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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Baker Tilly (a firm) v Makar, Re Application to Appeal [2010] EWCA Civ 197 (18 February 2010) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2010/197.html Cite as: [2010] EWCA Civ 197

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IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEEN'S BENCH DIVISION
HIS HONOUR JUDGE RICHARD SEYMOUR QC

		Royal Courts of Justice Strand, London, WC2A 2LL
		18th February 2010

Lord Justice Jackson:

1. This is an application for permission to appeal. The facts giving rise to this application are as follows. The claimant, Baker Tilly, is a firm of accountants which acted for the defendant, Ms Mira Makar, in the latter part of 2006. Baker Tilly claims fees of £30,000 plus value added tax; Ms Makar counterclaims for damages in respect of alleged negligence and breach of fiduciary duty.
2. The facts of this matter are set out very clearly in the lengthy and detailed judgment of the trial judge, HHJ Seymour QC, sitting as a High Court judge. Although inevitably on this application for permission to appeal criticism has been directed to some of the judge's reasoning, no criticism at all has been voiced of the thoroughness and detail with which he set out the relevant evidence and the facts of this case. For my part, I find the judge's judgment of immense assistance in that regard.
3. The defendant, Ms Makar, was director and CEO of Triad Group Plc ("Triad"). In 2004 Ms Makar believed that there were financial and accounting irregularities in respect of the company which she sought to investigate. During 2005 Ms Makar was first suspended as CEO and subsequently dismissed. In March 2006 Ms Makar launched proceedings against Triad in the Employment Tribunal. One of her claims was that she had been unlawfully excluded from statutory and financial records of the company; another of her claims was that she had been penalised for "whistle blowing".
4. The Employment Tribunal made an order permitting each party to call expert evidence. An approach was made to Baker Tilly to see whether that firm would act as expert witness for Ms Makar. On 7 September 2006 Ms Makar and her brother, Mr Ihab Makar, had a meeting with four partners of Baker Tilly concerning the professional assistance which they would provide to Ms Makar in relation to her dispute with Triad. The judge held that no contract was made on that occasion.
5. The judge held that there were three separate contracts of retainer made between Ms Makar and Baker Tilly. The first contract of retainer was made on or about 17 October 2006 when Baker Tilly agreed to start reading into the papers. The judge concluded that it was an implied term of that contract that Baker Tilly would be paid a reasonable fee which the judge assessed at £5,850. The second contract of retainer was made, said the judge, in correspondence on 30 October 2006. The claimant agreed to provide an expert report for a fee capped at £30,000 plus VAT. The two letters which the judge found as giving rise to this contract were, first, a letter of instruction from Burges Salmon (Ms Makar's solicitors) to Baker Tilly dated 30 October 2006; and, secondly, a letter dated 30 October 2006 from Baker Tilly to Burges Salmon accepting instructions. I will come a little later to the third retainer.
6. The Employment Tribunal hearing was fixed to start on Monday 6 November 2006. In the event, it never did start. The Employment Tribunal proceedings were settled at a mediation held on Friday 3 November which ran on through the evening and into the early hours of Saturday 4 November.
7. At 9am on Saturday 4 November an assistant solicitor of Burges Salmon telephoned Mr Ian White, a partner of Baker Tilly, and left a message to the effect that the Employment Tribunal proceedings had settled. Mr White regarded this event as terminating Baker Tilly's retainer and he advised his partners to stop work. Ms Makar, however, took a different view. She still required the expert report of Baker Tilly because she wished to draw the events at Triad to the attention of the regulatory authorities.
8. On Monday 6 November 2006, two days after the settlement, Mr Britton of Burges Salmon telephoned Mr White of Baker Tilly, and Mr White made the following attendance note of that phonecall:

"Mira wants us to complete a prelim report within budget by, say, Wed?

I said, diff[erent] ballgame -- having stood people down.

MB will speak to MM and let her know that I will be in touch today."

9. The judge held that the effect of the voice mail message left at 9.00 on 4 November was to terminate the second retainer of Baker Tilly. Accordingly a fresh retainer was required in order for Baker Tilly to continue work after that date. The judge held that a third retainer did indeed come into existence. At paragraph 154 of his judgment the judge said this:

"Whilst it is correct that the case of the Firm in relation to fees after 4 November 2006 was put as arising under an employed contract, it was in fact clear that what was relied upon was the express request by Mr Britton on 6 November that work on the report continue on the basis that the cost would not exceed £30,000 plus Value Added Tax. That as it seems to me was not an implied contract but an express offer on behalf of Ms Makar to pay not more than £30,000 plus Value Added Tax if the report was completed. In my judgment, the Firm accepted that offer by conduct in continuing to work on the report."

10. In the event, Baker Tilly never did produce a report from Ms Makar. The reason why Baker Tilly did not produce such a report was a matter of controversy at the trial. There was a meeting on 20 November between Ms Makar and her brother on the one hand and some partners of Baker Tilly on the other hand. It was agreed at that meeting that it would be appropriate to wait until Triad's interim results were published in December before any report was prepared.
11. The judge concluded that Baker Tilly was under no obligation to continue working on the report unless Ms Makar gave further instructions to Baker Tilly after publication of Triad's interim results.
12. In December 2006 Baker Tilly rendered a bill to Ms Makar for £30,000 plus value added tax. The bill was sent on 13 December 2006. Six days later, on 19 December, Triad's interim results were published. Following the publication of those interim results Baker Tilly did not produce any report for Ms Makar. However, Baker Tilly did press for payment of its bill. Ms Makar declined to pay Baker Tilly's bill pointing out that the firm had never delivered any report to her.
13. In due course, Baker Tilly brought proceedings to recover its fees against Ms Makar. Ms Makar defended on the basis that no fees were due and she counterclaimed for damages. The trial of the action took place between 24 June and 1 July 2009. HHJ Seymour QC gave judgment for Baker Tilly on the claim and dismissed the counterclaim.
14. The defendant, Ms Makar, was aggrieved by the judgment against her on the claim and accordingly has brought the present appeal. There are seven grounds of appeal which I shall read out:

"1) The learned judge was wrong to conclude (as a matter of mixed fact and law) that the Defendant terminated her retainer of the Claimant by means of a voice-mail message left by the Defendant's solicitors with a partner of the Claimant on Saturday 4 November 2006. The judge should have held that the said voice-mail message did not represent a termination of the Claimant's retainer and that the Claimant's retainer accordingly continued in existence.

2) The learned judge was wrong to conclude (as a matter of mixed fact and law) that the sole purpose of the Claimant's retainer was the production of a report for the purposes of the Defendant's Employment Tribunal proceedings. The judge should have held that the purposes of the retainer included (at least) the provision of the Claimant's expert report to the Defendant.

3) The learned judge was wrong to conclude (as a matter of mixed fact and law) that the work purportedly carried out by the Claimant for the Defendant after 4 November 2006 was carried out pursuant to a new contract of retainer between the Claimant and the Defendant. The judge should have held that (as the defendant believed and intended) the said work was carried out pursuant to the previously existing contract of retainer between the claimant and the defendant.

4) The judge was wrong to find (as a matter of fact) that it was agreed between the Claimant and the Defendant on 20 November 2006 that the Claimant would carry out no further work pursuant to its retainer, pending the receipt of further instructions from the Defendant. The judge should have found that no such agreement between the Claimant and the Defendant was reached.

5) The learned judge was wrong to find (as a matter of fact) that the Defendant gave no further instructions to the Claimant after 20 November 2006. The judge should have found that the Defendant gave such instructions, in particular by her letters dated 27 March 2007 and 11 April 2007, in the latter of which the Defendant offered the Claimant a choice between producing the expert's report for payment and 'walking away' without payment.

6) The learned judge was wrong to conclude (as a matter of law) that the Claimant did not breach its retainer in failing at any stage to provide to the Defendant a written report, or indeed any report. The judge should have held that the Claimant remained under an obligation to the Defendant to provide such a report and breached that obligation by failing to provide it.

7) The learned judge was wrong to conclude (as a matter of law) that the Defendant came under any obligation to pay to the Claimant £30,000 plus VAT, or any sum, in circumstances where the Claimant had failed to provide a report to the Defendant."

15. Those grounds of appeal were considered on the papers by Goldring LJ who made an order that the application for permission should be listed for oral hearing with an estimated length of one-and-a-half hours. That hearing is taking place today. Mr Michael Hartman appears as counsel for Ms Makar. I am grateful both to the original counsel who settled the first skeleton argument in support of the application for permission and also to Mr Hartman, who now appears as counsel, for his elaboration of the seven grounds of appeal.
16. I shall turn first to ground 2. It is clear from the evidence of both Ms Makar and Mr White that Ms Makar intended to use Baker Tilly's work both for the purposes of her claim in the employment tribunal and also for the purpose of raising her concerns concerning Triad with the regulatory authorities. Mr White said in cross-examination that two different reports would be required for those two different purposes. Even if that is correct, it seems to me arguable that the underlying work of Baker Tilly which was in progress as at 4 November 2006 had two different purposes. Although the prospects of success on ground 2 are not high, I do regard that ground of appeal as arguable.
17. I turn next to ground 1 of appeal and the issue whether or not the voice mail message had the effect of terminating the retainer, which the judge characterised as the second retainer. No record survives of what was said in the voice mail message. Perfectly understandably, that message has been deleted. Mr White was not able in his oral evidence to recall the precise terms of the voice mail message and that is unsurprising. What we do have, however, is the email which Mr White sent to his colleagues at 9.30 on the Saturday morning. That reads as follows:

"I have been informed by Burges Salmon this morning (Saturday 9 am) that a settlement was reached in this matter at 12.30 am on Friday night/ Saturday morning.

No need to work the weekend. Nigel I hope you might be able to resurrect your golfing appointment? Please put your time charges on to ISIS asap, or at least let me know what they are -- I need to bill this quickly. 258538 826 is the ISIS code."

18. It is argued on behalf of Ms Makar that such evidence as there is about the voice mail message on 4 November is not sufficient to establish in law that the existing contract of retainer was terminated. It is pointed out on behalf of Ms Makar that the retainer had two objectives; first, the employment tribunal proceedings, and, secondly, the complaints which Ms Makar wished to pursue with the regulatory authorities. It is also pointed out on behalf of Ms Makar that the written terms of business of Baker Tilly say that a contract of retainer can only be terminated in writing. On the other hand, the point against that is that those standard terms of business were not in fact incorporated into the contract of retainer, which was established by the exchange of correspondence on 30 October.
19. I have carefully examined the judge's findings of fact on this issue and the evidence bearing on the events of 4 November. My conclusion is that, although the prospects of success on ground 1 are not high, it is nevertheless a ground of appeal which is properly arguable.
20. I turn next to ground 3. Ground 3 is parasitic upon grounds 1 and 2. If the claimant succeeds on grounds 1 and 2 then I would have thought she has good prospects on ground 3. If the claimant fails on grounds 1 and 2, I would have thought that she has considerable difficulties, if not an impossible task, on ground 3. That does not therefore add anything for present purposes to the issues which I must consider.
21. I turn next to grounds 4 and 5. These seem to me to be the strongest grounds of appeal. I have studied the judge's findings of fact concerning the events in and after November 2006. I have been taken to the written record of the meeting on 20 November 2006. One starts consideration of grounds 4 and 5 by bearing in mind that a fresh contract of retainer had come into existence on the judge's findings in early November 2006, which required Baker Tilly to carry out at least similar work to that which was envisaged before the settlement of the employment tribunal proceedings and to produce a report covering broadly the same grounds for precisely the same fee as was previously agreed, namely £30,000 plus VAT. The issue which I have been considering is whether any events occurred in or after November 2006 which entitled Baker Tilly not to produce a report but still to collect the fee. As I say, I have considered the judge's findings of fact and I have considered those passages in the evidence -- the documentary evidence and the oral evidence -- to which Mr Hartman has taken me. I do not on this occasion in any way prejudge the outcome of the appeal because, at the hearing of the appeal, the relevant material will be studied in great detail and submissions will be advanced on behalf of Baker Tilly. Baker Tilly of course has no legal representative here today.
22. However, whilst expressing no view about the outcome of the appeal, it does seem to me properly arguable that the events in and after November 2006 did not have the consequence which the judge found. It seems to me properly arguable that, in order to earn the agreed fee of £30,000, Baker Tilly remained obliged to produce the report. Alternatively expressed, it seems to me properly arguable that Baker Tilly were not entitled to produce no report but still recover the fee.
23. It follows from this that, in my view, grounds 6 and 7 of the Notice of Appeal are properly arguable. Grounds 6 and 7 are parasitic upon grounds 4 and 5. If the earlier grounds fail, I do not see how grounds 6 and 7 can succeed. If, however, grounds 4 or 5 succeed, then there is a reasonable case on grounds 6 and 7 because they flow from the earlier grounds.
24. Let me now draw the threads together. Under Civil Procedure Rules Part 52 Rule 52.36(a) I have got to consider whether this appeal has a real prospect of success. I am certainly not saying that the appellant will succeed in her appeal. I do, however, conclude that the appeal does have a real prospect of success and therefore I grant permission to appeal.

Order: Application granted