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England and Wales High Court (Queen's Bench Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Queen's Bench Division) Decisions >> Watson Farley & Williams (A Firm) v Ostrovizky  EWHC 160 (QB) (31 January 2014)
Cite as:  EWHC 160 (QB)
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QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL
B e f o r e :
| WATSON FARLEY & WILLIAMS (a firm)
|- and -
Michael Pooles QC and Gary Blaker (instructed by Matthew Arnold & Baldwin LLP) for the Defendant
Hearing dates: 12-15 November 2013, 18- 21 and 28 November 2013
Further Written Submissions served on 6, 9 and 10 December
Crown Copyright ©
MR JUSTICE SILBER:
|II The Issues||13|
|III The Witnesses|
|(ii) Mr A Weinerman||27|
|(iii) Mr I Ostrovizky||33|
|(iv) Ms I Ostrovizky||46|
|(v) Ms Virginia Murray||47|
|(vi) Mr A. Simos||49|
|(vii) Mr Christos Rinis||51|
|(viii) Mr A Papachristou and Mr R. Battistuta||55|
|IV The Background|
|(i) The PV projects in Greece||56|
|(ii) Mr. Weinerman's investigations into investment in PV projects in Greece||59|
|(iii)The involvement of the Claimant and Ms Murray||62|
|(iv) Mr. Weinerman's Instructions to the Claimant to act for Mr. Engel||72|
|(v) The involvement of the Defendant and the 2007 Agreements||84|
|(vi) Developments after the First Agreement was made||87|
|(vii) How the terms of the 2007 Agreements were disregarded by the parties||94|
| (viii) The major amendments to the 2007 Agreements so that Mr. Rinis
became entitled to payments from the Defendant not provided for in the 2007 Agreements
|(ix) The Credit Crunch||128|
|(x) The Further Amendments to the 2007 Agreements in the 22 November 2008 Agreement||141|
|(xi) The Post November 2008 Agreement varying the 2007 Agreements and the November 2008 Agreement||155|
|(xii) The Silcio Negotiations||167|
|(xiii) The Energetica Negotiations||189|
| (xiv) Developments in 2010-2012 including the Demand for Payment of the Claimant's fees,
the Termination of the Claimant's Retainer and the Fate of the Projects
|V The Retainer Issue|
|(ii) The Duty owed by the Claimant to Mr. Engel||207|
|(iii) The Duty owed by the Claimant to the Defendant||216|
|VI The Breach Issue|
|(i) The Expert Evidence on Greek Law||218|
|(ii) "Know Your Client"||227|
|(iii) The Approach to the Breach Issue||232|
| (iv)The Claimant's alleged failure to include a provision for the immediate appointment
of a minority shareholder nominated by the Defendant in the First Agreement
| (v) The Claimant's alleged failure to include a provision for the immediate appointment
of a minority shareholder nominated by the Defendant in the Second and Third Agreement
|(vi) The failure to include a provision in the agreements requiring the use of an EE entity||265|
| (vii) The Agreements should have contained pledges which protected the totality
of any claim that the Defendant might have in respect of his rights concerning the project companies
|(viii) Matters to which the Defendant ought to have provided clear advice||279|
|(ix) Matters which should not have been included in the 2007 Agreements||284|
|VII The Causal Connection/ Loss of Profits Issue|
|Is there a causal link between the alleged negligent errors of the Claimant and the Defendant's loss of profits claim?||299|
|The Effect of the Defendant's Failure to disclose documents and to give reliable evidence||316|
|VIII The Causal Connection/ Expenditure Issue|
|Sums which would have been payable even if the Claimant was not negligent:||322|
| Sums paid as a result of the promise of the Defendant to pay the expenses of Mr. Rinis even though not liable
under the 2007 Agreements and no evidence that these payments were a result of the Claimant's negligence
|IX The Quantum Issue on Loss of Profits Claim|
|The Defendant's Case||334|
|The Claimant's Case||338|
|The number of parks which had received exemptions||340|
|What is the maximum achievable purchase price for a fully licensed park?||345|
|What deductions would have to be made for expenses that would be incurred by the Defendant?||348|
|Should there be a deduction for the tax that would be payable on the receipts of 20%?||350|
|How many parks would have been connected and would have started producing electricity and making profits?||355|
| What deduction (if any) should be made because the Defendant only had a 75% interest with Mr. Weinerman
who was not a party to the action having a 25% interest?
|Credit for residual interest||386|
|X The Quantum Issue on the Wasted Costs||383|
Mr Justice Silber:
a) The Claimant (through its partner Ms Virginia Murray, who is a Greek-qualified lawyer) acted negligently in relation to provisions which should have been and which were not incorporated in each of the 2007 agreements relating to investments made by the Defendant in the Greek PVs and the advice given by that firm or the lack of it concerning those matters;
b) In consequence, the interests of the Defendant were not properly protected; and that
c) The Defendant has thereby suffered loss which comprised first, loss of profits which he would have received if it had not been for the Claimant's negligence, and second, wasted expenditure.
a) Ms Murray was instructed to draft the 2007 agreements, or at least the First Agreement along the lines of a written document entitled the "Points for Agreement" provided to her by Mr Weinerman as supplemented by oral instructions and as drafted for another investor for whom he acted, Mr Jacob Engel. Matters such as the corporate structure to be used had been determined by the Defendant's agent, Mr Weinerman, who the Defendant now accepts acted as his agent;
b) Ms Murray of the Claimant complied with this obligation. If, as is alleged by the Defendant, the Claimant was also obliged to give advice, then the advice given was not negligent, but it was appropriate;
c) Even if the Claimant had acted negligently, the Defendant and/or his agent, Mr Weinerman, had been contributorily negligent;
d) The Defendant has not suffered the losses alleged or sustained the wasted expenditure alleged. In any event, he cannot recover both;
e) In any event, even if the Defendant had suffered the loss alleged or sustained the wasted expenditure alleged, such matters were not caused by the negligence of the claimant but by other factors, such as the decision of the Defendant to promise to make substantial payments to Mr. Rinis even though not obliged to do so under the 2007 agreements and then his failure to make those payments when promised or at all; and that
f) Even if the Claimant was obliged to give advice and did so negligently, this did not cause any loss to the Defendant. In so far as the Defendant has suffered loss (the extent and nature of which is denied) it is then contended that, inter alia, (i) even if the 2007 agreements had instead been drafted as contended by the Defendant, he would not have availed himself of those rights and/or would still have suffered the alleged loss alleged; and (ii) the losses alleged were caused by other factors, including but not limited to first, the amendments agreed by the Defendant to the 2007 Agreements without the involvement of the Claimant, second, the Credit Crunch and the ensuing financial problems in Greece, and other factors not connected with the way in which the Claimant performed or ought to have performed its services.
i) SA "société anonyme", which are companies limited by shares, which in 2007 required EUR 60,000 paid up initial capital. They are similar to an English limited company. They cost about EUR 5,000 to set up and are relatively cumbersome to establish and run. Until just before Mr Pooles for the Defendant made his closing submissions, a feature of the case for the Defendant supported by expert evidence had been that the Claimant should have advised the use of a SA for the venture entered into by the Defendant, but this allegation is correctly in my opinion no longer pursued;
ii) EPE "etairia periorismenis efthinis", which were smaller companies, in 2007 requiring EUR 18,000 paid up initial capital. In these companies, liability was limited by capital contribution, but ownership of share parts was of a more personal nature with any decisions requiring a majority of shareholders in number as well as the majority of the company's paid up capital;
iii) OE "omorrhythmi etairia", which are partnerships under Greek law which are discrete legal entities in which the partners have unlimited liability for the company's debts (and in that sense are akin to English general partnerships). They are cheap and quick to establish as the agreement between the partners is not subject to any particular formality and is simply registered with the local court. There are no minimum initial paid-up capital requirements; and also;
iv) EE "eterrorhythmi etairia", which are also partnerships under Greek law which are discrete legal entities in which one of more partners has unlimited liability, whilst the liability of the other partners, who play no role, is limited to their contribution; in that sense, they are similar to the old English limited partnerships established under the 1907 Act. They are cheap and quick to establish as the agreement between the partners is not subject to any particular formality and is simply registered with the local court. There are no minimum initial paid-up capital requirements. Just before Mr Pooles made his closing submissions, the case for the Defendant became that the Claimant should have advised the use of EE entities for the project companies.
II. The Issues
"Mr Rinis having been vested with the ownership of those companies was placed in a position where he could and did hold [the Defendant] to ransom over the years receiving sums significantly in excess of those sums to which he would otherwise have been entitled under the agreements"
"a duty to prepare a draft agreement following on from the Points of Agreement, to provide appropriate explanations of significant risks arsing from the draft agreement, to ask for instructions as necessary and then to act on and to incorporate further instructions received".
a) Whether the Claimant's Retainer included a duty to advise the Defendant ("The Retainer Issue") (see paragraphs 205 to 217 below);
b) If the Claimant's Retainer included a duty to advise, whether this was complied with and also, if the Claimant had acted negligently, whether the Defendant would have acted differently from the way he actually did if he had been advised properly ("The Breach Issue") (see paragraphs 218 to 291 below);
c) Whether there is any causal connection between any of the Claimant's negligence and the loss of profit claim of the Defendant ("The Causal Connection/ Loss of Profit Issue") (see paragraphs 292 to 320 below);
d) Whether there is any causal connection between any of the Claimant's negligence and the wasted expenditure claim of the Defendant ("The Causal Connection/Expenditure Issue") (see paragraphs 321 to 331 below);
e) What losses are recoverable by the Defendant for the loss of profits claim ("The Quantum Issue on Loss of Profits Claim") (see paragraphs 332 to 384 below); and
f) What losses are recoverable by the Defendant for the wasted costs claim ("The Quantum Issue on Loss of Profits Claim") (see paragraphs 385 to 386 below).
III. The Witnesses
" 22…the best approach for a judge to adopt in the trial of a commercial case is, in my view, to place little if any reliance at all on witnesses' recollections of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts. This does not mean that oral testimony serves no useful purpose – though its utility is often disproportionate to its length. But its value lies largely, as I see it, in the opportunity which cross-examination affords to subject the documentary record to critical scrutiny and to gauge the personality, motivations and working practices of a witness, rather than in testimony of what the witness recalls of particular conversations and events. Above all, it is important to avoid the fallacy of supposing that, because a witness has confidence in his or her recollection and is honest, evidence based on that recollection provides any reliable guide to the truth."
(ii) Mr Abraham Weinerman
(iii) Mr Itzhak Ostrovizky
"All emails passing between myself, my daughter Ilanit, Mr Avi Weinerman, Mr Damien Isaacs, Anastasia Chronopoulou and the claimant and other third parties relating to this action which are either in my possession or have been provided to me by the aforementioned."
i) "it doesn't look like an email that was sent. ..I believe that I never received this email";
ii) When asked if he had received this email he said "I believe – I don't not remember. I remember the – I am one hundred per cent sure that I didn't. Not because I know the content of the email, but because of the date. I was not involved in it at all at the time and I didn't know anything about it..";
iii) He had sought the advice of "clever young people" on the authenticity of 27 July 2007 email provided during the trial by Mr Simos, but apparently he did not ask them to tell him what the email said; and that
iv) The part of email of 27 July 2007 with his email address as a recipient "appears to me to be" a forgery and that is what " the clever young people said to me" even though there was no expert evidence or any credible support for that contention.
(iv) Ms Ilanit Ostrovizky
(v) Ms Virginia Murray
(vi) Mr Athanasios Orestis Simos
(vii) Mr Christos Rinis
...viii) Mr Aris Papachristou of Silicio and Mr Rene Battistuta, the Chief Executive Officer of Energetica.
IV. The Background
(i) The PV projects in Greece
(ii) Mr Weinerman's Investigations into Investment in PV projects in Greece
(iii) The involvement of the Claimant and Ms Murray
a) the Cypriot company, represented by Mr Abdani, would make a down-payment of € 2,000 per application and would pay €3,000 to each company on full registration;
b) Mr Rinis and Ekoplyn Hellas would register five new companies to submit the full applications, required by RAE on 1 August 2007 and they would be to receive a Feed-In-Tariff of € 0.5 or 0.45 per kilowatt hour and 40% investment grants;
c) under point 6, Mr Rinis and Ekoplyn would hold the companies as "trustee" for EW and, besides submitting the above application and dealing with the approval process, the Developer "will not do any operation with them and will not create any obligations";
d) under point 7, the ownership of the companies would be assigned on "blank" to EW and all their statutory documents would be held by EW's lawyers;
e) the Developer would sign rental agreements for each of the 10 plots of land which would start after connection to the grid and then for a 20 year period; and that
f) upon grant of each application, EW would decide whether to request the Developer to proceed to the construction stage. If it decided not to engage the Developer, then €30,500 would be paid to them within 30 days to settle all the claims and "relations" between them. If it was decided to engage the Developer, a separate construction agreement would be reached between the parties.
(iv) Mr Weinerman's Instructions to the Claimant to act for Mr Engel
"1. What sort of companies are these going to be? SA, EPE?
2. What would their registered capital be? Surely more than the 7,000 you seem to be agreeing to pay for them?"
"can be either OE partnerships or EPE limited liability companies- in the latter case, there will be more money for the buyers to pay as each company will have a EUR 18,000 minimum capitalisation. I have also put Mr Rinis as well as Ekoplyn as a party, as I understand that he will be the majority shareholder of one or more Project Companies, rather than Ekoplyn…."
"I attach the SPA, with amendments to the definition of 'Grants', 'Permits' and increase to 99% of the Sellers' shareholding with an insertion at 3.6 concerning the feed-in tariff."
"I attach an SPA with further revisions following my discussion with Mr Avdani. I have provided at Cl. 4.3 for a pledge over the proceeds of the shareholding of the OE (such as the profits); I do not think that it is possible to pledge the shareholding itself, as membership in a partnership is a personal right which cannot be subject to pledge.
I have also provided that the conditions precedent at Clause 3.6 must be met in order for the transfer to take place, or waived by you (if you want to complete the transfer earlier to secure your position).
I have left the amounts for the development bonus as they are, and deleted the reference to EPEs. I can confirm that an OE can be converted into either an EPE or an AE at a later stage, you will have to consider all your options in this regard at a later stage"
(v) The involvement of the Defendant and the 2007 Agreements
a) Ekoplyn would develop PV projects in Mytilini and in paragraph B in the Background to the agreement, it was explained that production licence applications would be made in the name of special-purpose OE partnerships which would be the Project Companies; in which Ekoplyn and/or Mr Rinis and one of their Associates would be shareholders;
b) Under Recital C, that the Defendant and Mr Weinerman would purchase shareholdings in Project Companies on successful grant of Production Licences for the PV projects;
c) Under clause 2.2, Ekoplyn or Mr Rinis would hold at least 99% of the shareholding in each project company and the Defendant and Mr Weinerman would appoint an additional party to purchase up to 1% of the shareholdings, which party would also be bound by this Agreement;
d) Under clause 2.3, Ekoplyn would receive €35,000 upon signing which represented €2,000 for each of the 10 projects and €3,000 for each of the 5 OE partnerships;
e) Under clause 3.2, the Defendant and Mr Weinerman would have the right to monitor and check the progress by performing additional due diligence;
f) Under Clause 3.3, Ekolyn would procure that no project Company would at any time prior to Closing without the prior written consent of the Buyer enter into any contract, liability or other binding agreement with any third party subject to certain limitations except in so far as might be reasonably required to give effect to this Agreement or to satisfy the conditions precedent to Closing set out in Clause 3.4;
g) Under Clause 3.4, Mr Weinerman and the Defendant would be entitled to rescind the agreement without any liability to Ekoplyn in a wide variety of cases including where an event occurs which has a material adverse effect on the Project;
h) Mr Weinerman and the Defendant would purchase the shareholdings of the OE/EE partnerships once the conditions of clause 3.6 had been met or waived;
i) Under clause 3.7, if the conditions precedent were not met by 31 December 2007, then Ekoplyn would be entitled to a further 6 months to replace the project with one or more further projects. If Ekoplyn could not replace the project by 30 June 2008 then Mr Weinerman and the Defendant could complete closing for that project company or rescind the agreement for that company;
j) Under clause 4.1 the developer would within one week of signing, deliver to Ms Murray the Articles of Association, corporate records and executed and undated letters of resignation from the administrators of each project company;
k) Under clause 4.2 the statutory documents referred to in clause 4.1 would be retained by Ms Murray "by way of security";
l) Under clause 4.3 there would be a "Pledge of Proceeds of Shareholdings" which would be expressed to be "as security for the First Payment, Mr Weinerman and the Defendant would be entitled to require that all shareholders of the Project Companies assign and pledge the share of profits and all other rights and benefits arising from their shareholdings in favour of Mr Weinerman and the Defendant who would be entitled to perfect such pledge by registration with the Company";
m) Under Clause 4.4, Mr Weinerman and the Defendant would have an early closing option,
n) Under Clause 5.1, Ekoplyn would give a number of warranties including that:-
i) at the Closing Date the project company would have obtained Production Licences for the Projects and all licenses, consents, approvals, certifications and authorizations or other supporting documentation necessary for the issue of the Production License, as well as all Land Rights required for the Project and entry into this Agreement does not violate the validity of such licenses, consents, approvals, certifications and authorizations;
ii) to its knowledge the Production License and any other Permits, all licenses, consents, approvals, certifications and authorizations or other supporting documentation as required by Greek Law which have been obtained up to date, would have been 10Wfully issued and obtained and would be valid and in full force and effect and all conditions of such permits and licenses have been fully complied with; and that;
iii) to its knowledge, the Company would have complied with any environmental legislation applicable to it and would have obtained any environmental licenses or permits necessary for carrying on its business which it had obtained to date and entry into this Agreement does not violate the validity of such licenses or permits; and that:
o) Under clause 7.3 Defendant and Mr Weinerman would pay Ekoplyn a bonus of €30,500 per project upon the issue of a decision to award a grant of 40% towards the cost of the project. In addition, Defendant and Mr Weinerman were obliged to provide to Ekoplyn by 31 August 2007 a letter of guarantee in the sum of €305,000 to secure its payment of the bonus to Ekoplyn.
(vi) Developments after the First Agreement was made
(vii) How the terms of the 2007 Agreements were disregarded by the parties
(viii) The Major Amendment to the 2007 Agreements so that Mr. Rinis became entitled to payments from the Defendant not provided for in the 2007 Agreements
(ix)The Credit Crunch
"after the 20.11. 2008, whoever does not reply to my letter to forget his investment in Greece I will sell the approvals/applications in order for me to be able to pay off my obligations and to avoid my personal destruction"
"in spite of the fact that no sums are payable in accordance with the  Agreements… efforts have been made throughout your cooperation to provide additional payments outside the scope of the agreements in order to provide you with working capital. To that end Mr Weinerman had agreed that he would try to supply [Mr Rinis] with a further sum of [€900,000] without any documentation to support that payments and based only on an oral agreement, to cover your working capital requirements. However the light of the current banking crisis, and as has been explained to you by [the Defendant] in person, it had not proved feasible to send that sum; however a sum; however a sum of [€450,000] has been sent to you, without documentation or any legally-binding obligation on [the Defendant's] part. Their efforts are continuing to find further funds, which they hope to be able to send you within the next few weeks.
Please also note that there are no grounds on which you are entitled to withdraw from the terms of your agreements with my clients and any attempts to do so will be met by immediate litigation.
I therefore trust that you will be able to respond by return with a clear withdrawal of the allegations contained in your letter dated 30 October 2008."
(x) The Further Amendments to the 2007 Agreements in the 22 November 2008 Agreement
a) by 24 November 2008 and before 23.59pm, Mr Weinerman and the Defendant either individually or together would notify Mr Rinis by phone, fax or email whether they would be able to deposit into his Greek account to be proven by a copy of the wired deposit details slip the sum of €3,831,400;
b) should the Defendant and Mr Weinerman fail to make the payment, then they would both agree that they would permit and allow Mr Rinis to proceed and sell 79 parks of the Non-connected islands portfolio for no less than €40,000 per park and 200 PV of the 409 PV Connected Islands portfolio for no less than €40,000 per PV;
c) the money which Mr Rinis would collect from the sale would be used to cover his immediate and near future project expenses and the debt which he was obliged to cover; and that
d) if Mr Rinis received for the sale of those projects more than those sums, then the additional money would be split between Mr Rinis and Mr Simos.
a) on 7 December 2008 explaining that according to the document they had signed, Mr Rinis "sold three companies with 79 applications and 200 of the applications in the connected islands. This was for a total sum of 3.831 million, this sum supposed to be paid to him in a way that he can cover all his expenses". Nothing in that email suggests that this was not a commercially negotiated arrangement or that the Defendant was in some way handicapped by the terms of any of the three 2007 agreements. No complaint about the terms of the agreement was to be found in an email from Mr Weinerman to Mr Rinis stating that "you absorbed the other 200 preparation in the connected islands, to finance with those EUR3.82m for the 82 …";
b) on 14 January 2009 when he and the Defendant asked her about the implications of the November 2008 Agreement which they had been "forced to sign", but significantly there was no suggestion in that email of a wish to rescind it or to resile from it or that they had been unduly pressurised into signing it; or more pertinently that they had done so as a result of any defect in any of the 2007 Agreements. Of course, the reason why, if that was the case, the Defendant was forced to sign was because he had taken on a responsibility to finance Mr Rinis but he then failed to do so; and it is not then suggested that he was forced to sign because of defects in the Claimant's services or in any of the 2007 Agreement;
c) in an email in early 2009 in which the Defendant refers to having agreed to sell 79 parks and 200 submissions in the Connected islands to Mr Rinis. This undermines the contention that the November 2008 Agreement was made under some form of duress or as a consequence of any defect in the 2007 Agreements or any negligence of the Claimant ; and
d) on 21 March 2009 Mr Weinerman emailed Ms Murray a table of the Non-connected island applications showing a division of the parks into 79 and 82.
(xi) The Post November 2008 Agreement Varying the 2007 Agreements and the November 2008 Agreement
"For the first time I will go on record and say that the way things have turned out. I conclude [Mr Rinis] is 100 per cent right to be angry, disappointed and furious with how things have turned out. All he ever asked for was your financial support when he would have needed it, and he would have been able to handle everything else".
(xii) The Silcio Negotiations
a) the price that Silcio proposed to pay would take account of the respective maturity of individual parks with less being paid for parks that had not reached a PPA and applied for a subsidy than for those parks that have completed the licensing stage of the development process;
b) the seller would complete all payments due to the developer for the licensing stage and the price would include payment for land rentals until the date of the signing of the agreement;
c) the seller would pay the PPC connection charges for each park;
d) the payment would be in instalments according to progress along the development process;
e) the price would be 1 million Euros per mw;
f) Silcio wanted a refund for any park for which an exemption decision was not issued or where the purchaser decided that the land was unsuitable.
"bureaucracy is very harsh in Greece, but we need to understand exactly the status of your applications to be able to assess the possible time schedule for the realisation of the projects and to estimate how many have a chance of materialising".
a) clause 5 would require that the purchase price be refunded for any application for which an exemption decision was not issued;
b) clause 6 provided that any part of the purchase price paid for a project would be reduced or delayed if the Purchaser decided that the land was or might be unsuitable for building or if zoning restrictions applied. The obligations of the seller to repay had to be backed by a bank guarantee;
c) clause 7 provided that the seller would be obliged to complete the licensing process including obtaining the grid connection agreement and the PPA;
d) clause 8 provided for payment in instalments including 22% related to the connection of the project to the grid after construction and on signature of the PPA and 16% on approval of the grant;
e) clause 11 gave the Purchaser the right not to complete in the event of a Material Adverse Change which was very broadly drafted;
f) all lease agreements up to the date of completion would have to be paid prior to completion.
(xiii) The Energetica negotiations
(xiv) Developments in 2010-2012 including the Demand for Payment of the Claimant's fees, the Termination of the Claimant's Retainer and the Fate of the Projects
V. The Retainer Issue
(ii) The Duty owed by the Claimant to Mr. Engel
a) The project companies would be OE entities as set out in Background Paragraph B and this was after advice had been given about the alternative SA companies;
b) There would be a large collection of warranties given by the Developer as set out in clauses 3.2 and 5.1;
c) There would be a variety of conditions precedent to be satisfied before the buyers would have the obligation to purchase the project company shareholdings on completion as set out in clause 3.6;
d) The right of the Defendant and Mr Weinerman to require that all shareholders of the project companies assigned and pledged the share of the profits and other rights and other benefits arising from their shareholding in favour of them;
e) The right of the Defendant and Mr Weinerman to rescind the agreement without incurring any liability to Ekoplyn; and
f) The provision that the Defendant and Mr Weinerman would appoint an additional party to purchase up to 1% of the shareholdings which would be bound by the Agreement.
(iii)The Duty owed by the Claimant to the Defendant
VI. The Breach Issue
(i) The Expert Evidence on Greek Law
(ii) "Know your client"
(iii) The Approach to the Breach Issue
"In short, in my judgment, as the law stands, any claimant who seeks substantial damages arising from a solicitor's negligent failure to give him proper advice must satisfy three separate conditions, namely by showing
(1) what advice in all the circumstances should have been given by a normally competent solicitor; and
(2) what action the claimant would on the balance of probability have taken if he had received such advice; and
(3) that, in the light of (1) and (2), the loss which he has suffered was in fact caused by the failure to give the relevant advice"
(iv) The Claimant's alleged failure to include a provision for the immediate appointment of a minority shareholder nominated by the Defendant in the First Agreement
"Either [Ekoplyn] or [Mr Rinis] shall hold at least 99% shareholding in any project company. [Mr Weinerman and the Defendant] shall appoint an additional party to purchase up to 1% of the shareholdings which party shall be bound by this Agreement"
"Production Licence Applications are to be made in the name of the special-purchase partnerships (..OE).. in which [Ekoplyn] and/or [Mr Rinis] and one of their Associates will be shareholders".
"shall be entitled to requires that all shareholders in the Project Companies assign and pledge the share of profits and all other rights and benefits arising from their shareholding in favour of [the Defendant and Mr. Weinerman] and [the Defendant and Mr. Weinerman] shall be entitled to perfect such pledge by registration with the Company".
"we have to put this [company] as a shareholder for the Greek companies, submitting RAE applications and the shareholders have to be put in place before the application (sic) are submitted and they have to be submitted this week"
(v)The failure to include a provision for the immediate appointment of a minority shareholder nominated by the Defendant in the Second and Third Agreements
(vi) The Failure to include a provision in the agreement requiring the use of an EE so as to permit the appointment of a minority shareholder without unlimited liability.
"We are buying it only finally when it is finished, when there is a licence. Then we replace it . But until this stage, I don't care"
(vii) The Agreements should have contained pledges which protected the totality of any claim that the Defendant might have in respect of his rights concerning the project companies.
"as security for the First Payment [namely €2,000 for each of the ten companies], [Mr Weinerman and the Defendant] shall be entitled to require that all shareholders of the project companies assign and pledge the share of profits and all other rights and benefits arising from their shareholding in favour of [Mr Weinerman and the Defendant] and [Mr Weinerman and the Defendant] shall be entitled to perfect such pledge by registration with the Company".
(viii) Matters on which the Claimant ought to have provided clear advice.
(ix) Matters which should not have been included in the three 2007 Agreements
i) Background B which provided that the developer and/or Mr Rinis or one of his associates would be shareholders of the project companies;
ii) the provisions in clause 2.1 that required Mr Weinerman and the Defendant to buy 100% of the shares if it was intended that he would hold 1% already;
iii) the developer's discretion in that clause as to the use of EE companies;
iv) Clause 2.2 in its final form as later substitution of a minority shareholder would cancel exemption applications;
v) Clauses 4.1 and 4.2 the provisions in respect of delivery and retention of statutory documents; and
vi) Clause 6.1(a) and its warranty concerning an existing Cypriot company.
"21. The Agreement was competently drafted and provided terms which operated in favour of the investor such as the list of conditions precedent before payment and the pledge over the share profit.
22. The agreement provided for a controlling system of the Defendant over his partner Mr Rinis.
23. By drafting the relevant contractual terms Ms Murray acted diligently and competently protecting the interests of her client, given the instructions that she had received to use the OE partnership structure.
24. I do not agree that the corporate system resulting from the Agreement that was drafted by Ms Murray resulted in Mr Ostrovizky having no control over his investment. The Agreement provided for Mr Ostrovizky to have control and his investment was protected in that he did not need to pay until various conditions precedent had been met. Given the fact that Mr Ostrovizky opted for a system where OE/EEs in Greek ownership applied for licence exemptions, there was no way that the agreement could have been structured better to protect Mr Ostrovizky's interests".
VII. The Causal Connection/ Loss of Profits Issue.
(ii) The Submissions
(iii) Is there a causal link between, on the one hand, the alleged negligent errors of the Claimant and, on the other hand, the Defendant's loss of profits claim?
"the sale of the shares, of the partnership, the shareholdings…on the basis of that Mr Rinis was endeavouring to do something in breach of his contractual obligation"
(iv) The Effect of the Defendant's failure to disclose documents and to give reliable evidence.
VIII. The Causal Connection/Expenditure Issue
a) Many of these payments would have been payable in any event even if the Claimant had not been negligent as alleged and so they are irrecoverable as wasted expenditure;
b) Other payments were made as a result of the promise of the Defendant to pay the expenses of Mr. Rinis even though under the 2007 Agreements, no such obligation was imposed on the Defendant and in respect of which there is no evidence that these payments were made as a result of the alleged negligence of the Claimant.
(ii) Sums which would have been payable even if the Claimant was not negligent
(iii) Sums paid as a result of the promise of the Defendant to pay the expenses of Mr. Rinis even though under the 2007Agreements, no such obligation was imposed on the Defendant and in respect of which there is no evidence that these payments were made as a result of the Claimant's negligence
a) The Kos Equipment and the Possible 50% share in the parks a sit is unparticularised and it is unclear as to why or how it is related to the alleged breaches of duty or negligence of the Claimant. In any event, there is no evidence to show that any ascertainable loss has been suffered; and
b) The fees of Ms Chronopoulou which are similarly too unclear as it has not been explained in evidence why they arose as a consequence of or related to the Claimant's negligence. There is much to suggest that these fees could wholly or partially have related to OW Energy and other services performed for the Defendant which are unrelated to the present counterclaim against the Claimant.
IX. The Quantum Issue on Loss of Profits Claim
(ii) The Defendant's case
a) 161 exemptions had been obtained and of those, 32 would or should be deemed failures to have achieved construction;
b) The value of those 32, which would be deemed to have failed to achieve construction, would be according to Dr Xenopoulos € 20,000 each giving a claim of €640,000; and
c) Of the remaining 129 which would have been ready for construction, 39 would have been in Crete with 90 on other islands. Their average value would have been € 100,000 thereby giving a value of € 12,900,000.
(iii) The Claimant's Case
a) The number of the relevant parks should be based on the November 2008 Agreement with the maximum number being 91 parks, namely the 102 exemptions in the trial bundle less 11 Kastoria parks;
b) The maximum value of each park which would be developed to construction should be assessed at €80,000;
c) Credit against this maximum value has to be given not merely for the sum of €32,500 per park accepted by the Defendant as being the sum due to Mr Rinis for each licence park, but also for the PPC connection charge which is about €15,000 per park. This leads to a maximum value of €32,500 per park being the difference between €80,000 and the total of the two credits of €32,500 and €15,000;
d) A deduction of 20% has to be made because tax that would be payable on the profits if actually obtained if the Defendant had been able to develop the park, bur no tax would be payable on the damages. This would leave a balance of €26,000 per park;
e) There has to be a discount of 75% for contingencies bearing in mind that there were a number of conditions that had to be met before a park could become fully licensed and any purchase price paid with many parks not reaching that stage; and
f) A further discount of 25% has also to be given for Mr Weinerman's interest bearing in mind that the shareholding in the Cypriot company was to be 75% to the Defendant and 25% to Mr Weinerman with the consequence that the Defendant could only recover 75% of the loss.
(iv) The number of parks which had received exemptions
(v) What is the maximum achievable purchase price for a fully licensed park?
(vi) What deductions would have to be made for expenses that would have been incurred by the Defendant?
(vii) Should there be a deduction for the tax that would be payable of 20%?
(viii) How many parks would have been connected and would have started producing electricity and making profits?
(ix) What deduction (if any) should be made because the Defendant only had a 75% interest with Mr. Weinerman, who was not a party having a 25% interest?
"… where a joint damage accrues to several persons from a tort, they ought all to join in an action founded upon it." (Lindley & Banks on Partnership, 19th Ed, (Sweet & Maxwell, 2010) at 14-35, citing Cabell v Vaughan (1669) 1 Wms. Saund. 291m)
"Where a claimant claims a remedy to which some other person is jointly entitled with him, all persons jointly entitled to the remedy must be parties unless the court orders otherwise."
(x) Credit for residual interest in the remaining parks
i) The maximum number of parks was 91 Parks (being 102 exemption decisions minus the 11 worthless Kastoria Parks).
ii) The maximum achievable purchase price for a full licensed park in 2009 would have been €80,000.
iii) In respect of each park that reached the connection stage:a) €32,500 would have had to be paid to Mr. Rinis; andb) €15,000 would have had to be paid for the PPC connection charge (which was a construction cost).
iv) Thus, the net maximum value per park would be: €32,500 (being €80,000 – [32,500 + 15,000]) and for 91 parks, that would have amounted to €2,957,5000.
v) Assuming a 75% discount for contingencies in respect of whether 91 parks would ever have realised their maximum value on sale: that would have been €739,375 (being €2,957,500 x 25%).
vi) Deduction of Mr Weinerman's 25% means a further reduction of €184,843.75.
vii) It is necessary to give credit for the residual interest of: €950,000, and so there is no loss suffered by the Defendant. Indeed, there would have been no loss if no deduction was made for Mr Weinerman's 25% interest.
X. The Quantum Issue on the Wasted Costs Claim
a) The Claimant was not negligent (see paragraphs 234-252, 258-262, 265-268, 274-276);
b) Even if the Claimant had produced the 2007 Agreements with the rights and remedies which it is said by the Defendant should have been included and advised in the way in which it is said by the Defendant that the Claimant should have acted, the Defendant would not have taken advantage of or used any of those rights and remedies (see paragraphs 253-256, 263, 269, 271 and 277) or followed that advice (see paragraphs 330-382);
c) The Defendant has not established that he has suffered any of the alleged loss of profits or incurred any of the alleged wasted expenditure (see paragraphs 383-384); and that
d) Even if the Defendant has established that he has suffered a loss of profits and/or incurred any wasted expenditure, this was not a consequence of the Claimant's negligence or any aspect of the 2007 Agreements but a consequence of a variety of other factors. These factors include (but are not limited to) (i) the Defendant's decision to promise to make payments to Mr Rinis to which he is not entitled under the 2007 Agreements which, as I have explained, his counsel has described in an understatement as "slightly naïve"; (ii) thereby removing the incentives set out in the 2007 Agreements for Mr Rinis to perform his duties so as to receive more than the small initial payments until he had performed his duties under each of the 2007 Agreements and thereby radically amending the entire basis of the carefully constructed agreements which protected the interests of the Defendant; (iii) the failure of the Defendant to pay the sums promised to Mr. Rinis at the appointed time and in some instances at all.
a) The payment of €11,000 on 29 January 2010 which is alleged to be an additional down-payment for the Rhodes projects but there is no evidence that this payment related to the Rhodes projects;
b) The claim for a payment of €72,000 on 24 February 2010 in respect of which there is no evidence as to what the balance of €32,000 related;
c) The payment of €125,000 on 30th April 2010 which allegedly relates to "projects appropriated by CR but which is not supported by evidence";
d) The payment of €149,410.07 on the 21st May 2010 which is alleged to be in relation to "Crete rents paid even through projects not operating and these projects were appropriated by CR" but this is not supported by any evidence;
e) The payment of €60,500 on May 2010 for PPC payments for projects appropriated by Mr Rinis but the evidence does not support the assertion that this was a payment "for projects appropriated by CR";
f) The payment of €300,000 on 28 May 2010 for "additional down-payment to CR for EPO approvals is unrelated to the First Agreement, the Second Agreement was the Third Agreement and is thus irrecoverable;
g) The payment of €30,000 on 17 June 2010 which is not a payment to Mr Rinis but a payment to Zetro Ltd a separate company of Mr Simos;
h) The payment of €124,545.15 for "PPC payments for projects appropriated by CR" but it not supported by any evidence;
i) The payment of €14,760 on 9th November 2010 for pre-invoice payments for "projects appropriated by CR" which again is not supported by evidence;
j) The payment of €31,500 on 9th December 2010 being payments demanded by Mr Rinis allegedly for the Forest Land Office in the sum of €62,000 for which Mr Rinis is alleged to have failed to supply invoices for those payments but the documents produced do not give evidence of "payments demanded by Mr Rinis";
k) The payment of €32,000 on 17th December 2010 for "see previous payment and in addition €1,500 general expenses demanded by CCR" There is no evidence to reprove the relationship between the payment of €31,500 on 9th December and the payment of €32,000 on the 17th December nor to any payment in addition of €1,500 "general expenses demanded by CR";
l) The payment of €72,437.17 on 4th January 2011 for PPC payments for five PV projects in Crete appropriated by Mr Rinis which is unsupported by evidence;
m) The payment of €42,269.49 "PPC payments for three projects in Crete appropriated by CR" which is not supported by evidence;
n) The payment of €18,450 for "PPC payment for pre-invoice payments transferred to CR but the invoices were not delivered by him" but this is not supported by documents;
o) €15,375 on 18th February 2011 for "PPC payments for pre-invoice payments transferred to CCR but the invoices were not delivered by him" but this is not supported by any documents.