Capita Trust Company Ltd v Optical Service (UK) Ltd

MRS JUSTICE ROSE: This is an application for summary judgment on this claim for £477,630.87 plus interest from 30 September 2006 amounting to about a further £170,000. The Claimant is the administrator of the estate of Mr Graham Smith who died intestate on 12 September 2006 aged 52. A grant of administration was made to the Claimant on 2 August 2010. The Defendant is a company who used to employ Mr Smith until his death. The managing partner of the Defendant company was Mr Malcolm Eldridge who was the brother of Mr Smith. The Defendant is a successful family business importing and distributing glasses to opticians from premises in Cornwall. One hundred per cent of the shares of the Defendant are held by Mr Eldridge. Mr Eldridge and his wife, Rosemary, are the only directors of the Defendant company.

The sum claimed is alleged to be the balance of a loan account that was maintained by the Defendant for Mr Smith. It is common ground that Mr Smith’s remuneration package included an annual salary of about £60,000 which was paid in instalments into his bank account each month in the normal course. In addition, Mr Smith earned bonuses that were declared each year. The amount of the annual bonus was determined by Mr Eldridge at his discretion. It is common ground that the amount of the bonuses fluctuated greatly and was usually set at a sum far in excess of the annual salary, sometimes five or six times as much.

The Claimant says that there was an arrangement in place between Mr Smith and the Company since about 1999 that rather than paying him these annual bonuses, these sums would be held for him in the Company’s bank account. They were treated as a loan by him to the Company. Mr Smith would ask for amounts to be paid out of the loan account to himself or to other people of various amounts and those amounts would then be deducted from the balance that the Company owed him. Interest also accrued on the loan account and was added from time to time to the balance in the account. The Claimant says as at the date of Mr Smith’s death, the balance of this loan account was a credit of £477,630.87 - that is to say that this was the amount of stored up bonuses and interest that had accrued and not been paid out at Mr Smith’s request. The Claimant asked the Company in May 2012 to pay this amount to the estate but the Company has refused.

Proceedings were launched on 11 December 2012 and Particulars of Claim was served on 24 July 2013. The Particulars of Claim allege the existence of the agreement to hold Mr Smiths’ bonuses and interest in the loan account. The amount of the balance claimed is asserted on the basis that the sum of £477,630.87 is stated in the Company’s financial statement for the year-ending 30 September 2006 as being, “Other loans”. It is asserted therefore that this sum described as, “Other loans” in the Company’s financial accounts is in fact the unpaid bonuses and interest owed to Mr Smith.

The Defence was served on 19 September 2013. The Defence raised a Limitation Act defence alleging that all sums said to have fallen due more than six years earlier were statute barred. The Defence admits that the Company employed Mr Smith but denies that there was any agreement about the non-payment of his remuneration. The Defence admits that there is a figure of £912,825 listed in the company’s audited financial statement as at 30 September 2006 and described as “Other creditors”. It is further admitted that this figure incorporated an item valued at £477,630.87. At the stage of the Defence however, no explanation was given as to what this item was, if it was not monies due to Mr Smith. All that was said is that the entries in the company’s nominal ledger supporting that ‘Other creditors’ figure included an item of £477,630.87 recorded under an entry called “Deferred pension payments”.

The Defence goes on to set out that Mr Eldridge agreed to pay Mr Smith bonuses over the years in addition to his salary. The total amount of bonuses net of tax agreed to be paid between 1999 and 2006 is pleaded by the Company as being £746,626.20. It is asserted that these sums due to Mr Smith by way of bonus were satisfied by the Company in the main by contributions made by the Company to its pension plan of which Mr Smith was a member. Other sums due were satisfied by the payments of amounts at Mr Smiths’ direction, for example, to Mr Smith’s mortgage account or to Her Majesty’s Revenue and Customs on Mr Smith’s behalf. It is therefore denied that there are any sums still owing to Mr Smith by the Company. The Defence refers to the interest payments earned on the bonuses as amounts that were really not really interest but were additional bonuses described as interest.

Once the proceedings had been started but before the claim had been served, there was an application by the Claimant for specific disclosure heard by Master Teverson. The application for disclosure was strongly resisted by the Company and was largely unsuccessful. In the event, only a small amount of disclosure was ordered. What the Master did order was that the Company must disclose documents showing a breakdown of the figure of £912,825 which was included as, “Other creditors” in the 2006 accounts and which the Claimant is convinced includes the unpaid bonuses to Mr Smith. The order required the Company to disclose the breakdown of that figure and any supporting narratives explaining what it is. In response to Master Teverson’s order, the Company’s solicitors in fact produced their own prepared breakdown and narrative. That breakdown sets out all sorts of ordinary trade creditors and provided some narrative in relation to all but one of the figures that went to make up the £912,825. Unfortunately as far as the Claimant is concerned, the one item for which no narrative was provided was the only item that had possible relevance to Mr Smith’s claim. That was the figure of £477,630.87 described in the breakdown as, “Deferred pension payments” but without any further explanation of what this was.

Some contemporary documents were also provided by the Company in response to the order of Master Teverson in addition to the breakdown and narrative. Some of these were irrelevant as they related to other creditors such as the gas bill or the invoice for burglar alarm maintenance. More pertinent was an extract from the nominal ledger of the Company supporting the entry for deferred pension payments as part of the overall figure of £912,825 listed as, “Other creditors”. The nominal ledger sets out various figures which generate the final figure of £477,630.87 which is carried forward into that overall ‘Other creditors’ figure.

In support of the application for summary judgment there is a witness statement from Mr Timothy Constable who is a solicitor in the firm acting for the Claimant. He records the lengthy correspondence between the parties about the various items in the Company’s accounts. He also explains how the sum claimed is calculated. He is able to show clearly that the movements in the nominal ledger that was disclosed to show where the figure of £477,630.87 comes from all relate to the bonuses plus interest owed to Mr Smith as set out in the Defence or to payments made by the Company at Mr Smith’s direction also as set out in the Defence. That figure can be tied in to the penny with a net bonus and interest payments that the Defence sets out as having accrued to Mr Smith since 2003 less the payments that it is agreed were made at Mr Smith’s direction over that period. Mr Mills appearing on behalf of the Claimant has taken me through the documents supporting the Claimant’s case. I agree that there can be little doubt that the sum described as “Deferred pension payments” which forms part of the ‘Other creditors’ listed in the balance sheet is the sum of bonuses and interest accruing to Mr Smith over the years less some payments totalling about £81,000 made at his direction before his death. Indeed, the Company does not contend that this is some arithmetical coincidence but they deny that the bonus and interest payments described as ‘Deferred pension payments’ are now monies owed to Mr Smith.

In support of a contention that these sums are owed to Mr Smith pursuant to the agreement pleaded, the Claimant relies on other contemporary documents. They say that their case is supported by a fax sent by Mr Eldridge to Mr Smith on 11 August 2006. The fax deals mainly with a proposed transfer of shares in the Company from Mr Eldridge to Mr Smith and the likelihood that this will generate a tax liability for Mr Eldridge of between £113,000 and £250,000, something that the revenue would have to determine. Mr Eldridge says that Mr Smith should pay this tax liability on Mr Eldridge’s behalf. The fax then goes on to refer to the loan account:

“I will therefore transfer the sum of £250,000 from your director’s loan account to a suspense account awaiting the outcome of the Inland Revenue verdict. In the meantime interest on the account will be accrued as normal.

This will leave you with the balance of circa £199,764.58 as you asked John Murphy for this figure, why I am unsure as I advised you less than three months ago.”

This fax therefore supports the Claimant’s case that there was a substantial amount of money owed by the Company to Mr Smith and his loan account, £449,764.58 as at August 2006 (not including of course the September 2006 payments) and that interest was accruing on the account “as normal”. This fax from Mr Eldridge therefore supports the Claimant’s assertion that there was a loan account maintained in Mr Smith’s favour with a balance close to that which is now claimed.

I turn now therefore to the alternative explanation put forward by the Company for what this ‘deferred pension payments’ amounting to £477,630.87 found in the Company’s financial statements is. The Company has served two witness statements in opposition to the application for summary judgment. One is from Mr John Murphy who is the company secretary. He sets out the remuneration to which Mr Smith was entitled over the years since 2001, a fluctuating salary of about £60,000 per year and substantially higher annual bonuses. Mr Murphy says that in 2000 a small pension scheme was set up with Mr and Mrs Eldridge and Mr Smith as its only members. He says that Mr Eldridge regularly declared an annual bonus for Mr Smith. Mr Smith almost always wanted his bonus paid into the pension fund, except for a few one-off payments for other purposes. Mr Murphy then goes on to give a much fuller explanation of how this was organised than was set out in the Defence. He says:

“18.

In the September of each year preceding Graham’s bonus payments, Optical paid a contribution to the pension scheme for Malcolm and Rosemary, and following Graham’s decisions to pay the majority of his bonus to the pension scheme, the September payment to the pension scheme had to be adjusted and treated as a payment on behalf of all three of them.

“19.

Malcolm and Rosemary were giving up part of the contribution paid by Optical on their account for Graham’s benefit. So Optical then owed Malcolm and Rosemary, because the contribution paid by Optical to the pension scheme on behalf of Malcolm and Rosemary had then been reduced by the amount of Graham’s bonus which was then treated as part of the sum Optical had contributed to the pension. The effect was that Optical then owed Malcolm and Rosemary the amount of September pension contribution which represented Graham’s bonus and I made entries in Optical’s books to that effect. The entries in Optical’s nominal ledger called Deferred Pensions Contributions which is exhibited to Mr Constable’s witness statement is part of this record and shows sums due from Optical to Malcolm and Rosemary.”

Thus the defence in the witness statement is that Mr Smith wanted his bonuses and the interest on those bonuses to be treated as contributions by the Company into the pension fund. However, each year the bonus for the previous year was not declared by Mr Eldridge until after the close of the relevant financial year and hence after the Company had made its annual payment into the pension fund. The annual payment into the fund was always therefore made just in relation to Mr and Mrs Eldridge and no contribution was made in relation to Mr Smith’s pension. When the bonus was then declared in March or April of the following year, there had to be a re-allocation of the earlier pension contribution to treat some of it no longer as having been made for the benefit of Mr and Mrs Eldridge but for the benefit of Mr Smith. That earlier contribution had to be readjusted so that a chunk of the payment was to be treated as Mr Smith’s pension rather than the Eldridges’ pension. Mr Murphy says that the result of this annual re-allocation of the pension contribution was that it is the Eldridges and not Mr Smith who are owed sums equivalent to the bonus accruing to Mr Smith. The ‘deferred pension payments’ are therefore sums owing to them and not to Mr Smith. Mr Murphy goes on to say that the same happened with the interest payments on the amounts due on the unpaid bonus payments. Mr Eldridge apparently decided that Mr Smith should have these too. However, rather than crediting the interest payments to Mr Smith, they were also paid into the pension fund so those sums have also ended up being owed to Malcolm and Rosemary Eldridge instead of being paid to or at least credited to Mr Smith. There had, according to Mr Murphy, to be a further adjustment to the amount that the Company had previously paid into the pension scheme to reflect the fact that even more of that payment made earlier now had to be treated as if it had been made in respect of Mr Smith and even less as having been made in respect of Mr and Mrs Eldridge. Mr Murphy says that on Mr Smith’s death, his share of the pension fund was paid out to his sons. Thus it is said the £470,630.87 chunk of the £912,825 owed to ‘Other creditors’ is in fact owed to the Eldridges and not to Mr Smith.

Mr Eldridge also made a witness statement in which he confirmed what Mr Murphy says. Both Mr Eldridge and Mr Murphy stress in their evidence that the reason why Mr Smith did not want his bonuses paid to him directly was that he wanted to keep his earnings secret from his wife. That is what the defence puts forward to the claim and I must decide whether that defence has a real prospect of success. There is no dispute between the parties as to the test to be applied under CPR24.2. That rule gives the court power to give summary judgment against a defendant on the whole of a claim if it considers that the defendant has no real prospect of successfully defending the claim and there is no other compelling reason why the case should be disposed of at trial. It is not suggested that the second limb of the test is satisfied here. In Nigeria v Santolina [2007] EWHC 437 (Ch) Lewison J (as he then was) summarised the authorities which give guidance as to the test in the following terms:

“(i)

The court must consider whether the defendant has a ‘realistic’ as opposed to a ‘fanciful’ prospect of success;

(ii)

A ‘realistic’ defence is one that carries some degree of conviction. This means a defence that is more than merely arguable;

(iii)

In reaching its conclusion the court must not conduct a ‘mini-trial’;

(iv)

This does not mean that the court must take at face value and without analysis everything that a defendant says in his statements before the court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents;

(v)

However, in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial;

(vi)

Although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without the fuller investigation into the facts at trial than is possible or permissible on summary judgment. Thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case.”

As to what is meant by “real prospect of success”, I was also referred to the decision of the House of Lords in Three Rivers District Council v Bank of England (No. 3) [2001] UKHL 1 and to the speech of Lord Hobhouse of Woodborough. At paragraph 158 his Lordship said that the criterion which the judge has to apply under Part 24 is not one of probability; it is absence of reality. The majority of the Court of Appeal he said used the phrase “no realistic probability” and distinguished between a practical possibility and what is fanciful or inconceivable. Although used in a slightly different context, his Lordship said those phrases appropriately express the same idea.

Having heard the skilful arguments of both Mr Mills for the Claimant and Mr Staunton for the Defendant, I am fully satisfied that this defence has no real prospect of success at trial and that the Claimant is entitled to judgment on this claim. There are many aspects of Mr Murphy’s versions of events that are so deeply flawed that they can properly be described as unrealistic or fanciful. First, the whole arrangement described by Mr Murphy is inherently implausible. If it was Mr Smith’s habit over the years to ask for all of his bonus to be treated as pension contribution, why give him a bonus at all, why not just make a contribution into his pension fund? If for some reason he wanted to retain the option of having the bonus, why not deal with the bonus in a timely way so that there was no readjustment needed to the contribution for the Eldridges already made? It appears from Mr Murphy and Mr Eldridge’s evidence that the bonus was simply an amount chosen by Mr Eldridge. There is no reason why it could not be declared in a way which meant that the pension payment could follow on accordingly without this complicated re-allocation of earlier pension payments made only for the Eldridges.

Mr Murphy’s version of events is a very strange way to organise pension contributions. The Company first generates a liability to pay Mr Smith his bonus as part of his remuneration. This means that Mr Smith is liable to pay top rate tax on it and the Company has to pay national insurance contributions on that amount. However, the Company then pays the net amount of the bonus into the pension plan as its own contribution to the plan, thereby preventing Mr Smith from claiming any tax relief on the contribution. Mr Mills has shown that the result of this over the years is that Mr Smith has had to pay £452,975 in tax over the period 1998 to 2005 because he could not claim tax relief on the Company’s pension contribution and of course, he only gets the benefit of contribution of the bonus net of tax into the fund. Since the Company has demonstrated in other correspondence that I will discuss later a clear desire to maximise the pension contribution it can make for all three members and to do this in the most tax efficient way, the suggestion that this arrangement is what was agreed between Mr Eldridge and Mr Smith is, in my judgment, incredible.

Secondly, none of the contemporary documents support this version of events and they all support the Claimant’s case. No evidence at all has been disclosed by Mr Murphy or Mr Eldridge of any communications with the professional pension trustee about making any of the annual readjustments which Mr Murphy now says were made to contributions initially made on behalf of only of Mr and Mrs Eldridge. The suggestion that the £477,630.87 chunk of £912,825 is owed to the Eldridges is also contrary to what appears in the audited financial statement of the company. That statement, as is commonly the case, identifies expressly loans made to the directors and gives this figure as £375,521. It does not make any sense for the auditors to have included this figure as the amounts owed to the Eldridges and yet to include another larger unspecified debt also owed to the Eldridges as part of “Other creditors”.

Thirdly, the version of events set out in Mr Murphy’s and Mr Eldridge’s witness statements is the last of a series of different and inconsistent explanations given by the Company. The Claimant has been pressing the Company to explain the content of the other creditor’s figure of £912,825 in the 2006 financial statement for many years. If what Mr Murphy and Mr Eldridge now say is true was indeed the case, there is no reason why that could not have been said right from the start. In fact, Mr Murphy gave a different explanation when the matter was first raised in a letter from a Mr Hathaway sent to the Company on behalf of the estate in June 2007. The letter from Mr Hathaway said that a copy of Mr Eldridge’s fax of August 2006 had been found amongst Mr Smith’s papers on his desk. Mr Murphy was asked, among other things, to confirm the balance held in the director’s loan account for Mr Smith at the date of death. Mr Murphy replied to that inquiry by letter dated 16 July 2007. He said that the loan account was not a loan “in the true sense of the word” but a provision to be made available to Mr Smith for the purchase of a property he was looking at in Portugal. He went on to say that the property was not bought so the loan facility was never used.

Mr Hathaway had also asked whether Mr Smith had contributed to a private pension plan and whether the Company knew of any monies due to the estate or to Mr Smith’s widow. As regard pension contributions, Mr Murphy said in that same letter of the 16 July 2007 that Mr Smith was a member of the Company pension arrangement and the Company made contributions to the fund but that Mr Smith did not. Mr Murphy said that no monies were due under the plan either to the estate or to Mrs Smith. Mr Mills submitted, and I agree, that these answers are clearly inconsistent with the case now being put forward by Mr Murphy and Mr Eldridge. Mr Mills accepts as Mr Staunton says that there had been discussion about the Smiths buying a property in Portugal and about the Company possibly lending Mr Smith some money to fund this. However, this fact does not in my judgment detract from the fact that Mr Murphy was clearly suggesting in the letter of 16 July 2007 that the loan account referred to in the August fax from Mr Eldridge to Mr Smith was a facility to pay for a property in Portugal. That was clearly not the case and is not now the defence put forward by the Company.

Mr Hathaway on behalf of the estate was initially satisfied with that assurance given by Mr Murphy that there was no money either owed to or owing from Mr Smith. However, a letter before claim was sent to the Company on 23 May 2011 by the Claimant’s solicitors setting out the evidence on which they relied as showing the sums due to Mr Smith. They sought disclosure of particular documents and asked again for an explanation of the £449,764.58 referred to in the fax sent by Mr Eldridge to Mr Smith on 11 August 2006. In the response from Bond Pierce LLP acting for the Company on 23 September 2011, they repeat the reference to the proposed purchase of a property in Portugal. The letter attached to the schedule showing payments to Mr Smith and stating that Optical had paid the correct tax and national insurance. At this stage, it was not suggested by the Company that the interest payments shown in the schedule provided were not amounts paid to Mr Smith as interest on a loan. It is also noteworthy that the Bond Pierce letter says that Mr Smith decided what he wanted done with his bonus before 30 September of each year. This is inconsistent with the new case which is that Mr Smith’s decisions came only later in the following year. It is therefore not consistent with Ms Murphy’s evidence that the pension contributions already made on behalf of the Eldridges before the end had to be reallocated later to reflect a payment on behalf of Mr Smith instead of just on behalf of Mr and Mrs Eldridge.

As far as the documents are concerned, Mr Staunton submits that the nominal ledger detailing the £477,630.87 payment supports the Company’s case because it posts the 2006 bonus and interest as accruing on 30 September 2006, that is at the year-end rather than at April 2006 when the bonus at least was actually declared by Mr Eldridge. Mr Staunton says that this shows that there is a link between the pension payment and the bonus. However, in my judgment this is a weak point and I do not accept that it shows the link posited.

The fourth reason why the defence is so seriously flawed is that it is clear that the version of events that Mr Murphy has now put forward is not what he told the forensic accountant, Mr Mason from BDO. Mr Mason was instructed by the company to report on various aspects of the Company’s financial statements. I have mentioned already that the Claimant pressed the Company for disclosure of accounting information to explain amongst other things, the breakdown of the ‘Other creditors’ figure of £912,825 in the 2006 balance sheet. In response to these requests, the Company at one stage declined to provide more information but decided instead to instruct Mr Mason. Mr Mason’s first report was provided to the claimant on 2 April 2012.

Mr Mason’s report was unsatisfactory so far as the Claimant was concerned because it appeared that Mr Mason had not been asked to address and so did not address what they regarded as the key question, namely, what was in the ‘Other creditors’ figure of £912,825. He was asked to address points that were not relevant to the dispute, such as the shareholdings of the company and the fact that the financial statements recorded that £375,521 were owed to the Eldridges by the Company. That was not a sum of money in dispute. Mr Mason certainly did not provide the explanation that Mr Murphy and Mr Eldridge now put forward. He did not say that the ‘deferred pension contributions’ figure within the ‘Other creditors’ was money owed to the Eldridges. He did identify some monies within the overall ‘Other creditors’ figure as money owed to the Eldridges but not this money. Mr Mason does not suggest that the interest payments were anything other than interest payable on a principal sum owed to Mr Smith.

Significantly for current purposes, Mr Mason records in his report that he has been told by Mr Murphy precisely what the Claimant now says is the case. Mr Mason says in his report:

“As I now understand from Mr Murphy, rather than be paid the money that was awarded to him as his remuneration plus annual bonus, Mr Smith instead instructed the company to keep the net amount that was due to him within the company bank account until he decided to draw on it. Therefore, I understand that until the company received instructions from Mr Smith as to how to utilise those funds Mr Smith earned interest on that amount.”

This is entirely supportive of the Claimant’s assertion of the existence of such an agreement and contrary to the case now put forward by the company.

Mr Murphy attempts to deal in his witness statement with how it came about that Mr Mason so comprehensively got the wrong end of the stick such as that he record being told by Mr Murphy the version of events on which the Claimant now relies. His explanation is that Mr Mason simply misunderstood what Mr Murphy told him. He does not explain why a report containing that misunderstanding came to be delivered uncorrected to the Claimant. It is difficult to believe that Mr Murphy did not read Mr Mason’s report before it was handed over. He does not say why he failed to spot Mr Mason egregious mistakes or to insist on the report being redrafted to reflect what he now says is the true position.

It is true that Mr Mason says in the passage that I have quoted that Mr Murphy told him all of Mr Smith’s remuneration was held back, whereas it is common ground that his annual salary of about £60,000 was paid in his bank account in monthly instalments in the normal way. However, as Mr Mills pointed out, Mr Mason does say a few paragraphs earlier in the report that Mr Murphy told him that Mr Smith’s monthly salary was paid directly into his bank account. This small slip in the later paragraph does not in my judgment detract from the clear evidence that Mr Murphy instructed Mr Mason on the basis that the agreement that the Claimant now asserts existed did exist and not on the basis of the facts as now asserted by the Company.

Also of note is the fact that Mr Mason says in paragraph 6.22 of his first report that Mr Murphy told him that in September in each relevant year Mr Smith instructed the company to invest his unutilised bonus into his personal pension fund. He says that these payments were made into the pension fund before the Company’s year-end. Again, this is inconsistent with the company’s current case that the allocation was made only after the year-end and that is why the payment ostensibly made from Mr and Mrs Eldridge had to be diminished so that part of it could reflect the bonus to Mr Smith that he had belated said he wanted paid into the pension plan. Mr Mason does not make any mention in his report of this late re-allocation and again Mr Murphy in his witness statements says simply that Mr Mason must have misunderstood what he was told.

The fifth reason why I am convinced that the current defence is fanciful is that it is inconsistent with what Mr Eldridge said in his fax to Mr Smith in August 2006. As I have set out, the fax refers to the loan account for Mr Smith containing almost exactly the amount now claimed, the difference being due apparently to late interest falling due and a mis-transposition by Mr Eldridge of two numbers. Mr Eldridge’s explanation for this fax in his witness statement is that it was sent in anger to Mr Smith after Mr Eldridge had accidentally overheard Mr Smith saying unpleasant things about Mrs Eldridge over a speakerphone in conversation with Mr Murphy. Mr Eldridge says he felt shocked and betrayed and sent this fax to Mr Smith in order to cause trouble between Mr Smith and Mr Smith’s wife. The purpose of the fax was to signal to Mrs Smith that Mr Smith had more money than he had disclosed to her. I accept that that may well have been the purpose and according to Mr Eldridge’s evidence it succeeded in causing a great deal of unpleasant strife in the Smith household. However, that does not support Mr Eldridge’s current contention that what was said in the fax was untrue. Trouble was caused because he let the cat out of the bag to Mrs Smith that Mr Smith had not been taken home all the pay to which he was entitled. Again, Mr Eldridge’s evidence that he gave an inaccurate description of the position in this fax out of spite and just happened to give a description which accorded with the case that the Claimant now relies on is in my judgment entirely far-fetched.

Sixthly and finally, the contemporaneous documents show clearly that the pension contributions made into the Company plan by the Company on behalf of Mr Smith were not the sums accruing as bonuses and interest but other sums paid in addition to Mr Smith’s pay and bonus remuneration package. Mr Mills showed me the contemporary documents that demonstrate this. The Company sought advice from an actuary before the year end about the maximum contribution it could make to the pension plan and obtain the benefit of corporation tax relief. There is an actuarial report in September 2003 reviewing the Company’s directors’ pension scheme. The report says that the purpose of the review is to reassess the maximum contribution levels that may be paid into the fund to provide maximum approvable benefits. The report states that the three members of the scheme are the Eldridges and Mr Smith. It gives details of the members set out in an appendix, including their average remuneration. The sum given is similar for Mr Smith and Mr Eldridge and clearly includes the bonuses as well as the £60,000 salary. The actuary says that he has been advised by the Company as to how the fund is to be allocated and that this is in the proportions 47 per cent to Mr Eldridge, 42 per cent for Mr Smith and 11 per cent for Mrs Eldridge. This fixed proportion is entirely inconsistent with the claim that all sums paid each year were initially for Mr and Mrs Eldridge and it was only in a subsequent reallocation that some payment was treated as made from Mr Smith. The actuary then gives advice as to the maximum contribution for all three members.

In addition, there is an exchange of letters between Mr Murphy and the professional pension trustees in August 2005 giving them a schedule of remuneration and saying that the fund is to be allocated into the 47/42/11 proportions. James Hay, the professional trustee, replied on 15 September 2005 setting out the maximum funding that can be paid in before the year-end on behalf of all the members. This included £29,700 for Mr Smith and that is the amount that was paid in that year. Therefore according to this evidence, pension contributions for the year-end September 2005 were made on behalf of all three members of the scheme. There is therefore nothing in this documentation that lends any support to the Company’s case that Mr Smith’s pension was not initially included in the Company’s annual pension payment and that there had to be some re-allocation at a later date. On the contrary, it shows that advice was sought and acted upon to make the maximum contribution for all three members in a timely manner.

There are also letters between Mr Murphy and HMRC which make it clear that over the relevant period the payments into the pension fund were made in addition to the bonus payments to Mr Smith, at least up to 2005. There is a letter dated 16 August 2006 from Mr Murphy to the Revenue asking for assurances about a proposed salary sacrifice for 2006. What is significant in the letter is not so much the proposed arrangements for 2006 but rather what Mr Murphy tells the Revenue about what happened in previous years. He tells HMRC that historically, the salaries of each of the three members of the scheme have included bonuses. He also says that in addition to the payment bonuses, pension contributions have been made and he sets out the pension contributions going back to September 2002. This letter makes it clear that at that stage, Mr Murphy was telling HMRC that historically all the pension contributions were made in addition to salary and bonuses and were made by the Company and not by the members. This is further evidence fully in support of the Claimant’s case and there is nothing really in support of the version of events set out in Mr Murphy’s and Mr Eldridge’s witness statements other than their bare assertion.

Mr Staunton raises two other points; first he says that the Limitation Act point raises a triable issue. If the agreement asserted by the Claimant does not exist then the claim must be statute barred. Mr Murphy and Mr Eldridge say in their witness statements that the agreement did not exist, hence there must be a triable issue about the application of the Limitation Act. I consider that the Limitation Act defence stands or falls with whether there is an arguable defence to the existence of the agreement asserted by the claimants. If there is an arguable defence to the existence of that loan account then it amounts not only to a defence on the substance but also raises a possible Limitation Act defence. If there is no arguable defence then the Limitation Act point does not arise because the cause of action only accrues once the repayment of the monies in the loan account has been demanded and that only happened in May 2012. Since I have found that the evidence is overwhelmingly in support of the Claimant’s case and there is really no evidence in support of the Company’s case, I do not consider that there is an arguable Limitation Act defence either.

Finally, Mr Staunton says that disclosure in this case has not yet taken place and there may be documents produced on disclosure that cast further light on whether the agreement existed. In particular, he refers to a request made to the Claimant for Mr Smith’s bank statement from the period before 2003. This is on the basis that the amount claimed in this action is for bonuses and interest accruing from 2003 onwards and not in respect of bonuses and interest accruing before that time. Mr Staunton says that if the bank statements show that the bonuses declared prior to 2003 were paid to Mr Smith’s bank account then that would support the Claimant’s case. If there were no bonuses made, then that would support the Company’s case that the bonuses were used to make pension contributions.

I bear in mind what Lewison J said in Nigeria v Santolina to the effect that in reaching its conclusion on summary judgment a court must take into account not only evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial. If reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of a case, then it is not appropriate to give summary judgment. However, I do not accept that anything will emerge if this case goes to trial that has not yet come out. The Claimant has said that it does not have any bank statements of Mr Smith going back beyond 2003. Conversely, the Company must have access to information about what it paid Mr Smith. There is no reason why they could not have brought that information forward now if it is available and helpful, even though the case has not reached the stage of disclosure yet. It is not open to them to try and stave off an application for a summary judgment by referring to documents that are or may be in their possession which they say might support their case but which they are not prepared to exhibit to the evidence that they lodge in opposition to the application.

Having been taken very carefully through the facts, I am sure that the defence now being put forward by the company has no prospect of success at trial. All the substantial documentary evidence points in the Claimant’s favour. The Company has been given every opportunity over many years to explain what the figures shown in its own audited financial statements and nominal ledger refer to. Their response has been contradictory and the current position is so far-fetched as to be properly described as fanciful.

I therefore give judgment to the Claimant for the sums claimed.