Judge condemns BCCI liquidators' case against Bank as 'a farce'

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The Independent Online

The High Court judge who presided over the lawsuit brought against the Bank of England by the liquidators of the collapsed bank BCCI condemned the case as a "farce" yesterday.

In one of the most damning judgments seen in recent legal history, Mr Justice Tomlinson criticised Gordon Pollock QC, counsel to the liquidators Deloitte, whom he said was guilty of "sustained rudeness". His colleague, Clare Montgomery QC, was responsible for deliberately "wasting time" during the trial, he added.

The judge also accused Deloitte of trying to manipulate the media to paint the Bank in a bad light and force it to settle the case. He revealed he had consulted the Lord Chief Justice on how to end the marathon action which he feared would damage the British legal system. The judgment is expected to have implications for future legal battles.

In November, Deloitte finally dropped its £850m damages case against the central bank, ending what is believed to have been the most expensive and longest commercial legal battle in UK history. After repeatedly failing to negotiate a settlement with the Bank, the liquidators decided to abandon the lawsuit which dragged on for 12 years and racked up legal bills of about £120m.

Deloitte agreed to pay the Bank's legal costs of £81.5m but never withdrew its allegations and did not offer any apology. The case came to trial in January 2004 but had been the subject of pre-trial hearings since 1993.

Mr Justice Tomlinson said after listening for many weeks to opening submissions from the Bank's lawyer, Nicholas Stadlen QC, "I became so concerned about the case that I decided both to consult and to warn the Lord Chief Justice about it. I told the Lord Chief Justice, then Lord Woolf, that the case was a farce."

The judge told him the case being pursued "bore little or no relation to that which the House of Lords had considered fit to proceed to trial".

Referring to the "myriad hopeless inconsistencies and implausibilities" in the liquidators' case, the judge also warned Lord Woolf he "feared that the case had the capacity to damage the reputation of our legal system". They discussed whether they could do anything to "persuade the liquidators of the folly of their enterprise," but Mr Justice Tomlinson concluded there was nothing which could be done as they were represented by "a legal team of the greatest eminence".

As the Bank is legally protected from negligence claims, the liquidators pursued the stronger claim of misfeasance in public office, alleging the central bank deliberately turned a blind eye to fraud at BCCI, which collapsed in 1991 owing more than £10bn to creditors. The allegations originally centred on 22 Bank officials but during the course of the trial extended to more than 40 officials. The liquidators accused them of widespread dishonesty in failing to regulate the fraudulent activities of BCCI and to prevent what has been described as the largest banking collapse in modern history.

In his 86-page judgment, which the Bank had asked for, Mr Justice Tomlinson set out the reasons why he exonerated all the individuals involved and the Bank. He said the officials had been accused of "an immense catalogue of outrageous behaviour". They were accused of deliberately misleading their governors as well as Parliament and were alleged to have created a monumental misleading paper trail to cover their tracks over 12 years.

The judge said he was aware of the distress caused to the accused officials and families of those accused after their deaths. He deplored the fact the liquidators had "assiduously courted publicity" to back their claim by employing a PR firm and by releasing selective extracts from documents to show the Bank in a bad light. He described this as a "cynical and grotesque operation" which painted "a wholly distorted picture of the Bank's conduct".

Deloitte reacted to the judgment by saying: "The liquidators undertook and conducted this litigation in absolute good faith, in the interests of the creditors of BCCI and on the basis of legal advice. They are therefore disappointed by the way in which the judge has characterised the conduct of the case." The Governor of the Bank of England, Mervyn King, said: "The judge's words speak for themselves."

The judge also accused Mr Pollock, one of the City's highest-paid lawyers, of rudeness to himself and Mr Stadlen. "It was behaviour not in the usual tradition of the Bar and it was inappropriate and distracting," he said.

Deloitte has recovered large sums from other institutions embroiled in the BCCI collapse and has returned 81 per cent - nearly $6bn (£3.4bn) - to creditors.

The firm has received £184m in fees during the entire liquidation and a reported £56m in the 12-year claim against the Bank. A committee representing the creditors thought the legal action should have been dropped sooner.

Laying down the law

What the judge said

The farce: "I became so concerned about the case that I decided both to consult and to warn the Lord Chief Justice about it. I told the Lord Chief Justice, then Lord Woolf, that the case was a farce."

The fear: "I warned the Lord Chief Justice that I feared that the case had the capacity to damage the reputation of our legal system."

The rude QC: "Mr Pollock's sustained rudeness to his opponent... was behaviour not in the usual tradition of the Bar and it was inappropriate and distracting."

The timewaster: "I regarded as unhelpful this unusual approach of the claimants' counsel [Clare Montgomery]. It wasted time and it prevented the Bank (and me) from ever knowing quite what case it was expected to meet."

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