Fonexco Group Ltd & Ors v Manches (a firm) & Anor

This action arises out of events which took place at the end of 1999 and the beginning of 2000.

From about January 1992 until it was dissolved in about February 2007 there existed a partnership, called the Touchbase partnership. At the times material to this action the partnership comprised three partners: Mr. Jeffrey Maynard; his son, Mr. Riordan Maynard; and Mr. Byron Rose, the third claimant. It seems that the business of the partnership was investing in various companies, one of which was the first claimant, Fonexco Group Ltd. Fonexco changed its name from Fonexco Ltd. to its present name in about February 2000, but it is convenient in this judgment to refer to it as “Fonexco” no matter what its name in fact was at the time of which I am writing.

Fonexco was concerned in the mobile telephone business.

Telit Mobile Terminals S.p.A. (“Telit”) was a corporation existing under the laws of the Republic of Italy and based at Trieste. It was called Telital S.p.A. in 1998, but it is convenient to refer to the company in this judgment as Telit even in relation to the period before it changed its name. The business of Telit was the manufacture of mobile telephones.

The second claimant, Fontel Italia Plc (“Fontel”) was incorporated in England as a subsidiary of Fonexco for the special purpose of acting as exclusive distributor in the United Kingdom and the Republic of Ireland of mobile telephones manufactured by Telit. Fontel was dissolved on 8 September 2009.

Telit and Fontel entered into an exclusive distribution agreement (“the Exclusive Distribution Agreement”) in writing dated 31 July 1998. On the same dated Fonexco entered into heads of agreement in writing (“the Letter of Intent”) with Telit.

By the Exclusive Distribution Agreement Telit appointed Fontel as exclusive distributor in the United Kingdom and Republic of Ireland of various identified mobile telephones manufactured by Telit. The term of the agreement was three years, subject to earlier determination in certain, limited, circumstances. It is only necessary to give particular attention to one of the clauses of the Exclusive Distribution Agreement for the purposes of this action, clause 21. By that clause it was provided, so far as is presently material, that:-

“21.1

This Agreement shall be subject to and construed and governed in all respect [sic] and [sic] according to the Laws of the Republic of Italy (without regard to Italy’s conflicts of law rules).

21.2

Any dispute or claim arising out of or in connection with this Agreement shall be finally submitted to the sole competence and jurisdiction of the Courts of Trieste.”

None of the terms of the Letter of Intent are material for present purposes.

What is material is that by the latter part of 1999 difficulties had arisen in respect of the dealings between Telit and Fontel. It seems that sales of mobile telephones manufactured by Telit in the United Kingdom had become important to Telit by that date, and that Telit was interested in undertaking the distribution of such equipment itself. The existence of the Exclusive Distribution Agreement was an impediment to progressing that interest.

The managing director of Fonexco in 1999 and 2000 was Mr. Rose.

In 1999 the sister of Mr. Rose married Mr. Alasdair Simpson. Mr. Simpson was, at that time, and remained, until 2003, the senior partner in the firm of Manches, the first defendants. Manches was a firm of solicitors. The practice of the firm ceased on 29 February 2004 and was taken over, with effect from 1 March 2004, by a limited liability partnership, Manches LLP, the second defendants. No allegation in this action was made on behalf of any of the claimants against Manches LLP. From the Re-Re-Amended Particulars of Claim it seems that Manches LLP was joined in this action simply because, as part of the arrangements for taking over the practice of Manches, it had entered into an indemnity with the partners of Manches. It is unnecessary to refer to Manches LLP again in this judgment.

Mr. Rose sued in this action as assignee of the alleged causes of action of Fonexco and Fontel against Manches. He did not allege that he had any cause of action against Manches other than as assignee.

It was common ground that by an assignment dated 30 November 2007 Fonexco purported to assign to Mr. Rose any causes of action which it had at that time against Manches. It was also common ground that by an assignment dated 5 March 2009 Fontel purported to assign to Mr. Rose any causes of action which it had at that time against Manches.

The causes of action which it was contended in this action Fonexco and/or Fontel had against Manches were alleged to arise, first, out of the failure of Manches to cause to be issued and served on Telit in Trieste before 9 February 2000 a claim form issued out of this court, and, second, out of the failure of Manches to challenge the jurisdiction of the court of Trieste to adjudicate on the disputes between Telit and Fonexco and Fontel.

In order to explain how those causes of action were said to have arisen it is convenient to set out the dealings between Telit, Fonexco, Fontel and Manches in the latter part of 1999 and the early part of 2000. Save with regard to three vital matters it did not appear that there was any significant difference between the parties as to the material exchanges.

The detail of how Telit sought to progress with Fontel the interest of Telit in undertaking itself the distribution in the United Kingdom of mobile telephones manufactured by Telit is not really material to any issue in this action. It is enough to summarise some features of the exchanges between the parties between about June and about December 1999.

A meeting took place on 7 June 1999 in London between Mr. Rose and others acting on behalf of Fontel, and Mr. Massimo Zanzi, chief executive of Telit, and various other representatives of Telit. That seems to have set in train a series of discussions and negotiations. The next step was a visit to Trieste by Mr. Rose and Mr. Simpson on 27 and 28 June 1999. The upshot of that visit was a proposal which was put forward on behalf of Fontel by Mr. Simpson in a letter to Mr. Franco Macchi, international sales and marketing director of Telit, dated 30 June 1999, written on the printed stationery of Manches.

Telit did not respond to the letter dated 30 June 1999 until Mr. Maurice Naressi wrote a message dated 16 July 1999 sent by facsimile transmission. That message was not a substantive response, but simply informed Mr. Simpson that Mr. Macchi was away on business and would get back to him as soon as possible. Mr. Macchi himself sent a message dated 19 July 1999 by facsimile transmission, but all he said was that a decision could not be made because Mr. Zanzi was not available. On receipt of that message Mr. Simpson replied in a letter dated 19 July 1999 that, in the circumstances, Fontel was proceeding under the Exclusive Distribution Agreement without any alteration.

However, Fontel did not leave matters there. Mr. Simpson wrote again to Mr. Macchi on 16 August 1999. What he said was:-

“I wrote to you on 30^th June with the proposals for the new arrangements which was based fairly closely on the proposals that you yourselves put forward at the meeting in Trieste.

Since then despite numerous attempts to contact you by telephone we have in effect had no response.

In the meantime there have apparently been certain discussions direct between Telital and Vodafone on issues which under the existing Sole Distribution Agreement are clearly arrangements over which Fontel is meant to have sole control, e.g. after sales service. Fontel were extremely concerned about this and, as a result, they asked me to try and contact you by telephone. I did speak with you briefly on Friday whilst you were on holiday in Tuscany and you agreed to speak with Mr. Naressi and ensure that nothing further is done to alter the status quo until we know whether the new arrangements are to be put in place.

Fontel remain more than willing to conclude new arrangements on consensual terms provided those are satisfactory to them. If this is to happen they want it to be on an entirely amicable basis so that the companies can move forward in partnership.

However, I am asked now to notify Telital that if the new arrangements have not been concluded and documented by 30^th September it is the intention of Fontel to proceed solely on the basis of the existing Sole Distribution Agreement.

I have therefore suggested that there should be a meeting, preferably in London, in early September to see whether the proposed new arrangements can be finalised.”

There was no response to that letter from the Telit side. Mr. Simpson wrote again to Mr. Macchi on 7 September 1999, asserting that Fontel, “have been forced to the conclusion that Telital does not in fact intend to enter into new arrangements”. That, after some delay, provoked Mr. Zanzi to send a message dated 23 September 1999 by facsimile transmission suggesting meetings in Trieste on 7 and 8 October 1999. Those meetings took place. The outcome was that on 8 October 1999 Nathalie Goujon, senior manager contracts and negotiations of Telit, sent a message by facsimile transmission to which was attached a draft form of proposed agreement. The course of negotiations then seems to have speeded up, with a number of exchanges over the ensuing days and weeks, before slowing down once more. To try to resolve the issues then outstanding it was proposed that a further meeting take place in Trieste between representatives of Fontel and representatives of Telit at the beginning of December 1999.

A meeting took place on 8 December 1999 between Mr. Rose, Mr. Simpson and Mr. Jeffrey Maynard, acting on behalf of Fonexco and Fontel, and various representatives of Telit. The outcome of that meeting was the preparation and signature of two written agreements. That which is material for present purposes was entitled “MEMORANDUM OF UNDERSTANDING CONCERNING A SHARE SALE AGREEMENT RELATED TO Fontel Italia Plc AND RELATED FEE AGREEMENT” (“the Memorandum”). The Memorandum began by setting out, beneath the title which I have quoted, the date upon which it was made and the parties to it, respectively Telit, Fontel and Fonexco. There was then a heading, “Share Sale Agreement”. That was followed by identifying as the parties to that agreement Telit and Fonexco. Beneath those identifications the Memorandum went on:-

“WHEREAS

(A)

FONEXCO is the beneficial owner of the whole of the issued share capital of Fontel comprising 50,000 ordinary shares of one pound (1£) each.

(B)

FONEXCO has agreed to sell and TELIT has agreed to purchase the said issued share capital for a total consideration of a total of 1,600,000£.

Now it is agreed:

1)

FONEXCO will sell and TELIT will purchase the whole of the issued share capital of FONTEL for a total consideration of of [sic] 1,600,000£. Payable by instalments as hereinafter provided.

2)

On completion, FONTEL will be 100% owned by TELIT (or its nominee) and TELIT shall have sole control of FONTEL and its board of Directors (including the right to change the company name of FONTEL).

3)

Completion of the sale and purchase shall take place on or before 31^st December 1999.

4)

FONEXCO sells as beneficial owner free from incumbrances; TELIT shall have the right to verify FONTEL’s accounts through a necessary due diligence to occur before the completion on or before 31 December 1999 and the Parties shall cooperate to prepare a proforma Balance Sheet as at completion.

5)

FONEXCO warrants that on completion, FONTEL shall have no liabilities to any third parties (other than its indebtedness to TELIT) and FONEXCO shall indemnify TELIT and FONTEL in respect of any such liabilities of FONTEL (other than its indebtedness to TELIT).

6)

TELIT confirms that prior to completion, no steps will be taken to recover the sums now due from FONTEL to TELIT.

7)

The consideration of 1,600,000£. Shall be paid as follows: [sic]

a)

On completion, the sum of 300.000£

b)

On 31^th [sic] March 2000, 150.000£

c)

On June 30, 2000 150.000£

d)

On 30 September 2000, and at three monthly intervals thereafter, 50.000£ (four payments)

e)

Commencing on 30 September 2001 and at three monthly intervals eight further instalments of 100,000£ (eight payments)

8)

On Completion, FONEXCO shall procure a board meeting to be held so as to appoint the new Directors and secretaries of FONTEL nominated by TELIT and shall hand over the resignations from the present Directors and Secretary of FONTEL confirming that they have no claim whasoever [sic] against FONTEL.

9)

FONEXCO commits itself to give all necessary support in terms of human resources and/or facilities, and documentation in order to help the new organisation of FONTEL under TELIT’s control.

10)

In the event that TELIT so request prior to completion, FONEXCO shall transfer the shares direct to such other company within the TELIT Group as TELIT shall nominate. In such circumstances, TELIT shall remain liable for and will guarantee the payment of the total consideration as herein provided.

11)

For the avoidance of doubt, all respective obligations of the Parties pursuant to

a)

the Exclusive Distributorship Agreement dated July 31, 1998 and made between (1) Telit and (2) Fontel and

b)

The Heads of Agreement (described as Letter of Intent) also dated 31 of July 1998 and made between (1) Fonexco and (2) Telit

are hereby extinguished, other than the existing indebtedness of FONTEL to TELIT.

12)

On completion, TELIT shall procure FONTEL to execute and FONEXCO shall execute a Fee Agreement in relation to the provisions of the services of Mr. Byron Rose and Mr. Jeffrey Maynard as Directors of FONTEL in the form of the draft annex hereto initialled on behalf of the Parties. The execution of that Fee Agreement is a condition of completion of the present agreement.”

On 13 December 1999 Nathalie Goujon sent to Mr. Rose and Mr. Jeffrey Maynard a message by facsimile transmission. The material part of that message for present purposes read as follows:-

“as anticipated to you on the phone by Mr. Oro, Mr. Zanzi informed us that he will not be able to come in London within the end of the year as he thought during our last meeting of December 8, 1999. Mr. Zanzi apologizes for such impediment that is only due to several commitments that are overalaping [sic] with the dates we have agreed.

For such a reason Mr. Zanzi proposes the 12^th of January 2000 as the next available date to conclude the overall operation.

Notwithstanding the above, all the activities related to the completion Agenda shall be fulfilled as agreed. Therefore, we confirm the dates of 20 and 21th [sic] December to come in Fontel in order to proceed with the due diligence. To this purpose, Fonexco and Fontel shall provide all necessary documentation in order to undertake the due diligence properly.

I wonder if you could take actions in this sense.

In addition, we are waiting for all other documents such as Share sales Agreement, Shares certificate, and all other document requested for the correct completion of the acquisition of Fontel.

Take note that Mr. Marcocci will be back in the office at the beginning of next week, therefore, we would like to also confirm a date for the commercial meeting to be held, if possible, during the visit of Mr. Zanzi on the 12^th January.”

Mr. Rose and Mr. Maynard seem to have been relaxed about the delay in completion of the sale of the issued shares in Fontel to Telit pursuant to the terms of the Memorandum. It is convenient in this judgment to refer to that completion as “Completion”.

In the short term the focus was on the visit on behalf of Telit to undertake the due diligence contemplated by the Memorandum. Representatives of Andersen Consulting undertook such due diligence on the dates envisaged and produced a report running, in the English translation, to 13 pages, including sheets of figures.

It was contemplated at the meeting on 8 December 1999 that the Memorandum would be superseded by more formal, fuller forms of agreement. Such forms of agreement were produced by Manches. The draft share sale agreement contained a provision for the payment of interest in the event that the agreed purchase price was paid late, which type of provision was not to be found in the Memorandum. On the other hand, the warranty contained in clause 5 of the Memorandum was not reproduced in the draft share sale agreement.

The matter of Completion was not pursued in writing until 10 January 2000 when Mr. Simpson sent Nathalie Goujon a message by facsimile transmission in which he said:-

“Under the Agreement of 8^th December completion should have taken place on 31^st December 1999. As you know all parties agreed to aim for 20^th December but shortly before that date you indicated that this was inconvenient to Mr. Zanzi.

By an oral agreement between us it was agreed that completion should be deferred until Wednesday 12^th January and Fontel has made preparations accordingly.

Could you please confirm who will be attending at the completion meeting and the earliest time upon which we can get started.”

Nathalie Goujon replied in a message sent by facsimile transmission the same day:-

“referring to the fax received today, we inform you that, in accordance with the due diligence executed in Fontel/Fonexco on the 22th [sic] and 23th [sic] of December in London, Telit is not in the position to confirm the meeting scheduled for the 12^th of January, 2000.

As anticipated in particular at the meeting between Mr. Oro and Mr. Maynard, several issues related to Fontel’s tax liabilities and related to the overall debts from Fontel to Telit need to be deepened and better understood before any satisfactory completion.

In this regard, we have received a preliminary report from Andersen Consulting, but we are still waiting for a more exhaustive document from them.

Finally, after a further analysis of the draft contracts proposed by Mr. Simpson (Agreement for the sale and purchase of the entire share capital of Fontel Italia Plc, and Fee Agreement) we regret discovering that there are several points that are still not congruent with the previous drafts (Purchase Price, warranties are not sufficiently described …ecc).

Therefore, we are at your disposal for proceeding to the next steps to further clarify the overall situation of this activity.”

The issue of the congruency of the draft documents prepared by Manches and the terms of the Memorandum seemed to focus, at least amongst other points, on the provision for interest and the lack of the repetition of the warranty in clause 5 of the Memorandum, although Nathalie Goujon herself did not identify specifically what were her concerns.

Mr. Simpson replied to the message sent by Nathalie Goujon on 10 January 2000 in a letter dated 11 January 2000 sent by facsimile transmission:-

“I am responding to the fax of 10^th January which you sent to Messrs. Rose and Maynard and which you kindly copied to me.

Our clients, Fonexco Limited, are extremely disappointed that Telit do not intend to complete their acquisition of Fontel Plc on 12^th January which was the revised date agreed and, more particularly, that the only notification of this was your fax of 10^th January despatched after I had spoken by telephone with your assistant Antonella, with a view to fixing the time of Wednesday’s completion meeting.

Whilst everyone remains hopeful that the transaction will now be concluded promptly without either side having to consider their legal remedies, I am obliged for the protection of Fonexco Limited to state our understanding of the legal position.

1.

On 8^th December 1999 Telit and Fonexco entered into:

1.1

an unconditional Share Sale Agreement whereby Telit agreed to purchase the issued share capital of Fontel Plc;

1.2

a Fee Agreement which governed fees to be paid to Fonexco Limited during the four year period commencing 31^st December 1999.

2.

The date for completion of the Share Sale Agreement was 31^st December 1999 and, at the request of Mr. Zansi [sic], it was agreed there would be an immediate due diligence exercise with a view to a meeting on 19^th/20^th December in London to conclude the matter. In the event you sent us a fax on 13^th December saying that Mr. Zanzi would not be able to be in London within the end of the year and you proposed that 12^th January should be the date for completion. Fonexco Limited indicated their preparedness to accommodate this request.

3.

After the Agreements had been signed, you asked me whether Fonexco Limited would consider entering into fresh documentation which embodied the agreed terms with such other terms as Telit might request and to which Fonexco took no objection. In view of the fact that the Share Sale Agreement was concluded in some haste I confirmed that Fonexco Limited would have no objection with that principle.

However, I must make it clear that the terms upon which the sale is to be completed are those contained in the Agreement of 8^th December although, provided we now agree and adhere to a completion date, we will still look at any points which you raise and which are in the opinion of Fonexco Limited reasonable.

Indeed, at the meeting in London on 20^th December we presented a slightly expanded document and confirmed in principle that we were prepared to include various further points which you raised. Since then we have heard nothing further from you and if there are any further points you would like us to consider could you please ensure that we receive details of your request by close of business on Friday 14^th January.

4.

At completion Fontel Plc will be handed over, in accordance with the terms of the Share Sale Agreement. You should be aware that prior to completion the following steps will have been taken:-

4.1

a dividend of distributable profits as shown in the 1999 Accounts will have been declared and be payable to the Parent Company;

4.2

the internal group inter company indebtedness due to Fontel from group companies other than Fonexco Limited will have been assigned to Fonexco Limited;

4.3

any indebtedness of Fonexco Limited to Fontel will have been eradicated by virtue of an inter company management charge;

4.4

the outstanding tax liability of Fontel (approximately £120,000) will have been paid or will be paid by Fonexco Limited on completion;

4.5

the benefit of debts due to Fontel from independent third parties (approximately £120,000) will have been assigned to Fonexco.

In essence Fontel Plc will be a “clean” company with the exception, as provided in the Contract, of the debt of approximately £610,000 due from Fontel to Telit.

In the circumstances I do not understand what the “taxation” issues are which you say are outstanding.

Please do let me hear from you with any points you wish to raise. At the same time would you please give a definite date upon which the transaction will be concluded. If you cannot do this, simply to protect Fonexco, we will be obliged to serve notice making time of the essence and specifying the required completion date.

It would greatly serve to maintain goodwill if steps could be taken immediately to remit to my firm the sum of £300,000 which is due to be paid on completion on the basis that we hold it pending completion as agents for Fonexco.

Do please telephone me if any of the points set out above are unclear.”

Nathalie Goujon replied to that letter in a message dated 14 January 2000 sent by facsimile transmission:-

“With reference to your fax dated January 11, 2000, for which I thank you, I am sure you share with the idea with me that the acquisition of a company is not a small issue and it deserves all the attention and accuracy that is normally required from any serious organisation.

Having said that, from an operative point of view, I remind you that we made some comments on the last contracts presented to us the day before and during the London meeting of the 22th [sic] of December 1999 that your colleague Mattew [sic] Martin and yourself have accepted as Telit’s concepts to be inserted into the drafts. Subsequently, the day after the meeting on the 23th [sic] December I have asked to Matthew Martin to kindly send me the last e-mail of his draft in order to proceed on our comments, but I still did not hear from him, therefore I have renewed my request today.

I confirm that my duties are to execute the will of my top management and in addition, for this project, I am only part of the general activities undertaken up to today. That is why for example I cannot give any statement in terms of the due diligence activity, since Mr. Oro is responsible for this aspects [sic], let alone the strategies of the company. As I told you, Mr. Oro was out of the office not only up to Thursday as anticipated by phone but his commitments obliged him to extend his stay up to this week-end. As you have asked me about the possibility to reach him on his mobile phone, you could have checked this fact by yourself.

As a matter of fact, (apart from our pending negotiations on the documents), the reason why it is not possible for the time being to give a realistic completion date is simply that the intention of Mr. Zanzi to acquire Fontel was and is still based on the assumption of two essential conditions:

-

a clean company meaning a company free of any kind of encumbrances), which fact must be demonstrated by the due diligence

-

satisfactory contracts to precise the understanding declared with the Letter of Intent (MOU) dated December 8, 1999

Confident to receiving your understanding on the above, and always at your disposal with all my support on those matters, I remain.”

The message dated 14 January 2000 from Nathalie Goujon prompted Mr. Simpson to write two letters, each dated 20 January 2000. One of those letters was expressed to have been written on a “without prejudice” basis. In that letter Mr. Simpson said:-

“I thank you for your letter 14^th January which progresses the matter no further.

Matthew Martin [a partner in Manches] despatched to you on 21^st December by email a revised copy of the supplemental documentation which we had been discussing which incorporated the further provisions to which in principle we had agreed. I have asked that yet another copy be sent to you by email.

Please understand that my letter of 11^th January was not intended to attribute blame for the current position to you personally. It is simply a statement of facts.

We have sent to you separately an open letter incorporating a notice requiring Telit to complete the transaction by Thursday 3^rd February. We will give you any reasonable co-operation you require in the meantime and our clients still remain prepared to execute the supplemental documentation which we have been discussing although there is no obligation to do so under the “Memorandum of Understanding”.

I must make it plain, however, that if the transaction is not completed in accordance with the completion notice our clients are likely to be initiating proceedings immediately for the liquidated sum of £1.6M payable under the Share Sale Agreement, the guaranteed sum of £400,000 payable under the Fee Agreement, and damages in respect of the further sums to which they would have become entitled upon the implementation of the Fee Agreement.

I tried to telephone you this morning but you were evidently unable to return my call. Should you wish to discuss the matter further with me please do not hesitate to telephone.”

The open letter of 20 January 2000 was in these terms:-

“As you are aware we act for Fontel Italia Plc (“Fontel”), Fonexco Limited (“Fonexco”), Mr. Byron Rose (“Mr. Rose”) and Mr. Jeffrey Maynard (Mr. Maynard”). On 8^th December 1999 a document described as a Memorandum of Understanding was entered into between our clients and your Company, Telit Mobile Terminals S.p.A. (“Telit”) which incorporated:

1.

a Share Sale Agreement between Telit (1) and Fonexco (2);

2.

a Fee Agreement between Telit (1), Fontel (2), Fonexco (3), Mr. Rose (4) and Mr. Maynard (5).

The Share Sale Agreement relating to the whole of the issued share capital of Fontel was agreed to be completed on or before 31^st December 1999.

The Fee Agreement was agreed to come into effect upon completion of the Share Sale Agreement.

In relation to the arrangements concerning the proposed completion date and the events since then we would refer you to our letter of 11^th January addressed to Ms. Nathalie Goujon.

Our clients now require the Share Sale Agreement and the Fee Agreement to be completed and are ready willing and able to effect completion in accordance with the terms of those Agreements.

Please accept this letter as notice, as to which time is of the essence, that our clients require completion to take place at our offices on Thursday 3^rd February 2000 at 10.30 a.m. In the event that Telit fails to complete our clients reserve the right, without further notice to Telit, to take all such steps as are necessary to enforce the legal remedies arising by virtue of such default.

This letter is being sent to you by email, fax and post addressed to the registered office of Telit and marked for the attention of Ms. N. Goujon.”

The reaction to those two letters on the part of Telit was two messages, each dated 31 January 2000, sent by facsimile transmission. Neither was, in terms, a reply to either of the letters dated 20 January 2000.

One of the messages dated 31 January 2000 was sent by Mr. Scire, general manager of Telit, to Mr. Rose:-

“first of all I would like to present myself since up to now we have not had the possibility to meet or to talk to each other personally. I am the new General Manager of Telit Mobile Terminals Spa and directly report to Massimo Zanzi.

Mr. Zanzi, Mr. Oro and our legal office have informed me about Telit’s relations with Fonexco and Fontel up to now. Among other things, we have ben [sic] informed about your activities in the company “Big Red Phone”. You have personally confirmed to Mr. Oro that “Big Red Phone”, in which you are directly involved, markets and sells cellular phones. Therefore I am not sure how you will defend our interests as an Executive Director of Fontel since according to the information received by Mr. Oro you are a direct competitor of Telit.

Looking forward to hearing from you, I remain.”

The other message was from Nathalie Goujon to Mr. Simpson:-

“the purpose of this letter is to set forth that Telit has not been in the condition to complete the process of acquisition – at least in a short while – of Fontel Italia PLC. The reason is that the due diligence of Fontel Italia Pcl [sic] undertaken by Telit’s representatives with the presence of Arthur Andersen Consultant, on the 21th [sic] and 22th [sic] of December, 1999 has revealed encumbrances and liabilities related to Fontel (in addition to the already known indebtedness to Telit).

According to information available to us, Fontel neither is nor will it be able in a reasonable short while to comply with the warranty set forth under point 5 of the MOU: “Fonexco warrants that on completion, Fontel shall have no liabilities to any third parties (other than its indebtedness to Telit) and Fonexco shall indemnify Telit and Fontel in respect of any such liabilities of Fontel (other than its indebtedness to Telit)”. It is well known to you that this represents, for Telit, an issue of fundamental importance as to the overall evaluation and acceptance of the transaction.

In addition, despite the continuous collaboration on both Parties’s side on the legal documentation, the Manches’s draft contracts proposed up to today (including the Share Sale and the Purchase Agreement sent to us last 14^th January, 2000) are still not acceptable for Telit because they contain certain provisions that do not correspond to the intentions described in said MOU. It is important to mention that said documents should implement the intention of the Parties described in the MOU dated December 8, 1999.

Since at this stage the Vendor obligations are not complied, following the line of conduct set forth by Fonexco itself under point 4.4.3 of the draft Agreement for the Sale and Purchase of the entire issued share capital of Fontel Italia Plc., Telit is now willing to rescind the MOU and therefore, to renounce to the acquisition of Fontel in consideration of the above mentioned liabilities of Fontel.

Looking forward to hearing from you, I remain.”

I think that it was common ground that, following the receipt of those two messages dated 31 January 2000, Mr. Rose and Mr. Simpson were in contact. Mr. Simpson thought that the two of them had a meeting at or after about 5.30 in the evening on 31 January 2000. Mr. Rose’s evidence was that they spoke on the telephone. However they conversed, what they said was very much in dispute as between the claimants and Manches. Each of Mr. Rose and Mr. Simpson agreed, in their evidence, that the upshot of the discussion between them on 31 January 2000 was that instructions were given to Manches to issue a writ, as it was put in the evidence (strictly, by this date, it was a claim form), against Telit immediately. It is convenient to return to the oral evidence of Mr. Rose and that of Mr. Simpson about the conversation on 31 January 2000, for issues which were canvassed in cross-examination included whether instructions were given to issue a claim form immediately, or as soon as reasonably possible after 3 February 2000, if necessary; what the purpose of issue was, whether to supply some leverage in continuing negotiations between the parties, or actually to commence proceedings with a view to those proceedings being pursued through the courts; and what, if anything, was said about service of any claim form, or when or how that was to be effected.

The immediate response to the two messages dated 31 January 2000 was a letter of the same date written by Mr. Simpson to Telit:-

“We are asked to acknowledge the letter from Ms. Goujon of 31^st January addressed to us and the letter from Mr. Scire of the same date addressed to Mr. Rose.

Dealing with the points which have been raised we confirm:

1.

The Memorandum of Understanding of 8^th December 1999 contains every material term of the transactions agreed between the parties.

2.

After signature of the Memorandum of Understanding our clients agreed that they were prepared to consider expanded documentation to the extent that this may be necessary to cover any administrative matters raised by your Company which were considered by our clients to be reasonable. The documentation in question was sent to you yet again on 14^th January and even now you have not indicated what further provisions you might like our clients to consider. If there is anything would you please let us know by return.

3.

All necessary arrangements have been made to ensure that at completion the position of Fontel Italia Plc is precisely as contracted.

4.

We are asked to assure you that any involvement, either direct or indirect, which Mr. Rose or Mr. Maynard may have with The Big Red Phone Company in now [sic] way conflicts with their obligations to your Company pursuant to the contractual arrangements.

We interpret your first letter of 31^st January, sent by Ms. Goujon, as clear confirmation that your Company is either unwilling and/or unable to comply with the Completion Notice embodied within our letter to you of 20^th January and our clients will be proceeding accordingly.”

At the same time Mr. Simpson wrote a letter to Mr. Rose and Mr. Maynard:-

“You have seen copies of the two letters of 31^st January from Telit. I attach a copy of our reply.

In order to ensure that your position is impregnable, I believe the following steps have to be taken:

1.

The outstanding tax liability of Fontel has to be discharged.

2.

So far as possible any other liabilities have to be agreed and discharged.

3.

Any assets, by way of debtors, should be assigned outside of the Company.

The objective is that by Friday of this week the Company is “clean” and there can be no suggestion that it was not in a condition where by [sic] it could be suggested that Fonexco has failed to comply with the terms of the Memorandum of Understanding.

We need to meet, together with your Accountants, as soon as possible this week.”

It was not in dispute that on 1 February 2000 Mr. Simpson had a meeting with one of his litigation partners, Mr. Ashley Booker. Mr. Simpson contended that the purpose of that meeting was for him to instruct Mr. Booker to issue a writ (Mr. Simpson’s terminology) against Telit immediately. Mr. Booker’s evidence was that, whilst he was instructed to prepare for litigation against Telit on behalf of Fonexco and Fontel in the event that Completion did not take place on 3 February 2000, there was no suggestion that that needed to be done straightaway, rather than in the course of the days following 3 February 2000. Again, I shall return to the detail of the evidence of Mr. Simpson and Mr. Booker on the point.

Mr. Simpson did make an attendance note of his meeting with Mr. Booker on 1 February 2000. It was uninformative on the critical issue upon which Mr. Simpson’s evidence differed from that of Mr. Booker. It simply recorded that he had spent 24 minutes

“Attending briefing Ashley Booker and arranging for him to be supplied with copy documentation.”

Following the meeting Mr. Booker undertook some research and prepared an internal memorandum, dated 1 February 2000, which he sent to Mr. Simpson. That memorandum was in these terms:-

“Further to our conversation earlier today, I have satisfied myself that we can bring ourselves within the requirements of Order 11 and the Brussels Convention such that the High Court will have jurisdiction pursuant to the Civil Jurisdiction and Judgments Act. This is, however, an area which is a bit of a technical minefield and I am proposing to get Junior Counsel involved in the course of the next 24 hours. One factor that we must take into account is the fact that Italy is not one of the countries which, under the Convention, permits service by post. We are therefore almost certainly going to have to go through the process of service through either the Consular or judicial channels. This will involve getting the Claim Form and Particulars of Claim translated, which will take time. In addition, service by either of those routes is not necessarily terribly speedy. I am concerned that, if Fontel wishes to obtain judgment swiftly, this is something that needs to be factored into their thinking. I do not presently see a way of avoiding this and the only other alternative, namely proceedings in Italy, is fraught not only with procedural delays, but the Italian Court would almost certainly apply Italian law which may prove to be far less to the client’s benefit.

In these circumstances, perhaps you could just confirm that I should nevertheless push the button. Perhaps at the same time you would also let me know whether you would prefer me to route everything through yourself. In particular, when we come to issue a Claim Form, do you wish to ask for the Court fees up front or merely add them to the bill at the end of the day.

On the facts, I have now had an opportunity to see the letter from Nathalie Goujon of 31^st January. It seems very clear that Telit can hardly raise as an objection to completion the indebtedness of Fontel to Telit. Nevertheless, Telit clearly seeks to assert that it has undertaken due diligence and has discovered liabilities related to Fontel. Even if this is the case, I am not sure that this affects our position, given the obligation on Fonexco to indemnify Telit. Is it right that due diligence was undertaken in December and, if so, do we know what was found. Is there anything other than the liability to the Revenue? Given the road that we are likely to have to travel down from a procedural perspective in order to serve the proceedings on Telit in Italy, it may be sensible to ensure that we have dealt as fully as possible in correspondence with this allegation before finally issuing our proceedings.

In the meantime, I wonder whether it might be sensible for me to borrow your original file for an hour or so simply to see whether there is anything else that I ought to have for the purposes of the litigation so that I am starting from a point of the fullest available information.”

Mr. Simpson responded to that memorandum by writing in manuscript on the original copy received by him and returning that copy so marked to Mr. Booker. Mr. Simpson made no comment whatsoever on the first paragraph. He underlined the words in the second paragraph, “prefer me to route everything through yourself” and “add them to the bill at the end of the day”, and beside each wrote “YES”. He put a line beside the last two lines of the third paragraph with a further line leading to the words, in manuscript, “We are getting an update tomorrow showing the exact position”. Finally Mr. Simpson put a line beside the final paragraph and wrote, “herewith”.

Mr. Booker enlisted the aid of an assistant, Miss Phyllida Roberts, now Mrs. Day, to help in his allotted task. Miss Roberts, in her turn, brought in the help of a trainee, Mr. Magnus Mill. Mr. Mill’s career has prospered and he is now a member of the second defendant.

The detail of the work done by Miss Roberts and Mr. Mill is not material to the issues in this action. It is enough to say that the particular task assigned by Miss Roberts to Mr. Mill was researching the service of a claim form issued out of this court on a party in Italy. Miss Roberts accompanied Mr. Booker when he went to a conference with counsel, Mr. Antony Zacaroli. Mr. Zacaroli has since taken silk.

As foreshadowed in Mr. Booker’s memorandum of 1 February 2000 to Mr. Simpson, the conference with Mr. Zacaroli took place on 2 February 2000. It appears that Mr. Zacaroli was not provided with instructions or with any copy documents in advance of the conference, but rather that Mr. Booker talked Mr. Zacaroli through the facts, the issues and the documents during the course of the conference. Miss Roberts made a note of the conference. In that note the participants were identified by their initials. The note was in these terms:-

“ABB providing AZ with the relevant background to this matter, namely the following:-

•

We act for two companies, Fonexco Limited (owned by Jeffery Maynard, Riordan Maynard (his son) and Byron Rose). All three individuals are 33 1/3^rd shareholders of the company. We also act for a company Fontel Italia Plc (which is a wholly owned subsidiary of Fonexco Limited).

•

The other side is an Italian company, Telit Mobile Terminals SPA. The company is registered in Italy (in Trieste) with no office in the UK. Clearly there are jurisdiction problems.

•

The business concerns mobile telephones. The original business set up was via a sole distributorship agreement. Telit Mobile Terminals SPA (“Telit”) is the manufacturer and under an obligation to supply us with the product. Through the distributorship agreement, we had a contract with Vodafone [check] to sell the product here in the UK. To date, roughly £20 million of business has been conducted.

•

Telit has various “outfits” in Europe. Towards the end of last year, negotiations were entered into for Telit to have direct access to Vodafone (apparently this was as a result of difficulties with Telit wanting direct access and a desire on their part to bring the distributorship agreement to an end). Telit allegedly became difficult and the net effect was that, towards the latter part of last year, Fontel did very little business as it was starved of product from Telit in its capacity as manufacturer. Negotiations were entered into in or around December 1999. A fresh attempt was made to do a deal with Telit, essentially by means of Fonexco Limited (“Fonexco”) agreeing to sell Fontel to Telit. A deal was then struck and after a lengthy meeting in Italy, a Memorandum of Understanding was drawn up and signed by all parties.

•

The essential terms of the Memorandum of Understanding (“MOU”) being the following:-

1.

Fontel’s shares are to be sold to Telit.

2.

A total consideration of £1.6 million will be payable in instalments by Telit. The first instalment of £300,000 was to be due on “completion”. Thereafter, repayments were to be made by instalments.

3.

Completion was to be on or before 31^st December 1999.

4.

Fonexco warranted that Fontel had no liabilities to any third party other than its indebtedness to Telit. The MOU also referred to an indemnity whereby Fonexco would indemnify Telit and Fontel in respect of any liabilities other than those to Telit.

5.

Any previous agreements (including the distributorship agreement) were to be extinguished by the MOU.

The MOU was executed on 8^th December 1999. Despite the fact that it is termed a “Memorandum of Understanding”, the document contains all material conditions governing the deal and the intention clearly behind the document was that it would be binding would therefore constitute a valid contract.

•

The MOU also referred to a related “fee agreement” which was attached to the back of the MOU. This was also executed by all the parties. The effective date of the fee agreement was the completion date (in that it was intended to come into effect on completion notwithstanding the fact that it had already been signed by all parties including Jeffrey Maynard and Byron Rose). The addition of the two individuals being that it was agreed with Fonexco that Jeffrey Maynard and Byron Rose would continue to be directors of Fontel for four years (with a possible further two year extension if desired). In return, Telit were to assure a fee to Fonexco by reference to a percentage of the sales of the products in the UK and the sales introductions procured by Jeffrey Maynard and Byron Rose. The first year of the fee agreement provided for a minimum figure of £400,000.

•

No where in the MOU is there a proper law clause. ABB explained that this may have been deliberate in that there was no way that the Italian company would agree to a specific English law clause and a view was taken that, given that completion was to be in London and that payment was made to Manches in London, performance of the obligations under the sale and purchase agreement were clearly to be here in the UK. Prima facie, ABB sees there no problem in obtaining an order for service out of the jurisdiction. [NB – The MOU was signed in Italy].

•

ABB continued that since that date there has been what can loosely be termed “due diligence” in London by the Italian company. Completion was to be brought forward to an earlier date in December but then put back to the original completion date of 31^st December 1999. Since then there has been much dithering about by the Italian company and it is clear that they no longer want to do a deal with Fonexco. Completion did not happen on 31^st December 1999 and Telit asked for an extension until 14^th January 2000. We agreed to this, however, nothing materialised on 14^th January 2000. [At this point, AZ commenting that by this action, both parties must have viewed the MOU as a binding agreement].

•

As it became clear last week that there was going to be no completion, a completion notice was served on the Italian company which expires tomorrow. There is clearly no prospect of completing and a recent fax received from them on 31^st January 2000 appears to substantiate this.

•

On a purely contractual point, following the meeting in Italy on or around 8^th December 1999, Telit explained that if a more formal document is needed, could it be drawn up by us. Telit were not saying that they were not intending to be bound by the MOU but expressing a desire to “tart-up” the documents in due course. Apparently, we said yes in principle but with various caveats to any additional points being brought in. They then asked for a more formalised document later in December 1999 and we produced two drafts of two agreements which were described as “conformed copies”. They were prepared on the basis of the MOU and the fee agreement attached to it and the idea was that they were to be entered into in January 2000. This did not happen and Telit are now explaining that this was because some of the terms were not agreed. Although this does not detract from the binding nature of the MOU, it may be a “blip” further on down the line. That is, however, a matter of evidence.

•

Returning to the exchange of correspondence post 14^th January 2000, on 20^th January 2000, we wrote to Telit enclosing a completion notice and also explained that it is very clear that the terms of the MOU are simply incorporated in the sale and purchase agreement and the fee agreement.

•

The response from Telit on 31^st January 2000 indicated that they could not complete the deal as a result of the due diligence exercised which apparently revealed encumbrances over and above those in relation to Telit. They further state that Manches’ contracts were not acceptable as they were contrary to the intentions of the MOU. They want to rescind the MOU and the mere fact that they do not want to be bound by it supports the fact that in their eyes the MOU is binding! It appears that the due diligence exercise revealed a liability to the Inland Revenue to the tune of £150,000. The obligation under the MOU is to get rid of such encumbrances by completion and the fact of the matter is that given that completion has not yet reached it is highly likely that the liability would be discharged by completion. At this juncture, AZ commenting that it is quite bizarre to have conducted a due diligence exercise at this stage as due diligence is usually conducted before contract is entered into. Perhaps we should query their intention or is this in fact due diligence in the real sense? ABB commenting that as he understood it the due diligence exercise was not due diligence proper but simply an investigation into the company following the signing of the MOU. The reality is that Fonexco would have picked up the liability to the Inland Revenue if they had not done so already and the fact of the matter is that this did not pose a real problem in commercial terms.

•

Moving forward, ABB commenting that some time tomorrow he would be told of the position and will know for certain whether Telit have in fact not complied with the completion notice (in all probability this will not happen). ABB’s instructions are to issue proceedings for the £1.6 million assuming that the agreement is binding, and given that any extended date for completion will have passed after 3^rd February 2000, we are at liberty to pursue Telit.

•

There then entailed a discussion concerning how to structure our claim – are we going for damages for breach of contract as well as payment of the instalments. AZ will consider this.

•

There is clearly a problem on jurisdiction and ABB’s initial research has revealed that we are able to bring ourselves within the Brussels convention rather than Order 11. The convention states that it is clear that where there is a contract where we are suing for a breach of an obligation under that contract in which performance is to be in a convention territory other than that of the domicile of the defendant, we are not restricted to the domicile of the defendant but to the jurisdiction in any other convention territory. (Article 5, paragraph 1 of the Brussels Convention). This will bring us within the UK jurisdiction. To this extent, we do not need leave to serve out of the jurisdiction. A further complication is that we must ensure that the proceedings are served by a method which is recognised by local Italian law. It is not possible to serve by post in Italy. One of the questions we need to research is on what basis you can serve a limited company in Italy. Is it possible to leave it at the registered office of the company or do we have to personally serve a director of the company. Whatever it is, a representative from this firm will have to serve the documents personally either by leaving them at the registered office or by presenting them to a director of one of the companies.

•

ABB then giving AZ the documents, namely the MOU, the conformed copy agreements (the sale and purchase agreement and the fee agreement), the completion notice dated 20^th January 2000 and their fax in response of 31^st January 2000. ABB then taking AZ through our response to Telit’s fax of 31^st January 2000. We clearly state in that fax that the MOU contains every material term of the agreement, the expanded document was to cover administrative matters and not matters of any substance and also clarified the position re liabilities.

•

Our task now is to try to work out how the proceedings can be formulated. We need to have a first draft in gear so that we can issue and serve the proceedings some time next week.

•

AZ commenting that at this moment his key concerns are:

(1)

Whether the MOU is binding

(2)

What the governing law should be

(3)

What to sue for

(4)

Jurisdiction

(5)

The ingredients of the pleading

AZ will consider these points and call Ashley on Friday morning. In the meantime, Manches will look into the Italian law service point. ABB commenting that prior to issuing proceedings, we will send a fax to Telit explaining that it is clear that they have failed to complete (assuming that they do not come back by close of business tomorrow) and that we are now taking such steps as we are entitled to in order to enforce our obligations under the contract.

Time involved 1 hour and travelling time 30 minutes.”

It seems that there was no contact between Mr. Simpson and Mr. Booker on 2 February 2000 other than receipt by Mr. Booker of the copy of his internal memorandum dated 1 February 2000 sent to Mr. Simpson upon which Mr. Simpson had made the manuscript notes to which I have already referred.

On 3 February 2000 Mr. Simpson made an attendance note in these terms:-

“Attending Ashley Booker on a few occasions

He said they were still looking at how the claim would be drafted and the issue of personal service in Italy. I asked him to ensure that it was actioned as far as possible during my absence.”

The absence in question was by reason of Mr. Simpson departing on a skiing holiday to Kitzbuhel on 4 February 2000, returning to his office on 14 February 2000.

Before departing on holiday Mr. Simpson drafted a letter to Telit. The draft provided:-

“We are extremely surprised that you have not responded to our letter of 31^st January. Furthermore, our Mr. Simpson telephoned Ms. Goujon yesterday and was informed that she would return that call. We did not her [sic] from her.

The time for completion in accordance with the Completion Notice embodied in our letter of 20^th January has now expired. Proceedings will be issued and served upon your Company shortly.

For the avoidance of any doubt, we confirm that all necessary arrangements were put in place so as to ensure that Fontel Italia Plc would be handed over to your Company with only one outstanding liability, i.e. the agreed sum of £615,000 due to your Company.

In view of the terms of the Agreement reached on 8^th December 1999, and the Sole Distributorship Agreement having terminated, our clients’ claim is:

(i)

for the sum of £1.6M being the agreed consideration, plus interest and costs;

and

(ii)

for damages to be assessed flowing from the failure of your Company to honour its contractual obligations and compliment [sic] the terms of the Fee Agreement.”

The draft bore upon its face a manuscript note to Mr. Booker from Mr. Simpson’s secretary. The material parts of it were, “Is this OK please? AJS says please check v carefully. Thanks”. It appears that no letter in the terms of, or based upon, the draft was in fact sent. The evidence of Mr. Simpson was that he countermanded the provision of the letter to Mr. Booker in a telephone conversation with his secretary whilst he was at the airport on 4 February 2000.

The detail of the work done by Mr. Booker, Miss Roberts, Mr. Mill and Mr. Zacaroli over the ensuing days was not material to any issue in this action. As I have already noted, Mr. Mill became involved in the investigation of possible methods of service of English legal proceedings in Italy. Mr. Zacaroli, as he had promised, telephoned Mr. Booker on 4 February 2000. He expressed his views on the matters which he had been asked, at the conference, to consider. He concluded, according to the attendance note made by Mr. Booker of the conversation with Mr. Zacaroli, that the Memorandum amounted to a valid and binding contract; that the proper law of that contract was English law; that the courts of England and Wales had jurisdiction to entertain an action in respect of the contract; and that the likely remedy which the court would afford for breach of the contract was damages. Mr. Zacaroli also drafted Particulars of Claim and those were sent by facsimile transmission during the course of the afternoon of 4 February 2000. Miss Roberts was also involved in the matter of establishing how service of English proceedings in Italy could be effected. Specifically she made contact with an Italian lawyer, Francesco Franzi, on 7 February 2000 and obtained advice from him. In addition she prepared appropriate endorsements for a claim form and prepared a draft letter intended to be despatched once a claim form had been issued. That draft seems to have been dictated on 8 February 2000 and typed the following day. In her draft she wrote:-

“We refer to our previous correspondence in respect of the above matter and now enclose, for your information, a copy of a Claim Form together with corresponding Particulars of Claim dated [ ] and duly sealed by the High Court in London.

Formal service will follow in due course through the appropriate judicial channels under the Brussels Convention.

We would be obliged if you would acknowledge receipt of the enclosed documents.”

On 9 February 2000 Mr. Rose was served with a writ issued out of the Tribunale di Trieste on behalf of Telit claiming various types of relief against Fonexco and Fontel, including damages under the Exclusive Distribution Agreement and avoidance of the Memorandum. The writ had been issued on 4 February 2000 and put in the hands of the court bailiff for service on 5 February 2000.

By Civil Jurisdiction and Judgments Act 1982 s.2 the Brussels Convention has the force of law in England and Wales. Articles 21 and 22 of the Brussels Convention provide that:-

“21.

Where proceedings involving the same cause of action and between the same parties are brought in the courts of different Contracting States, any court other than the court first seised shall of its own motion stay its proceedings until such time as the jurisdiction of the court first seised is established.

Where the jurisdiction of the court first seised is established, any court other than the court first seised shall decline jurisdiction in favour of that court.

22.

Where related actions are brought in the courts of different Contracting States, any court other than the court first seised may, while the actions are pending at first instance, stay its proceedings.

A court other than the court first seised may also, on the application of one of the parties, decline jurisdiction if the law of that court permits the consolidation of related actions and the court first seised has jurisdiction over both actions.

For the purposes of this Article, actions are deemed to be related where they are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings.”

Consequently, the effect of the valid service of the Trieste writ was that Fonexco and Fontel were constrained to litigate their disputes with Telit in the Tribunale di Trieste.

In the event the litigation in Trieste was compromised by an agreement on the part of the liquidator of Telit (Telit being by then in liquidation) in August 2004 to pay to Fonexco the sum of £1 million, together with a contribution towards costs of €5,000. Those sums were duly paid. The background to the settlement was that, after lengthy interlocutory proceedings, on 16 February 2004 the judge in the Tribunale di Trieste had given summary judgment for Fonexco in the sum of £1,600,000, together with interest. Telit then sought to appeal. The court stayed enforcement of the judgment in excess of £400,000. In the settlement negotiations the liquidator of Telit indicated that Telit was not able to pay more than the sums offered and accepted. In this action the basic contention in relation to loss was that Fonexco would have recovered the full sum of £1,600,000, together with costs, if Telit had been sued in England and the proceedings brought to a conclusion much sooner than the date at which Telit went into liquidation. It seems that Telit was in financial difficulties as early as about July 2001, but that Marconi Mobile S.p.A. invested in Telit and that investment enabled Telit to continue until about March 2003, when it encountered the difficulties which ultimately resulted in its liquidation.

Mr. Rose informed Manches of the service of the Trieste writ on 9 February 2000. Miss Roberts made a file note that day of the immediate reaction of the firm:-

“PCR engaged in discussing recent events with ABB, namely the receipt by Byron Rose of a writ from Telit Mobile Terminals S.p.A. and subsequently ascertaining that proceedings have been commenced in Italy. Discussing the problems that this would entail. ABB leaving a message on Anthony Zacaroli’s voice-mail to telephone him as soon as possible in order to work out whether we can do anything in the UK courts in order stay the proceedings in Italy or obtain an injunction – time involved 18 minutes (discussion with ABB) and 6 minutes file work.”

Mr. Zacaroli returned Mr. Booker’s call on 10 February 2000 and was sent, at his request, copies of the Trieste writ and an English translation. He then advised that, in the light of the commencement of proceedings in the Tribunale di Trieste, it was not open to Fonexco or Fontel to commence proceedings in England. Miss Roberts summarised the advice of Mr. Zacaroli in the final paragraph of an attendance note concerning a discussion with him on 10 February 2000:-

“As regards there being any point in us issuing proceedings here, there does not seem that much point given that we will not be able to endorse on our claim form and particulars the fact that there is no similar cause of action pending. We could send a signal to the lawyers acting for Telit that we are serious and have proceedings up and ready to go, but this is a matter for the client. Essentially, we are stuck with Italian law and, in order to contest jurisdiction, we will have to do this in Italian Courts and not here.”

Later the same day Mr. Booker spoke to Mr. Zacaroli on the telephone. He confirmed the advice which he had given to Miss Roberts. Mr. Booker then spoke to Mr. Rose. Mr. Booker recorded that discussion in an attendance note dated 10 February 2000. The material part of the attendance note was to this effect:-

“Subsequently [to speaking to Mr. Zacaroli] speaking to Byron when he returned my call and explaining to him the advice that had been received from Counsel. I also made the point to him that, given the need to resolve matters quickly, there was no point in simply awaiting the July return date for these proceedings. Further, even if a challenge to the jurisdiction could be mounted and could be brought on for hearing earlier, it would nevertheless be a little while before that could be achieved. I suggested that, in those circumstances, it may be a better tactic simply to try and meet the Italians in an attempt to reach an accommodation, particularly now that Fontel was as “clean” as it could be. I made the point that I was particularly concerned not simply to run up a huge bill of costs preparing to fight the proceedings or, indeed, make a challenge to the jurisdiction which might well not succeed. I then indicated that I thought it important that we had the benefit of input from AJS [Mr. Simpson] and Byron agreed. I agreed to telephone him as and when AJS responded to the message that I had left for him. I also suggested that, in the short term, the best possible course of action might be for us to try and identify an appropriate firm of Italian lawyers and to begin to obtain a quick initial view from them on the jurisdiction question. If AJS agreed with that suggestion, then we would put that in hand. Subject to that, although the matter needed to be resolved speedily, it was not so time critical that we needed to rush into a course of action. Byron agreed with this and indicated he thought it would be sensible to take a little time to consider how to proceed and we agreed that we should consider our options with a view to deciding on a course of action early next week following the return of AJS.

In the course of discussing approaches to Italian lawyers, Byron made the point that Telit was effectively Trieste and that it and its large insurance backers effectively owned the place and that, therefore, whilst it was natural to think in terms of instructing lawyers locally, this might not be the best course to follow.”

From that point there was a hiatus in the involvement of Mr. Booker and Miss Roberts in the matter.

On 21 February 2000 Mr. Booker sent an internal memorandum to Mr. Simpson:-

“I am conscious that we have not spoken since you have had a chance to look at the Italian pleading. I attach for information a copy of my attendance note of 10^th February. I am conscious that I have taken no steps since then, having rather presumed that you would be speaking to Byron directly. Could you please therefore let me know if there is anything further you wish me to do at this stage or whether you are presently continuing to review the position with Byron.”

On 24 February 2000 Miss Roberts spoke again to Mr. Franzi. This time she asked him what, if anything, needed to be done in Italy in the light of the service of the Trieste writ. Mr. Franzi advised that nothing needed to be done immediately. Miss Roberts also raised the question of who could act for Fonexco and Fontel in the Trieste proceedings. Mr. Franzi offered his firm. Miss Roberts said that Manches would prefer to instruct a firm in the vicinity of Trieste. Mr. Franzi said that he would look into the matter of whom he could recommend.

Mr. Simpson wrote a long letter dated 25 February 2000 to Telit. It began:-

“We were amazed to receive copies of the proceedings issued by your Company against our clients, Fontel Italia Plc (“Fontel”) and Fonexo [sic] Limited (“Fonexco”) in the Tribunal of Trieste. In our view, for the reasons set out below, the claims made by your Company are patently vexatious and, furthermore, your officers (Messrs. Zanzi and Oro, and Ms. Nathalie Goujon) who concluded the contract on 8^th December 1999 (“the Contract”) for your Company to purchase Fontel must be aware that many of the assertions contained within the Claim are untruthful or misleading.”

After setting out at length arguments in answer to the claims of Telit, Mr. Simpson concluded:-

“Your Company’s behaviour has naturally impacted on the trust and confidence inherent in the relationship hitherto. We would commend that this might be partially restored by a dialogue involving frankness as to your Company’s true position and motives. In default of such a dialogue we predict that the matter will inevitably be determined in our clients’ favour in Court – thus incurring very substantial cost for your Company and considerable embarrassment for the Officers who have initiated this course of action.”

On 28 February 2000 Mr. Simpson sent to Mr. Jeffrey Maynard what he described in the covering letter as “a further monthly invoice to bring us up to date on this matter”. The invoice was in the sum of £17,500 plus Value Added Tax. The narrative of the bill included:-

“Preparing for the issue of proceedings against Telit. Conferences with Counsel and drafting proceedings.

Thereafter upon receipt of the Italian proceedings perusing and advising you thereon.

Further correspondence with Telit.”

Thereafter some effort was devoted, principally by Miss Roberts, into identifying an Italian lawyer who could act on behalf of Fonexco and Fontel in the Trieste proceedings. At length Mr. Simpson decided to instruct Avvocato Maurizio Traverso, who was based in Milan. Mr. Simpson wrote a letter of instruction dated 6 April 2000 to Avv. Traverso. One of the points on which Mr. Simpson requested the advice of Avv. Traverso was:-

“2.

Whether steps could successfully be taken to enable the High Court in London to be the forum.”

Avv. Traverso advised on that question verbally during a conference call to Mr. Simpson on 12 April 2000. Mr. Simpson’s note of that attendance included:-

“2.

Whilst it is possible to Petition of [sic] the Supreme Court in Rome on the issue of jurisdiction, which would have the effect of staying the proceedings in the Court of Trieste, this would be a lengthy and expensive process and he believes that there is sufficient to enable the Court of Trieste to assume jurisdiction. He does not advise it. I confirmed that this accorded with the advice of Counsel in England.”

The pleaded case of the claimants had undergone considerable refinement during the course of this action. Its ultimate manifestation was the Re-Re-Amended Particulars of Claim, for which I gave permission at the commencement of the trial. Omitting underlining, words deleted and other indications of which version of an amendment a particular form of words reflected, the critical allegations in the final version of the Particulars of Claim were these:-

“3.

In or about May 1999 the relationship between Telit and Fonexco/Fontel became strained and Fontel instructed the First Defendants, Manches, who at the time were a partnership of solicitors. In or about 2003 Manches a partnership of solicitors became a Limited Liability Partnership now known as Manches LLP, the Second Defendants. The Claimants gave the First Defendants a whole retainer to protect their interest and act on all matters as deemed necessary.

3A. There were implied terms of the retainer that the First Defendants would:

3A.1 exercise the care and skill to be expected of reasonably competent solicitors in performing their duties pursuant to the retainer; and

3A.2 carry out the instructions of the Claimant with reasonable skill and care.

3A.3 Further or in the alternative, the First Defendants owed the Claimant a duty of care in tort to similar effect.

…

6.

By a fax letter dated Monday, 31 January 2000 addressed to Alasdair Simpson of the First Defendants it became apparent that Telit were not going to complete on or before 3 February 2000 in accordance with the completion notice. On Tuesday, 1 February 2000 discussions took place between the directors of Fonexco/Fontel and Alasdair Simpson who was at the time the senior partner of the First Defendants. The First Defendants advised that it had become clear from the conduct of Telit that completion would not occur on 3 February 2000 and that proceedings would have to be issued. In particular, the Claimants were advised by the First Defendants that the Court first seized of the claim should be the High Court in London and that proceedings could be commenced to enable the High Court in London to have exclusive jurisdiction on the grounds that the agreement between the parties conferred jurisdiction upon the English Courts.

7.

Early on 1 February 2000 Alasdair Simpson, instructed Ashley Booker, a senior litigation partner of the First Defendants, to issue protective proceedings quickly to preserve and protect the position of Fonexco/Fontel.

8.

Contrary to the terms of the Claimants’ retainer and contrary to the First Defendants’ own advice the First Defendants’ [sic] negligently and/or in breach of contract failed to issue any proceedings on 1 February 2000 or at all. On about 9 February 2000 copies of a writ of summons issued on 5 February 2000 in the Tribunale Ordinario Di Trieste were delivered to the Claimants.

9.

The First and Second Defendants continued to act for the Claimants and advised the Claimants that any attempt to stay the Italian proceedings would be long drawn out and likely to fail. Defending the Italian proceedings, seeking to enforce the Sale Agreement resulted in substantial and significant delay to the outcome. Further, significant costs were incurred and Telit’s financial position deteriorated to the point of its receivership.

10.

It is the Claimants’ case that if proceedings had been issued in England in accordance with the First Defendants’ advice and if such proceedings had been served as quickly as possible then a prompt application for summary judgment would have enabled the Claimants to recover the sums due to them under the contract and to enforce payment in Italy.

11.

…

12.

In acting for the Claimants in connection with the Sale Agreement and the Fee Agreement, in advising and acting for the Claimants in connection with Telit’s breach of the Sale Agreement and the proposed proceedings against Telit and in further acting for the Claimants in connection with the proceedings brought in Italy by Telit, the First Defendants acted negligently and/or in breach of contract.

Particulars

12.1

Notwithstanding the obvious importance of commencing proceedings in London, and securing the jurisdiction of the English court, the First Defendants failed to issue proceedings on 1^st February 200 [sic], promptly or at all.

12.2

The First Defendants failed to serve such proceedings on Telit as quickly as was possible.

12.2A The First Defendants failed to consider and/or to obtain any or any adequate advice upon the fastest and/or most appropriate method of service on Telit in Italy.

12.2B The First Defendants carried out such research into service as was carried out by them by an assistant solicitor of relatively little experience & a trainee solicitor …

12.2C The First Defendants wrongly concluded (by Mr. Booker on 1^st February 2000) that service by post was not permitted in Italy when The Convention of 15 November 1965 on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (“the Hague Convention”) expressly permits service by post.

12.2D The First Defendants wrongly concluded that service in Italy had to be effected through consular or judicial channels, when it [sic] fact it could have been effected directly by next day delivery courier post or via the court bailiff.

12.2E The First Defendants failed to give full and/or adequate instructions either to Counsel or to Italian lawyers as to the fastest and/or most appropriate method of service on Telit in Italy.

12.2F Having received brief oral information over the telephone from an Italian lawyer as to what was described as the ordinary method of service between two Italian companies, the First Defendant failed to enquire as to whether there were other faster methods of service available.

12.2G The First Defendants entrusted its enquiries with the Italian lawyer to an assistant solicitor of relatively little experience.

12.2H The First Defendants failed to appreciate the risk that Telit might commence proceedings in Italy despite knowing that such proceedings would be disadvantageous to the first and second Claimants.

12.2I The First Defendants failed to take any or any appropriate steps to protect the Claimants position should Telit issue proceedings in Italy as it did. Such steps were or included (i) immediate or prompt issue of proceedings in London and (ii) service of the same on Telit in Italy by the fastest method available.

12.3

The First Defendants permitted Telit to issue proceedings in Italy before proceedings were issued in England.

12.4

Following delivery of the Italian proceedings to the Claimants on about 9^th February 2000, the First Defendants failed to give any or any adequate consideration as to the validity of (i) the issue of proceedings in Italy by Telit and (ii) the purported service of such proceedings on the Claimants in the United Kingdom, and whether the same were susceptible to challenge, notwithstanding that they were advised to do so by an Italian lawyer (one Franzi) on about 13^th March 2000.

12.5

The First Defendants failed to challenge the jurisdiction of the Italian Court and/or failed to take any or any adequate advice as to whether the Claimants were able to do so.”

There were, as it seemed to me, a number of unusual features in how the claims of the claimants were pleaded. The first was that the pleaded retainer was of extraordinary width. The only retainer pleaded was one said to have been agreed in about May 1999 by which Manches was retained, essentially, to do whatever was necessary to protect the interests of the claimants. Such a retainer was, conceptually, highly improbable. Ordinarily one would expect a party engaging the services of a solicitor to be much more precise in what was comprehended within the scope of the retainer. Implicitly in the present case it seemed to be said that a retainer agreed in about May 1999 comprehended obligations on the part of Manches to commence proceedings on about 31 January 2000 or 1 February 2000 to enforce, or to seek damages for breach of, the Memorandum, agreed some seven months or so after the retainer alleged, and to contest the jurisdiction of the Tribunale di Trieste to adjudicate upon disputes between Telit, on the one hand, and Fonexco and Fontel, on the other, in relation to the Exclusive Distribution Agreement and the Memorandum. That way of putting the case seems to come very close to alleging some kind of general retainer.

It is, I think, helpful to remind oneself of the wise words of Oliver J., as he then was, in Midland Bank Trust Co. Ltd. v. Hett, Stubbs & Kemp [1979] Ch 384 at pages 402G – 403B:-

“Mr. Harman sought to rely upon the fact that Mr. Stubbs was Geoffrey’s solicitor under some sort of general retainer imposing a duty to consider all aspects of his interest generally whenever he was consulted, but that cannot be. There is no such thing as a general retainer in that sense. The expression “my solicitor” is as meaningless as the expression “my tailor”” or “my bookmaker” in establishing any general duty apart from that arising out of a particular matter in which his services are retained. The extent of his duties depends upon the terms and limits of that retainer and any duty of care to be implied must be related to what he is instructed to do.

Now no doubt the duties owed by a solicitor to his client are high, in the sense that he holds himself out as practising a highly skilled and exacting profession, but I think that the court must beware of imposing upon solicitors – or upon professional men in other spheres – duties which go beyond the scope of what they are requested and undertake to do. It may be that a particularly meticulous and conscientious practitioner would, in his client’s general interests, take it upon himself to pursue a line of inquiry beyond the strict limits comprehended by his instructions. But that is not the test. The test is what the reasonably competent practitioner would do having regard to the standards normally adopted in his profession, and cases such as Duchess of Argyll v. Beuselinck [1972] 2 Lloyd’s Rep 172; Griffiths v. Evans [1953] 1 WLR 1424 and Hall v. Meyrick [1957] 2 QB 455 demonstrate that the duty is directly related to the confines of the retainer.”

A second unusual feature of the way in which the case of the claimants was pleaded was that it seemed to be contended that Manches was obliged, in order to perform its retainer with the care and skill to be expected of reasonably competent solicitors, to have commenced proceedings against Telit without being instructed specifically so to do, and should have commenced proceedings in the Tribunale di Trieste to contest the jurisdiction of that court without being instructed specifically to do so. It is, in my judgment, trite law that a solicitor is not authorised to commence any proceedings on behalf of his client without specific authorisation, and that, if he does commence proceedings without specific authorisation, he is personally liable to the opposite party for that party’s costs of the proceedings.

A third feature of the pleaded case was that a number of particulars of negligence or breach of contract focused on the issue whether it was appropriate for an assistant solicitor or a trainee to be entrusted with particular tasks. On any view, as it seems to me, these allegations were a distraction from the main foci of complaint, namely that proceedings were not issued in England and served in Italy on behalf of Fonexco and Fontel before Telit managed to issue proceedings in the Tribunale di Trieste and have them served on Fonexco and Fontel in England, and that Manches did not seek to challenge the jurisdiction of the Tribunale di Trieste.

The first pleaded particular of negligence or breach of contract seemed anachronistically chauvinistic. I should have thought that the days were long past when a lawyer, even in England, proceeded on the basis that the law of England and Wales was self-evidently superior to the laws of any other legal system, or that the practice and procedure of the courts of England and Wales were manifestly better than those to be found elsewhere. The attraction to an English lawyer of litigation in England and Wales is simply that he or she is familiar with the law to be applied and with the practice and procedure of the courts. No doubt a French lawyer looks with similar favour upon the benefits of litigation in France. However, a sophisticated, modern approach to commercial litigation surely requires a careful consideration, in a case in which a choice of litigation in different jurisdictions is possible, of the advantages and disadvantages of each of the possible options.

Notwithstanding the pleaded complaint about the failure to challenge the jurisdiction of the Tribunale di Trieste, absolutely no evidence was led at the trial to support the contention that any such challenge would have had any prospect of success. I have already noted that Mr. Simpson sought the advice of Avv. Traverso as to the prospects of a successful challenge. I have quoted from the attendance note which Mr. Simpson made of the advice of Avv. Traverso on the point. Although expert evidence of the law of Italy was obtained on behalf of the claimants from Avv. Alberto Pasino, Avv. Pasino was not asked to consider whether the advice which Avv. Traverso had given was wrong. When asked in cross-examination whether he felt able to express any view on the point, he said that he did not.

In Locke v. Camberwell Health Authority [2002] Lloyd’s Rep PN 23 Taylor L.J., giving the leading judgment, with which both the other members of the Court of Appeal agreed, considered the nature of the obligation of a solicitor to his client in a case in which advice from counsel has been sought. He said, at pages 29 – 30, having considered various authorities:-

“The principles relevant to the present case to be derived from those authorities can be shortly stated.

(1)

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

(2)

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

(3)

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

In the case of the advice of counsel a solicitor at least has the advantage that the advice will be on some aspect of English law or practice and the solicitor will have some knowledge of that law or that practice. In the case of a foreign law, a solicitor will not have that benefit. As it seems to me, it is incontrovertible that an English solicitor is entitled to rely upon the advice of an apparently competent foreign lawyer, properly instructed, on a point of the law or practice of the jurisdiction in which the foreign lawyer is an expert.

In his closing submissions Mr. Charles Douthwaite, who appeared on behalf of the claimants, abandoned the claim based on the alleged failure of Manches to challenge in Italy the jurisdiction of the Tribunale di Trieste. I think that he was right to do so.

Notwithstanding the way in which the case for the claimants on the questions of issuing and serving English proceedings on Telit was pleaded, it was clear from the evidence adduced before me that in fact the claimants’ case was that Mr. Simpson specifically advised Mr. Rose during their conversation on 31 January 2000 that proceedings against Telit should be issued in England immediately, that Mr. Rose accepted that advice and gave the necessary instructions, and that Mr. Simpson passed on those instructions to Mr. Booker in their conversation on 1 February 2000. The case, therefore, was a simple one. Manches had been instructed, on 31 January 2000, specifically to issue proceedings in England against Telit immediately and to serve those proceedings at once, and in breach of contract it had not done so.

At a point before the true nature of the issues in this action had become apparent Master Rose, on 12 March 2009, had directed a trial of preliminary issues, as follows:-

“There be a trial of all issues save quantification of loss and (for the avoidance of doubt) ‘all issues’ are to include all issues of liability and causation including

a)

Had the First Defendant issued proceedings in England (i) on 1^st February 2000, or (ii) promptly after 1^st February 2000, or (iii) at any time prior to 9^th February 2000, what is the likelihood that such proceedings would have been served on Telit prior to 9^th February 2000 and so what is the likelihood that the English Courts would have been the court first seised of jurisdiction?

b)

Had the First Defendant (on the Claimants’ case) given “any or any adequate” consideration to the matters pleaded in paragraph 12.4 of the Amended Particulars of Claim

i)

What advice ought to have been given to the Claimants?

ii)

Would the Claimants in fact have taken steps to challenge the jurisdiction of the Italian Court in Italy in the light of such advice?

iii)

What is the likelihood that such a challenge would have succeeded had it been made?”

Notwithstanding that, as I have explained, on the evidence led before me it seemed that the question of liability or not on the part of Manches depended simply upon whether Mr. Rose had instructed Mr. Simpson on 31 January 2000 to issue proceedings in England against Telit immediately and to have those proceedings served at once, in the light of the terms of the order for the trial of preliminary issues, with which this judgment is concerned, it was necessary also to consider what would have been the likely effect of so doing on the various hypotheses postulated in sub-paragraph a) of the order of Master Rose. As I have already noted, the issues identified in sub-paragraph b) did not arise.

In cross-examination Mr. Rose explained the material part of the discussion between himself and Mr. Simpson in this way (Transcript, Day 1, page 158 line 9 to page 162 line 20):-

“A. Yes. All I know is that that day, the button was pushed. Alasdair said: I don’t know what they have up their sleeve, but we have got to issue proceedings.

Q. You see, Mr. Rose, it is rather important. You say: the button was pushed. It is rather important we must issue proceedings.

We just need to understand a little more about that meeting. Who else was there?

A. I don’t know whether it was a meeting or it was a telephone conversation.

Q.

So you don’t even remember whether it was face-to-face or over the phone?

A. No, but I remember the implications of what we were doing that day.

Q. Do you remember a discussion where the words “Issue proceedings immediately” were used?

A. That we will issue proceedings, because I imagined, that by the 3^rd, before completion, Natalie Goujon would have a writ on her desk which would change everything. The whole position would fundamentally change, with us being on the back foot and Telit trying not to complete.

Q. Again, I just want to try and understand the dynamic. Who first suggested in that conversation that proceedings should be issued against Telit immediately?

A. Alasdair.

Q. Alasdair suggested it to you, did he?

A. Yes.

Q. Did he use the word “imperative”?

A. Not that I am aware of.

Q. Was there a discussion as to why Fonexco should issue proceedings immediately?

A. Why Telit?

Q. No, why Fonexco should issue proceedings immediately?

A. Or Fontel. Because it was totally clear that Telit had no intention of completing on the signed agreement by the business for £2 million.

Q. And there was that discussion, was there?

A. Yes.

Q. Was that a reason that Mr. Simpson gave to you or that you gave to him?

A. We had – on that day, I think we had probably two or three conversations – I know it was more than one – about the situation. And you know, the proposal – what we were doing that day of pushing the button means – and me saying: okay, we will go ahead, was, you know – was monumental. We were taking this Italian company to court, to enforce the contract.

Q. Mr. Rose, what I was trying to explore. You have confirmed now that it was Mr. Simpson who said to you: the companies must issue proceedings immediately?

A. Yes.

Q. So that was the direction in which that conversation flowed?

A. Yes.

Q. You said that there was a discussion that the reason that proceedings needed to be issued immediately was because in your mind, it had become clear Telit would not complete?

A. (Nods). And, you know, that they were up to something. They were definitely up to something. I didn’t know what it was and Alasdair said: I don’t know what they are up to, but we have got to issue proceedings.

Q. Did he give any other reasons for the need to issue proceedings immediately?

A. Well, it was pretty clear. I mean –

Q. No, listen to the question, Mr. Rose.

A. Okay.

Q. Did he give you any other explanation as to why his advice was: we must issue proceedings immediately?

A. No.

Q. So he did not, at any stage, say “There is a risk that Telit may issue proceedings themselves in Italy”?

A. No, but I knew from Telit and I knew from circumstances surrounding Georgio Fretti: for instance, Global Star, of them entering into a contract and then suing Global Star to get out of the contract, which then the whole litigation went to Italy. And the thought of us being in litigation with the Italians in Italy, horrified me. I do not want that situation to arise.

Q. So why weren’t you telling Mr. Simpson: get on and sue. Why was he telling you?

A. Why would I – why would I tell Mr. Simpson? Mr. Simpson said: we are going to issue a writ, we are going to sue. He was the lawyer I was relying on to do it.

Q. And he definitely used the word “immediately”, did he?

A. It was – my understanding is that by the 3^rd, we would be – so instead of completion, we were going to a totally different strategy of suing the firm.

Q. So Mr. Rose, this conversation is taking place some time on the afternoon or early evening of the 31^st?

A. 31^st.

Q. Which is the –

A. Monday.

Q. Monday. Your evidence is that your expectation and your understanding was that by the 3^rd, which was the Thursday, proceedings would have been issued against Telit?

A. Well, from –

Q. Is that what you understood by “Immediate” to be?

A. When a writ is served, I know from other experience that it’s straight away.

Q. Mr. Rose, I just want to again put myself back in your position a decade or so ago. I have just been told by my solicitor that the company must issue a writ immediately.

A. Yes.

Q. What did you understand “Immediately” to be?

A. Straight away. Immediate. The same day.

Q. The same day?

A. Well –

Q. So 31^st or if not the 31^st, then the 1^st?

A. Yes, absolutely.”

The oral evidence of Mr. Simpson about the discussion with Mr. Rose concerning the issue of proceedings was this (Transcript, Day 2, page 108 line 14 – page 111 line 16):-

“Q. And at that meeting, it is your evidence that a decision was taken that proceedings be issued immediately. Is that right?

A. Yes.

Q. Who took that decision?

A. In reality, probably me. In reality. If I can just finish the sentence, I explained to Byron there was now nowhere to go. They are not going to complete and we need to issue proceedings and I undertook to him that it would be done.

Q. When you used the word “immediately”, as you do, I think, 12 times in your witness statement, what did you have in mind at the time?

A. What I did would indicate to you what I had in mind, so we don’t have to rely just on my evidence. That evening or early the following morning, because as you pointed out when you –

Q. Mr. Simpson, I’m sorry to cut across you, it is a perfectly straightforward question. When you advised your client or at least when you say you advised your clients to issue proceedings immediately, what timescale did you have in mind for these proceedings?

A. The following day.

Q. The following day?

A. Yes.

Q. I see, right. Did you tell your clients that proceedings would be issued the following day?

A. They had the clear impression that the following day I would do whatever was necessary to get proceedings issued.

Q. Even though you had advised them by letter that very afternoon that by completion on Friday, they had to get certain things done?

A. I wonder whether you haven’t understood what I said. In relation to the letter, Mr. McPherson, what I said was: we are now in trouble. There is going to be litigation. I wanted there to be a letter on file that made it absolutely clear to the clients that they had an obligation to have it clean and effectively I was signalling, even though your intention was that the tax would be paid on the day of completion, the tax for cashflow purposes, that there might be a few creditors and a few debtors there. To comply with the word clean, ideally it would be absolutely clean.

Q. Important to have advice like that in writing so that one can look back in the future and say: look, I did advise, isn’t it?

A. Yes, but it is a dual purpose letter. I have put it in writing rather than saying by telephone, as it were, because it is important that it is there but more importantly, I was advising them to get it done.

Q. Why is there nothing in writing from you, either an internal note within Manches or an external piece of correspondence to any of your clients, confirming the equally important advice to issue proceedings immediately?

A. Because by the time – (a) it wasn’t my practice to dictate long attendance notes. My attendance notes were usually used as a means of recording time. So you will see – I have spotted one of 3 February, attending Ashley Booker on numerous occasions. The attendance note itself says very little. It says something but very little. I, unlike Ashley – I have read his witness statement – did not have a practice of every time I had a telephone call with a client, every time I had a meeting, doing a long attendance note. I would scribble down in a notepad, occasionally do an attendance note if for some reason I thought it was important. That wasn’t my practice. I mean, I might equally well ask why, in relation to the vital meeting in relation to these proceedings, on 1 February in the morning with Ashley – he is giving evidence that he was punctilious, it was his practice to make notes and dictate them and type attendance notes of every meeting – is there no record of the meeting that I had with him on 1 February, the crunch meeting, because in my view – excuse me if I’m wrong – that is actually what this case is about.”

In that passage Mr. Simpson dealt, to an extent, with documents which he was invited to consider which it was suggested were not consistent with his account. There were other passages in his cross-examination which dealt with that general point and I shall return to some of those passages. However, it is convenient, first, to consider the oral evidence of Mr. Simpson as to what thinking prompted him to take the view that it was necessary to issue proceedings against Telit in England immediately. At Transcript, Day 2, page 114 line 19 – page 116 line 21 Mr. Simpson addressed the risk of proceedings being commenced in Italy by Telit:-

“A. I said to Ashley: I want a writ issued straight away, immediately.

Q. Okay. When you and Mr. Rose and Riordan Maynard had a conversation on 31 January, was it discussed that Telit could issue proceedings in Italy at any moment?

A. I can’t tell you that it was said explicitly. I knew they were [not] going to complete. I also knew they had something up their sleeve. They had to have. And my instincts, all my instincts said: get a writ issued.

Q. You did not for one moment contemplate on 31 January or at any time before 9 February that Telit might try to sue Fonexco in Italy, did you?

A. It certainly had to be their responsibility. It certainly had to be. We get this letter. They are not going to complete. What are they up to because on the face of it there is an absolutely binding English contract? They are up to something and all my instincts said: we have got to do something.

Q. Mr. Simpson, that doesn’t answer my question. My question was whether or not you had it actively contemplated in your mind at any time prior to 9 February, that Telit might issue proceedings in Italy, seeking to sue Fonexco in Italy?

A. I would suspect I did.

Q. Mr. Simpson, that is simply incorrect, isn’t it. You were amazed when Telit took the step of issuing proceedings in Italy?

A. I used a whole lot of words: flabbergasted, amazed, many different words. Flabbergasted would have been the better word.

Q. Amazed was the one you used at the time?

A. We were trumped and if you read their proceedings, they were absolute rubbish. Absolute rubbish. They claim that there were illegalities going on within Telit. They were entitled to rescind the contract. That would have left them, on the face of it, with the distributorship agreement. They claimed that because of the breaches of VAT, that they were no longer bound by that and I think they claimed 10 or 20 million and it was utter fantasy, as I knew, and indeed when the proceedings in Italy actually got underway, the whole of that was dropped. The only issue that the Italian court dealt with – it took four years to deal with it – the only issue it dealt with was the validity of the contract.

Q. Mr. Simpson, I will go back to where we started. At no time between 31 January and 9 February, did you anticipate that Telit would issue the fantasy proceedings that they in fact did?

A. You have used the word “anticipate”. Anything was possible. I didn’t know what was in their mind. They were up to something and I knew we had to get a writ issued.”

Perhaps one should interpret the various references in the passages which I have quoted from the cross-examination of Mr. Simpson in which he spoke of issuing a writ as meaning “issue and serve”, but it was noticeable that he himself in this evidence seemed to consider that the critical aspect of the matter was simply issue. For example, Transcript, Day 2, page 117 lines 3 – 6:-

“I was there and I persuaded Byron Rose: there is nowhere to go. Will you now accept they are not going to complete? We need to issue a writ.”

A document upon which Mr. Simpson was pressed was the version of Mr. Booker’s internal memorandum dated 1 February 2000 upon which Mr. Simpson made manuscript additions. About this there were lengthy exchanges. They included:-

“(Transcript, Day 2, page 119 line 22 – page 120 line 13)

Q. The first substantive paragraph sets out difficulties or uncertainties that Mr. Booker has identified in relation to service and jurisdiction; correct?

A. Yes.

Q. You do not comment at all on that paragraph, do you?

A. No, and this is the paragraph I was referring to earlier, when I said were it not for the circumstances when I got that note, how I reacted to it, I should have picked up the phone to him and said: what on earth are you doing?

Q. But your witness statement criticises Mr. Booker for making a meal out of it?

A. Yes.

Q. If it was so imperative to get this writ issued, presumably it was equally imperative to get it served, was it?

A. Of course it was imperative to get it served.

(Transcript, Day 2 page 123 lines 1 – 6)

Q. Nowhere on here do you write:

“Ashley, just issue the writ”, do you?

A. No.

Q. Nowhere on here do you express displeasure that the writ is yet to be issued?

A. No.

(Transcript, Day 2, page 129 line 13 – page 133 line 7, questioned by me)

Q. I do find that rather puzzling, Mr. Simpson. When one looks at the bottom, page 258, and one sees what Mr. Booker has written – the last two lines of the page will do:

“It may be sensible to ensure that we have dealt as fully as possible in correspondence with this allegation before finally issuing our proceedings.”

Now, the first thing perhaps one can see from the use of that form of words is that Mr. Booker hasn’t issued a writ at the time he is writing this note?

A. Yes, I agree.

Q. The second thing perhaps one can see is that he is not intending to, until the matter has been dealt with as fully as possible in correspondence or at any rate you have given him some guidance on that point. And then the guidance that you give him, it is not: stop fiddling about, get on and issue, but: we are getting an update tomorrow, showing exact position.

A. Yes.

Q. So you are contemplating no writ being issued at least until 2 February?

A. Your Honour, this was the night of 1 February. So there was no possibility of a writ being issued until 2 February. I’m sorry, when I say in my note – this note was received by me after close of business on the 1^st. It is dated the 1^st. I responded that night with these scribbled answers –

Q. Yes.

A. – in some irritation.

Q. Rather than saying something like, “Stop faffing about, get on and issue”, what you have actually written is, “We are getting an update tomorrow, showing exact position.”

Now, that perhaps suggests that your instruction to Mr. Booker is to wait until that update has been received before making a decision about issuing, otherwise what’s the point of that note?

A. Well, he has – if you are suggesting that I in the meeting in the morning had said, “Don’t issue a writ until I get an update”

Q. No, Mr. Simpson, that isn’t what I’m suggesting. I’m focusing my attention, as I suspect you understand perfectly well, on the note that Mr. Booker has written and your comment on the last two lines on the page.

A. Yes.

Q. So we are at the point at which you are reading this note.

A. Yes.

Q. You tell me that this is some time on 1 February, after court hours, so that a writ could not be issued that day.

A. Yes.

Q. You are contemplating by saying:

“We are getting an update tomorrow, showing exact position”, are you not, on that being something relevant to a decision that Mr. Booker has to make about commencing proceedings? Otherwise what is the point of making that comment?

A. I cannot tell you what was in Mr. Booker’s mind, whether he thought he had now taken over this whole thing -

Q. Mr. Simpson, do, please, try and assist me.

You have written:

“We are getting update tomorrow showing exact position”

Why did you write that?

A. Because he has said he has seen another problem and that is he has now read Natalie Goujon’s letters, where she repeatedly says there are issues over the balance sheet and he is saying:

“Before we travel down in order to serve proceedings, it may be sensible to ensure that we have dealt as fully as possible in correspondence with this allegation before finally issuing proceedings.”

I was not or was certainly not intending to suggest that I agreed with his suggestion that there should be a letter. I was seeing this as another concern that he was raising and simply said: we are getting an update on that tomorrow. There was no suggestion in the instructions to Ashley that there were things to be done at our end or Fonexco’s end before we did what we promised which was issue the writ but –

Q. So it would be quite wrong, would it, to interpret what he [sic in the transcript, but the context requires “you”] wrote on this note as indicating that it was relevant to the question whether proceedings should be issued and if so, when, to see what the update was?

A. I think – I read this very hurriedly but I think it is fair to say that what was in his mind was that maybe a letter should go to the clients but what I read in my haste out of that, was he had now spotted another thing that concerned him and that was the allegations in the correspondence about the company not being clean and what I was saying in relation to that is: I’m getting an update in the morning.”

Mr. Simpson was asked why, on 2 February 2000, he did not make contact with Mr. Booker about his failure to issue a claim form (Transcript, Day 2, page 135 line 4 – page 136 line 2):-

“Q. Yet at no time during that day do you pick up the phone to Ashley Booker and put a rocket under him to get a writ issued, do you?

A. No, Mr. McPherson, I was running a law firm. I was running a department, I was running my own practice, I was going away on Thursday. You have literally no idea of what my working day and my responsibilities used to be. It isn’t like being a senior partner of some major law firm, which is some kind of figurehead. My days were absolutely frenetic and when I did get a break from the office, I used to wonder often: why have I bothered, because the lead-up to the holiday was so frenetic. I had handed this matter over to a 45 or 50-year-old senior partner from Clifford Chance. It is his problem, not mine. I cannot sit there all day thinking: gosh, it is 2 o’clock, it’s 3 o’clock, Ashley hasn’t confirmed the writ has been issued. If that’s the point you are trying to make, please put it in perspective. Although the point has been made I control things, I like to run them myself, there were two discrete tasks delegated: the conform copy contracts to Matthew Martin and now we have got to issue a writ to Ashley Booker. So in answer to your question, I did not chase him during the 2^nd and why should I have to?”

The final documentary reference arising before 9 February 2000 about which Mr. Simpson was asked in cross-examination, and which it was suggested was inconsistent with his evidence as to what advice he had given to Mr. Rose, what instructions he had received on 31 January 2000, and what instructions he had himself given to Mr. Booker on 1 February 2000, was his attendance note dated 3 February 2000 relating to a number of attendances on Mr. Booker. His evidence (Transcript, Day 2, page 141 line 23 – page 143 line 9):-

“Q. “Attending Ashley Booker on a few occasions. He said they were still looking at how the claim would be drafted and the issue of personal service in Italy. I asked him to ensure it was actioned so far as possible during my absence.”

You knew, as at 3 February, before you went away, that a writ had not been issued?

A. Correct.

Q. You did not say to Ashley Booker, “Make sure you issue it tomorrow,” or Friday or the following Monday. You simply asked that during your ten day absence skiing, matters be actioned as far as possible?

A. Yes, what my note says is that he reported to me they were still looking at how the claim would be drafted.

Q. Yes.

A. He is the expert. When we had the meeting on 1 February, to me it seemed the simplest of tasks: You put a general endorsement on the writ, which says it is for specific performance and/or damage or whatever and you walk down to the court and issue it. What I’m picking up from this expert and the team, evidently, that he had working for him was, it isn’t as simple as you think, and they have gone off to counsel. They have raised a whole lot of issues with counsel, which, if I may say so, I don’t think needed to be raised with counsel and which we have already discussed and, I thought covered, and they are telling me there are still problems how you formulate it. I can’t second-guess a top flight litigation partner and counsel. The essence is, on 1 February, Mr. McPherson – and you won’t get me to contradict this – at that meeting the instructions to Ashley were, “Please issue a writ”. He set about it in a certain way.

Q. Mr. Simpson, were they, “Please issue a writ” or were they, “Please issue a writ immediately”?

A. “Please issue a writ”. And of course it meant immediately.”

Mr. Booker’s evidence as to the instructions which he had been given by Mr. Simpson on 1 February 2000 was quite different from what Mr. Simpson contended he had said to Mr. Booker. Mr. Booker stated his position more than once during the course of his cross-examination, but the effect of his evidence, from which he would not be dislodged, appears from these exchanges (Transcript, Day 3, page 166 line 25 – page 168 line 22):-

“Q. Indeed. Now, that’s why I say that Mr. Simpson is right – I suggest this to you: Mr. Simpson is right when he said, “Issue proceedings immediately,” because anything short of that was just repeating what had already happened. Isn’t that right?

A. No, it isn’t right. He is not repeating anything. If what he says to me is that, “I want you to issue proceedings”, that’s totally different. What he never said to me was, “Issue them immediately”. There was never any discussion, whether it be on 1 February or any other time – and Lord knows, if that’s what he thought, he had plenty of opportunity to say so – that he expected things to be done there and then because certainly, if he had said that, my response would have been entirely different.

Q. You would have gone ahead and done it?

A. Absolutely I would.

Q. Did you not think – we are obviously at odds as to what Mr. Simpson said to you, what you recall of it.

A. I think, with respect, it is not you and I that are at odds, it is Mr. Simpson and I. There is a complete difference of view.

Q. Yes. But did you not exercise any independent judgment on this at all?

A. I don’t think I did because I was being given to understand – and this is the best of my recollection ten years down the line – that he wanted to be in a position to proceed with a damages claim if that’s what he had to do, but it was also in an expectation that this might rattle the cage and actually bring them to the table and make them realise that the client was serious.

Q. Let’s be precise about that. What would rattle the cage?

A. The issue and service of proceedings.

Q. Yes. But if that was not urgent, there was going to be no cage rattling for a week or two, was there?

A. That was in fact the case. That was never going –

Q. That’s as things turned out but Telit had indicated that they weren’t going to complete in their fax of 31 January. Mr. Simpson had accepted that. Why delay? Why not –

A. I’m sorry –

Q. – put pressure to bear?

A.

I’m not sure where you are getting the word “delay” from. There was no delay. We moved swiftly. We did not rush into issuing proceedings on the basis that it was immediate.”

Mrs. Day (Miss Roberts), Mr. Mill and Mr. Zacaroli were all called to give evidence on behalf of Manches. The evidence of these three, collectively was, in effect, that she or he was not made aware of any need for the issue and service of proceedings in England against Telit within hours, but understood that the intention was that, if Completion did not take place on 3 February 2000, proceedings would be issued in the course of the following week and served in an appropriate manner in Italy. The precise role of each was different, so that Mr. Mill was only involved in researching service of English proceedings in Italy, and Mr. Zacaroli was not invited to address the question of service at all. However, drawing the strands of the evidence of these individuals together, its substance, taken together, was as I have indicated. That evidence was thus consistent with the evidence of Mr. Booker. However, the evidence of Mrs. Day, Mr. Mill and Mr. Zacaroli plainly did not exclude the possibility that the impression which each of them had was not consistent with what Mr. Simpson had said to Mr. Booker.

The other significant factual witness called on behalf of Manches was Mr. Jeffrey Maynard. A witness statement from Mr. Maynard was served shortly before the commencement of the trial. It included the following passages:-

“5.

I have seen a copy of the Claimants’ re-amended Particulars of Claim and a copy of the Claimants’ witness statements which have been exchanged in this Action. My understanding from the Claimants’ witness statements is that the Claimants’ case against the Defendants is that Fontel and Fonexco were advised by Manches that proceedings would have to be issued in the High Court in London to enable that Court to have exclusive jurisdiction in its claim against Telit arising out of its failure to complete the purchase of Fontel, but that Manches negligently failed to issue those proceedings “on 1 February 2000, promptly or at all”. I also understand that the Claimants’ evidence is that Alasdair Simpson, then the senior partner at Manches, advised on 1 February 2000 that the proceedings would have to be issued “immediately”. Whilst obviously I cannot speak about the conversations which took place between Alasdair Simpson and Byron Rose or Alasdair Simpson and/or Ashley Booker, my recollection is firstly that I did not understand that proceedings would be being issued ‘immediately’ or even urgently and secondly that on the basis of the situation as it stood on 1 February 2000, there was no perceived need to act urgently or immediately in order to enable the Court in London to exercise jurisdiction over the dispute.

…

12.

Around this time, during the week ending 4 February 2000, I became aware that proceedings were being prepared by Manches against Telit. Ordinarily I would regard litigation as a last resort. In this case however, the litigation was really a device in order to provoke Telit into doing something. I did not know what the core claim against Telit was going to be; this was not simply a case of suing for a debt in the High or County Court. All we wanted was to achieve completion or to bring Telit back to the table. I therefore did not know what the basis of the claim against Telit would be, and I did not even know for certain that it would eventually prove necessary to serve it. Around this time, I also became aware that Alasdair Simpson was going away on holiday, and that in his absence, the matter would be looked after by Ashley Booker. To the very best of my recollection, my understanding was that Ashley would be progressing matters, preparing the case and getting things ready for Alasdair’s return. Again, I am confident that there was no sense of real urgency, for we were not driven by an expectation that Telit were going to be issuing proceedings. We expected Ashley to move quickly because we wanted to force the pace and wanted to bring Telit back to the table or just provoke them to react in some way. As far as I was and am concerned however this was not a case of having to ‘call the fire brigade’.

…

14.

I have now been taken through Manches’ file during this period. In my view, the documents which appear on the file are entirely consistent with my recollection, namely that while we wanted to progress quickly, the matter was not that urgent, and would certainly await Alasdair’s return. Indeed, I do not think that Byron and I would have been happy had Ashley taken a decision or advised us to serve the proceedings on Telit; as far as I was concerned, Alasdair had significant input into the way in which the Company’s affairs were conducted and particularly as in the matter of Telit Alasdair had initiated all legal aspects from the outset. Without Ashley and Byron/myself hearing from Alasdair advising us to issue proceedings and detailing the likely outcome I would not have wanted us to issue proceedings.”

Mr. Maynard was cross-examined about some of the passages which I have quoted, but he remained firm in his evidence.

Mr. Graeme McPherson Q.C., who appeared with Miss Emilie Jones on behalf of the defendants, submitted, in closing, (Transcript, Day 5, page 55 lines 10 – 18):-

“What I say next, I suspect may be more controversial, which is this: where a witness claims to have an independent recollection of events from a decade ago, that claim must in every case be tested against the documents. And if it is consistent with what the documents say, then my Lord, no doubt will give weight to it. If it is, however, inconsistent with what the documents say, my Lord should be sceptical about the accuracy of a witness’ claimed recollection a decade on.”

I accept that submission. It seems to me to be simple common sense, actually in every case, not just one in which the relevant events occurred over ten years ago.

I also accept the submission of Mr. McPherson that none of the contemporaneous documents was consistent with Mr. Simpson advising Mr. Rose on 31 January 2000 that proceedings should be issued in England against Telit immediately and served as soon as physically possible in Italy, that Mr. Rose accepted that advice and gave the appropriate instructions for those steps to be taken in the discussion on 31 January 2000, or that Mr. Simpson instructed Mr. Booker on 1 February 2000 to issue a claim form on behalf of Fonexco and/or Fontel against Telit in England immediately and to arrange for such claim form to be served on Telit in Italy as soon as physically possible. To the contrary, the contemporaneous documents were only consistent with Mr. Booker’s account of what he was instructed to do by Mr. Simpson, and that points to the overwhelming probability that the evidence of Mr. Simpson and Mr. Rose of their discussion on 31 January 2000 was simply false.

Mr. Douthwaite strenuously urged upon me the consideration that Mr. Booker had not made an attendance note of his discussion with Mr. Simpson on 1 February 2000. Mr. Booker was also unable, Mr. Douthwaite submitted, correctly, to recall whether he had had a meeting with Mr. Simpson on 1 February 2000 or had spoken to him on the telephone. These factors cast doubt, in the submission of Mr. Douthwaite, on whether Mr. Booker could really recall, after 10 years, what he had been instructed to do by Mr. Simpson.

One cannot, as it seems to me, take these points, which are fair up to a point, too far. True it is that Mr. Booker did not make an attendance note of his conversation with Mr. Simpson on 1 February 2000. However, he did that very day prepare the internal memorandum which I have quoted. One can, I think, fairly deduce from what steps he reported he had taken that day, what he had in fact been asked to do. Moreover, the manuscript comments of Mr. Simpson on the copy of the internal memorandum sent to him clearly demonstrate, as it seems to me, that he had not been expecting Mr. Booker to do anything different, and, in particular, not that day to issue a claim form against Telit and set in train the process of serving that claim form as fast as possible. Mr. Simpson’s comment that, “We are getting an update tomorrow showing exact position” demonstrated plainly, in my judgment, that he knew that no claim form had been issued by the time of the preparation of the internal memorandum, that he knew that Mr. Booker was not intending to issue a claim form until there had been correspondence with Telit on the subject of the liabilities of Fontel, and that he, Mr. Simpson, did not expect additional information on those liabilities to be available earlier than 2 February 2000.

The evidence of Mr. Booker was also supported, contemporaneously, by the attendance note made by Miss Roberts of the conference with Mr. Zacaroli on 2 February 2000. The thinking of Mr. Booker at that time, and the instructions which he had received, emerge plainly from what he is recorded as having said to Mr. Zacaroli.

What it seemed to me was very seriously damaging to the evidence of Mr. Simpson, indeed almost fatal on its own, was the terms of Mr. Simpson’s attendance note dated 3 February 2000 concerning his attendances that day on Mr. Booker. Not only was there the negative evidence of no reference at all to Mr. Simpson being surprised, disappointed, or dissatisfied that Mr. Booker had not by the date of the attendance note issued a claim form, but he positively accepted that the issues of the drafting of a claim and service were outstanding, yet he only asked Mr. Booker, “to ensure that it was actioned so far as possible during my absence.” A clearer indication that Mr. Simpson understood perfectly well, and was content with, the facts that no claim form had been issued and that it might well not be issued until after his return from holiday it would be difficult to find.

That it had not entered the mind of Mr. Simpson that there was a possibility of Fonexco becoming involved in a “jurisdiction race” with Telit was demonstrated plainly, as it seemed to me, by his letter dated 31 January 2000 to Mr. Rose and Mr. Maynard urging then to seek to ensure that their position was impregnable by Friday, 4 February 2000, and his draft letter to Telit dated 4 February 2000. Notwithstanding that the latter letter was not, it appears, despatched, the draft would never have been produced had the possibility of a “jurisdiction race” occurred to him, for the sending of such a letter would have given notice of what was intended on the side of Fonexco.

In addition to these precisely contemporaneous documents it is appropriate to have regard to a number of other factors inconsistent with the evidence of Mr. Simpson and Mr. Rose, and entirely consistent with the evidence of Mr. Booker and the case for Manches. Among these are the issue of an invoice at the end of February 2000 for fees covering work which, if Mr. Simpson and Mr. Rose were right, was known to have been valueless when done, “Preparing for the issue of proceedings against Telit. Conferences with Counsel and drafting proceedings.” Payment of those fees was pursued by Mr. Simpson with some enthusiasm. He wrote chasing letters dated 11 April 2000 and 2 May 2000. No notification of the circumstances of the case as alleged by Mr. Simpson was made to Solicitors Indemnity Fund Ltd. under Solicitors’ Indemnity Rules 1998. Manches failed to comply, as, if Mr. Simpson were right, it was bound to comply, with the requirement in The Guide to the Professional Conduct of Solicitors, 8^th edition, 1999, 29.09 that:-

“If a client makes a claim against a solicitor or notifies an intention to do so, or if the solicitor discovers an act or omission which would justify such a claim, the solicitor is under a duty to inform the client that independent advice should be sought.”

Mr. Simpson was asked in cross-examination about the latter obligation. He said that he thought that it only applied if the client had suffered damage, and Manches, by continuing to act once the proceedings in the Tribunale di Trieste had been commenced, was seeking to avoid damage. I do not accept that.

Further considerations which were urged upon me by Mr. McPherson as inconsistent with the evidence of Mr. Simpson and Mr. Rose were the facts that Manches, by Mr. Simpson, insisted that its fees for acting in relation to the proceedings in Trieste be paid in full, or be guaranteed by the parties behind Fonexco, until a comparatively late point in the proceedings; and that no suggestion of any dissatisfaction on the part of Mr. Rose or Fonexco was expressed while Mr. Simpson remained the senior partner of Manches, but the claim only surfaced after Mr. Simpson had left Manches in circumstances which he accepted (Transcript, Day 3, page 58 lines 4 – 8) were acrimonious. Those points seem to me to be well taken.

Another aspect of the matter, in my judgment, is the inherent unlikelihood of Mr. Simpson having advised on 31 January 2000 that it was necessary or appropriate to commence proceedings in England immediately against Telit. There are two aspects to this: whether, as at 31 January 2000, Fonexco arguably had a cause of action against Telit; and whether, as at 31 January 2000, there was any reason to suppose that Telit might be considering commencing proceedings in Italy.

Under the Memorandum as executed Completion was due on or before 31 December 1999. Completion did not take place then. It was agreed, or at least accepted on behalf of Fonexco and Fontel, that Completion would take place on 12 January 2000. When that did not happen, Mr. Simpson wrote his letter dated 20 January 2000 making time of the essence of Completion by 10.30 a.m. on 3 February 2000. The effect in English law of these steps was, I think, that Fonexco waived the requirement on Telit to complete any earlier than 10.30 a.m. on 3 February 2000, and so was not able to complain of a breach of contract by failing to complete at any time prior to that time unless Telit had repudiated the Memorandum by evincing an intention not to complete on the stipulated day.

The consequences of having a date fixed under a contract for the performance of an obligation, the passing of that date without performance, and the giving thereafter of a notice making time of the essence were explained in the very well-known case of Charles Rickards Ltd. v. Oppenheim [1950] 1 All ER 420 in the judgment of Denning L.J. at page 422G – page 424A:-

“It is clear on the findings of the judge that there was an initial stipulation making time of the essence of the contract between the plaintiffs and the defendant, namely, that it was to be completed “in six, or, at the most, seven, months.” Counsel for the plaintiffs did not seek to disturb that finding – indeed, he could not successfully have done so – but he said that that stipulation was waived. His argument was that, the stipulated time having been waived, the time became at large, and that thereupon the plaintiffs’ only obligation was to deliver within a reasonable time. He said that, in accordance with well-known authorities, “a reasonable time” meant a reasonable time in the circumstances as they actually existed, i.e., that the plaintiffs would not exceed a reasonable time if they were prevented from delivering by causes outside their control, such as strikes or the impossibility of getting parts, and so forth, and that, on the evidence in this case, it could not be said that a reasonable time was in that sense exceeded. He cited the well-known words of LORD WATSON ([1893] AC 32, 33) in Hick v. Raymond and Reid to support the view that in this case, on the evidence, a reasonable time had not been exceeded. If this had been originally a contract without any stipulation in regard to time, and, therefore, with only the implication of reasonable time, it may be that the plaintiffs could have said that they had fulfilled the contract, but, in my opinion, the case is very different when there was an initial contract, making time of the essence, of “six or, at the most, seven months.” I agree that that initial time was waived by reason of the requests for delivery which the defendant made after March, 1948, and that, if delivery had been tendered in compliance with those requests, the defendant could not have refused to accept. Supposing, for instance, delivery had been tendered in April, May, or June 1948, the defendant would have had no answer. It would be true that the plaintiffs could not aver and prove that they were ready and willing to deliver in accordance with the original contract. They would have had, in effect, to rely on the waiver almost as a cause of action. At one time there would have been theoretical difficulties about their doing that. It would be said that there was no consideration, or, if the contract was for the sale of goods, that there was nothing in writing to support the variation. Plevins v. Downing, coupled with what was said in Besseler, Waechter Glover & Co. v. South Derwent Coal Co. Ltd. gave rise to a good deal of difficulty on that score, but all those difficulties are swept away now. If the defendant, as he did, led the plaintiffs to believe that he would not insist on the stipulation as to time, and that, if they carried out the work, he would accept it, and they did it, he could not afterwards set up the stipulation in regard to time against them. Whether it be called waiver or forbearance on his part, or an agreed variation or substituted performance, does not matter. It is a kind of estoppel. By his conduct he made a promise not to insist on his strict legal rights. That promise was intended to be binding, intended to be acted on, and was, in fact, acted on. He cannot afterwards go back on it. That, I think, follows from Panoutsos v. Raymond Hadley Corpn. of New York, a decision of this court, and it was also anticipated in Bruner v. Moore. It is a particular application of the principle which I endeavoured to state in Central London Property Trust Ltd. v. High Trees House Ltd.

Therefore, if the matter stopped there, the plaintiffs could have said that, notwithstanding that more than seven months had elapsed, the defendant was bound to accept, but the matter does not stop there, because delivery was not given in compliance with the requests of the defendant. Time and time again the defendant pressed for delivery, time and time again he was assured that he would have early delivery, but he never got satisfaction, and eventually at the end of June he gave notice saying that, unless the car was delivered by the end of July 25, he would not accept it. The question thus arises whether he was entitled to give such a notice, making time of the essence, and that is the question which counsel for the plaintiffs has argued before us. He agrees that, if this is a contract for the sale of goods, the defendant could give such a notice. He accepted the statement of MCCARDIE J in Hartley v. Hymans as accurately stating the law in regard to the sale of goods, but he said that that statement did not apply to contracts for work and labour. He said that no notice making time of the essence could be given in regard to contracts for work and labour. The judge thought that the contract was one for the sale of goods, but, in my view, it is unnecessary to determine whether it was a contract for the sale of goods or a contract for work and labour, because, whichever it was, the defendant was entitled to give a notice bringing the matter to a head. It would be most unreasonable if, having been lenient and having waived the initial expressed time, he should thereby prevented himself from ever thereafter insisting on reasonably quick delivery. In my judgment, he was entitled to give a reasonable notice making time of the essence of the matter. Adequate protection to the suppliers is given by the requirement that the notice should be reasonable.”

Mr. Simpson was not cross-examined as to whether he was familiar with the decision in Charles Rickards Ltd. v. Oppenheim. However, the case is extremely well-known. Mr. Simpson had, by the beginning of 2000, been a partner in Manches for 32 years. On his own evidence he had had a broad spectrum of work, including commercial and corporate, in the course of his practice. However, perhaps decisive as to his awareness of the decision in Charles Rickards Ltd. v. Oppenheim, and its consequences, is the fact that, by his letter dated 20 January 2000 to Telit he was seeking to take advantage of the principles established by that decision. He must, therefore, have known that, he having despatched his letter dated 20 January 2000, Telit would not have been in breach of the Memorandum unless it failed to complete at 10.30 a.m. on 3 February 2000 or evinced an intention earlier than that time not to complete at that time.

Mr. Douthwaite submitted that, by her letter dated 31 January 2000, Nathalie Goujon, on behalf of Telit, evinced an intention not to complete on 3 February 2000. I do not accept that, and I do not accept that a reasonably competent solicitor reading that letter could have thought that. I certainly do not accept that Mr. Simpson actually thought that. Nowhere in the letter dated 31 January 2000 did Nathalie Goujon actually say that Telit would not complete on 3 February. The closest she came was to say that, “Telit is now willing to rescind the MOU and therefore, to renounce to the acquisition of Fontel in consideration of the above mentioned liabilities of Fontel”. As a matter of English that was not a renunciation, but an invitation to agree to a discharge by agreement of the Memorandum. I think that any competent solicitor would have recognised that, however unlikely it might seem that Completion would take place on 3 February 2000, it would not have been safe to rely on the words which I have quoted as amounting to a repudiation. Moreover, a reasonably competent solicitor would also have recognised that, if he or she had treated the letter dated 31 January 2000 as amounting to a repudiation, there was a very significant risk that it would be held subsequently by a court that treating as a repudiation what was in fact an invitation to agree to a discharge by agreement was itself a repudiation. It is notable that Mr. Simpson, in his letter dated 31 January 2000 to Telit, did not, in terms purport to accept a repudiation in Nathalie Goujon’s letter and to treat the Memorandum as at an end. His words, as it seems to me, were deliberately vague, “We interpret your first letter of 31^st January, sent by Ms. Goujon, as clear confirmation that your Company is either unwilling and/or unable to comply with the Completion Notice embodied within our letter to you of 20^th January and our clients will be proceeding accordingly”. That committed him and them to nothing definite.

Thus there was actually no justification, as at 31 January 2000, for commencing any proceedings against Telit, and doing so was likely to prejudice seriously the position of Fonexco as against Telit. As I have explained, the indications are that Mr. Simpson understood this perfectly well.

There was also, in my judgment, no reason for a reasonably competent solicitor acting on behalf of Fonexco on 31 January 2000 to suppose that proceedings on behalf of Telit were at all likely. A lunatic can always, at least in England, issue proceedings against an entirely innocent party with no justification whatsoever. However, it is not the function of a solicitor to protect his client from the hazards of lunatics. By definition, the irrational acts of lunatics cannot be predicted, and thus cannot sensibly be guarded against. A solicitor is, I think, bound and entitled, in advising a client, to assume, absent evidence to the contrary, that his client is dealing with rational beings whose actions will be dictated by common sense, albeit based upon their own perception of their position.

As at 31 January 2000 Telit had not communicated to Fonexco, Fontel or Manches that it considered that it had any claim of any sort against Fonexco or Fontel. If it had no claim of any sort, it followed, logically, that there could be nothing upon which to found any sort of court proceedings.

Any court proceedings in Italy which could have been guaranteed to put a stop to proceedings in England to enforce the Memorandum had, by virtue of Article 21 of the Brussels Convention, to be founded upon the Memorandum itself. As at 31 January 2000 there was nothing known to Fonexco, Fontel or Manches which should, as it seems to me, have suggested that Telit would have any proper claim under the Memorandum or based upon it which could possibly form the basis of court proceedings.

If one supposed that Telit might commence some sort of proceedings against Fonexco or Fontel in Italy, it would have been necessary then to recognise that, for that to be of any benefit to Telit in the context of proceedings commenced in England to enforce the Memorandum, it would have had to seek, in reliance on Article 22 of the Brussels Convention, to persuade the English court to stay proceedings to enforce the Memorandum so as to enable disputes about it to be determined in Italy in conjunction with whatever proceedings Telit had commenced there against Fonexco and Fontel. However, as the Memorandum was fairly obviously governed by English law, was written in the English language and related to the purchase of the shares of an English registered company, I think that any reasonably competent solicitor would have assessed the likelihood of the English court staying proceedings to enforce the Memorandum so that disputes about it could be resolved in Italy as slight.

There was also, in the background, the consideration that over the period of negotiation from about June 1999 leading up to the making of the Memorandum Telit had demonstrated a lack of urgency entirely consistent with the procrastination evidenced in the messages produced by Nathalie Goujon in January 2000.

In the result, therefore, there was really no reason, as at 31 January 2000, to consider that it was necessary, or likely to be of benefit to Fonexco and Fontel, for proceedings to be commenced in England against Telit at once, and every reason to consider that commencing proceedings prior to 3 February 2000 would be prejudicial.

Mr. Simpson agreed in cross-examination (Transcript, Day 2, page 39 lines 9 -10) that he was “a forceful character at work”. Later (Transcript, Day 2, page 39 line 21) he said that, “I say what I think. If necessary”. In my judgment those insights rather understate the character of Mr. Simpson. He was the senior partner of Manches for over 20 years, from 1982 to 2003. He struck me as a formidable personality. Clearly from the course of the negotiations between Fonexco and Telit, insofar as investigated before me, Mr. Simpson is an experienced, subtle and sophisticated negotiator. He is plainly very intelligent. It seemed to me that he was a gentleman accustomed to having his wishes complied with, and inclined to communicate clearly any dissatisfaction or disappointment which he might feel. He also had the politician’s trick of seeking to answer not the question which he was asked, but a question which he would prefer to answer. Some examples of that in relation to questions about his manuscript comments on Mr. Booker’s internal memorandum dated 1 February 2000 I have already quoted. It is with considerable regret that I have reached the firm conclusion that what he said in evidence of his discussion with Mr. Rose on 31 January 2000 and of his instructions to Mr. Booker on 1 February 2000 are fabrications. Mr. Booker, although an extremely experienced litigation solicitor, seemed to me to be a gentle soul at heart, certainly not a match for Mr. Simpson in full flow. I think that it is inconceivable that, if Mr. Simpson had given the instructions which he alleged that he had given to Mr. Booker, Mr. Simpson would not have been after Mr. Booker, persistently, for failing at once to comply. Yet there was not even the suggestion from Mr. Simpson of any articulated cross words. The highest Mr. Simpson seemed to put it was that Mr. Booker would have known from Mr. Simpson’s demeanour that he was not pleased with him.

Mr. Rose, I think, is a far more amenable personality than Mr. Simpson. I formed the view that he was unaccustomed to telling untruths because he always seemed to smile during his evidence when telling me something which he knew was untrue. He smiled a lot when telling me about the discussion with Mr. Simpson on 31 January 2000.

Per contra, I was very impressed by Mr. Booker. He seemed to me to be transparently honest and a very competent litigation solicitor. If he had been asked by Mr. Simpson to issue a claim form at once on behalf of Fonexco and Fontel against Telit, I am confident that, as he himself said, he would have done so. It is not as if the task of issuing was itself difficult. If Mr. Booker had been given instructions to issue at once, it would seem that the only explanation for failure to comply could be perversity.

In fact, as was plain from what he did do, Mr. Booker set about the actual task entrusted to him, that of putting Fonexco in a position to issue and serve Telit as soon as was prudently possible after any failure of Completion to take place, carefully, thoughtfully and swiftly. He considered, as he prudently should, whether the Memorandum was binding as a contract under English law. Any competent lawyer reading the Memorandum would, as it seems to me, be struck by its skeletal construction and want to consider whether there was sufficient in it to amount to a binding contract, even though it might not take very long to reach the conclusion that it was binding. Once one had reached a view on that point, the next obvious issue, given that the intended defendant was Italian, was what was the proper law of the contract. Again it might not take long to reach the conclusion that, probably, the proper law of the contract was the law of England and Wales, but, as it seems to me, any competent lawyer asked to do what I find Mr. Booker was asked to do would have wanted to address that issue.

It was not in fact suggested by Mr. Douthwaite that this was not the case, but Mr. Simpson’s criticisms of Mr. Booker actually overlooked the fact that, by paragraph 1.3 of the Practice Direction to RSC O.11 current at the beginning of 2000, it was necessary to serve Particulars of Claim with any claim form to be served in, amongst other places, Italy. Thus it was entirely right and proper for Mr. Booker to give attention to the preparation of Particulars of Claim in the context of the desire to issue proceedings against Telit if Completion did not take place on 3 February 2000.

I have already mentioned the investigations undertaken as to how to serve a claim form issued out of this court in Italy. The only criticism of what was done which might, superficially, appear to be valid, as it seems to me, is engaging Mr. Mill to seek to find out the answer, rather than going straight to an Italian lawyer. However, taking the course of employing Mr. Mill, in my judgment, was appropriate, given that, if the answer could be ascertained clearly and quickly, it was probably cheaper to use the time of a trainee than to retain an Italian lawyer to advise.

All in all, I have to say that the approach adopted by Mr. Booker, and the work undertaken by him and, under his guidance, by Miss Roberts and Mr. Mill, seem to me to be a text book example of how to go about the task which I find was in fact allotted by Mr. Simpson.

There was, rightly, no suggestion that either Mrs. Day or Mr. Mill was other than trying to assist the court to the best of her or his ability about events now over 10 years ago. However, there were some aspects of the cross-examination of Mrs. Day which hinted at, but did not articulate, criticisms of her work on the Telit matter. Consequently I consider that it is appropriate for me to say that there was, in my judgment, no conceivable criticism which could possibly be laid at the door of Mrs. Day. She struck me as completely honest and an impressively dedicated and competent solicitor.

Mr. Maynard was cross-examined about the circumstances in which he and his son had fallen out with Mr. Rose. There was also some evidence, not strictly admissible, to suggest some skulduggery in the past by Mr. Maynard involving the Rose family. All I need say is that I am confident that Mr. Maynard’s evidence in this trial was accurate and I accept it.

In his closing submissions Mr. Douthwaite sought to cover the possibility that I might reach the conclusion which I have in fact reached, that the evidence of Mr. Simpson and Mr. Rose as to the discussion between them on 31 January 2000, and Mr. Simpson’s evidence of his instructions to Mr. Booker on 1 February 2000 could not be accepted. Mr. Douthwaite submitted that it was plain, even on the evidence of Mr. Booker, that he had been given instructions to issue a claim form against Telit, and he should, as a reasonably competent solicitor receiving such instructions, even if actually told that what was intended was to issue if Completion did not take place, have recognised that it was actually necessary to issue and serve at once.

That way of putting the case was not pleaded. It gave rise to the need to consider the obligations of a solicitor to his client. I have already quoted from the judgment of Oliver J. in Midland Bank Trust Co. Ltd. v. Hett, Stubbs & Kemp on the significance of a solicitor’s retainer. The performance of the duty owed by a professional man or woman to his or her client was considered by McNair J., in the context of medical practitioners, in Bolam v. Friern Hospital Management Committee [1957] 2 All ER 118. In his directions to the jury he said, at page 121:-

“Before I turn to that, I must explain what in law we mean by “negligence”. In the ordinary case which does not involve any special skill, negligence in law means this: Some failure to do some act which a reasonable man in the circumstances would do, or doing some act which a reasonable man in the circumstances would not do; and if that failure or doing of that act results in injury, then there is a cause of action. How do you test whether this act or failure is negligent? In an ordinary case it is generally said, that you judge that by the action of the man in the street. He is the ordinary man. In one case it has been said that you judge it by the conduct of the man on the top of a Clapham omnibus. He is the ordinary man. But where you get a situation which involves the use of some special skill or competence, then the test whether there has been negligence or not is not the test of the man on the top of a Clapham omnibus, because he has not got this special skill. The test is the standard of the ordinary skilled man exercising and professing to have that special skill. A man need not possess the highest expert skill at the risk of being found negligent. It is well-established law that it is sufficient if he exercises the ordinary skill of an ordinary competent man exercising that particular art. I do not think that I quarrel much with any of the submissions in law which have been put before you by counsel. Counsel for the plaintiff put it in this way, that in the case of a medical man negligence means failure to act in accordance with the standards of reasonably competent medical men at the time. That is a perfectly accurate statement, as long as it is remembered that there may be one or more perfectly proper standards; and if a medical man conforms with one of those proper standards then he is not negligent. Counsel for the plaintiff was also right, in my judgment, in saying that a mere personal belief that a particular technique is best is no defence unless that belief is based on reasonable grounds. That again is unexceptionable. But the emphasis which is laid by counsel for the defendants is on this aspect of negligence: He submitted to you that the real question on which you have to make up your mind on each of the three major points to be considered is whether the defendants, in acting in the way in which they did, were acting in accordance with a practice of competent respected professional opinion. Counsel for the defendants submitted that if you are satisfied that they were then it would be wrong for you to hold that negligence was established.”

It is now very well-established that the same standard of performance is owed by any professional person to his or her client.

Thus the issue in the present case is whether no reasonably competent solicitor could have failed to recognise that, in the circumstances of the case in which Mr. Booker was instructed, it was necessary immediately to issue and serve a claim form.

I have already analysed, in the context of the question whether to accept the evidence of Mr. Simpson and Mr. Rose, what a reasonably competent solicitor, such as I am confident Mr. Simpson in fact is, whatever his pragmatic approach to the truth, would have concluded from the circumstances. My conclusion was actually, in effect, that no reasonably competent solicitor could have concluded that it was appropriate to issue and serve a claim form on Telit on 31 January or 1 February 2000, or at any time until after the stated time for Completion on 3 February 2000.

Mr. Douthwaite urged me to conclude that what Mr. Booker told me he understood was the intention of Mr. Simpson, to use the issue of a claim form to rattle the cage of Telit, should have been recognised by Mr. Booker as bound to be ineffective as Mr. Simpson had already threatened Telit with litigation and it had not worked. I do not think that that is an accurate assessment of the position. It seems to me that Mr. Simpson had a well-considered scheme of applying increasing pressure to Telit which was actually extremely sensible. To adopt a shooting analogy, it went something like this. Stage 1: here is my gun. Stage 2: and I have a bullet. Stage 3: I have inserted my bullet into the chamber of the gun. Stage 4: I have cocked the firing mechanism. Stage 5: I am aiming the gun. Stage 6: Fire. Stage 1 for Mr. Simpson was making time of the essence and suggesting, on a without prejudice basis, that “if the transaction is not completed in accordance with the completion notice our clients are likely [note, not “have resolved”] to be initiating proceedings immediately”. Stage 2 was the letter dated 31 January 2000 threatening unspecified consequences if Completion did not take place. Stage 3 (the draft letter dated 4 February 2000), we will be issuing proceedings. Stage 4 issue proceedings. Stage 5 (cf. the draft letter dated 9 February 2000 prepared by Miss Roberts), we have issued proceedings. Stage 6: serve proceedings. The purpose of all of the steps, and in particular those communicated to Telit, was to afford an opportunity to Telit to see that Fonexco was prepared to go through with its threat, but at the same time an opportunity to avoid the next (implicit) stage by entering into negotiations. Such threat of proceedings as Mr. Simpson had communicated prior to the date for Completion, 3 February 2000, was not even as definite as the classic solicitors’ seven day letter.

In the result this action fails because I do not accept the evidence of Mr. Simpson and Mr. Rose, but prefer the evidence adduced on behalf of the defendants.

In those circumstances it is not necessary to proceed to consider the issues of causation which would arise if I had found in favour of the claimants on liability. Nonetheless, as I have heard the evidence relevant to the only issues of causation remaining, it is appropriate that I indicate my conclusions concerning them.

The specific issues of causation identified at paragraph 3 a) of the order of Master Rose dated 12 March 2009 were a rather curious combination of Italian law, which is strictly a matter of fact in this court, and actual fact. The issues of Italian law related to how an English claim form could be served in Italy, and, insofar as there was more than one permissible way, which was likely to have been the fastest in 2000. The issues of fact, pure and simple, were how long it would have been likely to have taken to go through the process to be undertaken between instructions to issue a claim form in England, and effective service in Italy.

A further wrinkle was that the issues of Italian law were not free-standing, but depended, at least in the opinion of the Italian lawyer called as an expert on behalf of the defendants, Avv. Osvaldo Lombardi, to an extent on matters of English law. The Italian lawyer called as an expert on behalf of the claimants, Avv. Pasino, took a different view on that point, namely that it was unnecessary to consider English law at all.

It is convenient to start the consideration of the Italian law issues with the material provisions of the Hague Convention. The Hague Convention was incorporated into the law of Italy by Law 42/1981. For present purposes the relevant provisions of the Hague Convention are Articles 3, 5, 8, 9, 10 and 19. In the English language version these are in the following terms:-

“3.

The authority or judicial officer competent under the law of the State in which the documents originate shall forward to the Central Authority of the State addressed a request conforming to the model annexed to the present Convention, without any requirement of legalisation or other equivalent formality.

The document to be served or a copy thereof shall be annexed to the request. The request and the document shall both be furnished in duplicate.

5.

The Central Authority of the State addressed shall itself serve the document or shall arrange to have it served by an appropriate agency, either -

a)

by a method prescribed by its internal law for the service of documents in domestic actions upon persons who are within its territory, or

b)

by a particular method requested by the applicant, unless such a method is incompatible with the law of the State addressed.

Subject to sub-paragraph (b) of the first paragraph of this Article, the document may always be served by delivery to an addressee who accepts it voluntarily.

If the document is to be served under the first paragraph above, the Central Authority may require the document to be written in, or translated into, the official language or one of the official languages of the State addressed.

That part of the request, in the form attached to the present Convention, which contains a summary of the document to be served, shall be served with the document.

8.

Each Contracting State shall be free to effect service of judicial documents upon persons abroad, without application of any compulsion, directly through its diplomatic or consular agents.

Any State may declare that it is opposed to such service within its territory, unless the document is to be served upon a national of the State in which the documents originate.

9.

Each Contracting State shall be free, in addition, to use consular channels to forward documents, for the purpose of service, to those authorities of another Contracting State which are designated by the latter for this purpose.

Each Contracting State may, if exceptional circumstances so require, use diplomatic channels for the same purpose.

10.

Provided the State of destination does not object, the present Convention shall not interfere with –

a)

the freedom to send judicial documents, by postal channels, directly to persons abroad,

b)

the freedom of judicial officers, officials or other competent persons of the State of origin to effect service of judicial documents directly through the judicial officers, officials or other competent persons of the State of destination,

c)

the freedom of any person interested in a judicial proceeding to effect service of judicial documents directly through the judicial officers, officials or other competent persons of the State of destination.

19.

To the extent that the internal law of a Contracting State permits methods of transmission, other than those provided for in the preceding Articles, of documents coming from abroad, for service within its territory, the present Convention shall not affect such provisions.”

Just as a matter of English, the permitted modes of service of an English claim form in Italy seem to be: first, through the Italian Central Authority, following a request from the Central Authority of the United Kingdom; second, absent objection from the Republic of Italy, through the United Kingdom consular service effecting service itself in Italy; third, through the United Kingdom consular service effecting service using the means of service used in Italy; fourth, using Article 10, to which I need to return; and, last, using any means of service available domestically in Italy.

Avv. Lombardi took the view that Article 10 of the Hague Convention did not itself create any means of service: it simply had the effect that any means of service abroad which fell within sub-paragraphs a), b) or c) and was lawful under English law could be used to serve documents in Italy, there being no impediment under Italian law to such service. In a joint report prepared with Avv. Pasino setting out those matters about which they each agreed and those matters about which they disagreed Avv. Lombardi summarised his views as follows:-

“- according to the Hague Convention as implemented in Italy, service by post could have been admissible in Italy from abroad only in case the law of the requesting country specifically permitted it. Therefore service from England could have been performed by post in Italy only if permitted by English law and, where permitted, only within the limits set forth by English law as amended by the applicable international conventions, including the bilateral Convention of 1930 (where considered still applicable by English Courts);

- in case the law of a foreign country (i.e. England) allowed service by post in Italy and, at the same time, it provided such service to be effected in accordance with the law of the country where service is to be effected (Italian law), then service by post would have been considered as duly performed only where performed on an Italian recipient by an Italian public officer, such as the Italian court bailiff (ufficiale giudiziario).”

Avv. Pasino, on the other hand, considered that Article 10 of the Hague Convention did provide means by which service could be effected independently of any other provisions governing service of originating process in Italy. In a report dated 24 December 2009 prepared for the purposes of this action Avv. Pasino expressed his conclusion on this point rather obliquely:-

“The Convention entitles a State to object to the use of some of these alternative channels of transmission. However, there is neither a hierarchy nor any order of importance among the channels of transmission, and transmission through one of the alternative channels does not lead to service of lesser quality.

Neither United Kingdom nor Italy have made objections to any of these alternative channels of transmission so all of them could have been used in the year 2000 to obtain the service of a judicial document from the United Kingdom to Italy.

With reference to the issue at hand, we can affirm that the quickest way of transmission of all the above mentioned channels is the postal one, by means of which the service could have been executed from an English applicant directly to the addressee in Italy. We have been informed that in England any person can affect [sic] service.

In this case, it would not have been necessary to use the model form annexed to the Convention. In addition to that, no translation would have been legally required.

However, the fact that the addressee might not have been able to understand the nature and the importance of the served documents could have been a reason to object against the validity of the service. In fact, the Convention suggests in a specific recommendation that the model form is used and the document translated, also in case of use of alternative channels of service, to avoid possible objections.”

It was not possible, from that passage, to understand why Avv. Pasino took the view that Article 10 of the Hague Convention created an entitlement, inter alia, to serve documents by post. How he expressed himself, in particular his reference to his understanding of how originating process could be served in England, perhaps suggested that his view was in fact no different from that of Avv. Lombardi, but actually it seemed that it was.

In the joint report prepared with Avv. Lombardi Avv. Pasino’s position was set out in this way:-

“According to Mr. Pasino in order to proceed with the transmission of the proceedings either originals or copies of the documents to be served could have been used, pursuant to art. 3 of the Convention, provided that they had been furnished in duplicate. However, in case he had to serve an Italian proceeding in the United Kingdom, for the sake of prudence, he would have used the postal service together with another method, like the ones indicated in Art. 10 b) or 10 c). ”

It was only really during the cross-examination of Avv. Pasino that I think that I understood his grounds for his view. At the material point in his cross-examination Avv. Pasino was actually talking about another point in difference between himself and Avv. Lombardi, namely the need for the permission of a public prosecutor for the service in Italy of originating process from a foreign state. Avv. Lombardi considered that the permission of the public prosecutor was necessary, whilst Avv. Pasino took the view that it was not, unless the mode of service was through the Italian Central Authority. Before coming to what I understood was the explanation for Avv. Pasino’s opinion that a claim form issued in England could simply be served in Italy by putting the documents in the post in England, it is convenient to explain the issue about the need for the permission of the public prosecutor.

Article 71 of Law 218/1995, entitled Riforma del Sistema Italiano di Diritto Internazionale Privato, provides, in English translation:-

“1.

Service of summons to appear before foreign authorities or other instruments received from a foreign country is authorised by the state prosecutors before the court in whose jurisdiction the service is made.

2.

The service request is made through diplomatic channels, under the supervision of the public prosecutor, by a bailiff approached by him.

3.

Service shall be made in the manner prescribed by Italian law. However, it is necessary to comply with the terms requested by the foreign authority so far as compatible with the principles of the Italian regime. In all cases, the instrument can be delivered, by the person responsible for service, to a recipient who accepts it voluntarily.”

It was, I think, common ground between Avv. Pasino and Avv. Lombardi, that, on its face, that Article applied to service through the Central Authority, and was silent as to whether the consent of a public prosecutor was required in other cases, for example service under one of the means contemplated by Article 10 of the Hague Convention. Avv. Pasino took the view that, absent a clear indication in Article 71 of Law 218/1995 that the permission of a public prosecutor for service other than by the Central Authority was required, such consent was not required.

Avv. Lombardi considered that the permission of a public prosecutor was required for service of foreign originating process in Italy whatever method of service was adopted. He relied, in support of his view, on Circular 5/2494/035 of the Ministry of Justice (“the Circolare”). It was common ground that a circular of the Ministry of Justice in Italy is persuasive guidance as to the interpretation of legislation, but not binding upon a court. However, paragraph V of the Circolare concluded, in English translation:-

“It should be recalled that the Italian judicial officer [i.e. bailiff], in cases in which directly receives the documents to be served in one of the ways specified in Articles 9 and 10 Conv (ie a foreign authority or by a private foreign) must always ask, before proceeding to the notification, authorization ex art. 805, para 1 CPC [Civil Procedure Code] the Public Prosecutor at the Court, in whose jurisdiction the service has to be done.”

In cross-examination (Transcript, Day 4, page 92 line 20 – page 93 line 4) Avv. Pasino was asked about the Circolare and Article 71 of Law 218/1995. He said about the Article (Transcript, Day 4, page 93 lines 5 – 9):-

“This – I may only express an opinion on this. And my opinion is that if there is not any international agreement, then you may resort to this Article but if there is, then you shall interpret the international Convention.”

He had explained a little earlier in his cross-examination (Transcript, Day 4, page 91 line 17 – page 92 line 16) that Article 2 of Law 218/1995 provides, in his translation:-

“However, the rules set forward by this law cannot hamper, do not prejudice, the application of the international Convention in Italy.

In interpreting those Conventions, it will be borne in mind that they have an international character and that there is a need for uniform application of those.”

That led Avv. Pasino to the view that the provisions of the Hague Convention, and in particular Article 10, prevail over the provisions of Law 218/1995, and in particular Article 71, and also over the Circolare. It seemed to me that it was Avv. Pasino’s belief in the overriding character, under Italian law, of an international convention, that led him to the view that Article 10 a) of the Hague Convention permitted, without more, and without the need to consider any potentially relevant national law which might be in conflict with what the Article seemed to contemplate, that service of an English claim form could be effected in Italy lawfully simply by posting it in England.

Before expressing my conclusion on whether Avv. Pasino’s view should be preferred to that of Avv. Lombardi, it is appropriate to consider the relevant provisions of RSC O.11 r.5, as amended, which were in force in February 2000 and remained in force until 2 May 2000:-

“(1)

Subject to paragraphs (2) to (8) of this rule –

(a)

a claim form must be served personally on each defendant by the claimant or his agent;

…

(2)

Nothing in this rule or in any order or direction of the court made by virtue of it shall authorise or require the doing of anything in a country in which service is to be effected which is contrary to the law of that country.

(3)

A claim form which is to be served out of the jurisdiction –

(a)

need not be served personally on the person required to be served so long as it is served on him in accordance with the law of the country in which service is effected;”

Mr. Douthwaite submitted, as he put it in his opening submissions (Transcript, Day 1, page 9 lines 8 – 10):-

“What I say is: RSC 5/3(a) is an inclusive rule that incorporates, amongst other things, service in a country that permits it by post.”

Mr. McPherson contended, to the contrary, that the effect of RSC O.11 r.5 (1)(a) and (3)(a) was that a claim form to be served abroad had either to be served personally or had to be served by a method permitted in the country in which service was to take place. What that meant, in the case of service in Italy, Mr. McPherson said, was that a claim form could be served by a means permitted by the law of Italy relating to service of originating process coming from abroad. In my judgment those submissions were clearly well-founded and I accept them.

That brings one back to the issue of the law of Italy in relation to service of originating process issued abroad, and to the question whether I should prefer the evidence of Avv. Pasino, that service could be effected by posting a claim form in England addressed to the defendant in Italy, to the evidence of Avv. Lombardi that such was not possible.

In this court, as I have noted, the law of Italy has to be proved as a matter of fact. Consequently a finding as to the material law of Italy is not a conclusion of law, but a finding of fact. Nonetheless, in making such a finding of fact, the court cannot ignore the fact that the intellectual process of making the finding involves, to a degree, analysing the legal issue or issues at stake and evaluating the arguments advanced for the alternative positions adopted by the relevant experts.

I was very impressed by both Avv. Pasino and Avv. Lombardi. Each was plainly extremely competent, intelligent, experienced and doing his best to assist me in my task. However, I must decide between them on those issues upon which they disagreed which are relevant to the matters at stake in this action. I prefer the evidence of Avv. Lombardi. I accept his construction of Article 10 of the Hague Convention, that it does not create any means of service of documents, but preserves the methods of service identified in paragraphs a), b) and c) if, otherwise, they exist. That is plainly the effect of the English text, and it thus seems likely that it is also the effect of the Italian text. Avv. Lombardi’s construction was supported by the Circolare, as I think Avv. Pasino accepted, whilst emphasising that what it contained was only guidance, and not binding upon an Italian court. Moreover, it is difficult to understand why Italian public policy considered that it was necessary for the permission of a public prosecutor to be required for the service of foreign originating process through the Central Authority, but not for the service of foreign originating process in some other way. I do not overlook the evidence of Avv. Pasino, which I accept as accurate, that, in practice, the bailiffs in Trieste do not, on receipt of foreign originating process for service, seek permission from a public prosecutor before proceeding to serve. However, the significance of that evidence had to be assessed in the context that, as Avv. Pasino also told me (Transcript, Day 4, page 93 lines 11 – 18):-

“the Supreme Court in 1982 issued a statement or a judgment, whereby nobody can object on a procedural basis, that the public prosecutor has not been involved in the service; in other words, there is not a procedural objection in case there is not a request to the public prosecutor of authorisation or if he doesn’t authorise it because this requirement is merely for public purposes.”

That ruling in fact seems to provide something of an incentive to a lazy bailiff not to comply with the law.

There was no difference between Avv. Pasino and Avv. Lombardi as to how originating process is, or at least was in 2000, served in Italy where the process was issued by an Italian court. In the absence of authorisation from a judge under Article 151 of the Civil Procedure Code permitting service by some other method, service was to be effected by a bailiff. By Article 122 of the Civil Procedure Code all documents submitted at court must be written in Italian. By Article 137 of the Civil Procedure Code it is provided, in English translation, so far as is presently material, that:-

“the bailiff performs the service by delivering to the recipient a copy conformed to the original of the brief to be served.”

The effect of these provisions, it was agreed, was that to serve in accordance with Italian domestic requirements an original of the document to be served, together with a translation, if it was not in Italian, had to be put in the hands of a bailiff. The bailiff then either delivered the document in person or, in accordance with Article 149 of the Civil Procedure Code, by posting it to the party to be served. Posting, in this context, connoted only entrusting the document to Poste Italiane, not using a courier.

Avv. Lombardi’s evidence, which I accept, was that the fastest way of achieving service of an English claim form in Trieste in 2000 would have been to send the document to be served, together with an Italian translation, to an Italian lawyer in Trieste; for that lawyer to take the claim form and translation to a public prosecutor and obtain his or her permission for service; and then to take the approved document to the bailiff for service. It was common ground that an original claim form was not required to be served, although an original could be served. Consequently, as Avv. Lombardi accepted in cross-examination (Transcript, Day 4, page 144 lines 17 – 20), the documents to be served could be sent to the Italian lawyer by facsimile transmission. As I have already noted, by paragraph 1.3 of the Practice Direction to RSC O.11 in force in early 2000 an English claim form for service in Italy needed to be accompanied by Particulars of Claim. The permission of a public prosecutor for service of the claim form and Particulars of Claim could be obtained either by depositing the documents at the offices of the public prosecutor and awaiting his or her decision, or by attending in person and seeking an audience with the public prosecutor with a view to obtaining a decision on the spot. Given that the offices of Telit were some 12 kilometres outside Trieste, the bailiff would have sought to serve documents by post, rather than by personal visit.

It was common ground between Avv. Pasino and Avv. Lombardi that the offices of a public prosecutor were open to the public in the mornings from Monday to Saturday inclusive, and that the offices of a bailiff were also open between those days in the mornings, although it seemed that they closed earlier than the offices of a public prosecutor.

An assessment of when a claim form issued in England in February 2000 could have been served on Telit in Trieste, and, in particular, whether that could have been done before 9 February, depends, first of all, on what is assumed to be the date for the starting of the process. In his closing submissions Mr. McPherson accepted, I think, that, had Manches started the process on 1 February, as Mr. Simpson and Mr. Rose contended had been instructed, service could have been effected by 9 February. It seems to me that that is probably right, but the evidence as to how long it would be likely to have taken to achieve each necessary step was somewhat indefinite.

The first steps necessary could, to an extent, have been taken in parallel. These were preparation of a claim form and Particulars of Claim, ascertaining what was the fastest means of serving the claim form and Particulars of Claim in Trieste, and identifying a lawyer in Trieste to act on behalf of Fonexco and Fontel in relation to service. The latter step could only be taken once the fastest means of serving the documents had been identified, but might still have been commenced before the claim form and Particulars of Claim had been completed. The Particulars of Claim really needed to be prepared by Counsel. Mr. Zacaroli in fact produced draft Particulars of Claim within about 24 hours of him first becoming involved, and that timescale is probably the best evidence of how long was needed to prepare such a statement of case. When Miss Roberts made contact with Mr. Franzi concerning how to serve proceedings in Italy it seems, from her attendance note dated 7 February 2000, that he was able at once to explain the procedure for service through the Central Authority. It would probably have required a little more thought to come up with the mechanism of proceeding advised by Avv. Lombardi, but it seems likely that that way of proceeding would have been decided upon by the time the Particulars of Claim were completed. Avv. Pasino told me (Transcript, Day 4, page 74 lines 13 – 24) that in 2000 there were about 250 lawyers in Trieste, of whom perhaps between 15 and 30 had international commercial litigation experience. It is really a matter of speculation how long it would have taken Manches to identify a lawyer in Trieste who would have been prepared to undertake the necessary service of receiving documents by facsimile transmission, attending upon a public prosecutor for permission to serve, and taking the documents to a bailiff after approval had been given. As it seems that the fastest means of obtaining the permission of a public prosecutor was to go to his or her office and just wait to be seen, whoever took on the task of acting as correspondent for Manches would have had to have been prepared to give up at least half a day to hang around the public prosecutor’s office. How easy it may have been to find such a lawyer it is impossible to say. Mr. Douthwaite urged me, whatever conclusion I reached as to the requirements of Italian law in relation to the permission of a public prosecutor for service of originating process, to leave out of account a delay whilst the permission of a public prosecutor was obtained because of the evidence of Avv. Pasino as to the practice of bailiffs in Trieste. Not only do I consider that that would be wrong in principle, but Avv. Pasino seems only to have discovered the practice by enquiry of the bailiff in charge, Dr. Carola, who was somewhat equivocal on the point, and another bailiff, so it seems that, if there is a practice, it is not widely known in Trieste. Consequently there would have been no grounds for assuming in February 2000 that the permission of a public prosecutor was not required.

While it was plain that Italian translations of a claim form and Particulars of Claim would have been required, there was almost no evidence as to how long it would have taken to obtain translations once the claim form and Particulars of Claim were complete. The claim form contained relatively few words, but the Particulars of Claim amounted to 15 paragraphs over 7 pages. In addition the response pack had to be translated, although it may be that a translator might have had that part, at least, already translated, subject to checking. I think it unlikely that it would have taken less than a day to obtain the necessary translations.

While there is a good deal of guesswork in this assessment, I think it unlikely that the claim form, Particulars of Claim, the response pack and appropriate translations could have been prepared in less than two working days, given that counsel needed to be involved and either talked through the circumstances, as Mr. Booker in fact did, or properly instructed in a brief, which would have taken time to prepare. However, while this was going on, advice on service in Italy could probably have been obtained and a lawyer in Trieste lined up to do the necessary work at the Italian end.

Sending the documents to be served to the Trieste lawyer by facsimile transmission would have taken a matter of, perhaps, half an hour.

Consequently, had Mr. Booker been instructed early on 1 February 2000 to issue and serve proceedings on Telit in Trieste as soon as physically possible, I cannot see that it was at all likely that steps could be taken at the Trieste end any earlier than 3 February, a Thursday. If one assumed that a lawyer in Trieste was able to attend the offices of the public prosecutor when they opened on that day, it seems that there was a reasonable chance that the requisite permission would have been received that day and that the documents to be served could then have been entrusted to the bailiff, whose offices were in the same building as those of the public prosecutor. The evidence of Avv. Pasino was that one would expect documents despatched by Poste Italiane in Trieste addressed to the offices of Telit to be delivered the next day, which would have been Friday, 4 February.

If one assumes that what Manches should have been doing was to get into a position to issue and serve a claim form and Particulars of Claim as soon as possible after 3 February had passed without Completion, the timescale is probably set back by one or two working days. Preparatory steps could have been taken in advance of the date of Completion in the form of preparing the claim form and Particulars of Claim, seeking advice as to service in Italy, identifying a lawyer in Trieste, and preliminary translation work. However, the actual issue of the claim form could not have taken place until after 10.30 a.m. on 3 February and translation, insofar as necessary of any formal court stamp, could not be completed until after issue. The documents could then have been sent to the chosen lawyer in Trieste by facsimile transmission, but, by the time they arrived, it is likely that, given the time difference between England and Italy, the offices of the public prosecutor would have been closed for the day. The proceedings would then probably have been approved by the public prosecutor and put in the hands of the bailiff on 4 February. Avv. Pasino and Avv. Lombardi agreed that a critical aspect of the service of process in Italy is the completion by the person to be served of a return receipt. In the case of a company, the return receipt has to be signed by a person authorised on behalf of the company to sign it. This has the effect that service by post on a company cannot be effected on a Saturday unless the company is open for business on a Saturday. If it is not, service cannot be effected until the following working day, Monday. There was no evidence as to whether Telit was open for business on a Saturday.

I do not consider that it is necessary or helpful, despite the terms of paragraph 3 a) of the order of Master Rose dated 12 March 2009, to address any other possible factual scenarios in the context of the issues of causation.

In the result, for the reasons which I have given, this action fails and is dismissed.