Morgan Grenfell Development Capital Syndications Ltd v Arrows Autosports Ltd. & Ors

The Third Defendant, Mr Walkinshaw, who appears by Mr Pelling Q.C. and Miss Mallinckrodt, is a well-known figure in motor racing circles and was the prime mover of the Arrows Formula I racing team. He was engaged in the sport and business by way of several related companies. Formula I is a notoriously expensive undertaking and at any rate by September 1999 Arrows’ finances were causing very serious problems. Financing and re-financing was being attempted. Even day-to-day payments were causing difficulties. Such was the risk that Mr Walkinshaw himself was invited to give an indemnity ("the Indemnity") in respect of an Overdraft Facility granted to Arrows Autosports Ltd. ("AAL") by the First Claimant, a Morgan Grenfell company, of up to £13m. He gave it in writing on the 20^th October 1999. But the Team failed to achieve its hopes; it dropped from the grid, and its demise left very large debts, including the debt by way of the overdraft. Mr Walkinshaw has been required by way of the issue of these proceedings (as amended) to honour what was claimed to be his obligation under his Indemnity but nothing has been paid.

Amongst those who had directly or indirectly financed the Team were some or all of the Claimants; the 1^st Claimant, as I mentioned, had initially provided the overdraft but it was reimbursed later by others who are said to be Morgan Grenfell entities. This action began in 2002. By November 2002 it had acquired its present shape with 4 Claimants and the 8 Defendants, of which Mr Walkinshaw is the 3^rd. Many other issues in the action, including some defences which Mr Walkinshaw sought to raise against his personal liability under the Indemnity, have already been ruled upon but before me the principal issues remaining for decision are as follows:-

Needless to say, these broad issues break down into a larger number of lesser ones but I shall need first to set out more of the background.

The only oral evidence I heard was from Mr Graham Hutton, formerly Chief Executive of MGPE. Mr Walkinshaw gave no evidence at all.

There have already been several hearings and orders in this action. Thus on the 3^rd May 2002 Laddie J. granted ex parte an injunction against, inter alios, Mr Walkinshaw, which was later, upon undertakings by him and others, by consent continued on the 9^th May 2002. On the 4^th July 2002, after a full hearing inter partes before Lightman J., the Judge declined the request of the 1^st-4^th Defendants to release them from the undertakings earlier given. After a hearing of some 9 days in December 2002 and January 2003 Pumfrey J., in a reserved judgment of the 28^th February 2003, gave judgment against Mr Walkinshaw (and others) on a number of defences including defences sought to be raised by Mr Walkinshaw against his liability under the Indemnity. However, the issues of what sums were recoverable and, if any, by whom, under the Indemnity were left over. Directions were given for further evidence. I respectfully refer in particular to paragraphs 5-39 of the judgment of Pumfrey J. setting out the whole commercial background more fully than, upon my looking only at the few remaining issues, I have needed to do.

The 4 Claimants, who appear by Mr McQuater Q.C. leading Miss Tolaney, are loosely related but in this part of the action it is only the first 2 that are of interest; I shall call them "MGDCS" and "MGPE". They both form part of an elaborate structure of persons involved, under "Morgan Grenfell" or "Deutsche Bank" labels, in the attraction of investment, in investment advice and management and in investment banking. The relationships between the persons are variously one or more of those of shareholder and company, partner and partner, management adviser and client and investor and investment manager. The various relations were created by or are illustrated in a large of number of contracts and other documents summarised in the evidence and were explained during the hearing by reference to diagrams. The elaboration of the structure (the successive diagrams as to which attempted to deal only with a part of the greater Deutsche Bank enterprise, namely the part or, more likely, a part of the part dealing with Morgan Grenfell investment entities in the United Kingdom) was illustrated by the fact that not until the 3^rd diagram was produced by the Claimants was the structure thought to be acceptably well shown. I incorporate into this judgment a black and white version of that 3^rd diagram which, in the original, was in 4 colours. The key on the diagram describes whether a relationship is by way of management agreement, partnership, shareholding or investment. It will be useful to have the diagram in mind when I come to deal with the issue of who are the persons who, in point of construction, may have the benefit of Mr Walkinshaw’s Indemnity. It will be seen that at the foot of the diagram there are 5 boxes marked respectively MGE Partners I, MGE Partners II, MGE Partners III, MGE Partners IV and MGE Partners V. Each of those boxes represents a limited partnership having several partners. During the hearing and in many of the papers those limited partnerships were together referred to as "the Funds" and separately as Funds I-V respectively and I shall use these descriptions but it is to be borne in mind that, although thus described as funds, they are truly separate partnerships (not under the Limited Liability Partnership Act 2000) rather than mere assets. I shall otherwise refer to the various companies and partnerships shewn on the diagram by the names or acronyms there shewn.

AAL was set up as a holding company to hold all the shares in the 2^nd Defendant, "AGPI", which operated the Arrows Formula I Team. In late December 1998 Morgan Grenfell financing of Arrows began; there was a Subscription and Shareholders Agreement to which AAL (then called "Mailever Ltd"), Mr Walkinshaw, MGPE and MGDCS were amongst the parties. In January 1999 some $20.9m was invested and in June 1999 some $18m and the Funds thereby eventually acquired 45% of the shares in AAL. Another 45% was held by Mr Walkinshaw. The original investments were made by MGDCS but with a view from the outset to its being recouped largely or wholly out of the Funds and with a view also to a transfer to the Funds of such securities and other benefits as were not by arrangement syndicated to others. In a corresponding way the Funds also invested $41.25m in Senior Loan Notes of AAL. It is not, I think, necessary for me to go into any details of these dealings although, when I come to deal with what was called a "commercial reality" argument as to the true construction of the Indemnity, I will need to refer to some of these earlier, pre-Indemnity, relations between Mr Walkinshaw, AAL and Morgan Grenfell entities as part or, arguably as part, of the relevant factual matrix.

On the 22^nd September 1999 MGDCS by letter agreed to grant to AAL an Overdraft Facility of £5m as working capital. Interest was to accrue at the rate of 12% p.a.. If there was default that rate grew to 15%. The overdraft was in general repayable on demand but the letter provided that even without demand the full amount drawn down had to be repaid 360 days from the 22^nd September 1999. So long as the overdraft remained outstanding, AAL was to perform, and to procure its subsidiaries to use their best endeavours to comply with, the requirements of a Composite Debenture and Guarantee of the same date to which MGPE was a party. In that Composite Debenture and Guarantee the term "Overdraft Provider" was defined to include any assignee or transferee of the Overdraft Facility. The overdraft facility letter referred also to a Deed of Arrangement of the 22^nd September 1999 to which I shall later refer. Mr McQuater, rightly in my view, argues that the overdraft letter was not intended to be seen in isolation but (a point I shall return to) as part of a continuing rôle of Morgan Grenfell entities, begun not later than December 1998, in the financing of AAL. The overdraft was secured by the Composite Debenture and Guarantee. The letter provided that the lender or any successor or assignee of the lender might transfer to anyone all or any of its rights or obligations under the Overdraft Facility. The letter was executed as a deed by AAL by way of the signature of a lawful attorney of Mr Walkinshaw.

By a Deed of Variation of the 20^th October 1999 the overdraft limit was increased from £5m to £13m. MGDCS and MGPE, as well as Mr Walkinshaw, were amongst the parties to the Deed. References to a party were to be deemed to include that party’s respective successors or permitted assigns. Again there were references to the Composite Debenture and Guarantee and the Deed of Arrangement. It was the increase of the facility from £5 to £13m by way of the Deed of Variation that provided the consideration for the Indemnity of the 20^th October 1999 with which I am chiefly concerned. At the date of the Indemnity the overdraft stood at about £5.9m and it steadily increased, reaching its maximum in mid-December 1999. I have no doubt but that it was hoped and expected that the high level of overdraft at or about £13m was to be short lived. It was sometimes described as a "Quick-fix"; funds were very urgently needed to keep the F1 team on the track and the luxury of awaiting completion of complicated negotiations and documents was denied to the parties. Negotiations did continue; indeed Heads of Terms for the refinancing of the Arrows Group of Companies marked "subject to contract" were signed by Mr Walkinshaw but acceptable terms were never finally agreed and the overdraft therefore continued.

On the 19^th September 2000, on the expiry of the 360 days, the overdraft, not by then demanded, became repayable whether or not previously demanded. On the 5^th July 2002 formal written notice was served by MGPE on AAL calling for repayment forthwith of the principal sum of £13m. It was said that notice would be given later as to the interest amount outstanding. AAL was reminded that interest continued to accrue. The demand was said to be made at the request and on the authority of the "Finance Parties", a term which, by reference to the Deed of Arrangement and the Composite Debenture and Guarantee, included reference to the Funds (at any rate if they were by then permitted assigns of MGDCS). A further demand was sent on the 21^st August 2002.

On 20^th December 2002 Administrative Receivers were appointed over all of the assets of AGPI, the 2^nd Defendant, by then the main operating company of the dissolving Arrows’ empire. Receivers were appointed pursuant to a Debenture of the 28^th March 2002 granted to HSBC Bank plc. On the 13^th January 2003 the 2^nd Defendant was wound up in the Birmingham District Registry. It is common ground that AAL cannot repay the Overdraft Facility and that apart from minor recoveries from the Receivers of the 2^nd Defendant, the entire amount of the Morgan Grenfell investment in Arrows has been lost.

It is in the form of a letter on Mr Walkinshaw’s own writing paper and is addressed to MGDCS which is then defined as "the Overdraft Provider". It refers in its heading to the Overdraft Facility Letter of the 22^nd September 1999 which it describes as "the Overdraft Facility". The consideration for the Indemnity given was expressed to be MGDCS’s promise to increase the amount available under the Overdraft Facility to £13m "in accordance with the terms of a deed of variation ("the Deed of Variation") dated the date hereof". I will first set out the rest of the Indemnity in full but later repeat passages required to be addressed separately. The balance of the Indemnity provided as follows:-

I found it difficult to stifle my dislike for the language of the Indemnity. It is almost paranoid in its contemplation of those who might need to have protection and who thus needed to be put within the class of Indemnified Persons. Could one really foresee, for example, any facts such that the representatives (whoever they might be) of a subsidiary undertaking (whatever that might be) required protection by indemnity even where the subsidiary undertaking itself was already so protected? And, for all such excess, the most obvious and simple case of an assignee of MGDCS as such possibly, if that was intended, requiring protection was not expressly provided for. Mr McQuater, commenting on the fact that the class of Indemnified Persons did not expressly and as such include "assignees" said "Had it done so, no doubt we would not have been here!". However, there is, as yet, no principle whereunder a contract can be set aside on account of its unnecessary elaboration and accordingly I must construe the Indemnity by reference, inter alia, to a number of general principles of which I was reminded.

I was referred to Investors Compensation Scheme –v- West Bromwich Building Society [1998] 1 WLR 896 HL at 912-913, BCCI –v- Ali [2002] 1 AC 251 at 296e, Jumbo King Limited –v- Faithful Properties Limited (1999) HKCFAR 279, Society of Lloyds’ –v- Robinson [1999] 1 WLR 756 at 763, HSBC Bank plc –v- Liberty Mutual Insurance [2001] All ER (D) 61 at paragraph 20, Melanesian Mission Trust Board –v- Australian Mutual [1997] 2 EGLR 128 and The Tychi (No. 2) [2001] 2 Lloyds Reports 403 at 409. Whilst the different parties would have wished to emphasise different sentences from those authorities I do not take the parties greatly to have differed in their descriptions of what I could and could not take into account in ascertaining the true construction of the Indemnity. More contentious was the Claimants’ reference to Manks –v-Whiteley [1912] 1 Ch 735 at 754. That was a reference by Mr McQuater to the dissenting judgment of Fletcher Moulton L.J. in which at p. 754 he referred to the principle:

I would not have expected the other two in the Court of Appeal in Manks, namely Sir H.H. Cozens-Hardy M.R. and Buckley L.J., to have regarded Fletcher Moulton L.J.’s observation as one from which they had to dissent but the Lord Justice’s principle, if it is to be applied, gives rise to the question of fact as to whether the Indemnity did indeed form part of one transaction comprising several deeds. In a sense it did; it could be said to be part of the Morgan Grenfell financing and re-financing of AAL that had been continuing since late 1998. That, though, is too loose a connection to permit one to conclude that the Indemnity was merely a part of one transaction with all the other financing arrangements or even as one transaction along with some others, the Overdraft Facility letter and the Deed of Variation. However, even if I am not required to treat the Indemnity as if part of one transaction along with the Overdraft Facility letter and the Deed of Variation, it has to be noted that those other two documents are referred to in the Indemnity and themselves refer to the Composite Guarantee and Debenture and to the Deed of Arrangement of the 22^nd September 1999. Plainly, therefore, the Indemnity cannot be regarded as if a document wholly independent of all others, even though, in my view, it cannot, within Fletcher Moulton L.J.’s principle, be treated as if one document with them.

Mr Pelling invites me to construe the Indemnity contra proferentem. That leads to the question who is the proferens? Morgan Grenfell’s Solicitors proferred the draft but Mr Walkinshaw proferred the Indemnity after it was reviewed for him by his Solicitors. However, assuming in his favour that Mr Walkinshaw has the benefit of such a disposition in favour of his side that the maxim permits or requires, I did not find such disposition sufficient to affect the view on construction I would otherwise have come to.

In BCCI –v- Ali supraat p. 265 Lord Nicholls of Birkenhead said:-

For the immediate purpose of ascertaining those intended potentially to benefit from the indemnity I will repeat the relevant passage namely:-

In the simplest way of the several ways in which the Claimants put their case it was argued that the Funds all lost money, that the money lost fell within the categories of losses indemnified against (as I shall come on to) and that the Funds were amongst the Indemnified Persons. That gives rise to the primary question: are the Funds within the class of Indemnified Persons?

In the way the Indemnity is framed there are 3 sub-classes of Indemnified Persons. The first is the Overdraft Provider itself, MGDCS. The second (which, by the use of "and/or" is additional or alternative) is "any of its affiliates, associates, shareholders, subsidiary undertakings, any holding company". It is thus required of the members of this second sub-class that each should have such a relationship with MGDCS that it can be spoken of as "its" affiliate or "its" associate and so on. The third sub-class is "and their respective directors, office[r]s, partners, agents, employees and representatives". It is required of members of this third sub-class that they should have such a relationship with members of the first or second sub-classes that they can be spoken of as "their" directors or officers and so on. It is not only good sense but also is common ground that the word "their" refers not only to members of the second sub-class but also to MGDCS as the sole member of the first sub-class. Of the 3 sub-classes it is chiefly the second that has given rise to argument, and, of the words within the second sub-class, it is the words "affiliates", "associates" and "any holding company" that have received the most attention.

As for a "holding company", I was referred to section 736 of the Companies Act 1985 (as amended) which provides:-

MGDCS is 100% owned by Morgan Grenfell Development Holdings Limited ("MGDCH"). That company is 100% owned by Deutsche Morgan Grenfell Group plc. MGDCS, as a subsidiary of a subsidiary, has Deutsche Morgan Grenfell Group plc as a holding company. That far the Companies Act meaning is common ground as leading to those companies being Indemnified Persons but Mr McQuater argues that application of section 736 itself would lead to Deutsche Bank ("DB") being also a holding company of MGDCS. I am unsure of that; DB satisfies none of section 736 (1) (a) to (c) and the concluding words of section 736 (1) do not seem to go beyond two stages upwards, first to MGDCH and next to its holding company, Deutsche Morgan Grenfell Group plc. I am unsure, in other words, that any number of tiers of sub-sub and sub-sub-subsequent subsidiaries are, by the section itself, given the uppermost company as their "holding company". However, it is common in ordinary commercial and legal usage to find persons speaking of a "group holding company" or of an "immediate" or "ultimate" holding company or some such and, irrespective of the limits of section 736 itself, I have no difficulty in finding DB to be a holding company of MGDCS. The word "any" in the phrase "any holding company" in the Indemnity tends towards the draftsman having recognised, consistently with that ordinary usage, that there may be more than one holding company and that there may be immediate and more remote holding companies and that any of them is, and hence that all of them are, capable of being an Indemnified Person as MGDCH’s "holding company". I do not accept Mr Pelling’s argument that "any" before "holding company" means only "if any"; no two parties, both advised, as were MGDCS and Mr Walkinshaw, by leading City Solicitors, could, in the relevant circumstances as they were in October 1999, have had doubts as to whether MGDCS had any holding company, any more than doubts as to whether it had, for example, "any …. shareholders".

As for "affiliates" and "associates" it is notable that what one might call a "membership" relationship with MGDCS is already thoroughly catered for by the inclusion of "shareholders, subsidiaries, subsidiary undertakings [and] any holding company". That suggests that affiliates and associates may have a form of relationship with MGDCS not involving the notions of control or share ownership embraced by those words. The possibility of the sort of relationship that "siblings" may have – fellow subsidiaries of a holding company – is thus not excluded and may have been intended.

Whilst, on etymological grounds, I would have thought "affiliates" to be likely to be a smaller group or a group requiring a closer relationship with the propositus than would "associates", the meanings illustrated in the OED, 2^nd Edition 1989 do not make either markedly wider or narrower than the other. Thus commercial meanings are given to "affiliate" as a noun, including affiliates of banks, as those persons related to one another as branches to a central organisation and "associates" include those united by community of interest and sharing in business.

Against that background, can either of MGDCS’s "siblings", MGPE or MGC(GP)L be regarded as its "affiliates" or "associates"? Mr Pelling invites me to give "associate" the meaning conferred on an "associated undertaking" in Schedule 4A to the 1985 Act, paragraph 20 (1). That provides:-

Mr McQuater, though, refers to the very specific purposes of the definition of "associated undertaking" in the 1985 Act. It is not a definition of "associate"; it requires there to be an "undertaking" and a "consolidation" and it is for the purposes only of the compilation of group accounts – section 227 (4). If one had to pick, for the purposes of the Indemnity, some statutory meaning to be given to the word "associate", says Mr McQuater, why prefer that in the Companies Act to, say, that in the Insolvency Act 1986 section 435 which includes as "associates" those companies under the control of the same persons (as are MGDCS, MGPE and MGC(GP)L)? Why not, he asks, use the meaning of "associated company" in section 416 of the Income & Corporation Taxes Act 1988 ("… or both are under control of the same person or persons")? Alternatively, argue the Claimants, section 53 of the Companies Act 1989 could be used ("associate" – "…. any body corporate in the same group …"). And under section 430E of the 1985 Act fellow subsidiaries of the same holding company are associates in the particular context it was dealing with – section 430E (4) (b).

Whilst these and, no doubt, other statutory meanings may be borne in mind as meanings that, in their particular respective contexts, have been intended to be used and are such that, in those contexts, they make sense and serve the particular purposes required of them, I am not concerned with any statutory context nor with any purpose truly akin to the purposes being served in the various statutes. In the context I am concerned with, one that suggests that something other than what I have called a membership relationship was within contemplation for the words "affiliates" and "associates", I see the words as including within their meaning fellow subsidiaries (or sub - or sub-sub and so on - subsidiaries) of the same proximate or remote holding company, at all events where the candidates are, broadly speaking, in the same commercial sector. DB, for all I know, may have, say, an office cleaning subsidiary in Frankfurt or a computer subsidiary in New York; they would not be "affiliates" or "associates" within the Indemnity, but I take direct or indirect subsidiaries of DB operating, as does MGDCS, in the broad investment sector in the United Kingdom, to be "affiliates" or "associates" of MGDCS. On that basis I hold MGPE, MGC(GP)L and Deutsche Equity Funds Holdings Ltd ("DEFHL") each to be an Indemnified Person.

The next question then becomes this: in what way does the third sub-class ("….. their respective directors, office[r]s, partners, agents, employees and representatives") enlarge the relevant parts of the second (… its affiliates, associates ….). If I am right as to DB and, at any rate, its UK investment subsidiaries being within the second sub-class, the third sub-class, at the employee and representative level, becomes numerically huge, measurable, perhaps, in thousands and constantly changing. Mr McQuater first responds to the kind of doubt that that thought engenders by answering that I am not concerned with tort. Considerations that arise where a tortious duty, if owed to any one, is owed to an unknowingly large and changing class can lead, in tort, to an argument against the existence of the duty. But that sort of case is not before me. The second response is rather that I must construe that to which Mr Walkinshaw put his name; if it gives rise to a potential liability to hundreds or thousands then that is what Mr Walkinshaw signed. Thirdly, though, he adds that on the facts, whatever the number of those potentially liable, only those who satisfy the remaining requirements of the Indemnity (as I shall come on to) will be able to make actual claims and that Mr Walkinshaw is further protected by the specified cap on his liability. I accept all three limbs of that argument. But Mr Pelling then raises a counter-argument. He argues (to narrow it down by way of example) that the word "partner" in the third sub-class enlarges the sub-classes only to such members of the first and second sub-classes as are themselves partnerships and that the loss suffered, if it is to be indemnified, needs to be loss qua partner.

It is common ground that it is not possible to construe the second and third sub-classes distributively so that "their respective directors" should apply only to "affiliates", "officers" to "associates", "partners" to "shareholders" and so on without making a commercial nonsense of the Indemnity. The words "and their respective …." are thus not intended to lead to a distributive construction and, that being so, I see no linguistic, commercial or logical stopping place short of each word in the third sub-class being available to operate, and (where having applicability) operating, to enlarge each word in the second. More especially, I see no reason why a partner of "any holding company" of MGDCS or a partner of an "affiliate" or "associate" of MGDCS should not be an Indemnified Person. As for the capacity in which any may have suffered loss, if the restriction suggested by Mr Pelling could be made workable at all over the whole range of the second sub-class it would have required greater provision than is found or can be implied into the words of the Indemnity.

On that basis I hold the Funds I-IV to be Indemnified Persons. MGEP I is an associate or affiliate of MGDCS by being a partner of DB and of DEFHL, they being respectively a holding company and (within the meaning I ascribe to these words) an affiliate or an associate of MGDCS. MGEP II, III and IV are also Indemnified Persons as partners of DEFHL.

What though of Fund V? It is not a partner of DB or of DEFHL. It is a partner of MGELP but MGELP I have not so far held to be an associate or affiliate of MGDCS. True it is that MGELP (a Scottish limited partnership) is a partner of an affiliate or associate of MGDCS, namely MGC(GP)L, but can it suffice that Fund V is a partner of a partner of an affiliate or associate of MGDCS? Is it enough to be associated with an associate, affiliated to an affiliate? This gives rise to whether another kind of nexus, that of management, can lead to sufficient proximity to amount to association or affiliation. MGPE has contractual investment management relations with all 5 Funds and is, in my judgment, an affiliate or an associate of MGDCS. MGPE also has similar relations with MGELP which is a partner in all 5 Funds. But there was at no material time any standing investment management contract between MGDCS and MGPE. Whilst it was not unknown and could be expected that MGDCS would acquire positions which, on MGPE’s advice to and selection for the Funds, would be passed on to the Funds and would from the outset of MGDCS’s acquisition have been intended to be passed on to others including the Funds, there was in 1999 no standing arrangement, as Mr Hutton’s evidence makes clear, whereby MGDCS could "put" all or any of its acquisitions to the Funds or to MGPE. The Funds were, then, in my judgment, past and potential prospective customers of MGDCS but, in my view, it may be thought to stretch association and affiliation too far to regard that uncertain relationship as sufficing to bring the Fund V within the class of Indemnified Persons. Nor do I regard the fact that there were individuals who were officers of, or employees who were engaged in making decisions for, MGDCS who also had corresponding rôles at MGPE as sufficing to amount to association or affiliation as between those corporations themselves.

In implementation of a broader approach to construction Mr McQuater took me to a number of the very many documents relating to the financing of Arrows.

On the 5^th June 1999 there was a Supplemental Deed between AAL, Mr Walkinshaw, MGPE, MGDCS and Morgan Grenfell Development Capital Nominees Ltd (a company not shewn on the diagram) which was named in 5 guises, in each case its name being followed by "account MGEP I" to "MGEP V" respectively. The expression "MG Group" was used in the Supplemental Deed and was defined by reference to the definition earlier used in the Subscription and Shareholders’ Agreement of the 31^st December 1998 and so, again, all 5 Funds were contemplated as within the Group as well as referred to, as I have mentioned, by way of accounts at Morgan Grenfell Development Capital Nominees Ltd. By a separate instrument on the 5^th June 1999 Mr Walkinshaw, along with AAL, made a separate agreement with MGPE, MGDCS and Morgan Grenfell Development Capital Nominees Ltd., the last’s name again followed 5 times over by the name of each of the respective Funds, and with Deutsche Bank Nominees (Guernsey) Limited. The agreement was in consideration of those Morgan Grenfell parties and Deutsche Bank Nominees (Guernsey) Limited entering into the Supplemental Deed. On the 5^th June 1999 the Funds, once again represented by Morgan Grenfell Development Capital Nominees Limited, made an agreement as to written resolutions in AAL to which Mr Walkinshaw also was an agreeing party.

On the 22^nd September 1999 MGDCS as lender agreed in writing the provision of an overdraft facility for AAL as borrower in the sum of £5m as I have explained – see paragraph 8. As I have mentioned, assignment by the lender or its successors or assigns of the benefit of the agreement was expressly contemplated as, indeed, was its complete novation by MGDCS – paragraph 10 of the Overdraft Facility letter. On the same day a Deed of Arrangement was made to which, inter alios, Mr Walkinshaw, MGDCS, MGPE and - by way of being described as Morgan Grenfell Development Capital Nominees Ltd. accounts MGEP I–V respectively - the Funds were or as if party. The recital (B) provided (with my emphasis):-

Although the limited partnerships, the Funds, were within the Deed of Arrangement only by way of Morgan Grenfell Development Capital Nominees Ltd. and the reference to the relevant Fund as "a/c" number such and such, the way their joinder was expressed was presumably intended to have the effect that they were party or as if party to its provisions and bound by it. As such they gave the consents and agreed the waivers (in favour, inter alios, of Mr Walkinshaw) which were set out in clause 2 of the Deed; at the least the Deed made it difficult for them to claim that the apparent consents and waivers were not intended to be relied upon, whether in the particular commercial context their consents and waivers were significant or not.

These documents, part only of the totality of documents agreed as to Morgan Grenfell’s financing of Arrows (using both terms as broadly as possible) give rise to what I think he called a "commercial reality" argument from Mr McQuater. They are referred to not to suggest that any words or phrases used in them and there having certain meanings should, on that account, necessarily be given the same meanings if used in the Indemnity but rather to illustrate a factual point, namely that it was the case and was clear by the 20^th October 1999 to both parties to the Indemnity, that the Funds, in relation to the financing of Arrows, had been frequent affiliates or associates of MGDCS. By the 20^th October 1999 Mr Walkinshaw was, Mr McQuater argues, thoroughly at home in a context in which the Funds had been seen by him to be investors in AAL, as was MDGCS and as part of a defined MG Group including MGDCS. The Funds and MGDCS were respectively finding themselves entering into or bound by the same deeds and instruments as each other (and Mr Walkinshaw) relating to the financing of Arrows. The broad commercial purpose of the Indemnity was to ensure that Mr Walkinshaw, over however short or long a term as might emerge prior to some more formal refinancing being agreed and implemented, would protect half of the sums advanced - contemplated as half of £13m and interest – and would protect it in favour of anyone on the MG side who might stand to lose. Within such a broad and, as Mr McQuater would say, obvious a purpose, the Funds were plainly intended to be included as affiliates or associates of MGDCS, at any rate so far as concerned any financing relating to AAL, and certainly (I am sure he would add) there could have been no conceivable commercial purpose in leaving Fund V unprotected whilst Funds I-IV were covered. Indeed, one would only expect all 5 to be treated in the same way.

Mr Pelling raises two main arguments against the "commercial reality" argument. Firstly, the documentary history shows that the Funds, when intended to be included in anything, were expressly included. The draftsman knew how to procure that and when it was intended he did procure it. It was only necessary to repeat the definition of the MG Group if one wished to ensure that, inter alios, the Funds were included within a reference. Equally, if assignees of the benefit of the loan facility had been intended to be included, reference could have been made to MGDCS’s "assigns", a word with which the draftsmen were already well familiar. Accordingly, on finding no reference to "MG Group" as such or to the Funds in the Indemnity or even to assigns, one could take it that they were not intended to be included. Secondly, Mr Pelling made reference to a memorandum from Mr W. Slattery, Deutsche Asset Managements Compliance Officer, addressed Dr Krekeler, DB’s General Council and Co-Head of Group Legal Services, concerning the way in which assets of investment partnerships, including the Funds, or the partnerships themselves were proposed to be treated within the greater DB Group. I will deal with this second argument first.

The memorandum begins:-

There was no expert evidence given as to German law but I was given a copy of what were said to be relevant provisions of the German Commercial Code, in translation. The "20% rule" referred to would seem to refer to ascertainment of those bodies whose affairs need to be described in the consolidated accounts of a parent or related enterprise – see Articles 271 and 311. Mr Slattery’s memorandum went on:-

Mr Pelling argues that the memorandum shows that the Funds were or were as if external clients of MGPE and hence were not, as such, capable of being affiliates or associates of MGDCS. Mr McQuater resists any reliance on the memorandum in the construction of the Indemnity. It post-dates the Indemnity. It cannot be part of or be evidence of any relevant surrounding factual matrix admissible in construction as it was not within the knowledge or intended to be within the knowledge of the parties to the Indemnity; so far as within anyone’s knowledge (as or as part of the factual matrix as it stood at the time the Indemnity was made) it would have been known only, if to anyone, to the Morgan Grenfell side. I agree. Moreover an argument that the Funds’ investments, by reason of the de facto independence of MGPE’s investment management activity, should not to be taken, for German consolidated accounting purposes, to be lumped in with DB’s as if the Funds, for such purposes, were a related enterprise of DB, is not an argument that touches the question of whether the Funds are associates or affiliates of MGDCS for the very different purposes of the Indemnity. I add, finally, that I cannot be sure what Dr Krekeler’s response to the memorandum was nor whether its argument was or was not accepted for the purposes of German law. In all these circumstances I do not feel able to attach any weight to the memorandum in the construction of the Indemnity.

I revert to Mr Pelling’s first argument against the "commercial reality" issue - namely that obvious and simple words that had already been seen to be deployed between Mr Walkinshaw, AAL and Morgan Grenfell entities, words such as "assignee" or "successors-in-title" or such as "MGEP I" and so on, were conspicuously not used in, and therefore must be taken to have been intended not to be contemplated by, the Indemnity. Whilst the argument undoubtedly has some force, unless it is, in context, so powerful as to convince that the Funds were quite intentionally omitted it leads to the danger of construing a document, the Indemnity, by reference not to the language it used but to the language which it did not use. I am not at all convinced by this argument that the Funds were intended to be omitted. The extravagant terms of the Indemnity are plainly intended to be of a catch-all character and in the commercial context of both MGDCS and the Funds having been repeatedly and expressly all intended to be bound by documents in the broad financing by Morgan Grenfell of AAL (sometimes by way of Morgan Grenfell Development Capital Nominees Limited) I do not feel able to conclude that for the purposes of the Indemnity the Funds were not, but rather I hold by way of the "commercial reality" argument, that they were, affiliates or associates of the Overdraft Provider, MGDCS. More particularly, as this was the way in which Mr Pelling concluded his argument on this issue, I cannot conclude that it was never intended of the Indemnity that it should apply only to MGDCS. Mr Pelling says that that was so because when it was entered into it was contemplated that the overdraft would shortly be discharged and that, in turn, Mr Walkinshaw would be released from the Indemnity within a few days. Had that alone been intended there would have been no need whatsoever for the comprehensive words that followed "and hold harmless the Overdraft Provider" so far as concerned identifying who were the persons thereby to be indemnified. That, it seems to me, is a quite impossible construction. The "commercial reality" argument leads, in my judgment, to, inter alios, all 5 of the Funds being Indemnified Persons as affiliates or associates of MGDCS.

It is convenient at this point to deal with two arguments that go beyond construction. I am not able to accept Mr Pelling’s argument that by its very nature the Indemnity was such that its benefit could not be enjoyed by or assigned to another than MGDCS. It is not at all clear to me that enjoyment of the benefit of the Indemnity by anyone other than MGDCS necessarily required assignment to them if they were in any event Indemnified Persons. However, Mr Pelling relies upon Peters –v- General Accident Fire and Life Assurance Corporation Limited (1938) 2 All ER 267 CA. In that case Sir Wilfrid Greene M.R., with whom Scott L.J. and MacKinnon L.J. agreed, said that the contract there in question was such that by its very nature it was not assignable. Assignment of the character of contract that the Court of Appeal was there dealing with would have had the effect, were it permissible, of "altering in toto the character of the risk" – p. 269H. But there the contract was one of car insurance where it was ambitiously being asserted that the benefit of the car insurance passed with the car. The nature of the contract there in issue was so different from that with which I am required to deal that I find no guidance at all can be derived from Peters. Mr Pelling argues that if the benefit of the Indemnity is assignable then Mr Walkinshaw could find himself taking on a wholly different risk than that which was foreseeable. I cannot accept that. The overdraft itself plainly contemplated that the lender might become someone other than MGDCS; Mr Walkinshaw could thus not credibly assert that the lender was immutably fixed as being only MGDCS. The risk to which Mr Walkinshaw exposed himself was that, should AAL not repay the current overdraft - lender (either MGDCS or any assignee or successor-in-title of MGDCS), that lender might require repayment from him. The risk, taken on by Mr Walkinshaw in the Indemnity, so expressed, was exactly the same after a transfer to the Funds as it had been before. It is not even as if the Funds, once in place as the current lenders, then made some importunate demand that MGDCS would not have made. No demand was made until the overdraft became repayable under its own terms.

Nor do I find anything that assists Mr Walkinshaw in Telfair Shipping Corporation S.A. –v- Inersea Carriers [1985] 1 WLR at 553. Limitation had been raised as a defence in that case and it became necessary to determine at what point liability arose under the indemnity which was to be implied into a charterparty by way of the incorporation into it of clause 8 of the New York Produce Exchange Standard Time Form Charterparty terms. The species of indemnity there considered was utterly different to that to which the Indemnity belongs. Neill J. held that the question became one of construction. I can see that where an indemnity indemnifies against, for example, claims, liabilities or expenses then in some cases and in point of construction it cannot be relied upon in proceedings against an indemnifier until the claim has been made, the liability has accrued or the expense incurred but the Indemnity indemnifies also against losses and there can be no doubt, as it seems to me (to trespass on the next heading) but that relevant loss had already occurred before proceedings began.

Whilst it was undoubtedly the case, as Mr Hutton indicated, that at the date of the Indemnity the parties to it hoped and expected and in that sense "contemplated" that it would be repaid only by way of an imminent formal financial re-structuring, I do not accept Mr Pelling’s argument that payment-out of the overdraft by any other means was, in the legal sense, beyond their "contemplation". Had that been the case I cannot see that the elaborate reference to (inter alios) employees of subsidiaries would have taken the shape they did. It needs to be remembered that the facility itself created the prospect that others than MGDCS might become the current lender and accordingly might suffer should the overdraft not be repaid.

MGDCS, although habitually or at least commonly and with little delay passing on to other Morgan Grenfell entities the benefits of financings it had acquired, had at the time no written contractual ability to "put" the Overdraft Facility to MGPE or to the Funds or anyone else. Nonetheless it is the Claimants’ case that in the Summer of 2000 MGPE called cash down from the Funds and reimbursed MGDCS at 100p in the pound, thereby acquiring the benefit of the Overdraft Facility for the Funds. It is the Claimants’ case that the benefit of the Indemnity also passed to the Funds in the sense that thereafter claims by or on behalf of the Funds were to be possible under the Indemnity should its terms not be honoured.

There is a letter from MGDC(GP)L to MGDCS of the 19^th November 1999 which Mr Graham Hutton described in his witness statement as representing an agreement by "the Fund" that it would acquire the overdraft. It was always understood, he said, that all ancillary rights, including the benefit of the Indemnity, were also transferred. He accepted that no document recorded the terms of the transfer of the overdraft. Whilst the letter may provide some evidence of a broad intent that the Funds should take over MGDCS’s position in the financing of AAL, it cannot be read as evidencing a transfer of the benefit of the AAL overdraft without creating a need to correct several mistakes and adjust its language. It is certainly the case that the payment-out of MGDCS by the Funds and a transfer of the benefits to the Funds are not proved by the unequivocal and careful documentation one might expect, but neither is it greatly disputed by Mr Walkinshaw. Indeed, as to payment of MGDCS, in his pleadings Mr Walkinshaw admits and avers that the Funds reimbursed to MGDCS the advances made by MGDCS under the overdraft – paragraphs 64 (C) (a) and 64 (H) of the re-re-re-amended Defence of the 3^rd Defendant. By the 31^st December 2000 the benefit of all or part of the overdraft (there described as £12,093,023) was shown as an asset of at least one of the funds (MGEP II) and, as it would seem, as having been acquired in June 2000. MGDCS’s bank account with DB shows credits attributed to payments from the Funds with posting dates in July 2000 and the pleadings give details of money payments. Given that, amongst affiliates and associates (as I have held them to be), one might expect less formality than as between third parties and given also the written and oral evidence as to what was always intended and understood, I believe I can hold that MGDCS was paid out pound-for-pound for the overdraft well before proceedings began and probably in the Summer of 2000 and that the benefit of the Overdraft Facility and, in the sense mentioned, of the Indemnity had (again well before proceedings began) passed to the Funds.

On that basis MGDCS has, in my view, no claim for itself under the Indemnity; it suffered no loss of the kind indemnified. Whether (as I would doubt) the Funds are able to raise relevant claims against MGDCS in respect of the overdraft, they have not done so. But what of the Funds?

I do not understand the Funds to have been repaid anything significant from AAL, from any other Arrows company or from anyone else in respect of their acquisition pound-for-pound, of the position of lenders of the overdraft. On any footing that, as it seems to me, means that a loss was incurred by a number of Indemnified Parties but is it one which is "related to or arise[s] as a result [MGDCS] at any time and from time to time making advances to [AAL] under the Overdraft Facility (as amended by the Deed of Variation)"? Mr Pelling argues that the losses (thus pro tanto, accepting them as such) derived from the decision to purchase the overdraft from MGDCS on a pound-for-pound and non-recourse basis. That is so, but events may have more than one cause and that assertion does not, of itself, deny that the losses "relatedto ….. [MGDCS] …… making advances to [AAL] under the Overdraft Facility (as amended by the Deed of Variation)". As a nexus, "related to", especially when used disjunctively in addition to "arising as a result of", suggests, to my mind, that any within a very broad range of possible linkages (including but not limited to causal ones) is contemplated as required to exist between the advances and the loss and I hold the Funds’ shortfall in recovery under the terms of the Overdraft Facility (as varied) to be a loss suffered by the Funds and one falling within the terms of the Indemnity.

If, then, the Funds (not themselves parties to this action) are Indemnified Persons who have incurred losses falling within the terms of the Indemnity, is there a claim in the action that represents a claim for such losses duly made on their behalf? Mr Pelling accepts that by reference to the principles exemplified in Beswick –v- Beswick [1968] AC 58, MGDCS could properly bring proceedings requiring Mr Walkinshaw to indemnify an Indemnified Person other than itself. It is, of course, convenient that MGDCS should be able to sue on behalf of the Funds to obviate the need for the inclusion of 5 separate partnerships or (even less convenient) the partners in those 5 partnerships, as claimants. In the re-re-re-Amended Particulars of Claim MGDCS (i.e. as one of the Claimants’) claims, inter alia, against Mr Walkinshaw:-

Mr Walkinshaw’s case is that no Indemnified Person can claim from him in respect of interest payable under the overdraft but not paid. Interest contractually payable as between AAL and MGDCS but not paid cannot be, he says, within the description of "any losses … incurred by any of the Indemnified Persons which are related to or arise as a result of the Overdraft Provider … making advances to [AAL] under the Overdraft Facility…". The later reference in the Indemnity to "(plus interest)" was, argues Mr Pelling, referring to contractual interest merely as part of the computation of the cap to Mr Walkinshaw’s personal liability. I accept that argument as to the effect of that latter reference but I have difficulty with the argument as to losses in general. Had AAL honoured its obligation under the Overdraft Facility as amended the contractual interest there provided for would have been paid to the Funds as transferees of the benefit of the overdraft. But AAL has not paid anything and is unlikely to do so. It does not seem the least fanciful to me, in the context of an overdraft, to describe a situation in which a putatively valuable contractual right proves to be close on worthless as the incurring of a loss, a word commonly used to describe a situation in which someone does not receive what he bargained for. It was not even as if (whether or not this would have affected the question) the Funds had acquired their rights at less than a pound in the pound. Before looking at authorities I am thus disposed to regard unpaid contractual interest as (subject to the cap) within the sums for which Mr Walkinshaw is personally liable to the Funds under his Indemnity.

However Mr Pelling refers me to Swingcastle Limited –v- Alastair Gibson [1991] 2 AC 223. I do not see the case as assisting him. It dealt with a case in tort where the lender was asserting, not without inconsistency, firstly that if there had been no negligence (an over-high valuation of security) he would never have entered into the contract of loan at all and, secondly, that his losses should be taken to include sums computed by reference to the high contractual rates of interest provided for in the contract he in fact made, the very contract which he urged he would never (but for the negligence) have entered into. It was not the valuer’s negligence that deprived the lender of the high contractual rates of interest; indeed, in a looser sense the negligence could be said to have procured the high rates of contractual interest which, but for the negligence, would never have been the subject of a contract. So far from the case assisting the 3^rd Defendant I regard the endorsement in Swingcastle supra of older-established broad principles as reinforcing the disposition to which, without regard to authority, I was earlier inclined. Thus at p. 237 in the speech of Lord Lowry, with which Lord Keith of Kinkel, Lord Brightman, Lord Griffiths and Lord Oliver of Aylmerton all agreed, he endorsed the well-known statement of Parke B. in Robinson –v- Harman (1848) 1 Exch. 850at 855 that:-

That rule had attracted the support of Lord Oliver when at first instance in Radford –v- de Froberville [1977] 1 WLR 1262 where, at pages 1269-1270 Oliver J. had said:-

In context these broad principles seem to me to affirm Mr Walkinshaw’s personal liability to the Funds under his Indemnity in respect of contractual interest.

If I were to be wrong in that view it might have become necessary to attempt to compute compensation for the loss of the use of money by reference to what the Funds would have done with the money which they invested in the overdraft had it not been so invested, an endeavour to which a very late taking of points and a very late flurry of disclosure was directed. The very fact that so hypothetical or speculative an exercise might become necessary tends, in my view, if anything, towards a view that the parties to the Indemnity would have been more likely to have contemplated contractual interest as falling within loss but there was some evidence from Mr Hutton that had the money not been invested in the overdraft the Funds would have been likely to have taken a proportionately greater tranche of the opportunities in relation to Coral Leisure which were open to DB and its associates than in fact, having invested in the overdraft, the Funds were able to do. The Coral opportunity represented, as it turned out, a very good investment.

However, the subject of what would have been done with the Funds’ monies invested in the overdraft had they not been so invested or had the £7.1m or so of the monies not already so invested at the date of the Indemnity not been later so invested was not the subject of clear pleadings, not the subject of timely disclosure and is a subject so inherently speculative that it would have been difficult to deal with even if it had been timeously dealt with. Many questions remain unanswerable. It transpired, for example, that some of the partners in the Funds were offered Coral opportunities and some took them up. On what basis was it offered to such partners and was it offered to all or only to some? Why did those who did not take up the offer fail to do so? What, attempting to recast the gains in Coral as if a recompense per annum analogous to a rate of interest, was the appropriate rate in Coral and, as to its beginning and end, over what period would it have been appropriate to apply that recast Coral rate to derive a figure for what the Funds would have received? What would have been done with the money had the Coral opportunity been brought to fruition (if it was) and if fresh investment of the money then became necessary? Mr Pelling, other arguments failing, was not disposed, as I understood him, to argue against a recompense for the loss of the use of money at 1% over Base Rate. However, on the evidence I have, whilst I find Mr McQuater’s attempt to pray in aid the gain in Coral (said at some points to be 23% but not 23% per annum) as too untested and unproven to be acceptable, I would take 1% over base as too low. If I am wrong as to contractual interest and if I am thus required to do so, then, despite the inescapably speculative and inadequately informed nature of the exercise, doing the best I can I would hold the interest element for which, subject to the cap, Mr Walkinshaw is to be personally liable to be the rate of base plus 3% per annum over the whole period from the 20^th October 1999.

Lest the principal argument as to the Funds being Indemnified Persons which I have already dealt with should have failed Mr McQuater put MGDCS’s claims in two further alternative ways. The first was by reference to Linden Gardens Trust Limited –v- Lenesta Sludge Disposals Limited and Others [1994] 1 AC 85 HL. In that case Lord Browne-Wilkinson, by reference to the speech of Lord Diplock in TheAlbazero [1977] AC 774 at 846, referred at p.113 to a principle of English law. I shall add italic emphasis to it. It is that in a commercial contract concerning goods, where it is in the contemplation of the parties that the proprietary interests in the goods may be transferred from one owner to another after the contract has been entered into and before the breach which causes loss or damage to the goods, an original party to the contract, if such be the intention of them both, is to be treated in law as having entered into the contract for the benefit of all persons who have or may acquire an interest in the goods before they are lost or damaged, and is entitled to recover by way of damages for breach of contract the actual loss sustained by those for whose benefit the contract is entered into.

But if that is the principle which is to be extended beyond the sale of goods it would seem, from the words to which I have added emphasis, to be crucial to its application that it should be within the knowledge of both or all parties to the contract that it was the intention of the party that did transfer the subject matter or an interest in it on to a third party that it would do so. In Linden Gardens itself the contract was for a large development of property which, to the knowledge of both the Corporation and McAlpine, was going to be occupied and possibly purchased by third parties and not by the Corporation itself – p. 114 g-h. In the case before me, although, if MGDCS had any relevant intent it was, doubtless, that, should the overdraft become protracted, it would be transferred to others, I have no evidence that Mr Walkinshaw knew that that was the intention of MGDCS. Indeed, as he is likely to have understood, as did MGDCS, that the overdraft was only expected to be short-lived (he so pleads in paragraphs 11A, 12A and 15 of his re-re-re-amended Defence) he is, if anything, likely to have thought that it would be so early repaid by way of a re-financing that any transfer to another would have been unlikely to have arisen. Mr McQuater, though, argues, by reference to Alfred McAlpine Construction Limited –v- Panatown Limited [2001] 1 AC 518 that knowledge of an intention to transfer of such a kind is not necessary.

There is, I accept, considerable room to doubt whether the applicable principle is as restricted as that reference to The Albazero suggests. I remind myself that the assumption in this part of the case is that the Funds are not Indemnified Persons, that MGDCS as a contracting party to the Indemnity sues Mr Walkinshaw under the Indemnity but that it does so not asserting any loss of its own but a loss sustained by the Funds. In other words, Party A sues Party B in respect of loss suffered by a third person C. The argument leads one to an area of immense difficulties, the measure of difficulty perhaps being best demonstrated by a reflection that in Alfred McAlpine Construction Limited the arbitrator was reversed by the Judge, the Judge was reversed by the Court of Appeal and the Court of Appeal was reversed by a three to two majority in the House of Lords. The two chief difficulties in the way of MGDCS on this argument are, as I see them, firstly, in its establishing that the ability of A to sue for C’s loss is not dependent upon any knowledge or foresight in both A and B, when they make their contract, that breach of it would be likely to cause loss to C or to a class of others of whom C is a member. As I have mentioned, there is no evidence that Mr Walkinshaw contemplated that in the short period during which the overdraft was expected to subsist it would be transferred from MGDCS to anyone, still less that it was within his contemplation that, if it was not performed, loss would be likely to accrue to any persons outside the range of defined Indemnified Persons.

A second difficulty would be whether the express inclusion within the Indemnity of the very long list of Indemnified Persons (but in which, it is assumed, the Funds were not included) suggests of itself that recovery by MGDCS on behalf of others was intended, if contemplated at all, to be permitted only on behalf of other Indemnified Persons. Had I had to decide these questions I would, I apprehend, have been of the view that MGDCS could not overcome these difficulties but, as I do not have to decide the questions and because, as an alternative claim, the claim was never explored as fully as it might have been had it been at the forefront, the better course is that I leave this first alternative argument for decision in some case where it is required to be decided.

Mr McQuater’s second alternative formulation of a claim by MGDCS on the assumption that the Funds were not Indemnified Persons is that on any footing MGDCS is an Indemnified Person and that in computing its loss I must leave out of account the payments made to it by the Funds. MGDCS is, he says, therefore to be treated as having suffered a substantial loss. In support of this (to me, at first hearing) surprising argument he relied upon the unreported case of Interallianz Finanz AG –v- Independent Insurance Company Limited, a judgment given by Thomas J. on the 18 ^th December 1997. He referred me to a number of passages in the judgment which at first sight might be taken to support his proposition but did not take me to p. 46 of Thomas J.’s transcript where he referred to the decision of Phillips J. in Banque Bruxelles Lambert –v- Eagle Star Insurance Co. Ltd. and Others [1995] 2 All ER 769. Phillips J.’s decision in Banque Bruxelles was overturned on a different point in the Court of Appeal (also reported at [1995] 2 All ER 769) but the passage to which I am about to refer and to which Thomas J. referred seems to have survived unscathed. In the Banque Bruxelles case the Belgian Bank in the first place made loans to borrowers secured by commercial properties and those loans were then syndicated to others. At p. 802 in the All England Report Phillips J. said:-

To revert to the principal issues which I identified in paragraph 1, for the reasons I have given I hold Mr Walkinshaw not to be free of liability under his Indemnity but to be liable thereunder to MGDCS, claiming for the Funds. Subject to the cap on his liability, he is liable in respect of the principal money advanced and for interest thereon at the contractual rates provided for in the Overdraft Facility letter. Although I was given some figures for accrued interest (£8.16m as at 12^th March 2004), I was not told they were agreed and I have not been addressed as to the computation of that total; the detailed form which my order should take will need to be the subject of further discussion with Counsel. It may, for example, be necessary to clarify that recovery by MGDCS is not beneficially for itself but that it is accountable to the Funds. Another possible clarification would be to ensure that payment to MGDCS for the Funds should, by reference to the cap, pro tanto reduce any liability of Mr Walkinshaw to other Indemnified Persons.