Case No: HC11C02193
Neutral Citation Number: [2013] EWHC 3056 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

Rolls Building, 7 Rolls Building, 
Fetter Lane, London, EC4A 1NL

Date: 11/10/2013

Before :

MRS JUSTICE ASPLIN
- - - - - - - - - - - - - - - - - - - - -
Between :

	CAROLINE THERESE MATHIESEN	Claimant	
	- and -		
	CLINTONS (A FIRM) 	Defendant	

- - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - - -

Roger Stewart QC and Simon Hale (instructed by Lester Aldridge LLP) for the Claimant
Michael Soole QC Jamie Smith and Shail Patel (instructed by Bond Dickinson LLP) for the Defendant

Hearing dates: 12 – 14, 17, 20 – 21 June 2013  
- - - - - - - - - - - - - - - - - - - - -
Judgment

Mrs Justice Asplin : 
1.	This is a claim for damages for alleged professional negligence, made by the Claimant, Mrs Caroline Mathiesen (“Mrs Mathiesen”) against her former solicitors, Clintons (“Clintons").
2.	Mrs Mathiesen retained Clintons to protect her interests at a time when she had substantial matrimonial difficulties and suspected her husband, Per Mathiesen (“Mr Mathiesen”) of diverting monies earned from the business of which he was the founder, Matki plc (“Matki”) from her and their children. Between the time when Clintons were first retained in June 2002 and the completion of a series of documents on 4 July 2003 which has been termed “the First Retainer”, it is alleged that Clintons failed to protect Mrs Mathiesen’s interests and, in particular failed properly to advise Mrs Mathiesen in relation to a shareholders’ agreement dated 4 July 2003 (“the Shareholders’ Agreement”). It is alleged that had Mrs Mathiesen been properly advised, she would never have agreed to the Shareholders’ Agreement in the form in which it was executed.
3.	Thereafter, in or about 2005 Mrs Mathiesen instructed Clintons to monitor Mr Mathiesen’s compliance with the Shareholders’ Agreement (“the Second Retainer”).  Mrs Mathiesen contends that had Clintons performed their task properly they would have advised her that: she should take independent advice; Clintons did not have the documents expressly referred to in the Shareholders’ Agreement enabling them to advise on compliance; that the Shareholders’ Agreement had not provided her with the protection she required; and that Clintons were in no position to advise her as to whether the Shareholders’ Agreement was being complied with or not.
4.	Further it is alleged that the failure to advise Mrs Mathiesen properly in relation to the Second Retainer is attributable to a realisation by Mr John Seigal, a partner of Clintons who advised Mrs Mathiesen in relation to the Shareholders’ Agreement,  (“Mr Seigal”) that Clintons had been in breach of the First Retainer. It is alleged that he is guilty of deliberate concealment for the purposes of section 32 of the Limitation Act 1980. Alternatively, it is alleged that the principle in  Gold v Mincoff [2001] Ll Rep 423 applies to this case. 
5.	Mrs Mathiesen contends that but for the alleged negligence, the Shareholders’ Agreement would have restricted the amount of salary to be paid to Mr Mathiesen’s sole account to £250,000 per annum plus 5% per annum increases and as a result the total of family assets would have been greater. Alternatively, it is said that if such an agreement had not been reached, Mrs Mathiesen would have divorced her husband in 2004 which it is said would have resulted in her being awarded more in ancillary relief proceedings than was the case in 2011. 
The Witnesses and their recollection 

6.	I found Mrs Mathiesen to be an extremely evasive and at times, an unreliable witness. It was clear to me that she had no clear recollection of the details of events in 2002 -2005 which given the passage of time and the level of tension and argument on all of the relevant issues which took place between her and her husband is not surprising. Furthermore, she changed her case in cross examination in particular, in relation to a central issue which goes to the heart of her case, namely whether she had agreed and understood that her husband’s salary was to increase annually. In cross examination for the first time, and contrary both to her pleaded case and the contents of her first witness statement, she stated that she had always appreciated that Mr Mathiesen’s salary would increase by 5% per annum. Furthermore, despite it being readily apparent that Mrs Mathiesen is an intelligent person who took a detailed interest in the financial affairs with which the dispute is concerned, albeit that she was unused to company accounts or legal documentation, she sought to portray herself as unable to understand even the essence of the clause at the heart of this matter. In my judgment, it is clear, for example, from Mrs Mathiesen’s response to Ms Tournier in September 2002, to which I refer at paragraph 23 and the way in which she updated Ms Tournier by email on 1 December 2002 to which I refer at paragraph 60, that she is sophisticated and had a good working knowledge and understanding of the negotiations and the assets over which she sought control. 
7.	The only other witness was Mr Seigal himself. He is a solicitor of many years standing and is managing partner at Clintons who was responsible for the firm’s professional indemnity insurance cover at the relevant time. In 2002 he specialised in Corporate and Employment law. He also became involved in advising private clients of the firm. At times, I found Mr Seigal to be a defensive and evasive witness. 
8.	Despite his lengthy experience, the attendance notes of meetings with and advice given to Mrs Mathiesen are sparse and at times non-existent and a number of documents were misplaced in Mr Seigal’s files.  Mr Stewart QC on behalf of Mrs Mathiesen made submissions on these issues and reminded me about the risk of “happy hindsight”.  This phrase was coined by Dankwerts J in Goody v Baring [1956] 1 W.L.R. 448, at 452, to mean giving evidence based not so much on actual recollection as on usual practice and what would be likely to have been done. In assessing Mr Seigal’s evidence I take account of this factor and his candid acknowledgement that given the passage of time, he did not have a clear recollection of some of the crucial occasions on which advice was allegedly given. 
9.	In addition, Mr Stewart QC placed reliance upon the failure to call Ms Tournier, an assistant solicitor at Clintons at the relevant time, who has since left the firm and who also advised Mrs Mathiesen. Reliance was also placed upon the absence of any evidence from Ms Maggie Rae, a partner of Clintons at the relevant time who is now a consultant and who advised Mrs Mathiesen in relation to her divorce. In this regard, Mr Stewart QC referred me to Cavendish Funding Ltd v Henry Spencer & Sons Ltd [1998] PNLR 122. At page 128 of that report, Aldous LJ noted that it is open to the court to draw such inferences on the facts as are appropriate and went on:

“In doing so, and in deciding whether or not to accept evidence that was given, it is permissible to take account of a party’s unexplained failure to call a witness who on the face of it could have given direct evidence on the matters in question. Beyond this, each case must depend upon its own particular facts.”

10.	It seems to me given that the matters are dealt with in the contemporaneous documentation, it is not appropriate to draw any particular adverse inference from the failure to call either of the ladies concerned. This is the case in particular, in relation to Ms Tournier whose involvement is set out in detail in the attendance notes she composed and in the detailed emails both to her client and internally to Mr Seigal. In comparison, Ms Rae’s involvement is much less central. Her understanding of the position is also made clear in the correspondence and there is nothing in the documentation or Mrs Mathiesen’s evidence to the effect that she told Ms Rae that she understood the Shareholders’ Agreement to limit Mr Mathiesen’s salary to be paid into his sole account to £250,000. 

Duties in general
11.	Before turning to the relevant facts, I should mention that there was no dispute as to the scope of the professional duties owed by a solicitor to his client in the circumstances which arose in this case. Mr Seigal accepted in cross examination that a solicitor is obliged to follow his client’s instructions or to explain why it is not possible to do so. He also agreed that it is necessary to tailor the presentation and explanation of advice to the particular client and in the circumstances of this case, that this principle involved him understanding the Shareholders’ Agreement and ensuring that Mrs Mathiesen also understood it. Not surprisingly, he also accepted that if he thought he had or might have been negligent, he was obliged to inform his insurers and advise the client to take independent advice. 
The Relevant Facts
12.	Given the nature of the claim it is particularly important to set out the facts in this matter in some detail. Mrs Mathiesen married Per Mathiesen on 20 December 1993. He is her senior by a considerable number of years and has four adult children from a previous marriage. Mr and Mrs Mathiesen have three children (“the Children”). Mr Mathiesen is the founder of Matki, a successful public limited company which manufactures and markets showers and related bathroom accessories. Mrs Mathiesen issued divorce proceedings in September 2010 and a decree nisi was granted on 11 January 2011. Judgment in the ancillary relief proceedings was handed down in April 2012. 

The First Retainer

13.	It is common ground that Mrs Mathiesen sought the advice of Clintons in June 2002 because she had concerns about the financial situation between herself, Mr Mathiesen and the Children as a result of the matrimonial difficulties which she and Mr Mathiesen were experiencing. It is also not disputed that at this time Mrs Mathiesen was concerned that Mr Mathiesen might be giving large sums to his adult children from his first marriage and to the couple’s former nanny Samantha Lavin with whom she suspected him of having an extra-marital affair. Given the difference in their ages and especially the age of Mr Mathiesen at that stage, Mrs Matheisen wished to ensure that she and the Children were adequately provided for in his will and on his death. Mrs Mathiesen also wished to make a will. 
14.	Mr Mathiesen had already settled the Per Hans Christian Mathiesen Family Trust on 21 February 1996 (“the Family Trust”) which was intended to provide for Mrs Mathiesen and the Children in the event of Mr Mathiesen’s death. Mr Mathiesen had transferred 30% of the shares in Matki to the Family Trust. On 14 May 1996, Mrs Mathiesen was appointed as an additional trustee of the Family Trust and was also made a director of Matki in the same year. It was her evidence which I accept, that during her marriage, she was committed to the growth of the Matki business in order to secure an ongoing income for the family and to provide for the Children in the future. 
15.	Mrs Mathiesen attended Clintons’ offices on 27 June 2002, with her sister. She saw Ms Angeline Tournier, an assistant solicitor who specialised in private client matters and for part of the time Mr Seigal, joined the meeting. The attendance note of the meeting is in the following form: 

"Caroline came to our offices on 27th June 2002 with her sister Angela. JS [John Seigal] and AAT [Angeline Tournier] attending (JS leaving part way through the meeting)…Caroline’s husband owns a company called MATKI plc. He says that he transferred 30% of the shares in that company to a trust dated 21 February 1996 of which Caroline is a trustee and also allegedly a beneficiary. He also says that on his death he will ensure that the rest of the shares in the company will go to the trust.  He told Caroline that the trust was for the benefit of her children. Caroline is unhappy with the arrangements as she wants to make sure that the shares are definitely going to her children (and not the children of his previous marriage) and herself on his death…. . . . . . . . . 

Caroline wanted to ensure that her husband was not able to transfer capital out of the company without her consent, perhaps by inserting a requirement that he needs to obtain her consent if he transfers a sum over of an agreed amount of the company per year."

16.	This accords with Mrs Mathiesen’s evidence that she was angry that Mr Mathiesen had been spending money on his adult children and wanted to set up something so that he could no longer hide the destination of all the money that Matki was earning and that everything would go to her and her husband jointly. Contrary to the evidence in her witness statement, Mrs Mathiesen accepted in cross examination that she had not mentioned her concern about her husband’s relationship with Samantha Lavin, at this meeting. 
17.	She also accepted in cross examination that despite her evidence in chief, she did not recall discussing Mr Mathiesen’s salary or the level of it at the 27 June meeting and on another occasion contradicted herself. In fact, she accepted that she could remember very little about the meeting and that she found it difficult to remember exactly what happened at each stage of the negotiations with her husband. Taking the matter in the round, I found her evidence in relation to the discussion at the 27 June meeting to be unsatisfactory. It seems to me that quite naturally, her recollection of the discussion is very poor. Mr Seigal’s evidence in this regard was that he had little recollection of the meeting but if he had been told about the level of salary he would have recalled it. His evidence of his recollection of the meeting was not challenged in cross examination. As I have already mentioned, Ms Tournier was not called to give evidence and there is no mention of the level of Mr Mathiesen’s salary in the attendance of the meeting to which I have already referred. I should add that Mr Seigal agreed that he appreciated that Mrs Mathiesen wanted a binding legal agreement with her husband, that she did not trust him, that the marriage was in difficulties and if a satisfactory commercial arrangement could not be agreed there was every possibility that they would divorce. 
18.	On the balance of probabilities, in my judgment, it is more likely than not that Mr Mathiesen’s salary was not mentioned at the first meeting on 27 June 2002. Had it been so, it seems to me that it would have been likely to have been recorded in the attendance note. Despite the fact that it is short, there is no reason to assume that Ms Tournier would not have recorded an important matter had it been mentioned. This conclusion is supported by the content of the subsequent correspondence and documents to which I refer below. 
19.	Following the meeting, Clintons began working on matters which might be relevant to achieving Mrs Mathiesen's objectives. Ms Tournier copied Mr Seigal into an email she sent to Abigail Smith and Christopher Coates of Clintons’ corporate department, seeking input in relation to Mrs Mathiesen’s instructions. The email was in the following form:  

"Can husband transfer legal ownership of 70% shares to Caroline, but ensure he retains control of the running of the company? Caroline does not want to be involved in running the company. She only wants to ensure the shares belong to her on his death (she does not trust him to leave the shares to her in his will). She also wants to ensure he cannot strip the company of its value (eg she is concerned that he is giving money from the company to the adult children from his previous marriage) - how can this be achieved?"

	They replied as follows: 

"Our thoughts: …3. should husband be paid a salary for running the company as a director? Does he work there full time? Will this salary be deducted from any dividend paid to the trust?; 4. We could put a shareholders agt in place whereby: 4.1 husband runs the company (for a salary, but NB: this will attract NI and PAYE); 4.2 wife has certain vetoes on significant issues e.g. …4.2.3 increase in his salary… We should also cover what happens if they divorce (e.g. should the trust have to buy her shares or vice versa?) as if she is not confident of being left the shares, all does not bode well in the tunnel of love……"

20.	Eventually in August 2002 Mrs Mathiesen issued an ultimatum to her husband, requiring him to sign various agreements to protect her and the Children's interests after his death, or otherwise she would commence divorce proceedings. Ms Tournier had a telephone conversation with Mrs Mathiesen on 6 August 2002 which she recorded in an attendance note in the following way: 

"I tried calling Caroline several times and finally got through. She said that she did not want to divorce Per but had issued him with an ultimation (sic.) that she would divorce him if he did not agree to sign the relevant paperwork to protect her interests after his death. She said that although Per had agreed to sign the documents I had suggested in my correspondence, when it came to actually signing the deed appointing Caroline's sister as an additional trustee, he refused to do so as he said that she was emotionally unstable. He also changed his mind about transferring the shares in Matki plc into joint names as he said that he did not want to give Caroline any control over them. He said that he did not trust her in the event he died because he thought that she would marry a "mufti" (an Arabic person). This upset Caroline as she is half Arabic. Caroline had also drafted a letter for Per to sign addressed to his solicitors to request them to send me a copy of the trust deed. Per refused to sign that letter. Per and Caroline had many discussions and Caroline issued an ultimatum that he should change his financial arrangements to protect Caroline and her children or she will issue divorce proceedings (to gain immediate financial security). She asked me to write to Per to set out the suggestions I had proposed he should enter. I related my telephone conversation with Mr Leney to her and suggested that it would be more sensible for me to write to Mr Leney with the proposals that I had suggested."

21.	Shortly thereafter, in order to address these concerns and with a view to saving the marriage, Mr Mathiesen offered (against the advice of his own solicitor) to transfer the vast majority if not all of his assets to Mrs Mathiesen and to the Family Trust. These included a portfolio of investments with Singer & Freidlander which were formerly in joint names, Mr Mathiesen’s 10% shareholding in the company which owned the couple’s property in France, the beneficial interest in Exton House, the couple’s main residence and Mr Mathiesen’s shareholding in Matki. 
22.	Mrs Mathiesen stated in chief that Ms Tournier had advised her not to respond to what became known as the “extraordinary offer” until the draft documentation was available. On the contrary, Ms Tournier wrote to Mr Mathiesen’s then solicitors, Cripps Harries Hall, on 7 August 2002, recording the offer and Mrs Mathiesen’s thanks. She also set out three further outstanding issues which Mrs Mathiesen required to be addressed. They were a narrowing of the class of beneficiaries in the Family Trust to include only herself and the Children, the transfer into her name of a parcel of land adjacent to the French property and confirmation that Mrs Mathiesen would not bear any inheritance tax as a result of assets passing through her into Mr Mathiesen’s overseas will and on to his adult children.  
23.	By early September, the investments had been transferred and Mr Mathiesen instructed Kay Newsham, an accountant who advised both Mr and Mrs Mathiesen about their tax affairs, to deal with the transfer of the Matki shares. Mrs Mathiesen set out the position in her email to Mrs Tournier of 3 September 2002 in the following form: 

"…Per has signed over the investment portfolio at Singer & Friedlander to me and that all looks OK.

Per has asked our accountant, Kay Newsham to deal with the transfer of Matki shares. She is doing this though the company secretary, David Venus as follows: "Caroline would hold shares which are entitled to all the rights with the exception of voting rights in respect of the 52% holding in the company and Per would hold shares which give him only the voting rights for 52% of the shares. They are also able to ensure that Per's shares would not form part of the assets to bequeath on his demise and that control will automatically pass to Caroline at that point. These are called A and B shares."
I have not as yet seen any documentation for this, so perhaps you could drop a gentle line to Per to ask for a copy for me.

Also he has not mentioned any more about the Trust. I would still like to add a Trustee on my part and limit the beneficiaries to myself and my children.

Also, who is dealing with the transfer of the piece of land to out (sic.) French SCI, and can we ensure that Per's remaining 10% automatically go to me on his death?

Regarding his overseas assets, Per has passed these over to his other children already so there should be no question now of anything passing through me.

Perhaps I should wait until this is all settled to make out my final will?"

24.	In cross examination, Mrs Mathiesen refused to accept that she took a close interest in the financial arrangements which were being negotiated and stated that she was only aware of the basics. Given the nature of her email to Ms Tournier, the discussion between Mrs Mathiesen and her husband to which I refer below and the nature of her email correspondence with both Ms Tournier and Mr Seigal to which I also refer below, I am unable to accept her evidence in this regard. 
25.	On 11 September 2002, Ms Newsham wrote to Ms Tournier setting out what she stated to have been agreed between Mr and Mrs Mathiesen as follows: 

“To achieve this end, they have agreed the following:
 
1          Exton House is to be held by Per and Caroline as joint tenants.
 
2          The Singer & Friedlander portfolio is to be transferred to Caroline's sole name.
 
3          10% of the shares in Matki plc are to be transferred to Francis Cunild on Per's demise, in view of the transfer of shares to Caroline mentioned below, this is to be achieved by a transfer of shares out of the trust.
 
4          The beneficiaries of the trust are to be amended so that only Caroline and the three children, plus Francis to the extent of 10% of the A shares of the company, are able to benefit from the trust in the future.
 
5          Per is to continue to run the company during his lifetime and will, therefore, maintain 52% of the voting rights which he holds as a result of his shareholding in the company. Caroline is to acquire the rights to dividends and assets of the company in respect of Per's 52% shareholding and the voting rights are to transfer to Caroline's shares on Per's death.
 
To achieve this, the shares are to be divided into A and B shares and Per will transfer his A shares (which have the dividend and asset rights) to Caroline whilst retaining the B shares (which have the voting rights). On Per's death, the B shares will be purchased by the company and the voting rights will transfer to the A shares giving Caroline 52% of the voting rights.
 
6          Per's overseas asset of the 10% share in the SCI will pass to Caroline or the children on Per's demise.
 
7          The piece of land in France is to be transferred to the SCI.
 
8          The assets transferred will be available to provide an income for Caroline after Per's demise and will, ultimately, pass to their children.”
 
26.	Ms Tournier responded in detail on 18 September 2002 and from her response by email of 19 September 2002, it appears that a copy was sent to Mrs Mathiesen.  Mrs Mathiesen’s detailed point by point response was as follows: 

"Thank you for your letter. I reply to points as follows:

1.	I want to ensure that no other persons can lay claim to Exton House. Can Per make an irrevocable undertaking that he will not sever the Joint Tenancy agreement?

2.	I am confident that the Singer and Friedlander portfolio has been transferred to me.

3.	I agree that Pers (sic.) B shares should be transferred directly to me on his death and not bought by the company…

4.	I have no objection to Francis having 10% of the shares form the Trust, but I insist on adding a Trustee of my choice and that the beneficiaries are limited to myself and my children, or indeed just my children if he prefers.

7.	Please send Per a copy of my will so that all my estate goes to my children. [A]s he has now joined the two Singer and Friedlander accounts I don't have my own small account to give to my family therefore I do not want to rock the boat. Once this is all finalised I can write a codicil to my will for my family and the guardianship etc and hold it with you. Is this in order?

I don't see why they can't sign the stock transfer on the 26th September even if all the other matters have not been finalised, as that is a separate issue."

27.	On 20 September 2002, Ms Tournier emailed Mrs Mathiesen setting out the up to date position in relation to Exton House, the investment portfolio, Matki A and B shares, voting rights and the percentage of shares held by the Family Trust and Mr Mathiesen respectively, the trustees of the Family Trust and Mrs Mathiesen’s will. Mrs Mathiesen responded on 23 September 2002 as follows: 

“Dear Angeline,

Thank you for your e-mail.  I am more than happy to sign a declaration of trust for Exton House, and will talk to Per about this.

Richard Sargent of Singer and Freidlander has confirmed verbally the transfer of the portfolio, I will see when statements come through.

Per is getting very stressed regarding the company.  He says that he will not send you any copies of any documents and that he will call it all off, he says that if it is not sorted out by the 26th September it will not be done until next spring.  I said this was not acceptable and that all he has to do is sign.  If it means not insisting that he send you copies then I should let him go ahead and do it – at least it is something.  Then I will have more power to insist he add a trustee on my part to the trust.  I haven’t even discussed this with him at the moment. . .”

28.	The following day, Ms Tournier emailed Mrs Mathiesen to report the position having discussed it with Mr Seigel. She stated as follows: 

“Dear Caroline

Thank you for your email.  I have discussed Per’s offer with John Siegel.  We are concerned that Per is refusing to show us any of the draft company documentation – this is unusual.  From a strict legal point of view, there are risks with Per’s corporate offer, as Per is still able to transfer his A shares to another person and strip the company of its value.  We have two options:  either we can insist that this point is dealt with satisfactorily and that Per shows us the documentation to ensure everything is in order.  The risk with this is that Per might well just withdraw the offer altogether.  The alternative is to accept Per’s offer on his terms, but we will need to revisit the point at a later stage and review the corporate documentation once it is in place, to ensure it has been adequately implemented.

Please let me know your views on the above, before I respond to Kay.” 

29.	Ms Tournier’s manuscript attendance note of a telephone discussion with Mrs Mathiesen that day in which she discussed the content of the email records that Mrs Mathiesen wanted to accept Mr Mathiesen’s offer subject to Ms Tournier clarifying with Kay Newsham that Mr Mathiesen should not be able to transfer his shares during his lifetime. Ms Newsham confirmed later that day that Mr Mathiesen was happy to confirm in writing that he would not transfer his shares during his lifetime.
30.	On 4 October 2002, Ms Tournier wrote to Mrs Mathiesen to update her on progress Under the heading, “Shares in Matki” (“the Company”) she stated: 

“I have drafted an undertaking whereby you and Per undertake not to transfer your shares in the Company to a third person without the other’s consent. I have sent a fax to Kay today, asking her to clarify some points regarding the share structure, to finalise the deed. I have also reminded her that you have not yet received any of the corporate documents, which you are entitled to inspect within a reasonable time of the meeting, as a director of the Company.” 

31.	Eventually, Mr and Mrs Mathiesen having discussed matters between themselves, Mrs Mathiesen emailed Ms Tournier on 7 October 2002, stating: 

“I have discussed all matters with Per and he feels that he wants to have a meeting with you and Kay Newsham to finally resolve all matters.” 

32.	It is clear from an attendance note of 16 October 2002 that the draft documentation in relation to the shares was not available but was promised by Kay Newsham in time for the meeting. The meeting was held on 18 October 2002 at “Clintons’offices” and was attended by Mr and Mrs Mathiesen, Mr Seigal, Ms Angeline Tournier, and Ms Kay Newsham. It is not in dispute that the first draft of the documentation was also produced at the meeting and did not contain provisions designed to prevent assets being disposed of by Matki other than in the ordinary course of business.  
33.	Mrs Mathiesen accepted in cross examination that it was probable that there was no discussion with her husband about his salary prior to the meeting of 18 October 2002, because there was no need. She said that she thought that his salary would just carry on as before. This is consistent with the fact that there is no evidence of any kind of any negotiation with Mr Mathiesen as to the level of his basic salary whether before or after the meeting and accordingly, I accept her evidence in this regard. 
34.	In cross examination she also stated that before the meeting of 18 October 2002, her appreciation of the level of her husband’s salary arose as a result of grossing up the amount of £10,000 per month which was being paid into the couple’s joint account. As Mr Soole QC on behalf of Clintons pointed out such grossing up would lead to a gross annual salary in the region of £200,000 and does not support the £250,000 figure. Furthermore, Mrs Mathiesen also accepted that she regularly checked her husband’s bank statements in respect of accounts in his sole name. It is not in dispute that the statements revealed a gross salary in excess of £250,000. Given that the grossing up exercise does not lead to a figure of £250,000 for gross annual salary, I am unable to accept Mrs Mathiesen’s evidence as to her understanding of Mr Mathiesen’s salary level before the meeting. 
35.	It is Mrs Mathiesen’s evidence that at the meeting on 18 October 2002, it was Mr Mathiesen’s main concern to retain control of Matki and that she was concerned that everything should be paid for the joint benefit of her, her husband and the Children. It was Mrs Mathiesen’s evidence in chief that at the meeting her husband stated that he was happy for everything to be paid into a joint account but commented that he would need a small amount to be paid to his private account to purchase Christmas and birthday present other than from joint funds. In cross examination she said that she recalled her husband’s mannerism when he said this and that he adopted a jocular tone. In addition, Mrs Mathiesen’s evidence in chief was that at the meeting, Mr Mathiesen stated that his salary was £250,000 per annum and that it was agreed that everything but for that sum would be paid into the joint account. In fact, at one stage in cross examination, Mrs Mathiesen accepted that she could not recall exactly when the figure of £250,000 was mentioned.  However, she was adamant that there was discussion about it at the meeting and also added that increases of 5% per annum on the salary were also agreed. This is contrary to her pleaded case and inconsistent with her witness statement in which there is no reference to 5% increases having been discussed. 
36.	In fact, part of the cross examination in this regard was in the following form: 

“Q:	You are saying that at the meeting on 18 October 2002, your husband and you, and the others who were there, discussed the salary of £250,000, is that your evidence?
 
      	 A.  Yes.
 
Q.  And you entered an agreement, of course subject to drawing up documents and so on, that the £250,000 would go into his own account but everything else, bonus, dividends, into the joint account?
 
       		     A.  Yes.
 
Q.  And you were saying that that was crystal clear as to what was agreed informally at that meeting?
 
A.  Per always had a very funny way of speaking.  He would say it in quite a jovial manner.  Per was uncomfortable when he spoke about money and he would always make a joke about it.  He sort of said, I need £250,000 so I can buy Christmas and birthday presents.
 
Q.  Can I go back to my question: are you saying you have a crystal clear recollection that that was agreed at the meeting on 18 October?
 
A.  I have a crystal clear recollection that that is what was said.  I can't recall John or anybody else agreeing to it, but I can recall him quite specifically saying it because, like Roger pointed out, I~remember thinking that would be a very nice Christmas present.
 
Q.  Are you saying that you agreed with Per at that meeting that that would be appropriate, that he keeps £250,000 for Christmas and birthday presents, and the rest goes into the joint account?

A. Yes I am  . . . .”

37.	Mr Seigal’s evidence of the meeting differs. He has no recollection of any discussion of Mr Mathiesen’s salary and stated that he would have recalled if £250,000 had been mentioned.  This is despite accepting that he does not have a clear recollection of the matters discussed. Mrs Mathiesen’s evidence in cross examination with regard to bonuses and dividends discussed at the meeting was that bonuses and dividends would go into the joint account. She added: 

“ . .I came away thinking, “That is all great. We have got it sorted out. The bonuses and dividends into the joint account and Per keeps his salary.”” 

38.	There is a short attendance note of the meeting.  It is in the following form: 
“Meeting held at Clintons on Friday 18th October from 11.30 until 1pm. Caroline Mathiesen, Per Mathiesen, Kay Newsham, John Seigal and Angeline Tournier.

1.         Trust
            Per agreed to appoint Angela as an additional trustee of the settlement.
Caroline is happy to have Francis added as an additional beneficiary so that he can receive his 10% shares in Matki plc from the Family Trust. Per confirmed that if Francis were to predecease him, Francis should not receive anything.
 
2.         Caroline's will
Caroline said that she would like her residuary estate to go to the existing Family Trust. She also wishes to appoint Angela as a replacement executrix and trustee.
 
3.         Shareholders Agreement/Undertaking
Per agreed that he and Caroline should undertake that no material part of the assets of Matki plc will be disposed of without the shareholders consent. This should be reflected in the Shareholders Agreement and in the Undertaking.
 
The other suggested wording was any disposal of assets requires the shareholders consent otherwise than in the normal course of business. That was the preferred wording.
 
Attending: 1hour 30 minutes”

39.	It is said by Mr Soole QC on behalf of Clintons, that although it is plain that a great deal must have been discussed in an hour and a half, the attendance note contains central action points and had Mr Mathiesen’s salary been discussed and an agreement reached that all income from Matki but the salary of £250,000 be paid into the joint account it would have been recorded.   There is also no reference to Mr Mathiesen’s salary in Ms Newsham’s note of the meeting. 

40.	Mr Soole QC also points out that the focus of discussion recorded at paragraph 3 of the attendance note was upon disposal of assets by Matki other than in the normal course of business. This he says is consistent with the fact that such a clause was missing from the draft presented by Ms Newsham at the meeting. It is also consistent with the draft amendments produced by Mr Seigal after the meeting which were in the following form: 

3.1	Unless otherwise agreed by the Shareholders in writing the Shareholders shall exercise their powers in relation to the Company to procure that (save as otherwise provided or contemplated in this Agreement) the Company will not:

(a)	issues, allot, redeem, purchase or grant options over any of its shares or other securities or reorganise its share capital in anyway.

(b)	alter the provisions of its memorandum or articles of association.

(c)	sell, transfer, lease, license or in any other way dispose of any of its assets otherwise than in the ordinary course of its business.”

41.	Once again, on the balance of probabilities, given the content of the attendance note, in my judgment, a salary of £250,000 to be paid into Mr Mathiesen’s sole account was not discussed and agreed, nor were 5% pa increases mentioned or agreed. Had the level of salary been agreed, it seems to me that it would have recorded as a central matter and furthermore, that the figure itself would have appeared in subsequent drafts of the Shareholders’ Agreement to which I refer below and in Mr Seigal’s proposed amendments to which I have referred. It is also inconsistent with Mrs Mathiesen’s attitude to The Times “Rich List” and her comments to Clintons in relation to it to which I refer below. Mrs Mathiesen accepted in cross examination that she could not recall discussing its content with her husband. It seems to me that on the balance of probabilities, had £250,000 been discussed or agreed at the 18 October meeting, she would have made some trenchant remarks in this regard.  In addition, it seems to me that she would have made reference expressly to £250,000 when she referred the contents of the “Rich List” to Clintons and would have been likely to register surprise that the figure did not appear in the drafts of the Shareholders’ Agreement. 
42.	On 22 October 2002, Ms Tournier sent the draft amended Shareholders’ Agreement to Mrs Mathiesen. The draft contained no reference to the alleged agreement in relation to salary. In cross examination, Mrs Mathiesen stated that it had not crossed her mind that it should be written down and that she had no reason not to believe what her husband was saying. It seems to me that given her deep distrust of her husband which was at the heart of her requirement for certainty in relation to financial matters, it is more likely than not that had the alleged agreement in relation to salary been discussed at the meeting she would have mentioned its absence from the draft to Ms Tournier. In the light of the circumstances at the time and Mrs Mathiesen’s avowed objectives, I am unable to accept her assertion that she had no reason not to believe her husband and that it did not occur to her that it should be written down.    
43.	It is also inconsistent with the contents of Ms Newsham’s letter of 27 November 2002 to Mr and Mrs Mathiesen to which I refer below. In that letter, Ms Newsham records discussions between husband and wife and sets out suggestions including the way in which Mr Mathiesen’s salary should be dealt with, namely by way of side letter. Such suggestions are incompatible with the alleged agreement at the 18 October meeting and it seems to me that had the agreement been reached, on receipt of the letter, Mrs Mathiesen would have mentioned it both to Ms Newsham and to Clintons. In my judgment, it is also inconsistent with the nature and tenor of the Second Retainer to which I shall refer below. 
44.	In this regard, I also take account of Mrs Mathiesen’s insistence in cross examination that increases of 5% per annum were also agreed at the October meeting. This is inconsistent with her witness statement and is also incompatible with the fact that reference to 5% first arises in the documents when it is suggested on 19 May 2003. Accordingly, I am unable to accept her evidence in this regard and also conclude as a result and for the reasons that I have already mentioned, that her evidence as to the agreement as to £250,000 is unreliable. 
45.	Following the meeting, on 21 October 2002, Ms Tourner emailed Mrs Mathiesen to ask whether she was happy with the outcome of the meeting and whether there was anything else she wanted to raise. She added: 

“I will send you a deed appointing Angela as an additional trustee of the family settlement and a deed of appointment restricting the class of beneficiaries of the family settlement as agreed. 
John Seigal has reviewed the corporate documents. We discussed the amendments this afternoon and I will send the amended corporate documents to Kay tomorrow.”  

Mrs Mathiesen responded that she was very happy with the outcome of the meeting. 

46.	The draft Shareholders’ Agreement was forwarded to Ms Newsham on 22 October 2002. Ms Newsham commented on the draft on 6 November and on clause 3.1(c) in particular and negotiations ensued.  Mr Seigal annotated his copy of Ms Newsham’s 6 November 2002 letter and against her comments in relation to draft clause 3.1(c) concerning the sale of business assets, he added, “NO – It must be in the ordinary course of business.” 

47.	In my judgment, Mrs Mathiesen’s evidence as to an agreement on salary, bonuses and dividends at the 18 October 2002 meeting is also inconsistent with Ms Newsham’s note of a telephone conversation with Mr Mathiesen on 25 October 2002 in which she recorded:  

“  . . . He is not keen on the wording that has been used in the documentation as he does not want to have too many constraints and feels that the current wording does not achieve that.  He thinks that the clause as drafted is going a bit far and did not think that it reflected what was agreed at the meeting.  He would like the wording to the effect that he would not do anything which would hinder the operation of the business in any way.  He thought that we agreed a much looser term in the meeting.

He thought that something along the lines that the chairman should be able to run the company as hitherto and not dispose of any assets that would affect the running of the business.  He thought that we could mention the normal course of business and he needs to be sure that the final wording will not prohibit him from voting bonuses as he has in previous years.”
       
In my judgment Mr Mathiesen would not have been raising the issue about bonuses in such terms had it already been agreed that all but £250,000 of his salary would be paid into the joint account. 

48.	It was in November 2002 that Mrs Mathiesen discovered that Mr Mathiesen had been listed in The Times "Rich List" as earning in total over £2 million in 2001. This prompted her to contact Clintons to express her concern about this sum. She did so by means of an email to Angeline Tournier of 10 November 2002 in the following form: 

"I got a phone call from Kay Newsham on Friday to say that some technical points needed to be sorted out with the share agreement. I think she is trying to change some things that you had put in in my favour such as what happens if either of us have to transfer the shares. I told her that we were all happy with what was agreed at our meeting and that nothing must be changed. I don't know if this is coming from Per as he won't discuss anything with me or if it is her meddling, but I did say to her that it has all gone on for too long and that they have to get on and sign it. I wonder if we should set a dead line, otherwise it might never happen, which I'm sure is what Per wants.

I had another shock in that Per was recently listed in the Times 500 top earners in 2001 as having earnt (sic.) over £2 million in salary. I certainly have not seen that money or anything near it so I hope that in the agreement he is not able to take out huge cash sums like that.
Again he refuses to tell me where it is!"

As I have already mentioned, in my judgment, had Mrs Mathiesen believed her husband’s salary to have been £250,000 or had it been agreed that only that sum could be paid into his sole account, she would have been likely to have mentioned it at this stage. There is a conflict of evidence as to who saw this email at the time it was sent, Mr Seigal or Ms Tournier. It is accepted by Clintons however, that the instructions in this email were to the effect that Mrs Mathiesen did not wish Per Mathiesen to be able to receive for himself alone, £2 million gross remuneration (being salary and bonus). In cross examination however, contrary to her evidence in chief, Mrs Mathiesen accepted that she had no recollection of discussing The Times “Rich List” and the assertion that Mr Mathiesen’s salary was £10,000 per month with Mr Seigal in November 2002. 

49.	On 8 November 2002, Ms Tournier sent an internal memorandum to Mr Seigal enclosing amongst other things, the draft amended Shareholders’ Agreement which she had sent to Ms Newsham after the 18 October meeting, Ms Newsham’s letter of 6 November in response and a draft of Ms Tournier’s intended reply. Around this time, Mr Seigal gave the draft Shareholders’ Agreement further attention and annotated clause 3.1 of the draft. The annotations include the addition to clause 3.1(c) of a prohibition upon declaring extraordinary bonuses and the proposed addition of a new clause 3.1(d) to deal with “P.M Remuneration.” His time records support the contention that this occurred between 11 and 13 November 2002 and I accept that this is more likely than not to have been the time at which the annotations were made. It seems to me once again that Mr Seigal’s proposed addition of a clause 3.1(d) would have taken a much more precise form had an agreement in the form alleged by Mrs Mathiesen been reached at the 18 October meeting.  
50.	Thereafter, Ms Tournier had discussions with Kay Newsham on the telephone on 13 November 2002 and reported to Mrs Mathiesen in an email as follows: 

“I spoke with Kay this evening and confirmed that it is essential that Per transfers the majority of the A shares to you (and that therefore Francis' 10% shareholding has to be transferred from the family trust).
 
John Seigal was happy with all of Kay’s technical suggestions, except for those relating to 3.1(c) of the Shareholders Agreement, where Kay suggested removing our provision that the Company was not allowed to sell lease or transfer any of its assets "otherwise than in the ordinary course of its business" and replacing with the Company was not allowed to sell "all or substantially all of its assets". John feels strongly that his wording should remain, to give you adequate protection.
 
In addition he feels that consideration should be given to strengthening this clause, to ensure that Per does not strip the Company of its value by declaring large "extraordinary" bonuses or salaries (even if this is only a theoretical possibility). At the moment, this could happen. What are your views on this?
 
I spoke with Kay about our concerns and she will discuss them with Per tomorrow.”

Mrs Mathiesen responded on 15 November 2002 and stated: 

“I absolutely agree with all the points you make, especially in view of Per’s recent listing in “The Times” which I had absolutely no idea about.” 

51.	An attendance note of a conversation between Ms Newsham and Ms Tournier dated 14 November 2002 also records: 

“John has looked through the documents and is happy with all the suggested amendments with the exception of 3.1(c). As a minimum they would need for the wording that they have drafted to be used, all the other points are fine.
 
I queried whether there is any legal definition of ordinary course of business - she said not. It is more a question of what is reasonable and what he normally does. For example, if the company makes widgets, it would not be reasonable for it to take over the running of a pub. In their practice, the partners are not allowed to buy and run a Ferrari on the firm. I questioned whether this would suggest that Mr Mathiesen could no longer drive a Bentley. She said not as it depends on the particular circumstances of the business.
 
It would be a worry that Per could declare bonuses which would strip the value from the business. Would it be possible to put in wording to the effect that he could not declare any extraordinary bonuses? I suggested that the directors' remuneration has to be agreed at the AGM. She will have to think about this point and speak to Caroline. Maybe there could be a requirement for him to consult Caroline in respect of bonuses voted to himself or his family or that any changes in remuneration packages have to be agreed.
 
For example, if his remuneration is £100,000 one year and goes up to £750,000 - £1m the next. They are looking for a way to stop this without impeding Per's running of the company.”

52.	On 18 November 2002, Ms Tournier emailed Mr Seigal and recorded inter alia: 

“As I mentioned this morning, Caroline wants full protection against Per declaring unusually large bonuses or salaries. Caroline is very concerned about her recent discovery in the press that Per has received a 2 million salary. She does not know where this money goes.  . . “ 

It was Mr Seigal’s evidence that although he could not recall exactly what he thought when he saw the email, a salary of £2m would not have surprised him given Mr Mathiesen’s position in a successful public limited company and the lifestyle which he and his wife enjoyed. He added that this figure was the only one in his mind at the time. 

53.	In Mr Seigal’s witness statement he said that the use of the word “extraordinary” in relation to bonuses and salaries in Ms Tournier’s email of 13 November reflected his own view that Mr Mathiesen should be able to take salary and bonuses in the ordinary course of business. In cross examination, it was suggested that this was simply false and that the use of “extraordinary” reflected Mrs Mathiesen’s heated response to having discovered as a result of the “Rich List” that £2m had been taken out of Matki.  Given the sequence of events which I have set out and the reference to “ordinary course of business” in the draft amendments, I accept Mr Seigal’s evidence in this regard. This is despite the fact that at one stage in cross examination Mr Seigal accepted that he had seen Mrs Mathiesen’s email concerning the “Rich List” at around the time it was sent. In re-examination he stated that in fact, he did not believe that he had done so. In my judgment, this latter position is consistent with the fact that there is no evidence that Ms Tournier forwarded the email to him, her email of 18 November begins “As I mentioned this morning” which would have been unnecessary if she had already forwarded the email to him and her email to Mrs Mathiesen of 13 November 2002 seeks Mrs Mathiesen’s views which is inconsistent with Mr Seigal’s desire to strengthen clause 3.1 having arisen as a result of Mrs Mathiesen’s own instructions. This is also consistent with the fact that Mrs Mathiesen accepted in cross examination that she only discussed the “Rich List” itself, Mr Mathiesen drawing large sums in salary and the figure of £10,000 per month with Mr Seigal in 2005. 
54.	Thereafter, on 27 November 2002 Ms Newsham sent a letter to Mr and Mrs Mathiesen. The relevant parts are as follows: 

"Following recent discussions…"

"John Seigal has confirmed that the wording included in the documentation (which he has suggested is the minimum constraint that they would accept) would require authorisation for any significant expenditure, for example, the proposed extension to the factory. Caroline has confirmed that this is not what she is seeking to achieve and would not expect Per to have to seek approval from all the shareholders (including the trustees who have to vote unanimously on any issue for it to be passed) for this sort of transaction. This clause is, therefore, excessive in practical terms and not necessary based on your agreed view of how the company will operate in future.

However, Caroline is concerned that significant bonuses could erode the value of the business for the future. Per has confirmed that he will not draw bonuses unless there are surplus funds in the company that are not required for any capital expenditure (such as the proposed factory extension)."

"Suggestions

There are two issues to be agreed:

1	The matter of the level of control over Per's running of the company and the associated matter of reporting Per's remuneration. From my discussions with each of you, it would appear that the main issue is one of communication and that Caroline needs more information about Per's remuneration. I think that it would be inappropriate for such matters to be included in company documents - this is a personal matter for the two of you and should not be made known to employees of the company. From a business point of view it could have an adverse effect as people will usually stop concentrating on their work and spend some considerable time in speculation whilst such issues are working their way through the gossip mill. Also, if there is any level of uncertainty about the operation of the business in the future, key members of staff could be concerned about their future with the business.

I would, therefore, recommend that Per is allowed to run the company on a day to day basis and that there is the ability to withdraw funds by way of bonuses so that you and your children can enjoy the fruits of his hard labour. I would recommend that the matter of his remuneration is dealt with by a side letter between the two of you and not disclosed to third parties.

The terms of the side letter will depend on what arrangements will be acceptable to you both. I would suggest that it would not be practical for the net salary of £10,000 per month which Per draws from the company to be paid into his account and any bonuses paid into a joint account as the funds will be needed on a day to day basis for the running of the house, etc.

Whilst the company's position cannot be guaranteed and the present upturn in turnover may reverse (especially if the housing market takes a dive), Per has suggested that he endeavours to transfer to Caroline £4m from his bonuses over the next 4 years (equivalent to £6.8m gross remuneration), provided that the company has the capacity for him to draw this level of bonuses. This will provide Caroline with a further capital sum as a further level of security for the future. To extend the security, Per will also undertake, that apart from regular birthday and Christmas presents, his bonuses will all be used to benefit the two of you and your children."

55.	A draft side letter was produced in the following form: 
“To Mrs Caroline Mathiesen

Further to our recent discussions, I confirm that I will use my best endeavours to transfer to you £4m from bonuses drawn from Matki plc over the next 4 years, provided that the company has the capacity for me to draw this level of bonuses.

If the funds cannot be drawn in the four year period, I will continue to transfer bonuses to you until this level of funds has been achieved.

I also undertake that apart from regular birthday and Christmas presents, my bonuses will all be used for the benefit of you, our children and myself.

Signed

…………………………………………………   ……………………………………
Per Mathiesen”
		
56.	It was Mrs Mathiesen’s evidence that the content of the 27 November letter reflected what had been agreed at the October meeting. However, in cross examination, she accepted that at the time many discussions had been conducted between her and her husband through Kay Newsham and that the potential £4m bonus and the side letter had not been discussed at the meeting.
57.	A copy of the 27 November letter and the draft side letter together with other correspondence was produced under cover of a hand written note from Mrs Mathiesen to Ms Maggie Rae dated 30 April 2007 which read, “copies of letters I found as discussed”. It was Mrs Mathiesen’s evidence that it was on the file relating to Clintons which she kept and she would have sent it to Clintons and discussed it with Mr Seigal at the time it was sent. She could not remember when this occurred, however. She did accept eventually that she had not discussed the potential £4m additional bonus or the side letter mentioned in the letter, with Mr Seigal. Mr Seigal was certain that he did not see a copy of the letter at the time and pointed out that there was no evidence of any contemporaneous advice having been sought. In this regard, Mr Soole QC also pointed out that a separate file kept by Mrs Mathiesen had not been mentioned on disclosure. 
58.	It is Mrs Mathiesen’s case that there were a number of discussions about salary in late November 2002 between Mrs Mathiesen and Ms Newsham, to which Mr Seigal was privy. Mrs Mathiesen points to a number of entries in Clintons’ time recording records which show telephone conversations of some considerable length having taken place during this time. In cross examination though, Mr Seigal was unable to recall what these conversations might have been about. There is an attendance note of one of the calls dated 22 November 2002 which merely records “Speaking Kay re: Mathiesen. She will write with her proposals.” However, it would appear that the attendance note was misfiled. Mrs Mathiesen infers that the reference to writing with proposals is to the letter dated 27 November 2002 and also asks the court to infer that the letter of 27 November was received by Clintons but that the file was poorly kept. 
59.	Mr Stewart QC highlights the misfiling of the attendance note despite Mr Seigal stating in his witness statement that Clintons’ files were carefully maintained. Taken together, he says this shows that on the balance of probabilities, Clintons were shown the letter of 27 November 2002 contemporaneously but nevertheless, still failed to find out what Mr Mathiesen's salary was at that time, which was a negligent breach of their instructions. He also submits that it is fanciful to suggest that Mrs Mathiesen and her husband had cut Clintons out of the negotiations at this stage, something which Mrs Mathiesen strongly denied in cross examination. However, I found her evidence about how the 27 November letter and the proposed side letter allegedly came into the hands of Clintons, to be unreliable. She stated in cross examination that as far as she was concerned the content of the letter reflected what had been discussed the 18 October 2002 meeting and that it was all being discussed between Ms Newsham and Clintons. When asked whether she assumed that Ms Newsham would have passed the letter on she said “Not necessarily the letter” and added that she could not remember what she thought. She accepted that she herself had not mentioned the prospect of the £4m bonus to Mr Seigal. In the light of Mrs Mathiesen’s acceptance that she did not discuss the side letter and the potential for the additional bonus, together with the absence of any record of contemporaneous advice in relation to the 27 November letter and any contemporaneous record or reference to it having been sent to Clintons, on balance, I am unable to accept Mrs Mathiesen’s evidence that she sent the letter to Clintons at the time and discussed it with Mr Seigal. 
60.	On 1 December 2002, Mrs Mathiesen emailed Ms Tournier in order to update her. She stated: 
“I think we are nearly there on the shareholders agreement. Per has accepted to include in the documents that after taking his salary he will put all bonuses into our joint account and I have agreed that he should run the business without interference providing it is all for the benefit of the company. I just wanted to make sure that once this has all gone through that it then cannot be changed without my consent?

I will ask Kay to send you the documents once they have all been prepared.”

61.	It seems to me that on the balance of probabilities, that the 27 November 2002 letter was not discussed with Mr Seigal shortly after its receipt. I come to this conclusion based upon Mrs Mathiesen’s acceptance that discussions were being conducted directly with her husband through Kay Newsham, her acceptance that she did not discuss the £4m bonus proposal and the side letter with Mr Seigal, her acceptance that she could not recall discussing the £10,000 per month salary figure with Mr Seigal in November 2002, the lack of documentary evidence of advice in relation to the content of the letter, the content of her email to Ms Tournier of 1 December 2002 which makes no mention of the 27 November letter or level of salary and is consistent with discussions and progress being made without Clintons’ direct involvement and the omission of any reference to level of salary or £4m bonus in the subsequent Clintons documentation. 
62.	Matters went quiet over the Christmas period, and it would appear that nothing relevant to Mrs Mathiesen’s claim happened until the end of February 2003 when she emailed Angeline Tournier to express frustration at the delay in getting the relevant documents from her husband. The documents were eventually provided to Clintons by Mrs Mathiesen in or around 17 March 2003. Mrs Mathiesen emailed Ms Tournier on that date: 

“I have sent you photocopies of the documents that Kay sent to Per for discussion with me. She sent them 2 weeks ago and he has not mentioned it (he doesn’t know I’ve copied them.) Every time I bring it up he makes excuses and walks away. Please could you go through them and check that it is what was discussed, including him taking no more than his salary without my knowledge, and then perhaps we could discuss how to proceed.” 

63.	This was followed by a phone call from Mrs Mathiesen to Ms Tournier, in which she emphasised that she wanted to receive final documents from Mr Mathiesen ready to be signed, or she would reconsider their marriage. This was to be a "firm ultimatum". Ms Tournier reported the conversation to Mr Seigal in an email of 25 March 2003: 

"John

Caroline called this afternoon. She is going skiing to Canada (without Per) from Friday 28th March until 9th April. Per has been ignoring her requests to see the corporate documentation. She recently discovered papers in his briefcase, stating that he has £500,000 in an account at Coutts and instructing Coutts not to inform her of his investment plans regarding the same. When she confronted Per about it, he said that he did not want involve her in the investment "at this stage". She said that she does not trust Per and feels that he dismisses her and has no respect for her.

She would like us to write to Per asking him to finalise the documents, in the form agreed at our meeting, for signature on 9th April, or else she will reconsider the future of her marriage. She is quite adamant that she wants to leave him if this matter is not resolved soon, although she does not want to use the word divorce quite yet. She insisted that our letter should give Per a firm ultimatum and a clear threat that failure to comply to her request will lead to her reconsidering the future of their relationship.

She reiterated that she wants the documents to be watertight, to give her full protection, so that she can feel "secure" (her words)."

64.	As Mr Soole QC pointed out, at this stage the protection to be provided was as to the various issues addressed in the Shareholders’ Agreement and that bonuses would be paid into the joint account. 
65.	There followed a telephone conversation between Mrs Mathiesen and Mr Seigal, on 26 March 2003, in which he said he could not guarantee that Per would be unable to divert funds from Matki. Mr Seigal’s manuscript note records: 

“Speaking CM. She really doesn't trust him. I advised (1) I could not give her guarantee he would not divert funds. (2) that I would prefer that she sign a doc but although preferable it would not prejudice her "claim" if she did not. (3) at present she had not even "received" it so that should be our ground of attack."

66.	The same day, a draft letter to Mr Mathiesen requesting the draft documentation which was thought to have been ‘agreed’ was sent to Mrs Mathiesen for her approval which she duly gave. Shortly after this, it was Mrs Mathiesen’s evidence that she and Mr Mathiesen had a serious argument over his failure to provide the necessary draft documents as agreed. On 11 April 2003, Ms Tournier spoke to Mr Mathiesen on the telephone and reported to Mrs Mathiesen by email copied to Mr Seigal that Mr Mathiesen had agreed to instruct Ms Newsham to send the outstanding drafts. As a result, the draft documentation was forwarded by Ms Newsham to Clintons on 17 April 2003. On the same day, Ms Newsham wrote to Mrs Mathiesen enclosing the drafts. 
67.	The draft Shareholders’ Agreement amongst other things dealt with Mr Mathiesen’s shares in Matki on his death and prevented payments from the company to Mr Mathiesen’s adult children.  Clause 3.2 of the draft Shareholders’ Agreement, provided as follows: 

“Unless otherwise agreed by Mr and Mrs Mathiesen in writing, the Company [Matki] will procure that all bonuses or dividends paid to Mr and/or Mrs Mathiesen will be paid into NatWest account number 06569854 in the names of Mr and Mrs Mathiesen or any joint bank account as notified to the Company in writing by Mr and Mrs Mathiesen from time to time.”

It is immediately apparent that even at this stage, there was no reference to salary in the draft. Mrs Mathiesen accepted that she had “probably glanced over it.” Nevertheless, she did not comment on the failure to refer to salary nor the alleged failure to refer to £250,000 and in my judgment, her response is consistent with an assumption at that stage, that Mr Mathiesen’s salary would remain outside the terms of the Shareholders’ Agreement altogether. Such a position is also consistent with Mrs Mathiesen’s own email to Ms Tournier of 17 March 2003 to which I referred at paragraph 62.
  
68.	By email on 24 April 2003 to Ms Newsham, Ms Tournier suggested amendments to the draft which had been proposed by Mr Seigal. This included an addition to line 2 of clause 3.2 in the following form: 
“John suggests that the words “or dividends paid to Mr and Mrs M” are replaced with “dividends or other monies due of whatsoever nature including but not limited to any salary increases to Mr and Mrs M howsoever arising.” 
 
The email chain was forwarded to Mrs Mathiesen who replied to Ms Tournier that day and responded: 

		“I agree and await, with interest, the reply from Kay!”

However, Mr Seigal accepted that he did not take Mrs Mathiesen through the clause and the proposed amendments at this stage and that so far as he was concerned, the salary was what it was. Nevertheless, it seems to me once again, given Mrs Mathiesen’s level of interest in the terms of the arrangements, her involvement in negotiations and her detailed understanding displayed for example, in her email of 1 December 2002, that her reply is inconsistent with her claim in relation to the alleged agreement on £250,000 with or without 5% per annum increases. 

69.	Following further negotiations, Kay Newsham wrote to Ms Tournier on 14 May 2003 expressing Mr Mathiesen’s dissatisfaction with the proposals. She stated that the latest proposals took the matter back to what had been decided at the 18 October 2002 meeting should not happen, namely impact upon the day to day running of Matki. She added: 
“  . . As you pointed out in the meeting, Mrs Mathiesen is a director of the company and can, therefore, have access to company information if she has concerns about certain issues and could, for example in future ask for a breakdown of the directors’ remuneration figures for Mr Mathiesen shown in the company’s accounts rather than have to provide written permission for transactions in advance.” 

Once again, in my judgment, Ms Newsham’s comments in relation to the discussion on remuneration at the 18 October meeting are inconsistent with Mrs Mathiesen’s case that £250,000 was agreed. 
70.	The following day Mr Seigal responded in writing to Kay Newsham as follows: 

“Thank you for your letter of 14 May, addressed to Angeline.

I take on board a number of the points that you make and I am very conscious of the helpful stance that Mr Mathiesen has adopted in endeavouring to resolve the current difficulties. For my part, I have very much attempted to work within the spirit of what we are trying to achieve and it seems a great pity that you now appear to be presenting a "take it or leave it" position.

There is, I believe, only one substantive issue outstanding and that the other drafting matters raised by Angeline in her email of 24 April can easily be dealt with. As I explained to you on the telephone, it is not Caroline's intention or desire to involve herself in the day to day operation of the business. The amendments I proposed to you on the telephone were an attempt to give Mr Mathiesen comfort in this regard.  I believe that I have a very clear understanding of what Caroline wishes to achieve and the advice that I have given, based on the current draft (without my amendments) does not, I believe, go far enough. Given how we have been able to close the gap, it seems a great pity that we are not able to work further on the final substantive issue. To this end, might I suggest that we have one final attempt, either on the telephone or preferably, in a further meeting to try and finally resolve all outstanding matters. If however your position really is a final "take it or leave it”, then obviously this suggestion will not be acceptable, in which case, Caroline will have to decide how she wishes to proceed.”

71.	In response to Kay’s letter, Mrs Mathiesen emailed her and recorded her surprise and distress. She referred to the fact that her marriage had broken down and stated that she would contact solicitors. On the following day 16 May, Ms Tournier sent an email to Mr Seigal setting out the conversation which she had had that morning with Mrs Mathiesen. She recorded that Mrs Mathiesen was happy for any additional wording to be added to make clear that she would not “meddle with” the business. She also stated that Mrs Mathiesen had told her that she had found out that Mr Mathiesen had been sending cash to his eldest daughter, totalling £3million. 
72.	As a result on 19 May 2003, Ms Tournier spoke to Ms Newsham and put forward that Mr Mathiesen’s salary increases be limited to 5% with everything else going into the joint account and that no payments should be made to the other family. Ms Tournier’s note records that Mrs Mathiesen was happy with this. There is no reference to the level of basic salary. As I have already mentioned, this is the first reference in the documentation to increases in salary at the rate of 5% per annum. It is inconsistent with it having been already agreed.
73.	A further revision of the wording was put forward by Kay Newsham on 19 May which included reference to salary “subject to annual increases of 5% or the average increase provided to the Company’s employees in a year if higher”. It appears that this had arisen after a telephone conversation with Mr Mathiesen the attendance note of which records:
“ . . . . Define profit – as defined for other executives . . .
 . . . .
Like Fishing – fun part of it . . .
Take it away from entrepreneur – may become an onlooker . . . 
Don’t put me in a box I can’t breathe.”

74.	Very shortly thereafter on the same day, Ms Newsham sent an email stating: 

“Good afternoon John

Further to our earlier discussions, Mr Mathiesen has given further consideration to the clause relating to his salary and the "inflationary” rises. The company operates a bonus scheme for the executives and he feels that rather than link his increases to increases in general salary levels, it would be more appropriate if it is linked to the Company's performance. Could we amend the wording from "... salary subject to annual increases of 5% or the average increase provided to the Company’s employees in a year if higher ..." to "... salary subject to annual increases of 5% or the percentage increase in profit over the previous year as defined for the executives profit sharing scheme if higher ..."?

Also, for the sake of clarification and to avoid any discussion in the future, it may be sensible to amend clause 3.3 to state "... the exception of remuneration and benefits (including a company car) provided to Mr R Mathiesen at a rate commensurate with the services that he provides to the company." As Ricky has a car provided to him to undertake the service calls that he makes as part of his duties for the company and I believe that he is a member of the company pension scheme, these benefits form part of his current package and should, therefore, already be included. As we are restricting the amount to an amount commensurate with his services for the company, this should only clarify the position on this point.”

Some twenty five minutes later, Mr Seigal emailed Kay to state that he could not see any difficulties in the matters raised in her email. Later that afternoon, Ms Tournier emailed Kay proposing the following amendments: 

	     “3.1(c) agreed

3.2  Unless otherwise agreed in writing by both Mr and Mrs Mathiesen the Company will procure that all salaries (except for salaries, increased annually by either five per cent or the percentage increase in profit over the previous year, as defined in the executives profit sharing scheme, whichever is the highest) bonuses, dividends and distributions of any kind (except for any usual benefits which forms part of Mr and Mrs Mathiesen’s remuneration packages) paid to or for the benefit of Mr and Mrs Mathiesen are paid into their joint NatWest account . .  .  or any such other account held in their joint names (as notified to the Company by both of them in writing).

3.3  The Company will procure that no distributions of any kind, whether in the form of case, assets or otherwise, are made to or for the benefit of [named persons] (“the Excluded Persons”) or any connected persons who are connected to such Excluded Person (as defined by section 839 TA 1988) except for the usual remuneration paid to Mr R Mathiesen at a rate commensurate with the services that he provides to the Company.” 

75.	This was relayed to Mrs Mathiesen by Ms Tournier in an email of 20 May 2003. The email set out clauses 3.2 and 3.3 verbatim. The same day, Mr Seigal responded to Ms Tournier by email: 

“Well done. At some point we need to have recorded in writing that although we have reached a compromise on the clause 3 wording, PM controls the company and could devise ways to divert monies. This will now be much harder and he will be in breach of contract. In addition, CM is a director and is entitled to all co info. You may float with her whether we have a continuing monitoring role.”  

76.	Mr Seigal accepted in cross examination that in 2003 when clause 3.2 was agreed, he had no idea as to which of the various definitions of profit, was utilised for the purposes of the profit sharing scheme but that he knew that there was a mechanism and a scheme in operation. He relied upon what Ms Newsham had told him and believed that the scheme existed. He also accepted that to be able to sue on the clause, it would be necessary to know the level of Mr Mathiesen’s salary at the date of the agreement. In addition, he accepted that his role was to minimise the risks to Mrs Mathiesen and that he was relying upon the fact that Matki was a public limited company in which decisions were made by all the directors in its best interests, in order to avoid, for example, Mr Mathiesen receiving all the profit. He also accepted that he had not given Mrs Mathiesen worked examples of how clause 3.2 might operate and that he could have done better. He said that he saw that there was a risk but that it was an exceedingly good deal as a whole and there was a danger that they would not “get the deal home.”  He added that the matters dealt with at clauses 3.3 and 3.4 of the Shareholders’ Agreement preventing monies being paid to Excluded Persons who included Mr Mathiesen’s adult children had been the main driver for the negotiations, something which was not challenged.
77.	Mrs Mathiesen’s response to the email of 20 May setting out the proposed amended terms for clause 3 was by email on 21 May 2003. She set out the names of the adult children for the purposes of clause 3.3 but commented: 

“Why can’t clause 3.3 read “The Company will procure that no distributions of any kind, whether in the form of cash, assets or otherwise, are made to anyone other than Mr and Mrs Mathiesen and their combined children” (or something similar) and then include the bit about Richard?” 

When asked in cross examination about her response, she accepted that she had read the clauses and the matter she raised in relation to clause 3.3 was the only one which struck her. She accepted that she had read it over but insisted that clause 3.2 restricted salary to be paid directly to Mr Mathiesen to £250,000 plus increases of 5% per annum. She said that she could not understand the reference to “whichever is the higher”. In her witness statement she had maintained that her understanding of the clause at the time had been that Mr Mathiesen was entitled to have £250,000 paid to his sole account without any increase whatsoever. In my judgment, given the detailed interest which Mrs Mathiesen took in the negotiations and the drafts and the nature of her response for example, in relation to clause 3.3 in which she even offered alternative wording, I am unable to accept that she was an unsophisticated client as Mr Stewart QC submits and on the balance of probabilities it is more likely than not that she appreciated the meaning and overall effect of clause 3.2 without descending to the precise detail of the way in which increases were calculated in accordance with the profit sharing scheme. Furthermore, given my findings that she had read the clause, that there was no agreement restricting salary to £250,000 and that Mrs Mathiesen accepted that she had read the clause, that there had been no discussion of her husband’s salary level and that she was aware of the content of The Times “Rich List” and that there is no evidence whatever, of any negotiations to reduce Mr Mathiesen’s basic salary level, it follows that I do not accept her evidence that she understood clause 3.2 to restrict the salary payable directly to Mr Mathiesen in that way.  

78.	After further negotiation, Ms Tournier contacted Mrs Mathiesen by email on 9 June 2003 and stated the following: 
“After much discussion between John, Kay and myself, we finalised the wording for clause 3.3 (subject to your and Per's approval), as set out at the end of my e-mail.  We had to reintroduce the "Excluded Persons" concept, to ensure that the normal running of the Company is not affected.

I would like to point out that although John and I amended the shareholders agreement to give you maximum protection, as Per controls the Company, he could devise ways in which to divert money from the company. However, as you are a director of the Company you are entitled to receive all Company information. If it would give you some comfort, John would be happy to discuss with you whether you wish us to have a continuing "monitoring role" over the Company's affairs on your behalf.

UB-CLAUSE 3.3 (sic):

"3.3 Unless otherwise agreed in writing by both Mr and Mrs Mathiesen, the
Company will procure that no payments whether in the form of cash, assets or otherwise are made to or for the benefit of Mrs Jacqueline Weller, Mrs Rebecca Bidwell, Miss Anna Mathiesen and Mr Richard Mathiesen ("the Excluded Persons") or any connected persons who are connected to such Excluded Persons (as defined by section 839 TA 1988), with the exception of the usual remuneration and benefits (including a company car) provided to Mr R Mathiesen at a rate commensurate with the services that he provides to the Company.

3.4 Unless otherwise agreed in writing by both Mr and Mrs Mathiesen, the
Company will procure that no gifts are made whether in the form of cash, assets or otherwise, to anyone other than to Mr and Mrs Mathiesen and/or the children of Mr Mathiesen born to Mrs Mathiesen, with the exception of any usual small gifts for such charitable cause or causes or to members of staff, suppliers and customers, made by the Company in line with its current practice and as permitted by clause 4(K) of the Company's Memorandum of Association."

Kay asked whether you and Angela are free to attend a Company meeting on 10th July to sign the documentation.”
 
79.	The finalised documentation was provided by Kay on 9 June 2003. The Shareholders’ Agreement was executed on 4 July 2003. Clause 3.2 remained in the form in which it was proposed on 19 May 2003. On 29 September 2003, £519,998 corresponding to Mrs Mathiesen’s 52% “A” shareholding in Matki in accordance with Shareholders’ Agreement, was paid into the joint account and was used to purchase a house for her mother.  
80.	It is Mrs Mathiesen’s case not only that the salary of £250,000 plus 5% increases was agreed at the meeting on 18 October 2002 but that she would not have signed the Shareholders’ Agreement if she had believed that that was not the case. She says that she would have tried to renegotiate and would have participated actively in Matki as a director. She accepted in cross examination however, that Mr Mathiesen was very controlling and that she was actively involved as a wife and mother and therefore, all but abandoned her claim that she would have participated in company affairs. 
81.	She also accepted that she knew that Mr Mathiesen was taking more than £250,000 salary into his own account but stated that she believed that he was doing so in breach of the Shareholders’ Agreement. She also accepted that throughout the period from 2002, she saw documents and bank statements in relation to his personal accounts which Mr Mathiesen left on his desk and that she kept an eye on the balances in the accounts. Nevertheless, she denied looking at the company accounts for Matki for the year ended 2001/2. In fact, the schedules of the Matki finance director reveal that prior to September 2003, Mr Mathiesen was in receipt of around £49,000 per month which amounts to a salary in the region of £600,000 per annum. It seems to me that had the agreement in relation to £250,000 salary plus 5% increases been reached or had Mrs Mathiesen believed that it had been reached, she would have raised the issue forcefully at this relatively early stage. 
82.	In fact, on 26 January 2004, Mrs Mathiesen informed Ms Newsham that “All well back to normal”. On 5 February 2004 Matki voted a final dividend of £2m for the financial year ending 31 December 2003 and on 16 February 2004 and 5 March 2004 payments of £50,000 and £989,995.70 respectively being 52% of £2m were made by Matki into the joint account. 

The Second Retainer
83.	Ms Tournier saw Mrs Mathiesen again on 5 July 2004 in order to discuss her amended draft will and a draft letter of wishes. At that meeting, the salary paid by Matki to Mr Mathiesen was raised, Mrs Mathiesen having identified the remuneration of £785,650 at note 19 of Matki’s accounts for the year to 31 December 2003 which had been approved by the board on 11 June 2004. 
84.	Ms Tournier wrote to Mrs Mathiesen about the changes to her will that day and added that she would write separately about Mr Mathiesen’s salary. Thereafter, on 6 July 2004 Ms Tournier emailed Mr Seigal attaching a copy of the Shareholders’ Agreement and a copy of Matki’s financial statement for the year ended 31 December 2003. She explained the issue as follows: 

“Caroline is concerned about Per's salary for the year ended 31st December 2003 (see page 17 of the accounts). According to Caroline, prior to 2002, he used to be paid an annual salary of about £250,000. She was expecting him to receive this payment in 2003. She was surprised that he received £785,650.

Caroline said that Per's increased salary does not appear to tie in with clause 3.2 of the Shareholder's agreement.

When Caroline confronted Per about this, he said that he was operating on the basis that the salary increase was based on net rather than gross profits. The gross profit has increased from £7,053,287 to £9,974,312. The retained profit for the year (is this the net profit?) has increased from £31,343 to £91,411. On the basis of the retained profit figures, it appears that Per's salary increase is in line with the three fold increase of the retained profits.

However, I would be grateful for your comments regarding the same as I am not very familiar with reading and interpreting company accounts. I am also not sure where we would find the definition of the "executive profit sharing scheme" stated in clause 3.2 of the shareholder's agreement."

85.	It seems to me once again, that had there been an agreement as to £250,000 with or without 5% increases, Mrs Mathiesen would had made it clear to Ms Tournier at this stage. Mrs Mathiesen does not suggest that she did so nor is there anything in the documentation to suggest that that was the case. Instead, Ms Tournier’s note only contains reference to Mrs Mathiesen having mentioned that she believed that prior to 2002 Mr Mathiesen used to be paid £250,000.
86.	It was Mrs Mathiesen’s evidence in cross examination that she asked Ms Tournier whether according to the “scheme” her husband could take his salary with reference to gross or net profits. She accepted that she had looked at clause 3.2, identified the reference to profit and had already challenged her husband about it. He had responded that the increases were based on net and not gross profit. When asked why it was not a surprise to her that increases under clause 3.2 were other than at 5% she said that she had no experience of this kind of thing and that it was all “gobbledygook” to her. As I have already mentioned, although I accept Mrs Mathiesen’s evidence that she had no experience of legal documentation and company accounts, I am unable to accept that she did not appreciate that there was a mechanism for salary increases other than purely 5% increases and that it was dependant upon Matki’s profits. It seems to me that had she thought otherwise, she would have immediately questioned the entire premise of increases by reference to profits. Equally, had £250,000 been agreed she would have challenged her husband upon that basis and would have raised the issue with Ms Tournier.

87.	Mr Seigal’s response to Ms Tournier of the following day is contained in a manuscript note. Having ringed around “executive profit sharing scheme”, he went on:
“It turns on this definition – check in file to see if we have the rules of the scheme – if not suggest you do letter in my name to CM [Mrs Mathiesen] asking her to get copy of this . . .” 

88.	As a result a meeting was held on 13 July 2004, attended by Mrs Mathiesen, Ms Tournier and Mr Seigal. Ms Tournier’s attendance note records as follows: 

"Attending Caroline Mathiesen, John Seigal and Angeline Tournier. Caroline Mathiesen confirmed that half of the £3million in dividends (stated in the company accounts) was paid into their joint account…She is also going to ask Per for a copy of the executive profit sharing scheme. If that fails, she will ask Kay. If that fails she will ask us to write to Per regarding the same."

Not surprisingly, Mrs Mathiesen accepted in cross examination that she was aware at this stage that Clintons did not have a copy of the executive profit sharing scheme. There is no suggestion that this was hidden from her. 

89.	It was around this time that the first of a series of bonuses was paid into the joint account which totalled £1.8m. In November 2004, Ms Sonia Slater, an assistant solicitor employed by Clintons took over the Mathiesen file from Ms Tournier. Thereafter, on 17 June 2005, Mrs Mathiesen wrote to Mr Seigal in the following terms: 

"I have been asking Per for the end of year accounts since April and he says that they were incorrect and were being re-done. He is still reluctant to give them to me and instead presented me with the enclosed documents. I did know about the acquisition of the factory and 'Swadling' and he says that that is his reason for not paying out any dividends this year, although he still pays himself a huge salary!

I wonder if you could investigate for me and just ensure that what he purchased has been done according to the shareholder's agreement that we set up."

In cross examination Mrs Mathiesen accepted that she is likely to have been aware of the “huge salary” as a result of looking at her husband’s bank statements which she stated she “always did”. She also accepted that in June of 2005 she knew that £106,920 per month was going into Mr Mathiesen’s personal account. 

90.	Mr Seigal responded by email on 20 June 2005 stating that he would review the paperwork and report to Mrs Mathiesen in the next couple of days. He responded on 22 June 2005 in the following way: 

"Caroline, I have now had a chance to review the minutes that you sent to me and refamiliarise myself with the agreement that was reached in July 2003.
It would be nice to review the accounts for the year ended 31st December 2004 and perhaps you can let me have a copy when they are available. . . . . ."

Mrs Mathiesen replied the same day commenting upon an issue in relation to charitable giving under clause 3.4 of the Shareholders’ Agreement which had been raised by Mr Seigal and went on: 

"Per will not give me the set of accounts, which I have been asking for so perhaps he might react if the request came from you!
As far as the charity goes, if it is genuine I am not so concerned, obviously depending on what sort of donations he is making - I think 250k is quite generous.

Also he would not give me any papers relating to his salary, whether he had a percentage of gross or net profits, as we discussed when I came to see you and Angeline.  All he says is that he is not doing anything contrary to the agreement. Again, I think he might react if the request came from you."

It is clear, therefore, that salary increases by reference to profits had been discussed at   the meeting of 13 July 2004.  Nevertheless,  Mrs Matheisen had not raised her alleged understanding of the agreement of £250,000 flat salary or £250,000 plus 5% increases. 
91.	Mr Seigal replied on 23 June 2005: 

"I am sure that he would react to my request but not necessarily in a positive way!  Perhaps before I formally contact him you should request in writing all the information that you require to see as a DIRECTOR. As we discussed, as a director (as opposed to a shareholder) you are entitled to ALL information as of right.  If you would prefer that I contact him perhaps you can call me so that we can work out the best strategy."

92.	Mrs Mathiesen responded the following day stating: 
"Ok I will try that route, I might mention that I have contacted you, as that is more likely to get a reaction! What was the name of the paper I needed to ask for regarding how much salary he could take, I have forgotten as it was quite a while ago.”

In response, Mr Seigal suggested that Mrs Mathiesen should first ask for a copy of Mr Mathiesen’s P60 and P11D for the years ended April 05 and 04. Following this advice, Mrs Mathiesen did write to her husband on 28 June 2005 as suggested. On 29 June 2005, Mrs Mathiesen reported back to Mr Seigal:

"I enclose the response I had to my letter to Per. I did ask for the forms you suggested and he says that 'he is not doing anything incorrect'. As he seems reluctant to provide these, I would still like to check if his salary should be taken from gross or net profits, especially as he is not paying any dividends.

93.	Once, again, it seems to me that such an instruction is entirely contrary to Mrs Mathiesen’s case as to £250,000 with or without 5% per annum increases. In my judgment, it is also clear from the email exchange which I have set out and the further reply set out below, that Mrs Mathiesen was fully aware that under clause 3.2 increases in salary were calculated in accordance with the definition of profit in the executive bonus scheme. Having been asked to clarify the matters which Mrs Mathiesen wished Mr Seigal to raise with her husband, Mrs Mathiesen replied on 7 July 2005:

"I would like to establish that Per is taking the correct salary according to the executives bonus scheme that you mentioned and the P11D forms, that he is buying the new company within the boundaries of our agreement and that he will let you have a copy of the end of year accounts when they are published, as he did not pay any dividends I would like to check that the money actually went into the purchase of this company."

	As a result, Mr Seigal wrote to Mr Mathiesen on 8 July 2005 as follows: 

"As you know, Caroline has contacted me in connection with the agreed arrangements set out in the Shareholders Agreement of 4 July 2003.

There are several issues which are troubling Caroline and which may well arise from a lack of understanding on her part as to the actual operation of the business and/or there may have been a general misunderstanding as to the level of remuneration that has been drawn from Matki pursuant to the agreed provisions of the Shareholder Agreement."

94.	Mr Stewart QC sought to suggest that Mr Seigal’s request for clarification of the issues Mrs Mathiesen wished to raise was indicative of his negligence. It seems to me that such an interpretation assumes more than it proves. Such an inference can only arise if one starts from a position of suspicion which in my judgment is not the right approach. Mr Stewart QC also suggested that the tone of Mr Seigal’s letter to Mr Mathiesen was very strange. Mr Seigal’s response was that he was not seeking to be too “bullish” at that stage and was adopting a conciliatory approach in order to elicit a positive response. That was exactly what occurred. Mr Mathiesen confirmed that Mr Seigal could speak to Kay Newsham on the topic. Mr Seigal reported to Mrs Mathiesen and his note of 11 July 2005 states: 

"Reporting to Caroline - she is much more comfortable. This is as much about showing Per that I am involved & that we are looking at what is going on. She is away for 6 weeks - no need to trouble her until she gets back."

The same day he contacted Kay Newsham and his attendance note records: 
"Attending Kay Newsham on the telephone and discussing with her the up to date position. She is going to let me have a copy of the P11D and P60 forms together with a copy of the Acquisition Agreement and the accounts when they are finalised.

She is also going to let me have a copy of the Executive Bonus Scheme."

95.	Ms Newsham responded the same day: 

“I have Mr Mathiesen's forms P60 and P11D for the year ended 5 April 2005 and I have also prepared a reconciliation of the figures in the PAYE system to the figures in the accounts to 31 December 2004.

I have asked the FD at the company to let me have a copy of the executive profit,sharing scheme documentation and I will forward the forms with the profit scheme documentation when this arrives rather than send items piecemeal.

I have also asked the FD to let me know if he has a set of draft accounts - I will send these with the other documents if they are available now or later if he is still waiting for any amendments by the auditors.

I will also check the level of the bonus to be voted in the accounts and let you have a note of the figure when I send the other documents. I will also let you have a note of the FD's best estimate of when the funds may be available to pay the net amount into Mr & Mrs Mathiesen's joint account. . . .”

She enclosed therefore, the relevant P60 and P11D, a one page schedule setting out gross salary and bonus payment to Mr Mathiesen between January 2004 and March 2005 and a series of schedules prepared by the Finance Director of Matki “showing the profit figure per the Executive Profit Sharing Scheme “EPSS”) and the calculation of PM’s salary increases based thereon each year in line with the provisions in the Shareholders’ Agreement”. The schedules were divided into two sets, the first being manuscript schedules prepared by the Finance Director showing between 2002 and 2005, Mr Mathiesen’s gross starting monthly salary, the profit calculation and the resulting increased salary and the second being typed “Directors” Commissions” for 31 December 2001 to 31 December 2004 showing how the executive profit sharing scheme applied to some but not all of Matki’s executives. She also provided a copy of clause 3.2 of the Shareholders’ Agreement. 
 
96.	Thereafter, by a letter of 10 August 2005, from Kay Newsham to Mr Seigal, Ms Newsham provided documentation including final signed accounts for Matki for the year ended 31 December 2004 which showed amongst other things that the emoluments of the highest paid director (Mr Mathiesen) was £785,650. The relevant part of the letter is as follows: 
"I enclose copies of the following:

1	Mr Mathiesen's P60 for the year ended 5 April 2005

2	A schedule showing how salary and bonuses have been reflected in the 2004 accounts and PAYE system for the year to 5 April 2005 (please note that this is before the addition of the final bonus - see comments below).

3	Mr Mathiesen's form P11D for the year ended 5 April 2005

4	Schedules prepared by the Finance Director at the company showing the profit figure per the executive profit sharing scheme and the calculation of Mr Mathiesen's salary increases based thereon each year in line with the provisions in the agreement.

I can confirm that a significant bonus has been voted to Mr Mathiesen in order to reduce the corporation tax liability of the company for the year ended 31 December 2004 and the avoid the requirement for the company to make quarterly payments of corporation tax. I believe that the final figure was £3m gross."

97.	On 11 August, Mr Seigal reported to Mrs Mathiesen that the documents had arrived. His time keeping records reveal that he spent an hour on the file on 23rd August. On 24 August 2005 he emailed her stating: 

“Hi Caroline, 
I have now had an opportunity to review the documentation that Kaye sent me. 
I have raised a few question but I am hopeful that when I am fully in a position to report to you, you will get the comfort that you require. . .” 

Mr Seigal accepts however, that he cannot recall what calculations he performed in order to satisfy himself that he could report positively to his client.  However, Mr Soole QC points out that Mr Seigal’s evidence is that he would have done so and his manuscript notes and the further questions he put to Ms Newsham suggest that he did so. Those questions were in an email of 24 August 2005, in which he asked for her input on a number of matters. The enquiries that are directly relevant are as follows:
"I have now had the opportunity of reviewing the documentation that you kindly forwarded to me. I feel sure that all of this information will go a long way towards giving Caroline the comfort that she requires. Before I report to her could you possibly let me have your input on the following matters:-

1. Could you please let me have a copy of the executives profit sharing scheme so that I can satisfy myself that clause 3.2 of the Shareholders Agreement has been operated correctly.

2. I note from the Accounts that CM is described as a non executive director (sic.). I am sure that nothing turns on it but I have no recollection of this particular title being agreed. If I was can you please let me know.

3. I note that for the tax year 05 £2,361,289 was earned. It would be most helpful if you could please identify precisely what was paid into the joint account for the same period.

4. The accounts show that PM's emoluments for the year amounted to £5,188,539. I have your explanation for the 3m Bonus declared but again, and following on from 3 above, I am anticipating the comment that CM is likely to make, so could you please identify the amount paid into the joint account which by default will leave the unpaid bonus to be paid into it and therefore the balancing item which has remained personal, as agreed, to PM."

98.	Once again, Mr Soole QC points out that the third and fourth points inevitably arise from a financial analysis. Mr Seigal was the subject of robust cross examination on whether in fact, he had carried out such an analysis and whether it had led to a positive conclusion. He accepted that a reconstruction of that analysis had been attempted during preparation for the trial but that it had not been the subject of a further witness statement and had not otherwise been disclosed. Mr Stewart QC suggested that it should be inferred that in fact, the exercise had not confirmed the positive result and therefore had not been revealed. In my judgment, that goes too far. 
99.	Ms Newsham responded that she had “asked the FD at the company for a copy of the written terms of the executives profit sharing scheme." She also added: 
“I have also prepared a further reset to my spreadsheet of Per’s remuneration showing the relevant net amounts and request confirmation form the FD at the company that the net bonus figures were paid into the joint account (someone may lose their job if this didn’t happen) and the salary amounts were paid into his sole account.” 
 
100.	On 13 September 2005, Kay Newsham provided further information to Mr Seigal by email with attachments. The body of the email read as follows: 
"I attach my schedule showing the net equivalent of each payment to Mr Mathiesen. I spoke to the finance director on Friday and he has since been through the accounting records and confirmed that the 5 figures in the bonus column were paid into the joint account…

The executive profit sharing scheme is negotiated on an individual basis for each executive. For two of the executives the figures are based on the results of the factory for which they have responsibility. For the executives whose profit share is based on the results of the company performance, the profit figure that is used to calculate the profit share is the net profit before the directors' commission and after sundry income as shown in the published accounts. I addition to the adjustment for directors' commission, there is a reduction in the charge for Mr Mathiesen's salary from the actual salary charged in the profit and loss account to a notional figure of £96,000 pa. The balance of Mr Mathiesen's remuneration is shown separately as personal drawings in the published accounts.

I attach a schedule which sets out the net profit after sundry income figure for each of the last 4 years and the adjustments for commissions and Mr Mathiesen's salary arriving at the figure used for the executive profit sharing scheme calculations."

101.	This was the first indication that Mr Seigal had had that the executive profit sharing scheme was operated on an individual basis.  Mr Seigal’s time recording includes a further 1½ hours for perusal of the information and an email. In fact, having considered the figures, Mr Seigal responded that day: 
"From you Equivalent Net Figures schedule I am still not entirely clear what has been paid into the joint account. Looking at the last tax year P60, 2.361 was earned. This nets down to circa 1,287. If I understand you correctly 595,756 was paid into the jt account in respect of declared bonuses only. I am not sure how the gross bonus of £43,92[23/03/05] nets down to £756."

Once his investigations were complete, Mr Seigal emailed Mrs Mathiesen on 14 September 2005: 
"I have now concluded my review and by summary can report that I believe the arrangements set in place have been operating as intended.
I have a considerable amount of information which I would like to share with you and in particular I would like to give you a full explanation of my findings, which in turn I hope will give you certain comfort.
I think that the best way forward would be for us to meet up for say an hour when you are next in town. With this in mind, could you possibly telephone me to arrange this."

102.	On 22 September 2005, Mr Seigal wrote to Mrs Mathiesen and recorded their telephone conversation of the previous day and stated that he confirmed their meeting on 3 October at 11am. He enclosed a copy of the 14 September 2005 email which he stated had not been received together with a note of his charges which took into account the intended meeting on 3 October. 
103.	Mr Seigal’s evidence is that a meeting took place at Clintons’s offices on 3 October 2005 when he would have explained his investigations to Mrs Mathiesen and that salary and bonus were being dealt with in accordance with the Shareholders’ Agreement and gone through the documents and calculations received. He said that he recalled the clip of papers which he had prepared laid out on the round table in his office. Mrs Mathiesen’s evidence is that she has no recollection of such meeting and would be surprised if it had taken place because it was her son’s birthday and she was unlikely to have travelled to London that day. It was her recollection that there were numerous telephone conversations with Mr Seigal around this time in which only bonuses were referred to and that everything was “working according to the agreement.”
104.	However, the meeting appears in Mr Seigal’s professional diary and Mrs Matheisen’s name appears on the receptionist’s list of clients as entering Clintons’ offices on 3 October 2005. There is also a record of 10 units in respect of Mr Seigal as fee earner on Clintons’s fee ledger for Mrs Mathiesen in respect of her Personal Affairs which amounts to an hour. Surprisingly, however, there is no formal attendance note of a meeting. The only written record is a short manuscript note in Mr Seigal’s writing which on the bottom of a copy of his letter to Mrs Mathiesen of 22 September 2005 which confirmed the meeting at 11am on 3 October.  Those notes provide: 

"3/10 
Going forward 1) info when bonus paid 2) same info on annual basis"

105.	In the light of the fee ledger, Mr Seigal’s professional diary, the receptionist’s list, the absence of any evidence that the meeting was cancelled or that Mrs Mathiesen failed to attend and Mr Seigal’s subsequent email to Mrs Mathiesen of 25 October 2005 enclosing his bill and making reference to their meeting, to which I refer below, it seems to me that on the balance of probabilities, the meeting took place. In any event, Mrs Mathiesen accepted in cross examination that whether on the telephone or face to face at a meeting, Mr Seigal had explained that the Shareholders’ Agreement was being adhered to and she had not pointed out that that could not be the case because it was not what was agreed because Mr Mathiesen should only receive £250,000 plus 5% per annum. It also seems to me more likely than not that given that the meeting was an hour in length and given Mr Seigal’s request that they meet to discuss the considerable amount of information which he had amassed, which related to salary, that salary was discussed. 
106.	Mr Stewart QC submitted that Mr Seigal’s preference for a meeting and his failure to set out his findings in writing is indicative of a realisation of his negligence under the First Retainer. Mr Stewart QC says that by this point, if Mr Seigal had been a competent solicitor he would have informed his client that he did not possess the executive profit sharing scheme which was necessary in order to fulfil her instructions under the Second Retainer, that he had never had it and that she should take independent advice. He goes on to submit that his failure to do so was as a result of deliberate concealment to which I shall return. 
107.	It is also important to note that Mrs Mathiesen’s acceptance that she was informed that the Shareholders’ Agreement was being adhered to is contrary to the way in which her case was put at trial. Rather than concentrate on the level of Mr Mathiesen’s salary which Mrs Mathiesen accepted in cross examination she knew, Mrs Mathiesen’s secondary position at trial was that she was not told that her husband was honouring rather than breaching the Shareholders’ Agreement until it was pointed out by her new solicitors Vardags in 2010. It was said that had she been told that the agreement was being honoured, she would have realised immediately in October 2005 that Mr Seigal and Clintons had failed to fulfil her instructions under the First Retainer. In fact, Mr Seigal put this in writing and Mrs Mathiesen accepted in cross examination that she did not complain. 
108.	A further manuscript note on the same page as that which refers to the meeting on “3/10” is in the following form: 
“7/10
Per CM apparently 4000K bonus was not paid into Jt a/c and was used to pay tax. I said that we required an explanation to put us back in comfort zone. CM doesn’t want to upset FD. Asked her to think about it over week end and call me Monday.” 

In fact, Mr Seigal took the matter up with Kay Newsham and on 10 October 2005 he emailed her pointing out the error in relation to the bonus was most unfortunate. He also added that he had been speaking with Mrs Mathiesen at length and was due to speak to her again during the course of the day. There is a further manuscript note written by Mr Seigal of 14 October 2005 recording a telephone conversation with Mrs Mathiesen as follows: 
"Speaking CM and advising her of dir income going into jt a/c & that if she had any tax issues shd spk with Kaye. Only o/s issue now was re-notification of bonus payment"

	In that regard, Ms Newsham contacted Mr Seigal on 24 October 2005 to report: 

"Further to my previous message, I have spoken to Howard Symonds (the FD at the company) and he has advised that the company cash flow is likely to remain negative until May or June of next year. He has noted the request for notification of bonus payments in advance… Further bonuses are not anticipated until the cash flow position has improved dramatically."

	Mr Seigal replied:

"Thanks Kaye, This does indeed deal with the outstanding point. I will make a diary note to pick this up in mid February for an update"

	And to Mrs Mathiesen: 	

"Hi Caroline, I think this brings us up to date. If you have any outstanding matters please do let me know."

109.	The next day, Mr Seigal wrote to Mrs Mathiesen enclosing what he described as what he hoped to be his final bill “for the further work that was required following our recent meeting.” 
110.	On 13 February 2006, Mr Seigal emailed Mrs Mathiesen to inform her that he had contacted Kay Newsham for an update on the bonus position. He received a detailed update from Ms Newsham on 20 February in which she made reference to having spoken to the Finance Director of Matki who had stated that he had “payments to make this month in respect of the executive profit sharing scheme . .”. Mr Seigal forwarded on Ms Newsham’s email to Mrs Mathiesen on 21 February 2006.  On 19 March 2006, Mrs Mathiesen responded that:

"Per has confirmed that the bonus, or a large part of it, will be coming into the joint account shortly, I will let you know when that happens."

Mr Seigal provided an update on 21 March 2006 and the following day, Mrs Mathiesen responded by email: 

"Thanks for your mail. I have as yet not seen any payment go into the joint account, but will obviously keep checking.

As for this year's bonus, I would like you to have a good look at the accounts when they come in. Things have not been great with us again and I wonder if Per is deliberately holding back bonus payments. I will be interested to see what he pays himself this year!"

I should reiterate that in my judgment such a response is completely inconsistent with Mrs Mathiesen’s primary case that the agreement had been that only £250,000 salary plus 5% increases was payable directly to Mr Mathiesen and her case that until 2010 she believed that Mr Matheisen was breaching the Shareholders’ Agreement rather than honouring it.

111.	The next relevant interchange is in July 2006. Mrs Mathiesen emailed Mr Seigal on 10 July 2006 as follows: 

"I am sending a cheque in the post for your invoice. I have seen all monies you have notified me about so far. I am away in France from 13th July until 17th August. In the meantime if you are contacting Kay perhaps you could find out when they intend to pay the rest of the outstanding bonus and any from this year, as there is a house in London I quite like the look of!"

Mr Seigal acknowledged receipt from Kay Newsham of the 2005 Accounts for Matki on 13 July 2006 and on 17 July he contacted her raising two matters “ in anticipation of the matters Caroline will raise on the accounts.” They were the proposals for dealing with the £2.8m profit and asking for a breakdown of Mr Mathiesen’s emoluments of £1.8m. The email chain was forwarded to Mrs Mathiesen on 25 September 2006, on her return from holiday. Thereafter, having spent two and a half hours describing in his time recording as “perusing financial inf and reporting to client” he sent an email to Mrs Mathiesen on 12 December 2006, in which he stated:  
"It will take me some time to work my way through this but in the meantime I thought that I would send you a copy of her covering letter and would in particular draw your attention to the payments that have been made totalling 1.8m. The last payment that I was notified of was that made on 6/6 for 250k. You will note that 3 further payments have been made since that time and that therefore the 3m bonus has now been paid out in full. I presume you were aware that these payments had been made but can you please confirm."

On 13 December 2006 in a further email he added: 

"I have now tracked through the various computations making up the Accounts/Corporation Tax payments and have been able to cross refer these to Kay’s various explanations. 
I am no forensic accountant but I can see what has been paid and where it appears in the accounts/computations and on the face of it there is no obvious “gaps”  . . . 
. . . . 
Subject to any comments that you may have and subject also to your having been notified of the additional bonus payments the only issue that I was proposing to raise with Kay was a request for a breakdown of the monthly salary [£149,581] which is paid directly to Per."

He also forwarded Mrs Mathiesen his query sent by email to Ms Newsham on 14 December 2006 in which he stated expressly: 
“2.	Can you please explain the salary payment made to Per in April (£192,242) and provide a breakdown for the increase from £106,920 to £149,581 as well as confirming what the current salary payable is.” 

Mrs Mathiesen replied to Mr Seigal on 14 December 2006: 

"The other thing I don't understand is that I thought the agreement we set up was to ensure that profits went into the joint account in the form of dividends, however if they are saying there is no cash because of the acquisition of Swadling, how come Per can still pay such enormous salary to himself? Was that a loophole?"

Mr Seigal’s immediate response was:
"In response to the matters that you have raised:-
…
2. The agreement was that anything other than salary would be paid into the jt account. As far as I can see this is happening. It is for the Directors to determine what the Company should pay by way of Dividend/bonus and if they consider for good reason that it is not appropriate at this time to make such payments, they are within their right.
3. Per is able to draw a considerable salary because that was always agreed. However, the salary is calculated on a set formula and I am going to check with Kay that this is being kept to.
4. I do not believe there is any obvious loophole, after all £3m (less tax) has been paid into the jt account!"

Mrs Mathiesen responded at 9.53pm that evening: 
" . . . . What I don't understand is that Per says there is no money in the company this year to pay dividends, however he is taking a £2m salary! I just wondered if he has found a way to not pay any more into our joint account. I found a super property in London which I wanted to get for the kids but after all expenses over the part two years there wasn't enough left of the last bonus and Per would not pay out any more!"

Mr Seigal’s response the following morning was: 

"I understand. Lets see what Kay has to say about the Salary although this will not unfortunately change the bonus position."

On 5 January 2007, Kay Newsham provided the following information: 

"On the specific questions regarding Per's salary, I note that you are querying the amount of £192,242 (you have noted this as an April payment, however, it was paid in March as shown on the schedule) and, as I mentioned in my letter of 11 December 2006, this was covered in our earlier correspondence. I have been back through my archived information to check this point and I attach a further copy of the file which I forwarded on 13 September 2005 setting out how this figure has been arrived at.

I believe that a copy of the calculation showing how Per's salary increased in February 2005 was forwarded with my letter of 10 August 2005, however, for completeness, I have summarized the salary increase calculations for February 2005 and February 2006 on the attached spreadsheet. You will note that I did not split down the payments in January to March 2006 to exact figures on the previous schedule as the P60 confirmed the total gross amount paid, consequently, it does not seem relevant whether the amounts paid were £149,581, £157,060 and £157,060 for January, February and March or £149,581, £149,581 and £164,539 for January, February and March as the overall figure for the three months is correct."

As a result, Mr Seigal reported by email to Mrs Mathiesen on 8 January 2007: 

"Kay has satisfactorily confirmed that the salary position accords with the agreement and you are correct that on an annual basis this amounts to nearly 2m."

Mrs Mathiesen responded that day:

"Per says he is setting up a new Bonus payment scheme which should make things easier . . .” 

112.	In cross examination, Mrs Mathiesen accepted that at this stage she sought to apply pressure to Per in order to obtain a monthly bonus and that she knew the extent of his salary. A bonus of £50,000 per month gross had been agreed in December 2006. She also accepted that she was generally happy with the package available under the Shareholders’ Agreement and wanted to keep it as it was at that stage. It seems to me that her evidence in this regard which I accept, undermines Mr Stewart QC’s submissions on her behalf that at this stage, Mr Seigal was seeking to “fob Mrs Mathiesen off” with talk of bonuses and deflect her attention from his alleged negligence in relation to salary. Mr Stewart QC puts emphasis upon Mrs Mathiesen’s suggestion of a loophole in her email of 14 December 2006 as evidence of the alleged agreement in relation to £250,000 salary and her lack of understanding of clause 3.2. However, as Mr Soole QC points out, contrary to her primary case, it seems to me that Mrs Mathiesen was not complaining about the level of salary or that it was being paid outwith the joint account but was disappointed that there was no mechanism connecting level of salary and level of bonus to which she would be entitled, something which had never been contemplated. 
113.	On 23 January 2007, Mr Seigal forwarded a lengthy email from Ms Newsham of 21 January setting out the up to date financial situation. In his email Mr Seigal made clear that there were no more bonuses to follow. 
114.	The difficulties in Mrs Mathiesen’s marriage continued and in early 2007 she took advice from Maggie Rae a partner of Clintons specialising in matrimonial law. On 5 February 2007, Mr Seigal forwarded his email of 23 January 2007 to Mrs Mathiesen in which it was stated that there was nothing more to follow, to Ms Rae and commented that “this is what kicked off the latest problems.” 
115.	On 17 April 2007 Mrs Mathiesen attended a consultation with leading and junior counsel who had been asked to advise upon Mrs Mathiesen’s likely financial position in ancillary relief proceedings on divorce and whether the Shareholders’ Agreement would be treated as binding in such proceedings. The conference was attended by Mr Seigal in addition to Ms Rae, an assistant solicitor and Mrs Mathiesen. Amongst other things, the note of the conference records: 
“ . . . . .

CM saying:

Per's salary of 'X' number of years has been put into share portfolio - this given to his children from his first marriage

Per was earning nearly £2M a year in past.

It was only in 2002/2003 that CM learnt how much Per was earning — this was when she discovered he was in the Rich List.

By the Shareholders Agreement — Per cannot cream the Company but in return CM accepted that Per's salary should increase as the Company's profits increase as the Company becomes more successful.

		     . . . . .

BSQC saying:

•The agreement in respect of the Company does not allow Per to cream the Company  for his other children but, he can do what he likes with his salary

• Even if company worth £50M this is not in cash

• Company could be worth as much as £40M net

		      . . . . .

CM saying that she doesn't want to get divorced but that she also cannot continue as things are at present. So either there are changes or they split up.

		     . . . . . 

CM saying that she doesn't trust Per. JS saying that Per was pretty frank in his disclosure and that the 2003 Agreement was pretty remarkable.   However JS acknowledging that the information was reluctantly given and having to fall back on the Agreement and it has been very much for Caroline to find out — JS saying that this has not helped matters.

		     . . . . . 

CM saying that on the face of it the marriage appears fairly but that there are problems underneath - regarding finances etc.

		      . . . .

BSQC saying that "materially" CM will not do better on divorce than she has now.

CM saying that Per does not want to get divorced or even to separate from CM

. . . . .

BSQC saying that the real question is what does Caroline really want?

CM to attempt to reconcile but this will only work if things change at home.
		     . . . . 

BSQC saying that the Court could agree with the Shareholders Agreement.

		     . . . . 

CM must decide what she wants”

The manuscript version of the note also records that the best result for Mrs Mathiesen would be to maintain the status quo and that she would not do better on divorce.  In my judgment, the content of this note recording the discussion and advice given at the consultation is contrary to Mrs Matheisen’s case in a number of respects .  First, it is entirely contrary to the alleged £250,000 plus 5% p.a. increases agreement.  Secondly, it is contrary to her assertion that prior to the execution of the Shareholders’ Agreement she believed  that Mr Matheisen was earning £250,000 per annum and thirdly, at least at this stage it is contrary to her contention that she did not understand the workings of clause 3.2.  Had she not done so previously it seems to me that she would have remonstrated at the consultation.   Accordingly, I do not accept her evidence in this regard. 
   
116.	On 11 July 2007, Ms Rae wrote to Manches LLP acting on behalf of Mr Mathiesen and amongst other things stated that if Mr Mathiesen wished the marriage to survive he would have to continue counselling and release joint monies for the purchase of a property in London. She also stated that her client wanted an assurance that neither Mr Mathiesen nor his adult children would try to change the trusts and agreements already in place. Mrs Mathiesen was described as “a totally committed wife and mother”. The Shareholders’ Agreement was referred to in the following way: 

“The agreements our clients happily reached together five years ago were meant to give my client and her children the security to continue their lifestyle on the demise of your client, and to give their children the opportunities that your client's previous children had…” 

117.	In fact, Mrs Mathiesen issued a divorce petition on 2 August 2007. It was withdrawn by consent as a result of Mr Mathiesen’s letter of 19 September 2007 in which he conceded the points raised in the letter of 11 July 2007 and gave the assurance that the trusts and Shareholders’ Agreement would not be changed. Ms Rae’s manuscript notes of a meeting with Mrs Mathiesen dated 20 September 2007 record amongst other things:

"Letter from Per to Maggie - just what we wanted"

118.	It was Mrs Mathiesen’s evidence that it was her belief at this stage that the effect of clause 3.2 of the Shareholders’ Agreement was that everything but for £250,000 salary would be paid into their joint account.  I am unable to accept that evidence for the reasons I have already given. It was clear from the emails in late 2006 that Mrs Mathisen knew the level of her husband’s salary and that she was fully aware at the joint consultation that increases were in line with profits. This issue had also been explored previously when Mrs Mathiesen had queried whether gross or net profits was the correct measure under the executive profit sharing scheme. Nevertheless, she sought at this stage to affirm the Shareholders’ Agreement. 
119.	Soon after the withdrawal of the divorce petition, in December 2007, Matki voted a £100,000 interim dividend which was paid into the joint account and a gross bonus of £500,000 was voted to Mr Mathiesen, part of which was used to purchase the property at Radnor Walk, Chelsea which Mrs Mathiesen had wanted. 
120.	It was not until 2010 that Mrs Mathiesen contacted Clintons again. On 5 March of that year she emailed Mr Seigal as follows: 

"Hi John,
Long time no speak! I hope you are well. I just have a couple of concerns that I thought I would run past you…. . . Also I have been asking him [Per] when he is going to be paying dividends into the account (I want to rebuild a large portion of our house in France) and he keeps saying that there are no dividends due to the recession - although he's been paying himself around £2million a year! Just wondered if this can be right."

Mr Seigal’s response was that he would have to retrieve his files from storage and look at the agreements. On 9 March 2010 he emailed Mrs Mathiesen saying: 

"I have now had a chance to do an initial review which has also included Maggie's file as well.
By way of recap:-
1. The affairs of Matki/Shareholdings are governed by the Shareholders Agreement of 4th July 2003.
2. No shares can be transferred other than by way of this Agreement. The Directors do not have the power to change this.
3. By letter to Maggie of 19th September 2007, Per confirmed "Neither myself or my older children will try to change the trusts or the agreements already in place". This was the basis on which it was agreed to dismiss the divorce proceedings.
4. The financial aspect is more complicated as there is no right to any dividends. There are specific provisions about the amount that can be drawn by Per.
You may recall that some time ago I did some detailed investigation into certain of the finances and for me to be able to give specific guidance to you on this we may have to revisit this.
I suggest that once you have had a chance to consider this E Mail you give me a call so that we have a general chat/catch up and work out the best way forward.” 

	Mr Seigal’s manuscript note of the following day records: 

"Speaking CM - agreeing that she wd ask Per one last time & threaten me. looking at all finances etc."

121.	Thereafter, Mr Seigal emailed Kay Newsham on 25 March 2010 to make further enquiries: 
"Dear Kay,

As you know, it has been a number of years since we last did the exercise of verification for the purpose of establishing the correct operation in particular of Clause 3.2 of the Shareholders Agreement dated 4th July.

With this in mind, I would now like to see the accounts for Matki for the last 3 years together with Mr Mathiesen's P11D and P60's for the same period. I will also need to see the working and formula application giving rise to any salary increases during this period. You will recall that this information is in line with that supplied the last time we did this exercise in 2006."

On 6 April Mr Seigal emailed Mrs Mathiesen to state that there was nothing positive to report but that he would work on the accounting information to ensure compliance with the Shareholders’ Agreement. On 9 April his manuscript note records a conversation with Mrs Mathiesen in which he was informed about Mr Mathiesen’s involvement with Ms Lavin, the couple’s former nanny. 

122.	In response, Kay replied on 18 May 2010, attaching documentation to show how the salary increases had been calculated over the period. Mr Seigal reported the receipt to Mrs Mathiesen on 19 May 2010. It prompted a call between them the note of which records that it was agreed that on his return from holiday they would meet to discuss an approach which would match “monthly increase to match increase in salary” and how to exploit Mrs Mathiesen’s suspicions in relation to Mr Mathiesen’s affair with the former nanny. He is recorded as having spent three hours reviewing the documentation and reported to her substantively on 20 May: 

"As I mentioned to you we are dealing with 2 separate matters:-

1. We have an Agreement that Per can only take so much out of the business. We have the right to monitor that and in many ways it is this right that is our best safeguard. We do not have any right to control how he spends these monies nor can we control the payment of additional monies into the Jt Account.

I have been through the financial details that Kay has sent and there is no obvious or apparent cause for concern. When we meet I will go through the details with you…"

123.	On 16 June 2010, Mr Seigal responded to an email from Kay Newsham in the following terms: 
"You should be aware at the outset that Caroline is far from happy with the current financial position. Any suggestion that "the obvious first cut would be the bonus which Per draws from the company….." even with the caveat that follows, is wholly misplaced.

In my lengthy discussions with Caroline, she makes the point that Per year on year consistently draws ever increasing "personal" amounts from the Company whilst the additional bonus monies paid into the joint account over the years has not matched the very substantial sums paid to Per.

If we are to avoid a situation where we call for an accounting of how the considerable sums paid to Per are spent then I think we need to consider revising the overall arrangement to achieve a situation where a substantial private income is now paid to Caroline. If because of the financial situation of the Company Per consequently needs to reduce his base salary then so be it.” 

The entirety of the email chain was forwarded to Mrs Mathiesen and Mr Seigal commented to her that he now considered it the right time to “go on the offensive”. 
After a meeting between Mrs Mathiesen and Mr Seigal on 24 June 2010 at which finances and Mr Mathiesen’s adultery were discussed, Mr Seigal emailed Kay Newsham requiring a monthly income for Mrs Mathiesen. Mrs Mathiesen responded on 29 June 2010: 

"Per tried to say that she was Jamie’s (his son-in-law) flat mate! He has tried to play it down and dismiss it, offering no explanation or apology. I don’t think he’ll give her up and will probably put her up somewhere else!
I think we can now insist on us having equal amounts paid into separate accounts from now on. He has accrued more than I have and has given millions to his other children and he has made no provision for my children in his will, (maybe we should ask for sight of that?)"

I should mention at this stage, that I consider Mrs Mathiesen’s receipt of the emails between Mr Seigal and Ms Newsham in which the treatment of salary and bonus under the Shareholders’ Agreement is explicitly referred to and her response make clear that she understood that Mr Mathiesen’s considerable salary was outside the joint account regime and that it was not limited to £250,000 plus 5%. 

124.	On 26 August 2010, Mr Seigal wrote an internal memorandum to Ms Rae to bring her up to date. It read: 
“1. CM made contact with me in March for the first time since the matrimonial advice you gave her.  She had a concern about the shares and the power of the directors to change the shareholders agreement.

2. Her real concern appeared to be about money and her desire to get PM to pay 1m euro towards upgrading the French property.

3. I made contact with Kay (the accountant) to establish the health of Matki and to do a financial audit to ensure that he was keeping to the agreement.

4. I received a fair amount of financial info which showed the profits of the Company reducing considerably.  I saw nothing to indicate that PM wasn’t adhering to the agreement.

5. It soon became apparent that CM had become aware that PM was carrying on an improper relationship with the former nanny some 10 years her junior.  To make matters worse she had sacked her for not looking after one of the kids.

6. We devised a strategy to try and capitalise on this to secure a personal monthly income for CM.  She has always been concerned that PM draws a very substantial monthly income (as he is entitled to do) and that she does not know how he spends it all.

7. Via Kay, we confronted him about his relationship with the Nanny which he played down maintaining that she was a friend of his son.  Certainly his various explanations did not accord with the evidence that CM had obtained.  We requested that he have no further contact with her and that he supply a full financial disclosure with a schedule of assets and means.  This happened at the end of June.

8. Needless to say he appears still to have contact with the nanny and has failed to provide any more financial information.

9. During the summer the situation has deteriorated considerably and CM has come to the conclusion that she no longer wishes to be with PM.

John” 

125.	Thereafter, in September 2010, Mrs Mathiesen transferred her instructions in relation to her matrimonial affairs to Vardags. In the email sent by Vardags to Clintons it was stated that Mrs Mathiesen wished to make clear that the change of firm “in no way reflects any dissatisfaction with your firm”. She said in cross examination that this was as a result of her friendship with a member of that partnership and in an email of 5 September 2010, asked Mr Seigal to continue to look after her financial affairs. A further divorce petition was filed that month. 

126.	Thereafter, on 6 October 2010, Mr Seigal emailed an assistant at Vardags, Emily Brand attaching a declaration of trust in relation to a property at 23 Radnor Walk and added: 

"As discussed, I confirm that it was always the intention that Mr Mathiesen's basic salary plus agreed increase would be paid into his personal account. All other monies were to be paid into the joint account."

On 8 October 2010 he confirmed to Emily Brand: 
"I have been back through the files and have established that there was no formal documentation evidencing the profit sharing scheme."

127.	Once the ancillary relief proceedings were underway, Mrs Mathiesen contacted Mr Seigal again concerning copies of correspondence with Kay Newsham. In an email of 11 November 2010 she went on to add: 
"Also, and of more concern, is the document relating to the executive profit sharing scheme which is referred to in the shareholder's agreement. I have never seen this, let alone agreed to anything in it, and Kay it seems has also never seen it. Per's solicitors seem to think you must have a copy of it, an assumption I would also make as you drew up the contract…"

Mr Seigal responded: 

"I never prepared any documents relating to the profit sharing scheme. This was an internal Matki operation.
I thought this was apparent from the E mail that I sent Emily on the 8th October…"

	In turn, Mrs Mathiesen answered: 

"Thanks John. I will put it to them. It seems that this document is how Per has been able to draw his vast salary to reduce the amount of dividends to the joint account - should we not have seen what in that document before signing the agreement? (sic.)"

	His reply was as follows: 

"I think that is a little simplistic.
The profit sharing arrangement allowed Per to increase his salary in line with others a point I recall that he was adamant about. We always accepted this arrangement on the basis that any other bonuses/dividends would be paid into the joint account. Substantial monies were so paid into the jt account. One thing we always knew could be a possibility was that as Per was in control of Matki he could "play around" with the figures in a way that would always be difficult for us to fully police. What we tried to do was to set up a structure that would at least allow us to get information and to ask the questions.
I have full details of the calculations that were used to increase Per's salary so to this extent I do not believe that this information was withheld. Whether the figures were "manipulated" I am unable to comment on."

128.	In cross examination, Mr Stewart QC on Mrs Mathiesen’s behalf drew attention to the reference in Mr Seigal’s email to Mr Mathiesen having been “adamant” about the increase in his salary being in line with that of others. Mr Seigal stated that he believed it to be true at the time because there had been negotiations and Mr Mathiesen had been concerned that the increases should be in accordance with the scheme. Mr Seigal stated that that was his overall impression looking back and that there had been no intention to mislead. Having been referred to the contemporaneous emails, he accepted however, that Mr Mathiesen had not been “adamant”. Of course, it is also correct that clause 3.2 and the executive profit sharing scheme did not increase Mr Mathiesen’s salary in line with other executives. Mr Stewart QC submits that these errors demonstrate dishonesty. 
  
129.	By an email of 15 November 2010 he added: 

"I appreciate you have got a lot on your plate at the moment but the last E mail you sent me on the 11th November troubled me.

…

Given the very specific issue that you raised, I have found the general advice that I gave you about the Shareholders Agreement which is attached.

As an aside, there was absolutely no reason why we would have objected to Per's salary being increased in line with the other Executives where the Company was doing well. Substantial bonuses were also paid in accordance with the Agreement."

The “general advice” attached was Ms Tournier’s email to Mrs Mathiesen of 9 June 2003. In fact, in cross examination, Mr Seigal accepted that the effect of the profit sharing scheme was not necessarily that Mr Mathiesen’s salary increased in the same way as other executives. However, his evidence was that the reference was intended to be to the scheme as a whole and that he would never deceive a client but that his recollection at the time was wrong. He also stated that he did not necessarily go back and consider clause 3.2 at the time. Mr Stewart QC sought to characterise these errors together with the reference to “being troubled” as dishonesty. In my judgment, they are explicable as faulty or generalised recollections and are far from an intention to deceive or other dishonesty. 

130.	In a supplemental statement, Mrs Mathiesen makes reference for the first time to a telephone conversation which she says took place around this time in which she says that Mr Seigal asked whether she was going to sue him. She also stated in cross examination for the first time that Mr Seigal had asked the same question of Emily Brand. It is said on her behalf that this is indicative of a recognition of his own negligence. It seems to me that even if such comments were made which Mr Seigal denies, they reflect nothing more than a serious tension between the parties. Such a question is not necessarily indicative of an admission of negligence but may arise from a concern as to the level of dissatisfaction manifested by a client. Thereafter, a claim form was issued against Clintons on 30 June 2011. 

131.	The final judgment of Macur J in the ancillary relief proceedings was handed down on 5 March 2012. Mrs Mathiesen had sought to uphold the Shareholders’ Agreement in those proceedings, subject to what the learned judge described as  “radical variation.” She determined that it should “stand” in its entirety or fall altogether” and set it aside. She also stated that “on [Mrs Mathiesen’s] own evidence she clearly did not appreciate the implications of paragraph 3.2 as drafted” and that Mrs Mathiesen “has not been disadvantaged financially during the subsistence of the agreement and has increased her property and share portfolio. The 1996 trust's interests have been protected to date.”

132.	Mrs Mathiesen accepted in cross examination that she was unhappy with the outcome of the Ancillary Relief proceedings and that she complained about Vardags’ handling of the matter and their bills. 

Conclusions in relation to the First Retainer
133.	It is not in dispute that Mrs Mathiesen instructed Clintons in relation to the restructuring of her family finances against a background of her distrust of her husband It was also clear from Mrs Mathiesen’s evidence that she was concerned that Matki, the source of the family’s wealth and income, should thrive and continue to do so for her benefit and that of the Children in the future. Furthermore, it is clear from the contemporaneous attendance note that in June 2002 when Clintons were first instructed, Mrs Mathiesen’s concerns and therefore, her instructions were to ensure that she and the Children would have her husband’s shares in Matki transferred to them on his death and that Mr Mathiesen should not be able to transfer capital out of the company without her consent and that monies which were withdrawn should be used for their joint benefit. 

134.	The landscape changed somewhat as a result of Mr Mathiesen’s offer to transfer the vast majority of his assets Mrs Mathiesen and as a result, Clintons set about achieving those transfers and resolving the way in which the Matki shares should be dealt with. In addition, it is accepted by Clintons that after information appeared in The Times “Rich List”, it was clear that Mrs Mathiesen’s instructions were that the arrangements when finalised should not enable Mr Mathiesen to be able to receive for his own sole use, sums in the region of £2million per annum by way of salary. 

135.	However, as I have already found, on the balance of probabilities, in my judgment, it was neither agreed with Mr Mathiesen that his salary payable to him directly for his sole control and use was to be restricted to £250,000 with or without 5% pa increases, nor was Clintons made aware of such an agreement at any time. In addition, I have found that Mrs Mathiesen did not make Clintons aware of the £250,000 salary level. Furthermore, after discussions between the spouses, in December 2002, a distinction was made between bonuses which had to be paid into the joint account and salary which was to be payable to Mr Mathiesen direct. This arose after The Times Rich List came to Mrs Mathiesen’s attention. It was nevertheless, her evidence that she did not discuss salary with Mr Mathiesen and that her husband’s salary was what it was. This is consistent with the first draft of the Shareholders’ Agreement which refers to only bonuses and dividends being paid into a joint account, a division with which Mrs Mathiesen was content. 

136.	In my judgment, Mrs Mathiesen’s concern and her instructions in relation to the Shareholders’ Agreement from early 2003, related to increases in salary and not the level of salary itself which it seems to me she had accepted should be outside the joint account. This accords with her acceptance in cross examination that she did not discuss salary with her husband and that it was what it was. By this time Mrs Mathiesen was also no longer concerned per se with the level of bonuses because it had been agreed that they would be paid into the joint account and it was in her interests that they should be as large as possible. This is reflected in the amendments to the draft Shareholders Agreement suggested by Mr Seigal on 24 April 2003 with which Mrs Mathiesen agreed. It made express reference to salary increases.

137.	Nevertheless, as Mr Stewart QC points out, it is also clear that one of the intended purposes of clause 3.2 was to prevent Mr Mathiesen from withdrawing large sums from Matki for himself rather than placing them into the joint account. Despite this, Mr Seigal did not seek to establish the level of Mr Mathiesen’s salary and inform his client accordingly, he did not explore the nature of the executive profit sharing scheme and obtain a copy of it, he did not ensure that Mr Mathiesen’s entitlement to salary was tied to Matki’s profitability on a downwards as well as upwards basis, nor did he explain to Mrs Mathiesen whether orally or in writing, the manner in which clause 3.2 operated. 

138.	In these respects, did Mr Seigal act as no reasonably competent solicitor could have done? First, he did not investigate and confirm the level of Mr Mathiesen’s salary immediately prior to the execution of the Shareholders’ Agreement. In my judgment, although a reasonably competent solicitor would have sought to confirm the level of salary in order to avoid dispute in the future and in order to avoid the outlay of unnecessary fees in any future monitoring exercise and although it would have been prudent to have recorded that level whether within the agreement or in a side letter, in the light of his instructions in 2003, in my judgment it cannot be said that no reasonably competent solicitor would have failed to take such steps. As Mr Soole QC points out Mr Seigal was not instructed to limit the level of passing salary itself, nor had he any reason to assume that it was extraordinary in the sense of other than could be justified in a properly regulated public limited company operated by directors in accordance with their fiduciary duty. As I have already found, the emphasis had moved to increases.

139.	I should add that even if the level of salary had been confirmed and at that stage it was running at around £600,000 per annum, there is no evidence that Mr Mathiesen would have agreed to any reduction nor that Clintons were instructed to conduct such negotiations. 

140.	In my judgment, the same is true in relation to the executive profit sharing scheme. Although Mr Seigal can hardly be commended for failing to obtain a copy and to determine the precise definition of profit to be used for the calculation of increases in salary for the purposes of clause 3.2 before the Shareholders’ Agreement was finalised, I do not consider that given that it was represented to him that there was such a scheme operated not only in respect of Mr Mathiesen but also other executives and that he was entitled to assume that it would be operated in accordance with the fiduciary duties owed by the directors to Matki and that its relevance was the definition of profit to be applied, that no reasonably competent solicitor could have gone ahead without a copy of the full scheme. In the same way as with the passing salary, by failing to determine and record the measure of profit used he failed to avoid the potential for dispute and added expense in the future. Furthermore, it is clear that a scheme existed albeit not in the form which may have been envisaged. In my judgment, Mr Seigal was entitled to rely upon the representations of Ms Newsham and through her of the finance director of Matki in this regard. It was not suggested that the integrity of either of them was in issue nor is it suggested that the figures produced were inaccurate. 

141.	Thirdly, it is said that a mechanism should have been negotiated which would have allowed for salary to fall as well as to rise. In my judgment, there are no grounds to suggest that this was negligent at all. There are no grounds to suggest that Mr Mathiesen would have agreed to such a clause and furthermore it is inconsistent both with Mrs Mathiesen’s case in the witness box that the salary was to be increased by a flat 5% per annum. In this regard, it is of note that Mrs Mathiesen’s own schedule of loss is compiled upon the basis that a 5% upward only increase should have been applied to salary. In any event, in my judgment, Mr Seigal was entitled to rely upon the fact that the directors were subject to the fiduciary duties owed to Matki and as a result would be required to tailor their remuneration in a way which was compatible with the best interests of the company. 

142.	Lastly, it is said that Mr Seigal was negligent in not explaining how clause 3.2 worked by giving a number of worked examples. In cross examination, Mr Seigal accepted that he had not done so. In fact, it is not disputed that Mr Seigal did not advise about clause 3.2 at all.  In this regard, Mr Stewart QC referred me to a short passage at paragraph 75 of the judgment of His Honour Judge Richard Seymour QC in Harwood v Taylor Vintners (a Firm) [2003] EWHC 471 (Ch) in which reference is made to the principle in Sykes v Midland Bank Executor and Trustee Co Ltd [1971] 1 QB 113 that a solicitor owes a duty to his client to explain unusual clauses in an agreement into which the client is contemplating entering. In Harwood v Taylor Vintners it is made clear that although there are circumstances in which it is desirable to give advice in writing rather than orally, it is not necessary to do so as a matter of law.  It was pointed out that it would often be convenient to reduce advice to writing to enable the client to reflect upon it and that it is prudent to do so where the advice in unpalatable. However, it is stated at [84]: 
“ . . . The only hard and fast rule, as it seems to me, is that a solicitor should give whatever advice a reasonably competent solicitor would in the particular circumstances of the case, and give it clearly and so that the recipient appears to understand it. . .”

143.	Mr Stewart QC also referred me to Phelps v Stewarts (A Firm ) [2007] PNLR 32 at [39]  in which it was stated that where the issues, which in that case concerned IHT allowances, were difficult for lay people to take in, especially if they were “unsophisticated”, in order to discharge the duty to advise, it was incumbent upon the solicitor to confirm the advice in writing. Mr Stewart QC submits that in relation to the terms of the Shareholders’ Agreement and workings of clause 3.2 in particular, Mrs Mathiesen fell into the category of the unsophisticated. Mr Stewart QC submits therefore, that written advice was desirable both in relation to the First and the Second Retainers. He points to the lack of such written advice in the First Retainer as being illustrative of the total failure to provide any advice as to the risks and benefits of the operation of the Shareholders’ Agreement. In relation to the Second Retainer he says that it is indicative or wrongdoing. He says that advice was not provided in writing because it would have exposed Mr Seigal’s own negligence, something to which I shall return.  

144.	In this regard, Mr Soole QC urges me to take account of the fact that Mr Seigal considered that his client had a good understanding of the draft agreements, how to improve and vary them and that she knew what she wanted and how to go about obtaining it. I consider that to be an accurate summary of Mrs Mathiesen’s position taking into account the correspondence and her detailed responses which I have set out in the chronology of relevant events. I have already mentioned that I do not accept that she was unsophisticated. However, as Mr Seigal accepted, Mrs Mathiesen had not entered into such an arrangement before. 

145.	Mr Soole QC also asked me to take into account Mr Seigal’s evidence that he was trying to “get across the line” and was concerned that what was considered to be a generous offer would be lost altogether if too much pressure was placed upon Mr Mathiesen in relation to clause 3.2.

146.	Despite the fact that Mrs Mathiesen was far from an unsophisticated client and had been involved in the negotiations, it seems to me that any reasonably competent solicitor would have advised his client as to the workings of the final version of clause 3.2 before the Shareholders’ Agreement was executed. It would also have been prudent, albeit not essential in my judgment, to have put that advice in writing. Accordingly, I consider that Mr Seigal was negligent in this regard.  

The Second Retainer and Limitation in relation to the First Retainer
147.	In relation to the Second Retainer, in summary, Mr Stewart QC says that Clintons breached the Second Retainer by failing to advise Mrs Mathiesen of the actual level of withdrawals by her husband, that in the absence of the EPSS, Clintons could not say whether the sums had been withdrawn in breach of the agreement or not and that Clintons had never had the EPSS and lastly, that Mrs Mathiesen should take independent advice as to her position.

148.	Furthermore, in relation to the Second Retainer it is said that had Clintons given Mrs Mathiesen proper advice, she would (a) have taken independent advice; (b) have sought to re-negotiate the Shareholders Agreement to give effect to the provisions it should have contained and (c) if no such provisions could be re- negotiated, would have sued Clintons and divorced her husband, leaving her over £13m better off. 

149.	Mr Stewart QC goes on to contend that Mr Seigal deliberately concealed from Mrs Mathiesen that he had never sought to obtain or obtained or considered the provisions of the EPSS prior to the execution of the Shareholders’ Agreement, that the Scheme did not exist in form contemplated in that agreement, that Clintons could not ascertain whether or not payments had been made in accordance with the Shareholders’ Agreement and that Mr Mathiesen’s salary had obviously been higher than £10,000 per month at the time of execution of the Shareholders’ Agreement. 

150.	In such circumstances, Mr Stewart QC contends that as a result of section 32 of the Limitation Act 1980, Mrs Mathiesen is entitled to damages in respect of the First Retainer, the remedy for which would otherwise be statute barred. Section 32 is in the following form: 

"32.— Postponement of limitation period in case of fraud, concealment or mistake.

(1) Subject to [subsections (3) and (4A)]  below, where in the case of any action for which a period of limitation is prescribed by this Act, either—
(a) the action is based upon the fraud of the defendant; or
(b) any fact relevant to the plaintiff's right of action has been deliberately concealed from him by the defendant; or
(c) the action is for relief from the consequences of a mistake;

the period of limitation shall not begin to run until the plaintiff has discovered the fraud, concealment or mistake (as the case may be) or could with reasonable diligence have discovered it.

References in this subsection to the defendant include references to the defendant's agent and to any person through whom the defendant claims and his agent.

(2) For the purposes of subsection (1) above, deliberate commission of a breach of duty in circumstances in which it is unlikely to be discovered for some time amounts to deliberate concealment of the facts involved in that breach of duty.

(3) Nothing in this section shall enable any action—
(a) to recover, or recover the value of, any property; or
(b) to enforce any charge against, or set aside any transaction affecting, any property;

to be brought against the purchaser of the property or any person claiming through him in any case where the property has been purchased for valuable consideration by an innocent third party since the fraud or concealment or (as the case may be) the transaction in which the mistake was made took place.

…

(5) Sections 14A and 14B of this Act shall not apply to any action to which subsection (1)(b) above applies (and accordingly the period of limitation referred to in that subsection, in any case to which either of those sections would otherwise apply, is the period applicable under section 2 of this Act)."

151.	Mrs Mathiesen claims that Clintons and Mr Seigal in particular, had actual knowledge of certain facts relevant to her cause of action against Clintons (the "Relevant Facts") including:
a.	The fact that Clintons had not at any point prior to the execution of the Shareholders’ Agreement either:
i.	Sought to obtain; or
ii.	Obtained a copy of;
iii.	And/or considered, and/or therefore
iv.	Advised the Mrs Mathiesen about the terms of, the EPSS; and/or
b.	The fact that the EPSS did not in fact exist in the form contemplated by the Shareholders’ Agreement; and/or
c.	The fact that as a result of the facts at a. and/or b. above, Clintons was unable to ascertain whether the remuneration paid to Mr Mathiesen by way of salary and as set out in the fax dated [4 August 2005] had been made in accordance with the provisions of or in breach of the Shareholders’ Agreement; and/or
d.	The fact that Mr Mathiesen's baseline salary had evidently been substantially higher than £10,000.00 per month net at the time of the execution of the Shareholders’ Agreement.

152.	She alleges that this concealment by Clintons was a conscious and deliberate decision by Mr Seigal not to act in accordance with a duty which he knew he was under. It is not disputed that a fact is a fact relevant to a claimant’s right of action within the wording of section 32(1)(b) Limitation Act 1980 if it is one which has to be pleaded in order to constitute the cause of action. Those facts are ones which “the plaintiff has to prove to establish a prima facie case”: C v Mirror Group Newspapers & Ors [1997] 1 WLR 131, at 138. It is also not in dispute that for the purposes of section 32, a deliberate commission of a breach of duty in circumstances in which it was unlikely to be discovered for some time amounts to deliberate concealment of the facts involved in the breach of duty. Furthermore, a deliberate decision not to advise a client of prior negligence may amount to a concealment: Williams v Fanshaw Porter & Hazelhurst (A Firm) [2004] 1 W.L.R. 3185. However, the decision not to advise the client must be a conscious one, as distinct from a negligent one: Cave v Robinson Jarvis & Rolf (A Firm) [2003] 1 A.C. 384. As Mance LJ (as he then was) put it in Williams v Fanshaw Porter & Hazelhurst at [34] “Deliberate commission of a breach of duty involves knowledge of wrongdoing.” 

153.	Mr Stewart QC says that in the context of the Second Retainer, Mr Seigal must have known that he had not obtained the EPSS before the execution of the Shareholders’ Agreement and there was no reason not to tell Mrs Mathiesen that that was the case. In relation to Relevant Fact (b) he says that it must have come as a shock in September 2005 to discover that the scheme did not exist in the form contemplated and it is difficult to see why he did not inform Mrs Mathiesen. He asks the court to infer that Mr Seigal considered the position and decided not to tell her. In relation to Relevant Fact (c), Mr Stewart QC says that Mr Seigal knew quite obviously that he was not in a position to ascertain that the salary was in accordance with the Shareholders’ Agreement and was equally aware that the salary exceeded the figure of £10,000 per month. As I have already mentioned he says that Mr Seigal’s reference to Mr Mathiesen being adamant and to salary increases being the same for all executives were just not true and reveals Mr Seigal’s dishonesty at the time. He says that one is also driven to the conclusion that his responses to Vardags were intended to put them off the trail. 

154.	He submitted that Mrs Mathiesen’s evidence in relation to the salary of £250,000 was inherently believable and referred for example, to the letter of 27 November 2002 which makes reference to £10,000 per month. He says that if I find that Mr Seigal did not see that letter, nevertheless, in accordance with his instructions to provide her with protection, he should have told his client that he was not aware of the baseline salary. Had he done so, she would have raised the £250,000 point.  As I have already mentioned, Mr Stewart QC points to Mr Seigal’s failure to put his advice at the October 2005 meeting in writing as indicative of a conscious attempt to avoid revealing his prior negligence to his client. 

155.	In response, Clintons says that they had no duty to explore the First Retainer, and in any event Mr Seigal felt he had done a good job for Mrs Mathiesen when performing the First Retainer, and consequently would never have advised her that he had misconducted it and that she should look elsewhere for independent legal advice. It is also strenuously denied that Mr Seigal was dishonest as alleged or at all. Furthermore, Mr Soole QC submitted that there was no evidence whatever either of dishonesty or of knowledge of wrongdoing in relation to the First Retainer. On the contrary, it is said, that Mr Seigal was open about the fact that he did not have the EPSS and needed to obtain the documentation from Ms Newsham and was also open about the level of Mr Mathiesen’s salary. Mr Soole QC says that he was also open with Vardags. In cross examination, Mr Seigal maintained that he did not consider that he had been negligent albeit that he did accept that with hindsight, he could have done better.  

156.	Given the terms of the Second Retainer, Mr Stewart QC submits in the alternative, that even if there was no deliberate concealment for the purposes of section 32, the terms of the Second Retainer were such that its proper performance required Clintons to advise of their own earlier negligence and to seek independent advice. In this regard, Mr Stewart QC referred me to Gold v Mincoff [2001] Ll Rep 423. This was a case in which there were two retainers: an initial advisory retainer between 1984 and 1990, and a further retainer in 1993. As a result of negligence in relation to the first retainer, Mr Gold became party to mortgage contracts the terms of which were disadvantageous to him, and exposed him to substantial risks. Under the second retainer in 1993, Mincoffs negligently failed to identify disadvantageous terms and consequent risks during a restructure of the mortgage contracts with the mortgagee, AIB, and failed to advise Mr Gold of their earlier negligence under the first retainer. AIB successfully sued Mr Gold upon the mortgage contracts under the terms which Mincoffs negligently failed to advise him about. 

157.	When suing Mincoffs, Mr Gold relied upon s32 and upon an argument that later negligence had concealed the earlier negligence. Neuberger J dealt with the latter argument at [97] to [102] in the following way: 

“97. If Mr Gold cannot rely upon section 14A or section 32, so far as the earlier mortgages are concerned, Mr Bonney contends on his behalf that he has, in effect, a fresh cause of action in relation to the earlier mortgages, based on Mincoffs' failure to advise him about the existence and effect of the liability clause in the earlier mortgages in or about July 1993. The claim runs thus. If Mincoffs had properly advised Mr Gold when the draft 1993 mortgage with the liability clause was proffered, they would have appreciated that they had been negligent in relation to the earlier mortgages and would have been bound to advise Mr Gold to that effect. Had they so advised, he would not have been barred by the 1980 Act from suing Mincoffs in relation to the earlier mortgages. On this hypothesis, through Mincoffs' negligence in the first half of 1993, Mr Gold lost the right to sue Mincoffs for their negligence in relation to the earlier mortgages. If that contention is correct, then, albeit on the basis of a slightly different set of facts Mr Gold has not lost the right to sue Mincoffs for their failure to advise as to the effect of the earlier mortgages, even if his claim was otherwise statute-barred.

98. Mr Davidson rightly warns against the court being too easily persuaded by the claimant that he has a fresh cause of action against his solicitor on the basis that the solicitor failed to advise, at some point after his initial negligence, that he had been negligent. If such an argument were too readily accepted, it would have two unsatisfactory consequences. First, it would enable the provisions of the 1980 Act to be evaded in many cases in an artificial way. Secondly, it would effectively impose on a solicitor some sort of implied general retainer. Accordingly, I would accept that it would be a relatively exceptional case where the court would be prepared to hold that a solicitor's negligence claim that was otherwise Statute-barred could, albeit in a slightly different guise, be resurrected on the basis that, at a time within the limitation period and less than six years before the issue of proceedings, the solicitor failed to advise that he had been negligent. Only if the facts clearly warrant such a conclusion should the court adopt it, in my view.

99. It is clear that a solicitor “who … has acted negligently [does not come] under a continuing duty to take care to remind himself of the negligence of which, ex hypothesis, he is unaware” — per Oliver J in Midland Bank Trust Co Ltd -v- Hett Stubbs and Kemp [1979] Ch at 403C. It is also true, in my opinion, that the mere fact that, following his negligence and within the limitation period, the solicitor is instructed in the same matter by the same client, does not itself put the solicitor under a duty to discover, or advise as to, his negligence on the earlier occasion. As was said by Oliver J in Midland at 403A, the Court must be careful of imposing a duty on a solicitor which involves going beyond his specific instruction. Nonetheless, if the subsequent instruction was also negligently implemented by the solicitor, and, this later negligence concealed the earlier negligence then, subject to normal questions such as causation and remoteness, if the earlier negligence only comes to light outside the limitation period, the loss of the right to sue in respect of it can properly be the subject of a claim based on the later negligence. I derive support for this proposition from Costa -v- Georgiou (2nd May 1984, CA Transcript 15G–17D, 18H–19G). See also Liverpool [2000] Lloyds LRPN 836 at paragraphs 11 and 27.

100. In the present case, during 1992 and 1993, Mr Gold sought and obtained the advice of Mincoffs in connection with the consolidation of the Partnership's liabilities to AIB, and, in particular, in connection with terms and signing of the 1993 mortgage. It is common ground that Mincoffs ought to have considered, and advised on the effect of, the liability clause in the draft 1993 mortgage. Had they done so, they would have appreciated that it imposed a far greater liability on Mr Gold than either he or Mincoffs intended. They would have advised Mr Gold about this and could have done so up to the time he executed the 1993 mortgage, namely in July 1993, less than six years before the issue of these proceedings.

101. In my judgment, if they had appreciated the effect of the liability clause in the draft 1993 mortgage, it would have led Mincoffs inexorably to the terms of the earlier mortgages, and that would equally inevitably have led them to appreciate that the earlier mortgages contained the liability clause, which was already binding on Mr Gold. This would have been achieved in one of two ways. First, Mincoffs would have advised Mr Gold that he ought to approach AIB with a view to amending the liability clause in the draft, and that would have, or at least ought to have, led them to consider the then-current extent of Mr Gold's present liability, i.e. under the earlier mortgages. Alternatively, if they had not been as efficient as they might have been, Mincoffs would have approached AIB objecting to the terms of the liability clause, in the draft 1993 Mortgage. In that event, from the evidence I have heard, AIB would have been reluctant to amend that clause, because, although it appears that they did not appreciate its full effect, it was in their standard form, and they were not anxious to depart from their standard form. That would have led Mincoffs, either off their own bat following negotiations, or (more likely) because their attention was drawn to it expressly by AIB, to the liability clause in the earlier mortgages, which represented Mr Gold's liability at that time.

102. In these circumstances, if Mincoffs had not been negligent in failing to advise Mr Gold as to the effect of the liability clause in the 1993 mortgage, before he signed it, they would have advised him as to the existence and effect of the liability clauses in the earlier mortgages. This would inevitably have required them to have advised Mr Gold that they had been negligent in connection with the earlier mortgages, and that he should seek separate legal advice, which would have led him to be able to bring proceedings against Mincoffs based on their negligence under the earlier mortgages. That follows, to my mind as a matter of law. It is also clear from paragraph 13.04 of the Law Society's Guide to the Professional Conduct of Solicitors (1990 Edition) which was then in force. This, I accept, is a somewhat indirect conclusion, but in my view, it is correct.”

158.	Mr Soole QC on behalf of Clintons submits that it is clear from the judgment itself that the decision in Gold v Mincoff provides a very narrow and exceptional escape from the consequences of section 32. In such a case the ingredient of ‘concealment’ is thus an element of causation, not breach. The claimant must show that as a matter of fact, the later negligence had the consequence that the earlier negligence was concealed from him. In other words, it must be shown that if the defendant had given competent advice on the second occasion he would have realised that he had given incompetent advice on the earlier occasion and so would have given the claimant timely advice that he ought to seek independent legal advice.
 
159.	He submits that it is necessary that the competent advice on the second occasion would have caused the defendant to have actual awareness of his previous error which he says is clear from the Judge’s use of “they would have appreciated” at paragraph 100, his conclusion at paragraph 102 that “This would inevitably have required them to have advised Mr Gold that they had been negligent” and by his reference to paragraph 13.04 of the Law Society Guide to Professional Conduct (1990 edition).

160.	Mr Soole QC emphasises therefore, that the Gold v Mincoff principle is not open to Mrs Mathiesen unless the Court is satisfied that competent conduct of the Second Retainer would in fact have led Mr Seigal to conclude that his conduct of the First Retainer had been negligent. Accordingly, he submits that it is insufficient to contend that Mr Seigal ought to have appreciated that he had or might have been negligent on the previous occasion and if that were the case, the principles to which Neuberger J referred in paragraphs 98 and 99 of his judgment would be undermined.

161.	In this regard, Mr Soole QC acknowledged that the language of ‘ought to have known’ appears in obiter remarks in two Court of Appeal decisions: Costa v Georgiou (unreported transcript) per O’Connor LJ at 19B-E; and Ezekiel v Lehrer [2002] Lloyds Rep PN 260 per Ward LJ at 267 para. 24.  Costa v Georgiou was the case from which Neuberger J derived support for the principle in the first place. Mr Soole QC submits however, that O’Connor LJ’s guiding remark is in his earlier passage at 18H where he states “Like my Lord [Stephenson LJ] I consider that there may be cases where a subsequent act of negligence, or a separate act of negligence, may operate to conceal from a client the fact that there had been a previous breach of duty…” Stephenson LJ’s judgment he says, contained no reference to constructive knowledge and Sir Denys Buckley simply agreed.

162.	As to Ward LJ in Ezekiel v Lehrer, Mr Soole QC points out that he ends the paragraph by stating that “The views of Neuberger J in Gold v. Mincoff…show the preferable way forward.” The other reasoned judgment of Jonathan Parker LJ, he says, provides no support for a cause of action based on constructive knowledge and his further comments are consistent only with a requirement of actual knowledge. Harrison J simply agreed that the appeal should be dismissed.

163.	In this regard, Mr Soole QC also referred to Cave v Robinson [2003] 1 AC 384 per Lord Millett at paras.23-29, a decision concerned with section 32 of the Limitation Act 1980. However, Mr Soole QC points out that strikingly Lord Millett emphasises the principle that a defendant should not be deprived of his limitation defence in the absence of ‘deliberate wrongdoing’. In particular he referred to paragraph 25 of Lord Millett’s speech: 

“It [i.e. section 32] does not deprive a defendant of a limitation defence where he is charged with negligence if, being unaware of his error or that he has failed to take proper care, there has been nothing for him to disclose.” 

Mr Soole QC submits that a wide interpretation of Gold v Mincoff would be inconsistent with such observations.    

164.	In summary in the present case, Mr Soole QC says that there is no basis for the application of Neuberger J’s narrowly confined cause of action. In particular there is no basis for the necessary evidential conclusion that competent performance of the task of establishing that Mr Mathiesen was taking the correct salary according to clause 3.2 of the executive profit sharing scheme would have caused Mr Seigal to believe that he had or might have been negligent in his work under the First Retainer. Nor, in any event, is there any valid basis for the contention that Mr Seigal ought to have concluded that he might have been negligent under the First Retainer. Accordingly there was no reason for him to have advised Mrs Mathiesen to take independent advice.

Conclusions in relation to Second Retainer
165.	It is quite clear that Mrs Mathiesen’s instructions under the Second Retainer were to establish whether her husband had been and was drawing his salary from Matki in accordance with the terms of the Shareholders’ Agreement. It is equally clear and obvious that in order to do so, Clintons needed to establish that the salary had been increased in accordance with clause 3.2 and in order to do so it was necessary to establish the definition of profit for the purposes of the EPSS. 

166.	At this stage, Mrs Mathiesen had already been informed that Clintons did not have a copy of the Executive Profit Sharing Scheme and she accepted that she was aware of that in July 2004. She also accepted that by June 2005 she was aware that her husband’s salary exceeded £100,000 per month. She said in cross examination that nevertheless, she believed Mr Mathiesen to be taking salary in breach of the Shareholders’ Agreement and that it was not until she instructed Vardags in 2010 that she came to learn that he was honouring the agreement. However, I have already found that in 2004 and in June 2005, Mrs Mathiesen was concerned to establish whether increases in salary should have related to gross or net profits. She was neither complaining about the level of salary at that stage nor the connection between increases in salary and profits. I have also found that Mrs Mathiesen was informed in October 2005 that her husband was honouring and not breaching the Shareholders’ Agreement, something which she accepted in cross examination. 

167.	It also seems to me that in the light of the fact that Mrs Mathiesen was aware of the current level of her husband’s salary in 2005, that Mr Seigal did not have the scheme and appreciated the need to request documentation from Makti in order to verify compliance with clause 3.2, Mr Seigal went about the task he had been instructed to carry out. I do not accept that Mr Seigal was unable to verify the basis on which the salary was increased. He received detailed schedules from Ms Newsham some of which had been compiled by the finance director and which showed the application of the relevant definition of profit in order to calculate increases in salary. As I have already mentioned, there is no evidence to suggest, nor is it part of Mrs Mathiesen’s case, that the figures provided were not genuine. 

168.	Although there is no evidence to suggest that Mr Seigal informed Mrs Mathiesen that he had not had a copy of the scheme before the Shareholders’ Agreement was executed, she was fully aware of the need to obtain documentation in order to verify the increases and actually participated in seeking to obtain them. Given that Mr Seigal did not represent that he had had the scheme and subsequently mislaid it and Mrs Mathiesen was aware that it was necessary to obtain the scheme in order to determine the definition of profit which was relevant to salary increases and she was also aware that there had been no advice as to the operation of the scheme, the inference must be that Mrs Mathiesen was aware of the need to obtain it and other documentation in order to fulfil the Second Retainer and that it had not been obtained prior to the Shareholders’ Agreement being executed.

169.	I have also found that Mr Seigal reported to Mrs Mathiesen at a meeting on 3 October 2005. Accordingly, although it was necessary to verify the relevant salary levels and to obtain documentation and records from Matki, in my judgment, Mr Seigal complied with his instructions. As I have already mentioned, he reported, the sums were being paid in accordance with clause 3.2.  It also seems to me that a reasonably competent solicitor would be entitled to rely upon the documentation provided in September 2005, in particular, the schedules produced and signed off by the Finance Director of Matki which related to the 2001 year end. 

170.	In fact, as Mr Soole QC points out, Mrs Mathiesen’s complaint was not as to the level of salary or the connection between profits and salary increases of which she was aware, but that the considerable salary was being paid rather than bonuses or dividends. All of the exchanges are entirely consistent with Mrs Mathiesen being entirely comfortable with profit as the index. In fact, the nature of the advice sought and obtained from counsel prior to the issue of the 2007 divorce petition and the assurance that no attempt to avoid or vary the Shareholders’ Agreement would be made which was obtained as one of the requirements for the withdrawal of the petition support the contention that Mrs Mathiesen was happy with its terms, including clause 3.2 whilst appreciating that it allowed Mr Mathiesen to draw considerable sums in salary. 

171.	Furthermore, there is no evidence to support the contention that the monies drawn in the form of salary increases were such that they might compromise the future growth of Matki or might not be being used for the benefit of Mr and Mrs Mathiesen and the Children. In addition, there is no evidence that there was any question of salaries having been paid contrary to the directors’ fiduciary duties. 

172.	In my judgment, therefore, it cannot be said that Mr Seigal acted in relation to the Second Retainer in a way in which no reasonably competent solicitor could have acted. In my judgment, his performance of the Second Retainer was not negligent. 

Concealment?
173.	Furthermore, in my judgment, the evidence does not support the contention that Mr Seigal concealed the Relevant Facts from Mrs Mathiesen. As I have already said, I accept Mr Seigal’s evidence that he did not believe that he had done other than fulfil his instructions in relation to the First Retainer and certainly did not believe that he had been negligent. Mr Seigal’s admission in cross examination that with hindsight he might have done better does not alter that. In this regard, I also take account of the fact that Mr Seigal was the partner in charge of notification to professional indemnity insurers and therefore, would have had a heightened awareness of issues of professional negligence and the need to notify. In my judgment, it is more likely than not that such a person would have notified the firm’s professional indemnity insurers at an early stage and advised his client to take independent professional advice had he believed that he had been at fault. 

174.	It seems to me that although Mr Seigal did not expressly inform his client that he did not have a copy of the EPSS prior to the execution of the Shareholders’ Agreement he did not conceal the fact from her. He was entirely open about needing a copy when it came to fulfilling the Second Retainer and the attendance note of the meeting he had with his client on 13 July 2004 actually records that Mrs Mathiesen is going to seek to obtain a copy. Nor does the evidence support an inference that Mr Seigal realised his alleged negligence and consciously decided to conceal the fact that he had not obtained a copy of the scheme and advised upon it prior to the execution of the Shareholders’ Agreement. First, and in any event, at all material times, Mrs Mathiesen was fully aware that he had not advised in relation to it. In my judgment, this would form the heart of any claim which she might have made in this regard and encompasses the mechanical process of obtaining the document itself. Secondly, as I have already mentioned, it is apparent from the documentation that Mr Seigal was open from the start about not having the scheme or the definition of profit.  

175.	Nor is there evidence to support the contention that Mr Seigal concealed from his client Relevant Fact (b), namely the fact that the scheme did not exist in the form contemplated in the Shareholders’ Agreement. The first occasion that this came to light was in Kay Newsham’s email of 13 September 2005 when she stated that it was negotiated on an individual basis. In fact, as Mr Soole QC points out, that email made clear that for those whose profit share was based on results, a class of which Mr Mathiesen was clearly a member, a particular definition of profit was applied. She also provided a schedule which gave precise details of the way in which “profit” was calculated for the scheme. I have found on the balance of probabilities that Mr Seigal shared his findings with Mrs Mathiesen at the meeting on 3 October 2005. Given that Mrs Mathiesen was aware of the level of her husband’s salary at this stage, it is difficult to see that there is any basis for the allegation of concealment.

176.	Equally, it seems to me that Mr Seigal’s email to Mrs Mathiesen of 14 September 2005 seeking to share the information obtained and to give a full explanation of his findings, coupled with the meeting of 3 October at which he shared the information, is incompatible with him having concealed any of the Relevant Facts from his client. 

177.	In relation to Relevant Fact (c), I have found that, Mr Seigal fulfilled his Second Retainer and accordingly, the relevant fact falls away. He obtained all relevant information from Ms Newsham and the finance director and carried out the calculations which he reported to his client. 

178.	Equally, Relevant Fact (d) does not arise. First, I have found that the level of base salary was not relevant and secondly, Mrs Mathiesen admitted that she looked at her husband’s bank statements and therefore, would have been aware of the level of his salary.

179.	I also prefer Mr Soole QC’s submissions in relation to the period from October 2005 until the end of 2006. Mr Stewart QC suggested that Mrs Mathiesen kept coming back to the same issue, namely why it was that her husband was able to draw such a large salary and that indicated that she was not satisfied with the answers given about clause 3.2 which she did not understand and should have reflected the alleged agreement as to £250,000 salary plus 5% per annum increases and she was being “fobbed off”. I have already found that in my judgment the agreement as pleaded on Mrs Mathiesen’s behalf was never agreed. In my judgment, over this period Mrs Mathiesen revisited clause 3.2 because she was disappointed that bonuses paid into the joint account for her benefit were hard to come by and in the end dried up whilst Mr Mathiesen continued to pay himself a handsome salary. She was provided with a breakdown of her husband’s emoluments and for example, Mr Seigal’s response to her on 14 December 2006 contains a candid statement that the considerable salary was always agreed and calculated on a set formula which he would check with Kay was being adhered to. Such assertions are entirely inconsistent either with concealment or being ‘fobbed off’.  

180.	Accordingly, in my judgment not only was there was no deliberate concealment by Mr Seigal of any of the Relevant Facts, but also from at least October 2005, Mrs Mathiesen was fully aware of the level of her husband’s salary and the way in which clause 3.2 operated and was satisfied with it. Inevitably, she was also aware of the fact that in breach of their duty, Clintons had not provided her with advice as to the mechanism in clause 3.2 in 2003 As a result, no question arises as to whether Mrs Mathiesen lost the chance to sue Clintons in respect of its performance of the First Retainer before such a claim became statute barred. 

The application of the Gold v Mincoff principle 
181.	It will also be apparent that in my judgment, the principle in Gold v Mincoff does not apply here. This is because I have found that there was no negligence in relation to the Second Retainer and in relation to the First Retainer, Mrs Mathiesen was fully aware that she had not received detailed advice as to the operation of clause 3.2 and in fact, was happy with it. In fact, at paragraph 41b. of the Particulars of Claim it was conceded that Mrs Mathiesen had the requisite knowledge for the purposes of section 14A Limitation Act 1980 which would have enabled her to have brought a claim more than three years before the proceedings were actually issued, in other words, before 30 June 2008. It is therefore, conceded that she had the requisite knowledge to have enabled her to bring a claim in relation to the Shareholders’ Agreement within six years of its execution. Accordingly, it cannot be the case that any conduct of the Second Retainer concealed matters in a way which concealed the earlier negligence and prevented Mrs Mathiesen from pursuing a claim in relation to the First Retainer in time. 

182.	In the circumstances, it is unnecessary to decide whether the principle in Gold v Mincoff applies where both the solicitor had actual knowledge of his previous error and in circumstances in which he ought to have appreciated that he had been negligent previously. Were it necessary, I would have decided that it is consistent both with Neuberger J’s articulation of the principle itself in Gold v Mincoff and the extract from the speech of Lord Millett in Cave v Robinson to which I have referred, that the principle should be restricted to circumstances in which there is actual knowledge of the previous error. As I have found that Mr Seigal did not possess such actual knowledge in my judgment, the principle would not have applied in this case in any event. 

Causation and Loss
183.	If I am wrong both about whether Clintons were negligent in relation to the Second Retainer and as to whether there was concealment and/or the principle in Gold v Mincoff applies, it would be necessary to go on to consider the issues of causation, loss and damage. I do so for the sake of completeness. 

184.	In summary, Mr Stewart QC submits that had she been properly advised, Mrs Mathiesen would never have accepted the terms of the Shareholders’ Agreement as executed and that it would have been likely that Mr Mathiesen would have accepted a revised version under which he was entitled to a salary paid into his personal account of no more than £250,000 per year and that salary could only be increased at a maximum of 5% per year. In the alternative, he says that the evidence supports the conclusion that if the terms were not revised, Mrs Mathiesen would have divorced her husband in or about 2004.  In relation to the Second Retainer, it is said that the same principles apply as in relation to the First Retainer but in addition, there is the value of the claim for the lost chance to pursue an earlier action against Clintons. 

185.	It is not in dispute that the burden of proof in relation to what Mrs Mathiesen would have done on any hypothetical basis is upon her and must be satisfied on the balance of probabilities. As to the actions of third parties the question is whether there is a substantial chance of the third party acting as alleged: Allied Maples v Simmons & Simmons [1995] 1 WLR 1602 at 1610G and 1614E. However, Mr Soole QC takes issue with Mr Stewart’s suggestion that the court should act effectively as a jury both as to whether there was something of real as opposed to negligible value which has been lost and in relation to the quantification of the lost chances themselves. In this regard, he referred me to Fabio Perini SPA v LPC Group plc [2012] EWHC 911 (Ch) per Norris J at [71] which he says underscores the need to make a proper evaluation of the specific chances which are said to have been lost rather than merely a “fair estimation” on a “broad view.” Paragraph [71] is as follows: 

“Sometimes the way in which this outcome is expressed makes it seem as if the Court is simply taking a broad view of making a “fair estimation” of the loss, such as would be made by a jury (without distinguishing between causation and assessment.) But I think on analysis it becomes clear that the Court is recognising (and then valuing) the loss of the chance to make sales.”    

It seems to me that Norris J is correct in this regard, and I accept Mr Soole QC’s analysis of the task. 

186.	Mr Stewart QC also says that the principle in Armory v Delamirie 93 E.R. 664 applies; namely where a defendant has, by his wrongful actions, precluded the precise establishment of a monetary value, the court should, save to the extent that it was persuaded otherwise by the defendant, assess the value on the basis most favourable to the claimant. Mr Stewart QC says that the modern application of the Armory principle applies where a defendant has been retained to prevent a claimant being exposed to a risk, which risk then eventuates due to the defendant’s negligence, in the defendant being unable to take advantage of any difficulties of proof placed upon a claimant which result from that negligence: Allen v. Sir Alfred McAlpine & Sons Ltd [1968] 2 QB 229 at p256-7, Mount v Barker Austin [1998] PNLR 493, at 510–511: Sharif v. Garrett & Co [2002] 1 W.L.R. 3118, at [39], Browning v Brachers (A Firm) (Damages) [2005] P.N.L.R. 44, at [204]-[212]. Accordingly, Mr Stewart QC submits that the Court should tend towards a generous assessment of a claimant’s prospects of having established his factual case in a hypothetical action, the pursuit of which action has been denied to them by reason of a defendant’s negligence. This generous assessment he says, amounts to a rebuttable evidential presumption in a claimant’s favour which gives him the benefit of any relevant doubt: Browning v Brachers (A Firm) (Damages) [2005] P.N.L.R. 44, at [210]. 

187.	Mr Soole QC submits that the principles enunciated by Simon Brown LJ in Mount v Barker Austin at 510 are inapplicable in this case. First, he says that the principle that the evidential burden lies on the defendant to show that despite having acted for the claimant in litigation and charged for their services, the litigation was of no value to the client is irrelevant here. Clintons neither vouched for nor sponsored any proceedings and not the matrimonial proceedings. Mr Soole QC says that the further principle is also inapplicable here. It is that:

“If and insofar as the court may now have greater difficulty in discerning the strength of the plaintiff’s original claim (or defence) than it would have had at the time of the original action, such difficulty should not count against him, but rather against his negligent solicitors. It is quite likely that the delay will have caused such difficulty and quite possible, indeed, that that is why the original action was struck out in the first place.  . .”  

Here Mr Soole QC says that there is no question of an absence of evidence arising from any fault of Clintons and therefore, the principle is irrelevant. 

188.	The last principle is expressed by Simon Brown LJ in the following way: 

“If and when the court decides that the plaintiff's chances in the original action were more than merely negligible it will then have to evaluate them. That requires the court to make a realistic assessment of what would have been the plaintiff's prospects of success had the original litigation been fought out. Generally speaking one would expect the court to tend towards a generous assessment given that it was the defendants' negligence which lost the plaintiff the opportunity of succeeding in full or fuller measure. To my mind it is rather at this stage than the earlier stage that the principle established in Armory v. Delamirie (1722) 1 Stra. 505 comes into play.”

Mr Soole QC submits that once again the application of the evidential bias in valuing the lost litigation in the claimant’s favour stems from the fact that it was the negligence of the defendant with conduct of the litigation which prevented it from being pursued to its full potential. By contrast, in this case, Clintons did not have conduct of the matrimonial proceedings.  

189.	It seems to me that the authorities to which I have been referred are concerned with circumstances in which the lost chance to pursue a particular claim or the settlement at an under value has arisen as result of the negligence of the defendant in relation to the conduct of the original action itself. In this case, as Mr Soole QC points out, Clintons did not have conduct of the matrimonial proceedings. It seems to me that the alleged negligence in this case has led to a situation in which the actual prospects of recovery are not known. This is no different from any other loss of a chance case and as a result, I do not consider that the principle in the Armory case applies.  

190.	In relation to loss of a chance, Mr Stewart QC submits that the fact that Mrs Mathiesen says that Mr Mathiesen referred to a £250,000 salary falling outside the joint account, that clause 3.2 is non-sensical as drafted and the fact that Mr Mathiesen did not wish to be divorced leads to the conclusion that there is a very substantial likelihood that he would have agreed to clause 3.2 being drafted in the way in which Mrs Mathiesen alleges it should have been and thought it had been. It was Mrs Mathiesen’s evidence in cross examination that she would have sought such a renegotiation and Mr Stewart QC drew attention to the fact that such a renegotiation was mooted by Mr Seigal in June 2010 as a result of the disparity between Mr Mathiesen’s salary and the amounts paid to Mrs Mathiesen in bonuses. He submits that any competent solicitor would have renegotiated on the basis of £250,000 plus the commercially sensible increases of 5% per annum. Mr Stewart QC also drew attention to the fact that throughout, whenever negotiations stalled and there was either a serious argument between the spouses or Mrs Mathiesen threatened a divorce, Mr Mathiesen capitulated. 

191.	As to the evidence on divorce, in cross examination, Mrs Mathiesen’s evidence was that she would have taken that course and Mr Seigal accepted that between June 2002 and the execution of the Shareholders’ Agreement, he felt that there was every possibility that there would have been a divorce if a satisfactory commercial arrangement was not reached. Mr Stewart QC also draws attention to the fact that Mrs Mathiesen issued the divorce petition in 2007 against advice and the note of the consultation with counsel records that she stated that there had to be changes or she and her husband would split up. Mrs Mathiesen also confirmed that as far as she was concerned the reconciliation which took place was on the basis that under the Shareholders’ Agreement Mr Mathiesen’s salary to be paid to his sole account was £250,000.  

192.	Accordingly, Mr Stewart QC submits that damages for breach of the First Retainer would need to reflect the very substantial likelihood that, but for the Defendants’ negligence, Mrs Mathiesen would have had much more valuable rights under the Shareholders’ Agreement than in fact was the case and the much less likely result that the couple would have divorced in 2004. He says that had the Shareholders’ Agreement been properly drafted all sums withdrawn from Matki save only £250,000 per year plus 5%, would have been paid into a joint account for the joint benefit of the spouses and the Children and accordingly, the pool of matrimonial assets would have been greater. 

193.	It is not disputed that between July 2003 and the end of 2010 (the last date for which data is available) this should have meant Mr Mathiesen taking salary to his sole account of £1,344,516. In fact, the published accounts show he drew the sum of £19,944,500.00 gross from Matki over that period, a sum of £11,963,500.00 net. Giving credit for the sums received into the joint account over that period, these amounted to £3,723,087 net. This leaves an excess salary figure for the £6,895,902 which was drawn into Mr Mathiesen’s sole account over and above that which it is alleged he would have been able to draw had Clintons performed the First Retainer properly. Mrs Mathiesen claims 45% of this sum, being £3,103,155.90, on the basis that it would have been available to her as her share of the further matrimonial assets had it been available upon the divorce in 2012.

194.	Mr Stewart QC goes on to submit that the proper value of the less likely result that the spouses would have divorced in 2003/4 or 2005/6 is arrived at by considering Mrs Mathiesen’s actual position on a divorce in 2004 with that achieved in 2012.  Had that occurred, she would have been around £10 million better off. Mr Stewart QC submits that the best available evidence as to how the court would have approached the Ancillary Relief proceedings is to consider the judgment of 2012 under which Mrs Mathiesen was awarded 45% of the available matrimonial assets, subject to the changes in the law and practice between 2004 or 2006 and 2012 which came about most notably as a result of Jones v Jones [2011] FLR 1864.  Moreover, it is said that this is a further application of the Armory principle, by which the Court should assume in Mrs Mathiesen’s favour that 45% is the appropriate figure. 

195.	The clear differences in the approach of the Court to ancillary relief between 2004 and 2012 it is said, are twofold. There would have been no uplift applied to the pre-marital value of Matki and the agreed value of Matki would have been vastly higher.   An uplift only became applicable as a result of Jones v Jones [2012] Fam. 1. It is not disputed that the development of the law in Jones was to apply the concept of using passive growth to exclude pre-marital assets to corporate assets.  

196.	In this case, therefore, it is said that the pre-marital value in an earlier divorce should logically have been the same: £5 million.  Thus, given that a 100% uplift was applied to Mr Mathiesen’s pre-martial wealth in the Ancillary Relief Claim, £5 million of value was taken out of the matrimonial pool immediately before any division of assets took place. This would not have occurred in an earlier divorce in this case. Furthermore, it is agreed that the value of Matki would have been a great deal higher. Compared with its £17.5 million valuation in the Ancillary Relief Claim, it had a value of £35.938 million at the end of 2004, and £42.839 million at the end of 2006. The figures in relation to the value of Matki are not in dispute. 

197.	As a result, Mr Stewart QC says that the damages to be awarded for breach of the First Retainer amount to the chance that but for the alleged negligence, Mrs Mathiesen would have had much more valuable rights under the Shareholders’ Agreement multiplied by the sums which flow from that plus the chance that Mrs Mathiesen would have divorced in 2004 multiplied by the loss allegedly attributable to that.  Thus he says, that if there were an 80% chance of a successful re-negotiation of the agreement and a 20% chance of a divorce, the damages awarded for breach of the First Retainer are 80% of the amount by which Mrs Mathiesen would have been better off in the event of a renegotiation and 20% of the amounts by which Mrs Mathiesen would have been better off in the event of a divorce.

198.	On the other hand, Mr Soole QC submits that Mrs Mathiesen does not satisfy the burden upon her that she would have sought to renegotiate in 2003. He says that there was no agreement in relation to £250,000 and as a result of the Rich List and her perusal of her husband’s bank statements which she admitted, plus her acceptance that she had seen the terms of clause 3.2, she almost certainly knew that his salary exceeded £250,000 and that increases were tied to profit but made no complaint. 

199.	He goes on to submit that there was no prospect that Mr Mathiesen would have agreed to reduce the salary paid to him directly and that his hard fought defence of the Ancillary Relief proceedings is evidence of that. He also highlighted Mr Mathiesen’s attitude to increases in his salary recorded by Ms Newsham on 19 May 2003, namely that increases in line with profits should not be taken away from an entrepreneur or he would become an onlooker, that it was like fishing and that he should not be placed in a box.  

200.	He went on to submit that the burden is not satisfied as at 2005 either. He says that at that stage, Mrs Mathiesen had seen the Matki accounts and been advised by Mr Seigal about the level of her husband’s salary and that it was in accordance with the provisions of clause 3.2 and at that stage she was seeking to uphold the Shareholders’ Agreement as an excellent package. Of course, Mrs Mathiesen’s evidence in cross examination was that she wished to uphold the package but for the salary element. 

201.	In any event, Mr Soole QC says that there are insuperable difficulties in Mrs Mathiesen’s claim under the “excess salary” head. First, he says that there were divorce proceedings in 2010 and the question of what if anything was lost should be viewed in that light. Macur J found that there had been no alienation of assets and therefore, the amount of the matrimonial pool of assets would therefore have been the same upon a hypothetical earlier division. He says that the entire pool of assets was available to share as it would have been had the monies been paid into the joint account. 

202.	I should say at this stage, that I do not accept that such a conclusion can be drawn from Macur J’s finding at [48] of her judgment. As Mr Stewart QC pointed out, the test for alienation of assets in a matrimonial context is directed at steps taken to alienate funds with the intention of defeating or reducing a financial claim to ancillary relief. In this regard, he referred me to Norris v Norris [2003] 1 FLR 1142 at [77] and Vaughan v Vaughan [2008] 1 FLR 110-8 at [14]. This is quite clearly a different exercise which does not necessarily lead to the conclusion that the pool of matrimonial assets would have been the same. 

203.	However, Mr Soole QC also points out that the burden is on Mrs Mathiesen to show that monies drawn by her husband into his sole account were indeed entirely lost to her. There was no evidence in this regard. Mrs Mathiesen accepted in cross examination that £250,000 was not enough to fund the family lifestyle. Accordingly, it is said that it is overwhelmingly likely that not only the dividends and bonuses but also Mr Mathiesen’s salary were used to fund the family’s lifestyle.  It seems to me that this must have been the case. 

204.	The point is also made that as the sums would have been paid into a joint account, in respect of salary, Mrs Mathiesen was entitled prima facie to only half of them. If the payments were by way of dividend she herself was entitled to 52% in any event and therefore, the remainder would need to be halved again. However, Mrs Mathiesen’s primary case is that to reduce these figures by half would be wrong.  Mr Stewart QC submits that but for clause 3.2, Mrs Mathiesen would have sought to uphold the Shareholders’ Agreement in the ancillary relief proceedings.  Furthermore, he says that the likelihood is that capital sums would, in fact, have been kept in Matki and Matki’s value enhanced.  Those two points, he says, can be reflected, in rough terms, by saying that if the terms of the eventual divorce remain the same, there should be no reduction for the joint nature of the payments. In the alternative, Mr Stewart QC submits that Mrs Mathiesen’s loss would still amount to just under £3.5m plus interest starting from 2003.

205.	Mr Soole QC also points out that any calculation of alleged loss in respect of excess salary should not run from a date before the execution of the Shareholders’ Agreement nor after the presentation of the divorce petition in September 2010 after which no monies would have been paid into the joint account in any event. It seems to me that these are good points which undermine the calculation in relation to alleged excess salary.  

206.	Mr Soole QC submits that the fact that there was no alienation is also evidenced by the significant accretion to matrimonial assets after July 2003 and points to the house in Radnor Walk Chelsea purchased in 2008 and the further £470,000 spent on its improvement and the house purchased for Mrs Mathiesen’s mother in August 2004. I disagree with Mr Soole QC in this regard. Both properties were purchased by way of bonus or dividend payments and as a result can have no direct bearing on any excess salary calculation or upon what may have been lost as a result of the effect of clause 3.2 in relation to salary. 

207.	Mr Soole QC also stressed that Macur J found that Mrs Mathiesen had not been disadvantaged financially during the subsistence of the agreement and had increased her property and share portfolio. It seems to me that inevitably, Macur J approached the matter from the view of the Shareholders’ Agreement as drafted and therefore, her conclusion does not take the matter any further forward.

208.	Although I do not accept Mr Soole QC’s submissions in relation to alienation, it seems to me overall that given Mrs Mathiesen’s acceptance that £250,000 would not have funded the family’s lifestyle and that there is no evidence in support of the contention that all of the salary paid into the sole account was lost to her or would otherwise have remained in Matki, it would not be appropriate in rough terms to take no account of the fact that had the monies been paid into the joint account, Mrs Mathiesen would only have been entitled to half of them. Such an approach in my judgment, would be over generous, even if the Armory principle were applicable. 

209.	Mr Soole QC also takes the point that Macur J found that only £8.4m of Mr Mathiesen’s gross salary was paid to his sole account after 2003 and therefore, the claim cannot exceed  the net equivalent of  that sum. It seems to me that this point must be correct. 

210.	Further, Mr Soole QC submits that there is no evidence to suggest that a divorce would have taken place in 2003 and even in 2007, the petition was withdrawn partly on the basis that the Shareholders’ Agreement was confirmed, counsel having advised that Mrs Mathiesen would not do better on divorce. This was at a time when she appreciated the workings of clause 3.2. He also drew attention to the conclusion of Macur J in the ancillary relief judgment at [30] where she stated that at the time of the Shareholders’ Agreement she was satisfied “beyond the requisite degree that both parties wished and believed that the marriage would continue.” He says that it applied equally at the later times and in fact, the divorce only came about once Mrs Mathiesen’s suspicions about her husband’s infidelity came to the fore in 2010. He also points out that any delay in the divorce between 2003 and 2010 cannot be said, in any meaningful sense to be Clintons’ fault, nor were the changes in the value of Matki and the decision in Jones v Jones attributable to Clintons’ retainer. 

211.	Mr Soole QC also submits that there is no evidence as to how an ancillary relief claim would have been evaluated whether in 2003 or 2006 and that it is not open to the court to apply the 45% used by Macur J having made adjustments for the greater value of Matki and the effect of Jones v Jones. He says that the learned judge in that case used the percentage as a cross check at the end of her deliberations having weighed up all the factors which were necessary for her to consider pursuant to section 25 Matrimonial Causes Act which gives a very substantial amount of discretion to the judge. He says that Mrs Mathiesen has failed to present the best evidence available as to what would have been before the court on a hypothetical earlier ancillary relief application. This is not a case in which any difficulty in presenting the relevant evidence arises from the fact that the defendant conducted the case in question in a defective manner. In this case, Mr Soole QC says that Mrs Mathiesen merely chose not to do so and is asking the court to pluck a figure out of the air and has sought to “cherry pick” additional elements which she wishes to add to the decision made. 

212.	He points out that Macur J’s decision was: 

“[82] On the basis of available matrimonial property, that is excluding the pre-marital value of Franklin as increased by passive growth, this means that the wife achieves approximately 45% of the total matrimonial assets. If available and ascertainable non-matrimonial property, that is 52% of the present day gross value of Franklin, was included the division would provide her with approximately 36% of the assets.” 

Mr Soole QC says therefore, that Mrs Mathiesen cannot therefore, simply apply the percentage of assets which her awarded in 2012 happened to constitute to the matrimonial pool as it stood at an earlier date but should at least have provided clear evidence of what the parties’ positions were in 2005. He says that it is unarguable that leaving aside the value of Matki, the pool had increased between 2003 and 2012, the marriage would have been shorter and Mrs Mathiesen would have been younger, all factors which would have been relevant. 

213.	Furthermore, in relation to Jones v Jones and the passive growth point, Mr Soole QC points out that the principle had been applied in other circumstances since 2002 and no doubt, it would have been argued in the context of Matki had ancillary relief proceedings been commenced earlier. As he pointed out, this would have been a high net worth case in which it would have been worth taking such a point. He says that there was no change in the law but even if there had been, the point would have been argued. 

214.	Next Mr Soole QC took the point that there was a divorce in 2010 and ancillary relief proceedings and as a result, there is no need to speculate as Mr Stewart QC would have the court do. In this regard, Mr Soole QC referred to Whitehead v Searle [2009] 1 WLR 549. It was a professional negligence claim against legal representatives for failing to bring an action against a health authority to a successful outcome before the death of the claimant who was the mother of a child whose spina bifida had not been detected before birth. As a result the quantum of damages recoverable was limited to the cost of care of the child up to the date of the death rather than for the future also and in addition, as a result of negligence the action was settled at an undervalue.  Laws LJ held that in most cases the general rule is applied in order to restore the claimant to the position he would have been in had the wrong not been committed, so far as that can be achieved in money. He went on: 

“[17]  . . . . .To attain that result, the court has to reconstruct events which in fact never happened, but would have happened but for the wrong. But there may be cases in which this exercise produces a serendipitous benefit.
[18] In a professional negligence case against legal representatives based on delay in the conduct of litigation the court is considering what the outcome of a claim would have been had it been resolved, contrary to the fact, at some time significantly earlier than the date of the court's deliberations. In such a case events may have happened since the putative date of the original claim's resolution, and before the court deals with the matter, which undermine or frankly contradict the view that just compensation for the lawyers' wrong is to be calculated by reference to what the outcome of the original claim would have been. 
. . . . 
[25] These observations are obiter, but they offer direct support for my view of the present case. The defendant solicitors are not to be held liable for failing to secure to the claimant an uncovenanted benefit: one which, upon an appreciation of all the facts, exceeds what the law would allot to him. In deciding what the damages should be in a professional negligence claim such as this, it is important as I have said not to take too narrow a view of the guidance afforded by the principle of restitutio in integrum so as to leave out of account events relevant to the ascertainment of just compensation, on the ground only that they have happened since the notional original trial and so were by definition unknowable at that time. That is supported by general considerations of justice, as with respect Smith LJ plainly thought in Dudarec, but also I think by two other factors. The first is a principle which has often been recognised, that the law should not speculate when it knows. It was applied by Waller LJ in Dudarec (paragraph 50) and by Sedley LJ who cited (paragraph 56) this passage from Lord Macnaghten in Bwllfa and Merthyr Dare Steam Colliery (1891) Ltd [1903] AC 426, 431: 

"The arbitrator's duty is to determine the amount of compensation payable. In order to enable him to come to a just and true conclusion it is his duty, I think, to avail himself of all information at hand at the time of making his award which may be laid before him. Why should he listen to conjecture on a matter which has become an accomplished fact? Why should he guess when he can calculate? With the light before him, why should shut his eyes and grope in the dark?" 

This passage was also cited by Harman LJ in Curwen v James [1963] 1 WLR 748 (to which I will refer further in a moment) at 753', along with some words of Uthwatt J in Re Bradberry [1943] Ch 35 which are much to the same effect.”

Mr Soole QC says therefore that there was a pool of matrimonial assets in 2010 and there would have been at earlier dates and there is no basis for believing that Mr Mathiesen dispersed funds to third parties. He says that the burden remains on Mrs Mathiesen and she could have produced evidence but has not done so. He says that this is not an Armory style case. The evidence was not and has never been in the hands of Clintons. In fact, Macur J found at [39] of her judgment that there had been no financial disadvantage as a result of the Shareholders’ Agreement and that in fact, during the subsistence of the agreement, Mrs Mathiesen increased her property and share portfolio. Mr Soole QC also drew attention to her finding at [49] that nearly 90% of the value of the lifetime bequests made by Mr Mathiesen to his adult children were made prior to 2003. Accordingly, Mr Soole QC says, the burden being on Mrs Mathiesen, there is no basis for any other finding. He also drew attention to the fact Mrs Mathiesen had argued that the Shareholders’ Agreement was irrevocable but that Macur J had not construed it to survive separation. 

215.	Once again, in relation to the Second Retainer, it is said that had proper advice been given, Mrs Mathiesen would have taken independent advice, sought to re-negotiate the Shareholders’ Agreement to give effect to the provisions which it is alleged had been agreed and if no such provisions could have been negotiated would have divorced her husband in 2006. It is said that if she had been given proper advice it is certain that the agreement would have been re-negotiated and that her losses as a result are identical to those which flow from the breach of the First Retainer. However, if it were found that there was a real chance that such negotiations would not have taken place, the appropriate chance has to be multiplied by her position on divorce in 2006.   Mr Soole QC’s submissions in this regard are in the same vein as under the First Retainer. 

216.	In relation to the loss of an opportunity to pursue divorce/ancillary relief proceedings at an earlier stage, Mr Soole QC submits that Mrs Mathiesen’s case fails in fact and law. He says that the question is whether the alleged loss is of a kind for which Mrs Mathiesen is entitled to be compensated and referred me to BBL v Eagle Star [1997] AC 191. He also referred me to Transfield Shipping v Mercator Shipping: (The Achilleas) [2009] 1 AC 61 at 68, Toulson LJ’s review of the “The Achilleas” in Supershield v Siemens [2010] EWCA Civ 7 and John Grimes Partnership v Gubbins [2013] EWCA Civ 37; [2013] BLR 126. 

217.	Mr Soole QC submits that neither the First nor the Second Retainer provides any basis for recovery of damages by reference to the higher value of Matki in the event that divorce proceedings had been instituted and completed at an earlier date. In fact, both retainers were concerned with the financial arrangements necessary to preserve the marriage, Clintons were not instructed in relation to the divorce, any loss as a result of the timing of the divorce was not foreseeable nor was it the kind of loss for which Mrs Mathiesen is entitled to be compensated. 

218.	In particular, he says that the First Retainer did not impose any duty on Clintons to advise Mrs Mathiesen in respect of any claim she might make for ancillary relief and her financial position on divorce fell outside the scope of their duty or alternatively there was no “assumption of responsibility” in that respect, nor was there any implied term that they would be liable for any kind of loss relating to divorce proceedings. He says that the circumstances can be distinguished from that in Grimes where the work was not done in the context of a time sensitive transaction where it was reasonably foreseeable that a breach of duty would cause delay which would result in market based financial risk. In Grimes, the engineers had been retained for the express purpose of providing essential components of a development scheme by a stated time and in the knowledge of the ups and downs of the relevant market. By contrast Mr Soole QC says, Clintons were not retained to consider or advise upon the present or future value of Matki and had no reason to conclude that any failure in their advice might expose Mrs Mathiesen to any loss resulting from a fall in the value of the company. This he says is all the more so in respect of changes in matrimonial law over the period which were disadvantageous to her. 

219.	Mr Stewart QC on the other hand says that none of the facts of the cases upon which Mr Soole QC relies come close to this case. Here he says it was always known that failure to agree terms would lead to a divorce and therefore, such a kind of loss is not too remote. On the contrary, Mr Stewart QC says that the joint statement of the experts reveals a direct link between the value of Matki and the amounts withdrawn from it.  

220.	Lastly, in relation to the additional element of loss as a result of alleged negligence under the Second Retainer, namely the loss of the chance to commence proceedings against Clintons in relation to the First Retainer earlier, Mr Soole QC repeats that Mrs Mathiesen faces the same difficulties on quantification.  
Conclusions
221.	I have already found not only that there was no agreement restricting Mr Mathiesen’s salary to be paid into his sole account to £250,000 salary plus increases of 5% per annum but also that Mrs Mathiesen was aware of the terms of clause 3.2 and also had sight of her husband’s bank statements. In such circumstances, and in the light of Ms Newsham’s note of 19 May 2003, it seems to me that on the balance of probabilities, Mrs Mathiesen would not have sought to renegotiate the arrangements in 2003, nor is there a substantial chance that Mr Mathiesen would have agreed to the terms for which Mrs Mathiesen contends. In my judgment, this is all the more the case in 2005 by which time I have found, Mrs Mathiesen had been told of the level of salary and of compliance with the Shareholders’ Agreement. She nevertheless, did not seek to renegotiate at that stage. The prospect of renegotiation in 2007 was on the basis of a new interaction between salary and bonus levels. 

222.	In relation to whether Mr Mathiesen would have acceded to a demand to renegotiate in the manner alleged, I come to the conclusion that there is not a substantial chance that Mr Mathiesen would have agreed to the terms for which Mrs Mathiesen contends, despite the fact that he did not wish to be divorced. I come to this conclusion despite Mrs Mathiesen’s evidence to the contrary and despite the fact that Mr Mathiesen capitulated to demands in 2007. That capitulation was on the basis of the Shareholders’ Agreement as drafted which did not restrict the extent of his salary to be paid into his sole account and therefore, it seems to me that it is no indication of whether he would have agreed to the restriction which is pleaded. My conclusion is supported by the fact that the agreement reached created a division between salary and bonuses at a time when Mr Mathiesen’s salary was already £66,554 per month. In relation to increases, it is clear from the email interchange between Kay Newsham and Mr Seigal that a take it or leave it attitude was being evinced and Kay Newsham’s notes of her discussion with Mr Mathiesen were to the effect that he required the incentive profit related increases. The fishing analogy was used. Furthermore, the likelihood of such an agreement must be viewed in the context of Mr Mathiesen’s extraordinary offer in 2002 to transfer the vast majority of his assets to his wife and the Children.  It seems to me that in such circumstances, there is not a substantial chance that he would have accepted the renegotiation which Mrs Mathiesen suggests she would have insisted upon. 

223.	It follows from what I have already decided, that Mrs Mathiesen cannot demonstrate that on the balance of probabilities she would have sought to renegotiate in 2005 either. At that stage, she was aware of the level of her husband’s salary and had been told that the salary was taken in accordance with clause 3.2. Nevertheless, she did not seek to re-re-negotiate. She did not do so and in her divorce petition of 2007 which ultimately, was not pursued, she sought to affirm the arrangements in settlement of the petition. Furthermore, had she sought to renegotiate in 2005, in my judgment, there is no evidence from which to conclude that there was a substantial chance that Mr Mathiesen would have acceded to the renegotiation. By that time his salary had increased to around £1.8 million. 

224.	In the light of these findings, it would not be necessary also to go on to consider whether a divorce would have ensued. However, for completeness, I would have found that Mrs Mathiesen would not have divorced her husband prior to the date of her final petition. It was Mrs Mathiesen’s evidence that she would have done so and in support of this, she clearly delivered ultimatums to her husband during the negotiations, if her demands were not being met. However, Ms Tournier’s file note of 25 March 2003 recorded that although Mrs Mathiesen had stated that she wanted to leave her husband if the documentation was not finalised quickly, she did not want to use the word divorce quite yet. In this regard, Macur J at paragraph 30 of her judgment in the ancillary relief proceedings found that “both parties wished and believed that the marriage would continue.” In 2007 Mrs Mathiesen withdrew her divorce petition on the basis that the Shareholders’ Agreement was affirmed. This was at a stage when she knew the extent of her husband’s salary and that it increased by reference to profits. Given my other findings, I reject her evidence that this was on the basis that she understood clause 3.2 to restrict the amount of salary going into Mr Mathiesen’s sole account to £250,000. In fact, despite the mistrust and the financial disputes, it was not until the alleged adultery came to the fore that divorce proceedings were both issued and followed through.   

225.	If it had been necessary, I would have rejected Mr Soole QC’s submissions in relation to BBL. It seems to me that the kind of loss was not too remote. It was inherent in the very nature of the instructions under the First and the Second Retainer.  

226.	In my judgment, therefore, the claim is dismissed.