B e f o r e :
MR JUSTICE HOLROYDE
Master WRIGHT and Mr Simon VEYSEY, Assessors
|| KRIS MOTOR SPARES LIMITED
||- and -
||FOX WILLIAMS LLP
Mr Alexander Hill-Smith (instructed by Key2Law) for the Claimant/Appellant
Mr Nicholas Bacon (instructed by Fox Williams LLP) for the Defendant/Respondent
Hearing dates: 7th, 8th & 15th October, 2009
HTML VERSION OF JUDGMENT
Crown Copyright ©
Mr Justice Holroyde:
- This is an appeal by Kris Motor Spares Limited ("KMS") against a judgment given by Costs Judge Master Rogers on the 6th February 2009 refusing KMS's application for a detailed assessment of the bill of costs delivered by their former solicitors Fox Williams LLP ("FW").
- I begin by summarising what I regard as the principal features of the factual background to KMS's application and appeal. I do so as briefly as possible, and deliberately omit matters which do not seem to me to be relevant to my judgment. It is however necessary to go into a little detail, in view of the criticisms which KMS make of Master Rogers' judgment, including in particular their attack on his findings of fact.
- KMS is owned and controlled by Mr Krishnani, an experienced and successful businessman. So too, as I understand it, is another company called Reachbyte Limited ("Reachbyte"). KMS and Reachbyte engaged in a substantial level of share trading through stockbrokers Brewin Dolphin Securities Limited and Brewin Nominees Limited (collectively, for convenience, "BD"). KMS and Reachbyte appointed a Mrs Mehta (an employee of Reachbyte) to conduct this share trading on their behalf. It was alleged that Mrs Mehta acted dishonestly, and that one or more employees of BD acted in collusion with her. In particular, it was alleged that daily records of trading were falsified, and a false picture given to KMS and Reachbyte of the profitability of their share trading. Those allegations led to substantial litigation commencing in 2002 between KMS and Reachbyte, and BD ("the BD litigation"). Mrs Mehta became one of a number of parties to that litigation. The solicitors acting for BD were Barlow Lyde and Gilbert ("BLG").
- Over the course of the BD litigation, KMS and Reachbyte jointly used at least 3 different firms of solicitors before FW were engaged. I am concerned with KMS, and will therefore for the most part refer only to that company.
- At one stage of the litigation KMS were represented by solicitors Sibley & Co, but in about July 2004 they became dissatisfied with the work of that firm and withdrew their instructions. The dissatisfaction gave rise to allegations of negligence and a dispute over the fees of Sibley & Co (collectively, "the Sibley litigation"). It is not necessary to go into any detail about the Sibley litigation, save to say that there came a stage when there had to be a detailed assessment of the fees which Sibley & Co had charged to KMS.
- KMS were next represented by DKLL solicitors. However, both those solicitors and KMS came to the view that a larger firm should take over conduct of the litigation, and there was an amicable parting of the ways. At that stage KMS instructed FW. They did so because FW had been recommended to Mr Krishnani by Mr Tony Craze, a retired stockbroker and radio commentator, from whom Mr Krishnani had sought advice in connection with the litigation.
- It was necessary in the course of the BD litigation for KMS to adduce expert evidence as to stockbroking practices. Mr Craze had apparently been Mr Krishnani's preferred choice as an expert witness in that regard, but he had declined to act in that capacity. He had however recommended as an expert a Mr John Symes, who was engaged by KMS some time before FW were instructed – I think in about 2004 - and who prepared a number of reports. Mr Craze himself was also involved from about 2004 in advising and assisting Mr Krishnani in relation to the litigation, describing his role as "case manager". It seems that he and Mr Symes had complementary areas of expertise, in that Mr Craze was particularly knowledgeable about "front office" aspects of stockbroking, whilst Mr Symes' expertise related to "back office" matters. Both gentlemen received their remuneration from Mr Krishnani rather than from any of the solicitors instructed to represent KMS.
- It follows that both Mr Craze and Mr Symes were working in connection with the BD litigation, and being paid by Mr Krishnani, long before FW became involved. Before the Master there was an issue as to what exactly FW were told about the arrangements between Mr Krishnani on the one hand, and Messrs Craze and Symes on the other hand. I refer below to a particular issue relating to a lunch meeting in July 2006.
- FW agreed to act for KMS and Reachbyte on a conditional fee basis. The conditional fee agreement ("CFA") was signed on the 29th March 2006. The essence of the agreement was that FW were to employ named persons (of differing levels of seniority) to work on the case at specified hourly rates: these persons included Mr Greager, Mr Dykins and Miss Roake. FW's ordinary fees were calculated by reference to those hourly rates. In the event of KMS being successful in the litigation, FW would be paid their ordinary fees plus an uplift of 30%. If KMS were unsuccessful, FW's fees would be limited to 70% of their ordinary fees. This was the first time FW had worked on a conditional fee basis, and the CFA was specifically drafted for the occasion.
- It is appropriate to go into more detail about the relevant terms of the CFA which was made between Reachbyte Ltd and KMS Ltd ("the Clients"), and FW. Clauses 1 and 2 identified what work was and was not covered. Clause 3.1 said that FW's fees were calculated by reference to the hourly rates set out in clause 5. Clause 3 then continued, in part, as follows:
"3.2 FW has agreed to act for the Clients on the basis that it will charge the Clients for all of its own work at a discounted hourly rate in the event that the Clients lose all of the Claims but it will charge its ordinary hourly rate in the event that the Clients win the Claims together with a Success Fee
3.3 If the Clients lose the Claims, FW agrees to charge the Clients its own legal fees calculated at 70% of the hourly rates set out in Cl 5. These will form the Non-Conditional Fees …
3.4 FW will render monthly interim invoices on account of costs to the Clients for sums not more than the amount of the Non-Conditional Fees … together with 'Disbursement only' invoices, and those invoices will be payable within 14 days of receipt …
3.5 If the Clients win the Claims FW will charge its own legal fees at the full hourly rates (100% of the hourly rates) set out in Cl 5 below, hereby referred to as the Ordinary Fees. In addition FW will charge the Clients a Success Fee calculated in accordance with Cl 7 below.
3.6 The difference between the amount of the Non-Conditional Fees and the Ordinary Fees will form the Conditional Fees".
- By Clause 7.1, "The success fee shall be 100% of the conditional fees". Thus the effect of the agreement was that if the clients lost, FW would only be paid 70% of their ordinary fees; but if the clients won, FW would be paid 130% of their ordinary fees.
- Clause 8 confirmed that the effect of the CFA had been explained to the clients. The various terms used in the agreement were carefully defined in a schedule.
- Condition 2 of Schedule 1 to the CFA set out the responsibilities of the clients, which were that the clients must –
"(2.1) give FW full, proper and timely instructions that allow FW to work properly;
(2.2) not ask FW to work in an improper or unreasonable way;
(2.3) not deliberately or negligently mislead FW;
(2.4) cooperate fully, properly and in a timely manner with FW when asked;
(2.5) pay the Non-Conditional Fees … within 14 days of receipt of a request for payment …".
- Clause 4.9, and Condition 8 of Schedule 1, set out what would happen if FW ended the agreement before the claims ended. By para 8.2 of the Schedule, FW were entitled to end the agreement "if the Clients reject FW's opinion about making a settlement with the Opponent": in that event, the clients would be liable for the non-conditional fees and disbursements and the conditional fees, and also liable to pay the success fee if they went on to win the claim. By para 8.5 –
"FW can end this agreement if the Clients do not meet their responsibilities in Condition 2. FW is then entitled to decide whether the Clients must
(a) pay FW's Non-Conditional Fees, Conditional Fees and disbursements but not the Success Fee, when FW asks for them; or
(b) pay FW's Non-Conditional Fees, Conditional Fees and disbursements, and the Success Fee if the Clients go on to win the claim".
- Condition 10 of that Schedule provided amongst other things for FW to have a right to preserve their lien until all monies owed under the CFA had been paid in full.
- Schedule 2 to the agreement set out the reasons for the level of the success fee. It referred to the advice which counsel had previously given about the prospects of success. It pointed out the Defendants denied all liability, and added –
"This is a complex case which depends substantially on the oral evidence of witnesses and experts. There are also difficult questions of law involved".
- It is clear from the correspondence that Mr Krishnani was happy, and indeed grateful, to enter into that agreement on behalf of both KMS Ltd and Reachbyte Ltd. At paragraph 38 of his judgment Master Rogers made a finding that the terms of the agreement had been fully explained to Mr Krishnani before he signed it. That important finding is not the subject of any challenge in this appeal.
- FW had to do a great deal of work to prepare KMS's case for trial. It is their case that Mr Krishnani was a difficult client to deal with, prone to changing his instructions and with a tendency to outbursts of anger. Mr Krishnani accepts a degree of volatility. However, the working relationship between him (as, in effect, the human embodiment of KMS) and FW continued over a period of nearly a year. FW point out that it was during that period that BD for the first time in the litigation made offers of settlement.
- It is relevant to note that during that period FW's interim bills (giving details of the work done, the time spent, and the fee earner engaged, and also giving details of disbursements which had been paid or were to be paid) were rendered to KMS and were paid substantially without demur. Four qualifications to that general proposition need to be stated. Firstly, Mr Krishnani did question a letter in September 2006 in which FW pointed out various unexpected developments in the proceedings, and gave an increased estimate of their fees. Secondly, Mr Krishnani again objected to the level of fees in January 2007, though he was simultaneously complaining that some work was being done by junior members of the solicitors' team rather than by senior members (whose hourly rates would of course have been higher). Thirdly, in the course of the BD litigation an order for costs was made against KMS in relation to an application concerning disclosure: Mr Krishnani was angry at the way in which that application had been handled, and for that reason objected to his company being ordered to pay the costs. Fourthly, Mr Krishnani's case is that he often raised oral objections to the amount of the fees which were being incurred, though he did not want to rock the boat too much. Notwithstanding those qualifications, the overall picture is, as I have said, broadly one of payment without demur. Mr Krishnani had requested that interim bills be sent monthly, presumably so that he could keep track of the costs being incurred. The costs were, in the aggregate, very substantial; but that was only to be expected, as the BD litigation was itself substantial and complex, and Mr Krishnani had transferred his instructions from DKLL solicitors to FW precisely because he wanted a bigger firm with greater expertise in the relevant field. It seems to me that the clear inference to be drawn from his payment of those bills is that he was broadly content with the fees which KMS charged.
- The BD litigation was set down for a 5-week hearing of preliminary issues commencing on the 2nd March 2007. On the 21st December 2006 BD made a without prejudice offer to pay £4.2 million in settlement: more than double the first offer they had made. FW wrote to Mr Krishnani explaining KMS's options and advising him to make a counter-offer. They enclosed however an Advice from leading and junior counsel to the effect that BD's offer was 'a very good one and one which clearly ought to be accepted'. Mr Krishnani rejected it.
- Soon after that, KMS ran into difficulties which caused the litigation to end in disaster for them. I set out below a more detailed chronology, but in a nutshell the difficulties related to the relationship between Messrs Krishnani, Craze and Symes, and the ability of Mr Symes to act as a properly independent expert witness.
- I have indicated above that Messrs Craze and Symes had received payment for their work in the litigation from Mr Krishnani rather than from KMS's solicitors. It was Mr Krishnani's case that he made payments to Mr Craze personally, and expected Mr Craze to pass on to Mr Symes the appropriate sums by way of payment for Mr Symes' work. However, as eventually emerged, the invoices for the work in question did not come from either Mr Craze or Mr Symes. Instead, they came initially (from about November 2003 until mid-2004) from Dawn Traders Limited, a company set up by Mr Craze and members of his family; and latterly, from July 2004, they came from Square Mile Investment Consultants Limited ("Square Mile"). Square Mile was incorporated in May 2004: its directors and shareholders were Mr Craze and Mr Symes. Its website described it as assisting investors who had been ill-advised or defrauded by stockbrokers or financial advisers.
- FW's case has always been that they had no knowledge of Square Mile until the later events to which I will come shortly. In this regard, there was a conflict of evidence about a lunch meeting on the 4th July 2006 between Mr Craze and Mr Greager of FW. Mr Craze gave evidence to Master Rogers to the effect that in the course of this lunch he told Mr Greager all about what Square Mile did ("though not, it would appear, Mr Symes' involvement therewith": see paragraph 53 of Master Rogers' judgment). Mr Greager gave evidence that Mr Craze did mention a company, but gave the impression that it was in the process of looking for business and might be able to work with FW in the future. Having seen and heard both witnesses, Master Rogers accepted the evidence of Mr Greager and rejected that of Mr Craze. KMS accept that he was entitled to do so, and there is no appeal against that finding of fact. It is, in my view, a highly significant finding when considering the attack upon other findings made by Master Rogers.
- The evidence before Master Rogers showed that FW, and counsel instructed on behalf of KMS, had been concerned for some time about the relationship between Mr Krishnani & Mr Symes.
- On the 7th June 2006 Mr Krishnani had sent to FW a draft expert report prepared by Mr Symes. He had annotated this with suggested additions and deletions. One annotation in particular (about which Mr Krishnani gave very unsatisfactory evidence when cross examined before Master Rogers: see paragraph 58 of the judgment) comprised a suggested revision of the draft preceded by the following parenthesis clearly addressed to Mr Craze: "(Dear Tony I have discussed with you about this please redo on following lines)". FW forwarded this annotated draft by e mail to counsel, expressing concern that Mr Krishnani "is now saying he is not happy with the report, that he now wants to prepare the report himself with Tony Craze … and that we should not tell JS about this for the time being. This of course presents many problems but as you know Kris can be quite insistent …". Leading counsel agreed to speak to Mr Krishnani and explain that the expert report must be the work of Mr Symes alone.
- There followed on the 9th June 2006 a telephone conference in which leading counsel stressed to Mr Krishnani the particular concern of the courts that there should be a distance between an expert witness, the clients and the lawyers; that it was important for Mr Symes to keep that distance; and that Mr Symes could at trial be cross-examined about any closeness to other witnesses and to the lawyers. Mr Krishnani said that he had reservations about Mr Symes' report (his concern apparently being, or including, that Mr Symes did not express himself with sufficient clarity), that he had discussed things with Mr Craze, and that he had asked Mr Craze to comment. Leading counsel specifically advised that it was not appropriate for another expert to rewrite the report. Mr Krishnani did not say anything about Square Mile. Nor did he say anything about the invoices which he was receiving in respect of the work of Messrs Craze and Symes.
- As the trial against BD approached, there were a number of problems over KMS's disclosure. It was found that some documents had not been disclosed as they should have been, and that a substantial number of original documents which had been in the possession of Mr Krishnani had been destroyed. As FW were grappling with those problems, BLG wrote letters dated 8th February 2007 to FW, and to Mr Symes (with a copy to FW), which called into question Mr Symes' independence as an expert witness, and the relationship between Mr Symes and Mr Craze. BLG indicated that they had reason to think that Mr Symes' reports were not his independent work; that the reports had been influenced by Mr Craze, who was understood to have a connection with Mr Krishnani; and that Mr Symes may not have the necessary independence to act as an expert witness. Each of these letters demanded prompt and full answers to a series of detailed questions exploring those areas of concern, and prompt disclosure of any relevant documents. In particular, questions were asked as to whether any business or company for which Mr Craze was an agent, employee, director or shareholder had received, or was due to receive, any (and if so, what) payment from Mr Krishnani. Questions were also asked as to Mr Symes' connections with Mr Craze and with Mr Krishnani "whether directly, or indirectly through Mr Craze". Master Rogers was satisfied on the evidence that copies of both letters were sent by FW to Mr Krishnani (see paragraph 60 of the judgment).
- On the 13th February 2007 Mr Krishnani travelled to India, and did not return until the 23rd February. It was understandable that he made that journey, because his brother in law was dangerously ill, but it was an added complication that he was not available in person to discuss matters with his solicitors at a critical time. However, communication by telephone and e mail was of course perfectly possible save when Mr Krishnani was travelling.
- On the 15th February Mr Craze went to FW's offices to provide his response to the questions posed by BLG. A detailed note was taken by FW. By the following day FW had produced a draft letter embodying Mr Craze's responses: this letter has conveniently been referred to as "the Craze letter", although it was written and sent by FW. Mr Symes, as will be seen, prepared a separate letter of his own in response in response to the questions which BLG had asked of him: this has been referred to as "the Symes letter".
- The draft of the Craze letter was sent by FW to Mr Craze. It contained a number of gaps which Mr Craze was asked to complete. In response to some of the specific questions, it said that Mr Craze had only received payments from Mr Krishnani personally and would continue to receive payment personally for any work carried out for Mr Krishnani.
- The draft was also sent by e mail to Mr Krishnani on the 16th February 2007. FW asked Mr Krishnani to read and comment on it, emphasising that it was important for him to review the information in the letter because he needed to be comfortable with what was said. His response was short and vigorous: he made one minor correction to a date, and asked for the paragraphs relating to payments, and to the role played by Mr Craze, to be deleted. Mr Krishnani said "It is not their business to know who is helping me and why or any monetary arrangements of Mr Craze". Mr Krishnani did not take this opportunity to tell his solicitors about the manner in which he had been invoiced for, and paid, the fees charged to him by Mr Craze and Mr Symes. On the contrary, he sought to exclude any reference to the topic of financial arrangements. It is submitted on behalf of FW that it is significant to note, and no coincidence, that Mr Craze similarly said nothing about the way in which his and Mr Symes' fees had been invoiced.
- A revised draft was prepared which did not exclude the paragraphs which Mr Krishnani had wanted to exclude. By e mail sent at 1926 on the 22nd February 2007, FW sent this revised draft to Mr Craze, and asked him to provide the information needed to complete certain blanks, including details of payments received. A copy was also e mailed to Mr Krishnani, but as I understand it he was by this time travelling from India back to England. Mr Craze provided the requested details, and as a result FW sent the final version of the Craze letter to BLG at 1538 on the 23rd February. Amongst other things it said that the sums paid by Mr Krishnani to Mr Craze, by calendar year, were as follows: nothing in 2003; £22,000 in 2004; £6,500 in 2005; and £28,000 in 2006. It also said, in answer to some of the specific questions which had been posed by BLG –
"(e) No business/company for which Mr Craze is an agent, employee, director or shareholder has ever received any form of payment from Mr Krishnani.
(f) Mr Craze will continue to receive payments for any work he does for Mr Krishnani on the same basis as set out above.
(g) No business/company for which Mr Craze is an agent, employee, director or shareholder is due to receive any form of payment from Mr Krishnani".
- At 1556 on the 23rd February 2007 a copy of that final letter was e mailed to Mr Krishnani. He did not volunteer any information to his solicitors about Square Mile or about the invoices from that company. It is submitted by Mr Hill-Smith that Mr Krishnani regarded himself as having made payments to Mr Craze personally, and so did not regard the terms of the Craze letter as inaccurate. Mr Bacon submits that Mr Krishnani had deliberately withheld that information throughout the drafting of the Craze letter, and had thereby caused his solicitors to send out what was in fact an inaccurate letter.
- Meanwhile, Mr Symes had completed and sent (on the 19th February 2007) his own letter in reply to BLG's enquiries. He described the circumstances in which he had first met Mr Craze many years ago, referred to a time in 2001/02 when Mr Craze had shown interest in a business which Mr Symes was trying to set up, and continued: "After that initial meeting we continued to meet occasionally for a drink at lunch time. Having failed to raise the required capital to launch the business I decided to retire. Mr Craze and I continued to meet on my rare visits to the city for a drink and a chat". It is common ground between the parties that that part of the Symes letter was a serious untruth.
- In the course of Friday, 23rd February, FW sent an e mail to Mr Krishnani advising him of the agenda for a consultation with counsel on the Monday morning. That agenda included the following: "Symes impartiality etc – we need more details on this".
- Later on the 23rd February, Mrs Mehta made an application to the court seeking to exclude Mr Symes from giving evidence as an expert witness for KMS. She attached to her application copies of the Square Mile website and details of the directors and shareholders of Square Mile.
- On the Saturday, 24th February, Mr Symes reported to FW that he had suffered a haemorrhage and was unwell. He played no further part in the relevant events, and was not called as a witness before Master Rogers.
- At the consultation which began at 1100 on Monday 26th February a number of topics were discussed. They included matters relating to Messrs Symes and Craze, and the fact that they were directors of Square Mile. By this stage BLG had made clear that their clients would be joining with Mrs Mehta in seeking to exclude Mr Symes from giving expert evidence at the (now imminent) trial. In cross examination Mr Krishnani ultimately admitted that he had seen and read the Symes letter on the 26th February. He still did not say anything in the consultation about his having been invoiced by Square Mile for the work of both Mr Symes and Mr Craze.
- At 2239 that night, BLG sent a letter to FW pointing out that Square Mile's website showed that it was a claimants' adviser whose business consisted in pursuing claims like the ones in the litigation. The letter contended that Mr Symes could have no excuse for having failed to disclose that he was a co-director with Mr Craze of a company set up to provide expert witness services for claimants against stockbroking firms, and that Mr Symes' assertions that Mr Craze had had no input into his reports could not be reconciled with documents recently disclosed. BLG asked amongst other things for disclosure of all invoices raised by Mr Symes in relation to his expert witness work in the case. They also asked for a statement as to whether Square Mile had received, directly or indirectly, any fees in relation to Mr Symes' work, and/or in relation to work which Mr Craze had done with Mr Symes, in the BD litigation. Mr Krishnani received a copy of this letter on the following day, 27th February. He did not volunteer to FW any information about the Square Mile invoices.
- Before Master Rogers, Mr Greager gave evidence as to the impact of BLG's letter. He pointed out that BLG were clearly going to allege that Messrs Craze, Symes and Krishnani were "all, as it were, in bed together". The independence of Mr Symes as an expert witness could now be the subject of a formidable attack, and so too – because of the untruthful content of the Symes letter – could his credibility. As Mr Greager summarised the position in relation to Messrs Symes and Craze: "They are joint shareholders, directors and they set up a website and they go round touting for this kind of business. He lied about that so that's the problem".
- On the 28th February FW wrote to Mr Krishnani expressing their astonishment that they had not previously been told by Mr Symes that he and Mr Craze were co-directors of Square Mile. The letter warned Mr Krishnani in blunt terms that there was now a serious risk that some or all of Mr Symes' evidence would be excluded, and said that without expert evidence they did not see how KMS could win the case. The letter concluded by advising Mr Krishnani that KMS should accept BD's earlier offer without further delay, and warning that they would invoke clause 8.2 of the CFA if that advice was not followed.
- That letter was e mailed to Mr Krishnani at 1238. In a telephone call later that afternoon, Mr Krishnani told FW that Mr Craze had visited him that morning. He gave the impression that he had been misled about the involvement of Mr Symes in Square Mile, and he still did not volunteer any information about the Square Mile invoices he had received. FW's attendance note of what Mr Krishnani said reads in part as follows: "this morning TC came to office – I said so far as I'm concerned can't see why Symes had to write that letter … I suggested to TC to come clean and write to BLG …". I refer below to a particular feature of the evidence which Master Rogers heard about this conversation between Messrs Krishnani and Craze.
- There were further negotiations between FW and BLG, but these did not bear fruit. BD's earlier offer was withdrawn before Mr Krishnani tried to accept it, and on 1st March BD proposed what has been referred to as a "drop hands" settlement which in broad terms would bring the BD litigation to an end without any damages being paid, and would leave KMS to bear their own costs.
- In prompt response to a request for invoices made on the 1st March by FW, Mr Krishnani sent to FW 28 pages of Dawn Traders and Square Mile invoices and statements. These showed that each of those companies had invoiced Mr Krishnani for the work of both Mr Craze and Mr Symes. These documents showed moreover that each company had acknowledged receipt of payment of their respective invoices. In short, the paperwork showed that Mr Krishnani had paid Dawn Traders, and latterly Square Mile, for all the work which Messrs Craze and Symes had done in relation to the BD litigation.
- FW regarded those invoices and statements as very damaging to KMS's case. They were right to do so. The expert evidence of Mr Symes was important to KMS's prospects of success; BD and Mrs Mehta were already equipped with strong grounds to challenge his ability to give independent evidence; and the very late revelation of documents showing that his and Mr Craze's work had been invoiced by Dawn Traders and Square Mile, and that those companies had acknowledged receipt of payment, strengthened their position yet further. The documents themselves were very damaging, showing as they did that KMS's expert and Mr Krishnani's adviser were in business together, with obvious consequences for the perception of Mr Symes' independence; and they were made all the worse by their being disclosed so very late in the day. It remains Mr Krishnani's case, despite these documents, that he always regarded himself as paying Mr Craze personally for the work of Mr Symes and Mr Craze. It is however difficult to understand, if that is the case, why the company documents ever came into existence, and why all 3 men failed for so long to mention the documents.
- On the 2nd March, at 1245, there was a consultation attended by Mr Krishnani, counsel, and the solicitors who had worked on the case (with the exception of Mr Greager, who was fulfilling a long-standing commitment to attend a meeting in Spain). It was a difficult consultation for all concerned. A detailed note was kept by Miss Roake, and a typescript of it was later prepared. KMS accept that it is an accurate record. Leading counsel outlined the problems caused by, amongst other things, the deliberate lie told in the Symes letter, and the Square Mile invoices. He also referred to the problems caused by the destruction of original documents. He summarised the present position as being that things had moved on dramatically for the worse.
- Mr Krishnani was shown the Symes letter. He said he had not read it until he returned from India. As summarised in the note, Mr Krishnani then went on: "I asked TC and JS why they lied. TC said it was not that bad. I asked TC to come clean. As far as I'm concerned – doesn't make a difference". Leading counsel pointed out to Mr Krishnani that it would be said against him that he knew Mr Symes "was part of the litigation team". The note continues with the following exchange between Mr Krishnani and counsel:
"CDK: I knew they were friends.
[leading counsel]: You must have known more than that".
- Leading counsel indicated that there would be an application by the other parties to disqualify Mr Symes from giving evidence. He went on to spell out to Mr Krishnani the limited options available to KMS, and the risks involved in doing anything other than accepting the "drop hands" offer. Mr Krishnani appears to have wavered (understandably, since he faced a very unhappy situation), but eventually indicated that he would accept that offer. Mr Dykins said he needed to speak to Mr Greager before any decision was made, because of implications for the CFA. The meeting was then adjourned for refreshments, and Mr Dykins made a telephone call to Mr Greager in Spain.
- When the meeting resumed, at about 1430, it appears that Mr Krishnani was inclined to fight on. However, Mr Dykins immediately handed to Mr Krishnani a letter in the following terms:
"We hereby give you notice of termination of the CFA dated 29th March 2006, effective immediately. Any further work which we undertake on your and/or the Claimants' behalf, including accepting the settlement offer from BD which lapses at 4pm today (if that is what you decide to do), will be charged at our normal rates and according to our normal terms of business. We will let you have an engagement letter confirming these in full."
- Just over 2 hours later, at 1648, Mr Krishnani instructed FW to accept the "drop hands" offer from BD. He indicated that he felt he had no option but to accept that offer once the CFA had been terminated.
- The importance of the sequence of those last two events is this. FW's case is that having terminated the CFA pursuant to condition 8(5) they were entitled to bill their clients for the full amount of their ordinary fees, which they subsequently did. Had the CFA still been in force when the "drop hands" settlement was concluded, FW would only have been entitled to 70% of their fees, because the proceedings would have ended in failure for their clients. This appeal effectively relates to the 30% difference between those two.
- Although FW had terminated the CFA their letter had expressed willingness to continue to act on the basis of their ordinary fees being paid, and for a short time they did so. KMS then instructed another firm of solicitors, in particular with reference to the contested assessment in the Sibley litigation. FW held papers relevant to that assessment, and the new solicitors wanted to obtain them.
- On the 22nd March 2007 FW wrote to Mr Krishnani referring to their termination of the CFA pursuant to conditions 8.2 and 8.5(a), and asserting their entitlement to payment of both their unconditional and their conditional fees for all work done until 3.15pm on the 2nd March 2007. Their letter went on to refer to certain monies which had been received from BLG in connection with the BD litigation, and indicated that those funds would be applied in settlement of their outstanding fees. FW sent with that letter their statement of account, which showed total fees of £1,276,288.53 and a balance outstanding (after taking into account interim invoices paid) of £441,089.89.
- There was an issue before Master Rogers as to whether Mr Krishnani had received and read this letter at the time. Master Rogers found that he had. There is no appeal against that finding, which it is accepted Master Rogers was entitled to make. That is hardly surprising, since Mr Krishnani had admitted receipt of the statement of account which had been enclosed with the letter. It is however an important finding in relation to Mr Krishnani's credibility, and it is relevant to note that Master Rogers (at paragraph 76 of his judgment) commented on this part of Mr Krishnani's evidence in the following terms:
"I am afraid that this is only one of many examples where I was wholly unconvinced by [Mr Krishnani's] evidence."
- I should note that condition 8.2 was not relied upon in Mr Bacon's submissions to the Master or to me. However, it does not seem to me that anything turns on that. It is true, as Mr Hill-Smith points out, that the letter of the 22nd March 2007 did not give particulars of the breach of condition 8.5, but it seems to me that Mr Krishnani must have known full well why FW had terminated the CFA.
- Bills were subsequently sent which related to work done after the termination of the CFA, and work done in relation to the Sibley litigation. These are not relevant to this appeal.
- On the 1st May 2007 FW wrote noting that Mr Krishnani had now instructed new solicitors in connection with the Sibley litigation, and requiring payment of their outstanding bills before they would release the papers to those new solicitors. The total amount then outstanding, in relation to 6 invoices which had either not been paid or had only been paid in part, was £144,498.63. However –
i) Inv 41138 related to counsel's fees;
ii) Inv 41217 did relate to work done on the BD litigation, but only £2,266.36 was outstanding;
iii) Invs 41594 and 41602 related to work done after the termination of the CFA or in relation to the Sibley litigation;
iv) Inv 41581 was mostly for disbursements, with solicitors' work in relation to the BD litigation amounting to little more than £550;
v) Inv 41883 was for a total of £84,688.60 disbursements. The vast majority of the charges were for photocopying and other expenses of document preparation in connection with the BD litigation. The bill did however also include some charges for taxi fares and meals when one of the solicitors was working late on the case. These charges amounted to about £400 in total.
- On the 5th May 2007 Mr Krishnani replied referring to his unhappiness over the outcome of the BD litigation and saying –
"There are certain elements of the account which I want to discuss with you and hopefully reach agreement"
- That letter went on to refer to the Sibley litigation, indicating that Mr Krishnani would be happy for FW (and leading counsel) to deal with that matter –
"if we can agree a reasonable fixed amount that I have to pay and then if you want there is an uplift on the success of the claim".
- In the ensuing exchange of e mails, FW indicated that there was no scope for a reduction in the outstanding bills. They also pointed out that if the new solicitors were taking over, they would need time to prepare for the assessment hearing in the Sibley litigation, and that accordingly FW must be paid by the 14th May 2007 so that either they could do the necessary work or the papers could be released to the new solicitors for that purpose. On the 10th May, FW e mailed Mr Krishnani again, asking him whether they would be paid by the 14th. By e mail of the 11th May Mr Krishnani replied expressing his disappointment that FW were not willing to compromise. In the course of this letter he said –
"I am disappointed with the way this matter was dealt with and costs paid to Barlow Lyde on the disclosure application. You have asked for taxi fares/meals etc which I do not think were part of arrangement. Your cost estimate are not accurate … Under protest I will settle your account and expect the papers to be immediately transferred to [the new solicitors]. I now formally demand that you tax/assess your costs pursuant to Solicitors Act 1974".
- Payment was then made of the outstanding amount, and the papers were transferred to the new solicitors. They wrote to FW on the 1st June 2007, saying amongst other things –
"As you will recall, Mr Krishnani has settled the balance of your account under protest and asked that you have your fees assessed. He has not heard from you to confirm your intentions, and therefore I presume that you have elected, as is your right, to decline to accept the invitation and force him to make an application".
- On the 13th August 2007 KMS issued a Part 8 application seeking "an order in standard form pursuant to s70 of the Solicitors Act 1974 for the detailed assessment of the Defendant's bill dated 21.03.07".
- Section 70 of the 1974 Act, so far as material, provides:
"(1) Where before the expiration of one month from the delivery of a solicitor's bill an application is made by the party chargeable with the bill, the High Court shall, without requiring any sum to be paid into court, order that the bill be taxed and that no action be commenced on the bill until the taxation is completed.
(2) Where no such application is made before the expiration of the period mentioned in subsection (1), then, on an application being made by the solicitor or, subject to subsections (3) and (4), by the party chargeable with the bill, the court may on such terms, if any, as it thinks fit (not being terms as to the costs of the taxation), order –
(a) that the bill be taxed; and
(b) that no action be commenced on the bill, and that any action already commenced be stayed, until the taxation is completed.
(3) Where an application under subsection (2) is made by the party chargeable with the bill …
( c) after the bill has been paid, but before the expiration of 12 months from the payment of the bill,
no order shall be made except in special circumstances and, if an order is made, it may contain such terms as regards the costs of the taxation as the court may think fit."
- It was FW's case that the bill had already been paid in full, and that accordingly KMS would have to show special circumstances justifying an order for detailed assessment. On the 10th September 2007 Master Rogers directed a preliminary hearing "to determine whether there are any special circumstances within the meaning of s70(3)( c) and, if there are, the terms as to costs on which any future assessment may proceed ("the preliminary issue")". He also gave directions as to the filing of evidence, directing that FW's evidence "shall include particularisation of the basis on which the CFA came to be terminated". Subsequently the preliminary issue was expanded to include the issue of whether FW were entitled to terminate the CFA as they did, and in the event the bulk of the main hearing was taken up with that issue.
- There were further directions hearings before the main hearing was reached. At one, on the 10th November 2008, Master Rogers dismissed an application by KMS for an order that FW "plead their case in relation to the termination of the CFA". He did so because in his view the issues were already clear from the detailed witness statements which had been filed.
- Although it was not a matter which had been raised at any of those interlocutory hearings, KMS made a last-minute attempt, on the day before the main hearing, to raise an issue as to whether KMS had in fact paid FW's bill in full. Their reason for wanting to raise that issue was that if the bill had not been paid, KMS were entitled to require a detailed assessment and would not need to show special circumstances. Master Rogers rejected that application as coming far too late in the day and introducing a substantial new matter. In their written Grounds of Appeal KMS sought to appeal against that decision. At the outset of his submissions before me, however, Mr Hill-Smith indicated that he would not be pursuing that point, and would proceed on the basis that the bill had indeed been paid. I therefore say no more about this.
- Having heard evidence from Mr Krishnani, Mr Craze, Mr Lawson, Mr Greager and Miss Roake, Master Rogers decided in favour of FW and refused to order a detailed assessment. It is against that decision that this appeal is brought.
- I have referred above to some of Master Rogers' specific findings of fact. It is relevant to note at this stage the assessment he made of witnesses from whom he heard:
i) Mr Greager's evidence was clear and consistent (para 24 of the judgment).
ii) Miss Roake's evidence was compelling not only in the modest and composed way in which it was given, but also in its consistency and truthfulness (para 26).
iii) Mr Craze was evasive, and unwilling to accept the consequences of the documents relating to payments. As to what was said at the lunch on 4th July 2006, Master Rogers rejected Mr Craze's evidence and accepted that of Mr Greager (para 31).
iv) Mr Krishnani was a very unsatisfactory witness, unwilling to accept the evidence of documents or of other witnesses who contradicted him. Where his evidence was contradicted by FW's witnesses, Master Rogers "unhesitatingly" rejected Mr Krishnani's evidence and preferred that of Mr Greager and Miss Roake (para 32).
- So far as is relevant for the purposes of this appeal, Master Rogers' decisions on the issues before him were as follows:
i) KMS were in breach of condition 2 of the CFA (para 79);
ii) FW were entitled to terminate the CFA pursuant to condition 8.5, and so were entitled to charge both their non-conditional and their conditional fees (para 80);
iii) FW did in fact terminate the CFA on the grounds of a breach of condition 2: "Half way through the 'crisis meeting' [Mr Krishnani] was accused of effectively concealing the facts from his legal team and he accepted the termination without complaint" (para 83);
iv) There was no necessity for FW to give reasonable notice because the termination of the CFA did not determine the retainer between them and KMS (para 85);
v) There were no special circumstances entitling KMS to a detailed assessment (para 96).
- Pursuant to CPR 52.11(1), the appeal is a review, not a rehearing. It will only succeed if Master Rogers was wrong in his decision. Where an appeal involves a challenge to a finding of fact which depended on the trial judge's view as to the credibility of witnesses, an appellant must show that the finding was plainly wrong: see Assicurazioni Generali SpA v Arab Insurance Group  1 WLR 577 at para 12; see also the note at 52.11.4 in the White Book. The importance of the judge's assessment of evidence after cross examination as a tool for determining the truth of disputes between the parties was rightly emphasised by Peter Smith J at para 27 of his judgment in Sibley & Co v Reachbyte Ltd & KMS Ltd  EWHC 2665 (Ch).
- It will be apparent from what I have said above that Master Rogers' findings, and ultimate decision, were heavily dependent upon the view he had formed of the credibility and reliability of the witnesses from whom he had heard. In this appeal, I of course have had no opportunity to make any such assessment. This case is in my view one in which it would be appropriate to accord considerable weight to that fact.
- Mr Hill-Smith argued on a number of different grounds that the Master should have found that special circumstances did exist, and that accordingly he was wrong to refuse a detailed assessment. The grounds can conveniently be subdivided into two categories:
i) It is submitted that Master Rogers should have found that FW were not entitled to terminate the CFA as they did. It is agreed between the parties that if the termination of the CFA was unlawful, KMS are entitled to a detailed assessment.
ii) Even if the termination of the CFA was lawful, it is submitted that Master Rogers ought to have found that a combination of some or all of the following four factors amounted to special circumstances:
a) The fact that there was an express reservation of the right to tax
b) The fact that payment of the outstanding balance of £144,498 was only made under protest about the amount of the bill
c) The fact that Mr Krishnani was under pressure to pay the bill because he needed the release to his new solicitors of the papers relating to the Sibleys assessment
d) The fact that at least some aspects of the bill were disputed, and there was an issue as to whether a particular interim bill (number 41217) had or had not been paid.
- The first submission turned on the evidence which Master Rogers heard, and on this appeal the submissions are to the effect that his findings of fact should be overturned. In the second category, the submissions on appeal are, in essence, that Master Rogers failed to give any or sufficient weight to the relevant factors, either individually or collectively; that he misdirected himself in law; and that his exercise of his discretion was accordingly flawed. It is because of those submissions that I have felt it necessary to summarise the history of relevant events in some detail above.
- I will deal first with the issues relating to the termination of the CFA. Master Rogers found that KMS was in breach of condition 2 of the CFA and that FW was entitled to terminate the CFA. In that regard, he made (amongst others) the following findings as to credibility and as to the facts:
i) The Square Mile invoices made it quite clear that Square Mile had invoiced Mr Krishnani direct for the work done by Mr Symes and Mr Craze. He did not accept the evidence of Mr Craze to the effect that all monies were paid to him personally, and that he in turn paid Mr Symes (para 63 of the judgment).
ii) On the totality of the evidence, he took the view that Mr Symes and Mr Craze were working together on the expert's report and were not therefore independent, and that Mr Krishnani knew this (para 64).
iii) The attendance notes of the consultation on the 2nd March indicate that Mr Krishnani was aware of Square Mile and its involvement in the case and had deliberately concealed that fact from FW. He did not accept Mr Krishnani's evidence to the contrary (para 67).
iv) After the termination letter had been handed to him, Mr Krishnani agreed to FW continuing to represent him and accepted he would have to pay their full rates for any further work. It was only some weeks later that the retainer between KMS and FW was terminated (para 70).
v) Contrary to his denial, Mr Krishnani did receive and read FW's letter of 22nd March 2007, and the enclosed fee note and accompanying documents (para 76).
- Mr Hill-Smith acknowledged the difficulties faced by an appellant who seeks to overturn findings of fact. He nonetheless submitted that Master Rogers' findings could not stand, being (as he contended) neither founded on the evidence nor sufficiently supported by any logical analysis.
- I do not propose (because I do not think it necessary) to deal with the minutiae of each and every one of Mr Hill-Smith's lengthy and detailed submissions. I have considered them all with care, and I have had regard not only to their individual strengths but also to their collective effect.
- Before considering specific points, it seems to me that it is appropriate to begin with a brief overview. The BD litigation ended disastrously for KMS. It did so because, against a background of problems relating to disclosure, an apparently good case was fatally undermined by the very late revelation of material which gave the opposing parties a good prospect of excluding the expert evidence which KMS needed if it was to win the case. Because of the CFA, that undermining of the prospects of success had consequences not only for KMS but also for FW. FW had sought to protect themselves against such problems by imposing on KMS the obligation not to mislead them, whether deliberately or negligently. Why, despite that protection, did FW only learn so close to the trial that Mr Symes' independence was open to cogent challenge? Master Rogers found that it was because Mr Krishnani had deliberately misled them.
- The principal grounds on which his judgment is attacked, as I see it, are the following.
- Firstly, complaint is made that neither FW nor Master Rogers ever formulated with sufficient precision the allegation of deliberate misleading. The case was, in Mr Hill-Smith's oft-reiterated criticism, beset by the absence of pleadings. He submitted that FW were in effect alleging dishonesty on the part of Mr Krishnani, and such an allegation must be precisely formulated and clearly proved. He further submitted that there is a distinction to be drawn between concealing and misleading, and that Master Rogers relied on evidence of the former as an improper foundation for a finding of the latter.
- I accept the premise of these submissions – namely, that in the circumstances of this case it was necessary to be clear and precise about what was alleged and proved against Mr Krishnani.
- However, I reject the submission that Mr Krishnani did not know what he was accused of having done wrong, or that Master Rogers' judgment leaves any doubt as to what finding he made against Mr Krishnani. He said in terms (at paragraph 67) that the attendance notes of the consultation on the 2nd March 2007 "indicate that [Mr Krishnani] was aware of Square Mile and its involvement in the case and had deliberately concealed that fact from [FW]". He did not accept Mr Krishnani's evidence to the contrary. It is submitted by Mr Hill-Smith that in that paragraph Master Rogers was mistakenly proceeding on the basis that Mr Krishnani had made an admission of knowledge and concealment at the consultation on the 2nd March 2007. I agree that the detailed note of that consultation does not contain anything which could properly be regarded as such an admission, and, with respect to Master Rogers, I accept that this paragraph in the judgment might have been more felicitously expressed. I do not however accept the submission that Master Rogers fell into error. In my view, the sentence in paragraph 67 beginning "These documents indicate …" is a statement of Master Rogers' inference from the evidence as to what was said by Mr Krishnani and by leading counsel at that consultation. It is apparent from the attendance note that Mr Krishnani had no convincing answer to leading counsel's observation (quoted in paragraph 47 above) "You must have known more than that". My view is strengthened by paragraph 83 of the judgment, in which Master Rogers summarised what happened on the 2nd March as being that Mr Krishnani "was accused of effectively concealing the facts from his legal team and he accepted the termination without complaint".
- I also reject the submission that in the circumstances of this case there is any significance in the distinction Mr Hill-Smith draws between concealing and misleading. In order to decide whether to take the risk as to their costs which the CFA involved, FW had to make an assessment of the prospects of success in the BD litigation. They needed from Mr Krishnani a complete and honest account of all relevant matters, and they imposed an obligation on their clients not to mislead them. Mr Krishnani, as the Master found, knew of Square Mile and of its involvement in the case. He knew, from at latest his telephone discussion with leading counsel on 9th June 2006, the importance of Mr Symes being, and being seen to be, independent. Yet he failed to tell his solicitors what he knew, even when it was obvious that BLG were pressing hard for all relevant information as to the payment of Messrs Craze and Symes. As Mr Bacon submitted, the obvious inference is that he knew how badly his case would be damaged by the link between Messrs Craze and Symes. Master Rogers was in my judgment entitled to find that such failure amounted to a deliberate misleading.
- Secondly, Mr Hill-Smith points to the evidence of both Mr Krishnani and Mr Craze to the effect that, despite the appearance to the contrary of the Dawn Traders and Square Mile invoices, all payments had in fact been made by Mr Krishnani to Mr Craze personally, and had been passed on as appropriate by Mr Craze to Mr Symes personally. He submits that there was no or no sufficient basis for Master Rogers' rejection of that evidence. It is said that the evidence was not even challenged in cross-examination. Reliance is placed on the fact that there were produced, in the course of the hearing, statements of a bank account in the name of Square Mile which did not show any receipt of monies from Mr Krishnani. These related to an HSBC account in the name of Square Mile, and showed that throughout the relevant period that account had a modest balance and almost no activity. Mr Hill-Smith submits that there was no basis on which Master Rogers could prefer the inference from the Square Mile invoices and statements to the direct testimony of the two witnesses. He cites paragraph 157 of the decision of the Court of Appeal in Conlon v Simms  1 WLR 484 in support of the principle, which I readily accept, that "a finding that a witness is unreliable does not in itself justify a finding of fact which is directly contrary to his evidence in the absence of other evidence before the court sufficient to justify that finding".
- Although I accept that principle, I reject Mr Hill-Smith's submissions in this regard as plainly wrong. Master Rogers did not only have the evidence of Mr Krishnani and Mr Craze, and he was not obliged to accept what they said. Their oral testimony was contradicted by the documents. He was in my judgment entitled to conclude from the evidence as a whole that the invoices showed the correct position. The totality of the evidence included the following features, to which in my view Mr Hill-Smith's submissions failed to accord appropriate weight:
i) The absence of any satisfactory explanation from either witness as to why the invoices and statements of account were in the form they were if the true position was as the witnesses claimed.
ii) The fact that Mr Krishnani had never mentioned the role of Square Mile and Dawn Traders until specifically asked to produce invoices, even though BLG were clearly pressing for full disclosure of anything relating to the payment of Messrs Craze and Symes, and had on the contrary sought – when such questions were first raised by BLG – to avoid any reference at all to the financial arrangements between himself and Mr Craze.
iii) The fact that neither Mr Craze nor Mr Symes had ever mentioned the roles of the two companies either, and that Mr Symes had told a direct lie about the nature and extent of his working relationship with Mr Craze. Mr Craze admitted in cross examination that on the face of the documents, it did look as if the money was going to the companies, though he maintained it had in fact gone to the individuals. As I have already observed, one is bound to wonder why it is, if the involvement of those companies was really believed to be insignificant, that all 3 gentlemen kept quiet about it for so long.
iv) Mr Krishnani's experience and considerable success as a businessman, and the consequent implausibility of any suggestion that he paid no attention to the names on the invoices, and/or did not think it mattered whether or not his expert witness and his "case manager" were directors of the company which invoiced for, and acknowledged receipt of, the fees for their respective services.
v) The fact that Mr Craze was declaring to Companies House that Square Mile was non-trading when the company was issuing the invoices and acknowledging receipt of payment.
- In my judgment, Master Rogers was entitled to draw the inference from those features that Mr Krishnani knew the significance of the invoices, knew the likely adverse effect on the prospects of success in the litigation if they came to light, and so had kept them from his solicitors until he was unable to conceal them any longer. He was entitled to reject as wholly implausible Mr Krishnani's reiterated claims that he took no interest in the invoicing arrangements and simply regarded himself as paying Mr Craze personally.
- I should refer at this point to an application made to me by KMS in the course of the appeal. It was not possible to complete all submissions in the time available for the hearing, and it was accordingly necessary to adjourn for a few days with the appeal part-heard. KMS took advantage of that break in proceedings to serve an application to introduce fresh evidence in the form of an affidavit by Mr Krishnani, to which were exhibited copies of paid cheques. KMS wished to rely on these as confirming that cheques made personally to either Mr Craze or Mr Symes, and tallying with the payments recorded as having been received by Dawn Traders and Square Mile, had been paid by Mr Krishnani from a number of different accounts. Objection was taken to this application, and Mr Hill-Smith very sensibly submitted that it would be convenient for me to take note of the evidence, continue with the hearing, and adjudicate upon the application in this judgment.
- By CPR 52.11(2), "Unless it orders otherwise, the appeal court shall not receive … (b) evidence which was not before the lower court". The helpful notes at 52.11.2 in the White Book confirm that the Ladd v Marshall  1 WLR 1489 criteria for admitting fresh evidence remain relevant in this regard. In my judgment, this proposed fresh evidence fails at least 2 of those criteria:
i) It is plainly evidence which could with reasonable diligence have been obtained for use before Master Rogers. Even if there was a difficulty about ready access to paid cheques, other sources (such as personal bank account statements) could have provided similar information. I reject the submission that KMS could not have been expected to foresee that there would be any issue about it: given the obvious importance of the overall issue as to the Square Mile invoices, one would have expected KMS to want to put forward all relevant evidence from the outset.
ii) In any event, I do not regard the proposed evidence as being such as would probably have an important influence on the result of the case. It raises more questions than it answers. The figures do not tally with the figures given in the final version of the Craze letter for the sums paid year by year to Mr Craze. It is surprising that 4 different bank accounts were used to make the payments. Moreover, the proposed new material can do nothing to assist KMS on the questions of why the Dawn Traders and Square Mile invoices and statements of account ever came into existence if they do not reflect the reality of the situation, and why Mr Krishnani never mentioned them.
- I therefore decline to receive this fresh evidence, and return to consideration of the grounds on which KMS attack Master Rogers' judgment.
- Thirdly, it is said that Master Rogers in his judgment made a number of factual errors and omissions which undermine the validity of his conclusions. In particular, it is submitted that he made a serious error in paragraph 64 of his judgment, when he said that Mr Craze had given evidence that "after these invoices came to light [Mr Krishnani] had asked him (Mr Craze) if he would replace them with invoices from Mr Craze personally to [Mr Krishnani] (or his companies)". FW agree with KMS that the evidence before the Master was in fact to the opposite effect: that it was Mr Craze who had offered to arrange for replacement invoices for his own and Mr Symes' work, and that Mr Krishnani had rejected the offer. KMS submit that the error was a very important one, because Master Rogers said of the evidence which he wrongly attributed to Mr Craze
" … it supports the view which I held having heard the totality of the evidence that Mr Symes/Mr Craze were working together on the experts report and were not therefore independent and, crucially, that [Mr Krishnani] knew this."
- It is agreed between the parties that Master Rogers' summary of this part of the evidence was factually incorrect, and it follows that his finding on this specific point could not be sustained. I have considered carefully whether it was an error of such significance that it undermines his overall findings of fact and conclusions. In my judgment, it does not. The fact which he mistakenly found was at most a further reason for his overall findings and conclusions. As Mr Bacon put it, it was the fact of this discussion which mattered, not who instigated it. The important feature of the meeting between Mr Craze and Mr Krishnani on the morning of the 28th February 2007 was that one of them was suggesting the retrospective issue of different invoices, a proposal which raises immediate questions as to how such a thing could even be contemplated, and why anyone would think it could be proper. Mr Hill-Smith makes the fair point that on the evidence in fact given, Mr Krishnani rejected the proposal, and reported to his solicitors the fact that Mr Craze had been to see him. He submits accordingly that the evidence in fact supports Mr Krishnani, yet was wrongly viewed by Master Rogers as something which impugned Mr Krishnani's honesty. That however leaves unanswered the obvious question as to why company invoices had ever been issued in the first place if they did not reflect the reality of the situation. It also leaves unanswered the equally obvious question as to why Mr Krishnani had never said anything about those invoices until specifically asked to produce them.
- It is relevant in this regard to note a passage from one of Miss Roake's statements, on which Mr Hill-Smith himself sought to rely. At paragraph 75 of her statement of the 1st September 2008, Miss Roake said –
"Mr Krishnani may have been making out cheques to John Symes or Tony Craze personally, but that does not alter the fact that he was being invoiced by the company (which was, albeit indirectly, receiving payment)".
- It seems to me that in that passage Miss Roake was rightly emphasising the importance of the fact that Messrs Craze and Symes were jointly involved in a company which was invoicing Mr Krishnani for the work of both men, and was acknowledging receipt of payments. That was a key feature of the attack on Mr Symes' ability to give evidence as an independent expert, as was Mr Krishnani's knowledge of their involvement in or connection with Square Mile. Master Rogers was entitled on the evidence as a whole to make his finding that Mr Krishnani deliberately concealed that knowledge from his solicitors, and in my judgment that entitlement is not undermined by the factual error he made in paragraph 64.
- Mr Hill-Smith helpfully provided a note of the other factual and evidential inaccuracies which he submits are to be found in the judgment. I do not think it necessary to consider these individually. None is as significant as the error in paragraph 64 to which I have referred above, and all are to my mind convincingly answered by Mr Bacon's submissions in reply. In my judgment they do not, either individually or collectively, undermine Master Rogers' overall decision.
- Fourthly, it is said that Master Rogers did not in his judgment ask himself the right questions, make any sufficiently precise finding of deliberate misleading, make any relevant finding about the Craze letter, or give a sufficient reasoned basis for his findings. Mr Hill-Smith relies on English v Emery Reimbold & Strick Ltd  1 WLR 2409. It is relevant to quote from paragraph 19 of the judgment of the Master of the Rolls in that case:
"… the judgment must enable the appellate court to understand why the judge reached his decision. This does not mean that every factor which weighed with the judge in his appraisal of the evidence has to be identified and explained. But the issues the resolution of which were vital to the judge's conclusion should be identified and the manner in which he resolved them explained. It is not possible to provide a template for this process. It need not involve a lengthy judgment. It does require the judge to identify and record those matters which were critical to his decision. If the critical issue was one of fact, it may be enough to say that one witness was preferred to another because the one manifestly had a clearer recollection of the material facts or the other gave answers which demonstrated that his recollection could not be relied upon."
- Relying also on paragraph 6.4 of the judgment of Henry LJ in Heffer & Knight v Tiffin Green QBENF 97/1050/1, Mr Hill-Smith submits that this is one of the rare cases in which it can be said that the judgment was
"… arrived at without sufficient regard being paid to the building blocks of the reasoned judicial process, where the evidence on each issue is marshalled, the weight of the evidence analysed, all tested against the probabilities based on the evidence as a whole, with clear findings of fact and all reasons given."
- Again, I reject this submission. No doubt it would be possible to rewrite Master Rogers' judgment, expanding upon its contents and amplifying some passages. But with respect to Mr Hill-Smith, it is simply unrealistic to suggest that the reader of Master Rogers' judgment is left uncertain as to why he came to the conclusions he did. It is to my mind entirely plain that he disbelieved key parts of the evidence of Mr Krishnani and of Mr Craze, and concluded from the totality of the evidence that Mr Krishnani had deliberately concealed from his solicitors information which he knew was important. As Henry LJ said in his judgment in Flannery v Halifax Estate Agents Ltd  1 WLR 377 at p382A (a passage on which Mr Bacon relies), "Where there is a straightforward factual dispute whose resolution depends simply on which witness is telling the truth about events which he claims to recall, it is likely to be enough for the judge (having, no doubt, summarised the evidence) to indicate simply that he believes X rather than Y; indeed, there may be nothing else to say". I cannot see how it would have assisted KMS for Master Rogers to have spelled out in any more detail, or with any greater emphasis, his adverse views of key parts of the evidence of the witnesses called before him on KMS's behalf.
- For those reasons, I conclude that Master Rogers' finding of breach of condition 2 of the CFA is not open to successful criticism. There is no justification for overturning his findings of fact.
- So far as the consequences of that breach are concerned, Mr Hill-Smith raised two issues.
- Firstly, he submits that FW in fact treated Mr Krishnani's conduct as a repudiatory breach of contract, and terminated the CFA on that ground rather than pursuant to condition 8.5. It is true that in his telephone call from Spain during the interlude in the consultation of the 2nd March 2007 Mr Greager, who did not have the CFA before him, referred to repudiatory breach. Master Rogers was however entitled on the totality of the evidence (including in particular the letter of the 22nd March 2007) to find, as he did in paragraph 83 of his judgment, that the CFA was terminated for breach of condition 2. I agree with Master Rogers that the authorities relied on by Mr Bacon – Laing Management Ltd v Aegon Insurance Co (UK) Ltd (1997) 86 BLR at p76F, and Dalkia Utilities Services PLC v Celtech International Ltd  EWHC 63 (Comm) at para 143 – support the conclusion on the facts of this case that Mr Krishnani's conduct gave rise both to a contractual right to terminate and to a common law entitlement to accept a repudiatory breach, and that FW were entitled to rely on the former whilst also leaving open a claim for the latter. Mr Greager's initial reference to repudiatory breach is therefore not a reason for rejecting Master Rogers' conclusion.
- Secondly, Mr Hill-Smith submits that FW were not entitled to terminate the CFA without giving reasonable notice, and that no notice at all was in fact given. He relies in this regard on Underwood & Piper v Lewis  QB 306 for the principle that the contract between a solicitor engaged to act in litigation, and his client, is an entire contract which can only be terminated on good cause, and that even then reasonable notice must be given. He also relies on the Law Society's Guide to the Professional Conduct of Solicitors, paragraph 12.12 of which says "A solicitor must not terminate his or her retainer with the client except for good reason and upon reasonable notice". I note that the Guide goes on to give examples of what may be good reasons for termination, which include where there has been "a serious breakdown of confidence between solicitor and client".
- The CFA itself is silent as to whether any notice is required before FW could exercise their right of termination under condition 8(5). I am not persuaded by Mr Hill-Smith's submission that a requirement of reasonable notice is necessarily to be implied: to take the hypothetical example which I suggested to him in the course of his address, that would leave a solicitor in an impossible position if, at the very door of the court, a client admitted that he had concealed information which greatly reduced his prospects of success in the long and expensive trial which was about to begin. In any event, the answer to this point is in my judgment the answer which Master Rogers gave at paragraph 85: there was no necessity to give reasonable notice of termination of the funding arrangement under the CFA, because the retainer to conduct the litigation continued (and was, indeed, only terminated – by agreement - some weeks later). KMS were not abandoned without representation at a late stage of the litigation: all that changed was that FW were no longer prepared to accept the risk as to their own costs which they had taken having assessed the prospects of success on the basis of what was now revealed to have been deliberate misleading by Mr Krishnani.
- For all those reasons I conclude that Master Rogers' finding of breach of condition 2 of the CFA, and his findings as to the consequences of that breach, withstand the prolonged challenge which Mr Hill-Smith has made upon them.
- I turn to the matters which are relied on as being special circumstances justifying a detailed assessment even if the CFA was lawfully terminated. I will of necessity deal with them individually, but it is of course necessary also to have regard to their combined effect.
- Mr Hill-Smith submits that there was here an express reservation by KMS of the right to taxation, and that on authority that reservation is a powerful factor in support of a finding of special circumstances. Both parts of that submission are contested by Mr Bacon.
- Mr Bacon submits that Mr Krishnani's e mail of the 11th May 2007 did not in fact reserve KMS's right to a taxation: rather, it called upon FW to exercise their right to seek a taxation. I see the force of that submission, but bearing in mind that the letter was not written by a lawyer I would be reluctant to decide the point against KMS on that basis. It seems to me that the letter might fairly be regarded as a reservation of KMS's rights, albeit clumsily expressed. Accordingly, without making any final decision on that point, I make an assumption in KMS's favour and proceed to consider the other issues as if there had in fact been such a reservation.
- There is indeed authority to support Mr Hill-Smith's submission as to the importance of such a reservation. In in re Solicitors (1934) Times LR 327, Farwell J clearly regarded a reservation of the right to tax as a powerful factor, though he did not say that mere reservation would always be sufficient to amount to special circumstances. In that case, Farwell J found special circumstances where there was a combination of pressure, payment under protest and a reservation. In Sanders v Isaacs  1 WLR 240 Goff J also said that payment with a reservation as to taxation was a highly important factor to be weighed with others. In that case, the reservation was combined with evidence pointing to substantial overcharge, and the exercise of a lien, and Goff J found special circumstances. Mr Hill-Smith particularly points out that with reference to the principles stated in re Boycott (1885) 29 Ch D 571, and re Norman (1886) 16 QBD 673 – cases on which Mr Bacon relies – Goff J observed (at p245C) that "… it seems to me that very different considerations apply in the exercise of my undoubted discretion when I come to consider a case where there is such a reservation". Relying on those authorities, Mr Hill-Smith submits that a reservation of a right to tax can be a sufficient special circumstance even in the absence of other factors such as pressure or overcharging: indeed, his submissions were really to the effect that a reservation would often be decisive. He submits that Master Rogers erred in law, and failed to give sufficient weight to the reservation of the right to tax.
- However, it is important to bear in mind that in a situation such as this the court is being asked to exercise a discretion which only arises if special circumstances are shown, and it is therefore necessary to have regard to all the circumstances of the particular case. I accept that a reservation of the right to tax is a highly important factor, but it is not to be viewed in isolation. The features of the case which I think relevant here are the following:
i) The costs relate to a substantial commercial action, and Mr Krishnani is an experienced, shrewd and successful businessman. In that regard, the nature of the underlying litigation is about as far removed as it could be from that in in re Solicitors.
ii) Mr Krishnani had received, and paid without demur, a series of monthly bills in substantial sums. Each bill had been accompanied by a detailed breakdown of the hours claimed, the fee earners involved, and the nature of the work done and disbursements paid. There had been ample opportunity, as the case had gone on, for specific items to be disputed.
iii) The final bill, which prompted Mr Krishnani's letter, did not all relate to the work under the CFA with which this appeal is concerned. Insofar as it did, the bulk of it was for counsel's fees.
iv) Although objection was made, it was in the vaguest of terms. The only items specified were taxi fares and meals. When the bill is examined, these relate to refreshments and transport home for persons who had worked late on the case in FW's offices. They amounted to a very modest sum in the context of the case as a whole, and were similar to other such items which had been paid without demur at earlier stages. There is to my mind great force in Mr Bacon's submission that a query over some taxi fares does not justify detailed assessment of a total bill of more than £1 million.
v) The issue between the parties in reality relates to the 30% difference between the ordinary fees and the non-conditional fees. It is not an issue as to the details of the fees claimed. The hourly rates were agreed long ago, and there has been little if any challenge to the need for FW to undertake all the work for which they claimed payment.
vi) There has never been any evidence to support an allegation that the fees were excessive.
vii) No right to taxation was claimed until after Mr Krishnani had failed in his attempt to persuade FW to agree favourable terms as to their costs of continuing to act in the Sibley litigation.
- Mr Bacon submits that a modern case such as Winchester Commodities Group Ltd v RD Black & Co (HC 1999 00894) provides a more helpful comparison to the facts of this case than do the older authorities relied on by Mr Hill-Smith.
- I agree with Mr Bacon's submissions to the effect that in a case such as this it would be surprising if relatively minor queries about aspects of a solicitor's bill, raised late in the day and in a manner suggestive of a last attempt to avoid having to pay a bill which was properly charged, could amount to special circumstances. Even if I make the assumption which I have indicated above in favour of KMS, I conclude that in all the circumstance of this case the reservation of the right to tax carries far less weight than it would do in many other cases. I agree with Master Rogers' conclusion, in paragraph 96 of his judgment, that Mr Krishnani's reservation is not here sufficient to amount to a special circumstance justifying detailed assessment of the entire bill.
- Similar considerations apply in my view to the submissions based on the protest made by Mr Krishnani, and I reach a similar conclusion.
- It is unfortunate that Master Rogers did not deal specifically with the submission made as to pressure. However, the evidence before him on this point was all one way. KMS knew that the date of the assessment in the Sibley litigation was getting ever closer. They knew they needed to be represented, and that they would have to pay FW's outstanding bills for the BD litigation before FW would either act in the Sibley litigation or pass the papers to another firm. FW could not be blamed if KMS allowed matters to continue over a period of weeks and thus came under some pressure of time because of the approach of the Sibley hearing. Far from putting KMS under pressure by stressing the need for prompt payment, it seems to me that FW were doing what they were obliged to do. They would surely have been criticised by Mr Krishnani if they had simply let the matter drift until it was too late for them or anybody else to prepare properly for the assessment hearing in the Sibley litigation.
- The final point made on KMS's behalf relates to minor matters which do not seem to me to provide any support for the appeal. Questions such as whether or not a particular interim payment had been made would arise, and be resolved, whether or not there were a detailed assessment. They do not begin to provide a special circumstance requiring such a detailed assessment. Nor do they add anything to the other matters relied on.
- In my judgment, Master Rogers – who, it should be remembered, is greatly experienced in these matters - was entitled to conclude that, even taken together, the matters relied upon by KMS were insufficient to make out a case for special circumstances. He made, in my view, no mistake of law or analysis. Nor did he go outside the generous ambit of his discretion. His exercise of his discretion cannot successfully be challenged.
- For those reasons, this appeal must be dismissed.
- The parties have provided me with their respective costs schedules, and have helpfully made written submissions as to matters of challenge. I understand it to be accepted by both that having made my decision as to the outcome of the appeal I would proceed to award costs as appropriate, and to make a summary assessment of them with the welcome assistance and expertise of my assessors. It seems to me that in this case there is no reason to depart from the general rule as to costs in CPR 44.3(2)(a) – namely, that the unsuccessful party will be ordered to pay the costs of the successful party. I therefore order KMS to pay FW's costs.
- It is submitted on behalf of KMS that the claim for costs in relation to the work of Mr Custance of FW should be disallowed, on the basis that he was effectively the client and acting in that capacity. On the authority of London Scottish Benefit Society v Chorley (1883) 16 QBD 872, FW are entitled to recover for some of Mr Custance's time, but the time claimed (totalling 18 hours) is unreasonable having regard to the involvement of other solicitors. The costs of his work should be limited to 3 hours (half an hour on documents, two and a half hours attending at the start and end of the hearing in case he was needed to consider any discussions as to settlement). In relation to Miss Roake, the time spent on documents in Part 2 of the schedule is excessive, and should be reduced to two hours. The hourly rates claimed for the trainee solicitors who worked on the case are too high, and should be reduced to £136 per hour in each case.
- Making the necessary arithmetical adjustments which flow from the above, the costs of this appeal which KMS must pay to FW are summarily assessed in the total sum of £38,817.60.