02 December 2022

This is the story of the fight to secure recompense for a business. It tells of the reality of litigating against a huge opponent with bottomless pockets, the reality of the cost and funding of litigation, and the reality of the need to find leverage, to use it to fight, and to keep fighting.

PART 1: Setting the scene

In 2017, the Managing Director of a manufacturing business came to me to ask for help. His business had been defrauded of over half a million pounds, and the 2 cashiers who worked for him, who had been the target of this sophisticated APP fraud, were devastated. His distress, not so much in relation to the lost funds, but regarding the impact this had had on 2 long-serving colleagues was painfully evident.

APP (authorised push payment) fraud is the name given to scams where the victim is tricked into making large bank transfers to an account controlled by the fraudster – often, as happened to Sekers, where the fraudster pretends to be a member of the bank staff (frequently claiming to be part of the Fraud Team). APP fraud has been steadily increasing over the past 5 years and such frauds have become increasingly sophisticated.

In Sekers’ case, the fraudster identified himself as “Steve”, claimed to be from Clydesdale’s Fraud Team, and gave certain confidential details about the account that suggested to Sekers’ cashiers - G and P - that he probably was who he said he was. He said that the company’s bank account had been blocked by the bank as a precautionary measure. This type of situation had happened before to the company. The fraudster said he would work to unblock the account.

Nevertheless, G and P had an element of reservation, and sought reassurance from Clydesdale that Steve was who he said he was. They phoned Clydesdale’s helpdesk and called the Relationship Manager (RM) assigned to Sekers, seeking help from both.

The Helpdesk took details from G and P, but gave no advice, simply indicating they would revert in due course. The RM asked G and P to obtain Steve’s full name, and then to send the RM an email. The cashiers duly did so.

No further advice was given by either the helpdesk or the RM. Critically, neither told the cashiers not to do anything until the caller’s true identity had been clarified. Neither took any steps to suspend activity on the company’s account until the position was clarified. Neither cashier was told that they must not make payments. The cashiers felt reassured that everything was in order and understood that either the helpdesk or the RM would get back to them if anything was untoward.

In due course, Steve asked the cashiers to regain access to the web portal and process a number of “blocked” payments. Payments totalling £566,000 were made (a small amount of which was later recovered). The majority of the transferred sums were lost to the fraudster…

PART 2: Preparing for battle

It has sometimes been said of me that many of my cases are “David and Goliath” battles. Never was that more true than in the Sekers’ case. Clients have said that I am “someone who knows how to throw a stone or two”. "In a general sense that’s true; however, it is one thing to know which stone you want to throw, and another to actually be able to get your hands on the stone."

In the Sekers’ case, the key stone we needed to throw was to secure full litigation funding to run the case, and After The Event (ATE) insurance against any adverse award should the case fail.

Without these two key building blocks, we ran the risk of exposing a business which had already lost over £500k to significant further cost and expense, including the other side’s costs (judicial expenses) if the case failed.

With these two elements, we would be able to send a clear message to our opponents that we were not afraid to run the case, and to go to Proof, or to take the risk of losing, as our clients would be insured against any adverse award of costs/expenses.

The client had some limited Before The Event insurance cover, and this was sufficient to enable us to raise proceedings, and to seek recovery of evidence from the Clydesdale, including call recordings. That recovery process took well over 2 years.

However, we always knew that ultimately, the insurance cover would not be sufficient to take us all the way, and we would have to secure top up funding from another source to enable us to go all the way. If our arguments did not succeed, our clients would not, of course, recover any of the half a million of which they had been defrauded, but crucially, they would be no worse off. They would not have to pay their solicitors, who would be funded via a combination of insurance funding and top-up funding, and any adverse costs awarded against them would be met by the ATE insurer.

Ensuring that we had this funding in place would shift the power dynamic between the parties in a really important way.

This level of funding would transform the situation from a David v Goliath situation into one in which Goliath’s power would be significantly diluted and David’s greatly increased.

We needed to get to the point where Clydesdale had a great deal more to lose than we did…

PART 3: Seeking reinforcements

To say that securing top up funding was a struggle would be a huge understatement. The process of securing litigation funding is never easy, nor quick to navigate, although many funders will claim otherwise.

A quick “no” from a funder is relatively easy to absorb. Much harder is the long protracted “maybe” that often involves many follow up questions and requests for further information and documentation, taking hours of time.

Funders will invariably ask for Counsel’s Opinion on Prospects when considering whether or not to fund. When you are asked for supplementary Opinions from Counsel, you need to think carefully about who is funding the cost of securing these follow-ups from Counsel?

In this case, we applied to many different funders, completed many application forms, followed through many diligence processes, obtained many supplementary views from Counsel, and answered numerous follow up questions.

Throughout this time, we had – helpfully – been faced with an apparent lack of enthusiasm on the part of Clydesdale to make progress. This suited us given the struggle we were facing to secure the top up funding we needed. The pandemic also helped slow everything down, and it wasn’t until 3 years after we had raised proceedings that the case really began moving along the procedural conveyor belt.

By the end of 2021 we were heading for Proof (Scottish equivalent of a Civil Trial) with deadlines for witness statements, productions, rebuttal statements and Joint Bundles. We were running out of money, we still had no top up funder and we had no ATE insurance policy to cover us for the cost of losing the case.

Our leverage was slim and Clydesdale knew it. If this was a marathon, we were at around mile 20 and had hit the wall.

To make matters worse, the insurers who had part-funded us up to this point were only paying us 2/3 of our bills. This was creating a steadily growing shortfall on our books and I was coming under huge pressure from management to cease acting and to abandon the case...

PART 4: Shifting the power dynamics

At this point, by serendipitous coincidence, I was introduced to Quantum Claims who I had always thought of as personal injury claims people, but who, in fact, were interested in commercial litigation and keen to do more funding in this area. I sent them the metaphorically well-thumbed case papers and held my breath.

After a staggeringly short period of time – less than a week – they said yes, they would provide the top up funding we needed, they would provide ATE funding, and they would fund the deficit showing on our books which would allow me to continue with the case.

Quantum’s involvement and support unlocked the case. With them on board, we were able to complete witness statements, consult with newly appointed Senior Counsel, discuss matters further with the banking expert we had appointed to look specifically at the general duty of care, finalise productions and fully engage with all of the necessary Proof preparation. We could head into the final mile of our marathon court case knowing that we would definitely make the finish line.

The dynamic between the parties shifted and, with so much less to lose, we were confident.

No litigator worth their salt will give you odds of greater than 75% of succeeding. Put another way, in even the very strongest of cases, you have a 1 in 4 chance of losing. There was always the prospect of losing at Proof (that 25% risk never goes away), but critically we were no longer exposing the clients to further loss. In this sense, they now had nothing to lose.

Their opponents, by contrast, stood to lose institutional and personal reputation by running the case; they faced the prospect of an award of £500k, plus substantial judicial expenses (costs) being made against them, and possibly an additional fee. Perhaps most importantly, they ran the risk of the floodgates opening to other claims in the event of a decision being made against them.

The balance had now shifted significantly.

For me, the central core of the case was always the argument that the advice tendered by the Bank’s employees to Sekers on the day in question fell below the required standard - nobody at any time had ever advised the cashiers to do nothing, to make no payments and to cease communication with “Steve” until the position was clarified. This failure in duty of care was always the reason why I had championed the case, and why I felt so strongly that Clydesdale should be brought to book.

Fast forward 5.5 years, after over 4 years of litigation, on the first day of the final evidential hearing (Proof, or Civil Trial) in proceedings which I had raised on behalf of Sekers against Clydesdale, the case settled on the basis of a payment of a 6 figure sum to Sekers – a just reward not only for the clients, but for everyone involved in the case.

PART 5: Lessons learned

So, my takeaway lessons from this long 5 year marathon?

First and foremost, trust your instinct. Lawyers must always base their arguments around legally stateable arguments, but if you believe there is a legally stateable argument and a clear legal basis for your position, trust your judgement.

There is a reason why you believe in the case. Good litigators tend not to see the world in black and white but instead, in variegated shades of grey, and whilst it is very valuable to be able to see the alternative point of view, don’t let your opponent’s perspective overwhelm you to the point where you can no longer see your own clearly.

Running a court case is as much about tactics and the balance of power as it is about “black letter law”.

I have been fortunate enough to have been ranked in Chambers for, amongst other things, being "commercially astute", yet, although being “commercial” in the context of court cases is often talked about, it is rarely defined.

For me, it is simply working out what you are trying to achieve, where you want to get to, and what your realistic chances are of achieving that outcome. If these things are known, you can then work out how to ensure everyone on your side of the table has the best possible chance of achieving this. Be commercial, not just for your clients, but also for you and your firm.

In the Sekers’ case, ensuring that the top up funder, Quantum, would meet the deficit unlocked matters and made it possible for me to continue working on this case.

Thinking about the balance of power is important too.

It is one thing to have worked out what would be a realistic, good outcome for your clients, but how are you going to achieve that if it appears that your opponent holds all the cards? A senior lawyer once told me that the best time to negotiate is when you have your foot on the other person’s throat. Thankfully, I’ve never had to test this out in a real sense!

Metaphorically, though, you’re always going to be able to strike a better deal and achieve better resolution for your client when you have genuine leverage against the other side – they need to have something significant to lose.

Finally, don’t take “no” for an answer.

The last word

In discussion with our funders after the dust had settled, George Clark of Quantum said:

“Funding of all Commercial litigation is complex and presents challenges. One of the important considerations for me is the expertise of the agents representing the client and the attention to detail in preparation of the case.

Cat MacLean certainly provided all of the above, but in addition, despite being presented with a number of challenges to obtain the funding to allow the case to continue, (Cat) simply would not take no for an answer! I believe she provided her clients with an exceptional service.”

Cat MacLean, Partner: cjm@bto.co.uk / 0131 222 2939