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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Vellacott v The Convergence Group Plc & Ors [2007] EWHC 1774 (Ch) (31 July 2007)
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Cite as: [2007] EWHC 1774 (Ch)

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Neutral Citation Number: [2007] EWHC 1774 (Ch)
Case Nos: HC 01-02055 & HC 01-02056

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

Royal Courts of Justice
Strand, London, WC2A 2LL
31/07/2007

B e f o r e :

THE HONOURABLE MR JUSTICE RIMER
____________________

Between:
CHANTREY VELLACOTT
Claimant
- and -

THE CONVERGENCE GROUP PLC
CONVERGENCE GROUP INTERNATIONAL SA
ALAN STUART MACDONALD ROBINSON
GAIL FARRIN ROBINSON
Defendants

____________________

Mr Richard Jacobs QC and Mr Paul Mitchell (instructed by Squire & Co) for the Claimant
Mr Stephen Atherton QC (instructed by Brooke North LLP) for the Third Defendant, Mr Robinson
Mr Hugh Sims (instructed by Foot Anstey) for the Fourth Defendant, Mrs Robinson
The First and Second Defendants (both in administration) were not represented
Hearing dates: 8, 9, 13, 14, 29 and 30 March 2007

____________________

HTML VERSION OF JUDGMENT
____________________

Crown Copyright ©

    MR JUSTICE RIMER :

    Introduction

  1. This is an application by the claimant for so-called non-party costs orders against Mr Alan Robinson and his wife, Mrs Gail Farrin Robinson, who were formerly directors of both, but subsequently of only one, of the two defendant companies. The costs in issue total some £5.6m. The application is made under the jurisdiction conferred by section 51 of the Supreme Court Act 1981 (see also CPR Part 48.2). The background is as follows.
  2. The claimant, Chantrey Vellacott ("CV"), is a firm of chartered accountants. The first and second defendants, The Convergence Group PLC ("PLC") and Convergence Group International SA ("SA"), are former clients of CV (I shall refer to them together as "Convergence"). In May 2001 CV brought separate claims against PLC and SA for unpaid fees: £159,666.73 from PLC and £110,545 from SA. The response of each was to dispute that the fees, or a material part, were due and to counterclaim for damages for alleged professional negligence. The most significant element of the counterclaim was one which, by the time of the trial, was for some €100m said to represent the value of the lost chance of which CV's negligence had deprived Convergence (the claim had earlier been put as high as about £150m). Convergence had an alternative claim for wasted expenditure of some £15m and an additional, relatively modest, claim for the professional costs of putting CV's errors right.
  3. The claims and counterclaims were consolidated and their trial commenced before me on 23 October 2006. CV were represented by Mr Richard Jacobs QC, Mr John Taylor and Mr Paul Mitchell. Convergence was represented by Mr Michael Swainston QC, Mr Sean Brannigan and Mr Stephen Midwinter. The meat of the trial was the counterclaim and so Convergence opened the case. The trial was estimated to run until February 2007. Many witnesses were to be called. The documentation was enormous, occupying some 250 files including some 50 files of expert evidence.
  4. In the event, the trial lasted only 14 days or part days. After oral openings from Mr Swainston and Mr Jacobs lasting just over two days, Mr Swainston called Mr Robinson to give evidence. He was the principal individual behind the Convergence group (a group in which he, through a family trust, had the primary beneficial interest) and was Convergence's main witness. He was the driving force behind, and the decision maker in relation to, the commercial venture the subject of the counterclaim. Mr Jacobs cross-examined him for some nine days. At the conclusion of his evidence, Mr Edward Mercer, a solicitor who had acted for Convergence, was called by Mr Swainston and he was cross-examined for part of a day. At the end of day 12 (Thursday 9 November) his cross-examination was still not concluded, when the trial was adjourned until the following Monday week, 20 November. That break had been arranged some months before.
  5. On Friday 17 November (at the end of that week's pause) the directors of PLC (who included Mr and Mrs Robinson) appointed Stephen Goderski and Geoffrey Martin as joint administrators of PLC. On Monday 20 November, when the trial was due to resume, the directors of SA (who did not include either of Mr and Mrs Robinson, although they had formerly both been directors) appointed the same insolvency practitioners as joint administrators of SA.
  6. On 20 November I adjourned the trial until 23 November so as to enable the administrators to consider their position in relation to the litigation. Their stance on 23 November, when they were represented by counsel, was that they did not wish to continue with Convergence's counterclaim.
  7. As a result I made various orders on 23 November. I struck out Convergence's re-amended Defence and Counterclaim. I gave permission to CV pursuant to paragraph 43(6) of Schedule B1 to the Insolvency Act 1986 to continue their fees claim against PLC and SA. I then gave judgment for CV on those claims against: (i) PLC for £293,529.61; and (ii) SA for £136,304.36, both sums including interest. I ordered PLC and SA to pay CV's costs of the proceedings, including reserved costs. CV's costs were then estimated to be some £6m (although the most recent figure I have been given is £5,685,357.68, a figure which includes CV's costs down to 28 February 2007 but which is also stated not to be a definitive figure) and I declared that PLC and SA were jointly liable to make an interim payment of £2.5m on account of costs. I reserved for later decision the question whether those costs should be assessed on the standard or indemnity basis, the rate of interest on them and whether they should include CV's costs of a failed mediation in December 2003. The joint administrators did not oppose any of those orders.
  8. The reason for so deferring those further questions was because CV had no confidence of recovering much, if anything, by way of costs from PLC and SA, both by then in administration. They subsequently learnt from the joint administrators that the creditors - of which CV are the largest - would not receive a penny piece. Mr Robinson signed a statement of affairs in respect of PLC on 28 March 2007 showing that he expected it to realise assets of £10,252, with an estimated deficiency as regards creditors of some £4.12m (CV being included as a creditor in the sum merely of some £2.8m). Both PLC and SA were made the subject of compulsory winding up orders on 23 May 2007, and no distribution has been or will be paid to creditors. In the expectation that the corporate cupboard was likely to be fairly bare, if not as bare as that, CV also applied to me on 23 November to add as third and fourth defendants Mr and Mrs Robinson, against whom they wished to apply for a costs order under section 51 of the Supreme Court Act 1981. The basis for that was said to be that Mr and Mrs Robinson had controlled and funded the litigation and stood personally to benefit from it if it succeeded; they had promoted the claim through two companies which now emerged as insolvent; moreover the claim they had so promoted was not just speculative and opportunistic but was advanced dishonestly, as (so they asserted) was shown by Mr Robinson's cross-examination.
  9. By way of a fuller explanation, CV's position was that they had admittedly been negligent in the handling of one aspect of Convergence's affairs. But that would only entitle Convergence to claim the massive damages for which it was counterclaiming if it could prove a causal connection between the negligence and its claimed loss. CV's position was, so it asserted, that it was apparent after the conclusion of Mr Robinson's evidence that Convergence's case on causation was built on lies, being lies to which Mrs Robinson had lent her support in her witness statement. Mr Jacobs invited me at the time to infer that the appointment of the joint administrators of both Convergence companies was a direct consequence of the emergence during Mr Robinson's cross-examination that Convergence's case was dishonest nonsense and that Convergence recognised that its further pursuit was hopeless and would fail, with orders for costs against Convergence.
  10. That suggested inference has since received solid support in the shape of an advice on prospects that Mr Swainston and Mr Midwinter wrote during the week's pause in the trial following the adjournment on 9 November. That advice and certain other privileged material were (with the consent of the joint administrators, the privilege belonging to Convergence) put in evidence before me by Mr Robinson by way of support for his defence of the present costs claim, although CV's position is that it merely underlines its justification. Its essence was that Mr Robinson's performance as a witness had been poor, his evidence was likely to be held to be evasive and, on critical aspects, untrue and the case on causation had been shown to be hopeless. The advice was that the case was likely to fail and Convergence would have to pay CV's costs. The recognition of that costs liability was, so I was told by Mr Stephen Atherton QC (counsel for Mr Robinson), the basis on which the appointments of the administrators were made. He also told me that, had it been perceived that the case was going well, it would probably have been continued. The manifestation by then of its difficulties would not have come as a surprise to Mr Swainston. He had earlier pointed out the problems in a written advice he had provided on 15 September 2006 by way of a summary of his oral advice in three prior consultations. Nevertheless Convergence ploughed on until, on 17 November, it bowed to the inevitable. Mr Robinson chose not to exhibit Mr Swainston's September 2006 advice in his original round of evidence in response to the application, but CV's advisers quickly learnt that Mr Swainston had provided such earlier advice and it was eventually produced, along with earlier advice that had also been provided to Convergence since the start of the litigation in May 2001. Much of that material was made available by Davies Arnold Cooper ("DAC"), Convergence's solicitors in the litigation.
  11. As I say, CV have incurred some £5.6m in costs. They had been unable to obtain security for costs from Convergence, although they tried once (in late 2002) and failed and they had tried again (in 2004) but did not pursue it in the light of further evidence as to PLC's apparent financial solidity. They did not try again because PLC's balance sheet (PLC being the main funder of the counterclaim) showed enormous apparent net assets. On the first day of the trial, Convergence produced to CV its audited accounts for the year ended 31 December 2005, showing net assets of some £8m, an asset figure approximating to that shown in management accounts that PLC had produced to CV early in 2006 by way of demonstration of the claimed futility of any further application for security. That ostensibly healthy picture proved illusory. Less than a month after the production of the 2005 accounts PLC and SA entered administration on the basis that they were unable to pay their debts. The massive apparent net assets have evaporated. CV say that the 2005 accounts and management accounts conveyed a bogus picture and falsely averted what would otherwise probably have been a successful application for security. They were accounts for which Mr and Mrs Robinson, as directors of PLC, were responsible.
  12. Having regard to this, and the circumstances in which the trial collapsed, CV say that it would be nothing short of scandalous if they should be expected to be left to bear their own costs of their defence of Convergence's claim. They say that justice demands that they should be entitled to recover them from Mr and Mrs Robinson. They say that it was they who promoted that claim, being one that was floated, sustained and eventually perished on a bed of lies. At least by 2006 Convergence was being advised that the claim was unlikely to succeed; and on 1 June 2006 CV's solicitors, Squire & Co ("Squires"), had pointed out to DAC that the claim had no prospect of success and invited its discontinuance. The letter included a warning that if any costs order in favour of CV remained unsatisfied, CV would apply for costs orders against Mr and Mrs Robinson.
  13. Mr and Mrs Robinson chose not to be present in court on 23 November, but I made orders adding them as defendants and gave directions for evidence on the costs application that CV wished to make against them. That required CV to serve their evidence by 29 November and gave Mr and Mrs Robinson until 20 December to answer it. I fixed the substantive hearing to take place on 18 January 2007. As Mr and Mrs Robinson were not present, my order permitted them to apply to vary or discharge those directions, as I expected them to do.
  14. They did so apply, and on 20 December they sought an extension of three months for their evidence in answer. I declined to agree to that but did extend their time until 31 January 2007. In the meantime, CV had indicated that they would seek freezing orders against them, although that became unnecessary when they gave equivalent undertakings. They were originally given over 16 January 2007 but on 15 January were extended until after judgment on this application. Mr and Mrs Robinson also undertook to disclose details of their respective assets to Squires. That exercise gave rise to considerable contention and occupied much time, as a result of which on 1 February Mr and Mrs Robinson sought a further extension for their evidence in answer to the costs application. I extended their time until 19 February and fixed the hearing to take place on 8 and 9 March. In fact, it also required further hearings on 13, 14, 29 and 30 March, largely because of the flow of additional evidence during the course of the hearing. This is my judgment on that application. Mr Jacobs and Mr Mitchell (two of the team of three who represented CV at the trial) represented CV. As I have said, Mr Atherton, instructed by Brooke North LLP, represented Mr Robinson. Mr Sims, instructed by Foot Anstey, represented Mrs Robinson.
  15. The figure of £5.6m for CV's costs reflects that this was major litigation. Convergence's costs were, I understand, in the order of £4m. To explain the issues in this application, I must set out the background more fully.
  16. Convergence's counterclaim

  17. Convergence's counterclaim arose out of a project known as the Silk Route project (formerly referred to by the code name Marco Polo) by which it intended to design, build, own and operate a broadband telecommunications network centred in Athens and linked to mainland Europe. It was intended to provide capacity for very high speed data, voice and video services in Greece as and when those different services were deregulated. The aim was to have the system in place before the 2004 Olympic Games in Athens.
  18. In the event the project failed and was finally abandoned in 2003 because finance could not be raised for it. Convergence asserted that this was caused by CV's negligence. It complained that CV's duty was to advise it as to, and to implement, a suitable international group corporate structure for the project but failed to do so. It says the structure should have been in place by about March/April 1998, but it conceded that it was not practicable for CV to have established it before then. CV did in fact establish, or purported to establish, a structure for Convergence in March and early April 1998 but Convergence claimed: (a) that it was defective from an international tax viewpoint (a defect of which it learnt in September 1998), and (b) that its establishment also suffered from formal defects which were only finally corrected on 14 July 1999. Convergence claimed that from the outset of the purported establishment of the new structure it was in a state of continuing uncertainty as to whether it had been validly established. It said that CV's failure to deliver an appropriate structure by April 1998 was causally responsible for its subsequent failure to be able to sell the Silk Route project to investors. Its case was that so long as there was no structure – or at least a doubt as to what it was - there was no company in which it could invite investors to invest. That is the line that Mr Robinson asserted in his evidence, which was also to the effect that it was only when the structure was consolidated into a final form in July 1999 that he was able to instruct a financial adviser to raise money for the project; and it was agreed between the experts that any fund raising by way of the type of private placement that Convergence was proposing required the assistance of a financial adviser. It was also Convergence's case that March 1999 was the latest date for appointing a financial adviser in time to catch the market before its alleged decline towards the end of 1999 and into 2000.
  19. More specifically, Convergence complained, first, that CV's negligence caused the aborting of a proposed internet placement in April 1998 by which it intended to raise initial funding of some US$5m for the project. The proposal to have such a placing was postponed. No such placement was ever made and by October 1998 Convergence had abandoned the idea. Convergence put all the blame for this on CV's shortcomings in relation to the corporate structure.
  20. By October 1998 Convergence had learnt of an admitted defect in the new structure from the international tax viewpoint, had lost confidence in CV's advice on the question of the group's structure and had instructed PriceWaterhouseCoopers ("PwC"). PwC's advice was that the structure devised by CV was broadly tax efficient, subject to the defect just mentioned for which they proposed a solution. Convergence claimed, however, that it still remained uncertain as to the structure, whereas an understanding of it was said to be necessary before PwC's advice could be implemented. The logic of Convergence's position was that, having allegedly been conscious of uncertainties in the new corporate structure since October 1998 (or, on its internet placing case, as early as April 1998), it took it until 14 July 1999 to put the structure right, during which time it said the taking of its project to the market was held up. One of the features of the case is that throughout that long period there is not one letter in which Convergence mentioned to CV that its allegedly defective structure was the sole cause of the hold up in the progression of the project.
  21. Having said that, and the structure having been put into final form by 14 July 1999, Convergence instructed HSBC (in October 1999) and, later, Eurofin, a Greek company, as successive financial advisers. They made unsuccessful attempts to raise finance for the project. Convergence's case on that was that, by September 1999, the investment market for telecoms projects had peaked, was in decline and would not support the required fund-raising, which is why the attempts failed. Its damages claim was for compensation for its lost chance to launch the project in Greece. Its complaint was that CV's negligence had prevented it from going to the market earlier.
  22. CV's response was that Convergence's claim was a try-on (and, as I shall explain, was by February 2006 known by Convergence to be so regarded). They admitted they had been negligent in certain respects relating to the structure they had advised and implemented; and Mr and Mrs Robinson made the point that that admission was only made at the beginning of the trial. As regards the complaint that their negligence frustrated the internet placing in early 1998 CV said this was a late thought which only occurred to Convergence long after the litigation started (that part of the claim was only introduced by amendment); and CV's case was that, for various other reasons, Convergence was never even close to being in a position to launch an internet placing. Convergence was anyway only seeking to raise US$5m by such a placing, which would not have been sufficient to launch the project. That was always going to be dependent on raising further substantial sums from equity investors by way of a private placing. This is what Convergence's financial advisers, HSBC and Eurofin, later sought to achieve. CV said that there was nothing in Convergence's assertion that it was their negligence that prevented it from proceeding earlier in its attempt to raise such funding.
  23. As regards the claimed inability to appoint a financial adviser before 14 July 1999, the weakness of Convergence's case was said to be that it did in fact appoint one, or least considered and discussed the appointment of one, in the spring of 1999, and before the structural problems had been sorted out. CV's case was that the reason the project was not pursued more positively until after 14 July 1999 had nothing to do with supposed structural problems, but everything to do with the fact that Convergence had not obtained the licences necessary for the project and was not willing or able to proceed further with the project until there was more certainty on that front, which was only achieved in early June 1999. One of the most damning documents in the case was a report to the Convergence board prepared by Mrs Robinson in June 1999 which acknowledged that Convergence's project problems had been attributable to a variety of factors, which did not include alleged structural problems but did include the failure to obtain licences. CV also said that HSBC's attempts between October 1999 and May 2000 to raise funds did not fail because the market had changed adversely but because (a) the potential investors recognised that the project was flawed and (b) Mr Robinson was demanding too much for too little. Central to CV's case in this respect was that a key element of the project presented to investors by HSBC was the inclusion in the system of a 40GHz wireless local loop, whereas Convergence had no licence for it and there were serious problems with the technology. They said that Eurofin's subsequent attempts between November 2000 and July 2001 to raise funds for a, by then, refined and simpler project only foundered in July 2001 because Pirelli withdrew when it acquired a majority stake in Telecom Italia. Further attempts by Convergence to raise finance in late 2001 and early 2002 also failed.
  24. The litigation raised many factual issues, or would have done had it not collapsed. The central ones can be summarised as follows: (i) were CV negligent and, if so, in what respects; (ii) what was the degree of consequential delay in putting their mistakes right and was the whole of it to be laid at their door; (iii) why did Convergence's proposed internet placement not go ahead in March/April 1998; (iv) was this caused by any breach of duty by CV; (v) why did Convergence not proceed with a private placement by early 1999 when, as they claim, the market was still hot; (vi) was the failure to do so caused by any breach of duty by CV; (vii) had the internet placing and/or the private placement gone ahead in, respectively, March/April 1998, late 1998 or early 1999, did Convergence have more than a speculative chance of raising the funds necessary for the project; (viii) why did the project fail to raise funds when it did go to the market in 2000: was this because of market conditions and a changed investment climate; or was it because of problems inherent in the project combined with Mr Robinson's attitude over valuation issues and control; (ix) if the project had succeeded in raising funds, did it have more than a speculative chance of being the successful money-spinner that Convergence asserted? If Convergence established liability against CV under these various heads, then there were questions as to quantum.
  25. The present application

  26. CV assert against both Mr and Mrs Robinson that they personally controlled the pursuit of the Convergence counterclaim and stood to benefit from a successful outcome, that benefit emerging via the family trust of which they are beneficiaries and which owns the Convergence group. In addition, it was said that, at least towards the end of the litigation, they both funded the litigation. There is no dispute that Mr Robinson then funded it to the tune of £120,000; and a further £833,000 was provided by Amador Limited, a company owned 60/40 by Mr and Mrs Robinson which owns Coxland Farm in Devon where they live. As I shall explain, the authorities show that control, benefit and funding are or may be relevant considerations in the exercise of the exceptional jurisdiction under which claims for costs may be made against the directors in relation to failed litigation brought by their insolvent companies. There was, however, a dispute about whether, and to what extent, these considerations were made good against Mr and Mrs Robinson.
  27. Apart from these points CV also relied on what they asserted to be the promotion by Mr and Mrs Robinson of a dishonest case from the start. There was considerable debate about that as well, Mrs Robinson asserting that there was no basis for levelling such a claim against her since she was not, she said, in control of it. Mr Robinson faced more difficulty on this front, because he was undoubtedly the key man in this litigation from beginning to end, he was undoubtedly the person giving DAC their instructions and Convergence's case was wholly dependent on his evidence: without his input, there could have been no case. His original stance in this application, founded on the material he chose to put before the court, was that the Convergence counterclaim had always received positive support from counsel, Mr Brannigan, with the first negative advice being that of Mr Swainston and Mr Midwinter during the November 2006 pause in the trial, in response to which the boards of PLC and SA had then responsibly packed their bags and walked away. The fuller material which emerged during the hearing showed that to be a travesty of the position, although it can be said that there were some positive elements in at least certain of the early advices that were provided by Mr Brannigan. A feature of those advices is, however, that they did not deal with the basic factual question of whether Convergence would be able to prove that its omission to progress the project by instructing a financial adviser and going to the market by March 1999 was in fact caused by CV's negligence. It appears simply to have been taken as a given that it could do so, apparently on the basis of an assertion from Mr Robinson to this effect, with counsel's advice focusing mainly on the question of whether, had any such marketing exercise been embarked on earlier than it was, it would have raised funds – a question whose answer was made uncertain by the lack of licences.
  28. By 2004, however, when Mr Anthony Temple QC had been retained to advise Convergence, he flagged up the potential difficulties on the primary causation issue; and by December 2005 he had read documents (contained in CV's evidence for a forthcoming disclosure application) which were potentially destructive of Convergence's case and which caused him promptly to advise that Convergence needed to settle it. When Mr Swainston was instructed in his place in May 2006 (Mr Temple had to withdraw because an adjournment of the trial from June 2006 to October 2006 precluded his availability) he spelt out the causation problems in no uncertain terms so that, at the latest by 5 September 2006, Convergence knew that his advice was that the case faced serious difficulties on the facts: the problem was that Convergence's case was materially inconsistent with the contemporary documents. His advice appears to reflect the first application by any of Convergence's lawyers of a detailed consideration of Convergence's own documents (which are as voluminous as documents can come) with a view to seeing whether there was anything in the case it was seeking to make. It is a remarkable feature of the litigation that the Convergence case was pursued from 2001 to 2006 without anyone on the Convergence team reading its own documents in order to see if it could prove its case as a matter of causation – or, perhaps more to the point, to see if it contained anything which tended to disprove it.
  29. That omission is the more surprising because the causation issue, which was at the heart of the cross-examination of Mr Robinson at the trial, was always at the forefront of CV's defence to the counterclaim. Over four days in October, November and December 2002 there came before me applications by CV for summary judgment on their fees claim, for the striking out of parts of Convergence's counterclaim and (failing that) for security for costs against both Convergence and SA. Mr Brannigan represented PLC and SA. I entered summary judgment for CV for the modest sums of £1,600 plus VAT against PLC and £5,120 against SA, but otherwise refused CV's applications. My judgment, delivered on 20 December 2002, records at page 32 the submission of Mr Garland (then counsel for CV) that:
  30. "… there is no realistic prospect of [Convergence] being able to establish the necessary chain of causation at trial. He says that it is unclear that even by September 1998 [Convergence] had any project to sell, and that anyway no company had yet acquired any of the necessary licences for the proposed operations, and he says that the licences were necessary for the obtaining of finance."
  31. The response to that was that the expert evidence at trial would show that the absence of licences would not have prevented the raising of money for the Silk Route project in the market. But Mr Garland had put his finger on the key point – namely, did Convergence even have a project to sell as at September 1998 which they could take to the market? Mrs Robinson's June 1999 report tended to show that the answer was no, or at any rate not yet, the problems including the lack of licences. More generally, regardless of what the experts might say on this, there was anyway an obvious factual question as to whether or not Convergence could prove that the claimed structural problems were in fact holding up the progress of the Silk Route project to the market; and the apparently astonishing delay between the claimed awareness of the alleged defects and their final correction might itself be thought to speak volumes. I add that at the time of the summary judgment application the claim in respect of the failed internet placing formed no part of Convergence's case: that was only introduced by an amendment sought in 2003 (one refused by Master Price and, on appeal, by Lloyd J but which was allowed by the Court of Appeal). The argument turned, however, not on whether it had any factual basis but on whether it raised a statute-barred claim.
  32. CV submitted on this application that, as I heard oral evidence from Mr Robinson at the trial over some nine days, I should make an assessment of the extent to which he was or was not being truthful. CV's case was that his evidence was, on crucial matters, a pack of lies from beginning to end. If, they said, that assessment was correct, it would be highly material to the discretionary exercise of deciding whether, and to what extent, either or both of Mr and Mrs Robinson should be answerable for CV's costs or part of them. Mr and Mrs Robinson's stance was that I should not make any assessment of the soundness of the factual case that Mr Robinson sought to make good in his evidence, or at least that I should be wary of doing so, because he was just one of many witnesses who would, had the trial proceeded, have supported what he said. I cannot, so it was said, therefore fairly come to any conclusion on CV's assertions at this stage as to the honesty of Mr Robinson's evidence.
  33. Mr Swainston does not appear to have regarded those last considerations as precluding him from making the critical comments he did on the quality of Mr Robinson's evidence when he wrote his November 2006 advice; or from advancing the view that, in light of it, the case was likely to fail on causation. He did not suggest that any of the other witnesses whose witness statements showed they were proposing to sing the same tune could save the day for Convergence. Having considered the statements of those witnesses, which (in relation to the causation point) amount to little more than generalised assertions (Mrs Robinson's witness statement being in particular an essay of inaccurate, loose and unsupported assertions of little apparent evidential worth) it is obvious why Mr Swainston regarded the case as standing (or, as happened, irrecoverably collapsing) on Mr Robinson's evidence.
  34. In any event I regard Mr and Mrs Robinson's general point as mistaken. It is true I did not hear from all these other witnesses. That was because, at the conclusion of Mr Robinson's evidence, and in light of Mr Swainston's advice, Mr and Mrs Robinson joined in a decision to put PLC into administration, one followed by a like decision by the SA board. Those decisions recognised that the companies would incur costs liabilities they could not discharge. But I fail to see why, now that an application for costs has been made against Mr and Mrs Robinson, I should not make an assessment of Mr Robinson's evidence, which appears to me to be likely to be relevant at least to the question of whether any costs order should be made against him. He has given evidence, I heard it and I am in a position to assess it. His proposition that, because he chose to pull the plug on the case, I should wash my hands of any attempt to assess his evidence is, in my judgment, wrong. I propose therefore to embark on a review of his evidence, at least as regards the causation issue. I accept that any such review as regards Mrs Robinson will require special consideration, because she did not give oral evidence at the trial or on this application.
  35. In order for the review to be tolerably intelligible I must rehearse the general background to the litigation and travel through the key periods relevant to the question, 1998 to July 1999. Because of the massive documentation and the complication of the story the account is of a length in which I take no pride. But I consider that any review of Mr Robinson's evidence can only be fairly embarked upon if I relate the story reasonably fully.
  36. PLC - background

  37. PLC is a United Kingdom company. Its main office is at Burgess Hill, West Sussex. Until its recent demise it was ultimately controlled by The Broadband Trust, a discretionary trust of which Mr Robinson was the settlor, life tenant and principal beneficiary; and it was formerly ultimately controlled by Mr Robinson. He is in his 50s and has some 30 years' experience in the global broadband cable and telecoms industry, his initial experience being gained during some 13 years spent in the USA. He returned to the UK in 1982. This was a time when the Government was considering deregulating the television and telecoms markets. He saw this as an opportunity to put his experience to effect. Deregulation in the UK started with cable television and was furthered in 1991 when cable companies were also permitted to carry voice telephony.
  38. Mr Robinson founded PLC (under a different name) in 1985. It had four main business objectives: (i) bidding for and acquiring a franchise or licences to own and operate a broadband system in particular areas; (ii) system design, construction and installation of broadband cable telecoms systems; (iii) development of television and cable television services; and (iv) provision of advanced telecoms services. It operated as a holding company for subsidiaries in the telecoms industry, and underwent various name changes until it adopted its present name, The Convergence Group PLC, in June 1996. By 1996 it had a track record in these various objectives and had franchised areas in the UK covering more than 2.5m homes, which was achieved through various Robinson companies. By then Mr and Mrs Robinson were directors of PLC.
  39. CV's retainer

  40. CV's retainer by PLC and other group companies dated from about 1991. The partners most closely involved included Ralph O'Beirne, Dapo Ladimeji and Colin Heath. Mr O'Beirne provided corporate and valuation advice in relation to the acquisition of franchises and funding. Mr Ladimeji provided international tax advice. It was primarily Mr O'Beirne's and Mr Ladimeji's work which was subject of criticism in the litigation. Mr Heath provided UK tax advice and was in charge of the UK compliance side of Convergence's affairs. SA was incorporated in December 1996 and also became a CV client.
  41. Convergence's case was that CV became responsible to PLC and SA for the following tasks: (i) devising a new structure for the Convergence group which would facilitate outside investment in international projects, including - via a new intermediate holding company - investment in the Silk Route project in Greece; (ii) implementing or organising its implementation; (iii) preparing the valuations necessary for the transactions involved in the reorganisation; (iv) advising on the desirability or otherwise and the tax implications of a European Economic Interest Grouping ("EEIG") structure amongst the group companies engaged in the project; and (v) preparing a report to validate the structure when implemented. The case was that CV failed to perform these duties at all, or only performed them inadequately, so that they came up with a deficient product. The story begins in earnest in 1998, but I must first summarise the events of 1996 and 1997.
  42. The events of 1996

  43. As at November 1996 Mr Robinson owned all but one of the issued shares of PLC. PLC in turn owned several UK cable local delivery operator ("LDO") companies, including: (i) Convergence (Mid Sussex) Limited ("Mid Sussex"), and (ii) Convergence (East Grinstead) Limited ("East Grinstead"). Both Mid Sussex (which was developing a telecoms project at Burgess Hill) and East Grinstead featured in the Silk Route story. PLC also wholly owned Convergence Ventures Limited ("CVL").
  44. In late 1996 Mr Robinson transferred his personal tax affairs from KPMG to CV. He had a meeting with CV in November 1996 in order to discuss his then Greek project, a forerunner of the Silk Route project. This was when CV first started advising Convergence in relation to Greece. They discussed the need for a group structure for Convergence projects. It was agreed that CV were engaged in 1996 to provide (inter alia) international tax advice to PLC.
  45. Mr Robinson had a meeting on 5 November of which CV made a brief file note, item 4 of which was "Group structure/planning". Mr Robinson told Mr Heath that PLC would be bidding on 29 November 1996 for a franchise to supply telecoms services to the Union of Greek Shipowners ("UGS"). This was a project PLC had been discussing with Guinness Mahon Holdings Plc ("GM") since about 1994, and in respect of which in December 1996 SA and GM were to form an 80/20 joint venture. The project involved the building of a broadband data communications network in the Greater Piraeus area of Athens. Mr Robinson explained to Mr Heath that the joint venture would need to be carried out via a Greek company, a bid requirement.
  46. Mr Robinson also explained to Mr Heath that: (i) the Convergence group was undertaking various international projects; (ii) it intended to undertake two specific telecom projects in the near future in Greece and Russia; (iii) both projects would probably require the group to seek outside funding from investors; (iv) the group intended to undertake further international commercial projects as opportunities presented themselves; and (v) it therefore wished to be re-structured in a manner which was so far as possible (a) internationally tax effective in terms of revenue and capital growth, (b) attractive to potential investors, and (c) sufficiently flexible to allow the group to undertake further projects.
  47. Mr Heath wrote to Mr Robinson on 11 November setting out his initial thoughts on the appropriate group structure for the proposed overseas projects. He recorded his understanding that the group's proposals were first to set up a project in Greece and then to acquire an existing project in Russia. He understood the group intended to engage in further projects world-wide as opportunities arose. He had discussed the international tax aspects with Mr Ladimeji and proposed that the group should set up an offshore intermediate holding company in Cyprus to establish and acquire the offshore companies required to own/run each project as it arose.
  48. On 20 November Mr Robinson told Mr Heath there was some urgency to set up an appropriate offshore structure for the UGS tender and they discussed the possibility of using a Swiss company: Mr Ladimeji was to advise Mr Robinson on the tax implications represented by the alternatives. Edward Mercer, a partner in Taylor Joynson Garrett ("TJG"), solicitors, was advising Convergence in relation to the legal requirements of the tender. On 22 November the Geneva office of Loyens & Volkmaars ("LV"), international lawyers, wrote to Mr Ladimeji in response to his request for advice on the establishment of an off-shore structure, their advice being that the best alternative was a Luxembourg holding company with a Swiss branch. Mr Ladimeji relayed that to Mr Robinson by faxing him a diagram of the potential group structure, the basic theme being a structure in which the Convergence group wholly owned a Luxembourg company, which had a Swiss branch. The Luxembourg company would wholly own an operating Greek company and have (with GM) a joint interest in another Greek telecoms operator. Mr Robinson instructed Mr Ladimeji to arrange for the incorporation of a Luxembourg company that would be owned by PLC and would itself own the Greek companies engaged in the UGS project.
  49. CV then arranged with LV for the incorporation of a Luxembourg company. On 29 November Mr Robinson instructed Mr Ladimeji that it was to be called Convergence Group International SA (i.e. "SA"). By 4 December he had also instructed CV to co-ordinate the setting up in Greece of Convergence Communications of Greece EPE ("CCGE") as an SA subsidiary.
  50. SA was incorporated as a Luxembourg Societe de Participation Financiere ("Soparfi") on 12 December. Soparfi companies benefit from advantageous tax rates provided certain conditions are satisfied. One criticism of the revised Convergence group structure that CV later advised and implemented in March/April 1998 was that it involved the use of a subsidiary company whose status infringed one of those conditions and had the potential to prejudice SA's Soparfi status (this was the defect that was discovered in September 1998). SA's paid up capital was US$500,000, with 275 (55%) of its issued shares being held by PLC and the remaining 225 (45%) by New World Trustees (Jersey) Limited ("New World"), a Jersey company. New World was the trustee of the Broadband Trust, the trust in which Mr Robinson was a beneficiary, and it held its SA shares as such trustee.
  51. SA's original directors were New World, Morris Evans (New World's managing director), Peter Wilton and Mees Pierson Trust (Luxembourg) SA. Mr Evans and Mr Wilton were resident in Jersey, from which SA was to be managed. Paul Nash was an officer or employee. SA and GM submitted their joint UGS tender on 12 December.
  52. On 18 December the Secretary of State for Trade and Industry granted CVL an International Facilities Licence under section 7 of the Telecommunications Act 1984.
  53. On 20 December a board meeting of SA in Jersey resolved to appoint an attorney to see to the incorporation in Greece of CCGE as a 100% subsidiary of SA.
  54. The events of 1997: part one

  55. Mr Robinson met CV several times in early 1997 to discuss the group structure and his personal plans for assuming non-resident status. CCGE was incorporated as a 100% subsidiary of SA during January.
  56. On 11 March Mr Ladimeji sent Mr Robinson a two-page advice as to the circumstances in which an individual would be considered both not resident and not ordinarily resident in the UK for tax purposes and advised him that it would be important for him to have an employment contract in place before departing the UK. He advised that "It would be most sensible for the overseas employer to be [SA] even if a new holding company were to be subsequently formed." He repeated earlier advice that there could be significant advantages in having the offshore company as the ultimate group holding company.
  57. On 21 March Mr Ladimeji produced a "Tax Report" for Mr Robinson, sub-headed "Plans for Going Offshore". This addressed Mr Robinson's personal tax status together with the implications for the structure of the Convergence group. It explained what had to be done (and not done) in order to ensure that Mr Robinson would not be regarded as resident in the UK once he had departed the UK, as was his intention. The report suggested, in part D, headed "Business Implications", that it would probably be most appropriate to re-arrange the Convergence corporate structure so as to make SA the group holding company, which is what ultimately happened. It further there said that "Corporate restructuring will probably be required in order to facilitate the introduction of external investors and the structure will need to be sufficiently flexible to allow the external investor, to some extent, to 'mix and match' which companies or activities he/she would wish to invest in." It proposed that the restructuring might take place in two stages: "an interim stage whereby a new holding company is put in place and which happens fairly soon, and a final stage where there is a wide scale reallocation of companies, would take place shortly after April 1998 and after [Mr Robinson] receives confirmation of his non-resident tax status." In section E, "Tax Opportunities", Mr Ladimeji advised that "This would be an appropriate time to engage in major restructuring of one's business as there would be no tax constraints."
  58. On 24 March Mr Robinson wrote to Mr Ladimeji thanking him for his recent efforts and recording his understanding that (inter alia) CV were going to complete their papers on the re-organisational structure of the Convergence group "with a view to moving the Master Ownership offshore to facilitate a focus of activities in Greece and the Middle East (and USA)" and with regard to SA's employment offshore of Mr and Mrs Robinson. Mr Ladimeji was also going to contact DFK Hellas Ltd in Athens (Mr Criton Tzavellas), Greek accountants, with a view to the possible formation of a Cyprus Master company and was to give Mr Robinson his "Advice on critical path actions and list all critical dates/decisions."
  59. By now Mr Robinson knew informally (it was confirmed in April), that the SA/GM tender for the UGS project had not succeeded and that the contract had been awarded to OTE (the incumbent state-owned and operated Greek telecoms provider that formerly had a monopoly in Greece in the telecoms field). SA and GM (as SA's financiers) were nevertheless still keen to press forward anyway with a project in Piraeus, which they were free to do.
  60. On 2 April Mr Ladimeji sent Mr Robinson a "first draft of your planning schedule done as a path analysis." It was directed at showing the steps to be taken to move Mr and Mrs Robinson's residence offshore and, once this was completed (in April 1998), to implement a new corporate structure (which was to be implemented after 5 April 1998), following which the final step was "to introduce outside investors." The scheme reflected that the new structure to be so completed was to be decided upon during the tax year ending 5 April 1998. On 3 April Gail Markham of PLC sent Mr and Mrs Robinson draft contracts of employment with SA. Mr Robinson was to be, and became, SA's chairman and chief executive officer. Mrs Robinson was to be, and became, SA's Group Operations Director. They were appointed directors of SA at a board meeting held in Jersey on 3 April, when the board resolved to enter into the service agreements. Mr and Mrs Robinson assumed non-UK residence as from 6 April 1997 and remained non-resident until 2004.
  61. The Convergence projects in UK and Greece: the Silk Route project

  62. The Greek Silk Route project occupied Mr Robinson's plans following SA's unsuccessful tender for the UGS project. He also had current projects in the UK. I have referred to PLC's subsidiary LDO companies, three of which had respectively acquired licences from the Independent Television Commission ("the ITC") for the provision of cable services to Haywards Heath (the franchise area for which included Burgess Hill), East Grinstead and Yeovil. These services would not simply be telephone voice services, but involved a wider package, including television and interactive services. The licences had been sought on the basis that there would be a build-out in the franchise area by using cable connections. Convergence had, however, become enthusiastic about the concept of instead providing these services by a wireless technology. Use of such technology would save the high cost of installing wire infrastructure, including the cost of digging up roads in which to lay it. The technology required a network of connectivity using a so-called Microwave Video Distribution System ("MVDS"), an industry term for technology also known as a Local Microwave Distribution System ("LMDS"). These terms were generally applicable to systems incorporating state-of-the-art wireless transceivers operating at a frequency spectrum higher than 10GHz, the favoured frequencies being 28GHz or 40GHz. Mr Robinson's attention was focused on the use of the 40GHz spectrum. The technology could be used for TV, multimedia and telecoms services. By 1997 it was regarded as the modern way for terrestrial delivery of multi-media, including television, data, internet and telephony. Signals from a transmitter mast are converted to the correct specified frequency and transmitted by directional antennae over a defined geographical cell. For two-way systems – enabling the delivery of telephony and internet services - the customer is provided with a transmitter/receiver antenna and a data interface unit. An MVDS or LMDS is to be contrasted with a Multipoint Microwave Distribution System ("MMDS"), the term generally applied to wireless systems operating at spectrums below 10GHZ, typically 2.5GHz, which could be used for television services. These systems had the advantage that they could cover large areas by reason of the combination of the lower frequency range and the higher transmitter power. By contrast, an MVDS or LMDS could only cover smaller areas because of their higher frequency and lower transmitter power.
  63. Mr Robinson's vision was not just to use this technology in Sussex and Somerset, but also in Greece for the purposes of the Silk Route project. In the event he was unable to achieve his ambitions in Sussex, Somerset or Greece. By 1997, however, 40GHz was an integral part of his vision.
  64. The core of the Silk Route project involved bringing broadband capacity to Greece. Convergence had perceived a growing demand within the Greek market for a method of deploying multiple communications services to business and residential customers that offered both choice and value. The population of Greece was some 10m, with 6m living in greater Athens, the target area. Convergence had by then had some two years' experience of planning and researching a Greek operation and had established valuable connections there.
  65. The Silk Route project required a source in Greece of international broadband capacity. Under OTE that capacity was limited and expensive. The project varied in its make-up at different stages, but (looking ahead somewhat) by October 1998 it had developed to a concept said to comprise three elements. The first element was international connectivity to Athens via a submarine cable and/or satellite link, with the earliest emphasis being on a cable connection. The second element was the establishment of an International Data Centre, or teleport, serving users of on-site hosted servers, data storage equipment and managed offices and also certain substantial "Access Parties". The submarine cable would be linked to the teleport, from which Convergence planned bulk sales of the cable capacity it brought to Greece, with the terminal landing station being sited in the basement of the teleport. The teleport would also constitute a self-standing business centre, which could make use of broadband capacity from anywhere. It also constituted a convenient landing point for other cables. The third element involved the distribution of broadband services via a local loop in Athens. The cable and teleport would provide income in themselves but more income could be generated by the distribution within Greece of broadband services. The original plan was for this to be done via a network of connectivity in Athens of an LMDS of state-of-the-art wireless transceivers operating at 40GHz.
  66. The events of 1997: part two

  67. On 25 July Mr Ladimeji faxed Mr Robinson advice about his personal residence and the corporate structure. As for the corporate structure, he advised first that there was no need to administer SA from Luxembourg, it was merely necessary for it to have its registered office there. He advised that the most appropriate structure was to have SA at the top, with intermediate holding companies below it: a Cyprus company for all activities in the Middle East and Central and Eastern Europe; another company for European activities; and a third for US activities. He said that "[o]ne of the main benefits is that this will allow outside investors an easier choice of which ventures they want to join and would also allow you greater flexibility in your own capital and borrowing operations. Not least this structure would make tax planning and acquisition and disposals much easier and more effective."
  68. Mr Robinson had a meeting with Mr O'Beirne on 13 August and followed it with a letter of 14 August. He raised a complaint about CV's fees, expressing "fundamental concern about the tax bills." The letter imposed some pressure on CV to progress the plans for the new structure. Mr Ladimeji was away, but he had returned by 29 August when Mr O'Beirne forwarded copies of Mr Robinson's letter to him and Mr Heath. He said in his accompanying memo that "We need to come up with a detailed plan to complete the group re-structuring including dates and an estimate of costs to complete."
  69. By 13 October Mr Robinson was interested in participating in Project Oxygen, a venture being promoted by CTR Group Ltd ("CTR"), a New Jersey company. Project Oxygen was a worldwide broadband connectivity project aimed at providing a new type of network to support a super-internet. The plan was to build a global system ("the Project Oxygen Network") being a high-speed, self-restoring network eventually comprising up to 38 transmission loops with up to 265 terminal points in up to 171 countries and locations, which could be accessed from nearly every country and territory. The project would include the laying of a submarine cable to Athens which would provide the connectivity essential to the first element of the Silk Route project. Mr Robinson registered his proposed attendance at a Project Oxygen Information Meeting due to be held in Las Vegas in December 1997.
  70. On 28 October Mr Rosewell (a non-executive director of PLC) had a conversation with Mr Ladimeji. Mr Rosewell reported that Mr Robinson was "particularly concerned to have some plans for merging [PLC] under [SA]." On 4 November Mr Rosewell had a meeting with Mr Ladimeji, who outlined the steps by which SA could become the group holding company, the further contemplation being the possibility of forming three or more intermediate holding companies (perhaps regionally, for Europe, the Middle East and the USA), which "would offer scope for individual/additional shareholders."
  71. At about this time PLC gave a demonstration to the ITC of MVDS 40 GHz wireless technology. It carried it out as part of a test programme at Burgess Hill (which was within Mid Sussex's franchise for Haywards Heath). The ITC was impressed. That test was part of Phase 1 of the Burgess Hill programme and it involved the development of what Convergence referred to as an Internet Protocol Local Multipoint Delivery System ("IPLMDS") (an alternative description of LMDS equipment) test site. Phase 2 would be a Proof of Concept exercise with revenue producing customers.
  72. On 14 November Mr Ladimeji sent Mr Robinson his advice as to the steps by which SA could become the holding company of PLC. They were as follows: (i) the starting position was one in which Mr Robinson owned 100% of PLC, which in turn owned 55% of SA, the remaining 45% being owned by "an offshore trust"; (ii) a Jersey company ("Jerco") would be set up and would issue bonds to PLC in exchange for PLC's 55% holding in SA; (iii) Jerco would acquire Mr Robinson's shares in PLC in exchange for its own 55% holding in SA plus notes entitling Mr Robinson to further shares in SA to be issued so as to reflect the greater value of PLC as compared with a 55% holding in SA; (iv) Jerco would transfer the PLC shares to SA in consideration of an assumption by SA of the obligation under the bonds; SA would also issue the promised further shares to Mr Robinson; (v) SA would set up an intermediate holding company to which it would transfer the PLC shares in exchange for shares in the intermediate holding company; and (vi) SA would charge PLC a management charge, the value of which would be used to discharge the bonds. The end result would be that Mr Robinson and the trust would own SA, which would own the intermediate holding company, which would own PLC. It is to be noted that step (v) would have the consequential effect of bringing CVL (at that stage a PLC subsidiary) below the intermediate company, of which it would be a sub-subsidiary. Mr Ladimeji's reference to the "offshore trust" was to the Broadband Trust. He ought more accurately to have referred to the original owner of the 45% holding in SA as New World, the trustee.
  73. An executive committee meeting of PLC was held on 25 November to consider several matters, including "the Group structure and tax planning". Mr Robinson attended it. He did not give any instructions at that stage for Mr Ladimeji's advice to be implemented. In its counterclaim Convergence advanced no criticism of CV for not implementing it before April 1998.
  74. CVL signed a Memorandum of Understanding ("MOU") on 10 December with CTR. It recited that CVL intended to access the Project Oxygen Network from England and to participate with CTR and other like "Access Parties" in the implementation of the network from England. The MOU did not add up to much in concrete legal terms, being essentially a memorandum of the parties' statements of intention. On the same day CCGE signed an MOU with CTR, CCGE intending to access Project Oxygen from Greece. Mr Robinson went to Las Vegas in December to attend presentations in relation to Project Oxygen.
  75. Events from January to October 1998: the internet placing case

  76. The story starts in earnest in 1998 when the proposed internet placing was being considered. It was first considered even before the re-structuring of the Convergence group was effected. Mr Robinson said that by early 1998 the technical and practical aspects of the Silk Route project were being advanced. He needed outside funding to go forward. He wanted to involve Greek investors in the project, in particular expatriate Greeks in Canada, South Africa and Australia. He had in mind raising initial funds by way of an internet placing. This involved placing a prospectus on a website controlled by a reputable webmaster, preferably a banking house, which would house and manage the server. He claimed, but CV disputed, that Barclays Bank in Gibraltar agreed to house and manage the server in Gibraltar, the issuing entity for the purposes of an internet placing being treated as resident in the place of residence of the server. There was no evidence that Barclays ever did so agree, and the weight of the evidence was that it never so agreed. The location of the server was the key to regulatory considerations.
  77. Mr Robinson said that it was planned to raise only a relatively small amount of investment by means of the internet placing – perhaps US$5m, which he called "seed money". Further equity and debt was to be raised as the project progressed. He recognised that the major funding would have to be raised by a private placing and that the proposed internet placing was not critical to the financial future of the project. However, he said it was important commercially, in order to demonstrate third party interest in the project and to stop all the funding being borne by the group at as early a stage as was possible. Mr Robinson said the group foresaw three stages to fund-raising after the initial internet placing. The first involved a listing of CVL on the Athens Stock Exchange (although it appears such a listing was not in fact considered until the spring of 1999). This was to be followed by a private placing or an IPO by the intermediate holding company. This was in turn to be followed by high yield debt and by an overall public listing on NASDAQ or EASDEQ. Of these stages, Mr Robinson conceded that the Athens Stock Exchange listing was not critical to funding, although it was a commercially desirable part of the operation. His position was that he wanted the advice on the international structure to be finalised so that the group could proceed with these fund-raising exercises.
  78. Mr Robinson had a meeting with Mr Ladimeji and Mr Heath on 15 January regarding group structure. He said he brought them up to date with the group's plans in relation to the project. He told them the group was developing the MVDS technology with a 40GHz bandwidth for the purpose of local connectivity in Athens. He told them about Project Oxygen and the group's physical point of presence in Athens. He told them the group would be making use of CVL's UK International Facilities Licence to provide that international connectivity and a landing facility for Project Oxygen's global fibre network. He explained that this would involve negotiating with OTE to connect to its submarine cable at Crete if Project Oxygen landed in Crete or Cyprus rather than mainland Greece. He said he referred to the Greek end of the group's project as "Project Farpoint" and to the UK end of it (at Burgess Hill) as "Project Nearpoint". He told them the group would be seeking funds "this year" and that the target date for securing initial funding was February 1998. He said he asked them to confirm within 10 days what information was outstanding with regard to the restructuring. He explained that funds were to be raised through an internet placing in March/April 1998 and through a larger fund-raising exercise towards the end of the year. Mr Robinson said he also raised with CV the use of an EEIG for the project, which he wanted CV to consider. An EEIG is a vehicle for promoting co-operation between European enterprises. It enables members to benefit from the combination of activities whilst retaining their own legal and economic independence. It owes its origin to EC Regulation 2137/85. An EEIG has the legal capacity to enter into contracts, to act in its own name and to sue and be sued.
  79. Mr Heath's file note of this meeting consisted of a series of manuscript jottings. They recorded that Mr Robinson referred (inter alia) to (i) the use of MVDS technology in relation to "Nearpoint", a reference to the MVDS tests being carried out at Burgess Hill, part of a Convergence programme known as WintraNet; (ii) to "Silverstone" being the "only supplier in Europe", which I find referred to components for the MVDS technology; (iii) to a plan to deliver a bi-directional system by 2000; (iv) to Project Oxygen, a submarine cable, and Greece; (v) to the fact that he was "now planning ? public offering 3/4/98," which I find referred to the proposed internet placing; and to (vi) the subject of EEIGs. It contained the following: "? Next week – offer; ? resolve by February; ?£1.5m in cash; £? Debt."
  80. As for the "Silverstone" reference, Mr Robinson raised at this meeting the subject of two companies: Silverstone Electronics Limited and Silverstone Telecom Limited. They were technology and engineering companies based in Milton Keynes which had run into financial problems, but which Mr Robinson had identified as capable of supplying technology crucial to the 40 GHz systems on a commercial basis, namely transmitter and receiver components. Convergence had been dealing with them. It later acquired these companies, or their assets, for what Mr Robinson called a relatively modest amount. In the event the companies could not deliver and they went into liquidation in 1999. But Mr Robinson also said that at no stage was Silverstone the only source of the relevant parts: Philips, Marconi, Ogier, Millitech, Hughes were other sources. Mr Heath's note continued with various jottings in relation to "Farpoint" but recorded little which afforded any real clue as to what was said about Greece. The note contained no narrative description of what particular advice or instructions Mr Robinson was seeking from, or giving, CV.
  81. Mr Ladimeji also made a note of the meeting. It opened with the heading "Project Nearpoint" (ie Burgess Hill) and referred to the MVDS 40GHz technology being used there. It referred to Project Oxygen's "global fibre network" and to the proposed use of CVL's International Facilities Licence. It concluded the "Project Nearpoint" section with the words "Target date:- February." That appears to be in line with Mr Heath's note. Under the heading "Project Farpoint" Mr Ladimeji noted simply "negotiate with OTE to connect to submarine cable – seeking funds this year." He concluded the note by writing "Check what info o/s for restructuring – 10 days – 25 January."
  82. On 19 January Job Maats produced the first draft for the proposed internet placing. He is Dutch and had a background in financial services, having worked for Citibank in Greece. Mr Robinson had met him in December 1997 at the Project Oxygen presentation in Las Vegas. It is he who had been the inspiration of Mr Robinson's ideas (a) to have an internet placing and (b) that there were potential benefits by using an EEIG as a structure by which the Convergence group might exploit the Silk Route project.
  83. On 22 January Mr Robinson wrote to Mr Bairactaris, a Greek lawyer acting for Convergence. He said:
  84. "… we now need to move forward and make formal applications for Data and/or CATV [cable television] licences.
    We have continued our development work on producing an 'end to end digital bi-directional MVDS (wireless) network' and are currently operating a trial/demonstration network in the UK. We now need to move on and acquiring [sic] licences as part of the plan.
    I would be grateful if you could investigate the requirements of the above licences such that we can have a meaningful discussion when we return to Greece."

    That records the importance Mr Robinson attached to licences. Without them there could be no project. Throughout his oral evidence, however, Mr Robinson played down their importance, often referring to them as a "process" and conveying the impression that their grant was a matter of formality and time. That was an oversimplification, and whatever Mr Robinson may have said at the trial, at the time he was saying and writing very different things.

  85. On 26 January Mr Robinson had a telephone conversation with Mr Heath. He wanted advice on whether Gibraltar would be a suitable jurisdiction for an intermediate holding company to act as the fund-raising vehicle in a private placing for the Silk Route project. The Gibraltar idea had come from Mr Maats, the then idea being to have an internet placing. A further idea was that the Gibraltar company would fund a proposed EEIG, which would itself have contracts with a Convergence company and with another entity, Alcatel, which would be a party to the supply and development of the MVDS.
  86. Mr Heath conveyed the matter to Mr Ladimeji for his comments. His note recorded that, since the meeting on 15 January, Mr Robinson had spoken to Mr Maats about his plans for 'Farnet' [sic: on 15 January it had been "Farpoint"]. Mr Maats apparently favoured Gibraltar for the "private placing", and Mr Heath's note showed he understood that to be an internet placing. His note recorded that the "Gibraltar coy to fund EEIG which would have contracts with Alcatel, Convergence etc and would have MOU (?)."
  87. On 2 February Robert Clinton of Clintons Medtrust Group Ltd ("Clintons"), a Gibraltar company, wrote to Mr Ladimeji in response to his inquiry, telling him that Clintons could assist in setting up a Gibraltar company. His letter also said that Clintons could assist with "the personal tax residence in Gibraltar". Mr Robinson had by then been considering establishing a residence there. Mr Ladimeji reported to Mr Robinson on 5 February. He provided comparisons of the tax regimes for companies in Cyprus and Gibraltar and as places to have a personal tax residence. He advised that "One of the major issues for the company would be the fact that Cyprus has a good network of double tax treaties whilst Gibraltar has not." He explained that each jurisdiction had several types of company for tax purposes, including exempt, offshore and resident companies. On 10 February he sent further fax advice to Mr Robinson. Its essence was that he understood that Mr Maats (whom he referred to as "your banker") wanted to do the internet placing out of Gibraltar, but he wished to advise Mr Robinson that he did not need to use a Gibraltar company for this and that to do so would not necessarily be cheaper.
  88. Mr Robinson then had various meetings in Gibraltar on 12, 13 and 14 February. On 12 February he met Andrew Haynes, a Gibraltar barrister and partner in the firm of Haynes & Trias, at which he outlined the background to the Convergence group, explained the WintraNet system and (as Mr Robinson later summarised it in a fax to Mr Mercer on 17 February) "our activities in Greece leading up to the establishment of the proposal of Marco Polo [the Silk Route project] and the Internet placing (MPIP) through a Gibraltar plc." On 13 February Mr Robinson had a meeting with Keith Lawrence, which Mr Haynes had arranged. Mr Lawrence was a former partner of Arthur Andersen and was by then an independent chartered accountant specialising in tax matters in Gibraltar. He was also introduced by Mr Haynes to Guy Stagnetto QC, who was said to be a key figure behind the Gibraltar Government. Mr Lawrence and Mr Stagnetto were both regarded by Mr Robinson as people who could provide assistance in relation to the project. On 14 February Mr Robinson met Michael Llamas, an English and Gibraltarian barrister as well as being a Parisian avocat. Mr Robinson had been advised that Mr Llamas "would be useful in identifying at an early stage the legal battles which may necessarily be required with respect to OTE's use of dominant position in Greece and inhibiting the progress of Marco Polo's landing sites for the Karina Cable and Project Oxygen."
  89. The outcome was that Mr Robinson did not give Mr Haynes any specific instructions at that stage, although Mr Haynes's understanding was that he might do so later. On 16 February Mr Haynes wrote to Mr Robinson referring to the various meetings, and recording that "Should you wish to proceed our instructions are as follows:" They fell under five heads. The first was to advise on the establishment of "a Gibraltar registered plc to generate investments pursuant to an Internet placing." The second was to advise "on the establishment of an EEIG to be registered in Gibraltar or elsewhere in the EU." Mr Haynes described the object of the EEIG as being "to undertake one or all the telecommunications projects identified by your company for realisation in Greece: (a) Submarine cable link Athens, Crete, Venice (b) Project Oxygen (c) Wintranet." That summary appeared to make no reference to the proposal to establish a teleport in Athens. The third was to "recommend professional advisors to assist both in establishing the above structures [by inference, the Gibraltar plc and the EEIG] and further to provide management and/or board members as may be required." The fourth was to "plan 'exit route' for investors to scheme." The fifth was to "advise on tax planning advantages available to include prospects for Captive Insurance etc." He continued:
  90. "In light of your requirement for an early 'placing' we propose that all parties work towards preparing the prospectus to be issued by the Gibraltar Plc. This will serve to focus the opinions and advice of the various contributors: Gibraltar: Keith Lawrence (KL), Guy Stagnetto (AVS), myself (AJH) – London/Paris: Ted Mercer (RM), Michael Llamas (MLL) and Convergence.
    I note that you have a 'blueprint' of the 'Mems and Arts' which you would like to see incorporated into the Gibraltar Plc. Please forward as soon as possible."
  91. Three things are to be noted about that. First, there was apparently no role for CV in what Mr Robinson had been discussing with Mr Haynes. Second, it is obscure how the proposed "Gibraltar Plc" was to fit in with the restructuring exercise upon which CV were advising. Third, that as Mr Robinson had indicated he wanted an "early" placing it was necessary to make a start on the preparation of a prospectus, which would require a multi-party contribution. At no point thereafter, I find, were any steps taken to draft a prospectus for an internet placing. The first draft prospectus ever produced only emerged in October 1998, after the idea of an internet placement had been abandoned.
  92. On 17 February Mr Robinson sent Mr Mercer a copy of Mr Haynes's letter and explained the background to it. He continued:
  93. "You will note that Andrew [Haynes] is suggesting that the MPIP be a foundation document around which usefully we can determine the relationship of all parties, and to this end, I would like to make a supreme effort to have a more comprehensive draft of the MPIP completed by the end of the week.
    Following on from our conversation today, I know that you are very busy preparing the list of activities to be achieved by Silverstone and were also going to cast your mind to the positive arguments for moving the Project Oxygen management centre from Cadiz to Gibraltar. I appreciate, therefore, that you are already extensively committed in matters relating to Convergence (as well as to your other clients) and therefore, Job [Mr Maats], Gail [Mrs Robinson] and I will attempt to progress the MPIP at this stage.
    Furthermore, as our legal activities are on the substantial increase, now would be a good time to review the matters relating to fees and future projected costs for this and other projects as we do not wish to fall out over such minor matters as money."
  94. It is not clear to me that in the first quoted paragraph Mr Robinson accurately summarised what Mr Haynes had said in relation to the prospectus for the proposed placing. But, as I have said, despite his expressed good intentions in relation to its drafting, nothing happened to that end.
  95. On 26 February Mr Maats wrote to Mr Haynes in advance of a meeting with him scheduled for the following Friday (either 27 February or 6 March) to be attended by Mr Robinson, Mr Lawrence and Mr Maats. He raised various regulatory concerns which presented potential obstacles, including ones of timing, to the proposed internet placing. It is worth quoting what he said:
  96. "1) Is it realistic, within the timetables and the framework set by Project Oxygen for a Gibraltar Plc to comply with the EU Second Investment Directive requirements and thereby being capable of offering the securities of the Gibraltar Plc to EU investors at large? How would Gibraltar's interpretation of the Second Investment Directive differ from the UK's interpretation of the Second Investment Directive i.e. the Public Offers of Securities Regulations 1995. (Statutory Instruments, 1995 – 1537, which was made on 14 June 1995). Is it realistic to issue a prospectus from Gibraltar which not only complies with the EU's SEC type requirements, but also with the Australian Securities Commission and the US Securities and Exchange Commission? (As Alan [Mr Robinson] will have explained, this is critical as we intend to offer securities beyond the EU to certain ethnic Greek diaspora communities. We can procure virtual travel into the EU should this be considered available!)
    2) Is it realistic in view of the early stages of Gibraltar's desire to assume a more substantial standing in the global offshore community to base a professional team for a project with global first-mover advantages out of Gibraltar? To what extent will it be required to use agents in other jurisdictions? How can control over the team and professional costs be maintained?
    3) What is the current status of Gibraltar's compliance with the EU telecoms deregulation and the general implementation of the EU's directives in this arena? Are there any current impediments in the Gibraltar legislation and regulatory climate and or sovereign status, even prior to the regularization of the Gibraltar telecoms regulations, which would inhibit the landing of a submarine cable by Project Oxygen? Are there any impediments to the operation of one of the world's three control centres for Project Oxygen out of Gibraltar? (rather than Cadiz).
    We are looking forward to exploring these issues and then moving forward with due speed, subject to satisfactory answers on the above. …"
  97. On the same day Mr Mercer wrote to Ms Barker, Mr Robinson's personal assistant. His letter was mainly concerned with the proposed Silverstone acquisition, but he also asked that Mr Robinson should be reminded that he had still not heard from Mr Haynes.
  98. At some point in March the Convergence group formed Silverstone Wireless Communications Plc ("SWC"), which acquired the assets of the two Silverstone companies. SWC was later described in the Directors' Report on PLC in its Report and Accounts for the year ended 31 December 1997 as "a leading European manufacturer of millimetric transmitters, receivers and associated equipment."
  99. On 5 March Mr Stagnetto sent Mr Haynes a memorandum summarising his understanding of Convergence's then plans with regard to the internet placing. It was to be launched from Gibraltar by a Gibraltar public company, whose objects were "to fulfil one or more telecommunications projects in Greece." The placing was to be directed primarily to expatriate Greeks in Australia, the USA and Canada. Mr Maats "a Dutch financier and an expert in telecommunications" was to "join" Mr Robinson in the Greek venture. Mr Robinson and Mr Maats wanted to establish an EEIG to be formed by the Gibraltar plc, the EEIG to be between that company and the investors in the project. Mr Mercer was advising, and Mr Llamas had also been introduced into the legal team. The Greek project comprised (i) the submarine cable from Athens to Crete to Venice; (ii) participation in Project Oxygen (funding of cable connection to Greece); and (iii) a "Wintranet" wireless system in Athens (again, no reference to a teleport). Convergence proposed to make a full presentation to the Gibraltar Government on about 15 March with a view to knowing that they had its support "before making any final decision."
  100. On 9 March Mr Ladimeji faxed Mr Robinson asking for his instructions as to where he would like the intermediate holding company to be incorporated so as "[t]o enable the group reorganisation to go ahead which will result in [SA] becoming the ultimate holding company …". He reminded Mr Robinson that the proposed structure inserted an intermediate holding company between SA and PLC. He said this "could be a Luxembourg company, like SA or you may prefer it to be a Gibraltar company. Please let me know which you prefer." He said he also needed to value SA and PLC for the purposes of the exercise and that he had asked New World to provide the relevant information as regards SA. It does not appear that Mr Ladimeji had been kept informed by Mr Robinson of the activities he had been pursuing with regard to the proposed placing by a Gibraltar company.
  101. On the same day Mr Ladimeji faxed Mr Evans of New World a message to the effect that the Convergence group was about to be re-structured by making SA the ultimate holding company. To that end he said that CV "urgently need to have up to date financial information relating to [SA] which will permit a valuation of [it] to be made." He asked for a copy of SA's latest accounts and management information. He provided Mr Evans with a summary of the steps involved in the reorganisation. On 10 March Mr Nash responded by sending Mr Ladimeji a draft balance sheet as at, and profit and loss account for the year ended, 31 December 1997, explaining that the accounts remained to be finalised. He explained that he was "currently liaising with David Waterhouse in order to assist him with the preparation of consolidated accounts for the Group as a whole." Those draft accounts showed SA as having net assets of £470,184 and as having suffered a net loss for the trading period 12 December 1996 to 31 December 1997 of £184,507.
  102. Mr Robinson instructed Mr Ladimeji that the intermediate holding company was to be a Gibraltar company. On 12 March he instructed him to carry out the group reorganisation proposed in the November 1997 report. It was to be completed by 16 March 1998. Mr Ladimeji immediately wrote to New World asking it to arrange for a Jersey shelf company to be available for CV by the following day (this was the company earlier referred to as "Jerco"). On the same day he faxed a message to Clintons (in response to theirs of 3 February) asking them to obtain a shelf company in Gibraltar which was to be wholly owned by SA. He gave Mr Robinson a choice of names for the Gibraltar company. On 13 March Mr Robinson chose the name Fergana Holdings Limited ("Fergana"). Clintons carried out the acquisition of Fergana as a Gibraltar company. Their proforma invoice to Fergana (there described as "New Exempt Company Limited") included a fee of £100 for an application for exempt company status. This status later proved to be a problem.
  103. Mr Ladimeji implemented – or, Convergence would say, purported to implement - the restructuring on 16 March 1998, the first of two stages in the operation, the second being on 6 April 1998. The operation was complicated and it is unnecessary to detail the steps in it, which essentially followed those explained by Mr Ladimeji in his letter of 14 November 1997. They were directed at inverting the group and making SA the top company.
  104. On 18 March Mr Robinson attended a meeting in Gibraltar with Mr Haynes and Mr Stagnetto. The outcome was that a further meeting was to be held "regarding the structure of the Gibraltar Plc and corresponding EEIG" during the following week, which Mr Robinson wanted Mr Mercer to attend. On 20 March Mr Maats sent Mr Haynes what he described as "notes which may assist for the initial briefing" for a meeting Mr Haynes was that day having with Mr Stagnetto and Mr Lawrence. It included a less than immediately comprehensible diagram and a two-page document headed "Marco Polo Contracting with EEIG backed by Protected Cell Trust (read in conjunction with the same titled diagram)." Mr Maats sometimes writes in a style which makes difficult a summary of what he is saying and I do not propose to attempt it in relation to this document. It does not advance the story.
  105. On 24 March Mr Haynes sent a fax to Mr Robinson summarising what they had agreed would be the agenda for a meeting on 26 March. It was to be attended by them, plus Mr Stagnetto, Mr Lawrence, Mr Llamas and Mr Mercer. The agenda was: (1) summary of the project, including (a) legal structure, (b) outline of prospectus, (c) investment targets and description; (2) summary of undecided aspects of the project; (3) assignment of tasks to individual team members and target dates for completion; and (4) remuneration proposals. The agenda showed the proposed internet placing to be still at the earliest of stages.
  106. That meeting took place, although there is no note of it. Mr Robinson's evidence was that Mr O'Beirne was also there and that its purpose was to identify what had to be done to finalise matters swiftly so that the internet placing could proceed as quickly as possible. He said that whilst they were able to make progress on most issues they could not make a final timetable because the necessary restructuring of the Convergence group had not been completed and there was no report on it. He said in his witness statement that the meeting lasted around five hours and was adjourned with various minor action points but "the key issue to be addressed was the valuation to complete the structure." He said that CV were instructed to advise, complete the valuations and get the corporate structure in place with documentation and supporting report as quickly as possible so that the internet offer could go ahead in May 1988. He said that CV failed to deliver and thereafter the dates kept being put back, first to June 1998, then to July 1998, and then later until eventually the concept of an internet placing had to be abandoned altogether. The valuations to which Mr Robinson was referring were those necessary to identify the proportions in which he and the Broadband trust were to hold the shares in SA, a matter not obviously critical to the progressing of any internet placement.
  107. On 30 March Mr Robinson wrote to Mr Tzavellas, with copies to Mr Bairactaris and Mr Ladimeji, saying that the outcome was that 31 May had been set for "the completion of the private placing documentation associated with the funding of Marco Polo through the Gibraltar Plc." His reference to "the Gibraltar Plc" was an odd one. He knew by then that Fergana had been formed, and so named, and that it was not a Plc. There is a question as to whether or not he was in fact here referring to Fergana. He continued:
  108. "Following the meeting at your [Mr Tzavellas's] office, I spent several hours with George Bairactaris and Christina Gennadopoulos going through in greater detail the background information that I discussed with you and have suggested that either George or Christina contact you directly.
    Whilst the timetable of the 31st May is tight, I believe it is a realistic objective for the specific documentation required to be generated in Gibraltar, however, a certain number of material contracts will be required both out of the UK and out of Greece.
    A considerable amount of the documentation associated with the UGS bid can be updated and will be applicable for this Marco Polo placing. However, consideration will now have to be given to transforming [CCGE] into a Societe Anonyme (SA) as previously envisaged and I have discussed this matter with George Bairactaris. It is also highly likely that a further SA will be required to be formed into which the licence applications can be made for the submarine cable to connect Athens with Crete.
    A second major component is the purchase/formation from new/joint venture required to establish an Internet Service Provider (ISP) company. To this end, I am most keen to meet with the representatives of Singular as discussed with you at our last meeting."
  109. That letter showed there was much to be done before an internet placing could be made. It contained no suggestion that progress was being held up by any perceived deficiencies in, or uncertainties about, the structure of the Convergence group, nor did it refer to the matter which Mr Robinson said CV had been tasked to do.
  110. Mr Maats wrote to Mr Haynes on 30 March. He opened by referring to the vehicle for the internet placing being "a Gibraltar Plc in the process of formation." Either he did not know about Fergana; or did know about it and did not understand it was to be the chosen vehicle. I quote a brief section of the letter by way of a sample of his crisp contributions to the process:
  111. "We believe that our meeting now positions us to focus all our efforts on a repetitive, tap like, structure for funding Marco Polo's financial and intellectual capital intensive commercial development at ever reducing systemic risk to thereby procure dilution suffered by the principals declines in line with the exponential growth in Marco Polo funding requirements over the next 12-18 months."
  112. The second stage of the re-structuring of the Convergence group took place on 6 April. It involved the transfer to Fergana of PLC's shares in Mid Sussex, East Grinstead, Convergence (Yeovil) Limited (the LDOs) and Mainline Television Limited. All were transferred for cash at par.
  113. On 3 April there was a meeting at CV. The file note suggests that Mr Robinson raised a question relating to the legal aspects of EEIGs, a note against which the note-maker added three question marks. On the same day Mr Robinson wrote a letter of complaint to Mr O'Beirne as to the quality of the documentation he had prepared in relation to the re-structuring that had taken place on 16 March. His complaint was that he and Mrs Robinson had been asked to sign minutes of board meetings of East Grinstead and Mid Sussex directed at authorising the registration of Fergana as the successor holder of the shares in those companies formerly held by PLC. The problem was that one board meeting purported to take place in Athens and the other in Reigate – both on the same day. Mr Robinson explained that he and his wife could not be in two places at once and that CV had anyway advised him not to attend board meetings in the UK. He said at the end of his letter "Such repeated mistakes on critical legal documentation is [sic] causing us some considerable concern as to what other details may have been overlooked and not picked up yet." He again made no reference to the instructions he claimed to have given CV on 26 March.
  114. On 6 April Mr Llamas sent a fax to Mr Maats, Mr Robinson and Mr Haynes. He referred to the meeting on 26 March and attached a 23-page questionnaire to which he wanted answers as a preliminary to proceeding with "the initial draft of the contract for the formation of the EEIG." The EEIG was intended to be registered in Gibraltar. On 8 April Mr Maats wrote to Ms Barker reminding her that he was still awaiting the questions about EEIGs that Mr Robinson wanted him to answer.
  115. Mr Mercer sent a fax to Mr Robinson on 8 April 1998. It was prompted by Mr Maats's fax to Mr Haynes of 30 March. It occupied over seven pages and dealt with a mass of matters. Mr Mercer referred to the EEIG proposal and to the proposed internet placing. He raised doubts as to the use of an EEIG as a "pre-formation" entity in relation to what he referred to as the "flotation of a new Gibraltarian Plc." He was there addressing the question of whether the expenses of such a flotation could properly and lawfully be channelled through an EEIG, which he understood to have been Mr Maats's proposal. On the other hand he suggested that use of an EEIG in respect of supply in the Marco Polo structure was sensible. As for the proposed internet placing, he did not suggest there were any perceived difficulties arising out of the structure CV had devised, a topic to which he made no reference. He identified three specific areas where, in his experience, prospectuses in internet placings most frequently went wrong, and he added a fourth peculiar to the Marco Polo project. They were (i) inappropriate or wrong wording or content relating to the applicable financial services regulations; (ii) "inadequate verification or poor description, particularly of the regulatory aspects", the regulatory aspects being, in this context, those relating to telecoms projects; (iii) unsustainable financial projections and assumptions; and (iv) the need to ensure non-availability of the web pages in jurisdictions where no financial services clearance has been sought: in particular, the USA, Australia, Japan and Canada. He explained that, with an end of May target date, it was necessary very quickly to (i) codify the financial services requirements that would need to be made of the web master; (ii) decide what countries the pages should be available in; and (iii) work out what security measures were needed as the internet was notoriously insecure. He added that "I do not think these are going to be provided by the web master (or combination of suppliers) without asking. I rather think it is going to be the other way round and I think the sooner we get on with identifying who is going to do this and getting into contractual negotiations with them the better." On the same day Mr Mercer sent a further, slightly edited, version of the same letter to Mr Robinson, of which he also sent a copy to Mr Maats. Mr Mercer's evidence was that he was unaware of any structural problems at this stage. The contents of his letter are inconsistent with the impression sought to be given in Mr Robinson's witness statement that the only matter which made the timetabling difficult was the question of the outstanding valuations.
  116. Ian Gamse was a financial consultant who had been introduced by Mr Maats in April 1998 and had a brief involvement in connection with the proposed internet prospectus. He entered the stage on 15 April 1998 when he produced (and sent to Messrs Robinson, Maats, Haynes, Woodward and Waterhouse) an outline of the process that had to be gone through to produce the prospectus. He said the first draft of the prospectus needed to be produced by 30 April 1998. He made no suggestion that there was any problem with the structure CV had devised. He said the draft would have to be sufficiently complete to be able to be shown to the Gibraltar and UK financial authorities "and ensure that they will be happy with the final version – which means that it must cover all the points that have to be covered even if the final detail, in the form of cashflow projections or whatever, isn't yet available." He said it would be based on the Alternative Investment Market ("AIM") prospectus prepared by TJG, subject to any amendments suggested by Mr Haynes. As regards the responsibilities for its creation, Mr Gamse proposed that he would be responsible for co-ordinating the information and compiling it; Mr Haynes would provide or procure the legal opinions; Mr Lawrence would provide the auditor's view; and "[Mr Robinson] and [Mr Maats] as directors of Marco Polo will have final sign-off." So Mr Gamse understood that Mr Maats was to be a director of the placing vehicle. He then listed a page and a half of matters that would need to be covered in the prospectus, with a suggestion as to who would be responsible for providing the information under the various heads. It covered a wide field and plainly represented the potential for an enormous amount of collective work. Given that not a finger seems by then to have been lifted towards collating the heads of material he listed, the notion that any sort of draft prospectus could be completed by 30 April was probably close to absurd; and no prospectus was ever produced. The burden of the task so identified was plainly brought home to Mr Robinson, who sent a fax to Mr Maats on 20 April. It clearly reflected the time pressures he regarded himself as then under in relation to the proposed placing. He said:
  117. "In these circumstances I have not been able to give the level of attention to the substantial volume of documentation concerning 'Marco Polo' that I have received in the week, to enable me to make the critical judgements required to allow matters to proceed beyond this point.
    In particular the nature of your various correspondence and dialogue, and that of Ian Gamse, with members of the management team of [PLC], have highlighted the need to now fully address and agree upon such basic fundamentals as proprietary information, confidentiality, references, protocols, objectives, ownership structure, management roles, areas of expertise, commitments, costs and cost controls in our proposed joint venture activities."
  118. That letter reflected that Mr Robinson was engaged in some joint venture proposal with Mr Maats, although it is obscure what it was. He plainly was not in a position to launch an internet placing within the immediate future: much remained to be done. I find that the reference to "ownership structure" was nothing to do with any suspicion by Mr Robinson that there were deficiencies in the CV restructuring that had just taken place. I also find that he harboured no concerns about this at this stage. Moreover, in the context, he cannot have been referring to any such deficiencies even if he had suspected any: they were not matters he had to "agree upon" with Mr Maats, with whom they had nothing to do. Mr Maats responded by fax on the same day. He referred to "our equity relationship" and "our joint Marco Polo Partners plans". He expressed concern about the delay in the formation of a "pre-formation" EEIG. He had by then seen Mr Mercer's fax of 8 April, but appeared not to have been moved by Mr Mercer's expressed doubts as to the scope for using a pre-formation EEIG in relation to the Marco Polo project. Mr Maats then said that the two-month target "for cranking out a prospectus of Marco Polo's nature is generally considered to be ambitious", that it did not allow for many contingencies and that "[t]ime is thus truly of the essence, if we are to secure the requisite commitment of one million euros from prospective, yet unidentified, greek [sic] pre June 1 flotation shareholders." That suggests there was an additional plan to raise an initial fund ahead of the internet placing.
  119. On 21 April Mr Robinson faxed a letter to Mr Maats, having by then read the material provided to him by TJG. He complained that Mr Maats did not appear to have picked up the message he had conveyed in the two paragraphs of his fax of 20 April (quoted above) He had considered Mr Mercer's advice and listed 12 commercial and regulatory matters with which he was "not comfortable". They were (i) the use of a pre-formation EEIG, (ii) "[t]he controls in place or envisaged for the creation of the placing documentation", (iii) the present ability to comply with financial services regulations, (iv) the then lack of concern "for a formal banking association", (v) the objectives of the fund raising and the application of the funds raised, (vi) the "non-structured and non-approved use of Convergence resources, i.e. human, physical and Intellectual", (vii) "[t]he target the diminished and much changed investors" [sic], (viii) the lack of any defined management team and structures, (ix) financial controls pre- and post- offering, (x) the role of the professionals, (xi) the identification and the role of the webmaster, and (xii) the members of the Marco Polo Plc EEIG. That list represents a comprehensive admission by Mr Robinson that – even accepting he had earlier formed a genuine intention to launch an internet placing in the Spring of 1998 - he had realised that by 21 April it had not got beyond the starting blocks. His list did not, it is to be noted, add that "anyway we can't proceed with the placing until the Convergence corporate structure is sorted out and validated to my satisfaction." That is a point which appears only to have occurred to him in 2003, when Convergence applied to amend its Defence and Counterclaim so as to blame CV for the non-progression of the internet placing. I find he did not utter it then because it was not then a point.
  120. That list of concerns was not the limit of Mr Robinson's concerns expressed in that fax. He complained that in two respects Mr Maats appeared to have been acting without authority. He complained that Mr Gamse appeared to think that reliance could be placed on contributions from Mr Woodward and Mr Waterhouse which had not first been cleared by Mr Robinson, Mrs Robinson or Mr Kemp. He complained that Mr Maats had been interfering in the affairs of Silverstone without prior reference to himself, namely by way of meetings with certain individuals. Mr Robinson wanted Mr Maats's role clarified. He wanted to know how he came to describe himself to Mr Haynes as a "Dutch financier and an expert in telecommunications". It is plain that Mr Robinson was warming up to a dispute with Mr Maats, saying as he also did:
  121. "We are all very keen to move on in an expeditious and cost effective fashion, but not to the detriment and risk of destabilising our established programme for the Burgess Hill Proof of Concept, the ITC trials, Wintranet and our other affairs to which you are not a party."
  122. On 21 April Tom Mackay, another TJG partner, sent a fax to Mr Maats. He had had personal experience of participating in an internet placing and so was able to offer particularly useful advice. The thrust of his advice was that Mr Maats's assumption that compliance with the regulatory requirements of one EC member meant that there would automatic compliance with those of other EC members was unsafe. He explained that EASDAQ companies had found the problems to be insurmountable and that what they were doing was "issuing the prospectus complying with the laws of one or two European countries and thereafter doing private placements in other countries."
  123. Mr Maats replied to Mr Robinson with a 13-page letter of 22 April. There is no need to detail what he said, although it is material to note that amongst other things he observed that "… to the best of my knowledge we have never seen any business plan, strategy or commercial outline on Marco Polo from your side. Hence in the vacuum and in view of the time constraints repeatedly emphasized by you, we jointly agreed to perform certain activities in parallel. If you are now prepared to relax the time constraints which you previously indicated needed to be achieved, then we can do all activities serially." It is no surprise that Mr Maats had not been shown any business plan. That is because none existed. Mr Maats's letter indicated that some deal had been struck between him and Mr Robinson at the Caesar Palace Hotel in Las Vegas in December 1997, although he does not identify it beyond referring imprecisely to "our joint Silverstone Holdings vehicle", in respect of which he complained that Mr Robinson had "possibly" appointed directors without prior consultation. It was Silverstone that led to the final breakdown between Mr Robinson and Mr Maats.
  124. Mr Robinson responded by fax to Mr Maats on the same day. He said that Mr Maats had failed to address in substance "the critical issues facing our potential joint venture activities." He said that Mr Mercer's letter of 8 April had been "very clear about the non-applicability of an EEIG as a pre-formation entity for Marco Polo, but you choose to pass by such warnings with somewhat flowery rhetoric." He said that "[u]ntil we can sort out some very basic principles there seems to be little point in pursuing further discussion of EEIGs and the Marco Polo placing."
  125. This bitter exchange marked the end of the Robinson/Maats relationship. Mr Robinson wanted to sever it and on 22 April he sent copies of the recent Maats/Robinson exchanges to Mr Mercer. On 24 April Clare Ferguson, a litigation partner in TJG, wrote to Mr Maats on behalf of Mr Robinson, PLC, SA, Corsaire Limited, Silverstone Holdings Limited and all their associated companies giving him "formal notice determining with immediate effect all and any agreement and/or joint ventures in place between you and any of our clients." The principal cause of the breakdown was some dealings Mr Maats had had with senior executives at Silverstone. There was a threat of litigation against Mr Maats and of disciplinary proceedings against the executives.
  126. On 27 April a Convergence diagram of the re-structured group was created. So far as material, it showed SA as the ultimate parent and as the 100% owner of Fergana and CCGE. It showed Fergana as the 100% owner of (inter alia) Mid Sussex, East Grinstead and PLC. It showed PLC as the 100% owner of CVL.
  127. Mr Gamse did not produce a draft prospectus by 30 April 1998 or ever, although he had by then at least obtained some limited financial information from Mr Waterhouse. Mr Robinson's explanations about the production of a prospectus in his oral evidence were as follows. To the suggestion that no prospectus was ever produced, he said that he thought "we were all satisfied that we had the substance of a prospectus." To the question whether any draft had actually been produced, he said he could not recollect "where we got. We were all comfortable that this was not a problem." The essence of his evidence was that the required prospectus was a much cheaper document to produce than a prospectus for an AIM or a Yellow Book placing. He said that "we felt we had all of the components for this." He said it was a very simple document. He said there were drafting meetings with TJG in May 1998. That is not reflected in the documents and Mr Mercer confirmed in his oral evidence that he was not involved in any such meetings at any time before September 1998. The first draft prospectus ever produced was dated 15 October 1998.
  128. By May Convergence was no longer contemplating an internet placing during that month. On 13 May Ms Ferguson had a two-hour telephone consultation with Richard Spearman QC. He was advising Convergence on its dispute with Mr Maats. The note recorded that a placement was still contemplated at that stage and reflected Mr Spearman's concern as to the impact which any litigation might have on it. In her subsequent letter of 18 May to Mr Robinson, Ms Ferguson recorded her own understanding that the then intention was that the initial placement "may be made" by "late summer".
  129. On 14 May Mr Robinson wrote a courteous letter to Mr O'Beirne apologising for an omission to pay a £20,000 bill and explaining that he would see what could be done about remedying the omission upon Mr Waterhouse's return from sick leave the following week. He made no suggestion, let alone a complaint, that any shortcomings on CV's part in relation to the re-structuring of the Convergence group had been or were holding up progress with the internet placing. If he perceived that CV were holding it up, it is inconceivable he would not have mentioned it: and it would be in character for Mr Robinson to decline to pay any further fees until the work was done.
  130. On 21 May Mr Ladimeji sent Mr Robinson two sets of what he called "the reorganisation documents." One set was described as "a copy of the original faxed documents which are for your records." The other was described as "a clean set which needs to be signed again and which will be used for permanent reference purposes and for official records. The clean set has been adjusted for the manuscript emendations." He added that "we still require a declaration of trust from Huntsmoor." That was a declaration of trust in favour of Amalfi (ie Jerco) of Huntsmoor's single share in PLC. On the same day Mr Dutta of CV (who had been involved with Convergence's affairs in March) had a meeting with Mr O'Beirne. His note of it recorded that Mr Robinson had wanted CV to do some research on EEIGs but that "[Mr O'Beirne] knew nothing nor did he have any books we could refer to on this." The note does not record the precise nature of the advice on EEIGs (if any such had been identified) that Mr Robinson wanted.
  131. On 22 May Mr Dutta sent an internal memo to Mr O'Beirne summarising what had happened since March. He said the reorganisation of 16 March had been completed subject to the location of (a) the declaration of trust by Huntsmoor, which despite enquiry of TJG and of Ms Barker, was not to hand, and (b) a signed copy of the minutes of an SA meeting of 16 March. The transfers of 6 April had been completed. Mr Dutta recorded that the papers relating to this "were returned yesterday 21 May when [Mr Robinson], [Mr Ladimeji] & I had a meeting." Mr Dutta listed seven matters he was involved in, including (i) researching into management charges from SA to its subsidiaries, (ii) collating all paperwork for "the three [sic] reorganisations since March 1998" (it is unclear what the third was), and (iii) drawing up the new group structure after re-organisation.
  132. Mr Robinson's oral evidence was that, following the re-execution of documents on 22 May 1998, he thought that all problems relating to the documentation of the re-structuring had been solved. The only outstanding matter in his mind was the need for valuations to which I have referred. He at no stage wrote to CV complaining that the omission to produce them was holding up the internet placement.
  133. On 28 May Mr Ladimeji sent Mr Robinson some 30 pages of material on EEIGs he had extracted from the EU website, including a copy of the enabling EC regulation, No. 2137/85. The essence of it was to explain that an EEIG was a European creation enabling the formation of a partnership between entities of different member states (and carrying with it the usual liabilities inherent in partnerships) but being one also enjoying separate legal personality. He added that "I have been trying to contact you about the group structure."
  134. On 2 June the Gibraltar Financial Services Commission wrote to Mr Lawrence on the subject of prospectuses and compliance with regulations. New legislation was about to come into force. The Commission advised Mr Lawrence that it was unlikely that the proposed prospectus could be issued before then.
  135. On 25 June Mr Robinson wrote to Mr O'Beirne. He opened by complaining about the level of CV's fees being charged in relation to the group reorganisation. He then wrote:
  136. "As expressed at our meeting [on 23 June], I am not satisfied that the international group structure has been completed to best purpose, or properly checked against our commercial needs for Marco Polo, and that the expenditure on establishing a tax efficient auditable structure has been properly and sufficiently documented. We, therefore, propose as suggested and tentatively agreed at our meeting that:-
    a) Dapo Ladimeji will validate the international group structure against the proposed Marco Polo placing and provide a written explanation and opinion as to its functionality and beneficial operation.
    b) Colin Heath provide in conjunction with David Waterhouse, an explanation of how particular activities will be allocated to group companies and the reporting and accounting structure/procedures that will best facilitate the annual audit and tax computation.
    We would expect the above to be completed within the next 6 weeks and be available for:-
    a) Inclusion in our planned explanation of the International Group as required for the Marco Polo placing.
    b) The 1996 tax filing and 1997 Audit completion.
    We remain concerned that the international structure proposed and executed on our behalf by Dapo and Chantrey Vellacott has not yet been completed to reflect the identified requirements of the Group and yet further substantial charges could yet be incurred to reach a point of satisfactory conclusion."
  137. Mr Robinson then agreed to pay £30,000 on account, with the balance of £46,000 to be "primarily paid to you upon completion of the Marco Polo documentation with inclusion of the additional work above scheduled for late August/early September." I do not interpret that letter as reflecting any concern by Convergence that the March/April structural reorganisation had not been validly effected according to its purported terms, but rather as an imprecise expression of alleged concern that the new structure may not have been the best one for the group. Whatever the precise nature of the letter of validation that Mr Robinson was asking for, he wanted it for the purposes of his then proposed placing in late September or early October 1998.
  138. On 1 July Mr Robinson sent Mr O'Beirne and Mr Ladimeji a background to the Silk Route project. He included a diagram Convergence had prepared of the then corporate structure of the Convergence group. It was essentially the same as that which Convergence had earlier produced shortly after the March restructuring but now showed (a) SA as also wholly owning an additional Greek company, Silk Route Systems SA, and (b) Fergana as the direct, 100%, owner of CVL. In the latter respect the diagram was wrong, the error being Convergence's. Their previous diagram had correctly shown PLC as the direct, 100%, owner of CVL, and nothing had since happened to cause Convergence to understand that the position had changed. A further diagram that Convergence provided to CV at the same time shows the importance of Fergana to their then plans. It was to be the investment vehicle for the Silk Route project. Their then hopes were that it would be funded by equity subscriptions from (i) an internet placing, (ii) institutional funds, (iii) private Greek investors and (iv) SA. A further enclosed diagram, headed "Funding Requirements", showed that the initial funding to be raised (in "Sept/Oct 98") was €15m by way of an internet placing, which I understand included the €5m which Convergence had hoped to raise in March/April. This was to be followed by a proposed placement in March 1999, intended to raise €60m, which was to be followed in June 2000 by the raising of €200m.
  139. On 30 July Mr Haynes sent Mr Robinson a fax raising various questions relevant to the placing. Mr Robinson's response as to its overall timetable was "as soon as possible in Sept/Oct 9th". I infer that 9th October 1998 (a Friday) was the far end of Mr Robinson's proposed bracket.
  140. On 24 August Mr Dickinson of CV sent a memo to Mr Ladimeji reminding him of the outstanding valuations that still needed to be carried out in order to perfect the March restructuring.
  141. On 26 August Mr Robinson had a meeting first with Mr Mercer and then with Mr O'Beirne. During the morning he sent Mr Mercer a draft agenda for the first meeting, which included what he had separately listed as "Critical Issues to the Placing". Those were (i) permits/declarations to/from the National Telecommunications Commission ("NTC"), the Greek national telecoms regulator, (ii) CTR landing party and access agreements, (iii) audited accounts for 1997, (iv) CV's valuations/projections, (v) business plans for the Silk Route systems and for WintraNet (Convergence's 40GHz technology project), (vi) formation of EEIGs and corporate structure, including management agreements, money transfers and tax work, and (vii) board of directors and banking support.
  142. Mr Waterhouse had a meeting with Mr O'Beirne on 14 September. He summarised it in a memo of the same day which he sent to Mr Robinson and copied to Mr O'Beirne. They had discussed "Progress on Valuations, Business Plans and data for Prospectus." Mr O'Beirne was working on two sets of valuations – as at 16 March and "now" – but to perform a proper valuation he needed a list of further material from Convergence comprising its business plans. Mr Waterhouse listed them, his list and memo recording that the required plans were not yet complete. Mr O'Beirne was about to go away on holiday and the memo recorded that Convergence must aim to have all the plans and other required information ready for his return on 5 October. He set out a timescale for the course of events, which estimated that CV's valuations should be completed by 20 October. His timescale did not, however, suggest that the delay until then in the production of valuations would prevent the publication of a prospectus by 9 October, his penultimate entry reading "6-9 [October] Consolidate results for inclusion in Prospectus as 'Illustrative Projection'". The accountants' report for the prospectus was to be based on the 1995, 1996 and 1997 accounts and work on the report was to be started straightaway.
  143. In the event no internet placing was proceeded with. I do not propose to devote more time to the internet placing story. What is apparent from the documentary and oral evidence is that the Convergence assertion that it was prevented by perceived defects in the structure created in March/April 1998 is unfounded. It is apparent from a consideration of the endless material relating to the proposed placing that there were innumerable questions, problems and matters which had to be met and dealt with before any such placing could have been proceeded with, which simply never were; and the evidence provides no support for Convergence's case that the only – or even the dominant – thing that held up the operation was the perception of structural problems following the reorganisation.
  144. As to the various problems, no prospectus was ever drafted and I have referred to (what I find to have been) Mr Robinson's disingenuous evidence about that. Financial plans were also required for the placing, but they were not obtained. In order to overcome that omission, Mr Robinson asserted that any prospectus would not need to include such plans, nor even any information about the financial position of the Convergence group. It would, he said, only need to include summary information of the cash required for the project. That evidence was at odds with what Mr Gamse had said in his outline on 15 April of what needed to be included in the prospectus ("financial status at or near 31st May … financial projections"). Mr Mercer also disagreed with it, saying that any prospectus would have to include financials explaining how it was expected the business would develop. Next Convergence had not even procured the agreement of anyone to act as the webmaster. Mr Robinson's case was that Barclays, Gibraltar, had agreed. That was untrue. No document was produced that supported it, Mr Robinson's position in July 1998 was apparently that the matter was still "in discussion" (that was his noted comment on an inquiry as to the position from Andrew Haynes on 20 July). Mr Mercer also confirmed that, so far as he was aware, no agreement was ever entered into with any webmaster. Further problems that had to be solved were the regulatory ones. Mr Robinson brushed those aside, saying that by March/April "we pretty much had resolved what we could do, yes." I find that evidence to have been untrue. Mr Robinson's evidence was that this was TJG's province; and Mr Mercer's evidence was that at the meeting on 26 March 1998 there was uncertainty about the regulatory framework, and that for concrete advice to be given on it he would have needed to see a draft prospectus and the advice o