Week 14

Day 52 – Monday 18th July 2005

A very interesting and eventful day.

Miles for ELAS continues to cross-examine Martin.

Page 9: Martin insists that, at first instance, there was a risk in the litigation – litigation risk and they were risking everything on it – betting the farm. Unfortunately, at least one of his co-directors - Ms Page, does not seem to have understood what was meant by this.

Page 19: At a meeting of 27th January 1999, when the Hyman litigation had started, Nash says: ‘if lost in entirety, then changes to final bonus rates, commercial cost same but different spread’. This presumably meant that he knew there could be a result with no ring-fencing.

Page 33: There is a curious dialogue arising here out of bundle C32 page 156 - a note by Mr Wilmot of the board meeting on 23rd June 1999 which Miss Leslie attended in part. It is a discussion of the consequences of disclosing the results of not being able to operate the differential policy.

Page 35: "Mr Headdon: from professional point, with

3 Miss Leslie and Mr Martin. Concern is commercial one,

4 ie disclosure that will be used against us, trying to

5 make point but less explicit about consequences.

6 "Mr Nash: agrees with Mr Headdon, would include

7 'seeds of our own destruction'. Cover in some other

8 way, ie impact of other policyholders not outflows of

9 funds and salesforce. Could be covered in appeal if

10 necessary.

11 "Mr Martin: cannot raise new points in an appeal

12 therefore in or out now."

13 Martin: Well, in broad terms, yes.

14 Miles:. Does that bring back to your mind the broad terms of the

15 discussion that took place?

16 A. Yes, but I cannot, I am sorry to say, remember from

17 these rather succinct notes what the core issue was that

18 was to go into presumably a second or revised affidavit,

19 I simply cannot remember, I am sorry.

20 Q. It may help if you go back to 158, and look about six or

21 seven lines down:

22 "Rationale, there is a PRE amongst non-GAR that they

23 would get asset share."

24 A. Yes, I understand.

25 Q. "Unfair to fund GAR cost, therefore need to balance

36

1 classes. If were to fulfil Bernard Brindley PRE then

2 would have to cut the final bonus, therefore difficult

3 to get new business (ie why should they subsidise) plus

4 possible exodus of money. Powerful point for the

5 litigation, but significant PR implications. Would have

6 to agree with Treasury."

7 So that is the point that is being addressed.

8 A. I understand, I have understood.

9 Q. And the impression one gets is that you were in favour

10 of spelling out the adverse consequences in the

11 affidavit, and you were on the same side as Miss Leslie

12 in that little debate.

13 A. Yes.

14 Q. And Mr Headdon and Mr Nash were against it, for

15 commercial reasons, do you recall that?

16 A. Yes.

17 Q. The point that was being discussed was whether to bring

18 out the point that if you could not follow the policy

19 that the Society had, there might be a downside for

20 non-GARs, who had a PRE that they would get asset share,

21 that was essentially the point.

22 And also that if non-GARs knew or were in the

23 position where they might have to subsidise that cost,

24 it would be difficult to get new business.

25 A. Is it a question?

37

1 Q. You see that --

2 A. I do, but are you asking me a question?

3 Q. Yes, I am asking whether you recall that that was part

4 of the discussion.

5 A. Yes, I do.

6 Q. And the decision that was ultimately taken was not to

7 spell this out, because to do so would tend to put off

8 investors, is that not right?

9 A. I cannot remember what the consequences of this meeting

10 were, whether, for example, Cindy Leslie discussed what

11 had been dealt with there with counsel, and whether he

12 expressed a view, I simply have no recollection of this.

13 I would have expected that before any decision was taken

14 about that, Brian Green at least would have been

15 consulted.

16 Q. Right, but the decision that was ultimately taken was

17 not to spell these consequences out in the affidavit.

18 A. Yes.

19 Q. And the reason was because of the commercial

20 consequences of doing so.

21 A. Very good.

22 Q. And the commercial consequences were that it would be

23 damaging for the Society, because it would put off

24 non-GAR policyholders.

25 A. That must be so.

So the non-GARs were not to be told the true position. But why should it have been necessary to ask the Treasury if they could be told? What was their role in this litigation? Am I right in smelling a rat? (literally).

Page 38: There is a very interesting comment by Martin about the judgment at first instance and the application for leave to appeal which worried Martin:

18 First of

19 all, you can imagine that when the case was won before

20 the Vice Chancellor, we were relieved, but a very

21 unusual thing happened immediately afterwards, at least

22 it struck me as very unusual, I cannot now remember

23 whether Jonathan Sumption was in court to receive the

24 judgment, but certainly Sarah Asplin, his principal

25 junior, was there, and she immediately made

39

1 an application for leave to appeal, more or less on the

2 usually ritualised basis, but actually very carefully

3 thought out, and I thought she was extraordinarily

4 persistent, rather than persuasive, and that is quite

5 a significant point, because the Vice Chancellor more or

6 less saw her off on discretion on two or three occasions

7 during her argument, but I felt him visibly weakening,

8 insofar as contract was concerned, and eventually -- and

9 this is what I found very unusual, and it was for me

10 very significant, because it goes to future litigation

11 risk -- he said, well -- one would have to look at the

12 transcript again, but he said, "Well, I have been

13 a judge for a very long time" -- it is a very unusual

14 thing for so senior a judge to say, "I have been a judge

15 for a very long time and I know that different judges

16 can take different views of the interpretation of

17 contractual language, and therefore, I had better let

18 you have your leave", and then there was the usual

19 debate about costs.

20 And I felt at the time that all the sort of

21 unconfined joy of winning had been removed, and that

22 a very serious warning had been given by the

23 Vice Chancellor which in a sense benefitted

24 Jonathan Sumption and his team, and Mr Hyman, and

25 disbenefitted us in quite a serious way, and that was,

40

1 for me, a sort of turning point, really. I do not know

2 the extent to which it was noted, I mean

3 Anthony Grabiner dealt with the matter in a perfectly

4 conventional way, and everybody went off, but for me,

5 for so senior a judge as Sir Richard Scott to make that

6 kind of observation seemed to me tremendously worrying,

7 and I was worried, my Lord.

8 I am sorry to have interjected it, but actually, it

9 has been on my mind for years.

Martin was dead worried from then on.

Page 50:After attending the Court of Appeal hearing he wrote:

25 "Thus, it is my view now, as never before, that the

51

1 executive owes the board a clear duty to spell out, in

2 terms, all the consequences they can now foresee if we

3 go down despite all our hopes and to present

4 a comprehensive strategic and tactical plan for debate

5 and decision. Financial, timing, short-term future,

6 long-term future, marketing/sales and so on. This is

7 not in any sense defeatism but plain common sense and

8 good planning. We, the non-executive board, must not be

9 caught unprepared personally and in PR terms by

10 a disaster we may all believe to be unthinkable.

11 Litigation is a very dangerous game and can have wholly

12 unexpected consequences. Prepare for peace, prepare for

13 war, as Churchill said!"

Page 58: It is agreed that Waller’s remark on ring-fencing was obiter dicta but critically important.

Page 63: Talking about going to the House of Lords:

13 Grabiner/Green unanimous that will win in

14 House of Lords. Did not get the real brains at Court of

15 Appeal. Hoffmann, Browne-Wilkinson, Millett do not have

16 policies, these are the ones we want.

But surely it transpired that Hoffmann did have a policy?

Page 64: Wilmot’s notes of meeting:

7 Mr Sclater a no brainer. Anyone not willing to go to

8 House of Lords. Any worse position if goes to House of

9 Lords.

10 "Miss Leslie: could be criticism that not currently

11 articulated.

12 "Mr Nash: Court of Appeal restricted to GAR class ie

13 unified rate only to that class. If to House of Lords

14 could be less palatable solution.

15 "Mr Sclater: could House of Lords come up with

16 something which will affect all policyholders.

17 "Miss Leslie: never hinted at in Sumption's case.

18 Risk, but v small. Would be difficult to spill over

19 from GAR class."

20 A. Could you read on a line?

21 Q. Yes:

22 "(As we)

23 "Mr Martin: process available of settling appeal

24 between parties where win all/lose all. Might have

25 missed an opportunity of saving from rocks. Right to

65

1 draw attention that Court of Appeal judges put forward

2 that board could redeclare in a way such that fair to

3 both sides. Worth considering mathematical."

4 In relation to the debate or the discussion that

5 took place there, it was recognised, was it not, that

6 there was a risk, albeit a small risk, as it was put, by

7 Miss Leslie, that the position in the House of Lords

8 could be worse than in the Court of Appeal?

9 A. Yes.

10 Q. And your own view was that the position might well be

11 worse because of what you considered to be the somewhat

12 populist position the House of Lords had taken in a

13 number of cases.

14 A. Yes, we have used -- or I have used in my witness

15 statement the expression "populist", perhaps less

16 pejoratively, shall we say "liberal"?

17 Q. Whichever tag you use, what you were concerned about was

18 the House of Lords coming to the decision that there

19 could be no process by which the benefits to GAR

20 policyholders could be, as it were, eroded.

21 A. Not entirely. Paradoxically, a populist decision by the

22 House of Lords, or indeed the Court of Appeal, would

23 have favoured the non-GAR policyholders, they were

24 numerically superior, and in a sense, they were the ones

25 who would most suffer as a result of the "wrong"

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1 decision. So you had an extraordinary situation where

2 the populist view might be in favour of the GAR

3 policyholders, but in numerical terms, populism would

4 have sided with the non-GARs.

5 My view was that paradox might be turned round in

6 the House of Lords, I thought it was dangerous, but it

7 might be turned round.

8 Q. But your concern at this stage was that the House of

9 Lords would take what you regarded as -- I will stick

10 with the word "populist", because you have used it in

11 your statement: the populist view that what the Society

12 was doing was going back on a guarantee it had given.

13 A. It would take the view that the discretion or the

14 contract points were against us.

15 Q. Right, and that would apply equally to the question of

16 the DTBP and to the question of ringfencing.

17 A. It is a possibility, I had not thought it through in

18 that way, that a populist view would also prevent

19 ringfencing, I am not sure that I had taken the thought

20 through that far.

All of this seems very damaging to the view that Scenario 6 was such a remote possibility that it was not worth mentioning to the non-GARs.

After the lunch break attention turns to what was said to the non-GARs:

23 Q. Right. Do you remember anyone saying at that stage,

24 that is to say in June 1999, "Should we not be telling

25 the non-GAR policyholders who are considering investing

82

1 in the Society, or who have already invested in the

2 Society, that there is a risk that they will end up

3 sharing the £1.5 billion cost?"

4 A. As I sit here today, on my oath, I do not remember.

5 Q. That is a question that ought to have been raised, is it

6 not?

7 A. With the benefit of 20/20 hindsight, perhaps.

Page 91: And the following is really damning:

5 Q. If you could go to page 18 of W3.2, first of all, that

6 is the witness statement bundle, in (z), you deal with

7 the question of this letter, and do you see about

8 halfway down that sub-paragraph you say:

9 "Either the last paragraph of the 1st February Nash

10 letter to policyholders was accurate or it was not. And

11 I remained unconvinced that a clean win in the Lords,

12 ringfencing and all, was a certainty."

13 So at the time the letter was sent out, you were not

14 convinced that a win involving ringfencing was certain.

15 A. Any more than anything else.

16 Q. Would you agree that the impression given by this letter

17 is that for non-GAR policyholders, the worst outcome

18 they faced is the decision of the Court of Appeal?

19 A. I think that may be too sophisticated an interpretation.

20 I can see what you are leading towards, but I find that

21 slightly too sophisticated an interpretation. I think

22 there is an appeal to the House of Lords, it is going to

23 be dealt with urgently, we will have to wait and see.

24 Q. Yes, and then the paragraph which says:

25 "Contrary to many of the reports which have appeared

87

1 in the press, there would be no significant costs

2 imposed on the Society if the Court of Appeal's decision

3 were upheld in the House of Lords."

4 A. Yes, I regard that as a distortion.

5 Q. A distortion of what?

6 A. Of the Court of Appeal's decision.

7 Q. Why is that?

8 A. Because I think that the ringfencing point made by

9 Lord Justice Waller was, as we agreed before the short

10 adjournment, obiter, it was not part of any decision

11 that I could see.

12 (2.15 pm)

13 Q. What about the next two sentences:

14 "The speculation regarding financial difficulties

15 and costs to be borne by with profits policyholders is

16 therefore unfounded. Your Society remains, and will

17 continue to remain, financially secure."

18 The impression given by those sentences is that the

19 worst outcome non-GAR policyholders would face is the

20 ringfencing solution suggested by Lord Justice Waller,

21 is that not right?

22 A. Yes.

23 Q. And that is not a fair reflection of the board's

24 understanding of the position at the time, is it?

25 A. No.

88

1 Q. You were uneasy about this letter; if we could go to C39

2 next, page 25, you wrote to Alan Nash a few days later.

3 A. No, I wrote to him on the day in which my wife and

4 I received identical copies.

5 Q. Right, okay. You make the point that you do not

6 understand the paragraph about costs:

7 "Leaving aside my lawyer's point about legal costs

8 which, win or lose, will be significant, please can you

9 explain or ask Chris to explain in simple language why

10 the effect of losing will not, or rather would not,

11 impose significant costs on with profits policyholders?

12 I am not the only non-exec who does not immediately

13 grasp this obviously simple point and I fear if we do

14 not, perhaps others will not either. Is the word

15 'significant' used here in any well understood way?

16 "I am really sorry to be a pest but time spent in

17 getting this right will not be wasted. If the meaning

18 is obscure, the words will come back to haunt us.

19 "As for the House of Lords case days, it was not

20 that I wanted the days changed but rather the ELAS and

21 Permanent meetings on those days changed, if possible,

22 as you no doubt do also."

23 Who were the other directors who did not understand

24 the letter?

25 A. I cannot remember now who I talked to about it.

One cannot help feeling that the judge will place greater weight on Martin’s evidence than on that of the other Directors. Has Martin dropped his co-directors in the proverbial?

1 I remember that I nearly had a seizure when I saw this

2 letter, and I called my wife, and we discussed it, and

3 I said, "Look, what does this mean to you?", and I rang

4 somebody -- it may have been Alan Tritton, to whom

5 I spoke most frequently in those days, probably it was

6 he, and he said the same -- if it was he, he said the

7 same, somebody said the same to me.

8 In any event, what was odd about it was that I had

9 no recollection of participating in the drafting of this

10 letter, in these terms, and I sent an immediate note to

11 Alan Nash in as rational terms as I could.

12 Q. Just going forward, do you remember discussing your

13 reaction to this letter with the other members of the

14 board after this?

15 A. I think in the context of the completed correspondence,

16 because if you remember -- well, it is in the bundle,

17 I corresponded with Alan, Alan asked Christopher Headdon

18 to write to me about it.

19 Q. Yes.

20 A. And there was an exchange.

21 Q. Yes, I am going to go through those.

22 A. Very well. Well, the answer to that is that at some

23 stage during that exchange, I discussed it with others.

24 Q. Other members of the board?

25 A. Other members of the board.

90

1 Q. And not merely with management?

2 A. Not merely with management.

3 Q. Do you recall how you expressed your reaction to the

4 letter to other members of the board?

5 A. It might have been intemperate.

6 Q. Do you think that you gave them the impression that you

7 had nearly had a seizure when you received it?

8 A. Probably.

9 Q. And do you recall what the outcome of that discussion

10 was?

11 A. It was too late.

12 Q. Well, it was not too late, was it, because it was always

13 possible to send out a further letter, was it not?

14 A. Well, the sequence of events was that I applied to Alan,

15 obviously, and some explanations were offered, and

16 I reached the point in thinking about it when I felt

17 that if I probed further and fussed further, I would

18 seriously demotivate them, and there had to be a point

19 at which I had to accept the explanations I was being

20 offered, or go.

21 Q. We will look at those explanations in a moment. When

22 you discussed the matter with other members of the

23 board, was a positive decision taken not to send out

24 a further letter, on the basis that it was too late?

25 A. Was a positive decision taken?

91

1 Q. Well, a decision taken that it was too late.

2 A. I cannot recall. Certainly no correction was sent out,

3 was it?

4 Q. No.

5 A. So I think the answer must be yes to your question, but

6 I have no recollection of it.

Page 92: Martin comments on the concept of obiter dicta:

13 Q. So you still were not content with Mr Nash's explanation

14 at that stage.

15 A. I felt that there was, either deliberately or quite

16 innocently, a failure fully to understand the nature of

17 what Lord Justice Waller had said, and the circumstances

18 in which he said it.

19 Q. Right, if we look -- I am sorry.

20 A. I think it is fair to say, as someone who was sitting

21 with a board of laymen, that the difference between what

22 forms part of a judgment and what forms part of it but

23 is not part of the judgment is quite difficult to

24 understand, even we lawyers, I think, sometimes have

25 difficulty with this, and I suspect this was an entirely

93

1 innocent misinterpretation of Lord Justice Waller's

2 words.

3 Q. But it is a dangerous misinterpretation nonetheless,

4 because of the impression it creates.

5 A. It is not so much that, but what is Miss Leslie for if

6 not for that purpose?

Page 101: Martin makes a serious admission:

20 Q. Right, let me go back to my question then: I suggest

21 that as a director, you ought to have ensured that there

22 was a full debate about it, and a full debate about

23 whether a corrective letter ought to be sent out; would

24 you accept that?

25 A. Yes.

Page 104: And there is more:

6 Q. Indeed, looking back at it, that letter of 1st February

7 was misleading, was it not?

8 A. Yes.

9 Q. Would you accept that it is a letter that ought not to

10 have been written, Mr Martin?

11 A. Well, it was a letter that clearly had to be written

12 round about that time, but obviously, in a different

13 form.

14 Q. In those terms, it ought not to have been written.

15 A. Yes.

16 Q. Would you accept that?

17 A. Oh, I must.

18 Q. And it is no justification, as various people have

19 suggested in this court, that to have said more about

20 the risk might have put off non-GAR policyholders; would

21 you agree with that?

22 A. Yes, if that is what they said.

And from then on the hypotheticals take over.

Page 156: But at the end of the day Milligan for ELAS reads out from a letter written by ELAS’s solicitors to E+Y inviting them to admit negligence. This arises from the previous bombshell from E+Y that they are not going to produce any witnesses as they regard ELAS’s claim as hopeless i.e. no case to answer. ELAS seem to be suggesting that E+Y could still admit negligence. But if there was no damage flowing from that negligence where does that help? It is not easy to understand what is going on and I may be wrong.

But then ELAS drops the lost sale claim!

Day 53 – Tuesday 19th July 2005

Mr Miles for ELAS continues to cross-examine Martin.

Hypotheticals continue.

Page 26: Sher for Wilson cross-examines Martin

Page 28: Martin thinks the Flanges correspondence should have been brought to the Board.

Page 32: Martin says he would have dealt with Flanges by sending them a FO or GL letter in the hope they would go away.

Page 62: Rabinowitz for Allen & Overy clients cross-examines Martin.

Page 86: Rabinowitz is trying to get Martin to pull back on the statements he made yesterday. He only half succeeds. Martin claims that he did not want to appeal to the House of Lords but to stop with the Court of Appeal decision and ring-fence. Nobody would agree to this. Rabinowitz claims that this meant that Martin did not regard the Court of Appeal as giving rise to a £1.5 billion liability. However this does not really stack up as the reason for appealing was that the Court of Appeal’s mention of ring-fencing was only obiter dicta and there was no certainty one could ring-fence hence the need to go to the House of Lords. The problem is that the situation was even more complex than that. Initially they were going to the House of Lords to get the decision on the DTBP reversed and it was only later that they realised that ring-fencing could be called in question when Gloster started talking to Sumption in April 2000.

Page 106: Martin does backtrack about the letter of 1st February 2000 and Rabinowitz tries to claim that Martin was eventually satisfied that the letter was ok. Whilst Martin sort of agrees with him a letter from Martin to Headdon which Rabinowitz reads shows that he still had a lot of queries about the situation. It is going to be up to the judge to make what he can of Martin’s vacillating. I think the actual correspondence is going to be more decisive in showing that Martin was very unhappy with Nash’s letter. There is of course no mention of how policyholders and potential policyholders might be misled.

Page 118: However I really do wonder whether Martin has been got at over-night. Apparently he did not return home:

19 Q. Just picking up your evidence -- I am very happy for you

20 to read all of it to yourself, but the bit that I want

21 to refer you to is four bullet points from the end,

22 where you say:

23 "I regard a scenario 6 result in the House of Lords,

24 given the advice and notwithstanding my own scruples

25 raised to satisfy myself they were seen by experienced

26

118

1 counsel as unrealistic, as so remote or unexpected as

2 not to justify any publicity of the kind suggested."

3 I think that reflects what you are telling my Lord

4 now.

5 A. It is, my Lord, yes.

It is difficult to see how evidence under oath can change so dramatically overnight.

Page 133: As to the Board meeting of December 1993 when the DTBPwas introduced they had a very long agenda which they were rushed through so as to start their Christmas lunch promptly at 1p.m. So Martin cannot remember what happened. Very understandable.

Page 134 Leaver cross-examines Martin.

Leaver has been able to drop a lot of his questions as they have already been asked by Sher and Rabinowitz. Counsel for the other Directors are really ganging up on him to make him recant on yesterday’s indiscretions!

Page 140: Mumford for Ranson cross-examines Martin.

MR MUMFORD: Good afternoon, Mr Martin.

25 A. Good afternoon. I am trying to remember who you are.

141

1 MR JUSTICE LANGLEY: Would you like a ten-minute break in

2 order to see if you can bring it back to mind?

3 A. Thank you, my Lord, I am fine.

There follows a eulogy of Ranson.

Then follows a long discussion on timetabling and a hint from the Judge that he has lost track of what this case is all about after the lost sale claim has been dropped. That makes two of us! :-

24 Can I mention just one other thing, which may be

25 an utterly irrelevant thought, that has been floating

188

1 around in my mind since I heard the sale claim was

2 abandoned against E&Y? It may be that everybody will

3 need to think about this, but occasionally, I have

4 struggled in my own mind in thinking about how the

5 surviving claims against the directors and the surviving

6 claims against E&Y relate to each other, that is to say

7 whether they are cumulative, alternative or a bit of

8 both, and at some stage, maybe not on Thursday, I might

9 like a bit of help on that too.

So what can one make of Martin’s evidence? Did he get carried away yesterday and perhaps got a bit too enthusiastic with the idea that he could distinguish himself from his fellow Directors by saying he was Cassandra and warned them all along but they would not listen? Was he done over by them during the night? Judge Langley will have to decide!

Day 54 – Wednesday 19th July 2005

Headdon cross-examines Martin.

Ring-fencing is discussed. They agree it is industry practice. But it is not obvious why this point is raised as this is where the House of Lords went off on a frolic of its own in banning ring-fencing – and seemingly there is nothing to be done about that – certainly not in this court.

Page 12: Mr Hapgood for E+Y cross-examines Martin.

Hypotheticals yet again.

Page 66: Martin is asked for his opinion of Headdon and Nash. As to Headdon he had the highest opinion. His view of Nash is not given or pursued. Possibly no significance in this.

That was the end of Mr Martin. The Judge invited him to make any corrections to the transcript for the past two days when he has had time to read it. It will be interesting to see whether he does in view of the contradictions between Monday and Tuesday.

The court rose at 1p.m.

Day 55 – Thursday 21st July 2005

Housekeeping.

Page 2: Milligan for ELAS suggests that E+Y’s expert witnesses Mr Ross and Mr Karim need not be called.

Page 3: Hapgood for E+Y says he has had no notice about this suggestion and he needs to think about it.

Page 4: Hapgood says he will write to ELAS before close of business on Monday 25th July. If no agreement then the Court can reconvene in that week any day except Friday.

Page 5: Mr Rabinowitz for Allen & Overy client Directors will still be calling Mr Franklin because :

MR JUSTICE LANGLEY: That is what I thought, because the

4 loss of sale claim on notional Hyman still runs.

5 MR RABINOWITZ: It depends which press release your Lordship

6 has regard to; one said it was being dropped, the next

7 said it was being carried on, but your Lordship, so far

8 as we understand it, at least at the moment, as we

9 understand it, it is going ahead.

I wish I could say that I could enlighten anyone as to what that means!

Page 9: We get some enlightenment about what Mr Arnold’s report contains:

9 MR HAPGOOD: We set out, on pages 1 to 4 of that letter,

10 seven significant differences between Mr Arnold's

11 approach and what has actually been put to the

12 witnesses.

13 It is not simply that Mr Arnold's approach has not

14 been put at all, it is that the case which has been put

15 is fundamentally inconsistent with Mr Arnold's approach,

16 and there is a world of difference between saying, "You

17 would have been a little bit more cautious, you would

18 have gone for 9 per cent not 10 per cent", saying that

19 on the one hand, and saying, as Mr Arnold does, that

20 these provisions would have caused a sudden realisation

21 that the Society's entire business model was not viable,

22 and that there had to be immediate and massive changes

23 of direction.

Page 10: Hapgood argues that if the lost sale claim has been abandoned because of what the Directors said in their evidence equally the claim based on bonus cuts should fail and this brings the claim down a mere £608 million.

Page 13: Rabinowitz weighs in about the bonus cuts claim against the Directors. Judge Langley says that he thinks ELAS are saying that it is in the Directors own interest to say that they would not have reduced the bonuses. However he points out that that point was never put to them as far as he can remember and it should have been if the claim is to be maintained. Significant.

Page 16: Confusion as to the nature of the case being put against the Directors seems to be rife and ELAS claims it will explain in its final submissions. Counsel for the Directors find it a bit rich to have the claim explained only at the end of the trial. Leaver says:

14 Really, the Society have to come clean about how

15 they are putting their case against the individual

16 defendants, and for our part, my Lord, we will assume,

17 when we come to prepare our submissions, at the end of

18 this case, that the way that the case is put is the way

19 that it was put to Miss Page in her cross-examination,

20 and that if a point was not put, then it is not being

21 proceeded with. I put that marker down now, in addition

22 to the points that have been made by Mr Hapgood and by

23 Mr Rabinowitz.

Page 18: It seems to be that Mr Arnold is proposing very deep cuts in bonus rates to bring bonuses back in line with assets rather than just the cuts of 1 or 2 percentage points upon which the Directors were cross-examined by Milligan for ELAS.
It is therefore suggested that that part of the bonus claim which suggests deep cuts for the purpose of getting down to asset level has been dropped as well. The Judge seems to be agreeing.

Page 20: Headdon and Nash claim to be out of their depth in all this but they are very happy to endorse what Counsel has been saying. Like cats that have been at the cream.

Page 22: Judge Langley is critical:

17 MR JUSTICE LANGLEY: Mr Milligan, it is a bit different.

18 I mean, we have now finished the factual evidence. We

19 have, as you rightly pointed out, a considerable amount

20 of expert evidence still to come. What targets are

21 still seriously being aimed at? I would have thought it

22 would be helpful to everybody to know the answer to

23 that.

24 Everybody has accepted that the court has no powers

25 to do anything in this situation, but I have to tell

23

1 you, I do find it odd at the moment that the point you

2 are making appears to be, "Well, if I put 1 per cent and

3 I get no, therefore if I put 20 per cent, plainly

4 I would get no too", I find somewhat unimpressive, when

5 I think the answers to the two points might be

6 different, and I am concerned that the question you have

7 been asked, "What are you going to submit to this court

8 that enables it to disbelieve the directors?", and the

9 response, as I have already indicated, which I have

10 read, is one which I do not think has been suggested to

11 any director in the course of this hearing, and there

12 has been ample opportunity to do it.

13 Those are the two things that I do have a concern

14 about. Maybe you are right, and in the last analysis,

15 if you want to say, "Wait and see until closing

16 submissions", you are entitled to do that, but it would

17 be helpful to at least know where you are coming from in

18 a little more detail.

Page 25: Milligan’s position, in reply, is that he accepts that the Directors quite reasonably accepted what Headdon suggested but that the experts are going to show what Headdon should have suggested. Did my hypothetical smile on the face of Headdon fade at that point?

Page 26: Milligan refers back to Tritton’s evidence:

19 MR MILLIGAN: It is against the background of what

20 Mr Headdon may or may not have been recommending. I just

21 take an extreme example, where on the first afternoon

22 when I cross-examined Mr Tritton, he dug his heels in

23 and took, if I may say so, an absurd position that he

24 would not have done anything or he would have fired the

25 auditors. However, the following day, in the light of

26

1 a conversation with his wife, common sense prevailed,

2 and he gave some very different evidence.

3 Clearly, we will be inviting you to accept the

4 different evidence and reject that which he gave on the

5 first afternoon. I mean, there are instances of that

6 kind.

So there is a woman behind this whole affair! And could Martin be another instance?

A discussion on friendly fire develops between the Judge and Milligan. It does seem as though Headdon may be coming into the sights of both friendly and hostile fire when the expert evidence is deployed. It looks as though Milligan will present Arnold’s evidence for that purpose.

Page 33: Judge Langley refers to it as the ‘Headdon route’.

Page 42: Hapgood for E+Y reminds us that they are going to seek costs on an indemnity basis for the abandoned lost sale claim i.e. a big bill.

Page 44: They think the case may still last from September 19th to Xmas. Judge Langley has his doubts about finishing by Xmas.

So finally everyone is off for a nice long holiday
Not quite two months and at whose expense?