Earlier posts have looked at the issue of witness credibility in the context of civil trials.  Here we look at the issue of witness evidence in the context of a multi million pound dispute between corporations. The judgment, given earlier this week, of Mr Justice Males earlier this week in UBS AG (London Branch) -v- Kommunale Wasserwerke Leipzig GMBH [2014] 3615


The case involved claims and counterclaims between a bank and a German water company in relation to the sale of credit protection. The trial lasted 42 days. The sums were large, involving a claim for $137,637,059.58. There were allegations of bribery and corruption.


General approach to witnesses

  1. In making those findings I am principally guided by the contemporary documents and by the inherent probabilities of the case, judged as best I can in the light of the documents and my overall assessment of the witnesses. Inevitably, when giving evidence about events so long ago (for the most part in 2006 and early 2007), witnesses cannot be expected to have a detailed or accurate recollection of events, let alone of such matters as precisely who said what at particular meetings or what they knew at particular times. The usual difficulties of recollection (see Gestmin SGPA SA v Credit Suisse (UK) Ltd [2013] EWHC 3560 (Comm) at [15] to [22]) are aggravated in this case by the effect of hindsight. These were transactions which went so disastrously wrong that it is natural for witnesses to have persuaded themselves by a combination of hindsight and wishful thinking, in some cases perfectly honestly, that they did or said or thought things (or that they did not) at the time, or that they had less to do with the transactions than was in fact the case. There was also a tendency for some witnesses to be defensive about the role which they played and (in my view) to give evidence, not of what they actually did but of what they now wish they had done. Such evidence was not necessarily dishonest.
  2. With oral evidence from so many witnesses of fact (14 from UBS, four from KWL, five from LBBW and five from Depfa) it would be impracticable and of no real benefit to record detailed impressions about the reliability and truthfulness of each of them. I should, however, say something about some of the principal witnesses, in particular (but not exclusively) those I find to have been deliberately untruthful.
  3. I should also record that with so many witnesses and with four separate parties involved, it was necessary for the trial to proceed in accordance with a fairly tight timetable. Without this, the trial could easily have taken much longer. I am grateful to all parties for ensuring that the timetable was adhered to. I am satisfied that the time available afforded all parties a proper opportunity to put their respective cases. Nobody suggested otherwise. Inevitably, however, the need to work to such a timetable means that some avenues may not have been as fully explored in cross examination as they might otherwise have been. I have borne this in mind.


We know that there is a tendency of judges in civil cases to be relatively kind to witnesses. Often preferring to attribute mistakes to honest errors of recollection rather than a witness deliberately lying. Well…

The UBS witnesses

Mr Steven Bracy

  1. Mr Bracy was a thoroughly dishonest man and dishonest witness. He had obviously been heavily coached (by his own lawyers who attended the trial during the four days when he gave evidence, not by UBS’s) and was highly evasive, refusing to give straight answers to simple questions. From a long list, four examples of his dishonesty will suffice.
  2. First, he deliberately deceived his colleagues at UBS, including the CRC, as to KWL’s credit rating, passing on an out of date shadow credit rating and suppressing a lower but more up to date rating in case the lower rating jeopardised approval of the deal (see [259] below). This alone was conduct for which, if it had come to light, other UBS witnesses said that he should have been fired. It shows the lengths to which he was prepared to go to promote the deal.
  3. Second, there was clear evidence that Mr Bracy made a number of fraudulent expenses claims while at UBS. Although he failed to disclose this in his second witness statement, he has been barred from associating with any member of FINRA, the US financial regulatory authority, as a result of refusing to co-operate with an investigation into expenses frauds while at UBS and also while working for a later employer. In the event FINRA made no findings whether Mr Bracy was guilty of making fraudulent expenses claims, but the evidence before me made it abundantly clear that he was.
  4. Third, I have no doubt that Mr Bracy understood perfectly well that KWL’s priority in entering into these transactions was to obtain upfront cash, and that for this purpose it was prepared to accept some additional risk. That was made very clear to him in his dealings with Value Partners. However, he was concerned that to present this to CRC as KWL’s objective would be likely to result in approval being refused. He took steps to ensure, therefore, that the deal was presented to CRC as an exercise in risk reduction, for example by briefing Mr Heininger about the line which he should take when he met Mr Linfoot, a representative of CRC, on 30 May 2006. In the event, Ms Short and Mr Bawden refused to approve the transaction anyway, but this was nevertheless an attempt by Mr Bracy to mislead UBS’s own control function. For tactical reasons neither party emphasised this aspect of Mr Bracy’s evidence, UBS because it had no interest in further undermining his evidence and KWL because its case was that the purpose of the transaction was in fact to reduce risk and was represented to it as such by UBS. However, I have no doubt that this is in fact what happened.
  5. Fourth, in what was described as the “letter for K” episode, when requested by Messrs Senf and Blatz in October 2006 to fabricate false evidence that a trip to Dubai to which they had treated Mr Heininger in 2003 had been for legitimate business purposes, he willingly co-operated (see [456] below). His evidence that he had merely pretended to co-operate, stringing Messrs Senf and Blatz along while hoping that the issue would go away, was quite obviously a pack of lies. The “letter for K” episode only emerged clearly in the course of Mr Bracy’s cross examination, although UBS has not denied that it was aware of this incident before his evidence began. It casts important light on the nature of Mr Bracy’s relationship with Value Partners. As I shall explain, he knew from the outset that Mr Senf and Mr Blatz were not acting in KWL’s best interests. In connection with the “letter for K” episode it appears to have come as no surprise to him that they were acting dishonestly to cover up an inappropriate relationship with Mr Heininger. His reaction to their request was not that of an honest man.
  6. These and other matters were not only put to Mr Bracy but also to Ms Short, an entirely honest and fair minded UBS witness. She was obviously horrified. The full extent of her reaction did not really appear from her answers on the transcript, frank as these were, so I put it to her in these terms, with which she agreed:

“MR JUSTICE MALES: To be blunt about this — and you haven’t, of course, seen all of the evidence in the case, or heard all of what Mr Bracy had to say about this — but in your opinion, would it be fair to say that on the face of these emails, if we take the whole run of emails that you have been shown at face value, there was something of a rotten apple in the UBS barrel?

A. It’s exactly what I would have said, yes.

MR JUSTICE MALES: It rather looked from the expression on your face as if that was what you were thinking.

A. Yes, precisely.

MR JUSTICE MALES: And I wanted to see if that was right.

A. Yes, indeed.”

  1. While I would not exclude the possibility that Mr Bracy may sometimes have given truthful answers, I conclude that no weight can be placed on his evidence save to the extent that it consists of admissions or is corroborated by the contemporaneous documents. When those contemporaneous documents were authored by Mr Bracy, as many of the important documents in the case were, I bear in mind also his tendency to boast about his achievements to his superiors and to exaggerate the importance of his own role. Messages of that kind cannot necessarily be taken at face value.


Then judge went on to deal with the other witnesses in detail. Some of whom he found to be entirely honest and accurate. Some he found to be honest and inaccurate; some were honest but incompetent.   The judge recognised that some of the evidence was coloured by hindsight.

LBBW and Depfa witnesses

  1. The witnesses called by LBBW and Depfa were truthful witnesses doing their best to assist, but their evidence was, not surprisingly, highly coloured by hindsight. That applies with particular force to their evidence about how they viewed the transactions involving them, and the incidence of risk, at the time.
  2. KWL made criticisms of the conduct of Mr Wiehler, in particular as to the way in which he dealt with the obtaining of a capacity opinion from Freshfields. I deal with these below. Mr Wiehler was lacking in experience, and was working largely on his own so far as legal issues were concerned. In some respects, as he admitted, he made mistakes which he attempted to disguise from his superiors. However, this does not detract from his overall honesty as a witness.


The final words of the judgment are of some interest. Not so much in relation to witness evidence but more in relation to jurisdictional disputes.

Concluding observations

  1. As I observed at the outset, neither UBS nor KWL emerges with credit from this saga. For UBS it has been a case study in how not to conduct investment banking in an honest and fair way. It is to be hoped that the events described belong to a bygone era. As most of the main participants have moved on, and many of them are no longer employed in the banking industry, there is room to believe that to be so.
  2. For KWL too, it is to be hoped that these events are firmly in the past. It is apparent, however, that for many years KWL was run by a criminal who was able to plunder the company for his personal gain and (at least in some respects) to enlist the support of his fellow managing director in covering his tracks. He was able too to hoodwink the Supervisory Board whose task it was to provide oversight of his activity, but who displayed remarkable complacency when the warning signs were there to be seen.
  3. Mr Heininger’s greed and dishonesty could easily have been catastrophic for KWL. They would have been if it had not been for the fact that the dishonest advisers with whom he was in bed overreached themselves by entering into a corrupt arrangement with a maverick banker at UBS who was allowed far too much autonomy, with a view to ripping off not only KWL but their other clients as well.
  4. Two final observations. First I express my thanks to all counsel and solicitors engaged in this case for the quality of their submissions and the co-operation which ensured the efficient process of the trial. Second I note that the outcome here and in Germany may be said to illustrate that the money and effort expended on jurisdictional disputes are sometimes misdirected. KWL fought hard to resist the jurisdiction of the English court and to have all these issues decided in Germany. There is therefore some irony in the fact that, as events have turned out and although there are good reasons why this is so, it lost the case in Germany against LBBW and has substantially, although not entirely, succeeded here. Litigation is not like football. It is not always an advantage to play at home.