Baxendale- Walker v Middleton & Ors

The Defendants (with the exception of the Fifth Defendant) have applied to strike out the “replacement” Particulars of Claim dated 29 July 2010 and apply for summary judgment to be entered against Mr Baxendale-Walker, the Claimant. The Fifth Defendant is not a party to these applications as he disputes that he has been served with the proceedings.

The Claimant is a former solicitor who specialised in tax law. He developed and advised on tax avoidance schemes including schemes utilising Employee Benefit Trusts (“EBTs”). These schemes were marketed through FSL Services Ltd (“FSL”). He received income both from FSL and from the clients to whom he recommended the schemes he devised for FSL. The Claimant practised from around 1994 as a sole principal and then, from around October 1997, as a partner in his own firm, Baxendale Walker Solicitors (“BWS”).

Mr Middleton, the First Defendant, and Mr Duerden, the Second Defendant, are employed by the Solicitors Regulation Authority (“SRA”) and previously by the Office for the Supervision of Solicitors (“OSS”). The First Defendant is a solicitor who was until 2007, Head of Investigations at the OSS and thereafter he was Head of Legal at the SRA. The Second Defendant was an investigating officer with the SRA. The SRA is (and the OSS was) responsible for discharging the regulatory functions of the Law Society, the Third Defendant, in relation to regulation and discipline of solicitors. This included investigating and, if appropriate, initiating and conducting disciplinary proceedings against solicitors for misconduct or breaches of regulatory rules. Mr Marcus Smith QC appears for the first three Defendants who have been referred to as “the Law Society Defendants”.

Mr Langley, the Fourth Defendant, and Mr Woodhouse, the Sixth Defendant, were partners of Deloitte & Touche LLP (“Deloitte”), a firm of accountants. Deloitte, and specifically Mr Langley, were engaged in around September 2002 by the Law Society to produce a report in relation to the legality of some of the tax avoidance schemes devised and promoted by the Claimant. In producing this report, Mr Langley was assisted by, amongst others, Mr Thornton, the Fifth Defendant, who at that time was an employee of Deloitte. Mr Charles Hollander QC appears for the Fourth, Sixth and Seventh Defendants, who have been referred to as the “Deloitte Defendants”.

Mr Isaacs, the Eighth Defendant, was Chairman of the Panel of the Solicitors Disciplinary Tribunal (“SDT”), the Ninth Defendant, which decided that the Claimant should be struck off the Roll of Solicitors on 29 September 2006. Ms Sue Carr QC appears for the Eighth and Ninth Defendants.

Paragraphs 28-39 of the Particulars of Claim contain what is described as “an overview of the Claimant’s case”:

“28.

The Claimant’s case is that at a time unknown to him but probably around the year 2000, the First Defendant and the Second Defendant, acting or purportedly acting on behalf of the OSS, formed the joint intention of constructing a knowingly false and fraudulent case against the Claimant with a view to destroying his tax practice and, if possible, to procuring his being struck off the roll of solicitors by the Ninth Defendant.

29.

The method to be employed was to construct a case that the Claimant’s Schemes were a fraud on HMRC and involved the participants in those Schemes in acting in a way which was unlawful and/or in fraud of HMRC.

30.

In the course of this conspiracy, the First Defendant and the Second Defendant recruited the Fourth Defendant and the Fifth Defendant of the Seventh Defendant, each of whom acted or purported to act on behalf of the Seventh Defendant and agreed to participate in the conspiracy. The Sixth Defendant, though not a recruit to the conspiracy as such, knowingly connived in the perpetration of the frauds of the Fourth Defendant and the Seventh Defendant, intending such frauds to operate to the prejudice of the Claimant. The Sixth Defendant thus became a member of the conspiracy alleged against the Seventh Defendant and its employees.

31.

In carrying out the conspiracy in the manner set out in this pleading each of the First Defendant, the Second Defendant, the Fourth Defendant, the Fifth Defendant and the Sixth Defendant acted fraudulently in that each of them

a)

knew that the allegations to be made against the Claimant, his practice and his Schemes were false in fact and wrong in law; alternatively

b)

did not believe that those allegations were true; alternatively

c)

made and connived in others making those allegations recklessly, not caring whether they were true or false.

32.

In furtherance of the conspiracy, fraudulent reports were placed before the Adjudication Panel and subsequently the Review Panel of the Law Society, resulting in the recommendation of conditions being imposed on the Claimant’s practising certificate which would have had the effect of closing the Claimant’s professional practice and destroying the Claimant’s firm. The Claimant was obliged to appeal to the Master of the Rolls (‘the MR’) against this imposition. The appeal succeeded after the OSS withdrew the fraudulent report upon which the recommendations had been based. The OSS was ordered to pay the Claimant’s costs. Nevertheless, the reputation and practice of the Claimant had been damaged by these manoeuvres.

33.

The First Defendant and the Second Defendant then sought to achieve the striking off of the Claimant by manufacturing an allegation to be brought against the Claimant in regulatory and disciplinary proceedings, namely that he had a conflict of interest for the purposes of the then Solicitors Practice rules and the Guide to Professional Conduct. The conflict of interest was alleged to arise from the fact that the Claimant had a financial interest in the fruits of sale by FSL of his own Schemes.

34.

In pursuance of that conspiracy, the First Defendant and the Second Defendant concocted a ‘Rule 4 Statement’, containing these allegations, which the MR ordered to be put for adjudication by a Special Adjudication Panel of the Law Society.

35.

The allegations in the Rule 4 statement were false, and the First Defendant and the Second Defendant each

a)

knew they were false; or

b)

had no belief that they were true; or

c)

were reckless as to their truth or falsity.

36.

In February 2006, the Adjudication Panel held that there was a sufficient case to proceed to hearing before the Ninth Defendant. The Claimant’s case is that the purported consideration of the case by the Panel was a sham in that the Panel was induced by the First Defendant to act as no more than a ‘rubber stamp’ for his views.

37.

The complaint came before the Ninth Defendant in October 2006. The Eighth Defendant was the Chairman of the Tribunal. Despite the true position concerning the Claimant’s relations with FSL being put before the Ninth Defendant, it found the complaint proved and ordered that the Claimant be struck off as a solicitor.

38.

So far as it concerned the Eighth Defendant, the Ninth Defendant’s decision was knowingly improper. The Claimant will say that the Eighth Defendant

a)

knew or believed that the complaint of conflict of interest was a sham;

b)

knew that the real purpose of the complaint was to secure the striking off of the Claimant because of the success of his tax Schemes;

c)

regarded the Schemes to be dishonest, ‘disreputable’ and a fraud on HMRC while knowing that the Schemes had never been the subject of a successful challenge by HMRC;

d)

intended to achieve the result of killing off what he wrongly and irrationally regarded as the Claimant’s ‘fraudulent’ tax practice by manipulating a bogus case of conflict of interest to provide a pretext for striking him off.

39.

In 2010 the Claimant in reliance upon the fresh evidence pleaded below, began the process of appeal against the order for his striking off.”

The “fresh evidence” relied upon was the product of telephone conversations that the Claimant had with Mr Middleton on 9 September 2009 and with Mr Isaacs on 18 September 2009. At paragraphs 94-97 of the Particular of Claim the Claimant purports to summarise the conversation with Mr Middleton; and at paragraphs 98-101 of the Particulars of Claim he purports to summarise the conversation with Mr Isaacs.

The pleaded case against the First, Second, Fourth and Sixth Defendants is that they have each committed the torts of conspiracy to injure, conspiracy to defraud, conspiracy to use unlawful means and malicious falsehood. In addition the First and Second Defendants have committed the torts of misfeasance in public office. The Third Defendant is vicariously liable for the torts committed by the First and Second Defendants. The Seventh Defendant is vicariously liable for the torts committed by the Fourth and Sixth Defendants. The Eighth Defendant has committed the tort of misfeasance in public office, for which the Ninth Defendant is vicariously liable. (Paragraphs 103-105 of the Particulars of Claim).

Mr Baxendale-Walker claims he has suffered loss and damage of some £229.7million.

On 22 October 1998, during the course of a criminal investigation instituted by the Serious Fraud Office (“SFO”), the Claimant was ordered by HHJ Beaumont, sitting in the Central Criminal Court, to produce certain documents. The Claimant failed to comply with the special procedure production order and on 1 October 1999 the Judge made a finding that he was in contempt of court and imposed a fine of £1,000. The Judge described the Claimant as “an extremely unsatisfactory witness. He was didactic, disputatious and very unconvincing” (B1/102 at D-E).

On 21 June 2000 the Claimant’s conviction for contempt of court was considered by an OSS Adjudicator, Ms Sue Webb. She found him guilty of bringing the profession into disrepute in breach of Principle 1.08 of the Guide to the Professional Conduct of Solicitors and issued him with a reprimand.

In November 2000 the Claimant was charged by the SFO with conspiracy to defraud the beneficiaries of the Clarion Group Retirement and Dependants Benefits Scheme (“the Balfron Pension Scheme”). The Claimant was also a Defendant, together with others, to civil proceedings brought by the trustees of the Balfron Pension Scheme in respect of this alleged fraud.

In May 2001 the Law Society commenced an investigation into the Claimant. The investigation was authorised by Mr James, the then Head of the Monitoring and Investigation Unit at the OSS. On 8 May 2001 Mr James wrote to the Claimant stating that he had been appointed to inspect the books of account of BWS and any other practice documents. The conduct of the inspection was delegated by Mr Michael Calvert, Head of Forensic Investigations, to Mr Duerden and Mr Richard Lawes. They carried out the inspection at the offices of BWS in London during the weeks commencing 14 May 2001 and 18 June 2001. (See witness statement of Mr Miller dated 20 October 2010 at paras 88-92, and generally for a full account of the investigation, see Mr Duerden’s second witness statement in the disciplinary proceedings dated 5 May 2005 at paras 6-40).

On 3 August 2001 an Adjudicator, again Ms Webb, resolved to impose conditions on the Claimant’s practising certificate with immediate effect for the 2000/2001 practising year. In giving her reasons for her decision Ms Webb said that she took into account the fact that the Claimant had a previous conviction for contempt of court and the implications of the charges currently outstanding against him.

The trial of the civil proceedings took place before Etherton J between 4 February and 5 March 2002. On 17 April 2002 judgment was given. The claim against the Claimant for dishonest assistance in a breach of trust was dismissed. However he was found liable for knowing receipt in respect of the professional fees which he had received in connection with the impugned transaction on the grounds that it would be unconscionable for him to retain them. At paragraph 282 the Judge said:

“… A competent and conscientious solicitor, with the knowledge Mr Baxendale-Walker had, would have declined to act on completion of the transaction. It was a gross error of professional judgment on the part of Mr Baxendale-Walker to have done so.”

At paragraph 268 the Judge referred to the Claimant’s “breathtaking lack of professional judgment [which] manifested itself in many ways throughout the trial”. One example was the giving of a reference by the Claimant to Barclay’s Bank Plc in respect of a Mr Nurkiman when “neither Mr Baxendale-Walker nor anyone employed by him had ever met Mr Nurkiman, who did not, in fact, exist…” (para 248).

On 27 June 2002, following Etherton J’s finding that the Claimant had not dishonestly assisted in a breach of trust in relation to the Balfron Pension Scheme, HHJ Wadsworth QC granted the Claimant’s application for a stay of the criminal proceedings against him on the grounds that their continuation would be an abuse of process.

On 17 September 2002 Ms Webb granted the Claimant a Practising certificate for the practice year 2001/2002 subject to conditions. Her reasons included the following:

“3.

… the finding in the High Court proceedings was that Mr Baxendale-Walker had knowingly received Pension Scheme assets in breach of trust, and this alone, irrespective of the fact that it has been ruled inappropriate that criminal proceedings should be pursued in respect of the matter, raises such serious concerns that I am satisfied both that it is necessary and in the interests of the public that Mr Baxendale-Walker’s practice as a solicitor is subject to additional monitoring, and that the conditions imposed are an appropriate and proportionate response having regard to the risks identified.”

The Law Society approached Deloitte in August or September 2002 with a view to instructing them to produce an expert report on the legality of the Claimant’s tax avoidance schemes. At this time the Law Society did not disclose to Deloitte the identity of the law firm under investigation.

On 20 February 2003 a Review Panel (Mr Sneary (Chairman), Mr Barber and Ms Nijjar (Panel Secretary)) considered an application by the Claimant for review of Ms Webb’s decision of 17 September 2002. His application was allowed in part. The Panel agreed with the decision of the Adjudicator that it was appropriate to grant the Claimant a practising certificate for the practice year 2001/2002 subject to conditions. The Panel rescinded and replaced one condition imposed by the Adjudicator relating to supervision by Mr Auden, his partner, taking into account the practical effect on the Claimant and his firm of the precise terms of the original condition. In their Reasons the Panel noted that Etherton J had found that:

•

“…he had to view the evidence given by Mr Baxendale-Walker with considerable caution because it left him with doubt as to the extent to which Mr Baxendale-Walker was giving ‘honest evidence’;

•

there were incontrovertible matters casting doubt on Mr Baxendale-Walker’s honesty and his credibility as a witness;

•

on a ‘difficult and finely balanced exercise’ Etherton J found that Mr Baxendale-Walker was not acting dishonestly as an accessory to the breach of trust;

•

Mr Baxendale-Walker’s self-confidence in and his sense in superiority [sic] of his intellectual and legal skills was a marked characteristic which was accompanied by a ‘remarkable and colossal lack of professional judgment’.

2.

The Panel took the view that whilst the events to which the proceedings before Etherton J related may have taken place while Mr Baxendale-Walker was an ‘inexperienced’ solicitor, however, as his conduct of himself during the trial in itself brought criticism from the Judge, this was a cause for grave concern. The Panel agreed with the Adjudicator that those concerns were so serious that they could be satisfied that it is necessary both in the interests of the public, and to safeguard the reputation of the profession that Mr Baxendale-Walker’s practice as a solicitor is subject to monitoring by the Law Society. The Panel agreed with the Adjudicator that to grant a practising certificate for the practice year 2001/2002, subject to the conditions specified by the Adjudicator by her decision dated 17 September 2002, was a necessary and appropriate course of action (other than amended by the changes set out above).”

Mr Langley, with the assistance of his colleagues at Deloitte’s, including Mr Thornton, produced a report dated 13 May 2003 (“the Langley Report”). On 5 June 2003 the Law Society produced a forensic investigation report (“the FI Report”) which reported the outcome of the Law Society’s investigation into the practices of the Claimant and Mr Auden. The report is addressed to Mr Middleton and signed by Mr Calvert. As explained by Mr Duerden in his second witness statement in the disciplinary proceedings at paragraph 40, he wrote the report. He passed a draft of the report to Mr Michael Davies, a Senior Investigation Officer, for his consideration. Mr Davies’s responsibility was to review the report and check it for any errors or inconsistencies. When Mr Davies was satisfied with the draft report, Mr Duerden submitted it to Mr Calvert for his approval and signature. The report was submitted by Mr Calvert to Mr Middleton. Copies of the report, together with the Langley Report, were then provided to the Claimant and Mr Auden on 4 July 2003. The conclusions of the FI Report are summarised by Mr Miller at paragraph 112 of his witness statement:

“(a)

Mr Baxendale-Walker’s honesty had been questioned by Mr Justice Etherton in his judgment in the Balfron Litigation in various respects;

(b)

Circumstantial evidence suggested that Mr Baxendale-Walker’s denial that he had any interest with FSL was false;

(c)

There was evidence that BWS had put in place trust structures with the intention that they would be operated in breach of trust and that this conclusion was supported by the Langley Report.”

On 29 September 2003 the Claimant provided his response to the FI Report which included an Opinion dated 29 September 2003 from Mr Robert Venables QC which was highly critical of the Langley Report and concluded expressing the view that “no reasonable Adjudication Panel, acting judicially and properly instructed in the law, would adopt the OSS’ recommendations on the basis of Mr Langley’s report” (para 209). On the Claimant’s behalf Irwin Mitchell, his solicitors, wrote in their “Closing Submissions” at page 10 of “the utter falsity of the suggestion of control or other interest in FSL” by the Claimant.

On 20 November 2003 an Adjudication Panel (Mr Heggarty (Chairman), Mr Stuart and Ms Ball) considered the Claimant’s response to the FI Report. The Panel concluded that the Claimant had failed to give a sufficient and satisfactory explanation of the matters set out in the FI Report. The Panel imposed conditions on his practising certificate for the practice year 2003/2004 which included a condition that he shall not

“act for or advise FSL, or its directors, officers or staff, or any client of FSL, or any associated subsidiary company of FSL or persons, whether directly or indirectly connected to FSL.”

The Panel was also satisfied that there was a case of misconduct appropriate for referral to the SDT. The Reasons of the Panel included the following:

“…in the light of the Report provided by Forensic Investigations, the very serious matters involving large sums of money set out in that Report and the express finding of impropriety on the part of Mr Baxendale-Walker by Etherton J and the Panel’s concerns about the conduct and involvement of Mr Baxendale-Walker and Mr Auden with FSL, it was necessary, appropriate and proportionate in the interests of the public that Mr Baxendale-Walker’s practice as a solicitor is subject to further and strict safeguards.”

The Claimant applied for a review of the decision of the Adjudication Panel and this was heard by the Review Panel on 9 March 2004. The Panel was constituted by Mr Venables (Chairman), Ms Stuart and Mr Hinchcliffe. In short, the Review Panel decided to refer matters to the SDT and to impose slightly different practising certificate conditions. At paragraph 3.2 of its decision the Panel stated that it

“…did not share Mr Venables’ scorn for the opinion of Mr Langley and did not find his opinion helpful or persuasive when considering the issues pertaining to professional conduct. They noted particularly that the Opinion appeared to depend on the issue of dishonesty which was not required for proof of the matters which the Panel had to consider. Mr Langley expressed without undue embellishment the view that schemes he looked at involved an apparent known breach of trust. This therefore goes to the reputation and integrity of solicitors and the solicitors’ profession. Accordingly the Panel concluded there was a prima facie case of professional misconduct.”

On 17 December 2003, after the decision of the Adjudication Panel but before the Review Panel actually met, the Claimant had petitioned the Master of the Rolls. Following the decision of the Review Panel the petition was amended on 16 April 2004 to take account of it.

In the meantime in around March 2004 Russell-Cooke, Solicitors, had been instructed by the Law Society to institute disciplinary proceedings against the Claimant.

The hearing of the Claimant’s petition before the Master of the Rolls with regard to the imposition of practising certificate conditions was initially fixed for 16 June 2004. The hearing went part heard and was re-listed for 7 October 2004. Lord Phillips MR ordered that the conditions imposed be held in abeyance pending the adjourned hearing.

On 4 October 2004 Russell-Cooke filed and served the Rule 4 Statement setting out the grounds of alleged misconduct on the part of the Claimant. The Statement was signed by Mr Cadman of Russell-Cooke. The Rule 4 Statement alleged that the Claimant had been guilty of conduct unbefitting a solicitor because (1) he had given evidence in the Balfron Litigation which Etherton J had found to be “manifestly untrue” (“Allegation 1”); (2) the Claimant had provided a reference in circumstances in which he knew, or ought to have known, were “improper and/or unprofessional” (“Allegation 2”); and (3) he had acted and/or continued to act where there was a conflict between his interests and the interests of clients of his firm, and there was a conflict between the interests of FSL and the interests of the clients of the firm (“Allegations 3-6”). Allegations 1 and 2 arose out of the proceedings before Etherton J and Allegations 3-6 are essentially conflict of interest allegations. The Rule 4 Statement did not rely upon the Langley Report and did not make any allegations that the Claimant had been involved with tax fraud in relation to the tax schemes marketed by FSL.

At the hearing on 8 October 2004 Lord Phillips MR decided, having considered the material relied on by the Law Society, that there was a case of substance for the Claimant to answer. As the conditions on his certificate that he was being invited to endorse would have the effect of “closing down the petitioner’s current practice” (para 32) Lord Phillips decided that the Claimant should have a proper opportunity to meet the case that was now being made against him. At paragraph 28 the Master of the Rolls said:

“In my judgment I both can and should have regard to the matters now being referred to the SDT when considering this appeal. I say this for these reasons. First, I do not consider that the Law Society is, as a matter of law, restricted to considering the matters that they called upon the petitioner to explain when deciding whether to place conditions on the certificate. Secondly, what is in issue here is the protection of the public and the good name of the solicitors’ profession. It is desirable that I should have regard to all matters that are relevant to those aims. Thirdly, the matter now raised is no more than an elaboration, albeit a very substantial elaboration, of one matter which the petitioner was originally asked to explain, namely, his relationship with FSL.”

The hearing was adjourned and directions were given as to the future conduct of the appeal.

In January 2005 the Claimant responded to the Rule 4 Statement. He said that he “was not the controlling influence of the FSL group of companies” and that he was “connected to the FSL group of companies only in the sense that FSL were clients of BWS”. All advice and assistance given by BWS to FSL “were a consequence of instructions given at arms length and were properly billed and paid for” (page 7).

Pursuant to the order of Lord Phillips MR a Specially Convened Panel of the Law Society (Mr Venables (Chairman), Mr Wilson and Mr Gardner) met on 15 February 2005. The decision of the Panel was that

“3.

… the disputed conditions should remain unchanged pending the outcome of the Solicitors Disciplinary Tribunal hearing. The Panel considered there were complex issues of fact to be determined, and serious allegations of misconduct that required answering, at the Solicitors Disciplinary Tribunal. The Panel considered that the disputed conditions were proper in all the circumstances for the protection of the public and the reputation and confidence in the profession. However for the reasons set out below, they recognised that the disputed conditions should continue to be suspended until after the determination of the Tribunal proceedings, subject to any further directions by the Master of the Rolls.”

The Claimant’s petition was restored before Lord Phillips MR on 23 June 2005. The Law Society was represented at the hearing by Mr Timothy Dutton QC (instructed by Russell-Cooke). The Claimant was represented by Mr Roger Stewart QC (instructed by Irwin Mitchell). The hearing on 23 June 2005 was however adjourned to give the Claimant time to respond to further allegations contained in the Law Society’s skeleton argument for the hearing. The Law Society was ordered to pay the Claimant’s costs of dealing with the allegation contained in the Langley Report to the effect that his tax schemes might involve a fraud on the Revenue. An interim payment of £50,000 was ordered. The Law Society was also ordered to pay the costs thrown away by the adjournment of the hearing on 23 June 2005.

A further hearing took place on 26 July 2005. The parties had the same representation as at the hearing on 23 June 2005. The Master of the Rolls identified the critical questions:

“First of all: is there a reasonable likelihood that the SDT will find that Mr Baxendale-Walker controlled or had a beneficial interest in the FSL group of companies, to use that broadly? If so, what will the implication of such a finding be; and what interim measures, if any, is it reasonable for the Law Society to take by way of imposing conditions on his certificate?” (Transcript of proceedings, para 5).

In his judgment the Master of the Rolls said,

“1.

… I consider that there is an arguable case before the Solicitors Disciplinary Tribunal that Mr Baxendale-Walker was interested in and/or in control of FSL or the FSL Group. If that case is made out, it has very serious implications as far as Mr Baxendale-Walker’s honesty is concerned. But the fact remains that he has been practising for over two years, subject to certain conditions, and the SDT proceedings are now in place.

2.

In my judgment, the appropriate restrictions on his certificate, in addition to those already imposed, should be simply designed to ensure that the conflict of interest situation alleged by the Law Society cannot arise. That means, first of all, that the condition in relation to acting for, or advising, FSL, shall come into force; but secondly that there should be a condition settled which will preclude Mr Baxendale-Walker from acting for any similar company to which he may advising clients to resort.

3.

I would propose to leave it to counsel to see that a suitable condition can be agreed between them.”

Prior to the conclusion of the proceedings before the Master of the Rolls Allegations 1 and 2 set out in the Rule 4 Statement were heard by the SDT separately from the other allegations. The hearing took place before the SDT on 4 and 5 April 2005. The hearing has been referred to as the First Part of the Disciplinary Proceedings before the SDT. The panel of the SDT was constituted by Mr Holmes (Chair), Mr Chesterton and Mr Baughan. Representation for the parties was the same as at the subsequent hearing before the Master of the Rolls. At the beginning of the hearing the Law Society applied for permission to amend Allegation 1 to replace the phrase “manifestly untrue” with the phrase “untrue and unsatisfactory”. The Tribunal refused permission because the Law Society had had

“every opportunity to formulate its allegations and its case. The effect of the proposed last minute amendment was to make it easier for the Law Society to establish its case. That was prejudicial and unfair to Mr Baxendale-Walker.” (Tribunal’s Findings at paras 6-12).

At the conclusion of the hearing the Tribunal found Allegation 1 not to be substantiated (Findings, para 97). The Tribunal found Allegation 2 to have been substantiated. Indeed, it was not contested by the Claimant (Findings, para 98). The Tribunal ordered that the Claimant should be suspended from practice as a solicitor for a period of three years.

The Claimant appealed the sanction. Pending the determination of the appeal, the SDT’s order suspending him from practice was stayed. The appeal was heard by the Divisional Court (Moses LJ and Stanley Burnton J) on 14 March 2006. On 30 March 2006 the Court handed down its judgment dismissing the Claimant’s appeal against the three year suspension from practice. Moses LJ (with whose judgment Stanley Burnton J agreed) said at para 38:

“In these circumstances, it does not seem to me that the Tribunal’s order of suspension was excessive or out of line with the previous approach to breaches of a solicitor’s obligations. I agree that for a solicitor to write a reference about someone he has never met and about whom he knows nothing is a grave breach of his duty. In my view the Tribunal was justified in making an order for suspension of three years.”

Upon the dismissal of the Claimant’s appeal, the three year suspension from practice ordered by the SDT became effective.

On 15 March 2007 the Court of Appeal refused the Claimant permission to appeal against his suspension from practice for three years. Sir Igor Judge P said at para 25:

“In our judgment the argument was unsustainable, and is unsustained. The reference was sought by a bank, in the context of money laundering regulations, which although much less draconian then than they are now, were nevertheless directed at the discouragement of profitable criminal conduct. The solicitor knew that the reference was critical to the proper discharge of the bank’s duties, and fully appreciated that the bank would naturally rely on the accuracy of any reference he provided, just because he was a solicitor. Moreover his reprehensible behaviour occurred in the context of the lamentable absence of candour and unsatisfactory evidence when he endeavoured to explain himself before Etherton J. The Tribunal was fully entitled to conclude that his conduct in relation to the reference represented ‘extraordinary’ recklessness, and that the consequent sanction should fully vindicate the profession.”

It is to be observed that in passing Sir Igor Judge P had this to say at para 17 on Allegation 1:

“The terms of Etherton J’s judgment provided ample justification for the first allegation brought against the solicitor by the Law Society. His conclusion that, in the end, the solicitor could not be shown to have participated dishonestly in the transactions relating to the loan did not extinguish the alarming features relating to the solicitor’s credibility revealed in the action.”

On 1 March 2006 Mr Richard Nelson, who had been instructed by Mr Auden, wrote to Russell-Cooke informing them that Mr Auden was working out his notice period and had, with effect from 1 March 2006, ceased to supervise the Claimant. At that time it was a condition of the Claimant’s practising certificate that he be supervised by Mr Auden. During March 2006 there was correspondence between Irwin Mitchell, on the Claimant’s behalf, and the Law Society with regard to this matter. BWS became “Baxendale Walker MDP” with effect from 1 April 2006. Marketing literature headed “Baxendale Walker MDP – The Wealth Strategy Firm” (B4/tab 69/2707) refers to “A New Multi Disciplinary Practice”. It states:

“Baxendale Walker, Solicitors will remain in being. Graeme Davidson takes over as senior partner, with Paul Baxendale-Walker working in a consultancy role. All existing client cases will continue to completion by Baxendale Waker, Solicitors.”

On the document the Claimant is described as a “Barrister”. In fact the Claimant was “voluntarily disbarred” on 5 October 1989 and has not subsequently been re-called to the Bar.

On 24 and 25 October 2005 a number of preliminary applications were heard before the SDT in respect of what has been described as the Second Part of the Disciplinary Proceedings involving the conflict of interest allegations. The members of the Tribunal at this hearing were Mr Isaacs (Chairman), Mr Clitheroe and Mr Gilbertson. The Claimant was represented by Mr Stewart QC and the Law Society by Mr Dutton QC. The SDT dismissed the Claimant’s applications (which included an application that documents obtained by the Law Society from the Attorney General of the Isle of Man (“the Isle of Man documents”) be ruled inadmissible) and ruled that the case should proceed to a substantive hearing. The Tribunal gave its reasons for dismissing the application in a 14-page written judgment dated 11 November 2005.

On 20 January 2006 the Claimant sought permission to apply for judicial review of the SDT’s dismissal of his application that the Isle of Man documents be ruled inadmissible in the disciplinary proceedings. Permission was refused on the papers by Ouseley J on 9 March 2006. The Claimant renewed his application at an oral hearing. The application was dismissed by Collins J on 7 July 2006.

On or about 11 July 2006 the Rule 4 Statement was amended to remove any reference to Allegations 1 and 2 which had already been determined. The basis on which the Law Society contended that the Claimant had an undisclosed financial interest in FSL was clarified.

The substantive hearing of the Second Part of the Disciplinary Proceedings before the SDT took place between 11-25 and on 29 September 2006. The Law Society was represented at the hearing by Mr Dutton QC and Ms Carpenter, who were instructed by Russell-Cooke. The Claimant was represented by Mr Kevin Robinson of Irwin Mitchell. The members of the Panel of the SDT were Mr Isaacs (Chairman), Mr Ground and Mr Fisher. At the end of the hearing the Tribunal found that the allegations of misconduct against the Claimant and Mr Auden (who did not appear and was not represented) were established and made an Order striking both the Claimant and Mr Auden off the Roll.

On 11 January 2007 the SDT’s findings and reasons were given in an 81-page judgment.

The evidence before the Tribunal included 31 lever arch files of written material (para 5).

The principal submissions of the Law Society (the Applicant) are set out at paragraph 8 of the Findings. They include the following:

“8.3

It was the Law Society’s case that both Mr Baxendale-Walker and Mr Auden were far too closely involved with the FSL group of companies for either of them to be able properly to act as solicitors for FSL and as solicitors for FSL’s customers, who were asked to pay large fees to FSL to take up any of the FSL schemes, as well as fees to Baxendale-Walker Solicitors for legal advice in connection with the schemes. There were conflicts of personal interest and duty as well as conflicts of interest between FSL customers and FSL which disabled the Respondents from being able to act. Their independence was compromised, yet the Respondents acted as solicitors for all the parties to transactions with FSL, and received fees as solicitors from FSL, as well as from FSL’s customers. The Respondents also benefited financially (and significantly) from loans made to them by discretionary trusts set up so as to cause money to come to them which had been provided to FSL by their customers who had also been clients of the Respondents. It was the Law Society’s case that the Respondents’ conduct was improper whatever their state of mind, but it was alleged that each of them was guilty of conscious impropriety, and that they deliberately flouted proper standards of conduct.

8.4

The Respondents’ motive for compromising their professional standards was money: the huge rewards to be reaped from selling such schemes.

8.5

The Respondents denied that either of them had any interest in FSL or that they benefited from FSL save by arms-length negotiated solicitors fees, and they said that their relationship with FSL was a straight-forward and proper arms-length one of solicitor and client. They denied that there was any conflict of personal interest and duty, or of duty and duty. They contended that FSL was owned by some entrepreneurs, whom they had not named. They not only denied conscious impropriety, but they denied that there was any misconduct at all.”

At paragraph 10 of the Findings the principal submissions of Mr Baxendale-Walker (the Respondent) are set out. They included the following:

“10.1

It was Mr Baxendale-Walker’s position that he had assigned the intellectual property rights in tax saving schemes to FSL. He had thereby relinquished his ownership of them and FSL was free to sell those schemes to customers seeking to make tax savings. Customers were introduced by introducers who were rewarded for making such introductions.

10.2

Mr Baxendale-Walker in his oral evidence explained that he could not himself ‘sell’ the schemes to clients as, because he was a solicitor, he could not pay introduction and referral fees. He would need ‘introducers’ of clients interested in such schemes. Other scheme providers were not solicitors and could reward introducers of clients and were because of this preferred by introducers. As a solicitor he was seriously disadvantaged in the commercial world. FSL could operate in the commercial world on the same basis as other commercial scheme providers.

10.3

It was Mr Baxendale-Walker’s case that he was not the controlling influence of FSL and certainly not the beneficial owner of it. Mr Baxendale-Walker and Mr Auden were not closely connected to the FSL group of companies in any way other than as independent legal advisers.”

The Tribunal heard evidence from Mr Bannister and Mr Blackwell, who had both at different times been Managing Director of FSL, that they both believed that the Claimant was the effective owner of FSL, and that he acted as its controller. (Para A.5.6 and 14.1). The Tribunal found Mr Blackwell’s evidence “wholly convincing” (para 14.2) and Mr Bannister’s evidence “compelling” (para 14.3).

The Tribunal was satisfied beyond doubt that the Claimant was in effective control of FSL (D.5). The Tribunal also found that the Claimant’s claim that BWS could be represented to clients as independent was “false” (D.6). In the Tribunal’s view:

“The ingenuity of Mr Baxendale-Walker’s arguments could not ultimately withstand the evidence which led inescapably to the conclusion that Mr Baxendale-Walker was not a credible witness.” (D.7)

At paragraph 7 of the Findings the Tribunal analysed the structure of FSL Companies/Trusts. The Mount Vernon Trust (“MVT”) was established on 29 September 1994. The named beneficiaries for the Trust are (1) Mr Baxendale-Walker’s grandchildren and remoter descendents (2) The International Red Cross and (3) the International League for the Protection of Horses. The Trust Deed permitted the Trustees to add other beneficiaries. Mr Baxendale-Walker was the settlor of the Trust (7.1). The Tribunal found that MVT was formed by or for Mr Baxendale-Walker and there was no evidence that it was formed for anyone else (A.5.2). The Tribunal’s Conclusion at paragraph 14 included the following:

“14.5

The Tribunal had no reason to doubt that when FSL and MVT were set up it was on the initiative and for the benefit of Mr Baxendale-Walker and his newly formed practice Baxendale Walker Solicitors of which he was and has remained the sole equity partner. …

…

14.7

For so long as the MVT remained hidden from view, there was nothing to connect FSL with Mr Baxendale-Walker except the professional relationship. When the IOM [Isle of Man] Documents became available and later in July 2005 when the MVT Trust Deed was produced the connection between Mr Baxendale-Walker and FSL was obvious. The Trust ostensibly benefited future generations of his family. Also although not stated to be a beneficiary and said to be excluded from benefit under the Trust, he knew that he could benefit whether or not such benefit was taxable in his hands. The Tribunal takes the view that the wording of Clause 22 (see 12B.1) created an impression (which the Tribunal regards as misleading) that Mr Baxendale-Walker could obtain no benefit from the MVT when he says he knew that he could. Mr Baxendale-Walker’s reliance on the argument that he had received no taxable benefit and therefore no benefit at all is unconvincing and rejected. He claimed that ability to receive loans from MVT did not need to depend on his being a beneficiary but the argument that anything he received other than in that capacity could not be a benefit to him is plainly untenable.

14.6

[the second 14.6] Mr Baxendale-Walker had in response to the Law Society’s enquiries made no disclosure of the MVT Trust Deed or of the loans he had received from MVT. In his response to Mr Duerden’s questions, he said he had received no loans. The Tribunal does not accept that Mr Baxendale-Walker could have honestly thought he was answering the questions posed in Mr Duerden’s letters. Mr Baxendale-Walker’s responses were in the Tribunal’s view either a lie or intended deliberately to mislead.

14.7

[the second 14.7] This analysis of the position leads the Tribunal to the conclusion that until the disclosure of the MVT Trust Deed Mr Baxendale-Walker thought he was safe to rely on the connection between the MVT and his firm being concealed by the description of FSL being controlled by ‘non-institutional shareholders’ and later by ‘sophisticated trusts’. Once the MVT Trust Deed was disclosed, Mr Baxendale-Walker must have appreciated that the problem for him was not tax related (he was very confident in relation to FSL and MVT that his schemes were effective to defeat any claim to tax) but the conflict of interests and duties. His loans from MVT might or might not withstand an attack by the Revenue but once the IOM Documents were disclosed it would be known that he was receiving substantial sums of money from MVT much of which could be shown to have derived from FSL. …

…

14.9

In relation to the critical question of whether Mr Baxendale-Walker is to be believed in his denial of any beneficial ownership of the whole or part of FSL, the Tribunal has concluded that it cannot believe him. The evidence to the contrary, despite the sophistication of his arguments, is in the Tribunal’s view overwhelming. His explanations were not credible. …

…

14.12

Although Mr Baxendale-Walker was stated not to be a beneficiary and excluded from benefit under the MVT Trust, he knew (as the Tribunal finds) that he could benefit from unsecured loans. …”

On 1 February 2007 the Claimant issued an Appellant’s Notice appealing against the decision of the SDT. The Grounds of Appeal, settled by Counsel, contained two grounds: first, a preliminary issue concerning the admissibility of the Isle of Man documents; and second, the Tribunal’s finding that FSL and MVT were set up on the initiative and/or to the benefit of the Claimant.

Subsequently the Claimant filed and served a skeleton argument, that he himself settled, dated “February 2007” in which, by contrast with the Grounds of Appeal, he did not seek to challenge any of the findings as to his financial interest in and control over FSL. Instead he indicated that he wished certain “Core Facts” (which he claimed had been found by the SDT) to be “taken as correct” (para 1.3) for the purposes of the appeal. He also asked that certain “Subsidiary Facts” (which he said had been found by the SDT or attested to by witnesses called by the Law Society) to be “taken as correct” for the purposes of the appeal (para 1.5). One of the Core Facts was that he “at all times was the effective owner of FSL” (1.3(1)). The Claimant submitted that as a matter of law the Core Facts do not amount to a conflict of interest.

The Claimant’s skeleton argument in support of his appeal does however include a paragraph headed “The errors in the factual findings” (para 7). This paragraph includes the following:

“7.2

ANNEX A to this Skeleton catalogues the factual errors made [by] the Tribunal. Regrettably, it is a long list. There are few paragraphs of the judgment which do not contain material errors of fact.

7.4

If this appeal is dealt with on the matter of principle addressed above in this Skeleton, further examination of these errors and their consequences is redundant.

7.5

We do submit that this unusual frequency and magnitude of factual errors arises from the Tribunal trying the [sic] shoe-horn the facts into the Regulator’s flawed matrix of logic and law.”

Annex A is a seven-page document described as a “Table Summary: Errors of fact and law made by the Tribunal”.

The Law Society filed a skeleton argument in opposition to the appeal on 22 July 2008, settled by Mr Dutton QC and Ms Carpenter.

By a letter to the Administrative Court Office dated 23 July 2008 the Claimant indicated that he had “decided to withdraw his appeal”. On 24 July 2008 Pill LJ and Rafferty J, sitting in the Divisional Court, ordered that the appeal be withdrawn.

On 29 September 2006 the SDT ordered the Claimant (together with Mr Auden) to, jointly and severally, pay the costs of and incidental to the Law Society’s application to the Tribunal in respect of the Second Part of the Disciplinary Proceedings to be determined by way of detailed assessment if not agreed, provided that no more than 25% of the Law Society’s costs were recovered from Mr Auden. Detailed assessment proceedings were started on 6 August 2007 and on 2 March 2010 Master Campbell granted the Law Society an Interim Costs Certificate. Master Campbell ordered that the Claimant must pay the sum of £200,000 to the Law Society within 14 days. On 25 March 2010 the Claimant’s solicitors sent to the Law Society’s solicitors a letter enclosing an Appellant’s Notice and Grounds of Appeal against the Interim Costs Certificate on the grounds that “new evidence” obtained by the Claimant provided compelling grounds for appeal. A Final Costs Certificate was awarded to the Law Society on 26 May 2010. It ordered the Claimant to pay £462,737.90 to the Law Society on or before 27 May 2010. On 17 June 2010 the Claimant issued an application for a stay of enforcement and execution of the Interim Costs Certificates and Final Costs Certificate. The basis for this application was that the claim, which he is advancing in the present proceedings, constitutes a liquidated counter-claim against the Law Society for his own costs of the disciplinary proceedings and an unliquidated counter-claim for the damages claimed in these proceedings.

On 4 June 2010 the Claimant issued the present claim against the Law Society. On 29 June 2010 Master Eyre stayed the proceedings, one reason being that the Claim Form showed only one defendant, but the Particulars of Claim referred to fourteen defendants. Master Eyre required the Claimant to amend the Claim Form and Particulars of Claim so as properly to formulate his case. On 28 July 2010 the Claimant’s application to amend the Claim Form and Particulars of Claim was allowed. On 3 August 2010 the Amended Claim Form was issued and subsequently served, together with the replacement Particulars of Claim dated 29 July 2010 (A/tab 5).

Paragraphs 103-105 of the Particulars of Claim identify the various causes of action pleaded against the Defendants (see para 8 above).

By section 4A of the Limitation Act 1980 the limitation period for malicious falsehood is one year from accrual of the cause of action. Mr Peter Susman QC, for the Claimant, concedes that this claim is time barred. Accordingly there is no need to consider the ingredients of this tort.

Mr Hollander submitted that conspiracy to defraud is a criminal offence (see Criminal Law Act 1977, ss.1 and 5), but not a distinct tort. Mr Susman did not argue to the contrary.

The essential elements of the tort of conspiracy to injure are: (1) an agreement between two or more persons to undertake some action; (2) the predominant purpose of which is to injure the Claimant; (3) which is then acted upon; and (4) which results in loss or damage to the Claimant. (See Clerk & Lindsell on Torts (20^th Ed.), 24-104-111).

Unlawful means conspiracy “is committed where two or more persons combine and take action which is unlawful in itself with the intention of causing damage to a third party who does incur the intended damage. It is not necessary for the injured party to prove that causing him damage was the main or predominant purpose of the combination but that purpose must be part of the combinors’ intentions. The main issues raised by this form of the tort are first the degree of intention required and second the ambit of unlawful means.” (See Clerk & Lindsell on Torts (20^th Ed.), 24-95).

In Three Rivers District Council v Bank of England (No.3) [2003] 2 AC 1 Lord Steyn at 192B-C explained that there are two different forms of liability for misfeasance in public office:

“First there is the case of targeted malice by a public officer, i.e. conduct specifically intended to injure a person or persons. This type of case involves bad faith in the sense of the exercise of public power for an improper or ulterior motive. The second form is where a public officer acts knowing that he has no power to do the act complained of and that the act will probably injure the plaintiff. It involves bad faith in as much as the public officer does not have an honest belief that his act is lawful.”

The first form is referred to as “targeted malice” and the second as “untargeted malice”. Lord Hobhouse explained the difference as follows: “targeted malice” is where “the official does the act intentionally with the purpose of causing loss to the plaintiff, being a person who is at the time identified or identifiable”; “untargeted malice” is where “the official does the act intentionally being aware that it will in the ordinary course directly cause loss to the plaintiff or an identifiable class to which the plaintiff belongs” (at 231).

Mr Susman accepted that the present case is one of “targeted malice” or nothing.

The employing authorities will be held vicariously liable for the misfeasance in public office of their employees if they acted in the course of their employment (Lister v Hesley Hall Ltd [2002] 1 AC 215, per Lord Steyn at para 28).

There was no issue between Counsel as to the relevant principles to be applied. The applications engage both CPR 3.4 and CPR 24.2.

The relevant principles which determine whether or not the claim should be struck out on the grounds that there is no basis for the allegations pleaded are stated in Three Rivers District Council v Bank of England (No.3) [2003] 2 AC 1.

On an application for summary judgment, the question for the court is whether the respondent to the application has a “real” prospect of success, as opposed to a “fanciful” prospect. His claim must be more than merely arguable. (See Swain v Hillman [2001] 1 All ER 91 at 92; and ED&F Man Liquid Products Ltd v Patel [2003] EWCA (Civ) 472).

A summary judgment application should not involve the court conducting a “mini-trial” (Swain, per Lord Woolf MR at 95). However, “that does not mean that a court has to accept without analysis everything said by a party in his statements before a court” (ED&F, at para 10). In particular, it may sometimes be “clear that there is no real substance in factual allegations made” (ibid. see also Three Rivers DC v Bank of England (No.3), per Lord Hope at para 95).

In determining the application, the court is entitled to take into account further evidence which may realistically be available at trial (Royal Brompton Hospital NHS Trust v Hammond (No.5) [2001] EWCA Civ 550 at para 19). However, a claim should not be allowed to proceed to trial based on a Micawberish speculation that something will turn up (ICI Chemicals and Polymers Ltd v TTE Training Ltd [2007] EWCA Civ 725 at paras 12-14).

Where the court is being asked by the Claimant to allow allegations of the most serious wrongdoing against reputable professionals to go to trial, the Claimant has the burden at trial of persuading the court to the standard of proof required to prove the most serious of allegations (see Secretary of State for the Home Department v Rehman [2003] 1 AC 153 at para 55). That is why an allegation of fraud must be supported by cogent evidence and why the court usually begins with the assumption that an innocent explanation will be preferred (ibid. at paras 54-55; and Jafari-Fini v Skillglass Ltd [2007] EWCA Civ 261 at para 49).

No real prospect of success

The Claimant alleges that the First and Second Defendants (for whose actions it is said the Third Defendant is vicariously liable) formed an intention of constructing a knowingly false and fraudulent case against the Claimant with a view to destroying his tax practice and, if possible, procuring that he be struck off the Roll of Solicitors by the Ninth Defendant (see Particulars of Claim, para 28).

In his witness statement dated 14 February 2011, made in response to the present applications, the Claimant relies upon what he describes as three overt steps taken by the Law Society Defendants in the carrying out of the conspiracy which he alleges against them. The first was their seizure of some of his practice files. In paragraph 40 of the Particulars of Claim it is pleaded that:

“In 2001 on the instructions of the First Defendant, the Second Defendant gained admittance to the Claimant’s London office on the pretext of carrying out an accounts inspection. … The true purpose of the inspection was to obtain documentation which could be used in the manufacture of a case against the Claimant that his Schemes involved unlawful tax evasion.”

Mr Smith submits, and I agree, this is no more than unsubstantiated assertion. By letter dated 4 August 2010 the Law Society Defendants’ solicitors requested further information of these allegations pursuant to CPR Part 18 (see para 2), however no particulars were provided (see Part 18 Reply dated 8 September 2010, para 2). In May 2001 there was plainly good reason for the Law Society to commence a thorough investigation into the Claimant’s practice: by that time there had been the contempt decision (see para 10 above) and there were the ongoing civil and criminal proceedings (see para 12 above). The circumstances surrounding the inspection are described by Mr Miller, the Law Society Defendants’ solicitor, in his witness statement at paras 88-101. The investigation was authorised by Mr Calvert and Mr James, not by the First Defendant. The conduct of the investigation was delegated to the Second Defendant and Mr Lawes, not just to the Second Defendant. The Claimant makes no allegations of wrongdoing against Mr Calvert, Mr James or Mr Lawes.

At paragraph 2.6 of his witness statement the Claimant refers to the “second overt step” as being the commissioning of an “expert” report from the Deloitte Defendants. Paragraph 45 of the Particulars of Claim allege that:

“In reality the First Defendant and the Second Defendant intended from the outset that any report from the Seventh Defendant would necessarily vindicate their views that the Claimant was engaged in fraudulent tax evasion and would provide material for a prosecution of the Claimant before his professional body.” (See also paras 42 and 46-48 of the Particulars of Claim).

It is difficult to understand why the commissioning of an expert report provides an inference of any kind of wrongdoing by the Law Society Defendants. The Claimant was heavily involved in the creation and selling of tax avoidance schemes. The First and Second Defendants, he says, had no expertise in taxation law (Particulars of Claim, para 41(a)). The line between tax avoidance and tax evasion is often difficult to draw. The Claimant nowhere explains why the decision to seek an expert opinion is evidence of conspiracy or dishonesty on the part of the First and Second Defendants.

At paragraph 2.7 of his witness statement the Claimant states that the “third overt step” taken by the Law Society Defendants in the carrying out of the conspiracy was that “before the final abandonment of the tax evasion complaint, the Law Society Defendants had procured the Law Society Adjudication Panel on 20 November 2003 and the Law Society Review Panel on or before 17 March 2004 to “rubber stamp” without any proper consideration the conclusion that [the Claimant] had a new and alternative complaint to answer of improper conflict of interest”. The Claimant alleges that there was “no genuine meeting” of the Adjudication Panel on 20 November 2003 or of the Review Panel on or before 17 March 2004 (see Particulars of Claim, paras 69 and 71 respectively).

At paragraph 2.7.2 of his witness statement the Claimant says that in 2009 it seemed to him that the only way for him to establish the truth of what had happened with the Law Society Panel “hearings” was to conduct his own investigation of the “investigators”.

On 4 September 2009 the Claimant, masquerading as “D. Keys” and describing himself as “Investigations Director” wrote to the First Defendant on what purports to be HM Revenue and Customs notepaper in the following terms:

“Dear Mr Middleton

Paul Baxendale-Walker

I am writing to initiate an information exchange between our departments concerning the above person.

I am aware that your department has had an interest in this individual. The Special Investigations Section also has an interest. Accordingly, I consider that an exchange of information between us is desirable, potentially leading to further co-operation.

You will appreciate the need to conduct inter-departmental discussions on an information sensitive and confidential basis. That is particularly so given the remit of this department. In accordance with this department’s policy, I am sending this communication to you via secure e-mail.

I shall contact your office to arrange a suitable time to discuss these matters with you in the near future.

Yours sincerely

D. Keys

Investigations Director”

Mr Smith describes this document as “certainly a thoroughly dishonest and quite possibly criminal letter to Mr Middleton”. (Transcript, Day 1, page 147, lines 9-10). Section 30 of the Commissioners for Revenue and Customs Act 2005, so far as is material, provides:

“(1)

A person commits an offence if he pretends to be a Commissioner or an officer of Revenue and Customs with a view to obtaining—

(a)

admission to premises,

(b)

information, or

(c)

any other benefit.

(2)

A person guilty of an offence under this section shall be liable on summary conviction to—

(a)

imprisonment for a period not exceeding 51 weeks,

(b)

a fine not exceeding level 5 on the standard scale, or

(c)

both.”

On 9 September 2009 the Claimant telephoned the First Defendant and spoke to him. He says that he “adopted the persona of Mr David Keys as an investigator contracted to HMRC” (Claimant’s witness statement, para 2.7.2). The conversation was recorded (according to the Claimant in his witness statement at 2.7.2, “for the most part”). He says that “Realising that the interpretation of some of Mr Middleton’s statements in that first telephone conversation might be open to argument,” he followed it up with a further telephone call on 17 March 2010, which was also recorded (para 2.7.3). On that occasion the Claimant said he “adopted the persona of Mr Chris Handford as a regulatory project manager with the Legal Services Board” (para 2.7.3).

However, only the contents of the first conversation on 9 September 2009 have been relied upon in the pleaded case against the Law Society Defendants (see, in particular, paras 93-96 of the Particulars of Claim).

Mr Miller dealt with these two conversations in his witness statement at paragraph 235 where he said:

“(b)

… Whether or not Mr Baxendale-Walker avoided committing a criminal offence under section 30 of the 2005 Act during these telephone conversations, the First to Third Defendants consider that his conduct in assuming a false identity and secretly recording telephone conversations is, at the very least, very discreditable conduct. Mr Baxendale-Walker ought not therefore be permitted to rely upon the ‘evidence’ of these telephone calls to justify a collateral attack on earlier binding decisions.

(c)

In any event, the First to Third Defendants consider that the recordings of these telephone calls and the transcripts provided by Mr Baxendale-Walker provide no support for the case of dishonesty and bad faith which he now seeks to run against the Defendants. Indeed, if anything, they are inconsistent with Mr Baxendale-Walker’s suggestion of a conspiracy.

(d)

For instance, Mr Middleton explained:

•

The SRA had a ‘good feel’ for what the SDT’s view on a particular case was likely to be and that this explained why the SDT was ‘very supportive’ of cases put forward by the SRA.

•

Mr Baxendale-Walker’s case was a good example of this. The SDT understood the concept of conflict of interest for a solicitor so putting the case on that basis proved to be ‘very successful’. By contrast, if the SRA were to put a case to them (as ‘Mr Keys’ was suggesting) on the basis that Mr Baxendale-Walker’s tax schemes were effectively fraud on the revenue ‘they would feel slightly out of their comfort zone’.

•

The SRA had ‘got enough evidence’ to show that Mr Baxendale-Walker had ‘set up the scheme and clients were unaware of that. They thought he was an independent solicitor giving independent legal advice’. He added that the SRA’s position was that Mr Baxendale-Walker had not disclosed his interest properly and that it was a dishonest conflict.

•

The SRA was ‘more than happy’ to do what it could to assist ‘Mr Keys’. If they received information which could give rise to further proceedings before the SDT, they would consider it and would advise ‘Mr Keys’ but that ‘without seeing the information and making an assessment it’s very difficult to know’.

•

It would be ‘out of the question’ to ‘have a chat’ with members of the SDT (as ‘Mr Keys’ has suggested) because it would be ‘like approaching the judge’. When pressed by ‘Mr Keys’, Mr Middleton said: ‘We don’t do that, no’.”

I read the transcripts and listened to the tape-recorded conversations. Mr Smith addressed me on the contents of the conversations and made his submissions in relation to them. He submitted they did not support what was pleaded at paragraphs 95-97 of the Particulars of Claim.

On the third day of the hearing Mr Susman abandoned any reliance on the two telephone conversations with the First Defendant. It followed, as Mr Susman accepted, that paragraphs 94-97 of the Particulars of Claim must be struck out in their entirety. Mr Smith submits, and I agree, that those parts of any other paragraphs in the Particulars of Claim that rely upon evidence obtained during the course of those two telephone conversations with the First Defendant must similarly be struck out. Paragraphs 36, 69 and 71 of the Particulars of Claim are particularly in point. Mr Susman submits that paragraphs 82-84 should not be struck out on the basis that they are not wholly dependent on the conversations with the First Defendant. I accept that if there is any evidence, other than those two conversations, to support those paragraphs then Mr Susman’s submission is correct.

In my view there is no evidence to support the allegations that the Claimant has made with regard to the decisions of the Adjudication Panel on 20 November 2003 (see para 22 for constitution of the Panel and Reasons for Decision) and the Review Panel on or before 17 March 2004 (see para 23 above for constitution of the Panel and Reasons for Decision). The Claimant petitioned the Master of the Rolls following the decision of the Adjudication Panel and his petition was amended following the decision of the Review Panel (see para 24 above). The history of the proceedings before the Master of the Rolls, the decisions of the Master of the Rolls and the reasons for his decisions are set out at paras 26, 28 and 31-33 above. Those decisions are not challenged in these proceedings. Further, the Claimant’s three year suspension from practice ordered by the SDT (see para 34 above) only became effective upon the dismissal of the Claimant’s appeal by the Divisional Court (see para 35 above). The Court of Appeal refused the Claimant permission to appeal against suspension (see para 36 above).

There is no real prospect that any of the causes of action pleaded against any of the Law Society Defendants will succeed.

Having reached the conclusion that the claims against the Law Society Defendants must be struck out, I propose to deal with the other points advanced on the First, Second and Third Defendant’s behalf fairly shortly.

Absolute privilege or immunity

Mr Smith submits that absolute privilege or immunity applies to the statements and conduct of the Law Society Defendants in the course of a disciplinary investigation in anticipation of disciplinary proceedings. The statements and conduct were either incidental to proceedings before the OSS or incidental to proceedings before the SDT or both, and both these organisations are tribunals that have the benefit of immunity against the type of claims made in these proceedings.

In Marrinan v Vibart [1963] 1 QB 528 Sellers LJ said at 533:

“Those who take part in the administration of justice … must be free from the fear of civil proceedings.”

This “core immunity” for witnesses, parties and judges was accepted by the House of Lords in Darker v Chief Constable of West Midlands Police [2001] 1 AC 435. The immunity applies to any “authorised inquiry which, though not before a court of justice, is before a tribunal which has similar attributes” (Royal Aquarium and Summer and Winter Garden Society v Parkinson [1892] 1 QB 431 at 442, per Lord Esher). It was held in Addis v Crocker [1961] 1 QB 11 that this included the Solicitors’ Disciplinary Committee, a statutory body established under the Solicitors Act 1957, with responsibilities similar to the SDT.

The immunity is not limited to things which are actually said or done in court or (in the present case) to proceedings before the SDT. It extends also to statements or conduct connected with the preparation of the case to be presented in court or before the SDT. Taylor v Director of the Serious Fraud Office [1999] 2 AC 177 was concerned with criminal investigations in criminal proceedings however I accept Mr Smith’s submission that the immunity extends and applies with equal force to disciplinary investigations and disciplinary proceedings (and indeed to other civil proceedings). (See Mahon v Rahn and others (No.2) [2000] 1 WLR 2150, per Brooke LJ at para 194).

In Gray v Avadis [2003] EWHC 1830 (QB) it was decided that both the SDT and the OSS (and presumably now the SRA) are tribunals exercising functions equivalent to a court of justice, so benefiting from absolute immunity. Mr Smith submits that implicit in this decision is the conclusion that review panels and adjudication panels are themselves tribunals to be protected by the immunity. In my view this follows from the decision of Tugendhat J.

In Darker v Chief Constable of West Midlands Police Lord Clyde at 456 said that the principles governing the immunity of witnesses in connection with judicial proceedings “should be of general application regardless of the particular form of the action”. The only exception to this principle of absolute immunity for participants in investigations or proceedings is the tort of malicious prosecution or malicious arrest. However the Claimant does not allege that the Defendants have committed this tort. I reject Mr Susman’s submission that the immunity does not apply in the case of an action for misfeasance in public office. The single passage in Three Rivers DC v Bank of England (No.3) at 191E on which he relies does not, in my view, support his submission. Lord Steyn was not there dealing with immunity as such; he was discussing the ingredients of the tort of misfeasance in public office and looking at the state of mind of the Defendant. I also reject Mr Susman’s submission that the immunity does not extend to inferior tribunals; it is clear from the authorities that I have referred to that it does.

Mr Susman referred during the course of the hearing to the pending appeal to the Supreme Court in Jones v Kaney (on appeal from the decision of Blake J [2010] EWHC 61) and submitted that I should not strike out the claims on this ground when the Supreme Court may take a different view to earlier decisions on absolute privilege and immunity. I agreed to receive written submissions from Counsel when the outcome of that appeal was known. On 30 March 2011 the Supreme Court handed down its decision in Jones v Kaney [2011] UKSC 13. Mr Smith submitted supplementary written submissions on behalf of the Law Society Defendants; so did Ms Carr on behalf of the Eighth and Ninth Defendants. Mr Hollander adopted the submissions of Mr Smith. Mr Matthew Richardson, junior counsel for the Claimant, informed me that “we [Mr Richardson and Mr Jonathan Harvie QC who is now leading him] will not be filing any submissions on this point as we believe that the authority [i.e. Jones v Kaney] speaks for itself in the context of this litigation”.

The Supreme Court in Jones v Kaney overruled the decision in Stanton v Callaghan [2000] QB 75 and held by a majority of 5-2 (Lord Hope and Lady Hale dissenting) that an expert witness has no immunity from suit in an action brought by his own client for breach of a contractual or tortious duty of care. I accept the submission of Mr Smith that the decision in Jones v Kaney does not touch on the immunity of a witness (whether they be a witness of fact or expert opinion) or a party to proceedings in respect of things said or done in the ordinary course of proceedings in respect of claims brought against him by an opposing party; nor does the decision affect the law on judicial immunity (see, in particular, Lord Phillips at [62], Lord Brown at [65-67], Lord Collins at [71-73], Lord Kerr at [88] and [94], Lord Dyson at [101] and [125-126], Lord Hope at [132], and Lady Hale at [179]).

In my judgment the actions of the Law Society Defendants are protected by absolute privilege and immunity and I would strike out the claims against them on this ground.

Collateral attack

Mr Smith submits that the Claim should be struck out as an abuse of process on the further ground of collateral attack.

In Hunter v Chief Constable of the West Midlands Police [1982] 1 AC 529 the House of Lords recognised that one form of abuse of process is

“… the initiation of proceedings in a court of justice for the purpose of mounting a collateral attack upon a final decision against the intending plaintiff which has been made by another court of competent jurisdiction in previous proceedings in which the intending plaintiff had a full opportunity of contesting the decision in the court by which it was made.” (Per Lord Diplock at 541B-C).

In Saif Ali v Sydney Mitchell & Co. [1980] 1 AC 198 at 222F-G Lord Diplock said that “the appropriate method of correcting a wrong decision of a court of justice reached after a contested hearing is by appeal against the judgment to a superior court.”

At paragraph 39 of the Particulars of Claim it is pleaded that:

“In 2010 the Claimant in reliance upon the fresh evidence pleaded below, began the process of appeal against the order for his striking off.”

That appeal should have been made to the Divisional Court. The Claimant did commence an appeal but then withdrew it (see paras 49-53 above). In the present case the Claimant seeks to go behind the decision of (at least) the Master of the Rolls to impose practising certificate conditions and the decision of the SDT to strike him off the Roll of Solicitors. He may also need to challenge the earlier decision of the SDT to suspend him from practice for a period of three years. He did appeal against that decision but his appeals were dismissed by the Divisional Court (see para 35 above) and the Court of Appeal (see para 36 above). His case depends on showing that the practising certificate conditions should not have been imposed and that he should not have been struck off. I agree with the submission made by Mr Smith that if the Claimant fails to show that these earlier decisions were wrong, the claim must necessarily fail.

In my view the present claim should also be struck out on the basis of abuse of process.

No real prospect of success

By the conclusion of the hearing the position with regard to the Deloitte Defendants was as follows:

That effectively just leaves on the pleaded case the alleged conspiracy to injure and the unlawful means conspiracy.

Mr Hollander summarises correctly, in my view, the pleaded case on the alleged conspiracy to injure at paragraph 52 of his skeleton argument. In particular:

For the reasons I have already stated it is my view that the Claimant has no real prospect of establishing any conspiracy or wrongdoing against the Law Society Defendants and that the claims against them should be struck out (see para 86 above). It follows that in my view the Law Society Defendants did not “recruit” the Fourth Defendant and the Fifth Defendant to the conspiracy ((ii) above), and the Fourth Defendant and the Fifth Defendant did not produce an expert report in pursuit of the conspiracy ((iii) above).

In any event, as Mr Hollander submits, “unless one can deduce from the Langley Report itself that the Deloitte Defendants were dishonest, there are no factual grounds for any inference that Deloitte were motivated by malice against Mr Baxendale-Walker or that they agreed with the Law Society to harm [Mr] Baxendale-Walker through the Langley Report”. (Transcript Day 4/page 7/lines 15-22).

Mr Susman did not pursue the point that Mr Langley’s Institute of Taxation Fellowship Thesis on the subject of “The Constitution and Taxation of Employee Benefit Trusts” was inconsistent with the Langley Report and showed bad faith on his part in representing the law to be at variance with what he knew to be the correct position (see Particulars of Claim, paras 55 and 56). As Mr Hollander observed, it was never clear what the case was on that.

One other related matter that was initially relied upon by the Claimant but was not pursued by Mr Susman concerned what has been described as “the McKenzie conversation”. In 2004 the Claimant brought a defamation claim against the Fourth Defendant and the Seventh Defendant on the basis of statements made by the Fourth Defendant to a “Mr George” who in fact was Mr McKenzie of FSL, who had secretly taped the conversation. In those proceedings the Claimant pleaded and gave evidence that Mr McKenzie had acted independently and without the Claimant’s knowledge when approaching the Fourth Defendant (see Claimant’s Reply, para 7 in C/5/190 and witness statement of 9 November 2004, at para 12 in C/5/184). This evidence was, Mr Hollander submits, crucial to the failure of the attempt by the Fourth Defendant and the Seventh Defendant to strike out the claim, and thus to their subsequent decision to settle it in June 2004 for £1,500 on the basis of a letter from the Fourth Defendant which made no admission of liability and confirmed that the comment made by the Fourth Defendant regarding the SFO had been an honest error made without malice. The wording of this letter was agreed with the Claimant and it follows that the Claimant accepted that the Fourth Defendant had not been actuated by malice. However it now appears clear that the Claimant’s evidence in those defamation proceedings was dishonest, says Mr Hollander, as the Claimant admits in the present proceedings that Mr McKenzie had approached the Fourth Defendant on his instructions. (See Particulars of Claim, para 73). In any event nothing said by the Fourth Defendant in the conversation with Mr McKenzie contradicted the Langley Report. The allegation in paragraph 73(b) of the Particulars of Claim with regard to the conversation was not pursued by Mr Susman. (See paras 86-89 of Mr Hollander’s skeleton argument for the Deloitte Defendants’ response to this allegation).

In accordance with standard practice at the Seventh Defendant, the Fourth Defendant was assisted in his work on the Langley Report by two more junior employees of the Seventh Defendant, namely the Fifth Defendant and Ms Katie Rimmington. They began working on the Langley Report on about 11 November 2002 and on 25 November 2002 the Fourth Defendant reported his preliminary views that the schemes in question were unlawful. The final report, which maintained this view, was sent to the OSS in May 2003. After this the Deloitte Defendants had no direct involvement with the investigation or disciplinary proceedings against the Claimant, save that the Fourth Defendant consented to the OSS serving a copy of the Langley Report on the Claimant.

Mr Hollander had understood that the motive that was being alleged by the Claimant as to why the Deloitte Defendants would agree to cast aside their professional ethics and risk their professional reputations by agreeing to produce a falsified report was because of the Seventh Defendant’s “lucrative” audit relationship with the Law Society and the Claimant’s position as a business competitor of the Seventh Defendant (see Particulars of Claim, para 43). However Mr Susman said this was not so and that the motive the Claimant alleges “is the desire to help put out of business somebody who is regarded as a menace” (Transcript Day 3/pages 83, line 14-page 84 line 3).

The Claimant’s case is that the Langley Report mis-stated the law, and did so deliberately for dishonest reasons. The law in question concerns the position of EBTs, which are trusts established for the benefit of employees and other persons connected with a company and which attract certain tax breaks depending upon how they are set up, as provided for in sections 13 and 28 of the Inheritance Tax Act 1984 (“the 1984 Act”) and section 239 of the Taxation of Chargeable Gains Act 1992 (“the 1992 Act”). The Claimant’s case on the relevant law is set out at para 50 of the Particulars of Claim, which is contrasted at para 52 with what the Claimant says is the position set out in the Langley Report.

The Claimant says that the difference is (and thus the alleged errors in the Fourth Defendant’s analysis) come down to:

Mr Langley in his witness statement dated 20 October 2010 responds to these paragraphs in the Particulars of Claim as follows:

“57.

As regards these latter allegations, it is correct that my view was, and remains, that Mr Baxendale-Walker’s EBT schemes were devised in such a way as to require a breach of trust by the trustees of the EBT in order to achieve their purpose. Whether this involves a criminal offence is not something which I am qualified to judge and I make no mention of it in my Report; if that is so, however, I struggle to see how such a consequence can be used to imply either a criticism of my Report or that is was somehow ‘fixed’.

58.

Further, I do not agree either with Mr Baxendale-Walker’s exposition of the law at paragraph 50 PoC nor his description of how I stated it at paragraph 52 PoC. I have set out at Appendix 1 to this statement an explanation of how the tax provisions work and why I believe Mr Baxendale-Walker’s description, and his criticism of this aspect of my Report, to be incorrect. But in any case, I fail to see the relevance of this criticism. Of the four points set out at paragraphs 50 and 52 PoC, the first – that there can be an exemption from inheritance tax for an EBT – is uncontroversial. The remaining three points all concern how those exemptions apply in the context of owner-beneficiaries under an EBT. But all of Mr Baxendale-Walker’s EBT schemes (or at least all of those I examined) specifically excluded owners from being beneficiaries.

59.

Further, my criticism of Mr Baxendale-Walker’s EBT schemes was not based on any flaw in their legal structure or of how the various tax exemptions applied to that structure. Rather, my concern was that his schemes appeared to be set up with the specific purpose of flouting that structure through the use of trustees who would agree to make ‘soft’, uncommercial – and therefore beneficial – loans to the owners despite their being excluded from the class of beneficiaries. As I stated in my summary opinion (emphasis added):

‘3.5 Baxendale-Walker structured arrangements for its clients so as to take advantage of the exemptions for EBTs. These clients were often introduced through a company called FSL. Baxendale-Walker assisted their clients to establish EBTs that excluded the existing owners from benefit, and therefore complied with the terms of the legislation. This meant under the legislation that the clients avoided capital gains tax and/or inheritance tax that would otherwise have been charged.

3.6

However, after the disposals of assets had taken place, the Trustees of the EBTs committed breaches of trust by lending money on ‘soft’ (i.e. uncommercial terms) to people who had expressly been excluded from benefit. These people therefore had the effective use of funds that should have been used for the benefit of employees. Although in some cases benefits were also conferred on employees, there are other cases where I have no evidence that the employees received benefits.’

60.

In other words, while Mr Baxendale-Walker’s EBT schemes were designed to take advantage of exemptions provided for under applicable tax laws, the question of whether they were operated lawfully was, in my view, primarily a question of trust law. Nor do I consider there to be any doubt regarding the legal position: it is a breach of trust to offer a loan on ‘soft’, uncommercial terms to a person who is not a beneficiary.

61.

In this respect, I note that in my Report I expressly state several times that – while the loans offered struck me as uncommercial – an opinion on this should be sought from a banker (see paragraphs 3.36 and 3.56). The only occasion where I do not qualify my view in this way is in respect of the ‘Jaymarke’ EBT scheme, described at paragraphs 3.23 to 3.29 of my Report, where it was apparent that an EBT was used to enable a company, excluded from being a beneficiary, to sell land without incurring a tax charge and use the proceeds – via an unsecured loan of £3m – to pay off a (commercial) bank loan. It was and remains my view that the circumstances of this payment were sufficiently egregious to allow me to opine that it was a breach of trust without needing additional evidence from a banker. Indeed as I noted in my Report, the original trustees of the EBT refused to make this loan, resulting in their removal by Mr Baxendale-Walker.”

Unless the Langley Report is wrong, there can be no complaint that the Deloitte Defendants knowingly or deliberately mis-stated the legal position. But even if the Report erred in law, the Claimant must still establish that the Deloitte Defendants were each aware of and indeed deliberately included the errors complained of. In the case of the Fourth Defendant this knowledge is said to be established by three matters: first, alleged inconsistencies between the Fourth Defendant’s description of the relevant law in the Langley Report and that in his 1992 fellowship thesis (Particulars of Claim, paras 55-56); second, the Fourth Defendant’s “refusal” to consider the Venables Opinion (Particulars of Claim, para 68); and third, various comments made to Mr McKenzie of FSL in the course of a conversation in 2004 (Particulars of Claim, para 73). The first and third of these points were not pursued by Mr Susman and I have dealt with them shortly in paras 106 and 107 above. As for the second, the Venables Opinion was commissioned by the Claimant in response to the Langley Report and served on the Third Defendant in September 2003. However it was not provided to the Deloitte Defendants until 16 June 2004. The Venables Opinion cannot, in my view, be relevant to the Fourth Defendant’s honesty.

In any event according to Mr Venables his instructions had been to consider whether the Langley Report:

“22.

… can in any way be contradicted or exposed as being flawed in regard to the fundamental question of whether Mr Baxendale-Walker has acted dishonestly…

24.

… I should stress that I am not advising as to whether the tax-saving strategies with which the firm of Baxendale Walker dealt worked as a matter of law or were correctly implemented in any particular case. …” (B3/19/1898-1899).

In fact, the Langley Report does not address the Claimant’s honesty. Rather, as Mr Hollander observes, “it addressed the lawfulness of the Claimant’s tax schemes – which Mr Venables was expressly told not to consider” (skeleton argument, para 83).

Mr Langley has now considered the Venables Opinion and remains of the view that his Report was correct. In his witness statement of 20 October 2010 at para 73 he says:

“…It is clear that Mr Venables has a number of differences of opinion from me. It does not follow that he is right and I am wrong and I stand by my conclusions. Indeed, his criticisms of my approach to the law predominately concern my failure to mention the possibility of owner-beneficiaries receiving benefits in the form of income, which as I explain above and at Appendix one was omitted because it was irrelevant in the context of Mr Baxendale-Walker’s schemes.”

As regards the Fifth Defendant, the Particulars of Claim do not make out any basis for alleging that he was aware that the Langley Report was incorrect. On the contrary, it is said that he had insufficient expertise to be able to comment on the schemes in question (Particulars of Claim, para 48(b)).

As for the Sixth Defendant, his involvement with the Langley Report was minimal. His role was to perform the “second partner review”, a part of the Seventh Defendant’s quality control procedure whereby a second partner is asked to review documents before they are sent to clients. He was asked to perform this review in around March 2003. Until this point he was unaware of the Langley Report. In his witness statement dated 20 October 2010 he says that so far as he can recall, he reviewed the document, provided comments on it and then met with the Fourth and Fifth Defendants to discuss his comments on 3 April 2003. This meeting was sufficient to allay any concerns he had and he was, and remains, satisfied as to the appropriateness of the report’s conclusions (paras 13 and 17). As he says at paragraphs 14-16 of his witness statement the allegations at paragraph 58 of the Particulars of Claim that he considered the Langley Report to be “fatally flawed” or otherwise incorrect or inappropriate are misconceived. At paragraph 16 of his witness statement the Sixth Defendant said as follows:

“In any case, though, I do not accept Mr Baxendale-Walker’s description of my conclusions.

(1)

I did not think that Mr Langley’s conclusions were ‘fatally flawed’. On the contrary, I stated that I agreed with his report’s overall contents and conclusions. The only question I raised regarding the law regarded the rules governing the provision of benefits to settlors of the EBT. But as Mr Langley explains in his witness statement, this was in fact irrelevant since the EBTs in question in fact excluded the settlors from obtaining any benefit under the trust. While I have no distinct recollection, I can only think that I had not appreciated this point when reviewing his report and that he explained it to me at our subsequent meeting.

(2)

I did not express any concern as to the ‘honesty’ of Mr Langley’s view that Mr Baxendale-Walker’s schemes involved him deliberately setting out to implement a structure relying on there being a (subsequent) breach of trust. Rather, I simply said that I wished to understand better the basis for Mr Langley having reached this view. Again, I presume that Mr Langley explained this at our meeting.

(3)

It is simply incorrect to say that I established that nobody had ‘sought or considered any professional advice the Claimant might have received’ (emphasis added). Rather I asked whether we had seen the advice that Mr Baxendale-Walker had given to his clients.

(4)

My suggestion that we include (in the appendix) a discussion of the income tax position was related to my prior comment that this position was relevant to the provision of benefits to settlors under the EBTs. As I explain above, once I appreciated that in fact such benefits were prohibited under the trusts, I would have seen that there was no need to include this point.”

There is therefore, Mr Hollander submits, no basis on which it can be said that the Sixth Defendant considered the Langley Report to be incorrect, and still less that he was “a knowing and intentional party to the perpetration of a fraud” as alleged in the Particulars of Claim at paragraph 59.

I am far from satisfied that the Claimant has an arguable case that the Langley Report mis-stated the law. However it is not necessary for me to determine whether the Langley Report is wrong. In my view there is no basis for the allegation that the Deloitte Defendants or any of them knowingly or deliberately mis-stated the legal position.

In my judgment the Claimant has no real prospect of succeeding in any of the claims against any of the Deloitte Defendants.

In the light of this conclusion that I have reached I propose to deal with the other matters raised on behalf of the Deloitte Defendants on this application shortly.

Witness privilege

Mr Hollander submits that a further ground for striking out the claim against the Deloitte Defendants is that its subject matter, the Langley Report, is protected by witness privilege. The Langley Report was commissioned as an expert report (see section 4 of the Report which contains an expert declaration pursuant to CPR35.3; and also see Mr Langley’s witness statement dated 20 October 2010 at paras 16 and 17 where he sets out the circumstances in which he was instructed and formally accepted instructions). The purpose of commissioning the Report was for the OSS to lay it before, first, the Adjudication Panel of the Third Defendant and, if further proceedings were approved, before the SDT.

In my view it is clear from the authorities that I referred to at paras 89 to 92 above that it is an established rule of law that a witness in proceedings cannot be the subject of any civil claim in respect of the evidence he gives. In Marrinan v Vibart Sellers LJ stated at 534 that:

“No action lies against parties or witnesses for anything said or done, although falsely and maliciously and without any reasonable or probable cause in the ordinary course of any proceedings in a court of justice.”

Mr Susman submitted that an expert has no immunity when there has been dishonesty. In support of this submission he relied on Kuwait Airways Corpn. v Iraqi Airways Co. (No.6) [2005] 1 WLR 2734 (CA) and Autofocus Ltd v Accident Exchange Ltd [2010] EWCA Civ 788 (CA). However Kuwait Airways is a case of privilege. There is a different public policy in play in relation to privilege. There is no privilege in iniquity. In my view the decisions in Kuwait Airways Corpn v Iraqi Airways Co. (No.6) and Autofocus Ltd v Accident Exchange Ltd, on which Mr Susman relies, do not detract from this statement of principle.

In Heath v Commissioner of Police of the Metropolis [2004] EWCA Civ 943 the Court of Appeal considered what was required of proceedings to bring them within the scope of the immunity rule. Auld LJ at para 21 stated:

“The nature of the exercise in determining whether a body is to be regarded as ‘judicial’ for the purpose of giving absolute immunity to those involved in its proceedings is not a technical or precise one. It is one of determining its similarity in function and procedures to those of a court of law.”

In doing so Auld LJ at para 22 had regard to the four questions identified by Lord Diplock in Trapp v Mackie [1979] 1 WLR 377, namely:

“(1)

whether the Tribunal is ‘recognised by law’, (2) whether the issue is ‘akin to’ that of a civil or criminal issue in the courts; (3) whether its procedures are akin to those in civil or criminal courts; and (4) whether the result of its procedures leads to a binding determination of the civil rights of a party or parties.”

Applying these tests, Auld LJ held that disciplinary proceedings before the Police Disciplinary Board were sufficiently akin to judicial proceedings for the immunity to apply.

In my view it is clear that proceedings before the SDT qualify as judicial proceedings for this purpose (see Addis v Crocker [1961] 1 QB 11 and Gray v Avadis at para 39). The SDT is a statutory tribunal established under sections 46-49 of the Solicitors Act 1974. Its members are appointed by the Master of the Rolls. Its proceedings were, at the material time, governed by the Solicitors (Disciplinary Proceedings) Rules 1994 which laid down detailed provisions akin to those for a civil action. Its decisions, which as to sanctions can include striking a solicitor off the Roll, are binding, subject to appeal to the High Court.

I am also of the view that proceedings before the Adjudication Panel qualify as judicial proceedings for this purpose. Such proceedings are of a quasi-judicial nature (see the witness statement of Mr Miller at paras 26-36). The OSS prepares a report, which the solicitor is invited to respond to. These documents are then passed to a single adjudicator or, as in the present case, a panel consisting of members external to the OSS. The panel applies a legal test to determine whether to refer the case to the SDT and may, at the same time, impose practising conditions on the solicitor. A decision to impose practising conditions may be appealed to the Master of the Rolls.

Mr Hollander submits, and I agree, that Mr Langley’s conduct in relation to the preparation of his Report enjoys the protection of absolute witness privilege. That immunity extends, in my view, to the other individual Deloitte Defendants who assisted him in the preparation of his Report: for it not to do so would be inconsistent with the purpose of the privilege which is to protect the integrity of the judicial process from collateral attacks. It follows equally that no action can lie against the Seventh Defendant, whose only liability can be vicarious.

In my view the decision of the Supreme Court in Jones v Kaney, which was concerned with immunity which prevented a client from suing in negligence the expert he has retained (see para 94 above), does not affect the oral submissions that Mr Hollander made to me.

Other matters

Mr Hollander submits that the causes of action pleaded against the Deloitte Defendants should also be struck out on the basis that they are time barred. Mr Susman accepts this must be so in relation to malicious falsehood (see para 57 above), but there is an issue between the parties as to the conspiracy claims.

Under the Limitation Act 1980 s.2, the limitation period for torts (including conspiracy) is six years from accrual of the cause of action. Damage is part of the gist of the action and the cause of action is therefore complete the first time the Claimant suffered loss or damage consequent upon the acts complained of. Permission to amend the Claim Form to add the Deloitte Defendants was granted on 28 July 2010. Mr Hollander submits therefore the key date for limitation for conspiracy is 29 July 2004. He further submits that the Langley Report was not relied upon before any court or tribunal after the hearing before the Master of the Rolls on 16 June 2004 nor has it been published to any third party since; it follows that the conspiracy claims were time barred at the very latest by 16 June 2010.

Mr Susman submits that the conspiracy to which the Deloitte Defendants were recruited was a continuing action which continued to cause damage until the allegation based on the Langley Report was withdrawn shortly before the hearing before the Master of the Rolls in October 2004, and accordingly the claims are not time barred.

Mr Susman is not able to point to any particular loss that occurred between the hearing on 16 June 2004 and the restored hearing on 7 October 2004. In any event I agree with Mr Hollander it may be very difficult to quantify any such loss. However I do not consider it would be right to strike out the conspiracy claims on the basis they are time barred. The Claimant may be able to establish that there was some loss that occurred up to 7 October 2004.

In the alternative Mr Hollander invited me to set aside the Order of Master Eyre so as to remove the Deloitte Defendants on the basis that they had not been given notice of the hearing on 28 July 2010 or invited to attend and the Claimant had failed to draw the attention of Master Eyre to the limitation position of the Deloitte Defendants. Mr Susman submits that when served with the Order the Deloitte Defendants had seven days under CPR 23.10(2) to make an application to set the Order aside. Mr Hollander retorts that in contravention of CPR 23.10(2) the Order did not contain a statement of the respondent’s right to make an application to set aside or vary the Order. I have decided on the basis of these competing arguments not to set aside the Order on the present application.

Mr Hollander also submitted that the conspiracy to injure claims should be struck out on the basis that an essential element in the cause of action, namely a predominant purpose to cause injury to the Claimant, was not properly pleaded. I reject this submission. In my judgment paragraph 28 of the Particulars of Claim sufficiently pleads a predominant purpose of the conspiracy, namely that it was “with a view to destroying [the Claimant’s] tax practice and, if possible, to procuring his being struck off the Roll of Solicitors by the Ninth Defendant”.

I also reject Mr Hollander’s submissions that the conspiracy claims against the Sixth Defendant should be struck out on the basis that the Claimant has not alleged any relevant agreement, combination or concerted action on his part. In my view paragraphs 30 and 31 of the Particulars of Claim sufficiently make clear the allegation that the Sixth Defendant was part of the conspiracy pleaded so that the claims against him should not be struck out on this ground.

The one cause of action pleaded against Mr Isaacs is the tort of misfeasance in public office (Particulars of Claim, para 105). The sole basis of the claim against the SDT is that it is vicariously liable for the alleged misfeasance of Mr Isaacs.

Paragraph 87 of the Particulars of Claim states that:

“In October 2005, the Claimant made an unsuccessful application to the Ninth Defendant to strike out the conflict of interest case.”

No allegation is made in that paragraph against Mr Isaacs, but he was in fact the Chairman of the division of the SDT hearing that application (see para 38 above). The Claimant applied for permission to seek judicial review of that decision, but permission was refused (see para 39 above).

Paragraph 89 of the Particulars of Claim states:

“The hearing of the conflict case took place before the Ninth Defendant from 11 to 25 September and on 29 September 2006. The Eighth Defendant was the Chairman of the Tribunal. On 11 January 2007 the Ninth Defendant delivered its ruling that the complaint had been made out and ordering the Claimant to be struck off.”

Again no allegation is made against Mr Isaacs in that paragraph. Paragraph 90 states that “The Claimant commenced an appeal to the High Court against these rulings”. What the Claimant does not say is that he withdrew this appeal in July 2008 (see para 53 above).

On 18 September 2009 a person purporting to be “David Keys”, an investigator contracted to HMRC, telephoned Mr Isaacs. The Claimant says that he was the person pretending to be Mr Keys. At paragraphs 99-101 of the Particulars of Claim the Claimant’s pleaded case is that Mr Isaacs’ statements in that conversation were to the effect that he had made a decision to strike off the Claimant because of his personal view of the Claimant’s Remuneration Trust scheme and not for the reasons stated in the decision of the SDT. On 17 March 2010 a person purporting to be “Jeremy Swinburne” and to be a member of the Law Society’s legal department telephoned Mr Isaacs. The Claimant says that he was the person pretending to be Mr Swinburne. This conversation does not form part of the pleaded case against Mr Isaacs. Both these telephone conversations were recorded. For the purposes of this application the transcripts that have been produced are to be treated as an accurate record of the conversations. The Eighth and Ninth Defendants have had the recording of the 17 March 2010 conversation examined by an expert in audio recording analysis, who has concluded that the recording has been “deliberately edited” (see report of Mr R.J. Butler dated 2 March 2011). The Claimant denies that he has tampered with the recording. Mr Susman asked me to note that there was no need for the Claimant to provide an expert’s report at this stage because the parties agreed the present application would proceed on the basis that the transcripts were accurate.

Mr Susman accepted that without these telephone conversations the Claimant had no case at all against the Eighth and Ninth Defendants (Transcript Day 3/85, lines 21-22).

Ultimately there was only one passage in the second telephone conversation on 17 March 2010 that Mr Susman relied upon in support of the Claimant’s case against the Eighth and Ninth Defendants. It is as follows:

“30.

[Jeremy Swinburne] Well, from our – or any viewpoint – you … you’re demonstrated to have been acting as a matter of policy with complete bias in favour of the Law Society in this and all other matters. I mean – do you think there is anything you’re going to be able to say honestly to gainsay that?

31.

[Mr Isaacs] Not really. No.”

Mr Susman submits that this excerpt demonstrates prima facie that Mr Isaacs has made an admission of improper bias in his dealing with the Claimant.

There is no reference to this “admission” in the Particulars of Claim. Mr Susman submits that as an admission is evidence rather than an allegation, it does not technically have to be pleaded, although he concedes one would expect it to be pleaded (Transcript Day 3/93, lines 16-22). This is perhaps particularly so when what Mr Isaacs is alleged to have said in the first telephone conversation on 18 September 2009 is pleaded at paragraphs 99-101 of the Particulars of Claim.

In his second witness statement dated 25 February 2011 Mr Isaacs explains at paragraph 13 what he said:

“In relation to the exchange at lines 30 and 31 of the transcript, my response ‘Not really. No.’ was no more than a contradiction of the statement that I had been demonstrated to have acted with bias in favour of the Law Society. ‘Swinburne’ had followed that statement with a question ’Do you think there is anything you’re going to be able to say honestly to gainsay that?’ but my response was to deny the statement itself. It is absurd to suggest, as is implicit from the Claimant’s apparent reliance on this exchange, that I agreed that there was in some way a pre-existing policy of ‘bias’ in favour of the Law Society, because that would not have been true. Again, I suspect that ‘Swinburne’ deliberately phrased this and other questions in such a way as to confuse.”

I have listened to this taped telephone conversation (and to the one on 18 September 2009). I entirely accept the explanation that Mr Isaacs has given in relation to this so-called “admission”. This excerpt must be read in the context of the conversation as a whole. Immediately before the excerpt that is relied upon “Swinburne” had informed Mr Isaacs that the earlier telephone conversation he had had with “Keys” had in fact been with the Claimant. “Swinburne” then said to Mr Isaacs the following:

“26.

… You supported the Law Society’s scheme of getting rid of Baxendale-Walker with trumped up cases. On tape. Isn’t that alarming?”

This was a false statement. Mr Isaacs had never said that. Mr Isaacs (and the Ninth Defendant) served a Defence on 15 October 2010. At paragraph 37 there is a detailed response to paragraphs 98-100 of the Particulars of Claim relating to the first telephone conversation on 18 September 2009. Paragraph 37(a) states:

“The ‘summary’ set out in paragraphs 99 and 100 is not an accurate summary of the recorded conversation. It is positively misleading as a summary.”

I agree with this description of it. Quite simply Mr Isaacs did not say much of what is alleged. At paragraph 22 of his first witness statement dated 2 December 2010 Mr Isaacs says:

“…The purported summary of what [the Claimant] alleges I said in the course of the discussion, accords neither with the Claimant’s transcript, nor with my recollection or note of the conversation.”

Mr Isaacs had made a note of the telephone discussion that he had had with “David Keys (DK) of HMRC Special Investigations Section at about 11a.m. on 18^th September 2009”. His record of the conversation includes the following:

“I made it quite clear that the SDT was not open to influence from any quarter (including the HMRC) and was wholly independent of the Law Society and the SRA.”

It is not surprising that in his submissions Mr Susman made no reference to paragraphs 98-100 of the Particulars of Claim and did not rely on what it was alleged Mr Isaacs had said during the telephone conversation on 18 September 2009.

The only other submission Mr Susman made in relation to the claim against the Eighth Defendant was that Mr Isaacs lacks credibility in what he says about the telephone conversation on 17 March 2010 because of what he said about it at paragraphs 27 and 28 of his first witness statement and in his note of that conversation. I do not accept that anything in those paragraphs in his witness statement or his note of the discussion was incorrect or adversely affects his credibility.

The claim against Mr Isaacs is one of “targeted malice” (see para 63 above). Mr Isaacs qualified as a solicitor in October 1960. He became a partner of Stephenson Harwood & Tatham (now Stephenson Harwood) in 1964. He was appointed senior partner in 1987 before becoming a consultant of the firm in 1996. He retired fully from the firm on 30 June 2009. On 13 July 1988 he was appointed to the SDT by the Master of the Rolls pursuant to section 46(2) of the Solicitors Act 1974. In 2001 he was elected to serve as its President. He retired as President in 2009. He also served as a member of the Council of Lloyds from 1993 to 2000 (nominated by the Governor of the Bank of England), and from 1996 to 2001 he served as the Chairman of the Lloyds Investigations Committee. Nowhere in the Particulars of Claim or in the Claimant’s witness statement dated 14 February 2011 is any motive suggested for the malice that it is alleged Mr Isaacs had towards the Claimant.

Mr Isaacs’ first awareness of and involvement in the SDT proceedings against the Claimant was when he sat as Chairman of the SDT division which dealt with the interlocutory hearing on 24 and 25 October 2005 (see para 38 above). He had not previously heard of the Claimant, nor was he aware until sent the papers shortly before the hearing, of the nature of the allegations against him (see para 10 of his first witness statement). At the conclusion of the hearing the Division dismissed the Claimant’s application to strike out the Law Society’s application. The reasons for the decision are set out in a full written judgment dated 11 November 2005. The Claimant sought permission to apply for judicial review to challenge that decision. His application was refused on the papers by Ouseley J and subsequently at an oral hearing by Collins J (see para 39 above).

Mr Isaacs’ next involvement in the SDT proceedings against the Claimant was when he sat, again as Chairman, of the Division which heard the Law Society’s allegations against him in September 2006 (see paras 12-16 of his first witness statement). The decision following the hearing of September 2006 was a collective and unanimous decision of a three-man tribunal. The reasons are expressed as unanimous, and Mr Isaacs’ unchallenged evidence (paragraph 14 of his first witness statement) is that all members of the tribunal agreed to the findings and the order. The other tribunal members, Mr Ground and Mr Fisher, have each had some years’ experience as tribunal members (see paragraphs 18-19 of Ms Aldred’s witness statement dated 2 December 2010). The decision of the Tribunal is very detailed and carefully reasoned (see paras 44-48 above). The Claimant instituted but subsequently withdrew an appeal against that decision (see paras 49-53 above).

In my judgment the claim against the Eighth Defendant has no real prospect of success, and should accordingly be struck out. In my view there was no proper basis for this claim against Mr Isaacs.

Judicial immunity

Ms Carr submits that immunity of judges for acts done within their judicial capacity is a firmly established feature of English law. Its history and rationale were well summarised by Lord Denning MR in Sirros v Moore [1975] 1 QB 118 at 132D-F as follows:

“Ever since the year 1613, if not before, it has been accepted in our law that no action is maintainable against a judge for anything said or done by him in the exercise of a jurisdiction which belongs to him. The words which he speaks are protected by an absolute privilege. The orders which he gives, and the sentences which he imposes, cannot be made the subject of civil proceedings against him. No matter that the judge was under some gross error or ignorance, or was actuated by envy, hatred and malice, and all uncharitableness, he is not liable to an action. The remedy of the party aggrieved is to appeal to a Court of Appeal or to apply for habeas corpus, or a writ of error or certiorari, or to take some such step to reverse his ruling. Of course, if the judge has accepted bribes or been in the least degree corrupt, or has perverted the course of justice, he can be punished in the criminal courts. That apart, however, a judge is not liable to an action for damages. The reason is not because the judge has any privilege to make mistakes or to do wrong. It is so that he should be able to do his duty with complete independence and free from fear. …

These words apply not only to the judges of the superior courts, but to judges of all ranks, high or low.”

In Re McC (a minor) [1985] 1 AC 528 at 541A Lord Bridge said:

“The principle underlying this rule is clear. If one judge in a thousand acts dishonestly within his jurisdiction to the detriment of a party before him, it is less harmful to the health of society to leave that party without a remedy than that nine hundred and ninety nine honest judges should be harassed by vexatious litigation alleging malice in the exercise of their proper jurisdiction.”

This immunity from suit extends beyond the courts to tribunals of various kinds (see Addis v Crocker and Gray v Avadis). Ms Carr submits, and I agree, that the considerations which led the courts in Addis and Gray to hold that the disciplinary bodies were immune from suit apply with at least equal force to the SDT (see paras 124-125 above for the application of the Trapp v Mackie “considerations” to the SDT).

I accept Ms Carr’s submission that the decision of the Supreme Court in Jones v Kaney does not in any way weaken the doctrine of judicial immunity.

Collateral attack

Ms Carr submits, in my view correctly, that even if there were no absolute judicial immunity in this case, the claim would represent an attempt to challenge a finding of a tribunal of competent jurisdiction to which the Claimant was a party. The claim against the Eighth Defendant challenges the correctness of the decision of the SDT of September 2006. The Claimant has a means of appeal, laid down by statute and the CPR, which he has not exhausted. It remains open to the Claimant to launch a fresh appeal to the Divisional Court. If the “new evidence” does entirely change the character of the case, as he suggests, then it will be admissible (see Hunter v Chief Constable of the West Midlands Police [1982] 1 AC 529 at 545, per Lord Diplock).

In my judgment for that reason also this claim should be struck out as vexatious and an abuse of the process of the court: CPR 3.4(2)(b).

The case against the Ninth Defendant is set out at paragraph 27 of the Particulars of Claim as follows:

“…The Claimant’s case is that each of the acts and omissions alleged against the Eighth Defendant was committed when acting in the course of his employment by the Ninth Defendant. Consequently, the Ninth Defendant is vicariously liable for his acts and omissions throughout.”

The proposition that Mr Isaacs was the employee of the SDT is simply wrong. He was directly appointed by the Master of the Rolls, pursuant to section 46(2) of the Solicitors Act 1974. There was no contract of service between the Eighth and Ninth Defendants. Moreover at the material time he was not paid for his duties. (See Ms Aldred’s witness statement dated 2 December 2010, paras 9-10). The fact that the Eighth Defendant was Chairman of the Division of the Ninth Defendant at the interlocutory hearing on 24 and 25 October 2005 and at the substantive hearing in September 2006 does not affect the position.

Accordingly the claim against the Ninth Defendant on the basis that it was the employer of Mr Isaacs and was thus vicariously liable for his actions must fail.

In any event the SDT is a statutory tribunal established pursuant to section 46 of the 1974 Act. It was not constituted as a corporation under that legislation and does not have a corporate identity or legal personality separate from its members, such as to make it capable of being independently liable in damages. Accordingly, in my view, for that reason in addition the present claim cannot be maintained against the SDT. It appears, as Mr Susman pointed out, that in Virdi v Law Society [2010] 1 WLR 2840 (CA) the SDT intervened as a party; however it is not clear from the decision why it was permitted to do so in its own name.

The Claimant seeks damages of approximately £230,000,000. The vast majority of the claim consists of alleged loss of revenue of (or from) FSL. Each of the Defendants’ counsel made submissions to the effect that the Claimant has no real prospect of establishing damages in any sum remotely close to that figure. In my view there are formidable obstacles to the Claimant recovering any damages against any of the Defendants. However I do not strike out the claims for this reason.

My conclusions are as follows: