Case No: HC08C03684
Neutral Citation Number: [2010] EWHC 306 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 19/02/2010

Before :

THE HON MR JUSTICE BLAIR
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Between :

	(1) DAVID BAXTER EDWARD THOMAS          (2) PETER SANDFORD GANDER	Claimants	
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	BPE SOLICITORS (a firm) 	Defendants	

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Mr Jeremy Cousins QC and Mr Hugh Jackson (instructed by Wright Hassall LLP) for the Claimants
Mr Michael Douglas QC and Mr Michael Davie (instructed by Beale and Company Solicitors LLP) for the Defendants

Hearing dates: 2, 3, 4, 5 and 8 February 2010
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Judgment
Mr Justice Blair : 
1.	This is a claim by the claimants, Mr David Thomas and Mr Peter Gander, against their former solicitors, BPE Solicitors, which is a firm with offices in Cheltenham and elsewhere.  It is alleged that the defendants were negligent in connection with the sale of the claimants’ shares in a company called PDP Management Services Ltd (“PDP”).  At the last minute, the vendor withdrew from the deal.  The claimants allege (among other things) that the defendants were negligent in failing to advise the claimants that by then the transaction had completed.  Had they known, their case is that they would have insisted upon the transaction being given full effect, and would have required the receipt of monies payable under the buyer’s solicitors’ undertaking.  The defendants’ case is that completion did not take place, so that there was no failure to advise in that respect, and that even if it did, the actual course of events demonstrates that the parties would nevertheless, in the changed financial circumstances, have agreed that the transaction should be cancelled.  The claimants accept that, if their claim succeeds, they have to give credit for the value of the shareholdings which they retained in PDP, but there is a dispute as to how much their shares were worth.  
The setting up and proposed sale of PDP
2.	The facts as I find them to be are as follows.  Mr Thomas’s background is in banking where he held senior positions with Midland Bank (now HSBC) and then the TSB Group.  On being made redundant from his position as an Area Director for the North West, he took on a senior management role at a company called Legal & Trade.  Part of his responsibilities was to bring to market a new service in respect of what has been called mortgage arrears counselling.  He subsequently moved to a company called Intrum Justitia which is a credit management group, and it was through that business that he met Mr Peter Wilson, who was Group Finance Director. Through Mr Thomas, Intrum Justitia recruited Mr Gander, a mathematics graduate who already had experience at a senior level in this type of business, and who was engaged to set up a similar unit within Intrum Justitia.
3.	Following the three of them being made redundant, in the course of 1997, Mr Thomas, Mr Gander and Mr Wilson decided to set up PDP as a company operating in the mortgage counselling field.  The company was incorporated in 1998 with offices in Banbury.  PDP had an issued share capital of £10,000 divided into 10,000 Ordinary Shares of £1. The three shareholders each owned one third of the issued share capital (to be precise Mr Wilson owned 3334 shares and the claimants owned 3333 each).   They were each directors, and Mr Wilson was also the Company Secretary.  There were three registered charges attaching to the shares, two of which were held by Close Invoice Finance Ltd which provided factoring services to the company.
4.	Reflecting the expertise of its founders, the company’s business was the provision of services of behalf of lenders in relation to mortgage arrears, but a major source of business became what they describe as utility companies’ service calling.  To quote from the claimants’ written opening, it was in this field that Powergen became a major source of PDP’s business.  By the summer of 2007, it is common ground that Powergen represented in excess of a third of PDP’s turnover.  As regards their respective responsibilities, Mr Thomas told me that Mr Gander dealt with the mortgage arrears side of the business, Mr Wilson dealt with the utilities side of the business, and he dealt with the property side of the business, by which facilities were provided for buy-to-let investors.  
5.	Both Mr Thomas and Mr Gander gave evidence at the trial, though Mr Wilson did not.  I found them both to be honest witnesses, who did their best to assist the court on the matters in issue.  Mrs Thomas and Mrs Gander provided witness statements, but they were not subject to cross examination, and so were not called.  (The same applies to Mr Richard Lilley, who was Mr Gander’s banker at the time of the transaction.)  I shall come back to their evidence, but it is not in dispute that for a long time personal relationships between the claimants had been strained.  Relationships deteriorated to the point that the claimants had little to do with each other at work from about the summer of 2004.  Though a substantial part of their witness statements deals with this subject, as their written opening puts it, the reasons for these difficulties are perhaps unimportant.  The important point, which I fully accept, is that these difficulties existed and caused the directors to wish for a parting of the ways.  Additionally, Mr Gander lives in Croydon, which is a five hour return drive from the company’s offices in Banbury, which meant that he and his wife (who also worked for the company) had to live in inadequate PDP funded accommodation during the week.  Furthermore, both claimants reached an age at which they wished to retire.  In addition, as Mr Thomas puts it, there was a perception growing within PDP that its business was on a plateau, and it was time to sell.  
6.	In late 2005 or early 2006, an outside party approached the directors with a view to purchasing PDP. In the event this approach did not lead to a sale, but it appears to have caused the directors to take the possibility seriously.  I am satisfied that by then, as they contend, each of the claimants was anxious to sell their stakes in the business.  In late 2006, the directors decided to retain the services of Mr Ken Elrick to market PDP through his Tudor Holdings consultancy.  The claimants point out that Mr Elrick had a substantial financial incentive to achieve a sale, and at a high value, because, in addition to his hourly based fees, he was entitled to be paid 10 per cent of any consideration over £2.85m.  The company’s accountants, Merrick & Co, prepared a draft share valuation dated 16 October 2006.  Its conclusion was that, “The minimum value of the company based on the last three years’ post tax profits to March 31 2006 is £1,480,000 and the maximum £2,368,000 using 5 or 8 as a profit multiple respectively.  If the forecast figures for the three years to 31 March 2009 are used, and these may or may not be maintainable profits, the minimum value of the company is £3,455,000 and the maximum value is £5,520,000 using 5 or 8 as a profit multiple respectively.  If a six year average of historical and forecast profits is used, then the minimum value would be £2,465,000 and the maximum value would be £3,944,000 using 5 or 8 as a profit multiple respectively.”
The MBO
7.	Efforts to market the company did not meet with success, and the parties began to think in terms of Mr Wilson (who was younger than either of them) buying out his fellow shareholders.  Discussions between Mr Wilson and Mr Mike Johnson of Royal Bank of Scotland in May 2007 led to concrete proposals for a purchase by Mr Wilson funded by the Bank.  The transaction was styled “Project Communicator”.  Mr Elrick drafted Heads of Terms setting out the agreement in principle reached between the shareholders.  A new company subsequently called PDP Management Holdings Ltd was to be set up to purchase the shares in the company for £3 million funded as to the cash element by lending from the Bank. Mr Wilson was to receive shares to the value of £1 million in the new company in exchange for his shares in PDP, Mr Gander was to receive £950,000 in cash on completion, and Mr Thomas was to receive £550,000 in cash and £500,000 in interest bearing deferred loan notes at a coupon of 0.5% over base rate.  Mr Thomas says that he was reluctant to accept loan notes rather than the full amount in cash, but Mr Gander’s insistence on taking his share in cash made such an arrangement inevitable.
8.	It was at this point in time that the parties retained solicitors, the firms in question being recommended by Mr Elrick.  On 30 May 2007, the claimants went to the offices of the defendant firm, where they were introduced by Mr Elrick to Mr Tim Ward, the partner who would handle the transaction on their behalf.  At that time, he had been qualified for some ten years.  The deal was outlined to him, and the claimants say, and I accept, that he told them that he had considerable experience in acting in the sale and purchase of companies, as indeed he had.  The Heads of Terms were sent to him the following day (they were signed by the parties on 5 June 2007).  The claimants formally instructed the defendant to act for them in the sale of their PDP shares by a letter of retainer dated 1 June 2007.  Mr Ward was to be assisted by a trainee solicitor called Mr David Dew.  The transaction was not considered a complex one, and at this stage, completion of the sale was envisaged as taking place in July 2007.
9.	Meanwhile, Mr Wilson instructed Rickerbys, another Cheltenham firm of solicitors, on behalf of himself and the new company Holdings that would purchase the shares in PDP.  Rickerbys initially acted through Mr Richard Knight, a partner.   Mr Knight was assisted from mid-July 2007 onwards by Mr Richard Cusack, who had qualified in September 2006.  In the week commencing 20 August 2007, which is the crucial week so far as the completion issue is concerned, Mr Knight was on holiday and Mr Cusack had conduct of the transaction on behalf of Holdings and Mr Wilson, subject to the supervision of Mr Edward Davies and Mr Jonathan Morley, both partners in Rickerbys.  A Staffordshire firm of solicitors called Knight & Sons acted on behalf of National Westminster Bank Plc (part of the Royal Bank of Scotland group), which provided finance for the transaction and also for RBSIF (Royal Bank of Scotland Invoice Financing Limited) which was to take over the factoring business from Close.  Knight & Sons acted through a solicitor called Ms Joanna Dale.  I should say at this point of time that Mr Ward, Mr Dew and Mr Cusack gave evidence for the defendants at trial.
10.	As discussions proceeded, following due diligence by accountants appointed by the Bank, the company’s projections were revised downwards, and the Bank reduced the cash advance from £1,500,000 to £1,300,000.  Mr Gander however continued to insist on payment of £950,000 in cash in full, and anxious as he was for the deal to proceed, in about late July Mr Thomas agreed to take £350,000 in cash with £700,000 in loan notes repayable over five years.  That was the final shape of the deal so far as the vendors and purchasers were concerned.
11.	Matters progressed up to the week of Monday 20 August 2007.  As Mr Thomas explains, on that day Mr Wilson ran revised financials (i.e. a cash flow forecast) based on the current position, and was concerned about the short term cash flow of the company. Mr Gander offered to defer £150,000 of his payment by way of loan notes, or take an equity stake of £150,000 following the deal, but Mr Elrick told them that the Bank was not comfortable with this late change, and would only agree to it subject to reducing the up-front advance by the same amount.  On 22 August 2007, Mr Dew sent the documents including the Share Purchase Agreement to the claimants for signing, but they were asked not to date them.  Mr Thomas and Mr Gander duly signed, and the documents were subsequently taken by Mr Wilson to Rickerbys.
12.	At this point, it is convenient to note the material adverse change provisions in the SPA and the Loan Agreement.  By the clause 5 and Schedule 4 of the SPA the sellers (that is, the claimants and Mr Wilson) warranted to the buyer (that is PDP Management Holdings Ltd), inter alia, that since the Accounts Date, which was 31st March 2007, there had been “no material adverse change in the turnover, financial position or (so far as the Sellers are aware but without making enquiry of any third party), the prospects of [PDP]” (see paragraph 17).  The Loan Agreement between National Westminster Bank Plc and PDP Management Holdings Ltd by which the loan to fund the purchase was made also contained warranties. By clause 8.1(g), Holdings warranted that “…there has been no material adverse change in its business or financial condition of the business or financial condition of the Group since the date of [the] financial statements”. 
13.	The terms of the SPA (as set out below) contemplated completion taking place on the date of the agreement at a place agreed by the sellers and the buyer.  In fact, a meeting room was booked for the completion meeting at Rickerbys’ offices on the afternoon of Thursday 23 August 2007. (Mr Ward did not plan to be present.)  Completion did not occur as planned because an issue again arose as to the impact on the transaction of possible cash flow difficulties facing the business.  Mr Cusack of Rickerbys made a note of receiving a telephone call from Mr Elrick at 9 a.m. on 23 August 2007, to the effect that there was a “small problem” in that “sales in PDP had fallen quite substantially in the last couple of months”. Mr Thomas and Mr Gander describe how they met with Mr Wilson and Mr Elrick at the latter’s home that morning.  Mr Gander said that he would be prepared to put up to £150,000 into the new company if the need arose. Mr Cusack’s attendance notes also record a call from Mr Ward that morning “in respect of the changed deal”, though Mr Ward still thought that completion was achievable that day or possibly the next.  In any case, matters were resolved, and that afternoon Mr Gander emailed Mr Dew to the effect that “we are going ahead with the original deal - straight cash to me”.  On the evening of Thursday 23 August 2007, Mr Cusack was told that the Bank “just needed sight of the signed documents in preparation for sending the monies through on 24 August”.  All seemed set therefore for completion the following day.  
The issues between the parties
14.	Up to 24 August 2007, there are no relevant factual issues between the parties.  The issues that arise between them thereafter are heavily dependent on what happened next.  I will need to consider the facts carefully, and reach findings on the matters in dispute. To put the discussion into context, I begin, as the claimants have done, by identifying the relevant issues.
(1)	Did completion of the transaction occur on 24th August 2007 (“the completion issue”)?  The claimants say that it did, the defendants say that it did not.  This has been described as by far the most important issue in the case, and it is where the bulk of the parties’ written and oral submissions have been focused.
(2)	Were the defendants negligent in failing to advise the claimants of the fact of completion and of the rights arising in that regard in respect of an undertaking by the purchaser’s solicitors to transfer the completion money (“the failure to advise issue”)?  This is largely dependent on the conclusion reached in respect of the completion issue.
(3)	If completion did not occur because of the non-acceptance, or rejection of, the purchaser’s solicitors’ undertaking, was this negligent on the part of the defendants (“the non-acceptance of undertaking issue”)?  A number of sub-issues arise in this regard.  One is whether, if the defendants in fact accepted the undertaking by subsequent email, as a matter of law such acceptance was effective upon sending, as the claimants argue by analogy to the “postal rule”, or whether acceptance by email should be treated in the same way as other instantaneous communications (Entores Ltd v Miles Far East Corporation [1955] 2 QB 327), as the defendants argue. 
(4)	In the light of information which emerged on 25 August 2007, would the claimants in any event have agreed voluntarily to rescind, or as the defendants prefer to put it, not to proceed with, the transaction despite completion?  Would any attempt to adhere to completion have foundered because of the complexities and expense of litigation (“the causation issue”)?
(5)	What is the value of the assets in the form of their original shareholdings in PDP which the claimants have retained as a result of the abandonment of the transaction (“the quantum issue”)?
Friday, 24 August 2007
15.	Mr Thomas took 24 August off, and spent it with his family in Oxford.  Mr Gander, in the expectation that completion would occur that day, had packed his things up in PDP’s Banbury offices, and returned to his home in Croydon.  He was shortly to go on holiday to Italy to mark his 30th wedding anniversary and the end of his working life.  Mr Ward was in and out of the office on Friday (he was working on another transaction at the time), and when he was absent Mr Dew dealt with the matter.  As I have said, by that time Mr Cusack was handling the matter at Rickerbys for the purchaser, the partner in charge (Mr Knight) being on holiday.  Mr Ward records in his witness statement that, “All of the signed, undated transaction documents were at Rickerbys by the morning of 24 August 2007”.  By then the bank had put Knight & Sons in funds (the firm held £1,410,000 ready to be paid to Rickerbys).  During the morning, Mr Cusack sent copies of the signed transaction documents to the defendants and to Knight & Sons by way of attachments to emails (some thirty seven were sent this way at 11.08).  In fact, Mr Ward’s recollection is not quite accurate, because though by the afternoon almost all the documents had been sent to the defendants, the Loan Note signed by Mr Wilson in respect of that part of the consideration due to Mr Thomas was still outstanding.
16.	Thereafter, it is necessary to examine the sequence of events in some detail.  In this respect, I have heard oral evidence from three of the four solicitors who were involved that afternoon, namely Mr Ward and Mr Dew of the defendant firm, and Mr Cusack of Rickerbys.  I should say that Mr Dew and Mr Cusack have since moved to new firms.  I found each of them to be honest witnesses, who were concerned to put an accurate account before the court, though my impression was that Mr Ward, in particular, had a tendency to reconstruct what took place after the event. This may be in part because he was dealing with other matters at the time, and did not expect his conduct of this transaction to be called into question until, without prior warning, his firm received the Professional Negligence Pre-action Protocol dated 13 December 2007 from the claimants.  By then, some months had passed.  In any case, since the recollection of all three solicitors is strongly challenged by the claimants, the documentary evidence in the form of emails and otherwise is of prime importance.  As regards the receipt of emails when they were out of the office, I should mention that at this time none of the solicitors had a BlackBerry.
The early afternoon
17.	At 15.00, Mr Ward says that he still did not know whether completion was likely to take place that day or the following week.  The weekend was the bank holiday weekend, and the banks would be closed on Monday.  The defendants’ case is that there was no urgency in that regard.  I am satisfied that Mr Ward instructed Mr Dew to call Mr Cusack to call him (Mr Ward) on his mobile phone when he was ready to complete.  Mr Cusack’s secretary took a note of a telephone message left by Mr Dew at 15.03:
“Re: Completion project communicator Can you call Tim Ward when you are ready to complete”.

18.	Under clause 4.3.1 of the SPA, at completion the buyer had to pay the sum of £1,300,000 by telegraphic transfer to the sellers’ solicitors, i.e. the defendants.  However, it is common ground that at 15:30 in the afternoon, the time for making same-day electronic transfers expired without the funds having been transferred, so that payment of the purchase consideration that day was no longer possible.  In fact, the buyer’s solicitors (i.e. Rickerbys) were not themselves in funds.  The Bank’s solicitors (i.e. Knight & Sons) still held the money which had been drawn down under the various facilities.  
19.	By an email sent at 15:50, Mr Cusack forwarded the last of the signed documents required for completion to Knight & Son.  By an email sent at 15:51, Mr Cusack sent Mr Ward (copy to Mr Dew) the signed Loan Note.  This is the first of two emails which cast particular light on what the parties did and said at the time.  Mr Cusack’s email read:
“I now attach signed Loan Note for your records.
I will call shortly, hopefully to complete.”
The defendants accept that all the documents had now been provided and, as they put it in closing, were ready to be dated on the basis that completion took place.  But, as the claimants put it in closing, Mr Cusack had apparently overlooked the bank deadline of 15:30.
20.	At 15:52 the phone records show that Mr Dew called Mr Ward’s mobile phone.  He told him that he had received the Loan Note.  Mr Ward says of this conversation, “As the 15:30 bank telegraphic transfer deadline had passed and we had not completed I realised that it would not be possible to transfer the funds to BPE’s bank account that day. At that stage I did not know whether or not Rickerbys had received the funds from RBS’ solicitors Knight & Sons. In view of the fact that the money could not be transferred that day I immediately realised that there was no point in Richard Cusack calling me to complete on Friday unless I had an undertaking from him to transfer the money.  Alternatively, if we had been completing on Tuesday, Rickerbys would have required an undertaking from BPE confirming that, following transfer of the money we would hold the money to Rickerbys order until completion by telephone. I therefore instructed David Dew to email Richard Cusack … requesting an undertaking as there was no point in Richard Cusack telephoning me to complete without an undertaking in place”. 
21.	Whatever Mr Ward may have thought at the time, it is clear that he and Mr Dew spoke, and the documentary record shows that in response to Mr Cusack’s email sent at 15:51, Mr Dew emailed Mr Cusack at 15:59 as follows:
“Many thanks for this.
In readiness for completion please can I have your undertaking to transfer £1,300,000 to our account on Tuesday?
Please could you call Tim on his mobile (07766 426592) to complete.”

What the parties agreed as to completion
22.	I set out below the terms of the SPA as to completion, but note that it contemplated completion taking place on the date of the agreement at a place agreed by the sellers and the buyer.  As I have said, a completion meeting in respect of the transaction was originally planned by Rickerbys, and a meeting room booked at their offices on the afternoon of 23 August 2007, albeit Mr Ward did not plan to be present.  That meeting went off because of the issue which emerged that morning as to the impact on the transaction of possible cash flow difficulties, and which was resolved later that day.  Mr Ward maintained in cross examination that completion was nevertheless something that had to occur at a “formal moment in time”.  He said:
“It is vital in all corporate transactions -- and I have followed this in everything that I have done -- that an undertaking is simply a prerequisite to completion.  It is one of the conditions that need to be put in place before you can complete.  It is nothing more than that.  There has to be a formal moment in time in which the parties agree that completion has been effected.”
On this basis, the question arises as to when and how that “formal moment in time” was to occur, in circumstances in which there was to be no completion meeting, and payment could not be made that day because the deadline for electronic transfers had passed.
23.	This issue has given rise to a fundamental difference between the parties which is at the heart of this case.  The claimants invite the court to infer that a conversation took place at around 16:00 between Mr Cusack and Mr Ward in which the method of completion was agreed.  It is necessary to be clear as to the submission in this respect.  To quote from the claimants’ written closing, “Very soon after this [i.e. Mr Dew’s email sent at 15:59], Mr Cusack spoke by telephone to Mr Ward to say that the bank was ready to complete and that all documentation was in place.  Mr Cusack had Mr Ward’s mobile number … .  In the course of the call the solicitors recognised that completion could only be achieved by undertakings as the bank deadline had passed.  Mr Cusack was unprepared to give an unqualified undertaking to forward monies as they were still with Knights, so it was agreed that a pair of undertakings would suffice: first an undertaking from Knights to Rickerbys to forward the monies on Tuesday: secondly Rickerbys’ undertaking to forward monies when received from Knights”.  These factual assertions are said to be supported by certain material, and “each of these documents supports the fact that Rickerbys got in touch with Mr Ward”.  I draw attention to the words “it was agreed that a pair of undertakings would suffice”, because this is the first of two ways in which the claimants put their case on completion.  As their oral closing made clear, their case is that it was agreed in this conversation that the receipt of the undertakings would suffice to complete the transaction.  If so, Mr Ward’s “formal moment in time” can be established by reference to the time when the “pair of undertakings” were received later that afternoon (as they were) at the defendants’ offices.
24.	The following material is relied on by the claimants to support the inference of such a conversation.   
(1)	First, it is pleaded in the defence that, “By late afternoon the parties were in a position to complete the sale and purchase transaction save that it was too late to transfer funds that day because the bank deadline for electronic transfers had passed”.  In paragraph 11, the defence goes on to plead that, “It was agreed between Mr Tim Ward of the Defendant and Mr Richard Cusack of Rickerbys that an undertaking of payment by Rickerbys would subsequently be acceptable in place of transfer of funds and that completion would be made by telephone”.  The claimants point out that the statement of truth is signed by Mr Ward, and they rely on the fact that the defence expressly asserts an agreement between the two solicitors.
(2)	The claimants also rely on the response of 27 March 2008 by the defendants’ solicitors’ following receipt of the Letter of Claim in December 2007.  This says among other things that, “The aim was to complete on Thursday 23 August but the paperwork was not in place and during the course of the following day, Friday 24 August it was apparent that Rickerbys were working to finalise the documentation with the bank.  By 4pm on 24 August Rickerbys had indicated that the bank were ready and the documentation was in place but the cut off time for the transfer of funds had been missed and it was not possible to transfer the money that day”.  This (it is submitted) places the time of such agreement at about 16:00.  It shows, it is said, that there was a telephone communication, because some of the things which were “indicated” do not appear from any of the emails.
(3)	Third, the claimants refer Mr Ward’s evidence, including an earlier witness statement made by him in connection with summary judgment proceedings in which he says, “… we heard from Rickerbys that the documentation with the bank was complete and they were ready to proceed”.  It was contended that none of the emails indicates that the documentation with the bank was complete and there was a readiness to proceed.  That must have been gleaned, the claimants say, by some other means of communication.  In this respect, the claimants point out that in cross examination Mr Cusack said that, “I believe that I was in touch with him [Mr Ward] throughout the day”.  A similar contention is made as regards the next passage, in which he says, “By this time it was past the cut-off time for bank transfers and it was therefore impossible for the funds to be transferred that day.  The only alternative was to obtain an undertaking from Rickerbys and Knight & Sons to transfer the funds to complete the following Tuesday, 28th August as the Bank Holiday intervened”.  Finally, reference is made to a passage which states that, “I discussed the position with David Dew, who sat in the same room, and asked him to send an e-mail to Richard Cusack asking him to forward an undertaking to transfer the funds to our account on Tuesday.  The intention, once an acceptable undertaking had been received was to complete the transaction by telephone as is standard practice in this situation.”  (I should note that although Mr Dew sat in the same room as Mr Ward, they were not physically together at 16:00 because Mr Ward was not in the office at that time.  He did not return until after 17:00 that afternoon.)  
25.	The defendants submit that none of this provides evidence that such a conversation took place between Mr Ward and Mr Cusack, and in particular provides no evidence that Mr Ward was expecting a “pair of undertakings”.  The evidence of Mr Ward and Mr Cusack in cross-examination was that they did not recall such a conversation.  The Rickerbys’ phone records which might have established such a conversation could have been adduced, it is said, but are not in evidence.  The conversation is not pleaded, and it is, in the defendants’ view, “an invention” designed to fill a “gaping hole” in the claimants’ case.  Their own case as advanced in closing submissions is that the parties “through their respective solicitors … agreed that completion of the Transaction would take place by means of (1) Rickerbys providing an undertaking in agreed terms that they would pay £1.3m in completion monies to BPE on Tuesday 28 August 2007 and (2) a telephone call between Mr Ward for BPE and Mr Richard Cusack for Rickerbys agreeing actual completion”.  The primary difference from their pleading is that the agreement is not expressly asserted to have been reached between Mr Ward and Mr Cusack.  
26.	The defendants rely (as they put it on oral closings) on conduct, circumstances and practice as “supporting the agreement that completion would be upon agreement of a satisfactory undertaking and a telephone call”.  They rely in particular on:
(1)	The contemporaneous documentary material, namely Rickerbys attendance note of 15.03 recording Mr Dew’s telephone call to Mr Cusack stating, “Can you call Tim Ward when you are ready to complete”: Mr Cusack’s email to Mr Ward of 15.51 stating, “I now attach signed Loan Note for your records.  I will call shortly to complete”: Mr Dew’s email to Mr Cusack of 15.59 stating, “In readiness for completion please can I have your undertaking to transfer £1,300,000 to our account on Tuesday?  Please could you call Tim on his mobile (07766 426592) to complete.”
(2)	The evidence of Mr Ward who stated, “…I would need to be satisfied that the terms of the undertaking were acceptable and if they were I could complete the transaction by means of a telephone call to Richard Cusack”, and of Mr Dew who said in cross examination that he had given Mr Ward’s mobile number to Mr Cusack because, “I was aware that once the undertaking had been received, it would be necessary in order to achieve completion that Mr Cusack would speak to Mr Ward.” 
(3)	The need in a consensual transaction for the form of an undertaking to be accepted by the receiving party.  In that regard, Mr Ward said in cross examination:
“And in this arrangement it never altered from the fact that that was going to be by telephone.  I do not know the form of the undertaking that was going to be given, it had not been discussed in detail.  I did not know whether it was going to be signed by a partner in an acceptable form.  I didn’t know whether it was going to come by just an email, on headed notepaper.  I didn't know when it was going to arrive.  You would not agree to complete simply on undertakings without a definitive phone call and a moment in time in order to effect that completion.” 
27.	My conclusions on this issue are as follows.  The claimants are probably right to submit that there were communications between the solicitors that cannot now be pinpointed.  On the other hand, this period around 16:00, when the claimants say that the conversation took place, has been the subject of the closest scrutiny during the course of this case.  In the event, the claimants accept that they cannot point beyond inference to such a conversation.  It does not feature in their helpful and thorough chronology prepared for the trial.  Although it is fairly said that neither of them excluded the possibility in cross examination, Mr Cusack cannot recall making the call, and Mr Ward cannot recall receiving it, and that in itself is important evidence.  In the absence of clear evidence that this conversation took place, I do not feel able to draw an inference that it did.  However, this conclusion may not greatly matter, because it is common ground that something was agreed between the firms about completion.  The real issue (in my judgment) is what was agreed, rather than how it was agreed.  In that regard, I consider that there has been a degree of reconstruction of events in the witness evidence, particularly in Mr Ward’s evidence.  The safest course appears to me to look to the contemporaneous material in form of Rickerbys attendance note of 15.03, Mr Cusack’s email of 15.51, and Mr Dew’s email to Mr Cusack of 15.59.  Each of these contemplates a phone call to complete the transaction.  The latter also refers to an undertaking, stating: “In readiness for completion please can I have your undertaking to transfer £1,300,000 to our account on Tuesday?  Please could you call Tim on his mobile (07766 426592) to complete.”  That in my judgment is where the parties got to so far as completion was concerned that afternoon, and on balance I accept the defendants’ case as to what was agreed in this regard.  It did not need to be spelled out that the undertaking or undertakings which Rickerbys were to send would have to be acceptable to the defendants, since that would have been obvious.  Thereafter, a call between Mr Cusack and Mr Ward was required to complete the transaction.  
28.	It follows that I reject the claimants’ invitation to infer a conversation in the course of which “it was agreed that a pair of undertakings would suffice”.  As the defendants argued, correctly in my view, it is very unlikely that Mr Ward would have agreed that the receipt of undertakings would suffice to complete the transaction, since he would not know until he got them whether the undertakings were adequate or not.  In the claimants’ oral closing a variant was advanced as follows: “Alternatively - we can see this is possible - the solicitors might have arranged that there would be confirmation on the part of BPE that the submitted undertakings were accepted, and that completion would occur upon that confirmation”.  This way of putting the case was to enable a submission that completion was effected by a brief phone call that took place in disputed circumstances later that afternoon.  I do not consider that I should infer an agreement in these terms either.  For the reasons I have given, I have concluded on balance that a call between Mr Cusack and Mr Ward was required to complete the transaction, and there is no reason to confine that requirement to confirmation by the defendants that the submitted undertakings were accepted. 
The provision of the undertakings 
29.	On the evidence, what happened next is as follows.  Having received Mr Dew’s email, Mr Cusack set about providing an undertaking.  Since Rickerbys did not have the money, he required a back to back undertaking from Knight & Sons (which he probably arranged by phone, as he accepted in cross examination).  After a chasing email sent at 16.59, this eventually arrived.  In order to provide an undertaking on behalf of his firm, Mr Cusack had to obtain approval from a partner, which again he did.  At 17.14, he faxed through these undertakings to the defendants.  The first was on Rickerbys headed notepaper FAO Tim Ward dated 24 August 2007.  It read: 
“Dear Sirs
PROJECT COMMUNICATOR
Please accept this fax as our undertaking to send you by telegraphic transfer the amount of £1,300,000 in respect of the completion money for the above matter upon receipt of the same from Knight & Sons pursuant to their undertaking (copy enclosed).
Yours faithfully,
Rickerbys”
30.	The second was Knight & Son’s undertaking to Rickerbys again dated 24 August 2007.  It read: 
“Dear Sirs,
Acquisition of PDP Management Services Limited by PDP Management [Holdings] Limited (“Acquisition”)
We currently hold the sum of £1,410,000 (one million four hundred and ten thousand pounds) in our client account (“the Sum”).
On bank opening on the morning of Tuesday 28 August 2007 we undertake to instruct our bankers to transfer the Sum to your account with Lloyds TSB Bank plc (sort code: … and account number: … ).” 
Yours faithfully,
Knight & Sons”
31.	Because the undertakings were sent by fax, whereas the parties had been communicating by email, I am satisfied that they were not seen by either Mr Ward or Mr Dew immediately.  By now it was after five in the evening before the bank holiday weekend, and Mr Ward had returned to the office.  At this point, he called the claimants on their mobile phones.  He explains in his witness statement that he called Mr Thomas from his office at 17:33, the call lasting approximately 5 to 6 minutes.  During this conversation, he says, he discussed the current situation.  At 17:39, he called Mr Gander.  This call lasted approximately 4 to 5 minutes. His recollection (which I accept) is that he had not at that point had sight of the undertaking from Rickerbys.  He says that he informed both his clients that the transaction had not yet completed.
32.	In response to Mr Ward’s witness statement to this effect, both claimants provided further witness statements in substantially the same terms.  Neither has any “recollection of the call but if he did speak to me then I have no doubt whatever he said to me accorded with my understanding that the transaction had not completed”.  Whilst the claimants do not recall the telephone conversation, they are clear that it must have been the case that Mr Ward did not inform them about the undertaking he had received.  Otherwise, they say, they would have been prepared to accept such undertaking rather than insisting on the receipt of cash.  It is somewhat surprising (Mr Thomas described it as a “little bizarre”) that neither claimant has any recollection of the calls.  It was the only occasion that day on which either of them spoke to their solicitor, a day on which they hoped that a transaction would complete which (as their evidence emphasises) they saw as vital to their futures and those of their families.  That however is the position, and I conclude that since Mr Gander had already established that the money had not arrived in his account by the time of the calls (which he regarded as constituting completion) whatever Mr Ward had to say did not make an impact on him.  The same must apply to Mr Thomas, though he did not establish the position as to his bank balance until he got back home that night after dinner.
The 17:44 phone call
33.	Shortly before trial, the defendants’ general telephone records were disclosed, and these show that at 17.44 (in other words shortly after the call by Mr Ward to Mr Gander) a phone call of 15 seconds duration was made from BPE’s general line to Mr Cusack’s extension number at Rickerbys.  This has given rise to a further important factual dispute between the parties.  I start by setting out the claimants’ case as to this phone call.  To quote their closing submissions, “By 5:44 [Mr Ward] saw the undertakings and called Mr Cusack’s direct line to confirm receipt and the fact of completion. … The call was not strictly necessary given the earlier arrangement as to undertakings to be given to achieve completion.  It was a courtesy, given the time of day, so that Mr Cusack would know that everything was finalised. … This call can have had no other purpose.”  I have already mentioned the claimants’ alternative case as to completion, namely that the solicitors arranged in the disputed conversation (i.e. at 16:00) that there would be confirmation on the part of the defendants that the submitted undertakings were accepted, and that completion would occur upon that confirmation.  Their case is that this happened when Mr Ward phoned Mr Cusack at 17.44.  They say (again quoting from their written closing) that following the call, Mr Ward “then realised that since completion had occurred on the Friday, but monies would not be received for four days, interest which accrued on the monies would belong to his clients, and he caused Mr Dew to send the 6:00 e-mail”.
34.	Though I have rejected the claimants’ alternative version of the disputed conversation at 16:00, I must set out my factual findings as to the call at 17:44.  Mr Ward accepted in cross examination that though the call was not made from his office extension, he and Mr Dew were the likely candidates for making it.  However, he said that he did not remember making the call, and did not believe that he made it.  He thought that the purpose of the call would have been to raise the question of interest over the long weekend (which was not mentioned in the undertakings), and thought it may have been made by Mr Dew.  The claimants respond in that regard that Mr Ward said in his witness statement that he directed Mr Dew to raise the interest point by email.  The only thing that needed to be said on the phone, the claimants argue, was that the undertakings were fine, the deal was done, and the paperwork could be sorted out on Tuesday, and that could be done within fifteen seconds.
35.	The solicitors disagreed.  Mr Ward said in cross examination that considerably more than fifteen seconds would be needed, allowing for opening courtesies, the agreement to complete the transaction, the reconfirmation he said he would ask for that Mr Cusack was holding the documents signed by his clients, and satisfying himself that Mr Cusack would send the paperwork to Mr Ward the next business day.  Moreover the defendants submit, if a call had been made making completion, it would be natural for Mr Ward to raise the question of interest which was covered in the subsequent email sent by Mr Dew.  Mr Cusack said in cross examination that he did not remember the call, but that bearing in mind that this was his first unassisted completion, “if I had made this call to complete, I believe that call would have taken a lot longer than 15 seconds”.  He mentioned other completion formalities to be carried out subsequent to the completion phone call, such as dating the documents, which he says would have been discussed with Mr Ward.
36.	On the balance of probabilities, I am satisfied that Mr Ward and Mr Cusack did not speak to each other at 17:44.  My reasons are as follows.  First, there is the evidence of Mr Ward and Mr Cusack themselves. Although this is not wholly satisfactory in some respects, the fact is that neither of them recall making or receiving a phone call from the other at this time. In particular, the evidence of both is positively that there was no phone call by which the transaction was completed, at this time or later.  Second, this seems to me to be supported by the overall probabilities.  It is unlikely that if, as the claimants contend, a conversation had taken place between them at 17:44 to the effect that the transaction had completed, neither solicitor would have informed his respective client.  Mr Ward had just come off the phone to his clients, and he would surely have called back if completion had occurred.  A more likely explanation, and the one I accept, is that he saw the undertakings after speaking to his clients, but did not regard them as satisfactory, because they did not cover interest pending receipt of the funds on Tuesday.  Third, there is the short time span of the call, namely fifteen seconds. The claimants’ factual case in closing has, I think it is fair to say, been crafted to enable a call on completion credibly to fit within this time span.  I accept their submission that, interest aside, all was by now in place to enable completion to go forward, and the conversation could have been brief.  But even on that basis, I cannot accept that fifteen seconds would be sufficient even for the briefest of completion calls.  On balance, I am satisfied that the defendants’ factual case as regards this call is correct.  The call was made (I find) either by Mr Ward or Mr Dew, and was probably about interest.  As I shall explain shortly, Mr Cusack had probably left by the time it was made, but in any case, he did not answer the phone.
37.	That brings me to the evidence in respect of interest.  Mr Ward says that the undertaking offered by Rickerbys was unsatisfactory because it did not make provision for interest between completion occurring and payment of the purchase monies after the bank holiday weekend.  He says that he directed Mr Dew to send an email to Mr Cusack requesting an amended undertaking that made provision for interest.  Mr Dew said in his witness statement that he could not specifically recall the conversation, but that he believes that Mr Ward was concerned about interest accruing on the completion monies over the bank holiday weekend and asked him to obtain a revised undertaking from Rickerbys that made provision for interest until payment.
38.	The documentary record shows that at 18:00, Mr Dew sent the following email to Mr Cusack:
“Thank you for your undertaking, please could you include interest from today when the £1,300,000 is transferred to our client account.”
39.	The claimants submit (quoting from their closing submissions) that the sending of this email “reflected completion’s having taken place, triggering the right to interest on monies held”.  They then deal with Mr Ward’s explanation of the email: “Mr Ward suggested that the email amounted to a request for a revised undertaking … .  It is common ground that the email did not, in terms, request an amended undertaking; it simply requested the inclusion of interest in the monies transferred.  It is to be noted that, in the absence of any indication that the text is to be construed as raising a question (there is, for example, no question mark and the word “please” is included), its plain meaning is as a direction and not a request for change. This reflects an underlying entitlement to interest on completion monies”.  Thereafter, to complete the claimants’ account of events, it is said that, “Messrs Ward and Cusack, both appreciating that nothing remained to be done, left their offices”.
40.	Beginning with the last point first, Mr Ward’s evidence is that he left the office sometime after six o’clock, which accords with the claimants’ view.  The timing may be more important in the case of Mr Cusack.  It was put to him in cross examination that he was still in the office at quarter to six.  He said that, “I don’t believe so, no”.  He said that by this time, he would have been anxious to get out of the office to enjoy the long weekend.  As the defendants say, Mr Cusack had no personal interest to protect in maintaining that completion did not take place—he has never worked for BPE and now works in Australia.  Though he suffers from the same difficulties of recollection as the other solicitors, and there is no means of verifying his precise time of departure that evening, I found his evidence convincing in this and other respects, and accept it.  It follows that I find that he had left by the time the email of 18:00 arrived. 
41.	The last to leave was Mr Dew, who was due to be away for two weeks on a charity trek the firm was sponsoring in Morocco, and so stayed late.  He believes that he would have left the office at around 21:30.  The following exchange took place in Mr Dew’s cross examination:
“Q.	… So when you dispatched that email at 6 o’clock, what was the position then as far as you saw it?
A.	That the undertaking originally received from Mr Cusack wasn’t in satisfactory form.  It needed to be revised and emailed to us, or alternatively by fax, and that once we had received that undertaking, it would be reviewed and if it was agreed, then following that, arrangements would be made in order to complete the share purchase.
Q.  	Right.  So in order to do the deal that evening, a further phone call was going to be needed?
 A.  	Yes, at some stage.
 Q.  	Yes.  Either from Mr Ward to Mr Cusack or Mr Cusack to Mr Ward?
 A.  	Yes.”
42.	Mr Dew appeared to me to be a reliable witness, and I accept his evidence in this respect.  But despite his subjective view of what it meant, the language of the email of 18:00 must be viewed objectively, and it is open to interpretation.  As the claimants submitted, it can be read as suggesting that, completion having occurred, interest should be added to the completion monies when transferred on Tuesday.  Clearly, there was no entitlement to interest over the weekend in the absence of completion on Friday.  But in my judgment, viewed against the factual matrix as I have found it to be, a more natural reading is that the email was a request for something additional to that provided for in the undertaking which Mr Cusack had sent three quarters of an hour earlier.  If completion was to happen on the basis of the undertakings, then the claimants were entitled to interest earned on the funds prior to receipt of the money.  In my view, the defendants are right to submit that the email amounted to a rejection of the undertaking.  Interest need not, in my view, have been an obstacle to completion that night, since it is hard to see what objection there could have been to agreeing to pay it.  On the other hand, the money was actually held at that point by Knight & Sons, and their assent would have been needed, and Mr Cusack would have required a partner’s approval before amending his firm’s undertaking.  But in any case, whilst a satisfactory undertaking was required for completion, a completion call between Mr Ward and Mr Cusack was (as I have held) also required. That did not happen that evening.
43.	In that regard, Mr Cusack’s evidence was he held the “vague recollection” when he went home that completion had taken place.  But he said, and I accept, that he left the office forgetting that he should have made a phone call to Mr Ward to complete.  He was clearly upset that he had fallen short in this regard, as the following exchange in cross examination shows:
“Q	Mr Cusack, the situation is this, isn't it, in truth: you left your office believing that you had completed because that's what you had done.  You prepared an attendance note the following Tuesday, noting that the deal had completed, because that's what you believed had happened, and you prepared that billing narrative recording completion because it's what you believed had happened?
A.  	No, the billing narrative, to take that one in a side completion would just be a very general term.  I didn't recall exactly -- or didn't record exactly what I was doing for seven hours, so it would have been a general -- I was working towards completion of this matter in seven hours' time.  I do not believe completion occurred on the Friday evening although at the time, I had the mistaken belief that my actions had completed, although I did not go through everything I should have done to complete, which was very mistaken and -- a very mistaken belief and something that -- well, I wasn't doing my job properly.  So, no I don't -- yes, we didn't -- we didn't complete.”
I have quoted this passage not by way of censure of Mr Cusack, but because of the light it sheds on the issue I have to decide.  The reference to the term “completion” in the billing narrative which he prepared, showed no more, as he said, than that he was working towards completion that day. 
44.	Mr Ward accepted in cross-examination that it would have made sense to close the deal off that Friday.  When asked why, before leaving the office, he did not himself pick up the phone and try to get through to Mr Cusack, he did not have an explanation.  Mr Dew says that he thinks he made a chasing call as to interest sometime between 18:00 and 19:30, but was told that Mr Cusack had left the office (the phone records do not confirm this evidence but there is no reason to doubt it). Before leaving himself, he left Form 395 for filing with Companies House for Mr Ward, but (as the claimants point out) did not leave a handover note to the effect that he had not received a response to his email from Mr Cusack. He believes that he would have left the office at around 21:30. 
45.	I have the strong impression that the transaction was left in an unsatisfactory state on that Friday night.  The explanation, I have no doubt, lies in the timing, coming just before the bank holiday weekend.  The last minute hitch (for which Mr Ward was in no way responsible) had prevented completion the previous day as planned.  For whatever reason, the loan note signed by Mr Wilson arrived too late to permit the transfer of funds that Friday afternoon.  By the time undertakings had arrived, it was Friday evening, and both Mr Ward and Mr Cusack were anxious to get away.  The question of interest was raised but not resolved.  Despite the detailed analysis which this case has required, I doubt that the formalities of completion were foremost in any of the solicitors’ minds.  The fact is that no-one foresaw any difficulties remaining, least of all Mr Ward, who planned to be on holiday on Tuesday, though he would be available on his mobile phone, and could, he said, have arranged cover if necessary.
46.	The claimants’ case is that the evidence as to the events that Friday has to be considered in the context of alleged admissions by Mr Ward, and that when these and other matters are taken into account, the court should conclude that the transaction did complete on that day.  It has been argued that Knight & Sons would not have given its undertaking unless satisfied that completion had taken place. As it is put in the claimants’ closing submissions, “Inherent in the case advanced by the defendants is the suggestion that Knights incompetently released funds without taking any steps to see that the Bank’s position was secured”.  I reject this contention.  Since the funds were not to be transferred that day, an undertaking from Knight & Sons was a necessary preliminary to completion, which could not have taken place that day without it.  The provision of the undertaking does not show that completion had occurred.  I regard this as a neutral factor.  Before reaching a conclusion as to completion however, I must describe what happened over the following days.
Saturday, 25 August 2007
47.	It is convenient to begin by setting out a summary of the claimants’ case from their opening.  In complete ignorance of what had happened the previous day, it is said, the claimants learned from Mr Wilson of the serious threat to PDP from the loss of Powergen’s business in the course of Saturday 25 August.  Mr Gander was the first to hear around lunchtime, and Mr Thomas spoke to Mr Wilson at about 18:45 having been unavailable earlier in the day.  Mr Wilson informed the claimants that he had that morning spoken to a contact at Powergen who told him that there was going to be a substantial down turn in invoicing, because Powergen intended to take “in house” much work which had previously been outsourced.  Mr Wilson mentioned that he had also spoken to Mr Elrick who expressed the view that the projected reduction in business would mean that revenues would be inadequate to sustain the transaction which would have to be called off.  Both Mr Thomas and Mr Gander (erroneously they submit in view of the fact of completion) were of the view that disclosure would have to be made to the bank and that in consequence the deal would fall through.  Mr Wilson told both claimants that he considered they should speak to the defendants on the following Tuesday to “call off” the transaction.  Mr Gander sent an email to Mr Ward at 16:29 on 25 August stating that for reasons beyond his control, and of which he was previously unaware, the deal would not go through and was cancelled.
48.	Mr Wilson did not give evidence at trial, and this account of how news of the loss of the Powergen business was received by him on Saturday morning may seem surprising.  As Mr Jeremy Cousins QC for the claimants put it in opening, the coincidence is absolutely remarkable.  But it is the evidence of both the claimants, and as Mr Cousins QC correctly said, the defendants do not dispute it as to the essentials.  The specific effect of the loss of the business was further explored in the part of the case that concerned quantum, and was in broad terms as follows.  PDP’s turnover for the year ending 31 March 2007 was £4,617,932, and it is common ground that Powergen (which Mr Thomas said was the company’s major client) accounted for 34% of the company’s turnover that year.  (It appears that this percentage had been rising prior to August 2007.)  Commenting on the experts’ views as to the expected loss of turnover which was £1m in the view of the claimants’ expert and £0.5m in the view of the defendants’ expert, the claimants said in closing that, “it is more like one and a half million that is lost, from four and a half million down to about three million”.  This was described by the claimants as the “hammer blow of a loss of a third of the business”.  Mr Gander in particular emphasised that at the time, he would have regarded it as fraudulent not to disclose these developments to the Bank.  Neither claimant may have had any formal disclosure duties to the Bank, because it was Mr Wilson (or his new company) who were in contractual relations with the Bank. Strictly speaking, it might be said that neither claimant had any disclosure duties at all, since their own contract was with Mr Wilson, who was himself the source of the information.  But I am satisfied that this was not how they saw it at the time, no doubt reflecting the fact that this was an entirely consensual transaction. Mr Wilson, Mr Thomas and Mr Gander had founded PDP’s business, and nursed it through until it was sufficiently viable to be sold.  Despite the differences between Mr Thomas and Mr Gander, all three were essentially partners in the same enterprise, and the claimants would not, in my view, have wished this transaction to go through on a false premise.
49.	The question arises therefore whether the claimants would have stood on their legal entitlement, assuming that the transaction completed the day before.  The defendants submit that the reality is that, regardless of the position as to completion, the claimants would have agreed to unscramble this transaction.  On that basis, it is submitted, any negligence that may be proved on the part of the defendants did not cause the claimants’ loss.  This is the causation issue, which I shall express my conclusions on in due course, but first I must set out my findings of fact as to the events on Saturday 25 August 2007. 
50.	It is common ground that the loss of the Powergen business had very serious financial implications for the company.  The experts called by the parties on the valuation issue concluded (on figures now agreed) that the value of the company would have declined substantially between Friday 24 August 2007 and Tuesday 28 August 2007 (the defendants’ expert says from about £3.6m to about £1.32m, the claimants’ expert says from about £1m to about £0.5m).  On the assumption that the purchase had gone ahead, a substantial additional burden would have fallen on the business in the form of the transaction charges and borrowings from the Bank.  The due diligence report commissioned by the Bank suggests that as well as substantial deal costs, the capital repayments would have been £130,000 in year 1, and £219,000 in subsequent years, and that the interest payments would have been £134,000 in 2007/8, £119,000 in 2008/9 and £105,000 in 2009/10.
51.	These details would not perhaps have been in the claimants’ mind on 25 August, but as their evidence made clear, the general implication of the loss of the Powergen business was fully understood by them.  As Mr Thomas (who had himself been a senior banker) put it, “in effect the company could not afford the commitment it was entering into. … All was in jeopardy at that moment.”  He was asked:
Q.  	…  Leaving aside any further questions about this, the object of this transaction had not been, had it, that Mr Wilson should be buying a company which was worth significantly less for a price that he could not afford and which would threaten the viability of the company and his interest in it.  That was not the object of this transaction, was it?
A.  	Not at all.
52.	In his witness statement Mr Gander said that, “This loss of Powergen revenue would have a devastating effect on the new company’s cash flow and endanger its ability to meet financial commitments under its proposed new borrowing arrangements”.  He was asked about that in cross examination:
Q.	For want of a better word, you believed what Mr Wilson was telling you?
A.	Yes
Q.	If what he was telling you was correct, [your witness statement] represents your view of what the likely effect on the company would be … ?
A.	Yes.
Q.	And if the new company’s cashflow was endangered and it was unable to meet its financial commitments, it could possibly go into liquidation?
A.	Yes.
Q.	So that was a very serious financial possibility?
A.	Very serious indeed.
Q.	And meant that from a commercial point of view he could not possibly be expected to go on with the deal, from a commercial point of view.
A.	Yes.
Q.	And you accepted that?  Commercially –
A.	Commercially he would not want to proceed with the deal. Definitely.
Q.	And couldn’t reasonably commercially proceed with the deal?
A.	Commercially, correct.
53.	He accepted that as of 25 August, things looked “very dire”, which was why Mr Wilson could not possibly contemplate carrying on with the deal.  By October 2007, he said that they were talking about the possibility of putting PDP into voluntary administration, “that’s how bad it was”.  That was without the burden of the bank lending.  At this point, I should record that the evidence is to the effect that the loss of the Powergen business was not in the long run as devastating as was feared, and the company is nearly back to where it was—but it is common ground that I have to look at the matter as it was at the time.
54.	Having spoken to Mr Wilson at lunchtime, and discussed the matter with his wife, at 16:29, Mr Gander sent an email to Mr Ward (copied to Mr Dew) stating:
“I have taken an urgent telephone call this afternoon from Peter Wilson to tell me that, for reasons beyond my control and of which I was previously unaware, the Communicator deal will now NOT go through and is cancelled.
Had I not already pre-paid all the costs, I would now be cancelling our 30th wedding anniversary holiday to help Peter Wilson sort things out, however, to practical intents & purposes there is nothing I can do until I return to the office on 11 September when I shall contact you.
In the meantime, please refer to Ken Elrick, Rickerbys and/or Peter Wilson”
Mr Ward’s evidence was that he did not see the email until he returned to the office on 29 August 2007.
55.	Mr Gander did not try to speak to Mr Ward about this, nor did he speak to Mr Thomas.  When asked why he did not seek advice from his solicitor, his explanation was that he was under great stress, and in any case had no choice, since the money had not arrived in his account, and he understood that the transaction had not completed.  In particular, he strongly believed that the Bank had to be advised immediately of the adverse developments, and that it would have been fraudulent not to have done so.  I have set out in paragraph 12 above the material adverse change warranties.  In his evidence, Mr Gander said that he believed at the time that he would have risked committing some kind of fraud had disclosure to the Bank not happened, irrespective of what the warranties said.
56.	Mr Thomas rang Mr Wilson on Saturday at about 18:45, Mr Thomas having been out during the day.   He was shattered by the news.  He did not speak to Mr Gander, and he did not try to get in touch with Mr Ward to ask his advice either, since in his view the transaction had not closed, and he had no choice, and further, he explained, he did not wish to trouble his solicitor at the weekend.  As with Mr Gander, the obligation to disclose the changed position to the Bank was lying heavy on his mind, and he had a duty, he said, to join with his co-directors in relaying this information.  He also made it clear in his evidence that he was concerned about the transaction fees that might be payable to the bank.  He thought (and this is not in dispute) that there was an arrangement fee payable in respect of the loan in the region of £100,000.
57.	So far as the evidence before the court is concerned, the next thing that happened was that at 17:05 on Monday 27 August (i.e. bank holiday Monday), Mr Wilson emailed Mr Knight and Mr Cusack at Rickerbys saying: 
“Following a very recent change in circumstances I am afraid that the directors of PDP have decided not to complete on the deal and to cancel the transaction.
Can you please notify all the relevant parties concerned as early as possible on Tuesday and instruct that no drawdown under the proposed facilities be made nor any payments out to the existing shareholders. 
I understand that Peter Gander has already issued instructions to Tim Ward in respect of this change.
I will try to talk to you as early as possible on Tuesday but please do give me a call on my mobile (0771 724225) if I don’t catch you first.”

Tuesday, 28 August 2007
58.	Though the deal had been called off, it is plain that the parties appreciated that the position was potentially messy.  High among their concerns, I find, was the possibility that an arrangement fee might be due to the Bank (I have already referred to Mr Thomas’ concerns in that respect).  At any rate, they did not want anything further to happen that might trigger that outcome.  At 08:01 Mr Elrick emailed Mr Cusack and Mr Knight at Rickerbys saying:
“Re PDP, Would you please let me have in the post today copies of the signed PSA and both Bank Facility documents.
Please do not under any circumstances draw down the capital funding from Knight & Co today Tuesday until we have talked” 
59.	Mr Cusack saw that email when he got into the office, along with the email sent by Mr Dew at 18:00 on Friday, and the email sent by Mr Wilson the day before.  At 08:50 he took a call from Mr Wilson, which he noted as follows: “Call from Peter. Biggest client – less work to PDP therefore financially not good. RBS [i.e. the Bank] notified this morning. Deal stopped.”
60.	Mr Ward, who was on holiday, says that he checked his mobile phone just after 10:00, and retrieved a message from Mr Gander. He called Mr Gander at 10:12, and they spoke for between 6 and 7 minutes.  He says that Mr Gander asked him what they would have to do to call off the transaction, and he said that in relation to the SPA it would largely be a case of ripping up the documents.  For his part, Mr Gander says the discussion quickly moved to discuss his concerns as to some £100,000 in fees payable to the Bank.  According to Mr Gander, Mr Ward said that, if he was speaking as a lawyer for the Bank, he would argue that the transaction did complete. Mr Gander says that Mr Ward proposed a solution that, provided Rickerbys agreed, he would be prepared to say that completion still awaited a phone call between the solicitors. Mr Gander accepted in cross-examination that Mr Ward had not told him that completion had taken place.  He said that Mr Ward was trying to be helpful.  At one point in his evidence, he accepted that his understanding from Mr Ward was that the transaction had not completed.  However he went on to say that though he never said it had completed, he didn’t say it had not completed.  He said that he had realised a long time afterwards that Mr Ward would not have had to invent this scenario if completion had not taken place.
61.	At 10:34, Mr Ward called Mr Thomas, the call lasting approximately 5 minutes. He says that Mr Thomas confirmed that the transaction was to be cancelled. Mr Thomas says that he told him it was largely a case of “tearing up the documents”, but that he needed something in writing from him.  Mr Thomas was out of the office at this point with a client, and said that this would have to follow later in the day.  Mr Ward did not mention to either Mr Thomas or Mr Gander that any undertakings had been given the previous Friday.
62.	Mr Ward says that at 10:42 he called Rickerbys, “as is demonstrated by the itemised [phone] bill. This call lasted approximately 1 minute”.  I do not think timing of the call is common ground, but equally I do not think that his evidence was challenged in this respect.  He spoke to Mr Cusack, who made an attendance note (erroneously timed at 10:00 am).  This is an important document in the claimants’ case. It read as follows:
“TW [Mr Ward] called RJC [Mr Cusack] in respect of a message he had received from Peter Gander saying that the deal had fallen through.
RJC said that he had the same email confirmation from his client in the morning. RJC explained the reasons for this, and explained that he understood all the parties were in agreement to this. RJC and TW agreed that if all the parties were in agreement, then the documents would be simply ripped up, and the deal would not go ahead. RJC queried his undertaking to send the money, and TW confirmed that RJC should hold this money until he had further instructions, and not send it to BPE pursuant to the undertaking. 
TW said he would speak to his clients, and get back to RJC as to how to proceed. TW noted that if his clients were not in agreement to stop the deal, then completion had actually taken place, and the parties should therefore sit down and decide the best way forward with this.
TW said he would call his clients now, and get back to RJC at some point during the morning.”
63.	The defendants’ pleaded defence originally asserted that the attendance note was inaccurate, and that the last sentence should read “completion had not actually taken place”.  That was later deleted by amendment, and in Further Information served on 18 June 2009, the defendants state that, “Upon reviewing the documents disclosed in the case, Mr Ward is no longer confident as to whether the attendance note is accurate or not.  At the time of the telephone conversation between Mr Ward and Mr Cusack on 28 August 2007 Mr Ward was on holiday and did not keep an attendance note of the telephone conversation”.  Mr Ward’s evidence at trial was that he was not in a position to say whether the contents of the attendance note were true or not, but that he did not believe that completion had occurred.  He was asked, “Is there any sensible explanation that you can give for why you might have said to Mr Cusack on 28 August that completion had actually taken place?”  He said that there was not.  
64.	Mr Cusack, who was the author of the attendance note, said that confronted with the emails that came in on Tuesday morning to the effect that the deal should not go ahead, he was confused.  He said that he may have written the last sentence in “a mistaken belief that was what was said” by Mr Ward.  The claimants submit that it defies common sense that a solicitor could have been so confused as to make a note recording Mr Ward’s acknowledgement that completion had occurred, when it had not.  They submit that the attendance note records an admission by Mr Ward that completion had taken place.  I agree that the best evidence of what was said by Mr Ward to Mr Cusack is that set out in the attendance note.  I shall have to come back to the question of the admissibility of Mr Ward’s views in this respect.  But in its terms, I do not regard the attendance note as recording an unequivocal admission by Mr Ward that completion had taken place.  I am satisfied that at this time, his understanding of his clients’ concern was as to potential liability to the Bank.
65.	At 10:33 following their conversation, Mr Gander emailed Mr Ward (copying Mr Wilson and Mr Thomas) as follows:
“I sent you an email on Saturday explaining that Peter Wilson’s MBO of mine and David’s shares had fallen through for last minute reasons previously unknown to me and outside my control.
Peter has telephoned me this morning to say that Ken Elrick has advised him that completion progressed further than anyone had realised, that legal “unravelling” was now required and that both David and I (especially as I am in Italy from Thursday 30 August) need to give you instructions to do this in conjunction with Rickerbys. This apparently has come from the Bank’s solicitors.
If this is necessary and unavoidable then you must do so and I authorise you to do so whilst obviously minimising costs as much as possible
However, I am confused as to what may need unravelling as it seems to me that, without my having received funds yet and I will not now do so, completion has not taken place. Furthermore, you tell me that Rickerbys haven’t received the funds from the Bank or the Bank’s solicitors so I don’t see how the Bank’s solicitors can say that completion has taken place.
I would appreciate your advice as to what needs unravelling but if it needs to be done then please do it.
You asked me to contact David to get him to telephone you as you need to speak to him personally. He is at an IFA meeting this morning and I cannot contact him, however, I have told Peter Wilson who will talk to David at the earliest opportunity and I am copying David in on this email.”
Mr Ward did not see this email until his return to the office on 29 August.  On the face of it, it gives him clear instructions to unravel the transaction, if it needed unravelling.  It was correct (as the email records) that at the time of the call Rickerbys had not received the funds from Knight & Son.  Funds appear to have been received shortly afterwards, and returned by Rickerbys later in the morning.
66.	At 10:44, Mr Ward called Mr Elrick, who “sought to ensure that I had instructions from the claimants not to proceed to complete the transaction”.  He then called Mr Gander at 10:52, and recalls that he was adamant that the transaction should not proceed.  He then made a second call to Rickerbys at 11:05, presumably to pass that on.  By the afternoon, Mr Thomas had returned to the office, and at 14:01 sent the email he had promised to Mr Ward (copying in Mr Wilson, Mr Gander and Mr Dew).  It said:
“Further to our telephone earlier today I write to confirm, very sadly, due to circumstances which came to light on Saturday morning, I confirm that the sale should now not proceed of my shares. It is my understanding that Peter Gander has already written to you confirm the same regarding his shareholding. You informed me this morning that it should largely be a case of tearing up the documents, but I appreciate that you need to take account of the other parties in the transaction.
I understand that the funds had not been released to Rickerbys, just held to order under an undertaking at this stage at RBS, so technically the sale had not been concluded. Having now just arrived back in the office and had the opportunity to read a copy of Peter Gander’s email to you on the same subject, I also echo his sentiments regarding fees. We will now have to fund these out of our own resources without the benefit of the share sale proceeds.  If you could look sympathetically at the total amount, taking account of the circumstances, it would be very much appreciated.”      
As regards fees, the defendants in due course rendered a bill in the sum of £11,500 plus VAT, which was paid.
Subsequent events
67.	At 16:09 on 28 August, Mr Elrick emailed Mr Thomas saying, “We commiserate on the totally unexpected outcome but up and at it for tomorrow and the new dawn of PDP which we will help with in any possible way”.  However just a few days later, on 31 August 2007, the three directors were shocked to receive invoices from Mr Elrick in the sum of £146,000 in respect of his services.  Payment not having been received, on 1 October 2007 Mr Elrick wrote to them demanding payment.  The letter states, “We do appreciate the unfortunate circumstances that have conspired to cause your instructions to abort the case after completion”.  This prompted Mr Thomas and Mr Gander to take advice from new solicitors.  Following that, Mr Gander explained that he purchased a solid state electronic recording device.  He fitted it up at his home, with the intent of calling Mr Ward and recording the conversation.  He said that the purpose was to confirm whether the transaction completed or not.  The claimants’ case is that he confirmed that it did, and that, it is submitted, is compelling evidence and amounts to an admission.
68.	It was on the morning of 5 October 2007 that Mr Gander called Mr Ward.  He did not disclose that he was recording the conversation.  Mr Gander carefully devised the conversation, the defendants submit, to put Mr Ward on the horns of an apparent dilemma—how to explain that Mr Elrick was entitled to his arrangement fee if the Bank was not entitled to its arrangement fee.  Mr Gander’s evidence was that he regarded Mr Elrick’s claim as a “try on”, and Mr Elrick as a man of “weasel talk”, but the defendants submit, in my view rightly, that in the course of the call he encouraged Mr Ward to think that the directors wanted to do the decent thing by Mr Elrick.  Mr Gander said, “Now we regard Ken entirely differently to [the Bank] who did not do much and did not advance the funds anyway and Ken [Elrick] we had worked with for a long time so I just want to make sure that we do whatever is completely right and I just want to check in my own mind, I’m right in saying that technically completion did take place.  Ken therefore has done all of his job and we just pay him and that our approach to [the Bank] is an entirely separate issue”.
69.	This went back to the conversation about the Bank’s fees that they had had on 28 August 2007.  To make sure that the claimants did “whatever is completely right”, Mr Ward was invited to agree that “technically completion did take place”.  Mr Ward responded, “Yes – I would agree with you”.  He went on to say, “I know we say contradictory things to an extent, but I think with regard to Ken and what he did the deal had been completed to all intents and purposes and technically and legally I think it has been.  My conversation to you was that I thought there was an angle to try and reduce [the Bank’s] fees and it just did not seem right to pay them a whole load of money for money they advanced to you that they returned the same day”.
70.	Apparently coincidentally (as the defendants put it), Mr Elrick rang Mr Ward later that morning saying that the directors were not paying his fees. Mr Ward then rang Mr Gander, and that call was also recorded.  Again, Mr Ward appears to draw a distinction between the position as regards Mr Elrick and the position as regards the Bank. He explains that Mr Elrick had asked if his firm could get involved to act for him in helping out.  He says at one point, “the deal did complete and therefore whatever is due under that contract with Ken is payable”.  He goes on to say, as was obviously the case, that there would be a conflict if he acted for Mr Elrick, and he would not want to get involved.  He says, “I have always said that I believed that completion had occurred it was just purely a negotiation tactic with [the Bank] to say that maybe it hadn’t occurred”. The recording device catches Mr Gander saying after Mr Ward had rang off, “Oh shit did he just drop himself in it”.  At no stage in the conversation however did Mr Ward say that the Share Purchase Agreement had completed, nor was he asked whether it had completed.  The conversation, the defendants submit in my view correctly, had to do with whether Mr Elrick had earned his fees.  Mr Gander did not suggest that, on the basis that completion had occurred, Mr Wilson was liable on the SPA, and that in my judgment was not the subject of the conversation. The defendants say, again in my view rightly, that as matter of fact Mr Ward had not “always said that I believed that completion had occurred”.  To the extent that he did so, I shall have to consider whether his opinion is admissible in this respect. 
71.	There is one final matter relied upon by the claimants with which I must deal. Without (it seems) prior notice that there was a potential dispute between them, on 13 December 2007 a Letter of Claim under the Professional Negligence Pre-action Protocol was sent to the defendants, alleging that the defendants had failed to advise the claimants that the sale of PDP had completed, and that it would have been open to the claimants to receive the moneys due to them. Mr Ward says that he was dumbfounded, and overlooking the fact that he should not at that time have been contacting the claimants personally, on 17 December 2007 he made a call to Mr Thomas.  Mr Thomas did not record the call, but made a note of it afterwards.  It was described by the claimants in closing, as the “most telling of all” the conversations.
72.	The note reads that Mr Ward “…explained that he tried to assist the situation on Tuesday [28 August], to unravel the situation and mitigate the cost to the bank, that we requested.  I [Mr Thomas] said, yes that it true Tim, but the fact of the matter was we had completed on the Friday and he had not told Peter or I this, and in fact the completion moneys were ours to keep.  He said it was late in the afternoon on the Friday, but he admitted he did not telephone either Peter Gander or I on the Friday to say completion had taken place and the money was ours”.  The claimants submit that the inference to be drawn is that Mr Ward thereby accepted that completion had taken place. However, the note does not say so, and Mr Ward says he did not do so, and even if admissible, this conversation does not appear to me to take the matter any further.
The issues between the parties: discussion and conclusions
(1) The completion issue
73.	The claimants’ case is that completion of the transaction occurred on 24 August 2007, and the defendants’ case is that it did not, and this is the first, and most contentious, issue which I have to decide.  A convenient starting point is the Share Purchase Agreement (it was never dated) which was the principal constituent of the transaction so far as the claimants were concerned.  It provided for completion as follows.   Clause 1 defined:
(i)		“Completion” as “completion of the sale and purchase of the Sale Shares 	in accordance with this agreement”;
(ii)	“Completion Date” as “the date of this agreement”
74.	Clause 2 of the SPA provided as follows:
“2.1	On the terms of this agreement, the Sellers shall sell and the Buyer shall buy, with effect from Completion, the Sale Shares…”
75.	Clauses 3 and 4 of the SPA provided as follows:
“3. PURCHASE PRICE
3.1	The Purchase Price is £3,000,000 payable as follows:
3.1.1	On Completion the sum of £1,300,000 shall be paid in cash to the Sellers Solicitors (“the Initial Consideration”);
3.1.2	£700,000 (“the Deferred Consideration) by the issue by the Buyer of the Loan Notes; and
3.1.3	969 “A” ordinary shares of one pound each in the Buyer
3.2	The Loan Note Instrument shall be issued at Completion in accordance with Clause 4…………
4. COMPLETION
4.1	Completion shall take place on the Completion Date at a place agreed by the Sellers and the Buyer.
4.2	At Completion the Sellers shall:
4.2.1	Deliver or cause to be delivered the documents and evidence set out in Part 1 of Schedule 3;
4.2.2	Procure that a board meeting of the Company is held at which the matters identified in Part 2 of Schedule 3 are carried out; and
4.2.3	Deliver any other documents referred to in this agreement as being required to be delivered by them.
4.3	At Completion the Buyer shall:
4.3.1	Pay the sum of £1,300,000 by telegraphic transfer to the Sellers’ Solicitors (who are irrevocably authorised to receive the same) and otherwise in accordance with clause 3.1.1.  Payment made in accordance with this clause shall constitute a valid discharge of the Buyer’s obligations under clause 3.1.1; and
4.3.2	Deliver a certified copy of the resolution adopted by the board of directors of the Buyer authorising the Transaction and the execution and delivery by the officers specified in the resolution of this agreement, and any other documents referred to in this agreement as being required to be delivered by it;
4.3.3	Issue the Loan Notes;
4.3.4	Deliver a share certificate for 969 “A” ordinary shares of one pound each in the Buyer in the name of Mr Peter Brian Wilson;
4.3.5	Execute the Debenture; and
4.3.6	Procure that Close Brothers issues letters in the agreed form releasing Mr Gander and Mr Thomas from the personal guarantees given by them in respect of the existing Close Brothers facilities granted to the Company. 
76.	Under the SPA therefore, completion was to take place on the “Completion Date” [being the date of the Agreement] at a place agreed by the sellers and the buyer. At completion, the sellers had (among other things) to deliver specified documents.  On its part, the buyer (among other things) had to pay the sum of £1,300,000 by electronic transfer to the sellers’ solicitors (i.e. the defendants).  The SPA therefore envisaged a completion meeting, and as I have explained, Mr Cusack arranged such a meeting for the afternoon of Thursday 23 August 2007. It could not go ahead because of the problem that emerged that morning as regards the company’s cash flow. The question, therefore, is what alternative arrangements as to completion were agreed, and whether they took place. 
77.	The defendants submit, in my view with justification, that the claimants have advanced different and inconsistent suggestions as to how completion might have occurred. The way it was put to Mr Ward at the end of his cross-examination was that, “whatever was necessary to bring about completion that afternoon was in fact done”.  The claimants point out that completion was handled by the solicitors, and they were not a party to that process.  What there is, it is submitted, is the most compelling evidence that completion took place contained in the telephone conversations between Mr Ward and three other individuals after the event, namely Mr Cusack on 28 August 2007, Mr Gander (twice) on 5 October 2007, and Mr Thomas on 17 December 2007. 
78.	It is correct that completion was handled by the solicitors, but the claimants have brought this case asserting that completion took place on 24 August 2007, and that the defendants were negligent in failing to inform them of this, and with the benefit of evidence gathered in the trial process, it is up to them to establish that it did take place.  As I have said, they lay great emphasis on what they characterise as admissions by Mr Ward in the four telephone conversations, all of them after the event.  I have set out my factual findings as regards each such call above, and will not repeat them.  In my view, when put in context, these do not amount to “admissions” by Mr Ward that completion took place.  He seems to have adopted the mistaken approach that this could be tailored to the outcome his clients wanted to reach with the other parties to the transaction.  On the other hand, an unfortunate feature of the first of the conversations on 5 October 2007 is that it was set up, as the defendants submit in my view rightly, as a trap for Mr Ward, who was not aware that he was being recorded. Be that as it may, the point of principle that applies to these after the event conversations in my judgment is as follows. The question whether a transaction has completed, or a contract has been entered into, or similar, must be determined objectively. Evidence from the parties’ lawyers as to whether particular steps were taken, or particular events occurred, are admissible. But the subjective views of the parties’ lawyers as to the conclusions to be drawn from the facts in question, in the present case whether completion occurred, are neither relevant nor admissible.  I agree with the defendants that, taken at the highest, Mr Ward’s comments in the various conversations to which I have referred, state his opinion as to whether completion had occurred.  As Mr Michael Douglas QC for the defendants put it, if the court concludes that completion did not occur on 24 August 2007, then nothing Mr Ward says can retrospectively have made it occur.  The contrary is also true. In my judgment, the completion issue has to be decided by an objective consideration as to what happened on 24 August 2007. 
79.	In its oral closing, the claimants put their case as to completion as follows.  The court should infer that there was a telephone conversation between Mr Ward and Mr Cusack at about 4pm on 24 August 2007 when a pair of undertakings was discussed.  The claimants say that it was agreed between them that a pair of undertakings in the form in which they were actually submitted would suffice to complete the transaction.  Upon receipt, completion would happen.  Alternatively, it is submitted that the solicitors might have arranged that there would be confirmation on the part of the defendants that the submitted undertakings were accepted, and that completion would occur upon that confirmation.
80.	I have set out my factual findings (on the balance of probabilities) in this regard above, and will not repeat the detail.  In summary, contrary to the claimants’ submissions, I do not infer that a conversation took place as contended.  The contemporaneous material shows that what was agreed was an undertaking to transfer the funds to the defendants’ account on Tuesday, and that thereafter, a call between Mr Cusack and Mr Ward was required to complete the transaction.  I reject the submission that completion occurred on receipt of the undertaking (or pair of undertakings) since Mr Ward would not know until he got them whether the undertakings were adequate or not.  I conclude that Mr Ward thought that they were not adequate because they did not provide for interest over the weekend.  I further conclude that no call took place between Mr Ward and Mr Cusack at 17:44 or later that evening as regards completion or otherwise.  Fifteen seconds (the duration of the 17:44 call) would not have been sufficient even for the briefest of completion calls, and I conclude that Mr Cusack did not pick up the phone, having (as he said) gone home by that time.  It follows that, in my judgment, the transaction did not complete on 24 August 2007.
The failure to advise issue
81.	Were the defendants negligent in failing to advise the claimants of the fact of completion, and of the rights arising in that regard in respect of an undertaking by the purchaser’s solicitors to transfer the completion money?  I do not think that it is disputed, and in any case hold, that if the transaction completed on 24 August 2007, the defendants were negligent in failing to advise the claimants of that fact.  For completeness, I note that in opening, the claimants’ case was that such advice should have been given on 28 August 2007.  It was said that as a “counsel of perfection”, Mr Ward should have made efforts to get through on Friday to say it had happened, but what “really matters is what happened on the 28th because no harm was done on the Friday afternoon”.  There was, in my view, no separate negligence in respect of the solicitors’ undertakings. Though the undertakings provided for the transfer of funds on Tuesday 28 August, this was on the basis that completion occurred, and clearly the funds would be held to the purchaser’s order pending completion. 
The non-acceptance of undertaking issue
82.	If completion did not occur because of the non-acceptance, or rejection of, the purchaser’s solicitors’ undertaking, was this negligent on the part of the defendants?  The claimants’ case is that completion had occurred before Mr Dew’s email of 18:00 was sent, and that the request for interest was an afterthought and was incapable of amounting to a rejection of the undertakings.  For reasons set out above, I have rejected this submission on the facts.  Though the language of the email of 18:00 is open to interpretation, in my view the defendants are right to submit that it amounted to a rejection of the undertaking.
83.	On that basis, the claimants submit that if, contrary to their case, the email constituted a rejection, then this was as a result of negligent drafting on the part of the defendants who rejected the undertaking without instructions.  They submit that if, contrary to their case, the undertaking was rejected, or not accepted, then this was a step taken without their authority. Authority should have been sought, it was submitted, because of the risk that what otherwise would have been an effectual and beneficial completion of the transaction would be lost by virtue of seeking to improve upon the undertaking already given.  As I have said, the claimants’ witness statements are to the effect that they would have instructed the defendants to accept the undertakings as proffered had they known about them. 
84.	In my view, there was no negligence on the defendants’ part in requiring the payment of interest over the weekend without reverting to the claimants for express instructions. The amount involved was not insubstantial, and at that point in time, neither party had any reason to anticipate the events of the following morning.  But in any case, whilst a satisfactory undertaking was required for completion, a completion call between Mr Ward and Mr Cusack was (as I have held) also required. That did not happen that evening, and could not in the event have happened, Mr Cusack (as I have held) having left the office by 17.45 on Friday evening.  The claim on this basis fails in any event on causation grounds.
85.	The claimants also submitted that the defendants ought to have accepted the proffered undertaking off their own bat without going to the claimants for instructions, and that it was negligent not to craft their response in a way that accepted Rickerbys’ undertaking.  For the reasons set out above, I do not consider that the course the defendants took was negligent, nor in the circumstances as they were understood to be on 24 August 2007, was there a foreseeable problem which would be visited on the claimants by stipulating that interest should be included in the undertaking.  I should nevertheless deal with an issue between the parties as to the time at which Mr Dew’s email of 18:00 would have been effective as an acceptance of the undertakings, had it been drafted as such.  The question is, had the defendants drafted the email in such a way as to accept the undertakings, as a matter of law, would such acceptance have been effective upon the sending of the email at 18:00, as the claimants argue by analogy to the “postal rule”?   Or should acceptance by email be treated in the same way as other instantaneous communications, as the defendants contend?  If the defendants are correct in this regard, at what point in time did acceptance by email occur, given my finding that the recipient (Mr Cusack) had left the office by 17.45 that evening?  The defendants say that the email cannot operate as an acceptance because it was not seen by Mr Cusack until the following Tuesday (he did not have a BlackBerry), by which time the parties had decided not to proceed with the transaction.  The claimants’ submission is that acceptance by email does not depend upon the message being read by the intended recipient.  As with the “postal rule”, it is effected (it is said) at the moment of despatch, or at latest, the moment by which the sender would receive, but does not receive, a non-delivery notification.
86.	The general rule is that the acceptance of an offer is not effective until communicated to the offeror.  The “postal rule” is an anomalous exception to the general rule, which is limited to its particular circumstances.  It does not apply to acceptances made by some “instantaneous” mode of communication (Chitty on Contracts, 30th edn, paragraph 2-050).  This was decided in Entores Ltd v Miles Far East Corporation [1955] 2 QB 327 as regards communications by telex.  At page 334, Denning LJ said that in such a case, “The contract is only complete when the acceptance is received by the offeror”.  Contrary to the claimants’ submissions, in my view the same principle applies to communication by email, at least where the parties are conducting the matter by email, as the solicitors were in this case.  However, that does not conclude the question, because issues may remain as to when the email in question was received (and also whether it was received).  As Lord Wilberforce put it in Brinkibon Ltd v Stahag Stahl G.m.b.h. [1983] 2 AC 34 (another telex case in which Entores was approved) at page 42:
“Where the condition of simultaneity is met, and where it appears to be within the mutual intention of the parties that contractual exchanges should take place in this way, I think it a sound rule, but not necessarily a universal rule.
… . The senders and recipients may not be the principals to the contemplated contract. They may be servants or agents with limited authority. The message may not reach, or be intended to reach, the designated recipient immediately: messages may be sent out of office hours, or at night, with the intention, or upon the assumption, that they will be read at a later time. There may be some error or default at the recipient’s end which prevents receipt at the time contemplated and believed in by the sender. The message may have been sent and/or received through machines operated by third persons. And many other variations may occur.
87.	Similar issues arise when the medium of communication is by email.  In Brinkibon, Lord Wilberforce’s conclusion was that: 
“No universal rule can cover all such cases: they must be resolved by reference to the intentions of the parties, by sound business practice and in some cases by a judgment where the risks should lie.”
88.	In Bernuth Lines Limited v High Seas Shipping Ltd [2006] 1 Lloyds Rep. 537, it was held that notice of arbitration was validly served by email notwithstanding that it may not have reached the relevant managerial or legal staff in the recipient company.  Christopher Clarke J said at p. 541-2:   
“[29] That is not to say that clicking on the “send” icon automatically amounts to good service. The e-mail must, of course, be despatched to what is, in fact, the e-mail address of the intended recipient. It must not be rejected by the system. If the sender does not require confirmation of receipt he may not be able to show that receipt has occurred. There may be circumstances where, for instance, there are several e-mail addresses for a number of different divisions of the same company, possibly in different countries, where despatch to a particular e-mail address is not effective service.”
89.	These particular considerations do not apply in the present case.  It is not in dispute that the email was received in Mr Cusack’s mailbox at or close to 18:00 on 24 August 2007, and was available to be read by him.  The question is whether the defendants are correct in their submission that acceptance was not effective from the moment the email was received because it was sent after working hours.  In those circumstances, it is submitted, relying on the passage in Lord Wilberforce’s judgment that I have quoted, acceptance by the 18.00 email could not in any event have been effective until it came to Mr Cusack’s eye on Tuesday morning.
90.	Once one sets aside the “postal rule” as inapplicable to email communications, the question whether an email acceptance is effective when it arrives, or at the time when the offeror could reasonably be expected to have read it, is not a straightforward one, and does not appear to be settled by authority.  On the basis that it must be resolved by reference to the intentions of the parties, by sound business practice and in some cases by a judgment where the risks should lie (Brinkibon at page 42), the answer does however appear to me to be clear in the present case.  In the context in which the 18:00 email was sent—that is a transaction which (as the earlier emails show) could have been completed that evening—I do not consider that 18:00 was outside working hours.  The email was available to be read within working hours, despite the fact that Mr Cusack had in fact gone home.  For that reason, I would have held that were the defendants to have accepted the Rickerbys undertaking by Mr Dew’s email, then as a matter of law such acceptance would have been effective upon the receipt of the email at or about 18:00.  However, as I have held, they did not do so, nor were they negligent in that regard. 
The causation issue
91.	On the assumption (contrary to my above finding) that the transaction completed on 24 August 2007, in the light of the information which emerged the following morning, would the claimants in any event have agreed voluntarily to rescind, or as the defendants prefer to put it, not to proceed with, the transaction despite completion?  Would any attempt to adhere to completion have foundered because of the complexities and expense of litigation?
92.	The defendants have a formidable case in this regard.  This was a situation in which the parties to the SPA were the founders of the company.  The position as relayed to the claimants by Mr Wilson on 25 August 2007 was that the company was to lose one third of its turnover. As Mr Thomas put it, “all was in jeopardy at that moment”. Mr Gander spoke of the “devastating effect” of the loss of the Powergen revenue. From a commercial point of view, he accepted that Mr Wilson could not possibly be expected to go on with the deal.  Had the transaction gone forward, the business would have had to carry the cost of the bank lending on much diminished revenue. In those circumstances, it is not surprising that both claimants decided on that Saturday there and then that the transaction could not go ahead.  Neither claimant sought Mr Ward’s advice. On the contrary, Mr Gander sent him an unequivocal email to the effect that the deal would not go through and was cancelled. The only realistic conclusion, the defendants submit, is that whatever the technical legal status of the agreement and the obligations of the parties under it, the parties were not going to proceed with the transaction.  Mr Thomas and Mr Gander would not have contemplated leaving Mr Wilson or PDP facing ruin. Furthermore, the defendants point out that the lion’s share of Mr Thomas’s consideration was by way of loan notes, which were subordinated to the bank lending.  His deferred consideration would have been at substantial risk, whereas most of the loan proceeds would go to pay Mr Gander, who would receive his full amount in cash straight away.  Finally, the defendants point out that the evidence is that Mr Wilson was firmly of the opinion that completion had not taken place.  Neither he nor the Bank, it is submitted, would have stood by without a fight. A dispute would have ensued, during which the directors would be forced to continue to work together in a poisonous and hostile atmosphere.  The defendants accordingly invite the court to find as a fact that if the transaction had completed on Friday 24 August 2007, and the claimants had been advised this was the case and/or that the Rickerbys’ undertaking was enforceable, the claimants would have agreed with Mr Wilson and/or PDP to render the transaction of no effect and/or not to enforce the undertaking.  Hence, it is submitted, the alleged negligence even if proved, did not cause the claimants any loss.
93.	The claimants’ case in this respect was as follows.  The difficulties in relationships at PDP, Mr Gander’s very real personal hardship in continuing involvement in PDP, and the desire of both claimants to take their money out of the business was unchallenged.  Further, it is submitted, this was a life-changing transaction for the claimants. It offered an “escape route” from financial constraints and a difficult situation. Whilst they would not have wished hardship upon Mr Wilson, they could hardly be expected to shoulder the burden of the changed circumstances when they were not obliged to do so, given the implications not only for themselves but their families.  Mrs Thomas spoke of what happened as a “crushing blow”.  In Mr Gander’s case, he and his wife were distraught when the deal fell through.  Mrs Gander says that they were devastated.  She had to sell her car, and the couple had to remortgage their home rather than extinguish the mortgage as they had planned. Considerable financial hardship has thus been caused.  The evidence of Mr Thomas was that the news from Mr Wilson shattered him, and caused his world to fall apart.  He also spoke of his desperation to get out of PDP.  Rickerbys and Knights were professionally committed to honour their undertakings, and would have been obliged to do so.  The evidence, it is said, is that Mr Wilson is a man who faces reality and he not would have sought to run an ill-founded case.  The Bank had no basis for involvement in any dispute, since its solicitors had released the funds pursuant to an unqualified undertaking.  In summary, the claimants would not have been prepared voluntarily to unravel the transaction had they known that completion had occurred.  They and their families had too great an interest in seeing it through.
94.	I have found this a particularly difficult issue to resolve. On the one hand, I fully accept that the news conveyed by Mr Wilson on 25 August 2007 was a crushing blow to the claimants and to their families, for all the reasons explained by them and by Mrs Thomas and Mrs Gander in their evidence.  But I am sceptical of the claimants’ claim that they agreed to the deal going off because, in the absence of completion, they felt they had no option.  These are both experienced business people, and in my judgment, the reason they agreed that Saturday to the cancellation of the transaction, without apparently investigating whether some renegotiated deal might be possible, and without seeking advice from their lawyer, was that they realised immediately that, on the reduced turnover, the transaction was simply not viable.  That said, it is a fact that they did believe (the money not having reached their bank accounts) that the transaction had not completed, and I accept their evidence to the extent that this was an important factor that governed their reactions.  What has weighed with me most is that if, as is their case, the transaction completed on the evening of 24 August 2007 by way of the receipt of undertakings and a confirmatory phone call, then the claimants were entitled to know about it.  If they had, the dynamics of the situation would have been different.   Equipped with that knowledge, however unpalatable it might appear, they might have insisted that the deal went forward, and taken the risk of any ensuing legal dispute.  At any rate, I have come to the on balance conclusion that I cannot conclude to the contrary, and that I should determine the causation issue in favour of the claimants, though it does not affect the ultimate result.
Quantum
95.	Given my conclusion as to liability, the question of quantum of damages does not arise.  But I should nevertheless set out my conclusions in that respect.  The parties were broadly agreed as to the approach.  Had the deal gone ahead, Mr Thomas would have received £350,000 in cash and a further £700,000 in loan notes. Mr Gander would have received £950,000 in cash.  The claimants accept that they have to give credit for the value of the shareholdings which they retained in PDP, it being common ground that valuation is to be as of 28 August 2007. A further valuation issue arises as regards the loan notes which Mr Thomas would have received had the deal gone ahead.
96.	Both parties called valuation evidence. In the case of the claimants it was given by Mr Anthony Hindley, and in the case of the defendants it was given by Mr David Cook.  Both are well qualified and produced clear and helpful reports.  The issues were narrowed following the experts’ meeting prior to trial, and further narrowed in the course of the trial prior to their oral evidence. I should record my appreciation of their work in that respect.  In the event, most issues were agreed.
97.	As regards the value of Mr Thomas’s loan notes, the experts agreed before the trial that although the face value of the notes was £700,000, taking into account the company’s prospects, the value on 24 August 2007 was in fact only £525,000.  Reflecting the deterioration in the company’s prospects following news of the withdrawal of the Powergen business on 25 August 2007, the experts valued the notes at £305,000 as at 28 August 2007.  During the trial, the defendants suggested that these figures did not take into account the £1,010,000 debt which would have been due to Royal Bank of Scotland, and which might have brought the company down had the deal gone ahead in the changed circumstances.  So, it was suggested, Mr Thomas might not have recovered anything from his loan notes at all.  However both Mr Hindley and Mr Cook said that they had taken this into account, and these valuation figures are now common ground.
98.	So far as the valuation of the claimants’ respective one third shareholding in PDP is concerned, the experts agree that the value of the retained shares is to be calculated by reference to the value of the company, and that the appropriate way to value the company is by reference to its maintainable post tax earnings multiplied by an appropriate multiple, namely the applicable price/earnings ratio. As regards post-tax profit (allowing for tax at 22.5%) the experts have helpfully agreed an annual figure of £132,000, and it is consequently unnecessary to describe the differing considerations that each took into account in agreeing that figure.  Nor is it necessary to resolve issues within their calculations that would otherwise have risen had agreement on this figure not been reached.
99.	However the experts are not in agreement as regards the multiple. The price/ earnings ratio is determined (in simple terms) by reference to the return a purchaser would seek from his investment.  It reflects the investor’s assessment of the number of years required to enable him to recover his outlay out of the company’s earnings. The formula as expressed by Mr Cook is, maintainable profits x P/E = valuation.  In seeking to assess the P/E which a notional purchaser would apply, one looks for closely comparable deals and other market evidence or indices. 
100.	Mr Hindley’s opinion is that 4 is the applicable P/E ratio in the case of PDP. Mr Cook’s opinion is that 10 is the applicable P/E ratio. The difference between them depends on a number of factors. Mr Hindley has used the ratings provided by the London Business School Risk Management Service materially adjusted downwards to reflect the difference between small private companies and the far larger and more diverse concerns in the quoted sector. Mr Cook notes that the Financial Times Share Indices show for the FTSE listed companies a P/E of 23.71 and for Support Services a P/E of 22.88 around the material time. These P/Es are for listed companies, and should be discounted to reflect the differences in market ability and size between a listed and a small private company like PDP. On that basis, he arrived at a P/E of 10. 
101.	Mr Cook was not aware of the sale of similar business in 2007 which might provide comparable transactions. Mr Hindley (while pointing out there is little available information within the public domain) did find some deals involving small companies, although the activities were not directly comparable. These showed an average multiple of 3.  However it is clear that the primary factor that influenced his opinion was the prospective effect on the company’s business of the loss of Powergen.  As he put it, the company only had two major customers, and if one was to go, the business could be in serious trouble.  Mr Cook also accepted the serious effect of the loss of the Powergen business, but maintained that he had reflected this within his own methodology in reaching the agreed post tax profit number of £132,000. His view was that the most serious risk of insolvency would have arisen had the deal gone through.
102.	The parties are in agreement that Powergen accounted for 34% of the company’s turnover in the year ending 31 March 2007. The loss of this customer was plainly therefore a most material factor in assessing its future profitability. As it happens, matters have not turned out as badly as was feared, but the position has to be judged as at 28 August 2007. On the other hand, Mr Hindley’s opinion leads to a total valuation of the company at £628,000, as opposed to the £3 million agreed in respect of the sale of the shares.  Even allowing for the changed circumstances, that is a big difference.  Also significant, is the fact that his valuation of PDP on 24 August 2007 was only between £860,000 and £1,040,000.  I agree with the defendants that this is unrealistically low at a time when the Bank was advancing over £1 million after due diligence.  That said, I see no reason not to take at face value the claimants’ evidence that, as it appeared at the time, the loss of the Powergen business left the company in a dire position.  I also accept Mr Hindley’s evidence that there is a very significant reduction in the level of multiples paid for small companies as opposed to larger companies.  Whilst I consider Mr Hindley’s valuation to be on the low side, I consider that (all things taken into account) Mr Cook’s is considerably on the high side.  Valuation as the witnesses explained is not an exact science, but my conclusion is that a P/E of 6 is applicable as of 28 August 2007, which when a sum of £100,000 is added (as the experts agree) to reflect the company’s cash balance, gives a total valuation of £892,000. 
103.	That leaves the question of whether and if so by how much the value attributable to the claimants’ shares should be discounted to reflect the fact that the entire share capital would not pass to a prospective purchaser.  I do consider that it is correct to apply a discount.  In that regard, the claimants submit that the shareholdings should be valued as individual holdings, and therefore subject to a discount of 37.5%.  I consider it much more likely that their shareholdings would be sold as a block.  As the defendants put it, the most likely sale was of the company as a whole. The next most likely sale was of both interests to Mr Wilson. The next most likely sale was of a single interest to one or other share holders.  The least likely sale was to an outsider seeking to buy a one third interest in a private company.  I prefer the evidence of Mr Cook to that of Mr Hindley in this respect.  On that basis, the experts are agreed that the appropriate discount for the sale of a two thirds interest is 12.5%. 
Conclusion
104.	Whilst in some respects I have accepted their submissions, the overall outcome is that the claimants have not established negligence on the part of the defendants.  I should express my appreciation to the parties for the manner in which the case was presented at trial, but in the event, this claim must be dismissed.