“248. …. In effect, therefore, the agreement committed R+V to making a significant payment to Risk to fund the operation with no clear entitlement to recover it. Mr. Gebauer knew that he did not have authority to make a contract of that kind without Mr. Kernbach’s approval and I am satisfied that he was also well aware that neither Mr. Kernbach nor the board would have approved an arrangement of that kind. Indeed I think he must have been aware that the board would not have approved such an arrangement with any prospective partner, even with proper safeguards, in view of the tight financial restrictions it had imposed. 249. If, as I think, Mr. Gebauer understood very well that the terms agreed with Mr. Chalhoub involved the acquisition by R+V of a shareholding in Risk UK, there were at least two reasons as far as he was concerned for putting part of the agreement into an addendum, thereby making it easier to conceal both its existence and the true nature of its contents: first, the deduction in respect of the additional 40% commission (which was bound to come to the attention of the accountants as soon as detailed statements of account were supplied) could be passed off as a premium deposit; secondly, the acquisition of shares could be passed off (if anyone asked, which was not very likely) as a security arrangement in the nature of a pledge. … 250. … I am satisfied that Mr. Gebauer took steps to ensure that copies of the Addenda did not find their way onto the files. … 251. … In my view there is no escaping the conclusion that in entering into, and subsequently implementing, the London binders Mr. Gebauer deliberately participated in a scheme that was designed to enable Risk to obtain as much as possible by way of commission during the first year of underwriting contrary to the interests of R+V. In doing so he acted dishonestly and in disregard of his duty to the company.”
“254. In the light of all the evidence I am satisfied that the Addenda to the London binders were the result of a dishonest conspiracy between Mr. Gebauer and Mr. Chalhoub which began in the spring of 2001, led to the signing of the binders and their Addenda in July and September 2001 and was pursued throughout the remainder of 2001 and 2002 in the ways described earlier in this judgment. Having proposed a form of close co-operation between their two organisations, Mr. Chalhoub was able to take advantage of Mr. Gebauer’s obvious enthusiasm for the London operation by persuading him to agree to terms that were very advantageous to Risk and manifestly disadvantageous to R+V. Since Mr. Gebauer was willing to co-operate, they were able to agree without any serious negotiation on the terms that were subsequently put into the Addenda in order that their existence and true nature could be concealed. The effectiveness of that step is apparent from the fact that between them Mr. Gebauer and Mr. Chalhoub were able to suppress the existence of the Addenda until the audit in March 2003 made it impossible to do so any longer. If the relationship between R+V and Risk had not broken down for other reasons and if Mr. Gebauer had taken over Mr. Kernbach’s position in May 2003, it is quite possible that the Addenda would not have come to light until very much later, if at all. I am satisfied that Mr. Chalhoub was well aware that Mr. Gebauer had no authority to commit R+V to agreements on these terms and that he was in breach of his duty to R+V in purporting to do so.”
“Ratification: or blowing hot or cold 47. If the court finds that Risk were party to a dishonest conspiracy to injure or cause loss by unlawful means, then there is no impediment to a claim for the 40% deduction as damages for conspiracy.”
“MR SCHAFF: I am making a different point, which is that R+V are saying prior to termination, for the period prior to April 17th, 2003, they are entitled to recover the 40 percent deduction. MOORE-BICK J: Yes, I am with you. Sorry, it is my fault. MR SCHAFF: With respect, it is my fault, because that is the issue. I mean in the scale of things, one of the … MOORE-BICK J: I think what slightly put me off my understanding was you said they had affirmed the contracts, it said they have not. They have purported to treat them as discharged. MR SCHAFF: They have ratified them ab initio and terminated them from 17th April. MOORE-BICK J: If they have purported to treat them as discharged by breach. MR SCHAFF: Yes. MOORE-BICK J: Not to avoid them. MR SCHAFF: Absolutely. … MR SCHAFF: But they are also claiming for the period prior to termination to say that, ‘We, R+V, can get our hands on the 40 percent. MOORE-BICK J: Yes, I think I probably lost sight of that. MR SCHAFF: ‘ … and that is worth a fair bit of money as well’. My point about this is that in order to do that, they can only do that as damages for unlawful means conspiracy. MOORE-BICK J: Yes. MR SCHAFF: They cannot say, ‘Yes, the contract was in existence up until termination’, and say, ‘Well, we will take all the nice profitable business out of that, but re-write the contract and not give you your 40 percent whilst the contract was under foot’. The only way they get round that – and I accept this – is that if in fact the creaming off of the premium was the unlawful means conspiracy which they prove, then they can recover that as damages for the unlawful means conspiracy. That is the only point I am making, but one just needs to put it in its legal context. So far as termination is concerned, that obviously is prospective and carries one forward to what would have been the end of 2004. MOORE-BICK J: It is not being said that the addenda are severable from the main contract, is it? MR SCHAFF: It is very difficult to say that. MOORE-BICK J: There is nodding going on on the other side of the court. MR SCHAFF: You can say it, and obviously if it is fraudulent and it is part of the suspicion to defraud, then there is no problem of getting … MOORE-BICK J: It is not really a problem if there is a conspiracy because you are going to get the money one way or another. MR SCHAFF: I agree.”
“In those circumstances when R+V discovered the existence of the Addenda it was in my view fully justified in treating both agreements as terminated with immediate effect and is entitled to recover damages for conspiracy. The precise nature and scope of the remedies to which it is entitled will be the subject of argument on a later occasion.”
“If Risk had sought to argue at the trial that R+V were prevented from recovering damages for conspiracy, even in circumstances where there had been dishonesty, then I would have instructed Mr Edelman QC to oppose and argue against this. I did not do so because I relied upon the concession by Risk that this was not the correct legal position, and that, if a dishonest conspiracy were proved then no issue of ratification could arise.”
“It may very well be, as has been convincingly argued (Watt, ‘The Danger and Deceit of the Rule in Henderson –v- Henderson: A New Approach to successive civil actions arising from the same factual matter’ (2000) 19 CLJ 287), that what is now taken to be the rule in Henderson –v- Henderson has diverged from the ruling which Wigram V-C made, which was addressed to res judicata. But Henderson –v- Henderson abuse of process, as now understood, although separate and distinct from cause of action estoppel and issue estoppel, has much in common with them. The underlying public interest is the same: that there should be finality in litigation and that a party should not be twice vexed in the same matter. This public interest is reinforced by the current emphasis on efficiency and economy in the conduct of litigation, in the interests of the parties and the public as a whole. The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all. I would not accept that it is necessary, before abuse may be found, to identify any additional element such as a collateral attack on a previous decision or some dishonesty, but where those elements are present the later proceedings will be much more obviously abusive, and there will rarely be a finding of abuse unless the later proceeding involves what the court regards as unjust harassment of a party. It is, however, wrong to hold that because a matter could have been raised in earlier proceedings that it should have been , so as to render the raising of it in later proceedings necessarily abusive. That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abuse in the process of the court by seeking to raise before it the issue which could have been raised before. As one cannot comprehensively list all possible forms of abuse, so one cannot formulate any hard and fast rule to determine whether, on given facts, abuse is to be found or not. Thus while I would accept that lack of funds would not ordinarily excuse a failure to raise in earlier proceedings an issue which could and should have been raised then, I would not regard it as necessarily irrelevant, particularly if it appears that the lack of funds has been caused by the party against whom it is sought to claim. While the result may often be the same, it is in my view preferable to ask whether in all the circumstances a party’s conduct is an abuse than to ask whether the conduct is an abuse and then, if it is, to ask whether the abuse is excused or justified by special circumstances. Properly applied, and whatever the legitimacy of its descent, the rule has in my view a valuable part to play in protecting the interests of justice.”
“MR ONIONS: To contend that R&V would have made an agreement with Risk on more favourable terms is not something that they can contend in the light of that finding, so the point is that you are not comparing to assess the loss and damage, here is the agreement that was made and here is the agreement that would have been made – which is what my learned friend is trying to do by saying you take the binder but not the Addenda. What you are comparing is here is the agreement that was made and here they did not enter into any agreement at all. That is why we say the correct approach to loss and damage, actionable loss as a result of this conspiracy, is to compare the two positions, the position under the agreement that was made with the position as it would have been if no agreement had been made. MOORE-BICK J: The difficulty I have with that analysis is that it sounds to me as though what you are saying is although these persons engaged in a dishonest conspiracy, which involved removing substantial sums of money – the first year’s premium – because the overall result was beneficial there is no loss to R&V, therefore no dishonest conspiracy, so it becomes a bit circular, and they can keep the 40 per cent. Is that right, is that the answer? MR ONIONS: My Lord, yes. MOORE-BICK J: They act dishonestly, knowingly dishonestly, yet they keep the fruits of their dishonesty. MR ONIONS: That is the result of the claimants saying we want to have the binders but not the Addenda. MOORE-BICK J: I can see an argument for saying you cannot have it both ways, you either get the benefits of the binders and pay the price, which includes the 40 per cent, or you do not, but that is an argument which goes to liability, not quantum. It is an argument that says, in effect, you chose to treat my conduct as lawful by adopting the agreement that I have made, warts and all, which includes 40 per cent going off to Mr Chaloub. That argument was never pursued in the litigation or trial.”
“Risk claim fees of 1% …”
“Rate 25% Reinsurance expenses: 5% Profit commission, to be calculated at each anniversary date of the contract, first calculation to take place after 24 months of date of commencement on underwriting year basis. Results being premiums ceded less commissions, losses paid and case reserves for claims on know [sic] losses excluding IBNR Losses carried forward 3 years.”
“It is agreed ‘that subject to issues of causation, remoteness and reasonableness of the expenditure and to issues arising out of its being made in connection with the litigation, there is no reason in principle why R+V cannot recover as part of its loss arising out of the conspiracy losses which consist in the cost of hiring external consultants or experts.’”
“To resist such a counter-attack and also counter-attacks from various other directions, the plaintiffs maintain, and must maintain, a large investigation department, and the money actually expended in unravelling and detecting the unlawful machinations of the defendants which have been proved in this case before any proceedings could be taken must have been considerable. I can see no reason for not treating the expenses so incurred which could not be recovered as part of the costs of the action as directly attributable to their tort or torts. That these expenses cannot be precisely quantified is true, but it is also immaterial. Accordingly, the plaintiffs have proved the damage which is essential to the tort of conspiracy, and they are entitled to an inquiry accordingly. As I had already indicated, not all the overt acts are exclusively referable to the conspiracy. Two of them are referable, yet at the same time they involve breach of covenant. Two transactions, though forming no part of the conspiracy, represent breaches of covenant. As no conspiracy to make and break contracts by impersonation or otherwise is alleged, damages for each breach of covenant must be assessed separately, and great care must be taken to ensure that in no case are damages awarded twice over in respect of the same transaction. [Counsel for the defendants], however, contended that this is not enough. He submits that there should be no inquiry at all as regards damages for breach of covenant, because, as he contends, only nominal damages are recoverable. I do not think so. I think that as regards each separate breach the master must estimate as best he can the pecuniary loss which the plaintiffs have suffered having regard to the circumstances in which it occurred and the difficulties which have confronted the plaintiffs in detecting and unravelling it before they were in a position to take proceedings, and I shall direct an inquiry accordingly.”
“I have no doubt that the expenditure of managerial time in remedying an actionable wrong done to a trading concern can properly form the subject matter of a head of special damage. In a case such as this it would be wholly unrealistic to assume that no such additional managerial time was in fact expended. I would also accept that it must be extremely difficult to quantify.”
“No doubt it is true as the judge stated, that, in visiting Vietnam, Mr Griffiths was engaged in an unusual task. However, it is not suggested that his trip abroad, as an employee engaged in the business of SCB and in respect of whose responsibilities his salary was in any event payable, led to any significant disruption in SCB’s business or any loss of profit or increased expenditure on SCB’s part (save in respect of travel subsistence and out of pocket expenses which the judge awarded in any event).”
“I do not accept the distinction Mr Woolf seeks to make between short and long periods of wasted time, nor his distinction between senior and less senior posts. In all cases, the claimants were paying for time which was to be of a benefit to them and they lost the benefit of that time. Even in the case of back-office staff who did not directly make a profit for the company, there was evidence that the brokers were distracted from their job of making profits when the back-office staff were not producing information and other back-up. So far as this Group is concerned, it is unrealistic to try to distinguish between profit makers and non-profit makers as the defendants have sought to do.”
“Every employer values each employee at more than the employee is paid, otherwise there is no point in employing him. If time had not been wasted sorting out the SYMBAL muddle, the employees concerned would not have been doing nothing. Mr Woolf also said that in the case of directors and senior employees, they do not work fixed hours and any time wasted on the SYMBAL muddle would have been made up in the evenings or at weekends. But, particularly in the case of directors and managers, the whole of any employee’s time is a benefit to the employer. If an employee is deprived of the benefit or leisure, either in the evenings or at weekends, productivity during paid hours suffers.”
“The British Motor Trade Association case was unusual, because the plaintiffs were held entitled to recover the costs of their investigation department, although its existence was not due solely to the torts of the defendants in that case. However, the plaintiffs incurred the costs of the investigation department only because of the torts of the defendants and others like them. In the present case, there is no evidence that the claimant has incurred any additional expense as a result of the torts of the defendants or indeed of anyone else. The British Motor Trade Association case is not authority for the proposition that the salaries of staff investigating a tort committed to their employer are recoverable as damages if those salaries would have been paid even if there had been no tort.”
“It is not sufficient for a claimant merely to say that damage is obvious, or to assert that but for a tort its staff would have been gainfully employed and would have brought in their alleged charge-out rate, particularly when a claim is made for substantial and precisely-calculated sums based on alleged charge-out rates of the employees concerned and the time allegedly spent by them in relation to the claims against the defendants.”
“In my judgment, a claimant in a case such as the present has no claim for damages in respect of the salaries paid to its employees during the period when they carried out work made necessary by the defendants' torts if those salaries would have been paid in any event. In such a case, the claimant has not incurred any expenditure as a result of the defendants' torts that it would not have incurred in any event. I therefore reject the claimants' claim to be entitled to the salaries paid to their employees.”