Neutral Citation Number: [2005] EWHC 202 (CH)
Case No: BM230340
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 18 February 2005

Before:

THE HONOURABLE MR. JUSTICE HART
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Between:

	ACCIDENT ASSISTANCE LIMITED	Claimant	
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	HAMMONDS SUDDARDS EDGE (A Firm) 	Defendant	

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Mr Jeremy Cousins QC and Mr Andrew Charman (instructed by Messrs. Clifford Chance LLP) for the Claimant.
 
Mr Christopher Symons QC and Miss Sophie Mallinckrodt (instructed by Messrs. Lovells) for the Defendant.

Hearing dates: 8,9,10,11,12,15,16,17th November,13th &14th December 2004
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Judgment

Mr Justice Hart : 
Preface
1.	This case may interest a student of the comparative law of evidence and procedure.  It illustrates how in English civil procedure the court may, by the decision of the parties, be deprived of relevant evidence on a crucial issue of fact in the case.
2.	The case arises out of an acquisition made in June 1997 by the renowned United States based multinational conglomerate General Electric Corporation (“GE”), through its subsidiary IGE (USA) Holdings Limited of the claimant company (“Accident Assistance”), which carried on, or more accurately achieved its profits by the operation of, a successful credit-hire business.  As a result of the decision of the House of Lords in Dimond v. Lovell (decided in May 2000 and reported at [2002] 1 AC 384) that business suffered serious damage.  GE or its relevant subsidiary (and for convenience I refer hereafter to the relevant entity simply as GE) has sued the firm of solicitors (Nabarro Nathanson) retained by it to advise in connection with its due diligence alleging that they were negligent in failing to spot, or advise adequately on, the point on which the business was vulnerable.  That action is not, however, the action which is before me.  That action remains to be tried.  The present action is an action by Accident Assistance against the defendant firm which alleges that the defendant firm was negligent in not drawing the attention of Accident Assistance to the vulnerability both in the period before and after the acquisition.  It claims that, had it received the advice which it says that it ought to have received, the losses which it subsequently suffered would have been avoided.
3.	The evidential issue to which I have referred arises in this way.  The moving spirit in Accident Assistance both prior to the acquisition and for a period after it was a Mr Steven Evans (“Mr Evans”).  On his instructions the defendant firm obtained the advice of specialist leading counsel (Mr Hirst QC), on three separate occasions, on points which are critical to the case.  It is common ground that the advice given by Mr Hirst on each occasion on the relevant point was correct, and that, if it had been acted upon in a particular way suggested by Mr Hirst, the problems which later arose would have been avoided.  Accident Assistance now claims that Mr Evans did not understand the implications of the advice, and that had he done so he would have caused Accident Assistance to adopt Mr Hirst’s suggested solution in time to avoid those problems. Critical issues in the case are, therefore, the extent to which Mr Evans (acting on behalf of Accident Assistance) understood the advice and its implications, and, if he did not, whether he would have caused Accident Assistance to act any differently than it did if he had.  The court has, however, been deprived of the opportunity of hearing what he would have to say on these issues.  This is despite the fact that he appears to have been alive and well enough to provide the defendant firm with witness statements for use at the trial and to have been available to be called as a witness at the trial.  I was invited to pre-read those witness statements before the trial, and some of the evidence contained in them was referred to by Mr Cousins QC (for Accident Assistance) in his opening written submissions. Mr Evans was not in the event called by either party.  Mr Cousins could, nonetheless, have put the witness statements in as hearsay evidence had he wished to rely on it:  see CPR 32.5(5).  He did not, however, do so.  I have, therefore, to put them out of my mind altogether.  Both parties were entitled to take the course which was taken.  I shall consider the consequences later in this judgment.
Introduction
4.	Accident Assistance’s business at all material times consisted of arranging the credit-hire of vehicles to drivers whose own vehicles had been damaged in road traffic accidents and who could be expected to be able to recover the cost of such hire from the insurers of the other motorist involved in the accident (“the third party insurers”).
5.	On 29th April 1999 the Court of Appeal in Dimond v. Lovell [2000] 1 QB 216 held that recovery from the third party insurers was not possible in cases where the credit-hire transaction was neither exempt from, nor complied with, relevant requirements of the Consumer Credit Act 1974 and regulations made thereunder (“the CCA requirements”).  That decision was upheld by the House of Lords on 11th May 2000.
6.	Until about the beginning of February 1999 the contracts for the credit-hire into which Accident Assistance’s customers entered were on terms which were not exempt from, and did not comply with, the CCA requirements.
7.	As a result, it found that it was not able to make recoveries in respect of large parts of its business written in the period between March 1998 and March 1999.  The reason why a similar inability was not experienced in respect of the period prior to March 1998 seems simply to have been that the third party insurers were not taking the point in that period.  It is a striking, and important, fact in this case that Accident Assistance had traded successfully (at least since 1993) using agreements which were neither CCA compliant nor exempt.
8.	In this action, Accident Assistance seeks to blame the defendant firm for the fact that, during the material period, it traded using such non-compliant agreements.  The claim is for some £5m, but issues of quantum are not before me.  This trial has been concerned with liability only (including the question, if liability in principle be established, whether the defendant’s negligence caused losses during the whole of the material period).
The ownership of Accident Assistance
9.	Accident Assistance was at all material times to this action a wholly owned subsidiary of First Call Accident Assistant Limited (“FCAA”).  Prior to 6th June 1997 FCAA was a subsidiary of United Kenning Rental Group Ltd (“Kenning Group”).  On that date the whole of the issued share capital of FCAA was acquired by a subsidiary of the General Electric Corporation, IGE (USA) Holdings Limited pursuant to a Sale of Purchase Agreement (“the Acquisition”).  I was told that the value of the consideration paid amounted to some £20m.
The pre-Acquisition structure of Accident Assistance’s business
10.	Prior to the Acquisition the hire vehicles supplied to Accident Assistance’s customers were supplied by a Kenning Group subsidiary, Kenning Car and Van Rental Limited (“KCVR”).  Contractual documentation of the customer’s obligations in relation to hire charges, and rights in relation to credit, consisted of an agreement made between KCVR as Owner and the customer as Renter (“the Standard Agreement”) of which the critical provisions for present purposes are those contained in clauses 13, 14 and 15 which provided as follows:
“13.	Unless otherwise agreed payment for the Rental Charge shall be made in cash prior to the commencement of the rental of the Vehicle and the balance due to the Owner whether on his behalf or on behalf of the Insurance Arranger shall be paid to the Owner on return or collection of the Vehicle. Where credit terms have been agreed by the Owner 30 days from the date of invoice.
14.	(a) This condition and clauses 15 and 16 shall (if applicable) take precedence over the provisions of clause 13; 
(b) For the purposes of this clause 14, “the Third Party” shall mean the party the Renter alleges is liable for damages arising out of the road traffic accident referred to in clause 14 (c) and “Claim for Damages” shall mean any application for default judgment, interlocutory judgment, interim payment of damages or assessment of damages or any settlement agreed between the Renter and the Third Party; 
(c) Where the owner enters into this Agreement consequent upon the Renter’s own vehicle being unroadworthy as a result of a road traffic accident 
(i) The Owner will allow the Renter credit on the Rental Charges until such time as a Claim for Damages has been concluded against the Third Party, subject only to clause 15 hereunder; 
(ii) The Owner shall have the right to pursue an action in the Renter’s name against the Third Party; 
(iii) For the purposes of sub-clause (ii) above and to cover legal expenses incurred by the Renter in pursuing a Claim for Damages against the Third Party, the Renter shall obtain an insurance policy.  Such insurance policy shall be arranged for the Renter by the insurance arranger in consideration of the payment by the Renter of a premium of £1 in respect thereof (which shall be in addition to the Rental Charge.  Payment of such £1 premium shall fall due upon a Claim for Damages having been concluded pursuant to sub-clause (i);
(iv) The Renter shall secure the earliest recovery of the sum representing his claim for damages; 
(v) The Owner shall have the right to pursue an action through the County Court and / or High Court and the Renter must co-operate in the conduct of the action and, if required by the Owner, attend any hearing that the court appoints.
15.	If, and only if, the Renter is in default Clause 14 (c) (iv) or 14 (c) (v), then credit allowed by the Owner to the Renter shall be terminated and the rental Charge will be due from the Renter to the Owner 28 days from the Owner giving notice thereof to the Renter by reference to this Clause 15.”
11.	Accident Assistance’s business consisted in marketing the hire scheme to customers, and in pursuing on behalf of customers their claims against third party insurers.  The essential skills therefore consisted in identifying correctly at the outset those accident victims who might be expected to make a successful recovery, persuading them of the merits of having a hire car for which they would not have to pay personally, and then processing the resultant claims to a satisfactory conclusion.  It was not part of Accident Assistance’s business philosophy (or as I understand it of KCVR) that the hire charges should be recovered from the customer in a case where recovery could not be made against the Third Party. 
12.	As between Accident Assistance and KCVR (which were in common ownership) there was no written agreement.  KCVR would notify Accident Assistance when the vehicle had been returned to it.  Accident Assistance would then draw up an invoice to the customer on KCVR paper for the full amount of the rental charge.  The KCVR invoice to the customer would be presented by Accident Assurance to the third party insurers (from whom it expected to be able to make recovery of the hire charges in typically three to four months).  Accident Assistance would account to KCVR for the sums claimed against the third party after deducting an agreed amount by way of commission.  The evidence was not entirely clear as to whether in practice Accident Assistance only so accounted after making recovery from the third party insurers (as was stated to be the usual practice in the Instructions to Mr Hirst in December 1996), or how Accident Assistance and KCVR accounted, as between themselves, in those cases where recovery was not made. 
13.	This method of trading was the invention of Mr Evans.  Mr Evans was highly experienced in the field of credit-hire, having operated in it from the mid 1980s.  From 1993 he had been both marketing director of, and a shareholder in, the Kenning Group and managing director of Accident Assistance.  One advantage of this method of trading no doubt lay in the use of the well known Kenning name for the car hire element in the transaction: not only is this likely to have been a reassurance to customers but the Kenning invoice served to obscure from the third party insurers the fact that they were dealing with a credit-hire arrangement.  A further feature of the method of operation was that the customer never contracted directly with Accident Assistance:  the customer would be offered the deal (usually at the garage to which his wrecked car had been taken), would contract with KCVR rather than Accident Assistance, and Accident Assistance would have no direct control over what the customer was told, or what documents he signed, before he took delivery of what he might have been led to believe was a “free” hire car. 
14.	One of the central issues in the case is the extent to which Mr Evans at material times appreciated that the Standard Agreement was or might be regulated by the Consumer Credit Act, if so whether he appreciated that it was non-CCA compliant and, if so, whether he appreciated that there was a risk that for that reason third party insurers might be able successfully to resist claims based on KCVR invoices rendered to Accident Assistance’s customers.  At this stage it is only necessary to note the following points.
i)	it is common ground that the Standard Agreement was regulated by the Consumer Credit Act but was not CCA compliant for a number of reasons and that, as a result, it was not capable of being enforced against a customer;
ii)	it is common ground that prior to the decision of the Court of Appeal in Dimond v. Lovell it was a widely held view amongst lawyers expert in the subject (and not a negligent one to have held) that such unenforceability against the customer should not prevent the hire charges from being recoverable against the third party insurers;
iii)	Accident Assistance did not itself require a consumer credit licence (since the trading terms involved no contract for credit between Accident Assistance and the customer).  KCVR did require such a licence and held one.
iv)	it is common ground that had the Standard Agreement been re-drawn so as to require payment by the customer within 12 months, it would have been exempt from the CCA requirements.
The post-Acquisition structure of Accident Assistance’s business
15.	It was obvious that, once separated from the Kenning Group, Accident Assistance’s trading relationship with KCVR would need to be put on an arms’ length footing.  One of the issues debated in the negotiations which led to the Acquisition was whether the new relationship would be one under which Accident Assistance would procure KCVR to hire the car to the customer with Accident Assistance agreeing direct with the customer to finance the customer’s debt, or whether it should take the form of a hiring by KCVR to Accident Assistance, which would then sub-hire (on credit terms) to the customer.
16.	What was eventually negotiated and put in place at the date of the Acquisition was an agreement called the Agreement Concerning the Provision of Vehicles (“ACPV”).  Under the ACPV (which was designed to last for at least five years) the vehicles were to continue to be hired to customers by KCVR on the terms of the Standard Agreement, but with a provision whose effect was that Accident Assistance could on giving 5 days’ notice to KCVR, insist that the Standard Agreement should thereafter apply without clauses 14 and 15 (which were the provisions in the Standard Agreement whereby credit was extended to the customer).  The thinking clearly was (for reasons which appear below) that Accident Assistance’s own terms of trading with the customer, once their form had been decided upon, might render it unnecessary for the credit provisions to be contained in KCVR’s terms of trading with the customer.  
17.	The ACPV also made provision for the raising of invoices by Accident Assistance in KCVR’s name as in the past, making it clear that Accident Assistance had to pay KCVR the hire charges (less its commission) in the month following that in which the invoice was deemed to have been issued (which was the date when KCVR supplied Accident Assistance with the necessary information for the invoice).  The risk of non-recovery from the third party insurers was therefore clearly on Accident Assistance.  Moreover the APCV provided, by Clause 4.5, that
“Accident Assistance acknowledges that its liability to pay [KCVR] the charges referred to in Clauses 4.1 and 4.3 shall apply regardless of whether it is able to recover the same either from any insurer or directly from an Accident Assistance Customer.”
Relevant provisions of the Consumer Credit legislation
18.	The Consumer Credit Act 1974 and the regulations made thereunder comprise a formidable body of complex legislation.  Once penetrated, however, the provisions which are of relevance to the present case can be summarised as follows:
i)	A licence is required to carry on a consumer credit or consumer hire business: section 21 of the Act. It is a criminal offence to carry on such a business without a licence: section 39; and any agreement made in contravention of this prohibition can only be enforced by an order of the Director General of Fair Trading: section 40. 
ii)	Section 60 of the Act provides for Regulations to be made in respect of the contents and form of agreements. These are the Consumer Credit (Agreements) Regulations 1983 SI 1983/1553. They make provision as to statement of “prescribed terms” – amount of credit, interest rate, repayment. An agreement is required to comply with other formalities. It has to be headed to show that it is regulated, and there has to be a box for the customer’s signature.
iii)	Section 67 gives the customer the right to cancel the agreement during a cooling off period of 5 days from receipt of the executed agreement sent by post, if there were antecedent negotiations including oral representations made in the presence of the debtor.  There is no such right of cancellation where the agreement is executed at the business premises of the credit-provider.
iv)	Part IV of the Act and regulations made thereunder regulate the advertising of consumer credit business.
v)	Section 61 provides that non-compliance as to the formalities (including prescribed terms) renders an agreement “improperly executed”.
vi)	Section 65 allows the Court to permit enforcement of an improperly executed agreement.
vii)	Section 127(3) prohibits the making of an order under section 65 in the case of an improperly executed agreement unless a document containing all of the prescribed terms has been signed by the debtor.
viii)	Section 16 provides for regulated agreements to be “exempt” in accordance with an order made by the Secretary of State. The Consumer Credit (Exempt Agreements) Order 1989 SI 1989/869 provides, in so far as is relevant to this case, for exemption where payments are to be made in not more than 4 instalments within 12 months of the date of the agreement’s being made. This type of exemption first took effect in 1985 (SI 1985/757).
19.	The effect so far as enforceability of a regulated (i.e. not exempt) consumer credit agreement which does not comply with the requirements of the legislation is that it will be enforceable only with leave of the court, but that the court has no power to give such leave in the case of such an agreement if either it has not been signed or it does not contain the prescribed terms.  
The Retainer Of The Defendant Firm
20.	In October 1996 Accident Assistance was considering extending its business by promoting a scheme of “credit-repair”.  This was aimed at the motorist whose vehicle had been damaged in an accident caused by the negligence of the other driver but who did not have insurance covering the cost of repairing his vehicle.  The scheme was one whereby Accident Assurance would bear the cost of the repairs and pursue a claim for recovery of those costs against the third party accidents.  It sought advice from the defendant firm in connection with that scheme.
21.	Accident Assistance, which was based in Birmingham, appears to have instructed the Manchester offices of the defendant firm instead of the solicitors normally used by it, namely the Birmingham based firm of Pinsent Curtis, because of Mr Evans’ desire to have the work done by a Miss Draper, the young assistant solicitor whom he had met while she was employed by Pinsent Curtis, when, on an earlier occasion, advice had been sought by him on some consumer credit point.  Miss Draper was relatively inexperienced, having no more than about three years’ post qualification experience, and was not, and did not hold herself out as being, an expert on consumer credit.
22.	The first contact with the defendant firm was made by Mr McGilp of Accident Assistance to Miss Draper at the beginning of October.  After a short period in which, in Miss Draper’s absence, the papers were picked up by other solicitors at the defendant firm, Mr Evans made it clear that the matter was to be dealt with by Miss Draper whose job it would be to instruct Mr Hirst QC to advise on the documentation which had been produced by Accident Assistance.  Written instructions to Mr Hirst to advise were in fact prepared by a Ms Doohan of the defendant firm but thereafter Mr Evans’ only contact with the firm was with Miss Draper until she left the firm at the end of 1997.  The structure of the proposed credit repair scheme in the documents which Accident Assistance provided consisted of an agreement between Accident Assistance and the repairer (“the Garage Agreement”) whereby the former undertook to pay the repairer for the repairs, and an agreement between Accident Assistance and the customer (i.e. the uninsured motorist) whereby the customer authorised Accident Assistance to have the repairs done at a reasonable price and to pursue a claim against the third party, and acknowledged that credit was being extended until the conclusion of the claim, the customer being liable whatever the outcome of the claim.  The Instructions stated that the agreement had been in place for approximately two years and asked, inter alia, “whether he feels there are any problems relating to its enforceability by Accident Assistance”, raising in that connection in particular the questions of maintenance and champerty.  Advice was also sought on whether the consumer credit legislation operated to prevent Accident Assistance claiming “interest on the cost of repairs (so that this can be claimed back from the third party)”.
23.	Mr Hirst provided a draft of his opinion on the 13th of November 1996. In it he advised inter alia that credit repair did not face difficulties from the “medieval doctrines of maintenance and champerty”; that the documentation left many points unanswered (which he enumerated), that interest would not be recoverable from the third party unless the documentation made the client liable to pay it to Accident Assistance and that “I would expect a court to be satisfied that this was a genuine liability on the part of the client – i.e. one that [Accident Assistance] would enforce against the client and not merely a provision inserted in order to increase the prospects of obtaining an award of interest against the third party.”  As to the Consumer Credit Act 1974, he advised that the repair agreement, as drawn, was regulated by the Act and not exempt from it. He then spelled out with clarity the implications of this for licensing, advertising, formalities (including prescribed terms), and cancellation. He pointed out that the absence of a licence under the CCA meant that the agreement was only enforceable against the customer with an order of the Director General of Fair Trading, saying
“I expect this point will not previously have arisen because no attempt has been made to recover garage credit from a client and I do not think the Court would regard it as an answer for the third party to a claim by the client for the costs of repair.  The client is not obliged to behave disreputably by taking what is in effect a money lenders’ point against [Accident Assistance] in order to reduce the guilty driver’s liabilities [citing Chitty #26-051 and Finlay & Co v. N.V. Kwik Hoo Tong H.M. [1929] 1 KB 400]”
He warned that failure to set out prescribed terms in the repair agreement could lead to total unenforceability by reason of sections 60(1),61(1)(a), and 127(3) of the Act.  He then adverted to the possibility of drawing the agreement so as to bring it within the exemption provided by regulation 3(1)(a) of the 1989 regulations, stating:
“If the agreement for third party repairs required full repayment by, say, a single instalment (with all outstanding interest) within a period not longer than 12 months from the date of the agreement, it would be exempt from the tiresome provisions of the Act including licensing.  However, this would mean a change of marketing by [Accident Assistance].  The credit repairs would only be a temporary loan and if the insurers delayed settlement of the claim, the client would have to repay [Accident Assistance].  It would have the side advantage of making interest more easily recoverable.  I must stress however that the present agreement is not exempt and that it does not comply with the Act.”
His draft Opinion concluded by saying
“Similar consumer credit points will arise in relation to the hiring agreements, which I assume are drawn so as not to be consumer hiring agreements”
The reference to “consumer hiring agreements” was, I think, a reference to “consumer hire agreements” which, as defined in the Act, are the subject of detailed regulation, although they may also (as the Court of Appeal’s decision in Dimond held – see [2000] 1 QB 216, 231) be regulated consumer credit agreements.
24.	By 19th November 1996 Miss Draper had prepared for Accident Assistance’s consideration a revised version of the repair agreement, drawn so as to take advantage of the exemption from the Act referred to by Mr Hirst.  She faxed this to Mr McGilp under cover of a note which said that the “Hire Agreements also need to be reviewed.”  This was in any case Mr Evans’ own view.  By a fax dated 18th December 1996 he commented in detail on the points raised by the draft Opinion (which had in fact by this time already taken final form) and asked Miss Draper to obtain an opinion “with regard to the operation of our credit hire scheme and our proposed credit repair scheme” and suggesting seeing Mr Hirst in Chambers “to wrap this matter up”.
25.	Thereafter Miss Draper, in consultation with Mr Evans settled Instructions to Mr Hirst to advise in a Consultation which, in the event, was fixed for 21st January 1997.  Those Instructions enclosed the previous instructions and enclosures, the revised repair scheme documentation, the Standard Agreement and various other material supplied to customers.  After describing the two schemes, the Instructions, under the heading “Consumer Credit Act 1974”, said:
“Leading Counsel has previously advised that both credit hire and credit repair may (depending on the amounts involved) be subject to the Consumer Credit Act 1974 (“the Act”).  Leading Counsel will recall that in his opinion of 20 November 1996 Leading Counsel advised that the scheme might be made exempt from the Act by requiring final payment within a period not longer than twelve months from the date of the Agreement.”
The Instructions then went on to identify, amongst the issues on which advice was sought:
“(iii) the general issues arising in relation to the provision of credit hire.  In particular
(a) the effect of the retention of any Revenue; and
(b) whether such arrangements are in breach of the provisions of the Act and, if so, what steps would Leading Counsel recommend Accident Assistance to take to remedy that?
(c) whether, if Accident Assistance used another company to supply the credit hire vehicle, and that company was not United Kenning Rental Group company, the rental documentation could and should be produced in the same manner.
(iv)  whether, having limited the loan to a 12 month period as Leading Counsel suggested, Accident Assistance could re-schedule the credit given (hire or repair), without the Act applying;….”
26.	The consultation took place on 21st January 1997 and was attended by Miss Draper, Mr Evans and (probably) Mr Betts (who was the chairman of Accident Assistance and a Kenning Group director).  For reasons which will appear, no satisfactory note of the consultation exists.  It is, however, common ground between the parties on the pleadings that Mr Hirst advised, inter alia, that the Standard Agreement did provide for the provision of credit, that it was regulated by the Act but that it did not comply with it for the purposes of enforceability, and that the failure to comply could be avoided by altering the Standard Agreement to become exempt by amending it to provide that all payments were to be made within 12 months of the agreement being made.  In a witness statement dated 23rd August 2004 supplied to both parties, and admitted in evidence without cross-examination, Mr Hirst, after making clear that the lapse of time necessarily meant that his recollection was based on the documents, said this:
“As is clear from the Instructions, by this time it was becoming clear that the arrangements between Accident Assistance, Kenning and the client were complex.  I am sure that I did advise that the [Standard Agreement] conditions of hire were not a consumer hire agreement given that, under clause 20 the hiring was limited to a maximum of 28 days.  I am equally sure that I did not advise that it was an exempt consumer credit agreement, or that it was outside the consumer credit provisions of the Act.  I had already explained the requirements for an exemption from the consumer credit aspects in my Opinion and paragraph 5 of the instructions confirmed that Miss Draper understood how it might be made exempt.  I do not think that anyone was suggesting that the rental conditions met the requirements of the exemption Order, or that the consumer credit provisions of the Act did not apply”.
27.	The great puzzle in the case is the fact that, despite all this common ground and apparent clarity, Miss Draper was subsequently to record the advice in a quite different sense.  In an attendance note which was never shown to Mr Hirst for his approval, and which seems not to have been supplied to Mr Evans until 18th April 1997, Miss Draper records the advice in the following terms:
“JH confirmed that given that the Agreement was with UKRG (the consumer credit issues, at least regarding the credit hire) were for UKRG to consider and not Accident Assistance.  In any event, the T/C of hire used by UKRG fall outside the ambit of the CCA:
(a) the rental is for no more than 28 days – therefore it cannot be consumer hire; and
(b) repayment is to be made in one lump sum – therefore the credit does not constitute consumer credit ”
and in relation to the specific issues raised in the Instructions, she records:
“iii)….
b)  breach of the Act – JH advised that the provisions of the Act could generally be avoided;
iv)	Rescheduling the credit – JH advised that a new agreement would be necessary.  If such new agreement were to fix a low interest rate, i.e. one below 13%, it would be exempt from the CCA.  Alternatively, since the instances in which such an agreement would be required were few, the agreement could be drafted and provided in accordance with the CCA” 
28.	Miss Draper’s oral evidence seven years later was that she thought it likely that she had prepared a note of the consultation very soon after it.  That was questioned by Mr Cousins on behalf of Accident Assistance.  His suggestion, based on the narrative in the defendant firm’s fee breakdown, was that the typed note (of which two versions exist on the file) had not been produced until a later date, namely in April 1997 when the idea arose of disclosing a note of the consultation in the course of the negotiations then in train between the Kenning Group and GE.  Mr Symons invited me to accept Miss Draper’s reconstruction, submitting that it was more consistent with the documentary record.  Nothing in the documents particularly assists me in resolving this issue.  For what it is worth, I incline to Mr Cousins’ theory. Although Miss Draper had made manuscript notes at the consultation, the contemporary record does not indicate that she was at the time asked to produce a note of the consultation.  She recorded what she had been asked to do after the consultation (and had by then done) in a letter which she wrote on 22nd January 1997 to Mr Evans.  No question of her producing a note of the consultation arose (on the documents before me) until April when Pinsent Curtis (acting for Kenning Group in the negotiations for the sale of Accident Assurance to GE) advised the defendant firm that it had been decided to disclose Mr Hirst’s advice to GE.  A note of the consultation was then sent by the defendant firm to Pinsent Curtis.  The documentary record before me does not show that it was thereafter disclosed to GE or to their solicitors (Nabarros).
29.	Whatever the truth of that matter, the typed note is an extraordinary document.  Given the clarity with which it is agreed that Mr Hirst expressed himself, and given the fact that Miss Draper’s instructions to Mr Hirst seem anyway to have demonstrated that she had in December taken fully on board the fact that the credit hire agreement would be non-CCA compliant unless it was amended to take advantage of the 12 month exemption, it is almost inexplicable that the note she produced read as it did.  What it does demonstrate is that, as at the date she produced it, she had not internalised what she had been told in the consultation and what she had clearly had in mind when drafting the December 1996 instructions to Mr Hirst.  It is also a very odd note since there are several matters within it which would only be of relevance to record if the hire agreement under consideration was not exempt but was regulated by the Act:  thus there is a reference to discussion of whether cancellability (the note records this ineptly as “transferability” of the agreement but the sense is clear) could be avoided by a video-recording of the client signing the agreement (a suggestion obviously rejected by Mr Hirst); and there is also the reference (quoted above) to the provisions of the Act being generally capable of being avoided (redundant if the Act did not prima facie apply).
30.	In her witness statement Miss Draper laboured mightily to explain how she had derived her typed versions of the consultation from her manuscript notes, recognising that everyone agreed that Mr Hirst cannot have said what she recorded him as saying as to the agreement being outside the Act because payment was “in one lump sum”, but reluctant to believe that she had in fact recorded him wrongly.  In fact her manuscript notes are, in my judgment, capable of being interpreted (except at one point) in a manner consistent with Mr Hirst having advised what he is agreed to have advised.  Her attempts now to read her manuscript notes so as to cohere with her typed notes seem to me to be indicative of the fact that by the time (three months later and no doubt heavily immersed in altogether other matters) she was asked to produce a note, she had simply forgotten what she once knew and produced a note which in fact misconstrued her own contemporary jottings.  The one point where manuscript seems to record something quite different is a jotting which seems to say that “JH” had advised that the arrangements did not involve giving credit and were therefore out with the Act.  This in fact would have been a possible view: the OFT a year or so later expressed a similar view which was a source of much encouragement to those who believed that Dimond v. Lovell would not be decided in the way in which it eventually was (see paragraph 59 below).  But there is no trace of this line of reasoning in her typed up note.  Nor does it seem to have been a fallacy into which Mr Hirst was ever tempted to fall.
31.	I have entertained my own theory as to how she came to mislead herself.  The theory is simply that, at the time in April at which she was asked to furnish the note, she was told that it was needed to support an argument being advanced in the commercial negotiations that Mr Hirst had advised that Accident Assistance did not need a licence under the Act.  Her manuscript notes do not flag up this point in the way in which the furnished note does.  I think it possible that in the furnished note, produced in a hurry, she dredged her manuscript jottings for arguments which would support this thesis without addressing her mind to their coherence.
32.	There is in fact evidence to support the theory at least to the extent that there is evidence from the commercial negotiations that the prompt for GE’s having asked to see the note was a context in which Accident Assistance’s need for a consumer credit licence was being debated:  see the gnomic references recorded at paragraphs 38 and 39 below.
33.	At the end of the day it does not, however, matter much why Miss Draper made the mistake which she did in the furnished note.  It was clear, and conceded by Mr Cousins in his closing speech, that Mr Evans understood by 8th May 1997 that the Standard Agreement was not an exempt agreement, and could only be transformed into an exempt agreement if it were amended to provide for payment within 12 months.  The concession was made on the basis of further advice which was given in consultation by Mr Hirst on 8th May 1997, and which, as appeared from a subsequent communication from Mr Evans to the defendant firm in January 1998, had been fully taken on board by Mr Evans.  The only reason it matters at all is that it was Mr Cousins’ submission that it had been Miss Draper’s duty either at, or immediately following the consultation on 21st January 1997, to point out to Mr Evans the desirability of her being immediately instructed to draft an amendment to the Standard Agreement making the hire charge repayable within 12 months and thus exempting it altogether from the requirements of the Act.
34.	  Before turning to that advice of 8th May 1997, it is necessary to record two matters.  The first relates to the tasks which Miss Draper was set and performed following the consultation on 21st January 1997.  The second relates to the debates which took place between the Kenning Group and GE during the period between 21st January 1997 and the ultimate completion of the acquisition which took place on  6th June 1997.
35.	As to the first of these, Miss Draper set out in a letter dated 22nd January 1997 to Mr Evans the steps she had taken “following our discussions yesterday”.  Of the five itemised matters, two related to credit hire as opposed to credit repair.  The first credit hire matter was an amendment she had done to the Standard Agreement which clarified the relationship between clause 16 and clause 14(c)(i), a point which had been noted by Mr Hirst.  Secondly she produced a short letter to be signed by clients confirming Accident Assistant’s ability to retain commission.  Her letter concluded:
“Then, if the sale to GE goes ahead, the UKRG terms and conditions will need to be copied over onto Accident Assistance Limited’s notepaper and UKRG can then operate on terms and conditions which do not refer to credit hire.  An agreement will also need to be put in place between Kenning and Accident Assistance, dealing with the provision of cars to Accident Assistance by Kenning, so that Accident Assistance can hire them on to its credit hire customers.”
36.	 This shows two things.  First that the upshot of what they had been told had not led to Miss Draper being instructed to produce an amendment to the Standard Agreement so as to make it exempt.  That is consistent with Miss Draper’s subsequent note of the consultation which recorded that it was already exempt.  It is also consistent with a decision by Mr Evans that such an amendment should not, at that stage at least, be made.  As Mr Hirst points out in his evidence, he would have noted that such an amendment would have marketing implications.  The letter is therefore neutral on the question whether Mr Evans, as the result of the consultation, believed the Standard Agreement to be exempt or non-exempt.  Secondly, it appears to support the proposition that both Miss Draper and Mr Evans believed that, even after the acquisition had taken place, no amendments would need to be made to the Standard Agreement other than to ensure that it was thereafter entered into in the name of Accident Assistance rather than KCVR.  The contemplation at that stage must have been that the post-acquisition arrangements would most likely take the form of sub-hire (this is in fact reflected in numbered points 2 and 3 on the penultimate page of her manuscript notes and in the first cross-heading on the second page of her typed note). 
37.	The points listed in the letter of 22nd January 1997 do not correspond with the five action points to which her typed note of the consultation refers.  The last of those referred to “potential for agreement for cover credit hire if client’s own car not available within 12 months”.  It is however plain from what followed that Mr Evans was not conscious that the work subsequently being provided by Miss Draper did not cover all the matters which had been discussed at the consultation.   That work consisted of further work on the credit-repair agreement and on the garage agreement.  She supplied her revisions to Mr Hirst on 25th February 1997, and spoke to Mr Hirst on the telephone about them on 20th March 1997.  It appears likely that she faxed her typed note of the consultation to Mr Evans on 18th April 1997.
38.	It seems probable that the attendance note was sent to Mr Evans because he believed that it supported responses he was giving to GE in the course of the latter’s due diligence.  A memorandum dated 14th April 1997 written by Nadine Russell, who was at the material time the Integration Manager responsible on the GE side for coordinating the acquisition, to Lynn Shaw, the head GE lawyer acting in connection with the acquisition, refers under the heading “Consumer Credit Act Licence” to the fact that:
“[Mr Evans] does not believe they need this licence since Accident Assistance is not actually extending the funds.   He believes that the finance company or building society who actually extends the funds is responsible for getting the licence.  Please follow up on this point, especially if we need to have one post-acquisition.”
39.	This seems to be a very mangled account of what Mr Evans would have been saying about the need for a Consumer Credit Act licence, which was that Accident Assistance did not need one because it was KCVR which was extending the credit.   If nothing else, the reference to “the finance company or building society” shows a remarkable lack of grasp at this stage by Miss Russell of the nature of the business being acquired.   Lynn Shaw’s note of the negotiating meeting which took place on 16th April 1997 has an item, marked 13, against which she writes “S Evans to check re note of conf. with counsel”.  Later in the note, under the heading “Cons. Credit Licence”, against the words “car hire credit repair” there is entered the observation “they say exempt + manage anything approaching 12 months”.  Subsequently, after a good deal more water had passed under the bridge in the negotiations (including the further consultation with Mr Hirst on 8th May 1997 with which I deal below), a decision seems to have been taken to let GE see all the advice received from Mr Hirst from the December instructions onwards, and the defendant was asked to supply copies to Pinsent Curtis on 12th May 1997.
40.	As already noted one of the debates which took place in the negotiations was whether, following the Acquisition, the business should be carried on by means of a “sub hire” by Accident Assistance from KCVR or by an agreement by Accident Assistance with the customer to procure the hire of a vehicle.  The Kenning side were proposing the former and the GE side the latter.  On 2nd May 1997 Mr Evans faxed Miss Draper “at extremely short notice” with a “Brief” to counsel, which he had drafted himself which sought to explore Mr Hirst’s views as to which option was to be preferred.  The following passages in that brief are material:
“4.	Accident Assistance does not currently have a Consumer Credit Licence.  However, and based on counsel’s previous opinion, believes that the operation of the scheme, in the manner described above, make it an exempt case.  Irrespective of this, an application for a Consumer Credit Licence has been made.
…….
8.	Counsel is asked to consider the above and advise on whether there are significant procedural and legal disadvantages which might threaten the enforceability of the credit hire transaction and the ultimate recovery of the hire charges.  In considering this, counsel is advised that the solicitors for GE – although they appear to have no understanding of the operation of credit hire schemes – want the master agreement between the parties to be an agreement to for Accident Assistance to procure vehicles from KCVR rather than to hire vehicles from KCVR…….(Counsel may recall having drafted a Consumer Credit Agreement for Accident Aftercare (now in administrative receivership) in 1991 and it would seem that this type of transaction would be supported by that kind of agreement.  However, we are keen to understand whether that form of agreement, in the light of the decision in Giles v Thompson, would now stand in the face of opposition from a legal challenge…..………
9.	The alternative option to the above – as proposed by the solicitors acting for Accident Assistance – is that Accident Assistance hires, but KCVR then delivers, the vehicle to the client.  Accident Assistance would then conclude a rental agreement with the client – which will be done through the post and may arrive with the client some days after the vehicle is delivered.  It appears that there are commercial risks associated with this ‘modus operandi’ and counsel is asked to advise on a number of issues.  For example, prior to the vehicle being delivered to the client and contracts arriving through the post, could a contract to hire be construed from the verbal explanation surrounding the transaction and the delivery of the vehicle by KCVR?  The ultimate result of following this transaction flow should be that the rental agreement would be an Accident Assistance agreement, the vehicle having been sub-hired to the client pursuant to the master hire agreement with KCVR, and the ultimate invoice would be an Accident Assistance invoice.  Although this would appear to prevent, in the event of a legal challenge, any potential right to seek discovery of the agreement to procure – between Accident Assistance, GE and KCVR – it does seem to impose a potential commercial weakness in terms of the execution and potentially the ultimate enforceability of the contract.  In addition, presumably the agreement would need to be a consumer credit agreement with the appropriate cooling off periods.”
41.	Miss Draper converted this Brief into a formal set of Instructions.  Those Instructions included a paragraph in identical terms to paragraph 4 of the Brief.  The consultation duly took place on 8th May 1997.  
42.	The advice given by Mr Hirst in consultation was recorded in a note prepared immediately afterwards by Miss Draper which no one has suggested is inaccurate, and is conspicuously clear.  In summary Mr Hirst advised that the agreement to procure route would involve a debtor-creditor-supplier arrangement regulated by the Act, but that it could be made exempt by imposing a maximum 12 month time limit on the credit provided.  In the note the words “exempt” and “maximum 12 months time limit” are printed in bold.  The note then records:
“SE asked whether the agreement could be for 12 months, but could then be extended for a further 12 months, without any adverse effects regarding exemption from the CCA. JH said that he did not see why the entry into a new agreement at the end of the 12 month period should affect the exemption from the CCA, provided no promise had been made, upon the client entering into the first agreement, that, if necessary, a further agreement could be entered into.  Such a promise would in effect undermine the 12 month maximum term, and avoid the CCA exemption.  Subsequent agreements could then be entered into every 12 months if necessary, so long as there was never any promise that they would be entered into.*”
In relation to the alternative option (a hire agreement) Mr Hirst advised that he was “extremely concerned” that the mechanics of delivery of the car might mean that the client took delivery before signing an agreement.  So far as consumer credit was concerned, the position was the same as the first option.  Under the heading “Consumer credit generally” the note recorded:
“Although either arrangement would be subject to regulation by the CCA, JH said he felt it was extremely likely, but he could not guarantee, that limiting the term of the relevant credit agreement to 12 months would exempt the agreement from the provision of the CCA.*
If Accident Assistance were not prepared to take the risk, it would have to comply with the provisions of the CCA:  both as to the content of the relevant agreement and as to the ongoing conduct of the business (advertisements, etc.).  JH said that the documentation would be similar to some draft documentation he had prepared for Accident Aftercare.
If the agreement to hire arrangement were to be followed, then some thought would have to be given to ensuring that Kenning employees, when delivering the vehicle, did not mislead clients as to the consequences of the credit agreement.”
43.	Mr Hirst followed up the advice in consultation with a note concerning his further thoughts on the means of renewing the credit at the expiration of the 12 month period.  This note, which once again explained the way in which exemption worked and suggested an alternative method of exemption in relation to renewed credit, together with the note of the consultation, was sent the following day by Miss Draper to Mr Hornigold of Pinsent Curtis with copies for Mr Evans and Mr Betts. It was Miss Draper’s understanding (see her witness statement at paragraph 56) that these were to be supplied to Nabarros, but unclear whether in fact they were. Miss Draper and the defendant firm then fell out of the picture, and were not consulted again until September 1997.  Indeed the prospects of their ever being retained again by Accident Assistance must have seemed slim:  at some point in this period Mr Evans told Miss Draper that if the acquisition completed he would no longer be free to instruct her, being obliged by GE procedures to go to the GE legal department.
44.	At the time the Instructions had been given for the May consultation it had been expected that the acquisition would be completed on 12th May 1997.  In the event this did not happen until 6th June 1997.  It is not known what steps Mr Evans thereafter took, and with whose assistance, to set about ensuring that that the post-acquisition credit hire arrangements were in satisfactory form.  That he regarded it as an outstanding task which needed to be completed is clear from subsequent events.  It is, however, unclear whether and to what extent his new owners were alive to that fact.  The relevant lawyers in the GE legal department at the time who might be expected to have had a role in assisting him (who appear to have been Mr Richard Elmitt reporting to either Matthew Williams or Kim Van Niewkoop, and later a Mr David James) were not called as witnesses.  Nor, of course, was Mr Evans.  Furthermore it appears that some documentation, which under standard GE procedures might have been expected to have been generated in the post-Acquisition period (in particular “policy 6.0” documents), was not available.
45.	Some additional light is thrown on Mr Evans’ stance in the negotiations for the Acquisition by a post completion Summary dated 27th June 1997 prepared by Nabarros for GE.  This document, plainly perceived by Nabarros to be of some importance so far as consumer credit issues were concerned, received a wide circulation on its receipt by GE.  I was not satisfied, however, by any evidence which I heard from the GE witnesses called by Accident Assistance in this action that any of its recipients regarded it as his or her responsibility to read it and take action as a result.  The material parts of the document for present purposes read as follows:
‘Consumer Credit Act Issues
1.1 	… The arrangement between KCVR, [Accident Assistance] and the Customer constitutes a consumer credit agreement. The agreement is not outside the legislation. In the jargon of the Consumer Credit Act, the arrangement between [Accident Assistance], the Customer and KCVR is a ‘debtor-creditor-supplier’ agreement for ‘restricted use credit’…: 
1.2 	Prior to Completion, [Accident Assistance] had maintained that the arrangements were exempt from the [CCA] by claiming that the ‘credit’ being advanced to the Customer was for a ‘fixed sum’ which would be repaid in not more than [sic] instalments within a period not exceeding 12 months (see s.16(5) of the Act and regulation 3(1)(a) of the Consumer Credit Act (Exempt Agreements) Order 1989.  Such an argument is however not sustainable in all cases for the following reasons:
(i)	At the commencement of the hire period, the duration of the hire is usually not known, as it depends upon the length of time required either to repair the damaged vehicle, or for the claim to be agreed with the third party insurers, where the vehicle is written off; and/or
(ii)	In certain cases the claim may not be resolved with [sic] 12 months, with the ‘credit’ therefore being extended beyond the 12 month limit set down in the relevant exemption.
1.3	In the light of the above, it was agreed commercially during negotiations that the prudent approach would be (i) for [Accident Assistance] to apply for a licence under the Consumer Credit Act; and (ii) to draft a new ‘Credit Hire Agreement’ which complied with the provisions of the Act, to be entered into between [Accident Assistance] and the Customer. This agreement would also rectify other legal issues which were highlighted during the due diligence process.  
Recommendations
…[Accident Assistance] should immediately apply for a Consumer Credit Act Licence, required under s.21 of the Act, from the Director General of Fair Trading.   
NB: In the interim period until a licence is obtained, [Accident Assistance] is committing to a criminal offence under s.39 by engaging in an activity for which a licence is required. Moreover the agreement for the provision of credit is only enforceable against the Customer with the order of the Director General (s.40)…
You will recall that these issues were raised by us prior to Completion, but a commercial decision was taken to proceed”  
Section H, Vehicle Rental Agreements
2.2 	A new Credit Hire agreement will need to be prepared, which conforms with the required formalities (i.e. it must be in the prescribed form and signed in accordance with the prescribed manner.) A first draft of the proposed agreement has been prepared by Accident Assistance and the Company has indicated its intention to seek the opinion of Jonathan Hirst QC to ensure that the agreed form of Credit Hire Agreement complies with the detailed provisions of the Act (see in particular sections 127(3), 61(1)(a) and 60(1) and the regulations under that section: 
………..
3.2	The draft Credit Hire Agreement should be reviewed and if considered appropriate, Counsel’s opinion should be sought to confirm that the agreement complies with the Consumer Credit Act 1974.” 
46.	It seems reasonably clear that the stance of Accident Assistance there described was that of Mr Evans, and that he seems to have been maintaining in the negotiations that the Standard Agreement was exempt under the twelve month exemption.  That was not a proposition which Mr Hirst had supported (he had advised that it could be made exempt by altering it so to provide); nor was it a proposition which Miss Draper’s inaccurate record of the consultation encouraged:  her note suggested that it was exempt for a different reason.  Mr Evans was, however, clearly concerned in the negotiations to seek to persuade GE and Nabarros that the CCA did not apply to the Standard Agreement.  No doubt that is because he was aware (having been so advised by Mr Hirst in consultation) that the Standard Agreement was not CCA compliant.  It can also be inferred that it was Mr Evans who had reassured GE/Nabarros (contrary to the fact) that a CCA compliant credit hire agreement was already in preparation.  That again demonstrates an acceptance by Mr Evans that the Standard Agreement was not itself CCA compliant.
47.	On 29th September 1997 Miss Draper received, out of the blue, a fax from Mr Evans which sought her advice on various matters in connection with credit repair and added:
““Finally, we have also not yet put to bed the Consumer Credit Agreement argument viz. a viz. the hire transaction.  Our thoughts are that we go for a Debtor Creditor agreement which incorporates the hire conditions and which we will have signed through the post.  I know that will horrify you – and Jonathan – but our thoughts are as follows:
1.	Before we order a car from Kenning, we speak to the client and explain in detail the terms of the hire and credit agreement that he will be sent in the post.  We specifically outline all of the significant legal issues from a script that is read to the customer.  That conversation is taped.
2.	If the customer agrees to the conditions of hire, we ask him/her for his/her mother’s maiden name as evidence that we have had the conversation and he has agreed.  We input this into the computer and send off the documents (which are outside the CCA).
3.	The claim handler records the date and time of the conversation with the client and the system generates a witness statement as the basis for an affidavit evidencing the existence of the oral agreement.
4.	The signed agreement is pursued and filed when it arrives.
I wonder if you could tell me whether this oral contract works for you.  I’m not sure but I think it might be.  Is it necessary to ask Jonathan or is it a simple contract issue.”
48.	In response to the request for advice Miss Draper forwarded various drafts of a credit repair agreement to Mr Evans in the period between 2nd and 22nd October 1997.  So far as the hire agreement was concerned the only contemporary record of advice given at this period is Miss Draper’s note of her telephone conversation with Mr Evans on 2nd October 1997 which, so far as material, is in the following terms:
“3.	Consumer Credit Agreement – Hire Transaction
I explained to Steve that the proposed sequence of events would at least provide evidence that all the terms had been explained to the customer (provided the staff were correctly briefed) – both in taping the conversation and also in asking for a mother’s maiden name of evidence that the conversation had taken place.  I said to Steve that a maiden name might not be such good ‘proof’ in some instances, for example where people having been living together.
I said that a bigger concern were the consumer credit issues generally, since I was not sure that the Agreement would be a Debtor Credit Agreement rather than a Creditor Supply Agreement.  Steve said he was quite happy on the consumer credit issues and did not require any further advice than that, his question was merely whether or not the proposed procedure dealt with my/Jonathan’s concerns as to proving the customer were aware of the terms of the contract.  I said that I felt it did.”
49.	Mr Evans’ next approach to the defendant firm was on 15th January 1998.  Miss Draper had by then left the firm, and the file (on which the only outstanding matter was the settlement by Accident Assistance of the bill which had been rendered) had been inherited by Miss Samantha Barr.  It is clear from Miss Barr’s note of her telephone conversation with Mr Evans that he gave her a clear and concise explanation of the background to the request which he was now making that she draft a new credit-hire agreement.  He explained to her that following the acquisition they had needed to consider the two options of either having a regulated agreement, with the attendant problems of cooling off periods, or having an exempt agreement by making the credit for a period less than 12 months.  He explained that he had now seen the document used by a competitor (Help Hire) which adopted the second route.  He explained that he wanted her to re-draft for use by Accident Assistance for credit hire the Help Hire Agreements using their plain English approach, it being vital (1) that the customer should understand that he is liable for the hire (2) that Accident Assistance should have the customer’s authority to pursue the claim and (3) that the credit should not last for more than 12 months, although the agreement should not highlight this fact to the customer.
50.	In her witness statement Miss Barr described the conversation as being
“very much a case of Mr Evans explaining the consumer credit issues and the way that his business worked to me, rather than the other way round.  Mr Evans gave the impression that he knew the legislation, knew exactly what he wanted from me and did not want me to go away and research matters.”
51.	Mr Evans did not in fact supply Miss Barr the Help Hire pro forma hire agreement until 2nd March, and she then proceeded to produce a re-draft.  It was in an unfinished state when, Mr Evans having chased for it at the end of March, it was produced to him in early April.  That appears to have been the last contact which Mr Evans had with the defendant firm.
52.	During this period both Mr Evans and the GE legal department had further opportunity to take on board (if he or they had not done so already) the significance of consumer credit issues in relation to credit hire.  This arose in the context of a contemplated acquisition by GE/Accident Assistance of 3 Arrows, a competitor of Accident Assurance, a project known internally as Project Robin.  In the course of this process, 3 Arrows, by its solicitors Addleshaw Booth & Co, instructed Mr Hirst to advise on consumer credit issues arising on the 3 Arrows documentation, with particular reference to a series of county court decisions in which the third party insurers had raised the argument that, if the hire agreement was regulated by the Act and was unenforceable for non-compliance, the charges were irrecoverable from the third party.  In a signed note of consultation dated 3rd March 1998 Mr Hirst advised, inter alia, in the following terms:
“4.  	Although it was possible that a Court of Appeal might take a different view, it was likely that courts would enable the customer to recover the hire costs (if otherwise reasonable) from the driver at fault on the basis of existing customer agreements.  An argument based on the unenforceability of the credit agreement because of failure to comply with the Consumer Credit Act and the Regulations thereunder, if raised by an insurer/careless driver, would be viewed as a poor defence and as an unmeritorious “technicality”.  Innocent parties were not obliged to take technical points for the benefit of insurance companies, in circumstances where they have had the use of the vehicle.  The result would otherwise be a windfall for the negligent driver.  The judgments of the County Court Judges Eagleton and Robertshaw were persuasive in this regard.  Wooton v Flagg went the other way but carried little weight as a decision of a district judge, where moreover the point seems to have been conceded.  The position will be stronger if (as is understood to be the case) the client is properly licensed under the Act.
5.		As regards the existing book of business, section 173 of the Consumer Credit Act did not assist.  It prohibits contracting out both prospectively and retrospectively.  It is not clear on what basis a DTI order could be obtained.  Refinancing agreements, if interest free, would overcome the problem.  However, Donnelly v Joyce will not be overruled and, as already stated, there are good prospects that the technical defence will not prevail against the customer.
6.	In conclusion:  very firm that Donnelly v Joyce would not be overruled, likely (and encouraged by the County Court Cases provided as part of Counsel’s brief) but less firm that non-compliance with Act and Regulations could not be relied upon as a reason for denying recovery of the hire costs from the negligent driver.  An amendment made to customer documentation would reduce risk on a week by week basis.  The introduction of a clause requiring payment within 12 months might allow interest to be charged.”
53.	Although the GE witnesses called on behalf of Accident Assistance were inclined to dismiss the relevance of what they learned in the course of Project Robin to Accident Assistance’s own position, there is evidence that it did quicken interest in GE as to the steps which were being taken by Mr Evans to produce a new form of credit hire agreement for use by Accident Assistance.  A fax from Mr Evans to Jonathan Beak (of the GE legal department) dated 22nd April 1998, written under a Project Robin reference, rehearsed the progress made and included the following observations:
“As an aside, no one within the industry operates a fully regulated CCA agreement.  Were we to do so I would envisage it would pose commercial difficulties in that it would be seized upon by our competitors as an unnecessary procedural loop that made it harder for the client to work with us.  This could have an unnecessary negative impact on revenue.
With regard to the hire transaction, I passed papers to Vanessa Draper at Hammond Suddards at the same time as she had the repair documentation.  Unfortunately, Vanessa left at Christmas and we have been handed to somebody who appears to have neither the interest, appetite nor intellect to get on with things.
As requested, I enclose for your attention a number of documents:
…
4.	Hammond Suddards first draft of the ‘plain English’ Accident Assistance credit hire agreement (including gaps).  They have not quite got it right.  They have presented the Conditions of Credit at the front of the agreement when, from a marketing perspective, it should really be at the back.  However, if you take the existing credit repair agreement we use, and the HelpHire credit hire agreement as the templates that should allow you to compile an exempt agreement in fairly short order and I would be happy to contribute where required.”
54.	The 3 Arrows acquisition did not in fact proceed.  Mr Owen Kane (claims reserving manager with GE Financial Insurance) who gave evidence for Accident Assistance recalled in his evidence that what he called “the unenforceability issue” was discussed “over and over” in the Project Robin transaction, and that “there was an opinion from Counsel that dismissed the risk of unenforceability”.  That was an inaccurate way of putting it since Mr Hirst’s advice had been to the effect that the fact of unenforceability ought not to lead to irrecoverability, although that risk could not altogether be discounted and could be reduced on a week by week basis by re-drawing the 3 Arrows’ agreement with a 12 month limit.  Nevertheless Mr Kane’s clear recollection was that Mr Evans throughout presented the “unenforceability issue as a technical question of no relevance…It was common knowledge amongst the GE Project Robin team that this was Steve Evans’ view”: see paragraph 20 of his witness statement.
55.	Mr Evan’s fax of 22nd April 1998 is, I think, the last documentary evidence of any involvement by him in the production of a new credit hire agreement.  By this time his star within Accident Assistance was on the wane.  His employment by Kenning Group had ended at the turn of the year as the result of allegations of misconduct, unconnected with this case, having been made against him at board level within Kenning Group.  The allegations were strongly denied by Mr Evans and their truth was not explored in evidence before me.  The episode, however, led to Mr Evans’ agreed departure from the board of Kenning Group and, as presented to me, formed the background to his agreement early in 1998 that he would leave Accident Assistance in mid 1998.  [This paragraph has been amended by the Judge since the original handing down of the judgment in order to emphasise that the court made no findings as to the truth of the allegations]
56.	Internal GE legal department memoranda show that the production of a new credit hire agreement (adopting the 12 month exemption route) continued to be under discussion in May 1998.  The process was given additional impetus thereafter as a result of a growing appreciation within Accident Assistance that third party insurers were now beginning to take the Consumer Credit Act point.  This in turn led Accident Assistance to retain its lead panel firm of solicitors, Betesh Partnership, to obtain advice from Mr Hirst as to the merits of various Consumer Credit Act defences being run by third party insurers.  The senior partner of Betesh Partnership, Mr Nigel Esterkin prepared Instructions dated 20th May 1998 directly raising the questions whether the Standard Agreement was a regulated agreement, whether it was unenforceable, and if so whether the hire charge was nevertheless recoverable.  In a lengthy Opinion dated 17th June 1998 Mr Hirst advised, inter alia, that the Standard Agreement was not an exempt agreement but could be made so by ensuring that the hire charges became payable within twelve months “but this would affect the marketing of the scheme”, that there was a powerful argument that it was not totally unenforceable under s 127(3) because “it does (just) contain the prescribed terms”, and that 
“(4)	Even if it were held that the agreement was unenforceable because it omitted “prescribed” terms, section 170 expressly states that a breach of the requirements of the Act incurs no civil or criminal sanction except to the extent provided for in the Act and by section 173(3) a party can always consent to enforcement without intervention by the Court.  The motorist owes a strong moral obligation towards KCVR.  I can see no reason why the Court should expect the motorist to take a wholly technical and unmeritorious defence (akin to the old money-lenders defences) to deny payment to KCVR of a recovery for the benefit of a tortfeasor and his insurers [footnote: Cf. Finlay v. Kwik Hoo Tong [1929] 1 K.B. 400]. In my view a motorist who agrees to meet his contractual liabilities in these circumstances, albeit that they are unenforceable, cannot be said to be acting unreasonably.  Judge Hargrove in Stevens v. Fenandez treated the unenforceable agreement as one where the motorist had “no obligation to pay for it” and as equivalent to a free supply of a car with the donor resolutely refusing payment.  Both parts of this proposition are false.  There is an obligation to pay, albeit unenforceable, and it can scarcely be suggested that KCVR is refusing payment, let alone resolutely!”
57.	Mr Hirst’s Opinion had also advised as to the risk of irrecoverability where the customer had not signed an agreement.  As a result of the advice Accident Assistance decided to adopt new procedures to ensure that rental agreements had been signed and also to introduce new documentation to make the credit hire transaction exempt.  This process was described as “currently in hand” at 28th July 1998 (see David James’ memo of that date to Sandra Basaran and Gwenno Lloyd) but the new agreement appears not to have been finalised until the middle of December 1998, and not brought into operation until February 1999.  Why the whole process took so long is not clear.  On the basis of Mr Kane’s evidence, the consumer credit issues had been clearly appreciated within GE at least from the time of Project Robin.  A memorandum prepared by him at some time in the summer of 1998 for his US superior Mr Yeo recounted the nature of the risk and the steps which were being taken to avoid it by the GE Legal department.  This document (which had not been disclosed) was produced by Mr Kane in the witness box, and was apparently dated 23rd May 1998, although there is some reason to suppose that the relevant text in the document may have been prepared at some time following Mr Hirst’s advice of 17th June. Mr Kane said in evidence that the document repeated what he would have said in a separate note written in connection with Project Robin.  A Betesh Partnership circular dated 2nd July 1998 refers to the GE legal department at that time “urgently reviewing” the hire documentation, mentioning the alternatives of re-drafting with a view to exemption or revising for compliance. However, it is clear that such a process of review had in fact been in place ever since the Acquisition, initially led by Mr Evans and then, after 22nd April 1998, under the nominal leadership of Jonathan Beak.  I get no sense from the contemporary documents or from the oral evidence which was given, that Mr Hirst’s advice in June 1998 as such provided a sudden stimulus for a new review of a different character.  In fact it was not until the middle of September that a draft agreement was in a sufficiently advanced state to merit a further consultation with Mr Hirst.  A resume composed, probably in March 1999, by Simon Irons described the process as follows (the interpolations in square brackets being mine):
“The introduction of the new rental agreement required the agreement of Kenning and legal input from a variety of sources, including leading counsel.  Around the end of 1998 CIS [the third party insurers in Dimond] decided to appeal a CCA case that they had lost [the date appears to have been October 1998 – see Mr Esterkin’s letter dated 20th October 1998].  This development caused us to accelerate the introduction of the new rental agreement notwithstanding the fact that our contract with Kenning does not support the new rental agreement nor could our IT, VAT and invoicing arrangements with Kenning cope with the changes.  The news of the CCA appeal was of sufficient concern that we introduced the new rental agreement on 1st January 1998 [sic the date was in fact February 1999], effectively before we were fully ready.  The IT, VAT and invoicing has been since fixed although the contractual terms with Kenning still need to be sorted out.
It is also worth pointing out that we took Leading Counsel’s opinion at the time the CCA defences started to become apparent and that this advice was favourable to us.  Leading Counsel took each component of the defences being received and put forward counter-arguments that he believed should succeed.  Our panel of solicitors was trained in the use and provided with precedents to support these counter-arguments.  Throughout the rest of 1998 CCA defences did cause some write-offs but these were not significant of overall under-recoveries.  Consequently, having received and discussed the advice with our solicitors the consensus was that the lack of signed rental agreements was the largest problem of the three [unsigned rental agreements, customer’s belief that he had a courtesy car, and CCA issues] set out above.  Consequently the first actions taken were in respect of this problem.”
58.	I do not entirely understand Mr Irons’ references to the need to obtain Kenning’s agreement.  The new Accident Assistance agreement took the form of an agreement by Accident Assistance to provide the customer with credit (repayable within 12 months) in respect of hire charges reasonably incurred by the customer, with Accident Assistance being authorised to pursue a claim on the customer’s behalf against the third party.  I am unclear why this could not have been introduced by the mechanism contemplated by the ACPV.  It is possible that the reference is to the desirability of re-negotiating other aspects of the ACPV which were perceived as operating unfairly in Kenning’s favour (cf Mr James’ memo to this effect of 28th July 1998).
59.	Mr Esterkin’s letter of 20th October 1998 had, incidentally, reported in bullish terms on the advice which had been received from the eminent QC acting for claimant in Dimond that he was “very confident indeed” that the consumer credit arguments would not prevail, referring in that context to advice which had been received from the OFT and to views expressed by Professor Goode, the leading academic authority on the CCA.
The case against the defendant firm
60.	The essence of the claim is that the defendant firm failed to bring home to Mr Evans the implications of the advice which was given by Mr Hirst in relation to the Standard Agreement.  It is accepted on behalf of Accident Assistance that at least following the 8th May 1997 consultation Mr Evans did appreciate that the Standard Agreement was not an exempt agreement.  It also must, I think, be the case that Mr Evans knew that the Standard Agreement was not CCA compliant:  he had been so advised by Mr Hirst at the January 1997 consultation and proposed, in the course of the negotiations, that it be re-drafted so as to make it compliant.  What, however, it is alleged that he did not appreciate was that the effect of its not being either exempt or compliant was that it ran the risk of being “totally unenforceable”, and that if it was totally unenforceable there was a risk that third party insurers could take the point so as to prevent recovery against them of the hire charges.  It is alleged that these implications of Mr Hirst’s advice ought to have been explained to Mr Evans by the defendant firm, and that had they been explained to him timely steps would have been taken by Accident Assistance to re-draw the Standard Agreement so as to make it exempt.
61.	At the heart, therefore, of the claim lies an issue about whether Mr Evans himself appreciated the implications of the advice which he had received, and, if he did not appreciate them, whether the defendant firm was at fault in not realising his lack of understanding and correcting it.  A secondary issue (the issue of causation) is whether, if he did not appreciate those implications, events would have taken a different course had the defendant firm taken such opportunities as it had to draw them to his attention.
62.	There was some debate in argument before me as to where the burden of proof lay so far as the question of Mr Evans’ understanding of the implications was concerned.  Mr Cousins relied on Viscount Dunedin’s observation in Robins v. National Trust Company Ltd [1927] AC 515 at 520 that:-
“Onus is always on a person who asserts a proposition or fact which is not self-evident.”
63.	For his part Mr Symons submitted that in an action for legal professional negligence, in particular where the allegation is not that the defendant has advised wrongly but has negligently failed to explain the implications of the advice, the claimant must show that it was necessary in the circumstances for the implications to be explained.  A solicitor should not be charged with negligence for failing to state the obvious.  But what will be obvious to one client will not be obvious to another.  As Goddard LJ said in Yager v. Fishman & Co [1944]  1 All ER 552 at 556F-H
“When solicitors are charged with negligence, it is material to know a good deal about the extent of the client’s knowledge and experience… The nature and amount of advice which, in a matter of this sort, a solicitor would be expected to give to a person wholly unacquainted with business may differ very materially from what he would offer to an experienced business man, who would naturally decide for himself the course he thought it in his interest to take.” 
64.	Marrying these two propositions, it seems to me that the onus lay on Accident Assistance to show that the circumstances were such as to require the defendant firm to spell out to Mr Evans the implications of the advice which he had received from Mr Hirst.  That involves having to show by evidence that Mr Evans did not understand the implications, and that the defendant firm ought to have appreciated that he might not have understood them.  In reality, however, the question of the incidence of the burden of proof is only potentially relevant in a case of the present kind in two circumstances.  The first is where, on the whole of the evidence, the court is left in a substantial doubt as to which rival version of the facts is on a balance of probabilities to be preferred.  For the reasons given below, I do not find myself in that position.  The second is where the court is asked to draw an adverse inference from the failure of a party to call a witness on a particular evidential issue.  There are various reasons why I regard it as dangerous in the present case to draw adverse inferences against either party from its failure to call Mr Evans.  I have preferred therefore to approach the central issues of fact as if Mr Evans’ evidence were simply unavailable through no fault of either party.
65.	On the issue of causation, it was conceded by Mr Cousins that the onus lay on Accident Assistance to show that Mr Evans’ lack of understanding of the implications was causative of its loss, i.e. that steps would have been taken, at some stage, to ensure either that the hire agreement was either exempt or CCA compliant, such steps being sufficient to prevent all or some of the losses which were in fact sustained from occurring.  That concession was plainly rightly made:  see the judgment of Sir Christopher Slade in Boateng v. Hughmans [2002] PN 449 at paragraph 35, and the interesting discussion of the distinction between the case of the failure to give correct advice and that of giving incorrect advice in the judgment of Ward LJ in White v. Paul Davidson & Taylor [2004] EWCA Civ 1511 at paragraphs 23 to 35.
66.	Two further issues were raised by the defendant firm as to the nature and scope of their retainer.  One was as to whether the relationship between the parties should be viewed as the product of a single retainer pursuant to which the defendant firm was under a duty to review and advise on the form and effect of the Standard Agreement, or, rather, of four separate retainers.  The second was whether the scope of the retainer/s extended to anything beyond obtaining the advice of Mr Hirst, and then performing the drafting exercise instructed by Accident Assistance consequent thereon.  I did not myself find it helpful to seek to individuate the retainers in the manner suggested on behalf of the defendant, although as a matter of contract law the exercise can be done.  The defendant’s analysis was that there had been four retainers, the first having led to the advice obtained and drafting done pursuant to the instructions to Mr Hirst in October 1996 and January 1997, the second having consisted of the obtaining of advice from Mr Hirst in May 1997, the third consisting of the instructions to Miss Draper in October 1997 and the fourth of the instructions to Miss Barr in the spring of 1998.  However, whether one regards these as four separate retainers (or indeed as five, since there seems to me a strong argument for saying that something new was being required of the defendant following receipt by Accident Assistance of Mr Hirst’s first advice), or as a single retainer, does not help in answering the question whether the defendant firm was in breach of duty in not having volunteered the allegedly missing advice at any particular stage.  At each stage the extent of the advice required was necessarily conditioned by what had gone before.  Similarly the scope of the retainer depended on what was being sought from the defendant firm on each occasion on which advice was sought.  It is the case that all the critical approaches by Accident Assistance to the defendant firm in the pre-Acquisition period were initiated as a result of its desire that the advice of Mr Hirst should be obtained in consultation, and that the only services sought from the defendant were to instruct Mr Hirst to give the advice, to do drafting work consequent on that advice and to produce notes of that advice.  That did not, however, in my judgment relieve the defendant firm from having an independent duty to ensure that the advice was properly understood. That, however, simply returns one to the primary issue of whether it was properly understood and, if it was not, whether the defendant firm should have realised that such was the case.  To that issue I therefore return.
67.	There are in my judgment good reasons for thinking that the implications of Mr Hirst’s advice would and should have been obvious to Mr Evans.  It was clear from Mr Esterkin’s evidence that Mr Evans was one of the most experienced UK operators in the field of credit hire.  He had experience of the difficulties which “enforceability” points might cause (there is a reference in his “Brief” to Mr Hirst to his experience with Accident Aftercare).  Mr Irons said in evidence that, up to the time Mr Evans left Accident Assistance the issues of recoverability and the concept of exemption under the CCA were
“matters that Steve dealt with.  This was, in a way, his forte, and he had a significantly better understanding of these points than anybody else in the business did.” [2/150/19-24].
68.	Mr Hirst described him as appearing in consultation to be “an experienced businessman and sophisticated client”.  Miss Draper described him as someone who appeared to know his business very well, and, as we have already seen – see paragraph 50 above, Miss Barr said that
“Mr Evans gave the impression that he knew the legislation, knew exactly what he wanted from me  and did not want me to go away and research matters.”
69.	Moreover, this was a man who initiated inquiries of his lawyers over the question whether the Standard Agreement was CCA compliant, having received and apparently understood the advice in November 1996 about the non-compliance of the proposed credit repair agreement, and the possible consequences of that non-compliance.  Miss Draper’s evidence was that his focus was ensuring that Accident Assistance should “get their money”.   It is difficult to understand why Mr Evans should have been as concerned about CCA as he was, unless he understood the possible implications of compliance and exemption so far as enforceability and recoverability were concerned.
70.	Mr Cousins submitted that Mr Evans cannot have understood the potential implications, since if he had done he would have taken more or less immediate steps to have the Standard Agreement re-drawn so as to ensure that it was an exempt agreement.  He submitted that it “beggared belief” that Mr Evans did understand and yet took no action, particularly since his fax to Miss Draper of 18th December 1996 had specifically expressed a concern to remedy any defects in the hire agreement should any exist.  Furthermore he pointed out that Mr Evans had personally warranted Accident Assistance’s receivables in the sale agreement, and would have been foolish to do so had he appreciated the risk of their non-recoverability; and he had also warranted that “the Company had no knowledge that any of the terms upon which the Company regularly does business are or may be unenforceable by virtue of….the Consumer Credit Act 1974”.  Mr Cousins made the following further points:  first, that Mr Evans appeared to have asserted in the negotiations for the Acquisition that the business was exempt: see paragraphs 38 and 45 above, and the indications are that the focus of this debate concerned Accident Assistance’s need for a CCA licence;  secondly, that his “Brief” to counsel in May 1997 appeared to show a belief on his part that the Standard Agreement was exempt; thirdly, that he must have believed that Mr Hirst’s views supported his own, since otherwise he would not have been so ready to produce to Nabarros the note of the consultation;  fourthly, that had he believed that the fact of its being non-exempt rendered the Standard Agreement unenforceable, and therefore the hire charges potentially irrecoverable from the third parties, it was remarkable that no documentary trail exists showing his appreciation of that fact in the form of warnings to the GE legal department; and, fifthly, that Mr Evans in other respects showed himself as very keen to ensure that customers signed enforceable agreements, including video conferencing (raised in the First Consultation) and the generation of witness statements “as the basis for an affidavit evidencing the existence of the oral agreement.” (fax of 29 September 1997).
71.	Powerfully put as these points were I was not in the end persuaded by them for the following reasons.
72.	First, as already mentioned, it appears to me that the focus of Mr Evans’ concern in obtaining Mr Hirst’s advice both in October 1996 and January 1997 was indeed to examine the enforceability of, respectively, the credit repair and credit hire schemes from a CCA point of view.  That concern only makes sense if the person expressing it was conscious of a potential link between the questions of enforceability against the client and recoverability against the third party.  In that connection, one may ask why the questions were being asked at all:  Accident Assistance had been operating its credit hire scheme for some years without problems from a CCA point of view.  The answer in relation to the credit repair scheme is that it was a new product which was to be launched.  The answer in relation to the credit hire scheme may well be (and I think probably was) that the context was the potential sale of Accident Assistance to GE, and the desirability of presenting as clean a package as possible to GE.  That Mr Evans simply did not understand the possible link between non-compliance with the CCA and enforceability, and between enforceability and recoverability, I find extremely difficult to accept.  The wording of paragraph 8 of his “Brief” to counsel in May 1997 – see paragraph 40 above – appears to show that he understood both potential links (“….procedural and legal disadvantages which might threaten the enforceability of the credit hire transaction and the ultimate recovery of the hire charges….”).  Mr Cousins sought to persuade me that Mr Evans’ understanding must have been that the CCA requirements were relevant to such matters as advertising restrictions, and cooling off periods, rather than to enforceability, but I see no reason to draw that conclusion from any of the documentary evidence.
73.	Secondly, the documentary clues as to the stance taken by Mr Evans in the negotiations for the Acquisition in relation to the issues which were then raised are sparse.  His role in the negotiations was, as a director and shareholder of Kenning Group, very much that of the willing seller. It is clear that the question was posed as to whether Accident Assistance needed a consumer credit licence in relation to the credit hire business.  To this Mr Evans had a clear answer:  Accident Assistance did not need one because the credit was being extended by the hirer, and Mr Hirst had so confirmed in January 1997.  To the extent that consideration had been given in the January consultation to the possible need for a licence by Accident Assistance following a separation of Accident Assistance from Kenning Group, Mr Hirst had also advised that CCA requirements could be avoided by use of an agreement similar to the credit repair agreement.  It may well have been those two points which Mr Evans was anxious to stress to GE were supported by Mr Hirst.  That interpretation derives some support from Nabarro’s post-completion note which shows a focus on the desirability, post completion, of Accident Assistance having its own licence and (not accepting that advantage could be taken of the 12 month exemption) a fully CCA compliant credit hire agreement.  It should be noted that the reference in the “Brief” to counsel to Accident Assistance being “exempt” is not in terms a reference to the Standard Agreement being exempt, but a much more careful reference to the fact that, having regard to the relationship between KCVR and Accident Assistance (described in paragraph 1.2 of the “Brief” in terms of a business run by Kenning from which Accident Assistance obtained commission), Accident Assistance did not need a licence under the Act.  That “Brief” (or Instructions based on it) was intended to be disclosed to GE, and was no doubt drafted by Mr Evans so as to be consistent with the line taken by him in the negotiations.  It does not follow that Mr Evans believed that the Standard Agreement was exempt.  Whatever uncertainty he may have been in on this point following the January consultation, it seems clear from the Nabarro’s post-completion note that GE was being advised that the Standard Agreement was not exempt, that the 12 month exemption provided no solution in all cases, and that a new fully CCA compliant agreement was the preferred solution.  That note records Mr Evans as having effectively accepted those points, even to the extent of having given the false assurance that such an agreement was in the course of production.  It should also be noted that, although Mr Evans suggested the possibility of supporting his views by reference to Mr Hirst’s advice on 16th April, and was supplied with a note of the consultation on 18th April, Mr Hirst’s various advices do not seem to have been disclosed to GE until after the 8th May consultation:  see C5/210.
74.	Thirdly, given the context in which the points were raised, I do not find it surprising that immediate steps were not taken by Mr Evans either in the pre-Acquisition period or in the post-Acquisition period to secure an amendment to the Standard Agreement so as to make it exempt.  So far as concerns the pre-Acquisition period (i.e. the period from the January 1997 consultation until the conclusion of the sale agreement) there was no obvious urgency about the matter.  The business was being operated as it had been since its inception, and no problems had been experienced.  A change in the Standard Agreement would undoubtedly require some change in the marketing of the scheme:  it was currently being sold as one under which open-ended credit was being extended which the customer would never in practice be expected to repay, whereas the suggested change would require there to be a formal requirement for repayment if recovery was not made against the third party within the 12 months (subject to the possibility, which could not be made the subject of an express promise, that credit might be extended at the end of the period).  Furthermore, Mr Evans, wearing his Kenning Group hat, was trying to sell Accident Assistance to GE on the basis of its track record.  To have altered the Standard Agreement at this point would both have risked showing a sensitivity on the point which might have been noticed and exploited by GE, and have raised questions as to whether the necessary change in marketing was likely to affect future performance adversely.  Mr Evans’ readiness to adopt the 12 month exemption strategy in relation to the credit repair agreement does not self-evidently show that he was, or would have been, equally ready to adopt the same strategy in relation to the credit hire agreement.  The credit repair agreement was a new, and apparently as yet unlaunched, project.  Adopting the strategy in relation to credit repair thus involved no change in existing marketing.  Moreover, it seems to me obvious that the considerations likely to be dominant in the mind of the customer in relation to the repair of his vehicle (where he is in any event likely to be contemplating undertaking a liability for the repairs) are likely to be different from those in relation to the hire of a vehicle (where the idea of hiring a substitute vehicle may not enter the mind of the customer unless accompanied by the carrot of not in practice himself having to finance the hire).  
75.	In relation to the post-Acquisition period, the lack of any apparent sense of urgency can be explained by the fact that events on the ground (i.e. in the shape of third party insurers beginning to take the point in any systematic or noticeable way) did not significantly change until 1998 rather than by a hypothesis that Mr Evans did not understand the point potentially at issue.  It is clear from the documentation (and from Mr Irons’ evidence) that even at a comparatively late stage in 1998 after the irrecoverability point was unquestionably on the table, Accident Assistance was still prioritising the desirability of putting in order the procedures by which agreements were signed over a change in the Standard Agreement.  Mr Irons’ evidence was that it was not until it was appreciated that the irrecoverability point was going to the Court of Appeal that any real sense of urgency was felt at all.  Until that point in time, all those involved appeared to have interpreted Mr Hirst’s July 1998 advice as being favourable to Accident Assistance’s position, and the inference I drew from Mr Irons’ evidence and from that of Jonathan Beak (see T7, pp136-137) was that that advice was felt to justify the time which it in fact took to put the new agreement in place.  But, as we know from Mr Kane’s evidence, Mr Evans (who placed a high value on Mr Hirst’s advice) was himself a strong adherent of the view that the courts would not allow the “technical” defence of non-compliance with the CCA to prevent recovery.  If Accident Assistance’s comparative lack of urgency in the post July 1998 period can be explained by a belief that Mr Hirst’s views on this point were correct, there is every reason to believe that Mr Evans’ actions in the period from June 1997 to April 1998 were conditioned by a similar belief, rather than by a failure to appreciate what the consequences might be if Mr Hirst were (as he was) wrong on this point. 
76.	I would add that not only does it not seem to have occurred to anyone at Accident Assistance at any stage that the simple solution was to insert a few short words into the Standard Agreement, but that such an expedient was never in fact adopted:  the change introduced in February 1999 was the introduction of an agreement between the customer and Accident Assistance which relied on the exemption.  This was the very thing which Mr Hirst had been advising on in May 1997, and Mr Evans had instructed Miss Barr to embark on drafting in January 1998.  The whole picture from June 1997 to December 1998 is, in my judgment, one in which the various participants were from the outset seeking to resolve the problems of getting an agreement between the customer and Accident Assistance in place (and in particular resolving the problems of getting such an agreement effectively signed by the customer) and at the same time ensuring that the resulting agreement was not vulnerable to CCA based arguments.  The reason why a simple amendment of the Standard Agreement was never made was not because the implications of its non-compliance were not understood by Mr Evans but because he believed that the implications were theoretical and that it was more important to resolve what he described as the “contractual” issues.  That no doubt reflected the actual experience of Accident Assistance in the county court during the period covered by Mr Evans’ direct involvement.
77.	A further point needs to be made in relation to the post-Acquisition period.  This is that it is a mistake to suppose that adopting the route of the 12 month exemption presented a risk free option.  Not only did that route have the potential marketing downside referred to above, but it had not been counselled by Mr Hirst as certain to succeed.  Thus the note of the 8th May 1997 consultation records him as saying that he could not guarantee that this approach would lead to exemption, and that unless Accident Assistance was willing to run the risk the alternative was to ensure that the agreement was fully compliant:  see paragraph 42 above.  Mr Evans seems not to have finally put this choice to rest so far as the GE legal department was concerned even as late as 22nd April 1998: see, first, his aside quoted at paragraph 54 above; and, secondly, the fact that the GE legal department was apparently still toying with the idea of having a fully CCA compliant agreement as late as July 1998 (as appears from the Betesh Partnership memorandum referred to in paragraph 57 above).  As already noted, Mr Evans’ comments in April 1998 have to be seen in the context of the view expressed by Mr Hirst in connection with 3 Arrows.  That view, foreshadowed in his October 1996 opinion and elaborated and subsequently repeated in the July 1998 opinion, was that a defence by third party insurers based on unenforceability under the CCA ought not to prevent recovery.  
78.	The 3 Arrows episode has the further significance that it is quite impossible to read Mr Hirst’s views at this juncture, albeit expressed in relation to a different agreement, without appreciating that the point on which he was advising was directly related to enforceability/recoverability in relation to a non-exempt, non CCA compliant agreement.  If Mr Evans had not previously appreciated that the advice which he had received from Mr Hirst was relevant to the question of the enforceability of the Standard Agreement and therefore to the recoverability of the hire charges, it is impossible to suppose that his ignorance of this implication could survive a reading of Mr Hirst’s March 1998 advice.  Yet his fax of 22nd April, while it contains an element of self-justification in seeking to lay the blame for slowness in producing a new agreement on to Miss Barr, contains no trace of any suggestion that he had only recently come to realise the importance of making early progress with the new agreement.
79.	Fourthly, I was not impressed by the submission that Mr Evans’ willingness to enter into the warranties contained in the Sale Agreement showed that he could not have believed that there was any risk of Accident Assistance’s receivables being irrecoverable or that the Standard Agreement was not enforceable.  All it shows is that he thought that the risk of his personal liability under these warranties did not outweigh the benefits which he could obtain by giving them.  In this he was proved right.
80.	For all these reasons I have not been persuaded that Mr Evans did not understand the implications of the advice which he received from Mr Hirst.  On the contrary, the conclusion I have reached on a balance of probabilities is that he did understand them. Even if I am wrong about that, I am not satisfied that the defendant firm should have appreciated at any relevant stage that he did not understand them.  Accordingly I do not think that the defendant firm is liable for not having taken such opportunities as it had to explain or emphasise them to him.
81.	That conclusion renders it strictly unnecessary for me to consider what Mr Evans would have done if, not understanding the implications of Mr Hirst’s advice, he had had them elucidated for him by Miss Draper.  Given my conclusions as to what he did in fact understand, this is quite a difficult counterfactual to address.  However, for the reasons already given, I find myself unpersuaded that events would have taken a different course from that which in fact they took.  Had Miss Draper said in either January or May 1997 “you do realise, don’t you, that Mr Hirst thinks (and I agree) that the Standard Agreement is non-compliant, and that unless it is amended to provide that the hire charges must be paid within 12 months there is a risk that all the current business may be fatally flawed?”, and this had come as news to Mr Evans, I think that Mr Evans’ reaction would have been to keep this information to himself for the time being and to continue with the negotiations for the sale to GE in the hope that he could persuade GE of the insignificance of the problem, blinding them with the juiciness of the fruit he had to sell and the assurance that apparent defects would be removed by the new agreement which would in any case be necessary following the Acquisition. I think also that, wearing his Kenning hat, he would have been keen to ensure that such risk as there was should fall on Accident Assistance rather than KCVR post the Acquisition.  This is all consistent with what happened.  Equally, had the point been spelled out to him subsequently I see no reason to think that he would not have dealt with it in the same way as both he, and the GE legal department itself, was subsequently to deal with it, namely by perceiving it as a problem which needed to be dealt with once other contractual and procedural issues in connection with putting in place a new agreement directly between Accident Assistance and the customer had been solved and not as being peculiarly pressing until events on the ground compelled its being dealt with a sense of urgency. 
82.	I return, by way of coda only, to the question of why I have approached the matter without regard to inferences which might be drawn from the failure by either party to call Mr Evans.    Mr Cousins told me that he did not wish to call Mr Evans as a witness since it had been apparent from an early stage in the case that he was supportive of the defendant’s position and did not wish to criticise it.  He also said that, given the circumstances of Mr Evans’ departure from the Kenning Group, Mr Evans could not be produced to the court as a witness of truth.  This, I thought, sat somewhat oddly with a submission he made to me that it would be unfair to Mr Evans to find that he might have made less than a full disclosure to GE during the course of the negotiations.  The available inference is that, had Mr Evans been called, he would not have supported Accident Assistance’s case by his evidence in chief.  It was not, however, suggested that Mr Evans would have had any motive for claiming to have understood what he in fact did not understand and which ought reasonably to have been explained to him by the defendant.  The only one that I can imagine might have been a desire not to make himself look foolish.  If his evidence in chief would in fact have supported the defendant’s case, the only reason it had for not calling him was a fear that his evidence would be made to look foolish in cross-examination coupled with a calculation that I would find as I have found without the benefit of his evidence.  Irritating as I found it to be deprived of his evidence, I have to say that that forensic calculation has proved to be correct.