BUNDLES WERE A DOG’S DINNER: MISSING WITNESSES AND AN EXPERT WITH NO CONCEPT OF HIS DUTY TO THE COURT

The judgment of Mr Justice Coulson in Bank of Ireland -v- Watts Group PLC   [2017]EWHC 1667 (TCC) exemplifies many of the issues in litigation that are regularly covered in this blog: bundles, missing witnesses and errant experts. In particular it is rare to see such a excoriating criticism of the conduct of an expert witness.

“Mr Vosser’s close relationship with the Bank was borne out by many things: his unrealistic approach to the allegations; his attempt to mislead the court; his application of the wrong test; his unreasonable intransigence which led to his refusal to make any concessions whatsoever; and the fact that many of his criticisms, which he did not withdraw, were so unpersuasive that the Bank, quite properly, declined even to plead them as allegations of professional negligence”

The buildings in question

THE CASE

The claimants were bringing an action in negligence, alleging that it had suffered loss when it lent money on a loan for a residential development (“on Clifford Street, York, directly opposite the  Magistrates’Courts, one of York’s finest Victorian Buildings”.  It was alleged that the defendant had negligently prepared an appraisal report which led the bank to lend money on the development. Money that the bank lost.

York Magistrates’ Court

SOME INTERESTING OPENING OBSERVATIONS

1. I should deal with two matters at the outset. First, although the bundles were something of a dog’s dinner, the trial could not have been more efficiently and competently presented by counsel on both sides. The conclusion of the evidence in four days was only possible because counsel properly concentrated on what mattered and ignored the secondary issues. I am very grateful to them both.

2. The second, more substantive point, concerns the incomplete nature of the Bank’s factual evidence. The Bank did not call Mr David Rainford, who was the relationship manager responsible for this loan. He would have been a critical witness as to the circumstances in which the loan was sought and approved, and the conditions of approval^[1]. His absence therefore meant that there were significant gaps in the Bank’s evidence. No reason was given as to why Mr Rainford did not give evidence, although I note that he was the subject of lending criticisms by Edwards-Stuart J in The Governor of the Bank of Ireland v Faithful and Gould Limited [2014] EWHC 2217 (TCC) at paragraphs 62, 90, 129, 131, 150, 154, 192, 207 and 249. There was also an absence of evidence from anyone at the Bank who actually read and/or expressly relied on the final IAR in April 2008. These difficulties were exacerbated by the absence of documentation which must, at one stage, have existed. These omissions mean that I have had to weigh the factual evidence in this case with particular care.

AND THEN WE GET TO THE BANK’S EXPERT

The absence of a key witness may be unfortunate for the bank.  Things did not get any better in relation to the bank’s expert witness.

2. General Observations on the Expert Evidence

5.2.1 Introduction

1. 1. It is necessary to make some general observations as to the expert evidence in this case relating to Watt’s performance of their role. Although it is commonplace for counsel to submit that ‘their’ expert’s evidence should be preferred wholesale to that of the expert on the other side, that is not usually a justified approach. But in this case, I have concluded that, for a variety of reasons outlined below, the written and oral evidence of Mr Vosser adduced on behalf of the Bank was unreliable. So, wherever he disagreed with Mr Whitehead, the expert called on behalf of Watts, I have concluded that I should prefer Mr Whitehead’s evidence.

5.2.2 Independence

1. 1. I concluded on the evidence that Mr Vosser was not a properly independent witness. It was clear that the Bank was his principal client, providing the vast majority of his work (and fees), and that he had spent most of the last few years acting for the Bank as an expert witness in actions against monitoring quantity surveyors arising out of the 2008-2009 financial crash. He told me that, until now, these had all been resolved by ADR, so that this was the first of those disputes which had come to court. He was, I think, unaware of the difference between acting as the Bank’s advocate in, say, a mediation, and his duties to the court when giving expert evidence.

   2. Mr Vosser’s close relationship with the Bank was borne out by many things: his unrealistic approach to the allegations; his attempt to mislead the court; his application of the wrong test; his unreasonable intransigence which led to his refusal to make any concessions whatsoever; and the fact that many of his criticisms, which he did not withdraw, were so unpersuasive that the Bank, quite properly, declined even to plead them as allegations of professional negligence. I deal briefly with each of those matters in turn below. They support, either separately or cumulatively, my conclusion that Mr Vosser was not an independent or reliable expert witness.

5.2.3 The Lack of Realism

1. 1. As noted above, Watts were paid £1,500 for producing the IAR. That modest fee reflected the fact that they were not expected to do their own detailed calculations of cost, time or cash-flow, but had instead to check the calculations and proposals which had been undertaken by the Borrower. I regard the size of the fee as good evidence of the limited nature of the service which Watts were expected to provide at the IAR stage.

   2. That must be compared with Mr Vosser’s approach. In addressing Watts’ performance of this limited service, his first report, together with appendices, filled a whole lever arch file. He incurred fees of £24,000 in carrying out that report, and the Bank’s solicitors incurred a similar sum in respect of their commissioning, checking and liaison work in connection with that same report. Thus, whilst Watts’ IAR cost just £1,500, the report and associated work done to criticise it cost more than 30 times that amount. In my view, that is a clear indication that the criticisms which have been generated are based on an entirely unrealistic expectation of what it was that Watts were required to do.

   3. Furthermore, Mr Vosser’s criticisms were not limited to a single report. He produced a second detailed report and then, the week before trial, another lever arch file of new documents purporting to address the key paragraphs of Mr Russell’s witness statement (paragraph 35 above). Mr Vosser said that this material was designed to show that the three properties considered by Mr Russell in January 2008 were not proper comparables, a point which he could have made in his second expert’s report, but failed so to do. This excessive industry only confirmed my view that Mr Vosser was prepared to go to any lengths to shore up the Bank’s case.

5.2.4 Attempt to Mislead

1. 1. One of the major issues raised in Mr Vosser’s expert report was his uncompromising view that Watts, as the monitoring surveyor, were obliged to start from scratch and produce their own detailed breakdown of the construction costs. He justified this approach by referring to the relevant RICS guidance, which he quoted as saying: “the Project Monitor…may have to develop his or her own elemental breakdown of construction costs to prove or disprove the Developer’s figures”.

   2. However, that was a highly misleading quotation. The full passage reads:

“When involved with smaller developments and inexperienced Clients and Contractors, the Project Monitor, whilst strictly responsible to the Client, may also be asked to perform a hand-holding exercise with the Client and may have to develop his or her own elemental breakdown of construction costs to prove or disprove the Developer’s figures.” (Words in bold omitted by Mr Vosser).

In other words, the passage which Mr Vosser purportedly quoted in his report deliberately excised the words which would have shown that this part of the RICS guidance was completely irrelevant to the facts of this case (because the Bank was not inexperienced, because the contractor/Borrower was not inexperienced, because this was not a small development, and because Watts were not being asked to perform “a hand-holding exercise”). This was a blatant misuse of a source document, in order to present a criticism on a false basis. It was clean contrary to Mr Vosser’s duty to the court.

5.2.5 Wrong Test

1. 1. In my view, Mr Vosser’s oral evidence made plain that he was applying the wrong test. He was not looking to see what a reasonably competent monitoring surveyor would have done in the circumstances, and to test Watt’s performance against that benchmark. Instead, he repeatedly said that what he was doing was setting out what he claimed he would have done, line-by-line, figure-by-figure. That exercise produced a range of figures for construction costs between £1.445 million and £1.8 million. His evidence was that this was what he did, so this is what Watts should have done too. In this way, there were never any margins of error in Mr Vosser’s analysis; no broader parameters within which a monitoring surveyors’ performance was to be judged^[2]. In his view, because they failed to advise that the construction costs would be £1.445 million or more, Watts were at fault. Accordingly, I doubted whether his evidence went to the right issue.

5.2.6 Unreasonableness

1. 1. I consider that Mr Vosser’s approach was thoroughly unreasonable. The agreed note demonstrated that he made no concessions at the experts’ ‘without prejudice meetings’, using them instead – quite deliberately – to raise entirely new matters with his opposite number, Mr Whitehead. He made no obvious concessions in his oral evidence although in his closing submissions, Mr Mitchell accepted one (which may be important on causation: see paragraphs 107 and 144 below). I observed at the outset of the trial that I had never seen a Joint Statement between experts that contained no agreement at all. I find that the main reason why the Joint Statement in this case contained no such agreement was due to Mr Vosser’s complete failure to make any concessions at all.

   2. Some examples of his unreasonable approach may be noted. One concerned the nature and scope of design warranties. It was put to Mr Vosser in cross-examination that, this being a matter of legal rights and obligations, it would primarily be a matter for the solicitors. Mr Vosser disagreed and said that this was an important matter for the monitoring surveyor. He was plainly wrong about that: the terms of warranties are for lawyers, not monitoring surveyors. It was obviously unreasonable for him to maintain that stance.

   3. Another example of Mr Vosser’s unreasonableness concerned the events after the IAR. It is a striking feature of this case that the Bank’s pleaded allegations go no further than the initial report produced in April 2008. They make no pleaded criticisms of the subsequent reports produced by Watts. And yet, despite that, Mr Vosser’s first and second reports included lengthy sections which were concerned with these unpleaded allegations, which he continued to try and advance during his oral evidence. In my view, this was yet further evidence of unreasonableness, an expert insisting on making criticisms which the Bank have deliberately chosen not to plead.

5.2.7 Summary

1. The duties of an independent expert are set out in the well-known passages of the judgment in The Ikarian Reefer [2000] 1 WLR 603. For the reasons set out above, Mr Vosser did not comply with those duties and I was not confident that he was aware of them or had had them explained. For him, it might be said that The Ikarian Reefer was a ship that passed in the night.

AND THE RESULT

The bank lost the case for a whole host of reasons.