Watson Farley and Williams (a firm) v Ostrovizky [2015] EWCA Civ 457

Case No A2/2014/0577

[2015] EWCA Civ 457

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM

The Hon Mr Justice Silber

HQ11X02644

Venue Royal Courts of Justice, Strand, London, WC2A 2LL

Date Tuesday 12 th May 2015

Before

LADY JUSTICE ARDEN

LORD JUSTICE PITCHFORD

LORD JUSTICE BURNETT

Between

WATSON FARLEY AND WILLIAMS (a firm)Appellant

ITZHAK OSTROVIZKYRespondent

(Transcript of the Handed Down Judgment of

WordWave International Limited

A Merrill Communications Company

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Official Shorthand Writers to the Court)

Michael Pooles QC and Gary Blaker QC (instructed by Irwin Mitchell Solicitors) for Appellant

Ben Hubble QC and Pippa Manby (instructed by Clyde & Co LLP) for Respondent

Hearing Hearing dates: 21 - 22 April 2015

Judgment

Introduction

[1]On 31 January 2014, after a ten day trial in November 2013, Silber J dismissed the appellant’s counterclaim for professional negligence against his solicitors. He held that there was no breach of duty, that causation for any losses there may have been was not established and that there was no loss. The appellant, Itzhak Ostrovizky, contests each of the judge’s conclusions.

[2]Mr Ostrovizky is an international businessman who invested in solar energy projects in Greece from July 2007 using Abraham Weinerman as his agent to find suitable partners. The respondent, Watson Farley and Williams, is an international law firm with offices in Greece. Its partner, Virginia Murray, drafted three agreements between Mr Weinerman and Mr Ostrovizky, on the one hand, and Christos Rinis and a corporate entity controlled by him, Ekoplyn Hellas SA, on the other. They were dated 31 July, 5 September and 16 October 2007. The plan was that Mr Rinis would undertake the necessary dealings with the Greek authorities to secure the required permissions to build solar parks which, in due course, Mr Ostrovizky (or one of his corporate vehicles) would acquire. Rich pickings were expected by investors because of the exceptionally generous grants on offer and high guaranteed feed in tariffs. The structure of the agreements required only small financial input from Mr Ostrovizky at the outset. Ms Murray continued to act for Mr Ostrovizky in the years that followed. The projects failed.

[3]These proceedings were commenced in July 2011 as a straightforward claim for unpaid fees amounting, after conversion from Euros, to about £25,000 (including interest) in respect of invoices rendered in 2010. By way of counterclaim Mr Ostrovizky suggested that Ms Murray had been negligent in drafting the agreements by failing to advise that the vehicles used for making the necessary applications to the Greek authorities should be limited liability companies (SAs), rather than partnerships which in the event were used. It was said that the agreements failed to secure sufficient control over Mr Rinis in his dealings with the authorities and the sites after licences or exemptions were secured. It was suggested that the agreements did not protect against Mr Rinis selling the partnerships on with the benefit of licences. The counterclaim was substantially amended before trial and the case evolved further during the trial. The suggestion that SAs should have been used was abandoned. The essence of the case became that Ms Murray was negligent in failing to advise Mr Weinerman and Mr Ostrovizky to secure the necessary control over Mr Rinis by purchasing a small shareholding in the partnerships established to make the applications. There were numerous subsidiary points. It was said that had they secured that shareholding Mr Rinis would have been precluded from selling on the partnerships without their consent. Mr Rinis threatened to do so and repeatedly demanded more money from Mr Ostrovizky, which he paid (it was said) under duress. Mr Rinis did not in fact dispose of the interests. Mr Ostrovizky’s case was that the lack of control over Mr Rinis, itself the fault of Ms Murray, was at the heart of the failure of the projects and the losses that followed. He put those losses at about €13 million.

[4]It was agreed that the courts of England and Wales had jurisdiction over the claim and that English law governed issues relating to the formation of the retainer. It was also agreed that in deciding whether Ms Murray had discharged her obligations the question was whether she acted as a reasonably competent Greek lawyer in drafting and advising on the agreements. Causation and quantum were governed by English law.

[5]The judge heard evidence over eight days which included oral evidence from the main players in the events, amongst them Mr Ostrovizky, Mr Weinerman, Mr Rinis and Ms Murray. There was additional evidence from a number of important, if less central, players. There was expert evidence on both sides on Greek law, which governed the agreements, and also on the workings of the Greek solar energy industry and quantum. Some witnesses, including Mr Weinerman and Mr Ostrovizky, gave evidence in English although it was not their first language. Others gave evidence through interpreters. At least for these reasons, the transcript does not read altogether easily and is littered with short interventions from the judge seeking clarification. The judge received written submissions and, before hearing oral submissions, requested further help from Mr Ostrovizky’s team to identify the case being advanced on his behalf. Mr Pooles QC provided a summary document which clarified the issues and thus assisted the judge in structuring the comprehensive 87 page judgment that followed:

[2014] EWHC 160 (QB)

. The judge summarised his conclusions at para [385] “During this case, the conduct of the Claimant has been subject to detailed scrutiny and for the reasons, which I have sought to explain, I have concluded that:- a) The Claimant was not negligent (see paragraphs 234-252, 258-262, 265-268, 274-276); b) Even if the Claimant had produced the 2007 Agreements with the rights and remedies which it is said by the Defendant should have been included and advised in the way in which it is said by the Defendant that the Claimant should have acted, the Defendant would not have taken advantage of or used any of those rights and remedies (see paragraphs 253-256, 263, 269, 271 and 277) or followed that advice (see paragraphs 330-382); c) The Defendant has not established that he has suffered any of the alleged loss of profits or incurred any of the alleged wasted expenditure (see paragraphs 383-384); and that d) Even if the Defendant has established that he has suffered a loss of profits and/or incurred any wasted expenditure, this was not a consequence of the Claimant's negligence or any aspect of the 2007 Agreements but a consequence of a variety of other factors. These factors include (but are not limited to)(i) the Defendant's decision to promise to make payments to Mr Rinis to which he is not entitled under the 2007 Agreements which, as I have explained, his counsel has described in an understatement as "slightly naïve";

(ii) thereby removing the incentives set out in the 2007 Agreements for Mr Rinis to perform his duties so as to receive more than the small initial payments until he had performed his duties under each of the 2007 Agreements and thereby radically amending the entire basis of the carefully constructed agreements which protected the interests of the Defendant;

(iii) the failure of the Defendant to pay the sums promised to Mr. Rinis at the appointed time and in some instances at all.”

[6]Mr Pooles opened the appeal by confirming that it did not raise any points of law but rather that the appellant sought to attack factual findings made by the judge in respect of every aspect of the evidence put before him and also the conclusions he drew from those findings. Mr Hubble QC submits that all of the findings made by the judge were open to him on the evidence he heard and read. In that latter regard, I should note that we were provided with 12 lever arch files of material (in addition to the core bundle) which included a transcript of the oral evidence. The judge had the benefit of 55 lever arch files. Mr Hubble submits that there is no single alleged error in the judge’s conclusions which would deliver success to Mr Ostrovizky. Rather, he would need to succeed in overturning a lengthy series of factual findings and invite this court to rewrite the judgment completely. That accurately summarises the exercise in which the appellant is engaged.

[7]It is convenient to state my conclusions at this stage before providing further explanation for them in the context of the broad factual picture which emerged at trial. In my judgment, Mr Ostrovizky has fallen far short of demonstrating that the judge’s conclusions on breach of duty and causation were not open to him. In those circumstances, I do not consider it necessary to engage in the hypothetical exercise of considering the judge’s findings on quantum. By way of respondent’s notice, Watson Farley and Williams sought a determination of the question of contributory negligence in the event that the appeal were to succeed. That too is unnecessary. Additionally, the notice pursued an argument that given the serious failings by Mr Ostrovizky in disclosure which emerged during the trial, and were acknowledged by the judge, the claim should have been struck out on causation without more. The judge did not consider it necessary to resolve that issue given his other conclusions. It is not something that calls for decision in this appeal.

The Approach to Factual Challenges

[8]The correct approach of an appellate court when invited to interfere with the factual findings of a trial judge was restated, not for the first time, by the Supreme Court in McGraddie v McGraddie

[2013] UKSC 58

;

[2013] 1 WLR 2477

and accurately summarised in the head note:

“It was a long settled principle, stated and restated in domestic and wider common law jurisprudence, that an appellate court should not interfere with the trial judge’s conclusions on primary facts unless satisfied that he was plainly wrong.”

Lewison L.J. returned to the topic in Fage UK Ltd v Chobani UK Ltd

[2014] EWCA Civ 5

; [2014] ETMR 26. In a vivid passage at para [114] he said:

“Appellate courts have been repeatedly warned, by recent cases at the highest level, not to interfere with findings of fact by trial judges, unless compelled to do so. This applied not only to findings of primary fact, but also the evaluation of those facts and to inferences to be drawn from them. … The reasons for this approach are many. They include i. The expertise of the trial judge in determining what facts are relevant to the legal issues to be decided, and what those facts are if they are disputed. ii. The trial is not a dress rehearsal. It is the first and last night of the show. iii. Duplication of the trial judge’s role on appeal is a disproportionate use the limited resources of an appellant court, and will seldom lead to a different outcome in an individual case. iv. In making his decisions the trial judge will have regard to the whole of the sea of evidence presented to him, whereas an appellate court will only be island hopping. v. The atmosphere of the courtroom cannot, in any event, be recreated by reference to documents (including transcripts of evidence). vi. Thus even if it were possible to duplicate the role of the trial judge, it cannot in practice be done.” i. The expertise of the trial judge in determining what facts are relevant to the legal issues to be decided, and what those facts are if they are disputed. ii. The trial is not a dress rehearsal. It is the first and last night of the show. iii. Duplication of the trial judge’s role on appeal is a disproportionate use the limited resources of an appellant court, and will seldom lead to a different outcome in an individual case. iv. In making his decisions the trial judge will have regard to the whole of the sea of evidence presented to him, whereas an appellate court will only be island hopping. v. The atmosphere of the courtroom cannot, in any event, be recreated by reference to documents (including transcripts of evidence). vi. Thus even if it were possible to duplicate the role of the trial judge, it cannot in practice be done.”

[9]The aptness of the metaphor relating to island hopping in this case arises not just because the planned solar parks were for the most part in the Greek Isles, rather than on the mainland, but more so because the parties engaged in an exercise of trading gobbets from the transcripts, emails and other documents to sustain submissions on the facts. At times, Mr Pooles’ submissions resembled a closing speech on the facts to a trial judge.

The Outline Facts and Judge’s Principal Findings

[10]Mr Weinerman spent time in 2007 looking for prospects for solar energy in Greece. He acted at first for an investor called Engel and his companies. He identified Mr Rinis as a Greek partner having concluded that it was necessary to have local involvement in making applications for licences and exemptions. The distinction between licences and exemptions arose in this way. Small projects of up to 100 kilowatts were to be exempt from the full rigours of licensing. It appears that the difference in regulatory regime was to encourage a proliferation of small-scale solar power generation. The Greek authorities were alive to the most obvious way of circumventing the more exacting regulatory regime which applied to larger projects, namely a single legal entity (personal, corporate or partnership) making multiple applications for contiguous smaller projects. That was not permitted. One of Mr Weinerman’s commercial aims was to operate with a series of different legal entities which could make such applications, even though they may be under the effective control of a single person. In that way economies of scale could be achieved without transgressing the rules.

[11]The first application date for exemptions for small-scale projects was set for 1 August 2007. It was expected (or at least feared) that the process would operate on a first come, first served basis and also that the exemptions would be granted very swiftly. In the event neither of those things happened. Nonetheless, Mr Weinerman (and no doubt other international investors) was acting under great pressure of time to have all the arrangements in place by 1 August.

[12]Mr Weinerman formally engaged Ms Murray on 23 July 2007. In the preceding weeks, during which he had been acting with a view to putting in place arrangements for Mr Engel to make a series of investments, Mr Weinerman had met a number of Greek lawyers and conducted what were in effect “beauty parades”, including with Watson Farley and Williams. On 20 July, Mr Rinis and Alon Avdani, a lawyer acting for Mr Engel and his Cypriot company, signed a document entitled “Points for Agreement” [“the PfA”]. It concerned 10 small-scale projects on Mytilini in respect of which Mr Rinis (for these purposes synonymous with Ekoplyn Hellas) would make the necessary applications through five new companies. He was styled “the developer”. Mr Engel would pay Mr Rinis €2,000 in respect of each application. The PfA provided that the five companies would be held by Mr Rinis as “trustee” and that “the developer will not do any operation with them and will not create any obligations”. Further, “the ownership of the companies will be assigned on blank to [Engel] on all their statutory documents will be held by [Engel] lawyers”. It was envisaged that agreements with the landowners would provide that rent should become payable only after the projects had been completed and connected to the grid. Following approval of each application (expected by November 2007), Engel would have the option to build the projects.

[13]The PfA was to form the basis of an agreement to be drafted by Ms Murray between those parties. Mr Weinerman was also in discussion with Mr Ostrovizky who committed to making a similar investment. Ms Murray set to work. A series of draft agreements was produced in the following days, during which she received instructions from Mr Weinerman (and Orestis Simos on his behalf) and Mr Avdani. Those instructions came by email, fax and by telephone. Mr Weinerman and Mr Avdani were keen to keep costs to the minimum. They drove a hard bargain with Ms Murray, who agreed to draft the agreement for €1,000. They were keen that the corporate structures should be cost-effective and both cheap to set up and run. It is for that reason that limited liability companies were not used, but instead partnerships. There was less outlay in establishing and running them. Mr Ostrovizky came into the picture so far as Ms Murray was concerned in the last days of July 2007. It was common ground that Mr Weinerman acted as his agent, as he did for Mr Engel and his companies. Mr Ostrovizky wanted an agreement in whatever terms were put in place between Mr Engel and Mr Rinis. It was therefore common ground that Ms Murray owed the same duty of care to Mr Ostrovizky as she did to Mr Engel and that instructions given on his behalf were to be taken as having been given on behalf of Mr Ostrovizky.

[14]Two immediate issues arise on the PfA. First, the concept of a trust (i.e. an entity where the legal and beneficial interest in property may be vested in different legal persons) is unknown to Greek law. Secondly, the concept of holding the statutory documents of a company, without which it could not be disposed of, was applicable to limited liability companies, but not partnerships. The agreements which emerged could not, therefore, include any relationship of trustee and beneficiary. Instead, different protections for Mr Ostrovizky were included. The agreements did contain a provision relating to the statutory documents, which the judge concluded was meaningless in the context of the arrangements which were in fact put in place.

[15]The agreement signed on 31 July 2007 evolved through a number of different drafts. It was signed by Mr Rinis and Mr Weinerman at the conclusion of meeting which lasted the whole day. Mr Simos, who acted as Mr Weinerman’s Greek representative, was also there. The parties discussed the agreement, to which changes continued to be made during the day, with Ms Murray going in and out as required. The one page PfA had been transformed into a 19 page formal agreement.

The judge summarised its terms as follows:

“a) Ekoplyn would develop PV projects in Mytilini … [P]roduction licence applications would be made in the name of special-purpose OE partnerships which would be the Project Companies; in which Ekoplyn and/or Mr Rinis and one of their Associates would be shareholders; b) Under Recital C, … the Defendant and Mr Weinerman would purchase shareholdings in Project Companies on successful grant of Production Licences for the PV projects; c) Under clause 2.2, Ekoplyn or Mr Rinis would hold at least 99% of the shareholding in each project company and the Defendant and Mr Weinerman would appoint an additional party to purchase up to 1% of the shareholdings, which party would also be bound by this Agreement; (emphasis added) d) Under clause 2.3, Ekoplyn would receive €35,000 upon signing which represented €2,000 for each of the 10 projects and €3,000 for each of the 5 OE partnerships; e) Under clause 3.2, the Defendant and Mr Weinerman would have the right to monitor and check the progress by performing additional due diligence; f) Under Clause 3.3, Ekoplyn would procure that no project Company would at any time prior to Closing without the prior written consent of the Buyer enter into any contract, liability or other binding agreement with any third party subject to certain limitations except in so far as might be reasonably required to give effect to this Agreement or to satisfy the conditions precedent to Closing set out in Clause 3.4; g) Under Clause 3.4, Mr Weinerman and the Defendant would be entitled to rescind the agreement without any liability to Ekoplyn in a wide variety of cases including where an event occurs which has a material adverse effect on the Project; h) Mr Weinerman and the Defendant would purchase the shareholdings of the OE/EE partnerships once the conditions of clause 3.6 had been met or waived; i) Under clause 3.7, if the conditions precedent were not met by 31 December 2007, then Ekoplyn would be entitled to a further 6 months to replace the project with one or more further projects. If Ekoplyn could not replace the project by 30 June 2008 then Mr Weinerman and the Defendant could complete closing for that project company or rescind the agreement for that company; j) Under clause 4.1 the developer would within one week of signing, deliver to Ms Murray the Articles of Association, corporate records and executed and undated letters of resignation from the administrators of each project company; k) Under clause 4.2 the statutory documents referred to in clause 4.1 would be retained by Ms Murray "by way of security"; (original emphasis) l) Under clause 4.3 there would be a "Pledge of Proceeds of Shareholdings" which would be expressed to be "as security for the First Payment, Mr Weinerman and the Defendant would be entitled to require that all shareholders of the Project Companies assign and pledge the share of profits and all other rights and benefits arising from their shareholdings in favour of Mr Weinerman and the Defendant who would be entitled to perfect such pledge by registration with the Company"; m) Under Clause 4.4, Mr Weinerman and the Defendant would have an early closing option; n) Under Clause 5.1, Ekoplyn would give a number of warranties including that:- i) at the Closing Date the project company would have obtained Production Licences for the Projects and all licenses, consents, approvals, certifications and authorisations or other supporting documentation necessary for the issue of the Production License, as well as all Land Rights required for the Project and entry into this Agreement does not violate the validity of such licenses, consents, approvals, certifications and authorizations; ii) to its knowledge the Production License and any other Permits, all licenses, consents, approvals, certifications and authorizations or other supporting documentation as required by Greek Law which have been obtained up to date, would have been 10W fully issued and obtained and would be valid and in full force and effect and all conditions of such permits and licenses have been fully complied with; and that; iii) to its knowledge, the Company would have complied with any environmental legislation applicable to it and would have obtained any environmental licenses or permits necessary for carrying on its business which it had obtained to date and entry into this Agreement does not violate the validity of such licenses or permits; and that: o) Under clause 7.3 Defendant and Mr Weinerman would pay Ekoplyn a bonus of €30,500 per project upon the issue of a decision to award a grant of 40% towards the cost of the project. In addition, Defendant and Mr Weinerman were obliged to provide to Ekoplyn by 31 August 2007 a letter of guarantee in the sum of €305,000 to secure its payment of the bonus to Ekoplyn.”

[16]The references to OE and EE partnerships identify two different types of partnership recognised by Greek law. An OE partnership is a partnership in which all partners share unlimited liability. An EE partnership is structured to allow a sleeping partner to have limited liability. Mr Rinis established seven partnerships (five OE and two EE) which were used to make the applications envisaged under the first agreement. The same partnerships were then identified as the corporate vehicles for the purposes of the second and third agreements.

[17]Those agreements were modelled closely upon the agreement of 31 July, but did not contain clause 2.2 (enabling Mr Ostrovizky to take a 1% holding in each of the partnerships established as vehicles for the projects). They also did not require Mr Ostrovizky to provide the guarantee under clause 7.3 of the first agreement and included a provision that required him to pay €750 to each landowner.

[18]Clause 2.2 was the focus of much of the argument before the judge, as it was before us. Mr Weinerman and Mr Ostrovizky did not take the 1% holdings which this clause envisaged. The plan had been to establish a Cypriot company or companies for that and other purposes. The evidence showed that Mr Weinerman did not pay the Cypriot lawyers for the work they had done in establishing the company and they, in turn, would not release the paperwork. His explanations of why no steps were taken in respect of the 1% holdings and his understanding of its effect were examined closely by the judge.

[19]A central argument advanced on behalf of Mr Ostrovizky before the judge was that clause 2.2 provided no protection because, properly understood, it did not entitle him to purchase the 1% holdings when the agreement was entered into, but only at closing (i.e. the end of the relationship). The judge rejected that argument. He concluded that the clause entitled to Mr Ostrovizky to take such holdings immediately. That was what the clause was for. The judge’s conclusion on this issue is not the subject of appeal. Instead, it is argued that Ms Murray should have advised Mr Weinerman expressly to take the holdings and that her failure to do so was causative of the problems that followed.

[20]The structure of agreements allowed for minimal financial commitment from Mr Weinerman and Mr Ostrovizky at the outset, with the burden then shifting to Mr Rinis to fund the applications and move the projects to fruition before further monies were required from his partners. Mr Rinis had been selected by Mr Weinerman as a suitable partner for these enterprises. However, it soon became clear that he was either unwilling or unable to commit the necessary money. He came looking to Mr Ostrovizky for financial support outside the agreements. The judge concluded that the parties were “not concerned to enforce their contractual rights and were not placing great reliance on them”. Quite apart from failing to take the 1% holdings, Mr Ostrovizky did not provide the guarantee required by clause 7.3. Mr Rinis had been hoping to use the guarantee as security for borrowing. Nor did Mr Ostrovizky seek to enforce the pledge under clause 4.3. The judge concluded that Mr Ostrovizky voluntarily financed the work necessary to obtain the permits. There were delays in the licensing process largely the result of the enormous volume of applications. Mr Rinis was pressed to proceed but pleaded lack of funds. He demanded substantial funds in December 2007 and March 2008. Mr Ostrovizky told the judge that he agreed to make payments (which Mr Weinerman put at over €1 million by the end of 2008) because Mr Rinis was constantly threatening to sell the projects. The judge rejected that explanation. He concluded that relations were still cordial in the summer of 2008. On 21 September 2008 Mr Simos produced a document identifying the sums due to Mr Rinis (outside the three agreements) but subsequently promised by Mr Ostrovizky. Mr Ostrovizky also assumed responsibility for paying rent to landowners at this time, and to fence the properties together with additional payments to Mr Rinis. All this amounted, in the judge’s words, to a “radical departure” from the 2007 agreements which resulted in Mr Ostrovizky rather than Mr Rinis becoming the financing party. The judge held: “… there is nothing whatsoever in the evidence which shows or even conceivably indicates that at or before this time when the defendant agreed to make and did make these payments to Mr Rinis that the negotiating position of the Defendant and Mr Weinerman had been impaired or inhibited in the negotiations with Mr Rinis by the alleged negligence of the Claimant. Nor is there anything to show that the Defendant would have acted differently if the 2007 Agreements had contained provisions of the kind now advanced by the Defendant in these proceedings or if it had not contained the matters which Mr Pooles says should not have been included in the agreements or if matters had been explained by the Claimant to Mr Weinerman or the Defendant in the way that Mr Pooles now says that they should have been explained.” (para [125])

[21]The financial crisis which engulfed the world towards the end of 2008 affected Mr Ostrovizky. Liquidity became a real problem because he was unable to access his assets. Mr Rinis was desperate for funds and on 30 October 2008 did indeed threaten to sell the approvals he had secured to meet his debts. There was a further renegotiation in November 2008. On 19 November 2008 Ms Murray was instructed by Mr Weinerman to write to Mr Rinis. In her letter she pointed out that he was not entitled to further sums under the 2007 agreements, that money had been advanced outside the scope of those agreements and that Mr Weinerman had agreed to provide €900,000 of further funds. She noted that because of the banking crisis only €450,000 had been sent but he and Mr Ostrovizky were hoping to send more “within the next few weeks”. She warned that that there were no grounds which entitled Mr Rinis to withdraw from the agreements and indicated that any attempt to do so would be met with “immediate litigation”. She demanded the withdrawal of his threat to sell. The agreement reached on 22 November provided that Mr Weinerman and Mr Ostrovizky would pay Mr Rinis €3,831,400 within two days, in default of which Mr Rinis would be able to sell a variety of the projects for a minimum price of €40,000 each. It seems that the total number of projects exceeded 150. Mr Rinis could use the money to cover his expenses and debt. If more than €40,000 were received for any park the excess would be split.

[22]There was an issue whether this agreement was reached under duress. The judge rejected that suggestion and accepted the evidence that the parties were “joyous” at having come to further terms. The money was not paid and in consequence Mr Rinis considered himself at liberty to sell the projects. He set about trying to find buyers. Mr Weinerman and Mr Ostrovizky were in continuing discussion with Mr Rinis about his plans and, from time to time, sought advice from Ms Murray.

[23]Negotiations for a sale were opened with an entity named Silcio. Mr Ostrovizky suggested that the sale was lost because of his inability to control Mr Rinis, who failed to enable the purchasers to undertake due diligence. Silcio were associated with a Chinese company for whom Mr Weinerman was also working. Silcio agreed a letter of intent in March 2009. Mr Rinis was co-operating at that time. Both Silcio and its Chinese partner raised a series of concerns about their proposed purchase. In short, they said that much still needed to be done and that there were risks involved. These concerns were ventilated in correspondence in April 2009. That coincided with a demand for €80,000 from Mr Rinis. He was apparently angry and in desperate need of money. He said he would co-operate if put in funds. Otherwise, he threatened to sell unilaterally. In May 2009 Silcio proposed terms which the judge described as “very onerous” upon the sellers. The judge concluded that the sale did not proceed because a price could not be agreed. As the negotiations with Silcio foundered an alternative potential purchaser, Energetica Hellas SA, emerged.

[24]Energetica was a broker acting for investors keen to acquire project companies that had completed formalities and were ready to proceed to construction and connection. Energetica would act as contractor. Mr Rinis and Energetica signed a letter of intent on 9 June 2009. Emails which came to light during the trial demonstrate that Mr Weinerman and Mr Ostrovizky were aware of the interest of Energetica and that they and Mr Rinis were in discussion. Energetica paid €450,000 to Mr Rinis, as the judge found, with the knowledge and consent of Mr Ostrovizky. Mr Ostrovizky had denied having any knowledge of what Mr Rinis was doing. After he had completed his evidence Mr Simos was called. He produced the series of emails which showed that the all encompassing denial was false. The deal fell through because Energetica discovered that not all of the projects were at the “ready to construct” stage. Further discussions with Silcio followed but to no avail.

[25]The chronology had reached the end of 2009. In the period of over two years since the three agreements had been entered into there had not been a breath of criticism of Ms Murray, of the agreements or any suggestion that the undoubted commercial problems which had occurred were in any way her responsibility. There was a flurry of exchanges in January 2010, including a further agreement between Mr Ostrovizky and Mr Rinis. On 8 February 2010 Mr Ostrovizky’s daughter, who is a lawyer, made the first rather general suggestion that “we would not be in the legal situation that we are today vis-à-vis [Mr Rinis] had our legal rights been safeguarded”. However, Ms Murray’s retainer was not terminated until October. In the meantime, Mr Rinis, Mr Weinerman and Mr Ostrovizky met in mid-February in an effort to sort things out. In July Mr Rinis threatened to sell the projects and was more specific on 6 September 2010 that he would dispose of “the small projects”. Ms Murray threatened legal action if he did so. The judge noted that there was no evidence that Mr Rinis did sell any of the projects. An application was made by the newly instructed lawyers for an injunction against Mr Rinis to restrain sale. The evidence about that before the judge was sketchy and second hand. The application was refused. Ms Murray gave hearsay evidence that the injunction was refused because a lawyer acting for Mr Rinis had attended the hearing and agreed that no sale should take place. The judge accepted her evidence about that. There was yet another agreement between Mr Ostrovizky and Mr Rinis in December 2010 which in turn was subsequently varied during 2011. A final proposal was made by Mr Ostrovizky to Mr Rinis in October 2012, which failed to resolve matters. There is litigation in Greece between them.

[26]Mr Ostrovizky’s case on liability before the judge focussed on four points. First, that the agreement should have provided for he and Mr Weinerman to take a holding which would deny Mr Rinis the opportunity to deal with the partnerships without their consent. Secondly, if clause 2.2 achieved that end, clear advice should have been given in relation to it. Thirdly, that Ms Murray should have advised that all the entities be EE partnerships rather than a mix of OE and EE partnerships. Fourthly, that the pledge incorporated in the agreement should have been wide enough to encompass the totality of any claim Mr Ostrovizky might have in respect of his rights concerning the project companies, rather than only his initial investment. A subsidiary point related to the inclusion of the clause providing for holding the statutory documents of the entities, which was of no practical effect.

[27]As I have noted, the judge found against Mr Ostrovizky on the first of those points and no appeal against that aspect of the judgment has been made. Mr Pooles relies upon what he submits was a lack of advice regarding the minority holding as founding liability against Watson Farley and Williams. The point relating to EE partnerships had developed at the trial after Mr Ostrovizky abandoned the suggestion that Ms Murray should have advised that the structure should involve SAs. The judge found that the point was not pleaded, had not been explored in evidence and for a raft of reasons could not assist him anyway. That point is not pursued before us. The pledge point too had developed in the course of the trial. As originally pleaded and argued, it was suggested that Ms Murray was negligent in failing to explain that in Greek law the shares of an OE partnership could not be pledged, but only its profits. The difficulty Mr Ostrovizky faced with that argument was that this very point had been covered in an email exchange with Ms Murray before the agreement was signed on 31 July 2007. It was in those circumstances that Mr Pooles sought to argue that Ms Murray’s negligence was in failing to widen the pledge to cover all of Mr Ostrovizky’s rights concerning the project companies, whenever made. The judge concluded that this allegation was not pleaded and could not be relied upon. He also found that it was not negligent to fail to include a clause of that sort.

[28]The judge concluded that neither Mr Weinerman nor Mr Ostrovizky was a reliable witness. He considered that Mr Weinerman’s evidence should be approached “with substantial caution” and noted that he had been unable to retrieve emails from before 2009. He was highly critical of Mr Ostrovizky over his conduct relating to disclosure. Aspects of his evidence were flatly contradicted by email exchanges produced by Mr Simos. The judge concluded that Mr Ostrovizky “on numerous occasions … gave answers that show that he was prepared to say whatever he considered most likely to advance his case without considering whether his answers were correct.” The judge was particularly mindful of the unreliability of these witnesses when deciding whether causation for the losses was established (the burden lying upon Mr Ostrovizky) and also rightly suspicious that only a partial documentary picture had emerged from his deliberately selective disclosure. By contrast, he found Ms Murray to be a “careful and reliable witness” and totally honest.

[29]The judge rehearsed the factual position in detail between paras [54] and [206] of the judgment before turning to his conclusions on the issues. The judge accepted that Ms Murray was not asked to advise on the corporate structures or the nature of the agreement but described the process of drafting, taking instructions on drafts and redrafting as providing implicit advice. There was an iterative process which started with the PfA but which required her to develop a formal agreement. It was not a question of tidying up the language of the PfA without more.

[30]The judge concluded that on questions of Greek law Ms Faitakis for Watson Farley and Williams was more reliable that Mr Gramatidis for Mr Ostrovizky. He gave a series of reasons which have not been challenged in this appeal. Instead, Mr Pooles submits that, despite Ms Faitakis suggesting that the agreements had been competently drafted, she made “concessions” that provided support for Mr Ostrovizky’s case.

[31]The judge dealt with the alleged failure to include a provision for the immediate appointment of a minority shareholder in the first agreement between para [234] and [257]. Having determined the construction point he moved to his factual findings on this issue. At para [244] he said:

“It was clear from his oral evidence that Mr Weinerman considered that the purpose of the provision in Clause 2.2 was to prevent the sale of the project company by Mr Rinis and he did not say anything to suggest that the right to purchase would only arise on closing. More importantly, he took steps to set up the Cypriot company well before closing and soon after the First Agreement was signed.”

At para [249] he continued:

“The next issue is whether Mr. Weinerman, and through him the Defendant, had actually been informed by Ms Murray that there should be an immediate appointment. Mr Pooles contended that Ms Murray had not explained to Mr Weinerman the need for him and for the Defendant to immediately appoint a party to purchase the 1% shareholding. The evidence of Ms Murray, which I accept, was that this matter was understood by Mr Weinerman during their discussions. Mr Weinerman explained in evidence that he knew that if a minority shareholding was taken by him and/or the Defendant, that would be protection against a sale of the project company. So it must have been obvious to Mr Weinerman that this protection was needed immediately from the signing of the agreements and it was not suggested by him that it was otherwise as is shown by a number of other factors.”

[32]The judge then set out a number of features of the conduct of Mr Weinerman at the time which supported that conclusion, quite apart from what had been said in oral evidence. He brought the threads together in para [257]:

“In conclusion, having considered all Mr Pooles' submissions and in particular those based on points that emerged from the cross-examination of Ms Murray and the Greek Law expert. I consider that this complaint must be rejected in respect of the First Agreement as (a) there was a provision in the First Agreement for the immediate appointment of a minority shareholder nominated by the Defendant; (b) this was known to Mr Weinerman; (c) if such protection could not have been invoked prior to closing, the Defendant was protected as there could always have been an application for an emergency injunction to restrain a sale by Mr Rinis which would have restrained a sale which if effective could and would have been subject to the Pledge in First Agreement if enforced, and (d) in any event, even if the First Agreement had failed to contain a provision for the immediate appointment of a minority shareholder nominated by the Defendant, the Defendant has not been prejudiced as he would not have taken advantage of it as Mr Weinerman thought that the Defendant had such a right but that nevertheless, he did not pursue it because of neglect.”

The reference in the first sentence to the cross-examination of Ms Murray and Ms Fiatakis are to the “concessions” to which I have referred. It is entirely clear that the judge took account of all the evidence of both of these witnesses. In placing the label “concessions” on the passages to which Mr Pooles took us he overstates the position.

[33]The judge rejected the contention that Ms Murray had been negligent in failing to include clause 2.2 in the second and third agreements. The relevant project entities had been established between 8 and 16 August 2007, prior to Ms Murray being instructed in respect of the second and third agreements. The expectation was that the same entities would be used for the purposes of the projects envisaged in those agreements. The point that Mr Ostrovizky could have restrained any threatened sale by Mr Rinis was repeated by the judge. Furthermore, he concluded that the failure of Mr Weinerman and Mr Ostrovizky to take up the minority shareholdings provided for by the first agreement would have been replicated even if the clause had reappeared in the second and third agreements.

[34]I have already indicated that the judge rejected the revised ‘pledge’ allegation on the ground that it was not pleaded. Additionally, he accepted Ms Faitakis’s evidence that it would not have been appropriate to seek to secure a pledge over more that the initial investment. He also considered that it was neither here nor there because Mr Ostrovizky did not enter into the pledge that was available to him under the first agreement.

[35]Before the judge, Mr Pooles had sought to argue that the agreements contained a number of features which should not have been there. The only one of those which had any substance was the reference to statutory books in clause 4.2 of the first agreement (and replicated in the others). The judge noted that neither Mr Weinerman nor Mr Ostrovizky was asked about what impact this clause had upon them. He concluded that there was no breach of duty in omitting to excise what had become a redundant clause when Mr Weinerman decided not to use SAs. Further, no loss could flow from its inclusion because(a) there was no evidence that either relied upon it in any way;

(b) neither tried to enforce it; and

(c) they failed to enforce any of those parts of the agreements which did provide them with protection in the face of Mr Rinis’s defaults.

[36]The overall conclusion of the judge was that there was no breach of duty in relation to the 2007 agreements and that, even if there were, Mr Ostrovizky would not have acted differently. He would not have taken advantage of different advice had it been offered. Mr Pooles submits that if explicit advice had been given to take the 1% holdings, Mr Ostrovizky would have followed it. He drew our attention to Levicom International Holdings v Linklaters

[2010] EWCA Civ 494

; [2010] PNLR 29 involving advice in a different context. This is a very different case and, in my judgment, Levicom does not bear upon the issues here.

[37]In the course of argument, the judge’s conclusion that none of Mr Ostrovizky’s points (if good) would have made any difference, bringing together findings made in the course of the judgment which preceded it, has been referred to as the “but for” causation test. He went on to consider in detail the question whether the alleged negligence caused either the loss of profits claimed or the additional expenditure which formed part of the claim.

[38]The judge considered the issue of causation between paras [299] and [315] of the judgment. He approached the question on the hypothesis that Mr Rinis had indeed threatened to sell the project entities, whilst not accepting that all the threats were made as alleged. The judge concluded that “Five factors, whether considered individually or cumulatively, have satisfied me that there is no appropriate causal link between the alleged negligent errors of [Ms Murray] and [Mr Ostrovizky’s] loss of profits claim.”

[39]In summary they were: i) Mr Ostrovizky became vulnerable to the threats of Mr Rinis because he chose to promise payments outside the 2007 agreements and failed to abide by his later promises. Mr Ostrovizky took responsibility for financing Mr Rinis and came to the series of further agreements with him which the judge had outlined. There was no connection between the drafting of the 2007 agreements and that sequence of events. The problem was that Mr Rinis either could not or would not finance the projects as required by the agreements. He was Mr Weinerman’s choice as Greek partner not Ms Murray’s. ii) Even if Ms Murray had given more explicit advice and it had been accepted, the losses would still have followed. On Mr Ostrovizky’s case Mr Rinis had been an unreliable, indeed dishonest, partner. Whatever the truth about that, his willingness or ability to finance the projects would have been unaffected by any advice given by Ms Murray. At no stage did Mr Ostrovizky seek to terminate the agreements or vindicate his contractual rights. The true cause of any loss of profit flowed from the decision to continue to deal with Mr Rinis and Mr Ostrovizky’s subsequent approach to funding the projects. iii) Mr Ostrovizky could have resisted any threats to sell the projects by using the remedies open to him. In addition to taking the 1% holdings, injunctive relief was available to him at any time. The agreements could have been terminated. iv) There was no contemporaneous or other evidence which indicated that Mr Weinerman or Mr Ostrovizky considered that they lacked protection or control as regards Mr Rinis with the consequence that they acted as they did. The judge could not believe, having seen them give evidence, that “if they suspected that their difficulties were or even possibly were caused by Ms Murray’s defective services, they would not have complained loudly”. No such complaint came until she pressed for her fees in 2010. They were not inhibited at all in their dealings with Mr Rinis by the terms of the agreements. v) Since no project companies were sold, the failures alleged (which were directed to control to prevent sale by Mr Rinis) were immaterial.

[40]The judge went on to consider expressly whether there was any causal connection between the alleged negligence and the loss of sales to Silcio and Energetica. His earlier conclusion, to which I have already referred, that these sales did not occur for commercial reasons provided one answer to Mr Ostrovizky’s case on causation. The second was that even if the loss of the sales was the result of a lack of cooperation by Mr Rinis in the process of due diligence, control over his ability the sell the entities would have made no difference.

[41]Similar reasoning applied to causation regarding the alleged additional expenditure claim.

The Argument

[42]Mr Pooles submits that each of the factual conclusions reached by the judge was plainly wrong. He reminds us that the judge accepted from Mr Weinerman that he wanted the first agreement (and thus those which followed) to “obey” the PfA and that he had annotated on an early draft that he wanted it “stronger”. He submits that the agreements departed from the PfA in ways which were not explained to Mr Weinerman, in particular in failing to secure sufficient control over Mr Rinis. He is critical of the judge’s conclusion that the process of drafting and re-drafting of the first agreement in the light of instructions amounted to Ms Murray giving implicit advice. He suggests that the judge should not have accepted from her that she explained to Mr Weinerman the purpose of the provision which allowed him and Mr Ostrovizky to take a 1% holding in the partnerships. He points out that some of the evidence from Ms Murray accepted by the judge had not been set out in her written statements. The judge was simply wrong to find that the minority holding and other protections provided adequate control, and that Mr Weinerman appreciated that the holdings could be taken immediately. Mr Pooles describes the conclusion of the judge on why the second and third agreements did not contain the 1% minority holding clause as “improbable”. He maintains the argument that the continued inclusion of the statutory documents clause had an impact of events. He suggests that the judge was wrong to conclude that Mr Ostrovizky had any effective legal remedies (including injunctive relief) in the event that Mr Rinis followed through his threats to dispose of any of the projects. That is because of the apparent difficulties of litigating in Greece.

[43]He submits that all of the judge’s conclusions on causation, both at the “but for” stage and in his analysis of the events which occurred in the following years were plainly wrong. He points to the fact that there is no suggestion that Ms Murray later reminded Mr Ostrovizky of his ability to take a 1% holding in the partnerships to neutralise threats to sell from Mr Rinis. The judge was wrong to have regard to the renegotiations or subsequent agreement in November 2008 (which Mr Pooles submits could not have been enforced by Mr Rinis) and had no basis for concluding that Mr Ostrovizky was aware of the payment from Energetica to Mr Rinis. He should have concluded that all the difficulties flowed for the agreements failing to secure proper control over him.

[44]Mr Hubble submits that all of the judge’s findings are sustainable on the evidence, indeed more than sustainable.

Discussion

[45]I have noted the findings of the judge relating to the reliability of Ms Murray, Mr Ostrovizky and Mr Weinerman together with the implications of the failure of Mr Ostrovizky to give proper disclosure. Mr Pooles has not sought to undermine those findings. Inevitably they coloured substantially the judge’s approach to the evidence, particularly on causation.

[46]There was clear evidence that Mr Weinerman did not seek express advice about the corporate structures to be put in place. He understood the difference between SAs and the different types of partnership. Ms Murray explained that she was not asked to give “general structuring advice” but that the structure had already been agreed. Her job was to incorporate it within a contract. The conclusion of the judge that there was an iterative process which involved the giving of a good deal of implicit advice, in my view captured what was going on as drafts passed back and forth with instructions being given to Ms Murray by Mr Weinerman, Mr Simos and Mr Avdani. In addition, there was direct evidence from Ms Murray that she advised Mr Weinerman to take the 1% minority holdings. It is true that she accepted that the evidence was not given in writing; but that did not disable the judge from accepting it. She did not agree with Mr Pooles that the expectation was that the holding would not be taken until closing. In the face of skilful and persistent cross-examination Ms Murray maintained that she had given the advice and that Mr Weinerman had understood it.

[47]Furthermore, in my judgment the evidence of Mr Weinerman himself provided support for that given by Ms Murray. In his submissions Mr Pooles focussed upon his re-examination of Mr Weinerman which, as one would expect, sought to undo the damage to Mr Ostrovizky’s case which had occurred during cross-examination. In the course of what appears to me to be quite confusing evidence about how many Cypriot companies Mr Weinerman would establish, and for what purpose, his evidence became clear. It starts at page 39 of the relevant transcript. He recognised that a Cypriot company was expected to hold the 1% interests. In earlier drafts 10% had been proposed.

The judge sought clarification:

“Mr Justice Silber: But one of the purposes of the Cypriot companies was to give a right of veto? Mr Weinerman: A right of veto for sale only.”

He continued by explaining that it did not have to be a Cypriot company. Then a little later:

“Mr Hubble: Your point is that EW, which is going to be the Cypriot company, shall appoint someone else, another entity – Mr Weinerman: Any other – Mr Hubble: to take the minority shareholding? Mr Weinerman: Correct. That is what I understood, and I am still understanding it like this. Mr Hubble: The change, so that another entity took a 1 per cent shareholding … was going to give you more protection? Mr Weinerman: Only, my Lord, one type of protection: for selling the thing. No protection of what is doing inside.”

Mr Weinerman: A right of veto for sale only.” Mr Weinerman: Any other –

Mr Hubble: to take the minority shareholding?

[48]Mr Weinerman accepted that the Cypriot company was going to be set up at the beginning and then nominate an entity to take the minority shareholdings. When pressed as to why no Cypriot company was set up he said it was due to his and Mr Ostrovizky’s neglect. A little later in the cross-examination he was asked, “Mr Hubble: But you knew, as I understand it, that if an … entity took a minority shareholding, that would give you protection against project companies being sold to someone else? Mr Weinerman: Against sales, yes. Mr Hubble: You’re not suggesting, are you, that during the development process you were going to be controlling the day-to-day activities of the project companies? Mr Weinerman: Not the day-to-day, but I am reminding my Lord that we thought at that time, that it was a matter of between ten days or – we didn’t agree the ten days which was in the law, but we thought that everything here was finishing in a couple of months. Maximum with up to the grant, one year. It took three.”

[49]The judge’s finding that Mr Weinerman knew of the purpose of the 1% holdings and that he and Mr Ostrovizky chose not to take advantage of the added protection such holdings would provide was based upon the evidence of these two witnesses. It also found further support in the evidence of Mr Simos and Mr Weinerman’s conduct. In the light of the judge’s conclusion that the holding could be taken at any time (and was expected to be taken immediately), the provision in clause 2.2 provided precisely the protection which was at the heart of the arguments in the case. That was an ability to prevent unilateral sale of the projects by Mr Rinis.

[50]The judge’s conclusions relating to these central issues in this appeal present a complete block to its success. That said, I am satisfied that each of the additional findings made by the judge, about which Mr Ostrovizky complains, were open to him. He was right to conclude that the argument relating to the pledge as it evolved in the course of the trial was not pleaded. Whilst that was sufficient to dispose of it, I agree entirely with the judge that, in the light of the events which developed, it was not a point of any substance. The same may be said of his conclusion that the omission from the second and third agreements of the protection provided by clause 2.2 of the first agreement carried Mr Ostrovizky nowhere. The evidence supported his finding that the relevant partnerships had been established and were to be used for the projects envisaged by the second and third agreements before those agreements were drafted. Its inclusion was unnecessary. In the light of the judge’s findings that Mr Weinerman and Mr Ostrovizky had chosen not to take advantage of the provision in the first agreement it was also natural for him to conclude that its later inclusion would anyway have made no difference.

[51]The judge recognised that the clause relating to statutory documents became redundant when Mr Weinerman decided that the corporate entities would not be SAs. He accepted the evidence of Ms Faitakis that the agreements provided proper protection (in the round) for Mr Weinerman and Mr Ostrovizky, given that the trust arrangement was not available. For that reason the inclusion of the redundant clause did not render the drafting of the agreement negligent. That conclusion was open to him. As with other aspects of the arguments advanced by Mr Ostrovizky he also concluded that its inclusion made no difference whatsoever to the train of events that followed.

[52]This is an example of his approach to the “but for” causation question. Although Mr Pooles criticised the judge for dealing with questions of breach of duty and at the same time whether the alleged breach would have led Mr Ostrovizky or Mr Weinerman to behave differently, there was no legal error in doing so. It was an appropriate course to take. It was also necessary for the judge to consider in detail the events which followed and the various explanations for what occurred over the next four or five years. Nonetheless, the immediate consequences (or lack of them) of the alleged negligence merited attention. Mr Ostrovizky and Mr Rinis began ignoring the terms of the agreements very soon after they were executed.

[53]I have set out in summary form the judges conclusions on causation in the wider sense in paragraphs [39] and [40] above. In my judgment they flow from findings open to him. He did not accept that he had been provided with the complete picture by Mr Weinerman and Mr Ostrovizky. Important aspects of their evidence were contradicted by the disclosure provided by Mr Simos, in particular in connection with Mr Rinis’s dealings with Silcio and Energetica.

[54]The judge was entitled to find that the 2007 agreements did not oblige Mr Ostrovizky to make additional payments and that he did so for his own commercial reasons when he discovered that Mr Rinis was not willing or able to commit the funds. The reality is that Mr Ostrovizky saw the potential for large profits and was willing to finance the projects well beyond his contractual obligations. Whether or not the variations of agreement that followed, and in particular the signed agreement in November 2008, were enforceable, Mr Ostrovizky considered himself bound by them. The credit crunch at the end of 2008 temporarily destroyed his ability to provide funds. None of these actions could be attributed to the drafting of the 2007 agreements. Equally, the judge was entitled to find that Mr Ostrovizky would have acted just as he did, whatever was in those agreements, given that he did not give the bank guarantee as required, did not take the minority shareholding and did not enforce the pledge. Mr Ostrovizky was entitled to purchase the partnerships but did not do so. Whatever may have been the difficulties in enforcing contractual rights in the Greek courts, Mr Ostrovizky did not attempt to do so during the time he says he was under the sway of Mr Rinis.

[55]On Mr Ostrovizky’s case, the real problem which led to his difficulties was with Mr Rinis. He did not do what the 2007 agreements required him to do. In the hope of securing a handsome profit Mr Ostrovizky was prepared to take on Mr Rinis’ financial responsibilities. Had the process been as quick as the parties hoped in the early stages, all would probably have been well. But as it dragged out over years good money was thrown after bad, the financial climate changed and the deals unravelled. In my judgment, the judge’s conclusion that none of that could be attributed to Ms Murray’s drafting or actions in 2007 cannot be faulted.

Conclusion

[56]The judge was entitled to conclude on the evidence before him that Ms Murray was not negligent and that, if proved, the negligence alleged against her was not causative of any of the difficulties that engulfed the projects in which Mr Ostrovizky and Mr Weinerman had become involved with Mr Rinis. In my judgment the appeal should be dismissed.

[57]I agree.

[58]I also agree.