ADVISING YOUR CLIENT ON LITIGATION RISKS 2 & 3 : RISKING IT ALL ON A RECOLLECTION OF A MEETING & THE WITNESS WHO GIVES A WHOLLY NEW ACCOUNT FROM THE WITNESS BOX

The judgment in Slade (t/a Richard Slade And Co) v Abbhi [2018] EWHC 2039 (Comm) (24 September 2018) illustrates another risk of litigation.  The risk of a witness giving a wholly new account whilst giving evidence at trial.

THE CASE

The claimant firm of solicitors sought recovery of costs f OF £371,000 from the defendant. The claimant’s costs was that the defendant had  personally agreed to pay the  litigation costs of his father-in-law,

RISK NO 1 – A WHOLLY UNNECESSARY RISK

The whole case centred on the question of what was said between the claimant solicitor and the defendant in a 45 minute meeting that took place in July 2013.  It is perhaps unnecessary to point out that all of this could have been resolved by a written memorandum of agreement, a confirmatory letter from the solicitor or (at the very least) a written attendance note. None of these appear to have existed.  The case turned on witness credibility.

RISK NO 2 – THE WITNESS WHO GAVE A NEW ACCOUNT

The claimant solicitor was successful because the trial judge preferred his account of what was agreed in the meeting. The defendant’s case was not assisted – at all – by a new version of the facts given by the defendant for the first time whilst giving evidence.  This meant that the defendant’s “new” case had not been put in cross-examination to the claimant.  This had a major impact upon the defendant’s credibility.

THE JUDGMENT ON THIS ISSUE

The judge observed that the defendant’s statement that he was willing to offer an assurance on costs up to the value of the shares emerged for the first time in the witness box, it contradicted the account of the meeting that had been given in the defendant’s witness statement.

1. 1. I have already explained how Mr Abbhi’s Defence and witness statement contain a denial that he reached any agreement with Mr Slade on 11 July 2013 that involved a commitment on his part to provide any funding of the Action. His position was that he had no obligation beyond the Loan Agreement which (despite the supporting security and whatever value that may have had) of course contained no commitment at all to lend further.

   2. However, in his testimony – which had previously sought to emphasise how the hotel meeting was a brief one with much of it taken up with introductory pleasantries so there was no time for a “big oral agreement” – he explained that he had indicated a willingness to provide loans against the value of his security over the EGL shares. Initially Mr Abbhi expressed himself in negative terms, saying “I gave him no assurance that I would pay him one penny outside of the 2012 loan agreement”, by which he meant the value of the shares. When asked questions about any implicit or explicit assurance to lend up to their value, Mr Abbhi confirmed to me that he had made it clear to Mr Slade at the meeting that he would lend up to their value.

   3. That confirmation inevitably provoked questions as to whether or not the value of the shares was discussed at the meeting. The relevant exchange (which involved something of a backtrack on the answer he had just given about clarifying to Mr Slade the limit of his commitment) was as follows:

“A. I made Mr Slade aware of the mortgage on the shares and he was – because that was part of the loan agreement as well. There was a mortgage over the shares. He was aware of that and I told him as well that this is the maximum amount that I would be lending, if I would even go to that extent, because I do have a clause of further loans at my discretion.

Judge: So when you say, “I told him this was the maximum amount”, what was “this”?

A. That was the value of the shares, which was at that point around roughly, I would say, £800,000 to £1 million, according to the books – the public records of Edwardian Hotels.”

1. Allowing for the fact that Mr Abbhi’s later answer contained a reminder of the discretion he had in relation to further lending, these answers represented a significant shift in his account of the meeting. So much so that Mr Slade had not been cross-examined by reference to how Mr Abbhi was now putting it. Mr Robins had cross-examined Mr Slade on the basis that there was a basic inconsistency between an oral agreement which bound Mr Abbhi to make further loans as a matter of obligation and the discretionary language of the Loan Agreement. Until Mr Abbhi gave his evidence there was no question of him having made a commitment to lend up to a certain value, or range of values, but no more.

2. It follows that there was no cross-examination of Mr Slade upon the point which he would presumably have been most anxious to establish if Mr Abbhi’s account was correct, namely his (Mr Slade’s) inquiry into what the mortgaged shares were worth. Only by establishing what the shares were worth or likely to be worth would Mr Slade have been able to establish what (on Mr Abbhi’s account in the witness box) the remaining headroom for further lending was under the Loan Agreement. Mr Slade says he was aware of the mortgage of the shares (even though it was only the Loan Agreement, which makes no mention of the security, that was sent to him the day after the meeting) but the contemporaneous documents do not contain any indication that he had any knowledge of the likely value of the shares until 10 December 2013. On that day Mr Abbhi sent him an email indicating a possible value of $1,123,200 but that email was written 5 months after the hotel meeting and as the subject matter of the email indicates (“EHL Shares”) it was written in connection with the proposal of a share purchase which had arisen as an alternative to Mr Abbhi lending to Mr Singh against his security.