to undertake their own investigation into the management of Triad and the adequacy of its financial records. In addition, it appeared, Miss Makar wished to seek to interest the relevant authorities in the alleged acts and alleged omissions of PwC as auditors of Triad in respect of the year ended 31 March 2005, and also to seek to interest the relevant authorities in the alleged acts and alleged omissions of Allen & Overy LLP (“A&O”), which, at the material time, had acted as solicitors to Triad.

Apart from the question of the non-provision of a report by the Firm, Miss Makar complained in this action that it had been an express term of the retainer of the Firm by her that Mr. Michael Taub, at the time the Head of Forensic Services at the Firm, would act as her expert witness, but Mr. Taub in fact had almost no involvement in the work for which the Firm sought to charge.

Miss Makar also complained that in fact the Firm had a conflict of interest in relation to acting on her behalf in the ET Proceedings because of previous contact with Triad in the context of seeking auditing work in succession to PwC. Miss Makar’s case was that that alleged conflict of interest ought to have been explained to her, and, if it had been explained, she would not have instructed the Firm. At all events, it was said, the expert evidence of the individual put forward on behalf of the Firm as the expert witness would have been weakened by the existence of the alleged conflict of interest.

A further specific complaint of Miss Makar was that the report which she had commissioned from the Firm was not available prior to the mediation which led up to the settlement of the ET Proceedings. Miss Makar asserted that, if the report had been available, she would have secured more favourable terms of settlement than in fact she did.

It was not suggested on behalf of Miss Makar at the trial that the hours recorded as having been spent on her affairs by partners in, or staff of, the Firm were not accurate, or that the hourly rates of charge at which the Firm sought to recover were excessive. However, it was suggested that Miss Makar had not received value for the hours put in because the expertise of those engaged was inappropriate or the work done was ineffective. In addition it was suggested that on various technical legal grounds Miss Makar was not liable to pay for particular elements of work, if the analysis of the retainers for which the Firm contended was found, contrary to her case, to be correct.

Miss Makar advanced a Part 20 claim against the Firm in relation to the matters of which she complained. As part of that claim she asserted that she had suffered loss not only as a result of the alleged weakening of her bargaining position in the mediation because the expert report had not been produced, but also because the lack of a report had lost her the opportunity to restore her professional reputation as Chief Executive Officer of a public limited company listed on the London Stock Exchange and had also reduced the value of her shareholding in Triad. She sought damages both in respect of alleged loss of future earnings and in respect of the alleged loss in the value of her shareholding in Triad.

By order of Master Leslie made on 21 July 2008 it was directed that there should first be tried in this action all issues of liability and quantum in relation to the claims of the Firm, together with all issues of liability in relation to the Part 20 claims of Miss Makar. Any issues of causation of loss or quantum of damage in respect of the Part 20 claims were to be tried subsequently. The trial before me was concerned with the first category of issues ordered by Master Leslie to be tried.

The nature of the issues as to liability concerning the claims of the Firm, and, indeed, the Part 20 claims of Miss Makar, emphasised, as it seemed to me, the importance of the retainer, or retainers, of the Firm by Miss Makar. There were important differences between the positions of each side as to what the retainer was, or the retainers were, and when and how it was, or they were, agreed. It is convenient to consider those matters next.

In his written skeleton argument on behalf of the Firm Mr. Christopher Semken explained his client’s case in this way:-

“3.

The Claimant seeks fees for its work for the Defendant under 3 retainers; in the sum of £30,000 plus £5,250 VAT plus interest pursuant to statute. The 3 retainers were:-

(1)

An oral retainer made on or about 17/10/06 between the Defendantand the Claimant to read into her case in Employment Tribunal proceedings brought by her against Triad. Under this retainer the Claimant claims fees totalling £5,850 plus VAT for work carried out between 19/9/06 and 30/10/06.

(2)

A retainer in writing made by letters dated 30 and 31/10/06 … between the Claimant and the Defendant’s solicitors Burges Salmon to prepare an expert report for use in the Tribunal proceedings for a fee (inclusive of the fees incurred pursuant to the oral retainer made on 17/10/06) capped at £30,000 plus VAT down to completion of the report. Such fees totalled £21,767.50 plus VAT, being the Claimant’s time charges between 31/10/06 and 4/11/06 when Burges Salmon informed the Claimant that the proceedings had been compromised and directed the Claimant to cease work on the report.

(3)

An implied contract of retainer pursuant to which the Claimant carried out further work between 6/11/06 and 20/11/06 for which its time charges totalled £12,350 plus VAT.”

Notwithstanding the fact that the total of these individual elements exceeded £30,000 plus Value Added Tax, the total sum claimed by the Firm was limited to £30,000 plus Value Added Tax plus interest.

The position as to retainer adopted on behalf of Miss Makar was not explained very clearly in the written skeleton argument of Mr. Charles Phipps. All that was really said about it was:-

“8.

C’s and D’s accounts of the formation of the contractual retainer between them differ:

a)

D says that:

i)

it was clearly established from the outset:

(1)

that C required both an expert witness to give oral evidence on her behalf and an expert report, firstly for the purposes of the Employment Tribunal and secondly for disclosure to the relevant regulatory authorities;

(2)

that the date for exchange of expert evidence was 13 October 2006;

(3)

that Mr. Taub was to be C’s expert witness; and

(4)

that the key terms of C’s retainer would be agreed directly between C and D (although D’s solicitors would in due course provide C with formal instructions identifying the specific issues that the Employment Tribunal required to be addressed); and

ii)

the key terms of C’s retainer were agreed at the meeting and over the next few days (a capped fee for C’s report being agreed over the telephone on about 12 September 2006).”

The meeting referred to in that passage was a meeting which it was common ground took place on 7 September 2006 between Miss Makar, her brother, Mr. Ihab Makar, and a number of partners in the Firm, Mr. Michael Taub, Mr. Ian White, Mr. Barney Whiter and Mr. Peter Souster.

The meeting held on 7 September 2006 was arranged following contact being made between Mr. Makar and Mr. Taub as to whether the Firm would be interested in being considered as a supplier of an expert witness. I think that it was common ground that a role to be performed by any expert witness appointed was to give expert evidence on behalf of Miss Makar in the ET Proceedings. It was the case of Miss Makar, supported by the evidence of herself and that of her brother, that only Mr. Taub was being considered by them for possible appointment, because Mr. Taub was reported in a directory of expert witnesses as having considerable experience of giving evidence in legal proceedings. It was not accepted on behalf of the Firm that only Mr. Taub was discussed or considered as a possible expert witness. The case for the Firm was that the discussion at the meeting on 7 September 2006, and later, was about an appropriately qualified chartered accountant from the Firm giving evidence. Who is correct about this issue is a matter which I shall have to determine. However, the case of Miss Makar, again supported by her own evidence and that of her brother, was that in substance the retainer by Miss Makar was agreed by her with the Firm at the meeting on 7 September 2006 and in some oral conversations in the ensuing days with Mr. White. Whilst that was disputed on behalf of the Firm, it was common ground that at some point, on the Firm’s case probably about 25 September 2006 or shortly thereafter, it was agreed between Miss Makar and Mr. White that the charges of the Firm for preparing a report for use in the ET Proceedings would be capped at £30,000 plus Value Added Tax. It was also common ground that at the meeting on 7 September 2006 there was discussion about Miss Makar wishing to have a report for presentation to the relevant regulatory authorities in support of her complaints about the financial records and management of Triad. However, while Miss Makar asserted that the same report was to be used for both purposes, the case for the Firm was that what was discussed was two different reports, with different ambits.

Neither Miss Makar nor her brother made any notes of the meeting on 7 September 2006. Mr. White made some notes of questions to raise in advance of the meeting, which notes were typed up, but entered very limited answers in manuscript on the document during the meeting. It seems that the other partners in the Firm who attended the meeting either did not make any notes or did not retain any notes made. In essence, therefore, there were no reliable records of what had been discussed at the meeting and in what terms. However, it was common ground that the meeting had lasted something like four hours, partly because at the start Miss Makar was not present, so that when she arrived matters already discussed with Mr. Makar were revisited. It was not in dispute that Mr. Taub left the meeting part way through and did not return, whilst Mr. Souster left for a period of some two hours to attend a luncheon engagement which had been made previously.

Given the absence of comprehensive notes of the meeting on 7 September 2006 itself, it is material to consider the assistance as to what was likely to have been discussed or agreed given by other documents produced either before or after the meeting itself.

Mr. Taub must have been approached by Mr. Makar on or before 24 August 2006, for on that day his secretary sent a circular e-mail to all partners in the Firm in these terms:-

“Michael Taub has received enquiries regarding a potential engagement involving the following parties:

Triad Group Plc

Vega Group Plc

Mira Makar

PWC (specifically in relation to the above names)

Please let me know as a matter of urgency, if you are aware of any ethical or other professional reason why we should not accept these instructions, or if you have in the past three years had any dealings with, or are otherwise connected with any of the above parties.

Please note that negative responses are not required.”

The circulation of an e-mail in similar terms seems to have been a regular practice within the Firm when the question of possibly taking on a new client arose.

It appears that the date initially set for a meeting between Mr. and Miss Makar and Mr. Taub was Tuesday 29 August 2006 at 11.30 a.m. However, that meeting was re-scheduled to 7 September 2006 following receipt by Mr. Taub of an e-mail dated 27 August 2006 (a Sunday), and sent at 19.19 hrs, from Mr. Makar. In his e-mail Mr. Makar wrote:-

“We have an appointment scheduled for 11:30 am this Tuesday morning to discuss your assistance as an expert witness in my sister’s court case against Triad Group plc coming to court in November.

Unfortunately we just learned late on Friday afternoon that we will be required to attend in person a Case Management Discussion at the court on Tuesday. I therefore apologise but I will need to reschedule our meeting. We should meet later in the week as we are required to notify the Court by Tuesday week of our choice of expert witness. I will drop you a line to find a new date.

In the meantime, you may find some background to the case by going to the website makar.co.uk which has a link to all the press articles that have appeared.”

That e-mail has a number of curious features. It was despatched in the early evening on a Sunday before a Bank Holiday in relation to a meeting arranged on the next working day. The occasion of the postponement of the meeting seems to have been stated incorrectly, for on the face of the orders of the Employment Tribunal copies of which were put before me, the hearing on 1 August 2006 was the Third Case Management Discussion, whilst that on 19 September 2006 was the Fourth Case Management Discussion. There appears in fact to have been no Case Management Discussion on 29 August 2006. There was no order of the Employment Tribunal requiring Miss Makar to notify her choice of expert witness by “Tuesday week”, which would have been 5 September 2006. The relevant order required the identity of the expert to be communicated by Friday, 1 September 2006.

Despite these peculiarities in the e-mail of 27 August 2006, it does seem material to notice that the purpose of the meeting which Mr. and Miss Makar wanted was expressed simply as “to discuss your assistance as an expert witness in my sister’s court case against Triad Group plc coming to court in November”, and not any wider purpose.

In an e-mail dated 29 August 2006 sent at 9.48 hrs Mr. Taub replied to Mr. Makar’s e-mail of 27 August 2006. Mr. Taub wrote:-

“That’s no problem. From our point of view next Monday morning would be ideal as I would like my colleague Ian White (another forensic partner) to attend.

I look forward to hearing from you.”

It is perhaps to be noted that Mr. Taub did not express himself in this e-mail in the first person singular concerning the anticipated meeting (he did not write, “From my point of view”) and he did indicate that at least Mr. White would be attending the meeting in addition to himself.

A “Briefing Pack” was provided to the Firm in advance of the meeting on 7 September 2006. That included various documents explaining the background to the disputes between Miss Makar and Triad. Virtually all of these documents appeared to have been generated by Miss Makar or her legal advisers. They were a document entitled “The Problems at Triad The Case Facts”, I think produced by Miss Makar; a document apparently produced by a lawyer entitled “Mira Makar – Issues for Expert Witness”; another document apparently produced by a lawyer entitled “Mira Makar – Schedule of Protected Disclosures”; a copy of counsel’s “Claimant’s Submissions on need for expert evidence”; a note produced by Miss Makar entitled “Overview of Makar vs Triad”; a lawyer-generated “List of Issues”; a number of press clippings; and a witness statement of Miss Makar comprising 329 paragraphs set out in 73 single-spaced pages of A4 paper.In cross-examination Miss Makar suggested (Transcript, Day 4 page 115 line 19 to page 116 line 1) that the documents included in the “Briefing Pack” included all of the documents which the Firm needed to undertake the preparation of anexpert’s report for the purposes of the ET Proceedings and the other purposes for which she required it. However, that, in my judgment, was plainly incorrect. To prepare any worthwhile report the Firm clearly needed to be provided with, and to consider, contemporaneous documents bearing on the issues in the ET Proceedings.

Mr. Taub acknowledged receipt of the documents included in the “Briefing Pack” in an e-mail sent on 29 August 2006 at 16.32 hrs. The material part of his e-mail read:-

“Thank you for the documents. I will circulate these to the others involved.”

Again, therefore, there was a clear indication from Mr. Taub, as it seems to me, that he was not anticipating that he alone would be involved in any work undertaken pursuant to instructions given by or on behalf of Miss Makar.

In the event the meeting between representatives of the Firm, Mr. Makar and his sister was arranged for 13.00 hrs on 7 September 2006. The day before the meeting Mr. White prepared a list of questions arising out of his consideration of the documents in the “Briefing Pack”. There were 15 questions, set out in typescript in boxes with a blank box beside each for the insertion of the answer. In the event Mr. White completed answers in manuscript in appropriate boxes to just three questions. In cross-examination Miss Makar suggested (Transcript, Day 4 page 112 lines 4 – 14) that Mr. White’s list of questions was a first draft of the necessary report and was “quite splendid”. I have to say that that seems to me to be a very odd view of the list. The questions were these (numbering supplied by me):-

“1.

Makar is considering the appointment of an expert witness in the context of Tribunal Proceedings in which she alleges unfair dismissal, principally on the grounds that she was dismissed for making protected disclosures.

2.

The matters she refers to in the brief would amount to serious financial irregularities in Triad, which is a fully listed Plc.

3.

It is understood that Makar has referred the matter to the FSA for investigation. What is the status of the investigation?

4.

In effect the allegations amount to conspiracy to defraud, as well as breach of a number of sections of the Theft Acts. In spite of this, Alan & Ovary [sic], Evolution and PWC have continued to act (albeit that PWC have now resigned as auditor and have been replaced by BDO).

5.

Why would Wooton, of A&O, effectively “change sides” and assist the remaining directors, if he thought that they had acted inappropriately, whether in respect of a cover up or in respect of their treatment of MM.

6.

Why would Evolution dismiss MM’s concerns and turn a blind eye to the extraordinary events of 4 February, unless they were completely satisfied that no impropriety had occurred?

7.

If the allegations are substantiated, the Bank may be at risk as to the extent of the overdraft which, it is alleged, may have been negotiated under false circumstances.

8.

The conduct alleged to have been perpetrated by the remaining directors, Rigg, Fulton and Haynes, would be likely to result in adverse D notices to the DTI in the event of an insolvency.

9.

Has anything been done to safeguard audit trails and electronic evidence? The matters first complained of probably date back to 2004, certainly to August 2004, and must be at risk of being contaminated or lost.

10.

Is Triad in fact solvent – (it would presumably be supported by Rigg, a wealthy individual).

11.

Although Makar had been CEO of Triad for 10 years, her full financial CV is not clear from the papers. It would be relevant to assess this when evaluating the claims.

12.

This would appear to be a sizeable piece of litigation: Is Makar wealthy enough to see it through?

13.

MM owns 30% of the business: the value of that shareholding has diminished dramatically – party [sic], it would appear, through the fuss caused by MM’s own actions. Is this evidence of her good faith?

14.

Why would PWC accept imperfect assurances from some of the directors as audit evidence at the same time as issuing a books and records qualification?

15.

When did MM last have a meaningful conversation with the Bank? If she was indeed the main point of contact with the bank, how was this position usurped? ”

It was accepted by Mr. White in cross-examination that during the meeting on 7 September 2006 there was mention of Miss Makar wishing to be able to present an expert’s report to the regulatory authorities concerning Triad.

At 9.51 hrs on 8 September 2006 Mr. Taub sent an e-mail to Mr. Makar. He wrote:-

“Many thanks to you and Mira for coming in yesterday. We all enjoyed meeting you and would be delighted to assist you.

I look forward to hearing from shortly but please contact me in the meantime if you have any further questions.”

That e-mail was relied upon on behalf of Miss Makar as an acknowledgement on the part of Mr. Taub that he personally was the expert to be instructed on her behalf. As it seems to me, it is impossible to read any such acknowledgement into what was written. While Mr. Taub himself wrote the e-mail, the second sentence, in my judgment, was consistent, and consistent only, with a willingness on the part of the Firm, rather than specifically on the part of Mr. Taub, to assist Miss Makar.

The e-mail was also relied upon on behalf of Miss Makar as an acceptance of an offer made during the meeting of 7 September 2006 by her to engage the Firm as her experts. Again, that seems to me to be an impossible construction. The third sentence made plain, in my judgment, that matters were left at the end of the meeting on 7 September 2006 on the footing that Miss Makar would get in touch with the Firm if she wanted to proceed with engaging it.

On 8 September 2006 Mr. White spoke on the telephone to Miss Makar. He made a manuscript attendance note of the conversation. A copy of that attendance note was put in evidence. From the note it seems that at that time there was uncertainty as to whether what was required for the purposes of the ET Proceedings was a single joint expert or an expert for Miss Makar alone. Mr. White also noted that:-

“Reputation – needs vindication – MM was right

-

R&H is coverup.

-

A&O involved.”

On about 13 September 2006 Mr. Makar asked the Firm to provide curricula vitae of each of those partners whom he had met on 7 September 2006. Those details were sent by e-mail on 13 September 2006 at 17.53 hrs. Mr. Makar replied at 18.01 hrs the same day that:-

“This is v helpful.

Could you please flag those occasions when they have appeared in the witness box?”

In cross-examination Mr. Makar explained that request as the result of him wanting to confirm the information which he had obtained concerning Mr. Taub that he was very experienced in giving expert evidence in the witness box. If that was his concern, it seems odd that he did not limit his request simply to the number of times Mr. Taub had appeared in the witness box, but asked also about Mr. White, Mr. Whiter and Mr. Souster.

Kylie Hunter of the Firm replied to Mr. Makar’s request about the numbers of witness appearances in an e-mail sent on 14 September 2006 at 16.22 hrs:-

“Michael has not appeared in the witness box on any of the cases listed below. [No list appeared below, so the significance of this answer cannot be assessed.] He has appeared in Court on 25 occasions. Ian White has appeared in Court on four occasions in the past three years.

I’m not aware how many times Peter Souster and Barney Whiter have appeared.”

Given Mr. Makar’s professed interest in Mr. Taub because of Mr. Taub’s experience of giving expert evidence, his reply to Kylie Hunter’s e-mail, by e-mail sent at 16.27 hrs on 14 September 2006, was very strange indeed:-

“Thanks. And sorry for asking you this again, because I have a terrible memory for names, can you remind me who each person was. Specifically, I know the specialities of Ian, Peter and Barney are (but not in order) accounting; corporate finance; and responsibilities of directors. Which one is which?”

The answer, sent by e-mail at 16.33 hrs that day, was:-

“Michael Taub – forensic accounting

Ian White – forensic accounting

Peter Souster – Responsibilities of directors

Barney Whiter – Corporate finance.”

It was common ground that Mr. White spoke to Mr. Makar by telephone on 25 September 2006. Mr. White made an attendance note of the conversation. After noting the name of Mr. Makar, his mobile telephone number and the date, the attendance note went on:-

“£25 - £38k

But – what would I need to get to a fixed fee quote?

- Agreement on actual scope of instructions, agreed with RJW [a reference to Messrs. Russell Jones & Walker, the solicitors who had been acting on behalf of Miss Makar in the ET Proceedings]”

In cross-examination Mr. White interpreted the note as indicating that he had advised Mr. Makar that the Firm’s fees for producing an expert report for use in the ET Proceedings were likely to be between £25,000 and £38,000, that Mr. Makar asked what would be necessary in order for the Firm to be able to agree a fixed fee for that work, and Mr. White gave the answer that the scope of the actual instructions would need to be agreed with the solicitors acting on behalf of Miss Makar. Mr. Makar’s account of the telephone conversation was different. He considered that by 25 September 2006 a capped fee of £30,000 for production of a report for use in the ET Proceedings had been agreed, and so what was being discussed was what would be the impact on that agreement of including in the report the work necessary to make it fit for production to the Financial Services Authority and other regulatory authorities. Mr. Makar also seemed to think that it was, or may have been, Mr. White who wanted to fix a fee, rather than himself or his sister. However, Mr. Makar told me that in fact he had no recollection of the conversation with Mr. White on 25 September 2006, whilst not disputing that there had been such a conversation.

It was common ground that during September and October 2006 Mr. White had a number of telephone conversations with Miss Makar. One such conversation took place on about 25 September 2006. Mr. White made a manuscript attendance note of that conversation in these terms:-

“Mira Makar –

BT [Baker Tilly] preparing a proposal?

What’s the work and how to do it

MM would offer to help

material & approach

Do we understand

Eade & Roberts (Keith Roberts) helped MM so far volunteered to help

Working presumption – BT not working on facts

MM preparing a dossier

Now job is beyond RJW o/side have stood down A&O employment team

Investment banker barrister

A&O solicitor – barrister in market abuse

MM – RJW out of depth – Burgess Salmon (Bristol)

questions.”

So far as the copy documents put before me went, there was no more contact between anyone at the Firm and either Miss Makar or her brother thereafter until 16 October 2006.

On 9 October 2006 the Fifth Case Management Discussion took place in the ET Proceedings. So far as is material for present purposes, on the occasion of this hearing orders were made for third party disclosure as follows:-

“3.3.1

Evolution Securities [stockbrokers to Triad] should provide the disclosure sought in the Claimant’s letter of 29 August 2005 within seven days of the date of the Order issued against Evolution Securities.

3.3.2

The Bank of Scotland should provide the disclosure sought in the Claimant’s letter of 29 August 2005 on or before a date seven days from the date of the separate order issued against Bank of Scotland.

3.3.3

PWC is ordered to provide the disclosure sought in the Claimant’s letter dated 29 August 2006 within seven days of the date of the Order issued against PWC.”

Whilst it may be that the date of each of the letters referred to – none was put in evidence at this trial – was in fact 29 August 2006, not, in respect of the first two, 29 August 2005, what is significant is that the formulation of the documents disclosure of which was to be sought was undertaken before the first meeting between Miss and Mr. Makar and any representatives of the Firm, and so without any input from the Firm. Similarly the orders sought on 9 October 2006 were sought without reference to the Firm. What precisely compliance with the orders required it is not possible to say without knowing when the Employment Tribunal issued the orders to Evolution Securities, Bank of Scotland and PwC respectively.

The next contact between any representative of the Firm and either of Miss Makar or Mr. Makar recorded in writing was on 16 October 2006. In an e-mail of that date to Mr. Makar sent at 12.21 hrs Mr. White wrote:-

“Sorry to have missed your telephone call this morning. I hope we can catch up later in the day. I would be grateful if you could confirm that the relevant papers will be arriving at my Old Bailey office (as that’s where I shall be).”

The nature of the papers referred to emerges from the terms of an e-mail dated 17 October 2006 despatched at 15.40 hrs by Mr. Matthew Britton, an associate with BS, which had by this time been instructed on behalf of Miss Makar in relation to the ET Proceedings, to Mr. White. Mr. Britton wrote:-

“So that you and your team can begin your reading in, a pack containing the following documents is being sent to you:

1.

Case facts dated 8 August 2005 (disclosure to FSA, earlier drafts to PwC);

2.

Mira’s witness statement;

3.

Instructions to A&O pre 4 February, including:

(a)

Suspicion of failure to maintain records under the Act;

(b)

Bank representations and consequences of misrepresentations;

(c)

Unexplained cash drain, contracts, fee rates;

(d)

Conduct, stonewalling; block on information flows;

(e)

Standing down of internal auditors who were doing a 100% substantive and compliance audit of sales and debtors;

(f)

Ditto Stork, debt collecting after telling Rigg about the heightened risk of fraud;

(g)

2 February prejudice of minorities; and

(h)

market abuse, written instructions from 31 January 2005; and

4.

Mira’s audit evidence on behalf of the Company under s 389B etc.

The pack will be couriered to your Manchester office along with the next files. The materials will also be sent to Peter and Barney, i.e. 3 of everything.

A log of all documents supplied will be kept and you will be provided with this in soft copy so that it can be appended to your findings report.

This pack of documents is being provided now to enable you to begin your reading in. As you will be aware, the ambit of the expert evidence depends on the outcome of a tribunal hearing tomorrow [in fact the hearing of the appeal against the Fourth Case Management Directions order]. We will send you formal instructions as soon as we are able to after tomorrow’s hearing.”

On the face of that e-mail BS, acting on behalf of Miss Makar, was requesting the Firm, specifically Mr. White, Mr. Whiter and Mr. Souster, to each of whom copies of the relevant documents were to be sent, to read the material to be sent with a view to preparing the individuals to whom the documents were to be sent to be able to participate in the writing of the expert’s report required for the purposes of the ET Proceedings. That request, as it seems to me, was capable of amounting in law to an offer to engage the Firm to undertake the work requested. It was plain on the evidence that the Firm, through Mr. White, acted on the request and embarked on the reading of the documents provided. I do not think that that was in dispute. The e-mail also gave a good reason why no formal instructions to prepare a report for the purposes of the ET Proceedings were given at that stage, namely that the precise scope of the report depended on the decision to be made, in fact by His Honour Judge Richardson, the following day.

Absent any contractual arrangement made between Miss Makar and the Firm prior to 17 October 2006, a conventional analysis of the sending of the e-mail of Mr. Britton and the work done by Mr. White subsequent thereto, would be that the e-mail amounted to an offer to engage the Firm to do the reading in requested, which offer was accepted by the Firm by conduct on the part of Mr. White in undertaking the reading in. Whilst the e-mail did not specify any price for the work requested, the law implies, in such circumstances, a term that the sum to be paid for the work requested would be a reasonable price.

It is to be noted that the e-mail was addressed not to Mr. Taub, but to Mr. White, and did not contemplate that a set of the documents promised would be sent to Mr. Taub.

From a manuscript attendance note of Mr. White dated 17 October 2006 and timed at 11.20 hrs it seems that Miss Makar made contact with him before Mr. Britton sent him the e-mail which I have quoted. In response to that contact Mr. White sent her an e-mail at 13.51 hrs asking her for her contact address, telephone number and the name and address of her solicitor. She responded with those details in an e-mail sent at 14.40 hrs.

It seems that Miss Makar was sent a copy of Mr. Britton’s e-mail sent at 15.40 hrs, for she forwarded that copy to herself at 20.00 hrs on 17 October 2006. She printed off a copy of what she had forwarded and then wrote on that copy in manuscript. What she wrote was addressed to Mr. Whiter, under the heading “FAMILIARIZATION PACKS”. The last line of the manuscript was cut off in the process of copying the document for the purposes of this action. The substance of the note, so far as legible, was:-

“Below are the files sent to Ian to be left in the Old Bailey office for you.

Please add the enclosed files to your bundle.

A pack for Peter will follow.

These packs will, hopefully, assist in you forming your views and allow you to input to the instructions …”

The note contained no reference to Mr. Taub. It plainly envisaged that the files sent were material to the relevant members of the Firm in forming their views, rather than their value consisting in providing evidence in support of views already formed.

In an e-mail sent at 9.45 hrs on 18 October 2006 to Miss Makar Mr. White acknowledged receipt of two boxes in Manchester. Miss Makar replied in an e-mail sent at 11.14 hrs on the same day:-

“Great.

Tried to stagger so the order warms you up gently.

The items of yesterday “Set 1” are the ones we suggest you start with so as not to drown:

Case facts

Witness statement

Instructions to A&O

Evidence to PwC

The rest of the Manchester boxes are “Set 2”

There is a Set 3 being the rest (other relevant witness statements, finance detail etc) but you should have enough to keep you going while we collate this.

Can you put me in e mail contact with Barney & Peter so I can alert them to shipments? Barney’s are going first if I cannot get both off simultaneously.

I am assuming the files you left in London are allocated to him.

I would also appreciate e mail contact with a secretary in each of Old Bailey/Manchester for logistics.”

In an e-mail dated 20 October 2006 despatched at 11.08 hrs Mr. White informed Miss Makar, so far as is presently material, that:-

“Should our instructions be confirmed, it will of course be necessary to arrange a formal identification of you as a client of Baker Tilly.”

Miss Makar was asked about that sentence in cross-examination by Mr. Semken. He suggested that the terms of the sentence made it plain that at the date Mr. White wrote the Firm had not received formal instructions to produce an expert’s report for use in the ET Proceedings. Miss Makar avoided the question. She simply said that she thought that the sentence reflected the belief she attributed to Mr. White that no charge could be made for work done unless there was in place a letter of engagement.

On, it seems, 24 October 2006 Mr. White spoke to Mr. Britton of BS. Mr. White made a manuscript note of the conversation and Mr. Britton confirmed the discussion in an e-mail sent at 11.02 hrs.

Mr. White’s manuscript note was in these terms:-

“Matthew Britton

MM [Miss Makar] suggest 2 stage approach.

BT [Baker Tilly] familiarise & suggest instructions

Retainer directly with MM

fee proposals

IDW [Mr. White] – to give quote for 1^st phase

and deal with the issues

Letter to MB [Mr. Britton]/MM

Application [i.e. the appeal to His Honour Judge Richardson] dismissed – but helpful comments to benefit

BT’s evidence? Wide scope for everything bar a couple of disclosures accepted as qualifying.”

In his e-mail Mr. Britton wrote:-

“Just to confirm the points from our conversation:

1.

You are going to speak to Mira about the credit checks you need to do and resolve that with her.

2.

The fee arrangement is going to be between Baker Tilly and Mira and you are going to agree a fee with her for stage 1, which will involve you completing your reading in so that you are in a position to input into the formal instructions, which will be stage 2.

3.

You are going to send an engagement letter to us, copied to Mira, to reflect this.

4.

Once you have completed stage 1, with input from you we will send you a formal letter of instruction for stage 2.

5.

You are going to review the attached list of documents and let us know whether or not you are going to need each of the documents identified in the list to complete your report. We really need this information for the Case Management Discussion that is due to take place this Friday and I would be very grateful if you could come back to me on this as soon as possible, by close tomorrow if you can.

As discussed, as a result of the EAT judgment last week, Baker Tilly will not be required to give evidence in relation to certain disclosures in the period before 4 February 2005. The extent of the disclosures that will be excluded from your remit will be clarified when the other side re-amend their pleading, which they should do by this Friday. I mention it now so that you have it in mind when reviewing the list of documents at point 5 above.”

In October 2006 the junior counsel acting on behalf of Miss Makar in the ET Proceedings was Mr. Sean Jones. Miss Makar had also instructed leading counsel, Mr. Andrew Hochhauser. In an e-mail to Mr. Britton sent at 10.28 hrs on 25 October 2006 Mr. Jones enquired:-

“Could you update me as to whether the Expert has now been instructed and as to when he will be able to say which of the documents on Schedule B he will need to see? I need to know by tomorrow morning at the latest. I also need confirmation that he can hit the existing timetable or else an indication as to what timetable he can hit.

I have described the issues he is entitled to address in my draft Skeleton for Friday.”

Mr. Britton replied at 12.44 hrs the same day:-

“The expert is continuing his reading in. We have not sent him a formal letter of instruction yet but will do so when he has finished familiarising himself with the material. Your skeleton identifying the issues he is able to address would be a great help in formulating the letter of instruction. Please could you send me a copy?

He said he would come back to me quickly on Schedule B and I will chase him on that and for his views on the timetable.

I will update you later on this afternoon.”

According to a manuscript note made by Mr. White of a conversation with Mr. Britton, it would seem on 25 or 26 October 2006, he advised Mr. Britton to ask for as long as possible for the exchange of an expert’s report. The note did not record any discussion about documents of which sight was required to enable a report to be completed. However, Mr. Britton did return to the latter issue in an e-mail sent at 15.28 hrs on 26 October 2006. In that e-mail he wrote:-

“As discussed earlier, the attached is a bullet point note of the reasons why Mira believes you need to see each of the documents in the schedule. The numbers in the note correspond to the numbers in the schedule. Please could you review the note and let me know whether you agree/disagree with these reasons and with any other comments that you may have as soon as possible this afternoon.

As agreed, when you come back to me on this point, you are also going to come back to me with a date by which you believe you will be able to complete the report.”

The bullet point note (“the Disclosure Schedule”) referred to ran to ten A4 pages, containing 46 categories.

The Sixth Case Management Discussion took place in the ET Proceedings on 27 October 2006. The orders made included:-

“5.

VARIATION OF EXPERT’S TIMETABLE

It is ordered that the timetable for the expert is varied as follows:-

5.1

It is ordered that expert’s reports with attached copies of instructions and all letters between the expert and the instructing party are to be served on the Tribunal and the opposing party by 8 November 2006.

5.2

It is ordered that the experts should meet on a “without prejudice” basis by 13 November 2006 to agree a schedule of the agreed and disagreed points.

5.3

It is ordered that any further expert’s report should be served on the Tribunal and the opposing party by 17 November 2006.

6.

THIRD PARTY DISCLOSURE BY PWC

By consent the tribunal order is varied so as to require disclosure within 10 days of 27 October 2006 of such available documentation falling within the following categories:

6.1

Notes of Fiona Kelsey’s meetings with Mira Makar regarding the alleged protected disclosures from November 2004 to December 2005;

6.2

Notes of Fiona Kelsey’s meetings and communications with John Rigg (non executive chairman of the Respondent) and Mr. Fulton (member of the audit committee of the Respondent) regarding the alleged protected disclosures from November 2004 to December 2005; and

6.3

Any notes of meetings and documents evidencing PwC’s decision to resign as auditors of the Respondent;

in each case to the extent the same are not privileged.

7.

THIRD PARTY DISCLOSURE BY BANK OF SCOTLAND

The order is varied so that it is made under rule 10(2)(d) requiring disclosure and not attendance.”

The extent of disclosure required from PwC under the order made on the Sixth Case Management Discussion appears to have been considerably more limited than the documents apparently covered by the Disclosure Schedule. As I understand it, the 46 categories of document listed in the Disclosure Schedule were those set out in a document (“the Document Schedule”) entitled “Schedule 2 Company Financial and Other Records Required for preparation of Expert Report”, a copy of which was attached to the letter dated 30 October 2006 written by BS in which instructions for the preparation of an expert’s report were given. Most of the 46 categories appeared to describe documents in the possession of Triad, rather than documents in the possession of a third party like PwC.

However, what does seem very surprising, given that the hearing of the ET Proceedings remained listed to commence on 6 November 2006, was that the orders made on the Sixth Case Management Discussion appeared to envisage that disclosure by PwC might only be given on the first day of the hearing, that expert’s reports might be exchanged only on the third day of the hearing, that a without prejudice meeting between experts might take place a whole week into the hearing, and that supplementary expert’s reports might be served as late as 11 days into the hearing. None of this seems conducive to efficient and expeditious management of the hearing, for important issues potentially might only be identified nearly one third of the way into the hearing.

27 October 2006 was a Friday. The following Monday, 30 October 2006, Mr. Britton sent Mr. White an e-mail at 8.48 hrs attaching a draft letter of instruction. The terms of the e-mail were:-

“Please see attached letter of instruction. I would bring your attention particularly to paragraph 1.7 and the need to send a letter to us today indicating whether or not on the basis of these instructions you require sight of the documents in the attached list of documents. Where you believe you require sight of a document, you must give your reasons why.

The other documents identified in the letter as being enclosed will follow under cover of a separate email so as not to hold up this email.”

Miss Makar’s evidence in cross-examination was that she saw the letter of instruction in draft, and, indeed, made a substantial contribution to the formulation of the issues for the consideration of the expert set out in the letter. Mr. Makar’s evidence in cross-examination was that the list of issues for the consideration of the expert set out in the letter had been determined by the Employment Tribunal, but he was unable to identify in which order of the tribunal that had been done. Certainly it was not possible simply from reading what I was told was, and appeared to be, a complete series of the orders of the Employment Tribunal to identify any attempt by the tribunal at any stage itself to formulate the issues for consideration by the experts. The interventions of the tribunal appeared to go no further than to limit, by the order made on the occasion of the Fourth Case Management Discussion, the scope of the permissible evidence.

Notwithstanding the various references in documents copies of which were put in evidence to BS or counsel wanting the Firm to identify which of the categories of document listed in the Document Schedule it needed to consider in order to be able to produce an expert’s report, it was not obvious from the material put before me why that needed to be made clear by 27 October 2006, or by or on 30 October 2006, together with reasons for what was wanted. Plainly the Firm needed to be properly instructed in order to be able to produce an expert’s report. The indications that particular documents which the Firm wanted to see had to be identified by 27 October 2006, or on or by 30 October 2006, and that reasons needed to be supplied to justify the requests, would suggest that the outcome of some hearing before the Employment Tribunal depended on this information or at least that the willingness of Triad to produce documents was likely to be affected by who was asking to see the documents, and for what reason or reasons. However, a perfectly ordinary order for standard disclosure was made by the Employment Tribunal on the occasion of the First Case Management Discussion on 28 April 2006. Time for compliance with that order was extended by an order made on the occasion of the Third Case Management Discussion. An application on behalf of Miss Makar for specific disclosure was first entertained by the Employment Tribunal at the Fourth Case Management Discussion, on which occasion an order was made for disclosure of one document or category of documents, but most of the applications were stood over. On the occasion of the Fifth Case Management Discussion further orders were made for disclosure, but other items were again stood over. It appears that on the occasion of the Sixth Case Management Discussion on 27 October 2006 the matter of specific disclosure was the subject of an order that, “By agreement it is ordered that agreed disclosure will take place by 31 October 2006”. What disclosure had been agreed which was the subject of that order, or in what terms the agreement had been made, did not emerge in the evidence led in this trial.

The letter of instruction written by BS was addressed to “Ian White, Barney Whiter and Peter Souster”. It was not simply addressed to the Firm. It did not mention by name Mr. Taub. For present purposes the material terms of the letter dated 30 October 2006 (hereafter “the Letter of Instruction”) seem to be these:-

“We act for Ms Mira Makar. The purpose of this letter is to retain you formally on behalf of Ms Makar in relation to her claim against Triad Group Plc (“Triad”) in the Employment Tribunal to prepare a written independent expert opinion addressed to and for production to the Tribunal and, if required, to give evidence at the hearing in this matter.

…

1 BACKGROUND

…

1.5

It is important for you to appreciate that certain concessions have been made by Triad. Ms Makar has sought clarification of the concessions and their effect and that clarification is still awaited. During the course of his judgment on Ms Makar’s appeal against a case management Order relating to expert evidence on 18 October 2006 (“the Appeal”), His Honour Judge Richardson indicated that Triad needed to clarify the concessions that it was making by re-amending its pleading and answering the Schedule of Protected Disclosures on a disclosure by disclosure basis. Triad’s Counsel at the hearing on 18 October 2006 indicated that Triad would be able to complete these two tasks by Friday, 27 October 2006. We will forward these documents on to you as soon as we receive them and advise you on any resulting alteration to the scope of your instructions.

1.6

Expert reports are due to be served on the Tribunal and the opposing party by Monday, 6 November 2006. The Tribunal has also ordered that the experts should meet on an [sic] without prejudice [sic] to agree a schedule of the agreed and disagreed points. Details of the timetable for the without prejudice meeting and the service of any further expert’s report will be forwarded separately.

1.7

In addition to the preparation of your report, you are required to send a letter to us indicating whether or not on the basis of these instructions you require sight of the documents in the enclosed list of documents headed “Schedule 2 – Company Financial and Other Records required for preparation of Expert Report”. Where you believe you require sight of a document listed in that schedule in order to prepare your report, you must give your reasons why. You must send this letter to us by Monday, 30 October 2006.

2 ORDERS RELATING TO EXPERT EVIDENCE

2.1

The Tribunal has given permission for the appointment of an expert. We enclose copies of the Orders made by the Tribunal in relation to your evidence on 1 August 2006 and 19 September 2006.

2.2

As HHJ Richardson’s judgment on the Appeal is not yet available, we also enclose a copy of our note of HHJ Richardson’s judgment on the appeal, which has been agreed by Triad’s solicitors.

3 INSTRUCTIONS

3.1

In respect of some of the disclosures that Ms Makar alleges were protected disclosures, Triad has conceded that:

(a)

the disclosures are qualifying disclosures for the purposes of Section 43B of Employment Rights Act 1996; and

(b)

Ms Makar made the disclosures with a reasonable belief in the truth of the information being disclosed.

3.2

Based on Triad’s current Amended ET3, the following disclosures which Triad has conceded are qualifying disclosures and ones in relation to which Ms Makar reasonably believed the information being disclosed to be true:

(a)

the disclosures contained in the report compiled by Ms Makar for Triad’s audit committee on 24 January 2005, referred to as the “First Audit Report” (see paragraph 45 of the ET3);

(b)

the disclosures made by Ms Makar at the Board Meeting on 24 January 2005, which were based on the disclosures contained in the First Audit Report (see paragraph 47.4 of the ET3);

(c)

the disclosures set out in paragraphs 40.1 to 40.3 of the ET1, which were contained in the second report compiled by Ms Makar for Triad’s audit committee on 27 January 2005, referred to as the “Second Audit Report” (see paragraph 50 of the ET3);

(d)

the disclosures set out in paragraphs 43.2, 43.3, 43.4 and 43.6 of the ET1, which were contained in the third report compiled by Ms Makar for Triad’s audit committee on 31 January 2005, referred to as the “Third Audit Report” (see paragraph 57 of the ET3);

(e)

the disclosures made in the instructions delivered by Ms Makar to Allen & Overy LLP on 3 February 2005 in so far as the instructions referred to matters that were price sensitive (see paragraph 64 of the ET3); and

(f)

the disclosures made in the letters from Herbert Smith LLP to Allen & Overy LLP dated 10 February 2005 and 3 March 2005 in so far as they refer to and repeat matters already raised with Triad in the First, Second and Third Reports (see paragraph 79.2 of the ET3).

(together the “Conceded Disclosures”).

3.3

Pursuant to the Order made by the Tribunal on 19 September 2006, when answering the questions posed in these instructions, in relation to the Conceded Disclosures you should only comment on market compliance issues.

3.4

Subject to the proviso in paragraph 3.3 above, please address the following issues in a written report:

(a)

The validity of the grounds of Ms Makar’s concerns

In respect of the disclosures that Ms Makar alleges were protected disclosures, were the indicators of irregularities such that Ms Makar had reasonable grounds to suspect that Triad had failed, was failing or was likely to fail to comply with any legal obligation to which it was subject?

(b)

Well-foundedness of Ms Makar’s concerns

Which of the concerns that you consider to have been based on reasonable grounds were well-founded?

(c)

Required appropriate conduct for Ms Makar

In relation to those matters of concern that you have identified as issues in relation to which there were reasonable grounds for concern:

(i)

in your opinion, in relation to each issue, what would a Chief Executive and Finance Director of a Plc, who was also a board director, be expected to do in terms of investigation, disclosure, market notification or other action in order properly to discharge their duties to Triad or other duties as a director; and

(ii)

did the conduct of Ms Makar amount to an appropriate response to each of those matters of concerns?

(d)

Required appropriate conduct for Triad, its Chairman, its board and its audit committee

In relation to those matters of concern that you have identified as issues in relation to which there were reasonable grounds for concern:

(i)

in your opinion, in relation to each issue, what would a public company, its Chairman, its board of directors and/or its audit committee, be expected to do in terms of investigation, disclosure, market notification or other action in order properly to discharge their duties; and

(ii)

did the conduct of Triad, its Chairman, its board and its audit committee amount to an appropriate response to the disclosure?

(e)

Relevance and implications of the audit

(i)

Was the effect of PricewaterhouseCoopers’ assent to Triad’s issuing of the interim statement in July 2005 and/or their audit opinion in September 2005 to demonstrate that any of Ms Makar’s concerns were not well founded or that Ms Makar did not have reasonable grounds for her concerns at the time the disclosures were made?

(ii)

Did the scope of PwC’s audit cover all of the issues, Ms Makar disclosed in the Schedule of Protected Disclosures and if not which did the audit not cover?

(iii)

Did PwC’s assent to Triad’s issuing of the interim statement and/or audit opinion make it unreasonable for Ms Makar to make any of the further disclosures, including those relating to matters that had been the subject of earlier disclosure?

(iv)

Did PwC’s assent to Triad’s issuing of the interim statement and/or audit opinion relieve Ms Makar, Triad’s board of directors and/or its audit committee of its obligations to investigate and/or resolve matters of concern identified before the interim statement; before the audit opinion or thereafter?

…

6 CONFIRMATIONOF YOUR ACCEPTANCE OF THIS APPOINTMENT

6.1

If you are willing to accept this appointment as expert please can you confirm this to us in writing….”

On the face of it, and absent any earlier contractual arrangement made between the Firm and Miss Makar, the Letter of Instruction appeared to be an offer of engagement of the Firm on behalf of Miss Makar to provide expert evidence in connection with the ET Proceedings. Any such offer was in principle capable of acceptance, so as to bring about a concluded contract. BS, in making the offer, invited an acceptance in writing.

Mr. White responded to the letter dated 30 October 2006 from BS in a letter of his own of the same date. That letter began in this way:-

“You have instructed me to write to you today, Monday 30 October, setting out, on the basis of your letter of instruction dated 30 October 2006, whether or not I require sight of the documents on the list of documents headed “Schedule 2 – Company Financial and Other Records required for the preparation of the Expert Report”.

I am instructed that, when answering the questions posed in your letter dated 30 October, in relation to the Conceded Disclosures I should only comment on market compliance issues.

At paragraph 3.2 of your letter of instruction dated 30 October, you have informed me that the Conceded Disclosures are the disclosures [which Mr. White then summarised]

At paragraph 3.4 of your letter of instruction dated 30 October, you have instructed me to consider [the headings set out in that part of the Letter of Instruction]

The documents listed in Schedule 2 were identified by Ms Makar and, as I understand it, are documents that she considers essential to the matters upon which I and my colleagues have been instructed to provide opinion evidence.

Market compliance issues need to be considered in context and are to some extent qualitative as well as quantitative in nature. It is thereforenecessary to take into account the substance of accounting and business information that was available at the relevant times.

Furthermore, the matters that are the subject of the Conceded Disclosures have to be considered objectively and not simply in the light of Ms Makar’s instructions. We would therefore wish to see the documents in order to form our own independent view as the [sic] appropriateness or otherwise of the assumptions inherent in Ms Makar’s claim.

The remainder of this letter concerns the documents that have been requested by Ms Makar, and my current understanding of their relevance to the work that I have been asked to undertake.

[Mr. White then reproduced Miss Makar’s views as to the reasons for disclosure of each of the 46 categories of document]”

On the basis that the Letter of Instruction was an offer of engagement capable of acceptance by the Firm, this letter of 30 October 2006 written by Mr. White seems to me to be a written acceptance of that offer. In his letter Mr. White not only addressed, albeit rather superficially, the specific matter raised in paragraph 1.7 of the letter from BS, but he also set out the headings from paragraph 3.4 and indicated that he was intending to consider the issues there raised.

Mr. White then prepared a letter (“the Letter of Engagement”) dated 31 October 2006 to BS marked for the attention of Mr. Britton. The Letter of Engagement reads as if it was based on a standard form of engagement letter. It included these passages:-

“We understand that you act for Ms Mira Makar (“your Client”), formerly Chief Executive Officer of Triad Group plc (“Triad”). You have informed us that you are currently conducting a claim in the Employment Tribunal against Triad.

This is to confirm our acceptance of your instructions that Ian White, Barney Whiter, Peter Souster and Nigel Tristem act as expert witnesses in relation to the proceedings.

We confirm that Ian White will be the partner responsible for the engagement. We may deploy other staff of this firm where required.

The work to be undertaken by us is summarised below and in the attached Terms and Conditions of Business dated 1 July 2006, which forms part of this Engagement Letter. Our work will be limited to the matters set out in this Engagement Letter.

…

SCOPE

We are to prepare a report for the Employment Tribunal, addressing the questions set out at Section 3 of your letter dated 30 October 2006, subject to the limitations of the information available to us at the current date.

We understand that our report is required to be served on the Tribunal and the opposing party by Monday 6 November 2006.

…

Fees

We have agreed that our costs for the preparation of our report will be capped at £30,000 plus VAT, which will include all work undertaken to that point.

Our fees for any further work that you may require us to undertake in relation to this matter, including attendance at any meetings of experts and attendance at any hearings of the Employment Tribunal, will be charged at the following rates (excluding VAT).

[Rates for Mr. White, Mr. Whiter, Mr. Souster, Mr. Tristem and Mr. Andrew Horner were then set out]

We understand that Ms Mira Makar will be responsible for our fees. We shall address our fee notes to Ms Makar periodically as we see fit.

…

We should be grateful if you would confirm your acceptance of the agreement, by signing and returning the enclosed duplicate of this letter.

Once this letter has been agreed, it will remain effective until it is replaced. ”

Attached to the Letter of Engagement was a confirmation page, completed as if it were appropriate for both BS and Miss Makar to sign, in each case below wording that:-

“I have read the above letter. I confirm that your understanding of our instructions is correct and that the terms of engagement set out in the letter shall constitute the agreement for you to carry out the engagement.”

In fact neither BS nor Miss Makar ever signed a copy of the Letter of Engagement to indicate agreement to its contents. Miss Makar told me, and she was not challenged as to this, that she did not even see a copy of the letter until about a year after its date when she was in dispute with the Firm about its fees.

The Letter of Engagement appears to have been intended as a counter-offer, on the standard terms of the Firm, to the offer ostensibly contained in the Letter of Instruction. For the reasons which I have explained, subject to the issue whether there was already a contract in place between the Firm and Miss Makar, it seems to me that the Letter of Engagement was too late to be an effective counter-offer, potentially capable of acceptance by Miss Makar, because, by the letter dated 30 October 2006 to which I have referred (hereafter “the Letter of Acceptance”), it seems to me that the Firm had already accepted the offer contained in the Letter of Instruction.

The “Terms and Conditions of Business” (“the BT Terms”) enclosed with the Letter of Engagement included, at clause 1.1:-

“All work by Baker Tilly for the Client Party will be in accordance with the Engagement Letter, of which the Terms and Conditions of Business form an integral part, or any subsequent written variation agreed by an authorised representative of Baker Tilly and the Client Party. You or we may terminate the engagement at any time without penalty. Notice of termination must be given in writing.”

The Letter of Engagement was sent to BS under cover of a letter (“the Covering Letter”) of the same date. In the Covering Letter Mr. White wrote:-

“I enclose Baker Tilly’s letter of engagement together with our terms and conditions.

At this stage, I wish to place on record our concern at the timescales inherent in your instructions. As you are aware, the issues are complex and the available documentation is deficient due to the current position on disclosure. Notwithstanding these concerns, we will of course use our best endeavours to comply with the terms of the Order.

You will note from our terms of engagement that we have decided to involve Nigel Tristem, the partner with overall responsibility for Baker Tilly’s audit practice, to take advantage of his experience in the plc audit environment.

Ms Makar has agreed to present herself at our Old Bailey offices for the purposes of identifying herself formally. She is also to provide us with a letter of comfort as to the source of the funds from which our fees will be paid.

Finally, I take this opportunity to enquire whether Triad have been asked for copies of PWC’s report to the audit committee, and their management letter, following the 2005 audit? Our initial view is that there cannot be many precedents for the change in attitude between interim announcement and final audit sign off, and that it must have been documented somewhere. Mira, however, says that no such documents were produced.”

The thought of introducing Mr. Tristem as part of the Firm’s team seems to have arisen only on 30 October 2006. That thought seems first to have occurred to Mr. Souster. When Mr. Tristem was approached, he in turn considered that Mr. Mark Harwood might be the appropriate person to become involved, rather than himself. Mr. Tristem sent an e-mail to Mr. Harwood at 9.22 hrs. on 31 October 2006 requesting a chat. Mr. Harwood, at 14.54 hrs, sent Mr. Tristem an e-mail saying:-

“For info – Paul Newman and I met Triad as part of an audit pitch some time back. I can’t recall whether we have already chatted to you about this.”

Mr. Tristem forwarded that e-mail to Mr. Souster at 14.55 hrs.

In the meantime, at 12.40 hrs Mr. Tristem sent this e-mail to Mr. Souster:-

“Mark Harwood is out most of the week – ouch!

This looks like a big job and we are never going to be able to meet the deadline of next Monday … I question whether we should take it on on this basis. I can assist with the Corporate Governance issues etc but have no practical experience in expert witness work … would be happy to learn if someone was leading it however!?

Tried to call …sorry was in a meeting this morning … give me a call when you can.”

Mr. White and Mr. Souster spoke on the telephone on 31 October 2006. Mr. White made a manuscript note of the conversation, in these terms:-

“PS –

read Stork & Egan Roberts

& problems at Triad

How much pertinent to PS?

Nigel Tristram [sic] – listed plc directors advice?

Mark Harwood – ex EY [Ernst & Young] London BS – up to speed on plcs

may have more cred[ibility] than PS?

Had a conflict.

Nigel – would deal with it.

Very fundamental concerns.”

Arrows linked the first line beginning “Nigel” with that beginning “Mark”, the line beginning “may” with that beginning “Had”, and the second line beginning “Nigel” and the last line.

Mr. Britton sent to A&O a copy of Mr. White’s letter dated 30 October 2006 in relation to documents. A&O responded in a letter dated 1 November 2006. The letter began in this way:-

“We are in receipt of your letter of 30 October, enclosing a copy of the letter from Ian White of Baker Tilly. We are copying this letter to Mr. White.

Without meaning any disrespect to Mr. White, we found the contents of his letter rather surprising and almost totally devoid of any independent analysis or thinking.

The obligation that Mr. White indirectly was under was to specify the documents he considered would be necessary for him to have sight of or review in order to perform his work, namely to prepare an expert report (which is to be served by 6 November 2006).

We are therefore surprised that Mr. White’s letter (with one exception) effectively requests every document listed in Schedule 2 of the Claimant’s Request for Specific Disclosure (based entirely on the premise that Ms Makar considers the documents essential). You are certainly aware that this comprises a huge amount of documentation. Someone with Mr White’s skill and experience must have at least reached a similar conclusion (if he had not previously been informed of the fact by you).”

Whilst the A&O letter continued at some length, two points which were not made in it were, first, that a representative of the Firm could not act as an expert witness on behalf of Miss Makar because of a conflict of interest with Triad, and, second, that A&O thought that the expert instructed was Mr. Taub, not Mr. White.

The Letter of Engagement seems in fact to have been sent to Mr. Britton on 1 November 2006 as an attachment to an e-mail sent by Mr. Horner at 13.40 hrs. In that e-mail Mr. Horner wrote:-

“Please find attached two PDF files:

1.

Our engagement and covering letter

2.

Accompanying terms and conditions of business.

Please arrange for a copy of the engagement letter signed by both you and Ms Makar to be returned to this office at your earliest convenience.

Hard copies of all documents follow by post.”

BS replied to the A&O letter dated 1 November 2006 in a letter dated 3 November 2006. In that letter BS specifically requested disclosure of a letter from A&O to PwC in connection with the audit of Triad in respect of the provision of director’s costs and the management letter mentioned by Mr. White in the Covering Letter.

A decision that Mr. Tristem should formally be the expert witness on behalf of Miss Makar was made within the Firm on about 2 November 2006. Mr. White continued to read, in the week commencing 30 October 2006, into the documents which he had been sent. Mr. Souster started to write parts of the intended expert’s report on about 2 November 2006, continuing on Friday, 3 November 2006. It was the intention of Mr. Souster and Mr. Tristem to work over the weekend of 4 and 5 November 2006 to complete the report for service on 6 November 2006.

On Friday, 3 November 2006 a mediation took place in relation to the ET Proceedings. Just after midnight on Saturday, 4 November 2006 a settlement of the ET Proceedings was achieved. The settlement agreement (“the Agreement”) was reduced into writing. The parties, by the Agreement, undertook certain obligations of confidentiality. For the purposes of this judgment it is, I think, necessary to mention some of the provisions of the Agreement, but it is not necessary to set out the sum which was agreed to be paid by Triad to Miss Makar, so my citation of the relevant clause omits that information. For present purposes the material provisions of the Agreement were:-

“3.1

Without admission of liability and subject to the Claimant’s compliance with her obligations under this Agreement the Respondent shall pay the Claimant the sum of … (the “Payment”) by way of a contribution to the costs incurred by the Claimant in connection with the discharge of her duties as a director and employee of the Respondent within 28 days of the date of this Agreement signed by the Claimant and her legal representative on the terms set out below.

3.2

The arrangements set out in this Agreement are in full and final settlement of the Claim and all other claims accrued or accruing that the Claimant may have against the Respondent or any Group Company (or any officers, employees or agents of the Respondent or any Group Company but only in their capacity as such) arising out of her employment with the Respondent or its termination and any claim arising from the termination of a directorship or her resignation therefrom, any claim arising out of or based on the articles of association of the Respondent and accrued rights (if any) to claim against the Respondent in her capacity as a shareholder of the Respondent. For the avoidance of doubt, nothing in this Agreement is intended to compromise or affect in any way any claim based on facts and matters arising after the date of this Agreement in respect of the Claimant’s capacity as a shareholder in the Respondent.

…

5.1

The Respondent and the Claimant agree that they will not, whether directly or indirectly, make, publish or otherwise communicate any disparaging or derogatory statement(s), whether in writing or otherwise concerning the other including, in the case of the Claimant, any disparaging or derogatory statements concerning the Respondent or any of its Group Companies or any of its or their officers or employees.

5.2

The Respondent and Claimant will as soon as practicable and in any event within 10 working days remove all material from any website they maintain relating to the facts and matters referred to in the Claim, the Claimant’s employment with the Respondent and any dealings between the Claimant and the Respondent, its officers and employees. [A new sentence was added in manuscript at this point, but it was illegible in the copy put in evidence.] The Respondent and the Claimant will maintain links for at least 18 months from the date of this Agreement on their respective websites to the agreed statement attached as Appendix 1.

5.3

Save for the agreed statement attached to [sic] Appendix 1 which shall not be edited, the Respondent and the Claimant agree to keep the circumstances surrounding the termination of the Claimant’s employment and the fact and contents of this Agreement strictly confidential and not to disclose, communicate or otherwise make public the same to anyone (save their professional advisers or otherwise as may be permitted or required by law or by the relevant tax and/or regulatory authorities and, in the case of the Claimant, to her immediate family). The Claimant agrees to use her reasonable endeavours to procure that the members of her immediate family keep the fact and contents of this Agreement strictly confidential. By his counter-signature to this Agreement, Ihab Makar agrees to be bound by these terms of confidentiality.”

The materiality of the provisions of the Agreement which I have quoted to the issues in this action is simply that, as it seems to me, whilst those provisions did not preclude Miss Makar from drawing matters concerning Triad which had underlain the ET Proceedings to the attention of the relevant regulatory authorities, it was necessary to take some care in formulating whatever was to be said, because the publishing of disparaging or derogatory statements would have amounted to breach of clause 5.1 of the Agreement.

At about 9.00 hrs on Saturday, 4 November 2006 Katie Knight of BS left a voicemail message for Mr. White that the ET Proceedings had settled. Mr. White was not able, in his evidence to me, to recall precisely in what terms Katie Knight had expressed herself in her message. However, following receipt, Mr. White sent e-mail messages to both Mr. Souster and Mr. Tristem at 9.30 hrs in these terms:-

“I have been informed by Burges Salmon this morning (Saturday 9 am) that a settlement was reached in this matter at 12.30 am on Friday night/Saturday morning.

No need to work the weekend. Nigel I hope you might be able to resurrect your golfing appointment? Please put your time charges on to ISIS asap, or at least let me know what they are – I need to bill this quickly. 258538 826 is the ISIS code.”

It seems clear from the terms of that e-mail that Mr. White interpreted the effect of the settlement of the ET Proceedings as being that the retainer of the Firm had come to an end, for not only did he indicate that Mr. Souster and Mr. Tristem did not need to work over the weekend, but he also considered that it was appropriate to submit a bill. The latter, certainly, would not seem to have been appropriate if the retainer was incomplete and more work remained to be done to complete the work the subject of it. Mr. Phipps submitted that the e-mail should be interpreted as indicating only that the urgency had gone out of the production of the report of the Firm, not that the need to produce it had ceased. What was the retainer, or were the retainers, of the Firm depend upon my findings as to the evidence of Mr. White, Mr. Taub, Mr. Souster, and Mr. Tristem, on the one hand, and that of Miss Makar and her brother, on the other. However, insofar as the e-mail despatched by Mr. White to Mr. Souster and Mr. Tristem on 4 November 2006 is concerned, for the reasons which I have given it seems to me to indicate that at the time Mr. White considered that the retainer then current had come to an end.

On Monday, 6 November 2006 Mr. Britton of BS spoke to Mr. White by telephone at 10.20 hrs. Mr. White made a manuscript attendance note of the call. The note included:-

“Mira wants us to complete a prelim report, within budget by, say, Wed?

I said, diff[erent] ballgame – having stood people down.

MB will speak to MM & let her know that I will be in touch today.”

It was unclear on the evidence led before me whether Mr. White did speak to Miss Makar on 6 November 2006. If he did, he did not make a note of the conversation. He did, however, speak to her on 15 November 2006 at 11.25 hrs, and he made a note of that conversation. It was, to a degree, unclear from Mr. White’s note when he was recording what had been said to him and what represented his contemporaneous record of his own opinion. The note said this:-

“Audit Ctee [Committee] consider that the B&R [Books and Records] situation was ok.

The Q&A [Questions and Answers]

final report is effectively notes of that meeting

get the high level prelim statements

Audit Ctee not acting as reported.

Rep[resentation] letter

Contingent Liab[ility] – not recognised

No valid meeting to approve a/cs [accounts]

Debenture required – dec[laration] to bank

PWC view – will it last 12 months

Fragmented Stork Report – 2 files

Ac reports

Mira said the settlement had left her shell shocked pleased and now able to think constructively

BT report will now be on basis of what we have

30k cap still applies.”

The terms of the note certainly indicate that Miss Makar was seeking a report from the Firm for a maximum cost of £30,000. It would seem that Mr. White suggested that an envisaged Question and Answer meeting between Miss Makar and representatives of the Firm would in effect indicate the views of the Firm, for it was contemplated that the notes of that meeting would amount to the final report she wanted.

It seems that Mr. White spoke again to Miss Makar on 16 November 2006 at 11.20 hrs for 45 minutes, for Mr. White made a manuscript note of such conversation. The note was both more difficult to read and more difficult to interpret than the note made the previous day, but the focus of it seems to have been complaint to the relevant regulatory authorities with a view to re-establishing the reputation of Miss Makar.

In the event a meeting was arranged for 20 November 2006 between Miss Makar, her brother, Mr. White, Mr. Souster and Mr. Tristem. Each of Mr. White, Mr. Souster and Mr. Tristem undertook work by way of preparation for the meeting. Mr. Souster prepared a document entitled “Questions for Mira Makar” (“the Questions”) dated 16 November 2006. The first question was:-

“Overall Objective

1.

Having settled at Employment Tribunal

- What are you[r] objectives now?

- What do you want to achieve?”

A copy of the Questions was sent to Miss Makar at 10.01 hrs on 20 November 2006. The meeting was fixed to start at 12.30 hrs.

Miss Makar made some comments on the Questions before the meeting. The answer to question 1 was:-

“The Employment Tribunal was not an objective in itself. People who win whistle blowing cases are stigmatised as destabilisers.

The original objectives were the turnaround of the Company (March 03 £5m loss to profit March 05); to gert [sic] it back to £200m cash exit valuation within 5 years from my resignation (oct 2002) and positioned with recurring contracts to achieve a £1 billion valuation. The conduct of Rigg Wootton Fulton Haynes PwC and A&O from January 2005 has prevented this from happening: I considered that without disclosure the risk management of the Company could not be restored and the turnaround completed.

This objective can no longer be achieved. Investor confidence in me can only be fully restored when there is some form of public censure and some blood letting. It is more likely to be effective if A&O and PwC are criticised, since the directors have lost market credibility. Other objectives are personal.

Baker Tilly’s terms of ref are unchanged although the addressee of the report may have changed. The conduct of the respective parties in response to my disclosures is important. (cover up/denial/misrepresentations).”

From the answers given to question 1 what Miss Makar seemed to want was a report from the Firm criticising, in particular, PwC and A&O. The roles of PwC and A&O had not been central to the issues in the ET Proceedings. The role of A&O had not been mentioned in paragraph 3.4 of the Letter of Instruction, and the role of PwC had featured only at (e) in that paragraph.

Mr. White made a contemporaneous note of the meeting on 20 November 2006. While contemporaneous, it was not represented to be an exhaustive record of all that had been said. A copy of a version of the note was put in evidence. That version, as I understood it, had been modified to reflect contributions after the meeting from the other attendees on behalf of the Firm. No clear outcome was recorded. However, a section of the note included comments from Mr. Tristem to the effect that one would expect the new auditors of Triad, BDO Stoy Hayward, to find that there was a “black hole” in the accounts, if that were indeed so. Those who attended the meeting on behalf of the Firm each gave evidence before me. Each said that the outcome of the meeting was that it had been agreed that nothing further be done by the Firm pending the publication of the interim results of Triad, expected in the middle of December 2006, so that it could be known whether the new auditors had indeed found a “black hole”. It was anticipated that, following the publication of the interim results, Miss Makar would give further instructions to the Firm, if she wished the Firm to do anything further.

While the outcome of the meeting was not recorded in the notes taken by Mr. White, it was said to be implicit in the terms of an e-mail despatched by Mr. White to Mr. Souster and Mr. Tristem at 10.28 hrs on 21 November 2006:-

“Nigel and Peter, thank you both for your attendance at the meeting with the Makars.

I attach my contemporaneous note – apologies for any typos and shortcuts.

I am grateful for your input in this and I will be interested to see what the Makars come back with in the nature of further instructions. In the meantime I will now render a fee note and would be grateful if you would arrange for your time charges to be posted to ISIS asap.

The ISIS code is, of course, 258538 826 001.”

A fee note dated 13 December 2006 was rendered to Miss Makar. It was sent to her under cover of a letter dated 13 December 2006. The letter described the fee note as “for work done in preparation for the Employment Tribunal hearing”. The Firm had not, by that date, received any instructions from Miss Makar following the meeting on 20 November 2006.

Miss Makar’s case was that she had been expecting a report following the meeting on 20 November 2006. She was asked in cross-examination by Mr. Semken whether she was surprised to have received the bill dated 13 December 2006 without having received a report from the Firm. She said (Transcript, Day 5 page 37 lines 12 – 14 and lines 18 – 21):-

“No, at that stage I thought, oh, they are trying to clear out the inventory and they have just sent out the bill; people often do.

…

They had said they wanted to wait for the next set of results and I don’t know when the next set of results came out. From memory, I think it was on or around 19 December, but is that only memory.”

It thus seemed to be accepted by Miss Makar that there was at least some discussion at the meeting on 20 November 2006 of the imminence of the interim results of Triad and of the desirability of seeing them.

In fact it appears that Miss Makar did not make contact with the Firm again until she wrote a letter dated 27 March 2007 in response to various reminders about the bill. She said in that letter:-

“I refer to your letter dated 5 February 2007 and other reminders. The above invoice relates to a contract to provide a report which has not yet been prepared (to my belief) or received by me.

I believe the invoice was raised in error. Please refer any further queries to Ian White of your Manchester office.”

Having spoken to Mr. White, Mr. Smith, the credit controller of the Firm, wrote in manuscript on the original of the letter:-

“29/3 Spoke IW. Report was delivered verbally after the case. No point in written report as costs already overrun by £11k – Told him that someone needs to respond with an explanation, will speak Souster/Tristem.”

Mr. White was, at this stage, on the point of leaving the Firm, hence the reference to Mr. Souster or Mr. Tristem possibly writing to Miss Makar. Mr. White accepted that it was not in fact correct that a report had been given verbally to Miss Makar after the conclusion of the ET Proceedings.

Miss Makar wrote to Mr. White a letter dated 11 April 2007. It included these passages:-

“I refer to the work BT agreed to undertake for me at the latter end of 2006. As you were aware I obtained agreement from my trustees for a fee for BT of up to £30k plus VAT (your figure) for the production of a report, the “high level requirements” for which were set out in instructions from Burges Salmon, and the details of which were for you to determine.

This report has not been produced to my belief, even in draft. I have to say I was astounded to receive any bill from you as were my trustees (Royal Bank of Canada) and Burges Salmon (BS), my instructing solicitors. My initial reaction on receiving it, was that you had sent it in advance of your (draft) report, having said in our last meeting that you wished to wait for the company’s September 2006 results published on or around 19 December 2006 before finalizing your team’s collective thoughts.

…

I had understood from your team and our meeting shortly after the settlement on 4 November 2006 that you preferred to wait for the December (2006) results announcement from the company (for the 6 months to September 2006) before continuing your work. I have not heard further from you.

In these circumstances, which are very disappointing, especially given the collosal[sic] effort my team put in at a time we were already regularly working formidable hours against crippling dead lines, I feel I have no choice but to offer you an alternative to producing a report. This is the option of “walking away”, ie drawing a line, my files returned to me, no report and no bill. In making this offer I would like to put on record my appreciation for your own personal interest. It goes without saying that neither I nor my trustees will be able to approve a bill for payment without a satisfactory report which adds value.”

It was suggested to Miss Makar in cross-examination that by the time she wrote that letter she no longer wanted a report. She denied that. She was then asked why she offered a “walking away”. Her answer (Transcript, Day 5 page 44 line 13) was, “Because you cannot force somebody to do something”.

Mr. Makar gave this account in his witness statement dated 12 June 2009 of what happened after the settlement of the ET Proceedings:-

“12.1

The settlement of the Tribunal proceedings did not mean that the need for the report had vanished. As agreed at our meeting of 7 September 2006, the Report was to be produced in any case to be used with the regulatory authorities. I understood from my sister that the periodic updates she was receiving from Ian White indicated progress was being made towards completion of the report. I believe he reported that this would be done for the original fee of £30,000, and would be completed quickly after a “Q&A session” to pin down specific facts, which was scheduled for 20 November 2006.

12.2

We met the team from Baker Tilly on 20 November 2006 for what had been billed as a “Q&A session” to pin down financial questions before finalising the report.

12.3

To our surprise, neither of the two principal expected participants, being Mr. Taub (the Expert Witness) and Mr. Whiter (the contributor on stock market issues) were present at the meeting on 20 November 2006.

12.4

The second surprise was more unexpected and less palatable. The Baker Tilly team opened by saying that, now that the Tribunal proceedings had settled, their position had effectively shifted and they were no longer prepared to prepare a report based on the questions laid out by the Tribunal, as originally agreed.

12.5

They explained this by saying that the “risk profile” of preparing such a report had now changed; that whilst preparing a report for a court or Tribunal gave them certain legal protection, for example from risk of being sued for defamation, if they finalised the report now they would have now [sic] such protection.

12.6

My sister made it clear that, be that as it may, what had been agreed had been agreed; and the agreement as clearly made in the meeting of 7 September was for a Report to be used after the Tribunal case, irrespective of its outcome or settlement, to be taken to the financial authorities. This was an agreement that could not now be reneged upon.

12.7

The Baker Tilly team emphasised what they felt the risk to them in completing such a report would be, and made clear they would be unwilling to do so.

12.8

As an “alternative”, they proposed a much more “bland” report commenting on certain corporate governance issues at Triad. My sister was clear that this was not what she wanted nor what had been agreed. The Baker Tilly team asked us to think about their proposed amendment to the mandate. We said that if we changed our mind we would let them know.

12.9

We did not subsequently contact them in the following days to say so, and awaited receipt of the originally agreed report. It never arrived, and no satisfactory explanation has arrived either.”

Against the background of the contemporaneous documentation copies of which were put before me, which, on their respective faces, appear at least generally to support the case of the Firm as to the retainers in which it was engaged by Miss Makar, it is appropriate to turn to consider the witness evidence called on behalf of Miss Makar in relation to the retainer of the Firm.

The two witnesses called on behalf of Miss Makar at the trial were herself and her brother, Mr. Ihab Makar. Before coming to the evidence of Miss Makar herself it is convenient to set out the account of Mr. Makar in his witness statement dated 12 June 2009 concerning the meeting held on 7 September 2006 and the immediate aftermath of that meeting. Mr. Makar said:-

“8.1

As agreed, on 7 September 2006 we met with Mr. Taub and his associates to assess their suitability for the task, and having the meetings with Mr. Michael Ellison of [sic, but I think Mr. Makar meant “and” rather than “of”] Alix partners as benchmarks.

8.2

This meeting was to be the single most important event of the entire engagement. It was a long in-depth discussion of what the engagement involved, and what each side expected of the other.

8.3

Present at the meeting were Mr. Michael Taub, and three other Baker Tilly partners, whom he introduced as Mr. Peter Souster, who had corporate governance experience, particularly of private companies; Mr. Ian White, a general forensic partner based in Manchester who would act as the interface between the parties; and Mr. Barney Whiter, a partner with experience of the stock exchange requirements of quoted companies and the associated issues of market abuse.

8.4

Mr. Taub opened the meeting by confirming that, as he had stated to me on the telephone, he would be the named Expert who would take the witness stand; whilst his colleagues would each contribute to the report from their respective areas of expertise. He stated that, as was their normal method of operating, they would do much of the spadework, and then “they will brief me before I go into the witness box, and I will give the witness box testimony”. As the named Expert, the Report would naturally go out in his name.

8.5

Of his colleagues, Mr. Whiter’s experience seemed most useful in supporting Mr. Taub’s since it was based around issues of Market Abuse and Stock Exchange requirements. After some discussion, we agreed that Mr. Whiter’s input would be critical to Mr. Taub’s Report.

8.6

Notwithstanding the presence and input of his colleagues, we stated on a number of occasions that, if we were selecting Mr. Taub, it would be on the basis of his personal witness-box experience. This was particularly relevant given the experience of Mr. Ellison, the nearest “competitor”, who had considerable experience and credibility. Mr. Taub assured us not to worry, that it would certainly be he himself would be taking the witness box stand, whilst the others were “contributors”. He repeated this assurance a number of times during the meeting.

8.7

We also raised the issue that a report would be needed for the regulatory authorities, irrespective of the outcome or settlement of the Tribunal case. We described what the FSA and DTI had said they required, and why an Expert report for them would be valuable. Mr. Taub said he understood fully the issue. We added that the fact that, being part of a Tribunal process, Baker Tilly would be in a particularly strong position to ask for disclosures from PwC and Triad which other experts could not.

8.8

At a number of different points in the discussion we repeated that we expected the deliverable of the Report for use with the regulatory authorities, the FSA and DTI, to be an important part of the assignment. At no point did Mr. Taub or any of his colleagues demur. It was therefore understood that this was a central part of the deliverable we were agreeing upon.

8.9

Finally we mentioned to the group that the requirement that Ms Lewzey, the Tribunal Chairman had laid out, which was for the Expert’s name to be submitted at the next case management conference, and for the draft reports of both sides’ experts to be ready on 31 October 2006, in advance of the hearing beginning on 8 November 2006. These facts were noted and agreed.

8.10

We finished by saying that, based on Mr. Taub’s witness box experience and the range of skills his supporting team had, we felt we would probably choose them, and name him to Ms Lewzey. Both sides were happy with the positive tone of this outcome. We agreed the only remaining factor to our agreement were the fees, which would be agreed in the next few days.

8.11

We agreed that two separate documents would define the mandate.

(A)

A formal letter from the solicitors, Burgess Salmon, limited to relaying the exact questions laid out in order of the Employment Tribunal. This would not be a commercial agreement.

(B)

A commercial agreement between ourselves as clients and Baker Tilly, detailing fees, deliverables, dates of deliverables and terms and conditions. The solicitors would play no role in the commercial agreement and had not been authorised to do so.

8.12

The Baker Tilly team said they fully understood. It was standard practice in the industry for an initial meeting such as we had had to be followed by a commercial “proposal”, addressed to us as clients, and the commercial agreement we were referring to would be exactly that.

8.13

We had received such a proposal from Martin Hall of Alix Partners after our meeting with him, and assumed Baker Tilly would be following normal practice.

8.14

Much later, I saw a subsequent internal note disclosed by Baker Tilly written by Ian White stating the need to write us a proposal. No such proposal was ever sent or agreed.

8.15

In the following few days, my sister spoke with Ian White of Baker Tilly and agreed fees “capped at £30,000” for the deliverables agreed at the 7 September meeting.

8.16

As stated earlier at paragraph 8.2, this meeting was to be the single most important event of the entire engagement. A number of commitments and representations were made here that are no where else recorded, since we were told by Baker Tilly’s solicitors (RPC) that all meeting notes from the four Baker Tilly partners “no longer exist”, presumably having been shredded, destroyed or otherwise disposed of. RPC also informed us that all emails associated with that meeting had subsequently been deleted “for reasons of cost”, even though the matter was one on ongoing litigation. In the absence of a signed proposal or signed engagement letter, it appears the discussions in that meeting constitute the only mutually-agreed agreement between the two parties.

9.

The naming of Mr. Taub to the Tribunal

9.1

Following the agreement with Mr. Taub, his understood track record of witness-box experiences, and the agreement of fees, my sister and I agreed to select Mr. Taub over Mr. Ellison and Mr. Hall. My sister’s counsel was informed, and attended the following case management conference before the Tribunal, and this information was relayed to the Tribunal Chairman. The Respondent in the case also named their expert witness.

9.2

I was surprised some time later, in the context of this action, to learn that (unbeknown to us) Baker Tilly had switched Mr. Tristem for Michael Taub as the proposed Expert Witness. Not only had the agreement been for Mr. Taub as an individual to be the expert, based on his individual witness box record, and he been named to the Tribunal Chairman, but also Mr. Tristem did not even appear as a recognised expert witness in any of the directories of expert witnesses I had consulted. For example, in the most authoritative guide (Sweet and Maxwell’s guide to Legal Expert Witnesses 2006), Baker Tilly name five Expert Witnesses, of which Mr. Tristem is not one. I have also seen an email from Mr. Tristem to Mr. Souster dated 31 October 2006 (timed at 12:40) in which he describes himself as having “no practical experience in expert witness work [although he would be] … happy to learn if someone was leading it”. This was not the highly experienced witness-box expert we had contracted for. ”

It is, I think, clear from the account given by Mr. Makar that his view was that the meeting of 7 September 2006 was in the nature of a “beauty parade”, that is to say, a meeting the object of which was to enable Mr. Makar and his sister to assess the quality of service likely to be provided by the Firm, if retained, with a view to comparing that assessment with the assessments made of other prospective providers of expert witness services, Mr. John [as his name correctly is, not Michael, as rendered by Mr. Makar] Ellison of KPMG and Mr. Martin Hall of Alix Partners. Given the purpose of the meeting, it perhaps was not to be expected that Miss Makar would there and then make up her mind whether to engage Baker Tilly. What Mr. Makar said at paragraphs 8.10 to 8.14 inclusive of his witness statement appeared to make it plain that Miss Makar did not say at the meeting that she would engage the Firm, only that she would probably do so. On Mr. Makar’s account it seems that what was expected was that the Firm would produce a proposal for a commercial agreement, and that never happened. However, by paragraph 8.16 of Mr. Makar’s witness statement this has all elided into an assertion that “the discussions in that meeting constitute the only mutually-agreed agreement between the two parties”. As a matter of law that cannot be so. Potentially an oral agreement could have been made at the meeting. However, the evidence of Mr. Makar was that his sister did not, at the meeting, commit herself to engaging the Firm. Without such an engagement there could be no contract. If Mr. Makar is right about what in fact happened at the meeting, no contract was then made, and, if a contract between Miss Makar and the Firm was ever made, it could only have been at a later point in time. Mr. Makar himself emphasised in his account in his witness statement that no agreement was made about the fees of the Firm at the meeting on 7 September 2006.

While, assuming Mr. Makar’s account of the meeting on 7 September 2006 to be correct, it is plain, as it seems to me, that no agreement was then made, actually it is clear that Mr. Makar’s account was erroneous in a number of respects.

It could not have been the case that it was agreed at the meeting that BS would write a formal letter to the Firm, because at that date BS had not been instructed by Miss Makar. According to the evidence of Miss Makar the solicitors acting for her in the ET Proceedings as at 7 September 2006 were either Messrs. Russell Jones and Walker or Withers LLP. Miss Makar was a bit vague about dates, but it is clear from the notes made by Mr. White from which I have quoted that his understanding until the end of September 2006 was that Messrs. Russell Jones and Walker were acting for Miss Makar, and her own evidence in cross-examination was that BS was not instructed until early October 2006.

No questions, exact or otherwise, for the consideration of an expert were ever formulated by the Employment Tribunal in an order.

The Firm did in fact write a proposal in connection with an engagement by Miss Makar, the Letter of Engagement.

There was no evidence, other than the assertion of Mr. Makar, that the Employment Tribunal or Miss Makar’s opponents in the ET Proceedings were ever told that Mr. Taub was to be the expert acting on behalf of Miss Makar. No order of the Employment Tribunal identified Mr. Taub, or anyone else, as the expert whose evidence was permitted on behalf of Miss Makar. The terms of the letter dated 1 November 2006 written by A&O to BS following the copying of Mr. White’s letter dated 30 October 2006 on the subject of disclosure made no mention of the fact that it had been understood on the Triad side that the expert was to be Mr. Taub, not Mr. White, and yet that was a point one would have expected to have been made, if it were correct, as the whole purpose of the letter was to cast aspersions on the independence of Mr. White.

Miss Makar produced two witness statements for the purposes of this action. The reason for there being two was obscure. Her witness statements were far more discursive than the statement of her brother. A statement dated 14 April 2009 ran to 114 paragraphs spread over 25 single-spaced A4 pages, whilst a statement dated 18 April 2009 ran to 222 paragraphs over 52 single-spaced A4 pages. The second of the statements really dealt with the meeting on 7 September 2006 and what was said to have been agreed at it or following it. The critical points in the statement seemed to be these:-

“40.

As agreed, we met with Michael Taub and his supporting team of three other partners, invited by him, on 7 September 2006 to discuss and agree the mandate.

41.

We agreed that there were essentially two key outputs that Baker Tilly would be contributing: firstly, the expert witnesses himself [sic], who would take the witness box; and secondly, the expert financial Report into the financial affairs of the Company.

…

43.

Michael Taub confirmed to me he understood the court instructions that only one person was allowed by the court to be nominated to take to the witness box, and Michael Taub confirmed several times during the course of the meeting to me that that individual would be he, himself. The disclosures and time records (February 2009) provided to me confirm that Peter Souster, at least, a fellow partner, attended this meeting with a view to selling the services of Michael Taub himself. [I think that that reference is to the time record of Mr. Souster describing his time spent preparing for the meeting on 7 September 2006 as “proposal re: M Taub”]

…

63.

At the meeting on 7 September 2006, it had been agreed that two documents would be exchanged to define the mandate:

(a)

(Formal CPR Terms of Reference) the first, the court-mandated list of questions that the expert witnesses were required to address in their Report, which would come from our solicitors on the record;

(b)

(Commercial Agreement) the second, and wholly separate document, would be a commercial agreement between me and Baker Tilly regarding the terms of the engagement. This second document, would set out the agreement of the firm to undertake the engagement; the outputs agreed and respective dates; the fees for the work, and the terms and conditions. This agreement was be [sic] directly between the firm and me as the client, not involving the solicitors, and confidential to us. I expected such a commercial agreement would take the form of a proposal from Baker Tilly, which I as client would counter-sign and accept. Baker Tilly’s expectation was the same as mine, so this approach did not take long to agree. On disclosure I have been provided with an undated file note written by Ian White, I am told, recording “BT are preparing a proposal”.

64.

In the event and subsequent to the meeting on 7 September 2006, although Baker Tilly verbally accepted the mandate, made the offer formally on 8 September 2006 by email from Michael Taub and began work, I never received a written proposal from Baker Tilly. Therefore no written commercial agreement exists between us. In its absence the effective commercial agreement is therefore the verbal agreement that was agreed at the meeting of 7 September, where the work and outputs were agreed; together with certain subsequent telephone calls (see below) with me, in which the fees for the report and the witness testimony were agreed. Baker Tilly has a number of relevant file notes written by Ian White that I have seen on disclosure such as “Retainer directly with MM”; “£30k cap still applies” (6 November 2006); and a confirmatory email (24 October) when, much later, Burges Salmon, came on the record “the fee arrangement directly between Baker Tilly and Mira.”

65.

After some discussion of the details, my brother and I concluded the meeting by saying that I was happy to proceed as discussed, with Michael Taub as expert witness and his team to assist him to produce the Report discussed to be used with the regulatory authorities.

…

73.

Given that the meeting on 7 September 2006 was the formative and sole meeting between me and Baker Tilly before the court case and before the draft Report was produced, and at which the terms of reference, goal, outputs and fundamental agreement was reached, the records of this meeting are clearly of great importance. In particular it was the one and only chance the Baker Tilly partners had to question me to obtain clarifications they required. I have been shown a record dated 6 September 2006 in preparation for the meeting on 7 September 2006, headed “matters to be established”. Although I took no notes (as I was answering questions mainly) I recognise the questions and issues on the document and can confirm that the meeting did not end until all Baker Tilly’s questions were answered.

…

77.

On 8 September 2006 Michael Taub wrote following the meeting, expressed delight at the opportunity and offered to do the work. His email thanked me and my brother on behalf of him and his team for attending. We stood down or did not pursue the other tenderers; John Ellison of KPMG and Alix Partners and did not pursue Grant Thornton. I was given to understand that work started promptly on 8 September 2006 and it was my belief, based on what I was told, that it had done. I have been provided with a file note written by Ian White dated 8 September 2006 which sets out precisely the areas on which I would have expected the Report to focus. This never changed, including according to the other Baker Tilly file notes from disclosure.

78.

Over the next few days a number of telephone calls were made between me and Ian White on behalf of Baker Tilly regarding the fee for the work to be undertaken. It was agreed specifically that the price of the Report would be subject to a maximum “cap” of £30k plus VAT. It was confirmed as agreed in the 7 September meeting that the Report would be produced, irrespective of settlement of proceedings in Court, so as to take to regulatory authorities as agreed. Ian White told me he thought that £30k would give Baker Tilly “plenty of headroom” (8-9 days of senior partner time, I calculated, when I first saw the rates in the December bill), as the matter had been well documented (there is a file note I have seen on disclosure) and Baker Tilly were not required to find on facts (there is a file note I have seen on disclosure). It seemed to me that he had spoken to someone else before proposing this capped fee (he went off and said he would revert to me before he made the suggestion) and I presumed it was Michael Taub, whose assistant he had been presented as being dealing with liaison with me and project logistics.

…

79.

After the extensive meeting on 7 September 2006, we speedily conferred with our counsel and confirmed with Baker Tilly that we would engage them and confirmed that we accepted the proposal of Michael Taub as our expert witness. I do not now recollect which day each communication was precisely but I believe they were 7 September after the meeting and 8 September. This information was relayed to our counsel, Andrew Hochhauser Q.C. When the tribunal chairman asked him our choice of expert witness, he confirmed that it would be Mr. Taub.”

Although the account given by Miss Makar rather tended to elide what she said were the events of the meeting of 7 September 2006 with what she contended happened subsequently, it appears that she did not assert that an oral agreement was made at the meeting on 7 September 2006 itself, but rather in the course of telephone conversations over the ensuing days. She also contended, both in her witness statement, and orally in the course of cross-examination, that the Firm did in fact start work on a report for use in the ET Proceedings from about 8 September 2006, notwithstanding that the Firm’s case was that it did not, and did not seek to charge for any work prior to receipt of the instruction of BS on 17 October 2006 to “read in”. Mr. Semken suggested to Miss Makar in cross-examination that, until the Firm received the documents sent on 17 October 2006, it was not in a position in any event to commence work. Miss Makar did not accept that, but it seems to me to be obvious, having regard to the nature of the documents provided prior to the meeting on 7 September 2006.

Neither in the Re-Amended Defence and Counterclaim in this action, nor in the written skeleton argument of Mr. Phipps was the nature of Miss Makar’s case as to when and how a contract between Miss Makar and the Firm was made really addressed. The closest the pleaded case seemed to get was in paragraph 17:-

“Having discussed the mode of payment, Ian White postponed a decision until after seeking authority for agreement of the terms of payment. Thereafter and by 12 September 2006, Ian White telephoned the Defendant and stated that the report ought to be relatively easy and quick to prepare and that the total cost would fall well short of £30,000 plus VAT. Accordingly and in any event Ian White on behalf of the Claimant offered to provide a completed report at a capped total charge of not more than the sum of £30,000 plus VAT and/or such said report to be available and ready as soon as possible after 15 October 2006 and in any event by 31 October 2006 as the Defendant’s said expert report for the trial commencing on 6 November 2006.”

Miss Makar did not herself seek to chase the Firm to provide a “proposal” or any other documentation in support of what she contended she considered was an agreement between the Firm and herself. She did not write to confirm to the Firm what she said had been agreed.

Of those present on behalf of the Firm at the meeting on 7 September 2006 Mr. White, Mr. Taub and Mr. Souster were called to give evidence. Each agreed with this account of Mr. White at paragraph 19 of his witness statement dated 24 February 2009:-

“I attended this meeting together with Mr. Taub, Mr. Souster and Mr. Whiter. As I recall, Mr. Makar arrived on time and the meeting began without Miss Makar, who was detained elsewhere. The meeting was very long. Mr. Souster left the meeting part-way through and returned to it following a lunch engagement and Mr. Taub left the meeting early.”

That account was also accepted, I think, by both Miss Makar and Mr. Makar. If, as Miss Makar and Mr. Makar would have it, Mr. Taub was intended to be the expert witness on behalf of Miss Makar, it seems odd that he left the meeting early.

Each of Mr. Taub and Mr. Souster agreed in his witness statement prepared for the purposes of this action with the account of events given by Mr. White in his witness statement, so far as Mr. Taub or Mr. Souster, as the case might be, had knowledge of the events in question. Mr. White said this in his witness statement about the meeting on 7 September 2006 and the immediate aftermath:-

“21.

I have read Ms Makar’s Defence to Baker Tilly’s claim and note that she claims that she made clear at this meeting that any “report was for the express purpose as evidence pursuant to the Order of the Employment Tribunal and/or it was further to be for use of [Ms Makar] to demonstrate to UK Listing Authority and/or the Regulators that they should re-open their inquiry relating to Triad”. This was not the case. The Makars explained to us that they had made approaches to various regulators following Ms Makar’s investigations into Triad, but at that stage we were told that she wanted an expert to give evidence to the Employment Tribunal. We were participating in a competitive tender process to be appointed as such an expert.

22.

During the course of the meeting, all of the Baker Tilly attendees provided the Makars with information about our own respective practice areas and expertise. It would have been apparent to the Makars that if they were to instruct us following the meeting (which, we understood, was not certain as they were meeting with other accountancy firms), any technical analysis would have been provided by Mr. Souster and/or Mr. Whiter, but not either Mr. Taub or myself.

23.

No instructions were received from the Makars during the meeting, nor was there any indication that instructions would follow shortly. I have seen Ms Makar’s Counterclaim in which she alleges that we agreed a two stage approach to preparing the report during this meeting. We might well have suggested such an approach in the context of a very broad discussion on our general approach to expert reports, as this was our normal way of working. However, we did not agree that we would work on this basis for Ms Makar. Matters did not progress that far. We did not know if we would even be instructed to act on Ms Makar’s behalf.

24.

I note from her Defence that Ms Makar alleges that Baker Tilly were made aware during this initial meeting that the report was to be crucial to the success of her claim and her exoneration. This may have been mentioned by Ms Makar, when she explained that she required expert evidence for the purposes of the Employment Tribunal. We were unable to say at that stage whether our evidence, were we to be appointed as Ms Makar’s expert, would vindicate her case. At that stage, there was no discussion that the report would be used for another, wider purpose.

25.

Following the meeting, on 8 September 2006 I spoke with Ms Makar and there is an attendance note of our discussion … Ms Makar had telephoned me to provide me with some further information. She confirmed that there was an indemnity for directors’ costs in place, up to £1 million. She also discussed again the investigations she had carried out on account of the financial irregularities within Generic. Her primary concern was clearly PwC’s role, given the auditors’ statement in July 2005 to the signed off accounts. As I recall her concern was how PwC had signed off an unqualified audit opinion when the Chairman’s statement had suggested there may be a qualification. She thought that perhaps they could have come under some pressure from the other directors of Triad to give an unqualified opinion. Essentially, Ms Makar considered that the other directors, Allen & Overy and PwC were all involved in a cover-up and she needed to prove that she was right. I did not provide any advice to Ms Makar during this telephone conversation or agree to undertake any work on her behalf.

26.

I see from Ms Makar’s Reply that she alleges that I accepted the instruction on behalf of Baker Tilly on 12 September 2006. I have no record of a telephone call between us on this date. If such a call did take place I believe I would simply have reiterated to Ms Makar that Baker Tilly would be pleased to assist her with her case, subject to engagement terms being agreed. There were, at this time, no instructions to accept.

27.

My notes indicate that I did not speak to either Ms Makar or her brother again until 25 September 2006. On that date, Mr. Makar telephoned me to discuss Baker Tilly’s likely fees in the event we were instructed to carry out work on their behalf. I made a note of our telephone conversation…. I advised Mr. Makar that the fees for the assignment were likely to be in the range of £25,000 to £38,000, based on hourly rates. In response, Mr. Makar asked what documents I would need to see or receive in order to provide a fixed fee quote. I advised that I could only provide a fixed fee quote once there was agreement on the actual scope of our instructions with Ms Makar’s then solicitors, Russell Jones & Walker. In addition, I would need to obtain approval for the fixed fee from my fellow partners.

28.

Following this call, I had a discussion with Ms Makar which I believe also took place on or around 25 September 2006. I made a note of our discussion … Ms Makar asked if we were preparing a proposal for the work, setting out what the work involved and how we proposed to carry it out. She offered to assist by providing materials (from which I assumed she meant documents) and her suggestions on the approach we should take. She also suggested that Keith Roberts (of Eade & Roberts) could assist as he had helped Ms Makar previously in respect of her own investigations. Ms Makar also advised me that she was preparing a dossier of the facts, so that we would not need to collate these. Ms Makar concluded the conversation by telling me that she had decided to change solicitors from Russell Jones & Walker to Burges Salmon as she considered that Russell Jones & Walker were out of their depth. Again, I do not recall making any comments of substance during the telephone call, and my note reflects this. It was still not clear to me that Ms Makar would actually instruct us to assist her, although it sounded as though she was preparing to instruct some firm of accountants at this time.

29.

I did not have any further communication with Ms Makar, her brother or her legal representatives for a further three weeks. Then, on 17 October 2006, I received a telephone call from Ms Makar … She said that she wanted the Baker Tilly team to start reading in to the background. This was the first instruction we had received from Ms Makar to carry out any work on the matter.”

On the material before me it seems to be plain that not even on the evidence of Miss Makar and her brother was an agreement between the Firm and Miss Makar said to have been made at the meeting on 7 September 2006. Rather Miss Makar’s case seems to be that an oral agreement was made after that meeting, perhaps on 8 September 2006, perhaps on 12 September 2006, possibly when Mr. White agreed that the fees to be charged by the Firm for producing a report would be capped at £30,000 plus Value Added Tax. There was no documentary evidence in support of that case. The documentary evidence to which I have referred, as it seemed to me, was completely inconsistent with an agreement having been made orally as Miss Makar apparently contended. As against that, the contemporaneous documentary evidence amply supported, in my view, the case of the Firm as to the relevant instructions which it contended had been received from Miss Makar or from BS, acting on her behalf. There was a clear instruction from BS to the Firm to start reading in to the documents relevant to the ET Proceedings given by Mr. Britton’s e-mail dated 17 October 2006, and that was followed by delivery of documents to read. Again, there was a clear instruction given by BS by the Letter of Instruction to prepare an expert’s report for use in the ET Proceedings on behalf of Miss Makar. Lastly, there was a clear instruction by Mr. Britton on 6 November 2006 to the Firm not to cease work on the report.

I regret to say that, quite apart from the documentary evidence, which in my judgment pointed all one way in favour of the case of the Firm, I was unimpressed by both Miss Makar and her brother as witnesses. It seemed to me that her whole case in this action had been constructed on an opportunistic basis, seeking to exploit perceived deficiencies in the contemporaneous documentation available to be put before the court. Moreover, I formed the clear impression that at times in both the cross-examination of Miss Makar and in the cross-examination of Mr. Makar they were essentially just making things up in answer to questions put by Mr. Semken.

On the other hand, I was impressed by the witnesses called on behalf of the Firm, particularly by Mr. White, Mr. Tristem and Mr. Harwood. I thought that all of the witnesses called on behalf of the Firm sought to assist the court, so far as his recollection could, and prompted, where available, by contemporaneous documentation. I have no hesitation in preferring the evidence of the witnesses called on behalf of the Firm to the evidence of Miss Makar and that of her brother, where there was a conflict.

Mr. White, in re-examination, became involved in these exchanges with Mr. Semken (Transcript, Day 2 page 72 line 25 to page 74 line 14);-

“MR SEMKEN: Mr. White, you were asked yesterday that if you had agreed to a retainer to prepare the report on about 12 September 2006 – that is shortly after the meeting on 7 September – whether you would then set to work. You said you wouldn’t set to work without an engagement letter in place.

What was the significance to you of having an engagement letter in place?

A. The procedures to which I have always worked and which Baker Tilly worked at that stage were that although I hear lawyers speaking about retainers, we would regard ourselves as being at risk as to time costs and at risk as to the number of other risk management matters dealt with in the firm’s terms and conditions, if we embarked on a project which would – without having those contractual terms in place.

So simply it is not something that one would do. One wouldn’t expect to be paid for work done other than on an engagement letter and that is only part of it.

Q. Yet it is your case that you did, in fact, start some work for which you started to record chargeable hours towards the end of October, 17 or 20 October, the reading in work. How does that square with your previous answer?

A.

I believe I would have said in answer to that – I hope I would have said in answer to that question that there is a problem for somebody who is in the position of being an expert witness in that he knows he is going to be instructed to prepare a report to the court. When that becomes likely then he knows that the administration involved in the preparation of an engagement letter and so on sometimes has to follow the event, to a reasonable degree.

So at that stage lawyers were clearly instructed and I was in correspondence with the lawyers and it was the lawyer who was asking me to start reading in. So we did that. At the time it has been – I would have regarded it at the time as being completely at risk in terms of whether we would get paid for that reading in if, subsequently, the instructions weren’t confirmed.”

In his closing submissions Mr. Phipps reminded me of that evidence and submitted that the answers given by Mr. White showed that, in relation to the instructions given by the e-mail of 17 October 2006, Mr. White had no intention of entering into legal relations, and thus no binding contract to pay for the work requested by that e-mail could have arisen. Mr. Phipps put his submission in this way (Transcript, Day 5 page 112 line 21 to page 113 line 5):-

“If Mr. White himself had no intention of entering into a binding contract but was simply agreeing to work on his own risk, then in my submission it cannot be right that there was a binding contract created on that day. And I emphasise this is the claimants’ own case. It is not consistent with our primary case, my Lord, but it cannot be right that there was a binding agreement entered into that day when the only person who was capable of entering into that contract didn’t intend to do so.”

The difficulty with that submission, as it seemed to me, was that it equated the evidence of Mr. White, which was to the effect that he thought that there was a risk of not being paid if no engagement letter had been produced, with his position being that he had no intention of being paid, which was not what he said. It appeared clear to me that in the passage of his evidence on which Mr. Phipps relied Mr. White was in fact confusing a number of issues, namely a right to be paid for work done, the practical difficulties if there was no clear evidence of the giving of instructions, and the preference of the Firm for entering into contracts on its own standard terms rather than the terms proposed by others. Doing the best I could with Mr. White’s evidence, it seemed that he intended that the Firm should be paid for the work done in response to the instructions contained in the e-mail of 17 October 2006, for otherwise he would not have started to record time spent in performance of those instructions as chargeable. However, he seems to have thought that, however slight the risk of non-payment was, since the instructions came from solicitors, there was nonetheless a risk of non-payment until the instructions to the Firm were confirmed.

In the result I reject the submission of Mr. Phipps. I find that the instructions contained in the e-mail of 17 October 2006 from BS amounted to an offer to enter into a contract on behalf of Miss Makar with the Firm under which the Firm would commence reading in to documents, copies of which were provided, with a view to equipping itself to provide an expert’s report for use on behalf of Miss Makar in the ET Proceedings, in consideration for which, impliedly, Miss Makar would pay the Firm a reasonable fee for the work done in response to the instruction. Thus I am satisfied that the Firm is entitled to charge the sum of £5,850, which I find to be a reasonable fee, for the work of reading in done by Mr. White subsequent to receiving that instruction.

I find that the second retainer of the Firm by Miss Makar was to be found in the Letter of Instruction and the Letter of Acceptance. Mr. Semken did not accept that that was a correct analysis in law of the communications between the parties. He emphasised that neither of the documents to which I have referred set out the fees of the Firm for complying with the instructions given. That is correct, but not an insuperable obstacle to the conclusion of a contract for the simple reason that, if necessary, the law implies an obligation to pay a reasonable fee for the work done in response to a request. Mr. Semken, however, contended that either the Letter of Engagement was an acceptance of the offer contained in the Letter of Instruction, or, more probably, it was a counter-offer accepted by conduct in permitting the Firm to work on the production of the expert’s report. Notwithstanding that the counter-offer was not accepted in the manner prescribed by its terms, that is to say, by counter-signature and return, Mr. Semken contended that it was accepted by conduct. I cannot accept the submissions of Mr. Semken as to how the second retainer was agreed.

My findings as to how the second retainer was agreed do in fact dispose of an issue which concerned Mr. Semken a little, namely the termination of the second retainer. Mr. Semken made submissions to me to the effect that, notwithstanding that the second retainer was not terminated in writing, as envisaged by clause 1.1 of the BT Terms, the Firm could waive that provision and treat the notice given on 4 November 2006 that the ET Proceedings had settled as a termination of the second retainer. If the second retainer did not incorporate the BT Terms the issue does not arise.

What did arise, however, was the submission of Mr. Phipps that the correct interpretation of whatever voicemail message was left by Katie Knight on the morning of 4 November 2006 was not that the second retainer was terminated, but rather that it was no longer as urgent to complete the expert’s report. I have rejected that submission for the reasons which I have set out earlier in this judgment. Whatever precisely Katie Knight said, whatever it was related, on my findings, to a retainer to provide an expert’s report for use in the ET Proceedings. As that requirement had ceased to exist, by reason of the settlement, the only sensible interpretation of whatever was said must have been that the report was no longer required, and so the engagement was terminated.

My finding that the second retainer was terminated by instructions given on behalf of Miss Makar is important for at least two reasons. One is that, without the termination of the second retainer, there would have been no possibility of there being a third retainer. Another is that Mr. Phipps submitted that the second retainer, if I found that there was such, was an entire contract, so that the Firm was not entitled to payment of fees under it unless and until it produced the expert’s report the subject of the retainer. Obviously there could be no complaint on the part of Miss Makar of the non-production of the report if it were on her, or her agent’s, instructions that work on the report ceased. I incline to the view that Mr. Phipps was right in submitting that the second retainer was, when made, an entire contract, but, given that the purpose of the contract was the production of a report for deployment in legal proceedings, and given that, certainly in civil litigation in this country, in percentage terms the number of cases which settle before trial is high, I should have thought that it was probably an implied term, as representing the common, unexpressed, understanding of the parties, that the party commissioning the report could terminate the engagement at any time, on the basis that that party would be liable for payment of the reasonable fees of the expert for the work done up to the date of termination.

Mr. Phipps submitted that the alleged third retainer was vitiated as a contract on the same basis that the alleged first retainer was vitiated, namely lack of intention to enter into legal relations. I need not revisit that issue, for the answer is the same in relation to this submission as it was in relation to the first retainer. However, Mr. Phipps also submitted that, as he put it at Transcript, Day 5 page 116 lines 17 – 23:-

“… if the claimant’s case is right, there cannot possibly be any charge for fees raised in respect of work after 4 November because if the existing retainer was terminated, it is simply not possible to imply, as a matter of necessity, a further retainer in the circumstances that pertained at the time.”

Whilst it is correct that the case of the Firm in relation to fees after 4 November 2006 was put as arising under an implied contract, it was in fact clear that what was relied upon was the express request by Mr. Britton on 6 November 2006 that work on the report continue on the basis that the cost would not exceed £30,000 plus Value Added Tax. That, as it seems to me, was not an implied contract, but an express offer on behalf of Miss Makar to pay not more than £30,000 plus Value Added Tax if the report was completed. In my judgment, the Firm accepted that offer by conduct in continuing to work on the report. Mr. Phipps submitted, on that analysis (Transcript, Day 5 page 117 lines 10 – 24):-

“But the professional has to make it clear to the client that that is how the professional is treating it.

On the evidence, in my submission, what is established quite clearly is that Ms Makar was making it clear that she expected the report on the basis of the existing retainer.

In those circumstances, if the professional agrees to do work, if the professional doesn’t at that point say, “But hold on, you do appreciate you are going to be charged separately for this”, then it would be monstrous if the professional could turn around afterwards and say, “I never corrected your understanding. I was just going along with the situation and here is my bill for £12,000.””

The answer to that submission, I think, is that the evidence did not establish that Miss Makar wished to obtain the report under the existing retainer to provide a report for use in the ET Proceedings, but rather that she wanted to obtain a report for no more than £30,000 plus Value Added Tax, which is a different point. The Firm, as it seems to me, agreed to that limitation, by conduct in carrying on with the work towards a report. Despite the breaking down of the sums claimed in this action between the work done under the first retainer, the work done under the second retainer and the work done under the third retainer into elements which, when aggregated, exceed £30,000, plus Value Added Tax, the overall sum claimed in this action was limited to £30,000 plus Value Added Tax.

The remaining issue arising directly in connection with the retainers of the Firm and relevant to its entitlement to the sum claimed, is how the third retainer came to an end. That depends upon what happened at the meeting on 20 November 2006.

I have already set out some of the evidence as to what happened at that meeting. Mr. White’s account in his witness statement of how the meeting ended was set out at paragraph 80:-

“Mr. Tristem advised Ms Makar that it would be better for her to wait for the company to publish its interim results before deciding whether to take the matter any further. If there was, for instance, a £5 million write off in those accounts there may be a legitimate concern which could be worth pursuing. If that was the case, Mr. Tristem advised that he may be able to prepare a report considering the corporate governance issues within Triad or commenting on PwC’s conduct. It was left that Ms Makar would wait until the interim results were published and then consider whether she wished to instruct Baker Tilly to carry out any further work.”

Mr. Tristem’s account, at paragraphs 28 and 29 of his witness statement dated 24 February 2009, was similar:-

“28.

Towards the end of the meeting I offered to record in writing that it was odd that PwC had changed their position so quickly from potentially giving a qualified audit opinion to actually giving an unqualified opinion. In addition, I explained that, whilst we could not opine on the accounts themselves, it may be possible for us to review the corporate governance of Triad in line with the best practice guidelines for listed companies set out in the relevant Code of Conduct, provided the Makars gave us further instructions to carry out this work. Whilst it is not clear from Mr. White’s note, I thought that this suggested further work would only be productive in the event that Triad’s interim results did reveal a large “hole” in the accounts. Ms Makar did indicate during the meeting that she might wish us to consider corporate governance issues “the narrow way” (from which I understood her to mean that she may wish us to review the conduct of the directors and not PwC or Allen & Overy); however, this was not a formal instruction. It was clearly left that we would await further instructions from Ms Makar.

29.

… Neither I nor any other member of the Baker Tilly team received any further instructions from Ms Makar. As a result I carried out no further work on her behalf.”

I accept the evidence of Mr. White and Mr. Tristem as to the conclusion of the meeting on 20 November 2006. I find, therefore, that it was agreed between Miss Makar and the Firm that no further work would be done pursuant to the terms of the third retainer pending the publication of the interim results of Triad, and further instructions from Miss Makar, which never came.

The principal defence of Miss Makar to the claim of the Firm in this action was, in effect, that the Firm was bound by contract to produce an expert’s report and that, absent the production of such report, it was not entitled to any payment. For the reasons which I have given, that defence fails.

A second major issue raised was the contention that the Firm had contracted to provide Mr. Taub as the expert witness on behalf of Miss Makar. I describe it as an “issue”, rather than a defence, because it did not seem to lead anywhere as a defence. In his closing submissions Mr. Phipps I think accepted this, contenting himself with this submission (Transcript, Day 5 page 120 line 24 to page 121 line 7):-

“But if for any reason your Lordship were to form the view that actually the time spent by Baker Tilly was chargeable, then my Lord – and it is a small point because Mr. Tristem’s fees were relatively limited – but in our submission, it would be inappropriate to charge my client those fees in circumstances where he wasn’t a satisfactory substitute or an agreed substitute for Mr. Taub. So that is where the argument goes, my Lord.”

It was plain, in my judgment, that there was no express term of any of the contracts made between the Firm and Miss Makar that Mr. Taub should be the expert witness on behalf of Miss Makar. In the light of that conclusion I am satisfied that the Firm is entitled to charge fees for work done by Mr. Tristem.

I have already indicated my conclusions on the objections advanced by Mr. Phipps to particular elements of the claim of the Firm.

The remaining defence of Miss Makar was of set off of sums due to her in respect of her counterclaims.

Before coming to the counterclaims of Miss Makar it is appropriate to record that, although the Firm was criticised for how Mr. White, in particular, responded to the requests of BS to comment on the issue of the necessity, for the purposes of the production of an expert’s report, of the categories of document listed in the Documents Schedule, that matter was not said to give rise to any defence to the claims of the Firm, or to any counterclaim on the part of Miss Makar.

The counterclaims of Miss Makar were conveniently summarised in the written skeleton argument of Mr. Phipps at paragraph 28:-

“D advances the following causes of action against C:

a)

C failed in breach of contract to provide its report.

b)

C failed in breach of contract to provide its report in time to enable the report to be used at the mediation of D’s dispute with Triad.

c)

C, in breach of common law, contractual and/or fiduciary obligations to D, failed to inform D fully of C’s prior dealings with Triad.”

I have already indicated my conclusion that, in the circumstances which I have found, the Firm was not obliged to provide a report to Miss Makar. Consequently the first ground of counterclaim fails.

The second ground of counterclaim fails on the simple ground that it was not a term of any retainer of the Firm by Miss Makar that the Firm provide a report “in time to enable the report to be used at the mediation of D’s dispute with Triad”. The relevant retainer was the second, and that required the production of the report by 6 November 2006, whereas the mediation was on 3 November 2006.

The third ground of counterclaim requires a little more consideration.

It depended critically upon a document (“the Agenda”) entitled “TRIAD GROUP PLC Agenda for meeting to be held at 6^th Floor, 145 Cannon Street on Friday 17 March 2006 at 4.30 pm”. The Agenda was in these terms:-

“1.

Introductions

2.

Triad Group: Key business issues for sustainable, profitable growth

3.

Key take-on considerations arising from recent Press coverage

i)

Alleged financial and accounting irregularities and the resulting independent investigation

ii)

Circumstances surrounding Ms Makar’s suspension from the Board and subsequent dismissal

iii)

Status of Ms Makar’s legal proceedings against the company

iv)

Failure to keep proper accounting records, disclosure within directors’ report and factors that led to a “clean” audit report to be given

v)

Outcome of reported FSA enquiry into the company

vi)

Discussions with Brokers/Lawyers/PwC

4.

Key corporate governance issues

i)

Update on intentions to appoint another non-executive director

ii)

Splitting the roles of Chairman/Chief Executive

iii)

Constituting an appropriate Audit Committee

6.

[sic] The Baker Tilly approach

Communication is crucial

- preliminary assessment of the reliability of internal controls

- initial partner-led planning meeting

- preparation of draft audit plan for consideration by those charged with governance

- carry out “early warnings work”

- on-site manager and partner file reviews

- partner-led discussions with management on audit findings

- preparation of draft audit findings report for comment

- circulation of final audit findings report to those charged with governance

- attendance at audit committee meeting

Approval of financial statements/preliminary announcement

Approach and delivery

- focus on key audit risks and controls designed to manage them

- keep business disruption to a minimum

- use your management information/don’t re-invent the wheel

- provide meaningful observations for management

- provide pragmatic support and assistance

- solutions driven

7.

Conclusions/next steps ”

The Agenda was produced by Mr. Mark Harwood of the Firm in the context of the search of Triad for auditors to take over from PwC.

In the Re-Amended Defence and Counterclaim of Miss Makar the meeting of 17 March 2006 between representatives of the Firm, in fact Mr. Harwood and his partner, Mr. Paul Newman, and representatives of Triad was called “the March 2006 Meeting”. The allegations about the March 2006 Meeting pleaded on behalf of Miss Makar were:-

“40.

Before, at and/or after the March 2006 Meeting, the Claimant proposed to Triad that Triad should retain the Claimant as its auditor in place of PwC, who had resigned as the Claimant’s [sic – presumably “Triad’s” was meant] auditor following their approval of the Claimant’s [sic] accounts for the year 2004/2005.

41.

At the time of its proposal to Triad, the Claimant knew (further or alternatively, should have known and/or would have been presumed by Triad to know) of the matters identified in the agenda referred to at paragraph 39 above [that is, the Agenda, in particular section 3], and/or:

a.

that PWC had resigned as Triad’s auditor without giving any public reason for their resignation;

b.

that Triad was in dispute with the Defendant;

c.

that the Defendant alleged, among other things, that:

i.

Triad’s financial statements were unreliable and concealed, or failed to disclose, significant financial malpractice;

ii.

PwC should not have approved Triad’s financial statements for 2004/2005; and

iii.

Triad’s accounting and financial reporting systems were not in a condition that would permit an external auditor properly to commence (let alone to complete) a statutory audit of Triad, without there having first been a full internal “100%” audit in order to reconstitute Triad’s records.

42.

Accordingly, by offering to accept office as Triad’s auditor, the Claimant expressly or impliedly represented to Triad that:

a.

Triad’s accounting and financial reporting systems were considered by the Claimant to be in a condition that permitted an external auditor properly to commence (and also to complete) an audit of Triad; and

b.

the resignation of PwC, the matters identified in the agenda referred to at paragraph 39 above and/or the allegations of the Defendant did not raise such concerns as would deter the Claimant (or indeed any reputable firm of accountants) from accepting an audit retainer from Triad.

43.

In the course of carrying out the checks referred to at paragraph 8 above [essentially designed to avoid conflicts of interest], the Claimant discovered or should have discovered (if and to the extent that it was no longer aware of them) both the fact of the March 2006 Meeting and (upon further appropriate internal enquiry) the nature and content of its discussions with Triad. The Claimant should at that point have appreciated (among other things) that the principal issues raised by the Defendant’s instructions included a number of issues which the Claimant had previously discussed with Triad and/or in relation to which the Claimant had already provided an opinion to Triad that was unfavourable to the Defendant’s interests. Thereupon, in accordance with the Claimant’s fiduciary obligations to the Defendant and/or the Claimant’s contractual and common law duties of care, the Claimant:

a.

should have declined to act for the Defendant; and/or

b.

should have made full disclosure to the Defendant in relation to the March 2006 Meeting. The Defendant will refer in this regard to:

i.

the Claimant’s subsequent assertion (in a witness statement by its solicitor dated 27 February 2009) that it received no confidential information from Triad at the March 2006 Meeting; and/or

ii.

section 220 of Part B of the ICAEW’s Code of Ethics.

44.

Further, in late October 2006 the fact of the March 2006 Meeting again came to the attention of the Claimant. The Defendant will refer to an e-mail sent from Mr. Harwood to Mr. Nigel Tristem, also of the Claimant. At 14.54 on 31 October 2006, which referred expressly to the March 2006 Meeting and the Claimant’s proposal to Triad.

45.

The Claimant should at that point have taken steps identified at paragraph 43 above (having failed to take them previously).

46.

In breach of the contractual, common law and/or fiduciary duties owed by the Claimant to the Defendant, the Claimant failed at any material time to inform the Defendant of the March 2006 Meeting (let alone to provide full disclosure in relation thereto). By reason of the Claimant’s wrongdoing, the Defendant remained entirely ignorant of the March 2006 Meeting until about early April 2009 (following the Claimant’s belated provision of limited disclosure towards the end of February 2009).

47.

If the Defendant had been properly informed of the March 2006 Meeting by the Claimant, the Defendant would not have retained the Claimant, alternatively would have terminated the Claimant’s retainer. The Defendant would instead have retained an alternative firm of accountants to provide her with the expert assistance, advice and/or evidence that she required.”

The significance of the allegations set out at paragraphs 40 to 47 inclusive of the Re-Amended Defence and Counterclaim is obscure. If those matters had been alleged in the Defence rather than in the Counterclaim one could, perhaps, see the point of them, for, if of substance, an alleged conflict of interest which prevented the Firm effectively providing expert evidence at a hearing of the ET Proceedings would have meant that the cost incurred in obtaining the report commissioned from the Firm was wasted. No particular loss alleged to be consequent upon the matters complained of which could logically have followed from those matters appeared in the Re-Amended Defence and Counterclaim. It is difficult to resist the conclusion that the discovery of the Agenda was simply seized upon in an opportunistic fashion to throw mud at the Firm. It does appear that, notwithstanding the existence within the Firm of procedures designed to avoid conflicts of interest or embarrassment in assuming retainers, in this case the involvement, such as it was, of Mr. Harwood and Mr. Newman, with Triad in March 2006 was not, or was not effectively, communicated to Mr. Taub or Mr. White in about September 2006 in response to the circular e-mail dated 24 August 2006 which I have already quoted, and, when that information was effectively communicated at the end of October 2006, there was no clear evidence that the significance of the involvement was assessed.

However, the edifice which was sought to be built upon the Agenda was, first, that the Firm had made a positive pitch to secure the audit work of Triad, or, alternatively, that, if not, Mr. Harwood and Mr. Newman had been made privy during the meeting with Triad representatives to confidential information which compromised the ability of the Firm to perform its contractual obligations to Miss Makar.

Mr. Semken emphasised in his closing submissions that there was no pleaded allegation in the Re-Amended Defence and Counterclaim that any confidential information had been communicated to Mr. Harwood or Mr. Newman. Mr. Phipps explained that he wished to pursue this point, and, if necessary, further to amend Miss Makar’s pleaded case. The matter was left that I would consider the necessity for any amendment following the making of my findings of fact, if, in the light of those findings, that issue remained live.

The evidence of Mr. Harwood set out in his witness statement dated 15 June 2009 was to the effect that Triad made contact with Baker Tilly concerning the possibility of Baker Tilly becoming the auditors of Triad. A meeting was arranged for 17 March 2006. In advance of the meeting Mr. Harwood and Mr. Newman undertook some research on the internet into Triad, and downloaded various documents. What they discovered informed the preparation of the Agenda, which was compiled before the meeting. What happened at the meeting was:-

“17.

I attended the meeting with Triad together with Mr. Newman from Baker Tilly. The meeting was attended by Mr. Burrows and also Mr. Rigg of Triad. Mr. Newman took a handwritten note of the issues discussed at the meeting. …

18.

The meeting lasted for approximately an hour. I believe that Mr. Newman’s handwritten note accurately summarises the comments made by Mr. Burrows and Mr. Rigg. In essence, the meeting was about the company as a whole. As is apparent from the notes, the situation with Ms Makar was only a small part of the discussion.

19.

As Mr. Newman’s note confirms, the meeting began with Mr. Burrows and Mr. Rigg providing us with a brief introduction to Triad, both its history and the type of business it carried out.

20.

We then enquired about the concerns raised by Ms Makar in respect of the potential accounting frauds. As recorded in the notes, Mr. Burrows and Mr. Rigg told us that they had got to the bottom of this issue and that there was no cause for concern. They also told us that Ms Makar had wanted to take the matter further and suspend the shares which, in turn, had led to her suspension as Chief Executive on 4 February 2005.

21.

Mr. Rigg and Mr. Burrows also mentioned an FSA enquiry in passing, although I cannot recall precisely what was said in respect of this.

22.

We, in turn, enquired about the dual role of Mr. Rigg as Chairman and Chief Executive and the limited number of non-executive directors disclosed in the accounts (which were corporate governance issues).

23.

As is clear from the note, John Rigg and Nick Burrows provided us with the names of their stockbrokers, Evolution and their lawyers, Allen & Overy. They told us that PwC had resigned.

24.

We briefly enquired about Ms Makar’s legal proceedings against the company (as we were aware from the press releases that Ms Makar had brought proceedings to compel access to the company’s records). We were then advised by Mr. Burrows/Mr. Rigg that Ms Makar had commenced an Employment Tribunal claim on the grounds of unfair dismissal and whistle-blowing. They did not provide us with any further information about this. We were not aware of the Tribunal claim prior to the meeting.

25.

We also enquired about the company’s current financial position and Mr. Rigg provided us with copies of the year end accounts for 2005 and the interim statements for 2005-2006 (both of which were publicly available) … He did not provide us with any other documents or information.

26.

Although we had set out on the agenda Baker Tilly’s general approach to audits, I do not recall that we actually discussed this with Triad during the meeting. We had gone to the meeting with concerns about Triad and neither Mr. Burrows nor Mr. Rigg had yet allayed these concerns sufficiently for us to want to respond to an invitation to pitch for the audit.

27.

At the end of the meeting I recall that we asked Mr. Rigg if we could speak with Allen & Overy, Evolution and PwC and it was left that Mr. Rigg would arrange for these discussions to take place.

28.

Even in the event that the additional information could have been provided by Evolution, Allen & Overy or PwC, we would have had to have presented our findings to the risk committee at Baker Tilly and obtained their agreement to take the matter forward before progressing to either an audit pitch or taking on Triad as a client.

29.

In summary the meeting on 17 March 2006 was only a preliminary meeting arranged for the purpose of gathering general background information about the company and introducing Baker Tilly. As is clear from the note of the meeting, we obtained very little background information and certainly nothing that was not publicly available.

30.

For the purposes of making this statement I have been shown paragraph 40 of the Re-amended Defence and Counterclaim. It is not the case, as alleged, that either before at and/or after the March 2006 meeting, we proposed to Triad that Triad should retain Baker Tilly as its auditor.

31.

In addition, and in response to paragraph 41 of the Re-amended Defence and Counterclaim, we were not given any specific information regarding the background to PwC’s resignation. In respect of the Employment Tribunal proceedings, all we were told was that Ms Makar had brought Employment Tribunal proceedings alleging whistle-blowing and unfair dismissal.”

Mr. Harwood accepted in cross-examination that his recollection of the meeting on 17 March 2006 was poor and that he had rather depended on the Agenda and the notes made by Mr. Newman in reminding himself of what had transpired. Nonetheless, he was confident that if he had been told anything significant at the meeting he would have recalled.

A copy of the notes made by Mr. Newman, and a copy of a transcription of the notes, were put in evidence. The notes were very skimpy – usually a word or two on a line – and very difficult to interpret simply by reading. Mr. Phipps pressed Mr. Harwood quite hard with the suggestion that confidential information was disclosed during the meeting, but Mr. Harwood would not accept that. In his closing submissions Mr. Phipps contended that the absence of Mr. Newman as a witness was significant and that I should draw adverse inferences from his non-attendance at the trial. The adverse inferences I was invited to draw were, I think, that some confidential information had been disclosed to Mr. Harwood and Mr. Newman. Mr. Harwood was also pressed as to his own opinion as to whether there would have been a conflict of interest if he had become involved, as was at one stage suggested, in the work for Miss Makar. He said (Transcript, Day 2 page 128 line 17 to page 129 line 9):-

“I think it would not be for me to determine whether there was a conflict of interest because obviously I was not aware of the instructions that had been issued or the circumstances relating to them and based on my knowledge of the meeting that Mr. Newman and I had with Triad, I can’t perceive that there could be a situation in which there could actually be a conflict of interest.

But I think I would have been unwilling to get involved, simply because I had met Triad previously and I could see that there might, therefore, be – a situation might arise where it could raise, perhaps, perceptions of unease or perceptions of conflict of interest in third parties. But you know, I would reiterate that I never felt that there was a conflict of interest in terms of either my own involvement or the firm’s involvement as far as I was aware, my Lord, understanding that I was not involved in discussion of the terms or scope of the work.”

In his submissions Mr. Semken reminded me of the speech of Lord Millett in Prince Jefri Bolkiah v. KPMG [1999] 2 AC 222 at pages 234 - 235 as to the significance of alleged conflicts of interest. The other members of the House of Lords agreed with the speech. What Lord Millett said was:-

“In Rakusen’s case the Court of Appeal founded the jurisdiction on the right of the former client to the protection of his confidential information. This was challenged by counsel for Prince Jefri, who contended for an absolute rule, such as that adopted in the United States, which precludes a solicitor or his firm altogether from acting for a client with an interest adverse to that of the former client in the same or a connected matter. In the course of argument, however, he modified his position, accepting that there was no ground on which the court could properly intervene unless two conditions were satisfied: (i) that the solicitor was in possession of information which was confidential to the former client and (ii) that such information was or might be relevant to the matter on which he was instructed by the second client. This makes the possession of relevant confidential information the test of what is comprehended within the expression “the same or a connected matter”. On this footing the court’s intervention is founded not on the avoidance of any perception of possible impropriety but on the protection of confidential information.

My Lords, I would affirm this as the basis of the court’s jurisdiction to intervene on behalf of a former client. It is otherwise where the court’s intervention is sought by an existing client, for a fiduciary cannot act at the same time both for and against the same client, and his firm is in no better position. A man cannot without the consent of both clients act for one client while his partner is acting for another in the opposite interest. His disqualification has nothing to do with the confidentiality of client information. It is based on the inescapable conflict of interest which is inherent in the situation.

This is not to say that such consent is not sometimes forthcoming, or that in some situations it may not be inferred. There is a clear distinction between the position of a solicitor and an auditor. The large accountancy firms commonly carry out audit of clients who are in competition with one another. The identity of their audit clients is publicly acknowledged. Their clients are taken to consent to their auditors acting for competing clients, though they must of course keep confidential the information obtained from their respective clients. This was the basis on which the Privy Council decided Kelly v. Cooper [1993] AC 205 in relation to estate agents.

Where the court’s intervention is sought by a former client, however, the position is entirely different. The court’s jurisdiction cannot be based on any conflict of interest, real or perceived, for there is none. The fiduciary relationship which subsists between solicitor and client comes to an end with the termination of the retainer. Thereafter the solicitor has no obligation to defend and advance the interests of his former client. The only duty to the former client which survives the termination of the client relationship is a continuing duty to preserve the confidentiality of information imparted during its subsistence.

Accordingly, it is incumbent on a plaintiff who seeks to restrain his former solicitor from acting in a matter for another client to establish (i) that the solicitor is in possession of information which is confidential to him and to the disclosure of which he has not consented and (ii) that the information is or may be relevant to the new matter in which the interest of the other client is or may be adverse to his own. Although the burden of proof is on the plaintiff, it is not a heavy one. The former may readily be inferred; the latter will often be obvious. I do not think that it is necessary to introduce any presumptions, rebuttable or otherwise, in relation to these two matters. But given the basis on which the jurisdiction is exercised, there is no cause to impute or attribute the knowledge of one partner to his fellow partners. Whether a particular individual is in possession of confidential information is a question of fact which must be proved or inferred from the circumstances of the case. In this respect also we ought not in my opinion to follow the jurisprudence of the United States.”

Mr. Semken submitted, rightly in my judgment, that the principles enunciated in that passage are not confined to solicitors, but apply to all professional people. He contended, again correctly as it seems to me, that a party with whom a professional man had been in discussion about becoming a client, but who had never become a client, was in the same position as, and certainly not in a better position than, a former client. Thus it follows that no conflict of interest was relevant to the position of the Firm as between Miss Makar, on the one side, and Triad, on the other. The only possible proper objection of Triad to the Firm undertaking work for Miss Makar was if the person, or a person, undertaking that work was in possession of confidential information belonging to Triad which was or might be relevant to the retainer undertaken for Miss Makar. As there was no possibility of a conflict of interest, it follows that the Firm can have owed Miss Makar no duty, of whatever sort, to disclose a non-existent possibility. I incline to the view that, if there was a real chance of Triad properly objecting to some individual becoming involved in the work which the Firm had undertaken for Miss Makar because that person was in possession of confidential information which was, or might be, material to the work being undertaken for Miss Makar, the Firm owed a duty to Miss Makar to disclose that. However, a more straightforward way of dealing with the possible problem was simply for any person who was, or might be thought to be, in possession of such information not to become involved in the work being done for Miss Makar. If the relevant person did not become involved, I do not consider that there was any duty on the part of the Firm to convey any information as to what the position might have been if that person had become involved. Neither Mr. Harwood nor Mr. Newman ever did become involved with the work which the Firm was undertaking for Miss Makar, so no obligation to make any disclosure to her ever arose on any view.

Moreover, I accept the evidence of Mr. Harwood that neither he nor Mr. Newman ever obtained any confidential information from Triad anyway, so for that reason also this ground of counterclaim fails. As Mr. Semken submitted, it was for Miss Makar in any event to prove that Mr. Harwood or Mr. Newman had obtained confidential information from Triad, not for them to disprove that. The only prospect of Miss Makar demonstrating that any confidential information belonging to Triad had come into the possession of Mr. Harwood or Mr. Newman was, as Mr. Phipps recognised, if I did not accept the evidence of Mr. Harwood to the contrary and was prepared to infer that some, unidentified, confidential information had come into his possession. That is not as matters turned out.

In the circumstances the possible pleading point in relation to confidential information does not require further consideration.

In the result there will be judgment for the claimants in the sum of £35,250, together with interest, as to which I will hear Counsel.

The Part 20 claims of Miss Makar all fail and are dismissed.