15 May 2006
6 January 2014
6 January 2014
11 November 2013
10 July 2014
13 November 2013
After 13 years of litigation, the BCCI liquidators’ case spectacularly collapsed. In its first interview, the Bank of England’s legal team relives the trial’s dramatic finale. By Joanne Harris
When Freshfields Bruckhaus Deringer partners John Goddard and Philip Croall arrived at the Royal Courts of Justice on 2 November 2005, they expected a day much like the previous 255.
Goddard, Croall and six barristers had been occupied since January 2004 defending the Bank of England against the £850m misfeasance claim brought by the liquidators of the Bank of Credit & Commerce International (BCCI).
On that November day, the claimants’ lead counsel Gordon Pollock QC laid out his papers in court 73 as he had done every day of the trial. At 10.26am Mr Justice Tomlinson came in to begin the day’s business. Less than 10 minutes later, Pollock had informed the court that the claimants were abandoning their case; the barristers and law firm Lovells had cleared away their files. Nicholas Stadlen QC, representing the Bank of England, was preparing a closing salvo that would shortly be flying round the City’s email grapevine.
Six months on, the Bank of England has secured indemnity costs exceeding £80m and Tomlinson J has handed down a damning judgment criticising the liquidators’ handling of the case. Goddard, Croall and Stadlen can now look back at the case that has consumed their lives for 13 years and at the extraordinary sequence of events that led to the collapse of the BCCI trial.
A speculative claim
“This case didn’t fail because it was big: it failed because it was a bad case,” says Croall. “It was essentially a speculative claim.”
The liquidators of BCCI, accountancy giant Deloitte, launched the misfeasance claim against the Bank of England in 1993, two years after BCCI collapsed. The case was designed to recover money for BCCI’s creditors and overall the liquidators have been enormously successful, paying back £5.5bn.
Freshfields was instructed by the Bank of England as soon as BCCI collapsed, and it brought in Fountain Court silk Stadlen at the same time. The team represented the Bank through the 1992 Bingham Inquiry into the collapse and was retained when the litigation kicked off.
It took a further 11 years for the case to reach trial. The Bank of England initially filed a strike-out application, which was upheld in the first instance and in the Court of Appeal, but was then dismissed by a three-to-two House of Lords majority. After 30 preliminary hearings, the trial finally began before Tomlinson J in January 2004 with a “Berlin Wall” of documents separating the parties.
The case was newsworthy from the outset. Just before the trial began, The Lawyer revealed that Pollock pocketed a brief fee of £3m and made waves by calling two Freshfields assistants on maternity leave “sex-crazed”. He also made the longest opening statement in English court history, speaking for 80 days.
The Bank of England’s team acknowledge Pollock began the case strongly. “For the first few months he did a very good job at painting the Bank in a very bad light,” admits Goddard.
However, Goddard says that soon it became apparent that Pollock was not restricting himself to the liquidators’ pleaded submissions, as new individuals were added to the list of defendants and new allegations about the events leading to BCCI’s collapse were made. Tomlinson J described this as “the extraordinary manner in which the claimants’ case was made to change to fit the exigencies of the moment”.
Stadlen explains that as Pollock spoke, Freshfields and counsel went back to the drawing board in order to answer the changing case.
“The Bank had no choice but to respond in detail,” he says, “and this involved an enormous amount of work during the claimants’ speech, rewriting the Bank’s submission and investigating new areas of the case for the first time. We made an effort to reduce court time by putting in 14 lever-arch files of written submissions which, if we had made them orally, would have added months to the trial.”
Even with the written submissions, Stadlen was on his feet for 119 days - a speech described by Tomlinson J after the case collapsed as a “tour de force”. As the judge noted in his costs judgment: “Unfortunately, [second counsel for the claimants] Lord Neill and Mr Pollock absented themselves from large parts of Mr Stadlen’s address so that the immediate impact thereof may have been lost on them”.
On the defendants’ side, Stadlen was the key figure in court, present for 255 of the 256 days of trial (missing one because of a bad back). The chronological period under debate was divided up among the other five barristers: Mark Phillips QC, Ben Valentin and Tom Smith of 3/4 South Square, and Fountain Court’s Bankim Thanki QC and Henry King. The Freshfields team was split along similar lines.
Goddard describes the demands of the case since it was sent to trial as “relentless”, adding: “[Lovells’] Christopher Grierson kept us under pressure all the time.”
The court sat for four days a week, which Stadlen thinks was one of the few things that made such a long trial bearable.
“I cannot imagine how one could have done a trial like that on a five-day week,” he says, adding that three-mile runs, seven-a-side rugby and a half marathon before beginning his opening statement helped him cope. However, “never having a moment’s doubt as to the ultimate success of the case” was also a factor.
It was the Bank’s confidence that led it to reject settlement approaches made by the liquidators.
Croall praises the way the Bank worked with its advisers. “The Bank has been an outstanding client,” he says. “The clarity of the instructions and the support never wavered. It emboldened us when we had difficult periods.”
But as the cross-examination of witnesses progressed, the defendants gained confidence, and they prepared a closing statement to be delivered in the event of the other side giving in.
“We were conscious that our case was going well, and theirs was going badly, and at some stage this might happen,” Goddard explains. He did not, however, expect the trial to end when it did, on a day when Bank governor Mervyn King was in court.
“I had been specifically asked by the Bank whether there was anything going to happen in court that day. I advised that the chances of anything unusual happening that day were extremely low,” Goddard admits.
He was wrong. Pollock announced the discontinuance and in the Bank’s camp there was general jubilation. King was even spotted hugging Stadlen.
Despite the celebrations, the defendants’ work was not yet done. Over the next two months the team produced an exhaustive 350-page submission explaining just why the bank should be awarded indemnity costs.
Tomlinson J took their points on board, concluding: “It would have been an affront to justice and contrary to the public interest had the liquidators successfully stifled publication of the court’s conclusions. This application enabled the consequences of the liquidators’ conduct fully to be worked out and in my judgment it is appropriate that the claimants should pay the costs thereof on the same indemnity basis as they must pay the costs of the action.”
Tomlinson J’s judgment provoked much comment in the wider litigation community. Not only did he lambast the claimants’ lawyers for the way the case was handled, but in admitting that he and the former Lord Chief Justice Lord Woolf had considered bringing an end to the case in December 2004, he raised questions about the way big-ticket litigation should be handled.
In hindsight it is easy to say that the House of Lords should have struck the action out, but Goddard, Croall and Stadlen admit that this view is too simplistic.
“It’s important to realise what their decision was here,” says Goddard. “They were overturning the judge and the Court of Appeal on the grounds that the judge and the Court of Appeal had based their decisions on the fact that no dishonesty had been found in the Bingham Report. I don’t think the House of Lords would have expected the case to develop in the way it did.”
Stadlen agrees, but says that the way that BCCIdeveloped sets a crucial precedent.
“I think it likely that the pendulum will swing towards a greater willingness to entertain strike-out applications even in complicated cases,” he says. “The first instance judgment [of Mr Justice Clarke] proved a very good model. At the time it was a ground-breaking decision at the cutting edge of judicial intervention.”
Tomlinson J’s judgment, too, will prove important. Stadlen says: “The effect is that it will act as a deterrent against unmeritorious claims in at least two ways: first, because the judge made an order for indemnity costs for the whole 12 years of the action; and second, because the judgment is now clear authority for the proposition that a court has power to give a judgment criticising the claimant’s conduct in the litigation even where the claimant unilaterally discontinues and offers to pay indemnity costs.”
The trio discount any suggestion that the bar for misfeasance claims is set too high, pointing out that those in public office are protected by statutory immunity.
“Before anyone objects to the status quo, the arena for debate is not the court, but Parliament,” says Stadlen.
That debate does not look likely yet and, as Croall says, “a successful claim of misfeasance remains an improbability”.
With only the costs hearings left, Goddard, Croall and Stadlen can move on to other things. The solicitors are pleased that they can turn their attention to other clients after having spent 100 per cent of their time on BCCI for the past five years.
Stadlen wants a holiday, but is reconsidering plans to travel around the world on a motorbike after reading actor Ewan McGregor’s horror stories of being bitten by parasites while making the trip. In the meantime, he says: “I’m happily enjoying doing cases that don’t last 15 years.”
If the lessons of BCCI have been learnt by the litigation and business communities, Stadlen, Goddard and Croall may never have to manage such a long case again.
119 days for the Bank’s opening statement
256 days in court in total
87-page judgment on costs
Six barristers for each side
£73m in legal fees for the Bank’s counsel and law firm Freshfields, plus interest
£37m in legal fees for Deloitte’s counsel and law firm Lovells
£3m brief fee for Gordon Pollock QC
£850m claimed by the liquidators in this action
£5.5bn returned to BCCI creditors in total
For the liquidators of BCCI:
Lovells (lead partner Christopher Grierson)
Gordon Pollock QC, Essex Court Chambers
Lord Neill of Bladen QC, Serle Court Chambers
Clare Montgomery QC, Matrix Chambers
Dominic Dowley QC, Serle Court Chambers
Barry Isaacs, 3/4 South Square
Nathan Pillow, Essex Court Chambers
For the Bank of England:
Freshfields Bruckhaus Deringer (lead partners John Goddard and Philip Croall)
Nicholas Stadlen QC, Fountain Court Chambers
Mark Philips QC, 3/4 South Square
Bankim Thanki QC, Fountain Court Chambers
Ben Valentin, 3/4 South Square
Henry King, Fountain Court Chambers
Tom Smith, 3/4 South Square
1993: Misfeasance claim against the Bank of England launched by Deloitte, the liquidators of BCCI
1997: Mr Justice Clarke strikes out the claim
1998: Court of Appeal dismisses the liquidators’ appeal
2001: House of Lords rules that the issue of misfeasance in public office must be heard at trial
2002: Mr Justice Tomlinson hands down his privilege judgment in Three Rivers District Council v Bank of England, finding for the Bank
2004: January - Gordon Pollock QC gets to his feet to begin his opening statement March - Court of Appeal upholds liquidators’ appeal on privilege July - Pollock sits down after a record 80-day opening speech; House of Lords finds for the Bank on the privilege issue
2005: March - Nicholas Stadlen QC sits down after 119 days of opening statement 23 September -The English Liquidation Committee passes a resolution that the case should be discontinued October - It emerges that Deloitte has made three rejected attempts at settling the claim with the Bank 2 November - The liquidators announce that they are abandoning the case
2006: 31 January-3 February - The Bank presents its case for indemnity costs; the liquidators do not attend the hearing 12 April - Tomlinson J hands down judgment on costs