Bibby Financial Services Ltd & Anor v Magson & Ors

The original claimant in this action, Bibby Financial Services Ltd. (“Bibby FS”) is a member of the Bibby financial services group. It seems that the group consists of a substantial number of limited liability companies. However, the other group company which is material to the issues in this action is Bibby Invoice Discounting Ltd. (“Bibby ID”). Bibby ID was added as a claimant during the course of the trial. The business of Bibby ID is the factoring of debts. At its simplest that activity involves paying a company which carries on some commercial enterprise an amount of money less than the face value for an assignment of a debt owed to that company by a customer. The factoring company makes its return in part from the discount from the face value of the invoice evidencing the debt of which it is taking an assignment which it pays for the assignment which it takes, and in part from other charges levied from the assignor.

It is not necessary for the purposes of this judgment to go into enormous detail as to the general activities of Bibby ID. It had an important role in relation to the matters which gave rise to this action, to which I shall come. However, it was only joined as a party to seek to cover a contingency which, in the light of the conclusions to which I have come, did not arise. In the circumstances it is not necessary in this judgment to explain how it was proposed that a claim on behalf of Bibby ID could be put. The live claims in this action were those of the original claimant, Bibby FS.

The sums which were said to be due from the defendants in this action were all said to be in consequence of dealings between a company incorporated in England and Wales on 4 August 2003 with the company number 04855344 as Christopher Harvard (Properties) Ltd. and Bibby ID. The company with the company number 04855344 changed its name, and a certificate of incorporation on change of name to the name QCFS Ltd. was issued on 21 August 2008. It is necessary, for the purposes of this judgment, to distinguish between the company whilst called Christopher Harvard (Properties) Ltd., and its existence whilst called QCFS Ltd. Consequently I shall refer to the company in this judgment by the name “Harvard” in respect of the period subsequent to incorporation but prior to the change of name, and by the name “QCFS” thereafter. Administrators (“the Administrators”), Mr. Christopher Ratten and Mr. Jeremy Woodside, were appointed in respect of the business of QCFS on 8 April 2010. It appears that QCFS was dissolved during the course of the trial.

Harvard was incorporated as a “shelf” company. The original director and secretary resigned on 12 August 2003. With effect from 2 April 2004 Key 2 Directors Ltd. (“Key2D”) was appointed director of QCFS, and on the same date Key 2 Secretarial Ltd. (“Key2S”) was appointed secretary. Key2D resigned as director of Harvard on 1 April 2008, the date upon which Quay Consultancy & Financial Services Ltd. (“Quay”) was appointed director. The only change in the directors of Harvard or QCFS thereafter was that the first defendant in this action, Mr. Richard Magson, was appointed a director of QCFS on 30 September 2008.

Mr. Magson was appointed a director of Quay with effect from 31 December 2007. He is the only currently serving director. The company secretary of Quay is Key2S.

The second defendant in this action, Mr. Robert Scott, is a solicitor, having been admitted on 2 November 1992. He is presently a member of Key2Law LLP (“the Firm”), which practises as solicitors from offices in Holborn, London. Between 2 September 2002 and 14 October 2005 Mr. Scott was a director of Quay. Key2D was a director of Quay between 14 October 2005 and 1 January 2009. Mr. Scott was appointed a director of each of Key2S and Key2D on 1 November 2002, and company secretary of each of those companies on 8 June 2004. He continued to serve in each of those roles at the date of the trial.

The third defendant, Saracen Plant Hire Ltd. (“Saracen”), did not appear at the trial and was not represented. Judgment in default had been entered against it before trial. The basis upon which judgment was entered against Saracen was that it was liable, in the circumstances which had happened, to Bibby FS pursuant to the terms of a guarantee (“the Saracen Guarantee”) dated 22 September 2008 which it had entered into with Bibby FS. The serving directors of the Saracen as at the date of the trial were Mr. Magson and Quay. The serving company secretary was Key2S.

Another non-Bibby group company which featured in the events leading up to the claims made in this action was Esdale Tooling Ltd. (“Esdale”). Esdale was incorporated in England and Wales on 16 September 2004 as company numbered 05233520 with the name Esdale Plastic Tooling Ltd. A certificate of incorporation on change of name to Esdale Tooling Ltd. was issued on 22 December 2004. Notice of the appointment of administrators of Esdale was given on 2 October 2008, but the actual effective appointment was made on 18 September 2008. The last director of Esdale, appointed on 31 December 2007, was Quay. The last company secretary, appointed with effect from 1 March 2008, was Key2S.

Bibby FS entered into a deed (“the Deed”) dated 11 June 2004 with a number, possibly all, of other members of the Bibby group. The companies with which Bibby FS entered into the Deed were listed in Schedule 1 to the Deed. They included Bibby ID. In the Deed Bibby FS was called “the Security Trustee”. By clause 2 of the Deed it was provided:-

“The Security Trustee shall hold the Trust Property upon the trusts herein contained for the Security Beneficiaries and the obligations, rights and benefits vested or to be vested in the Security Trustee by the Security Documents or any document entered into pursuant thereto shall (as well before as after enforcement) be performed and (as the case may be) exercised in accordance with the provisions of this Deed.”

Various of the expressions used in clause 2 of the Deed, in addition to the expression “the Security Trustee”, were defined in clause 1 of the Deed. Those definitions in themselves imported other definitions also included in clause 1. The material definitions were:-

“ “Bibby Companies” means any person which is or becomes at any time a party to this Deed in such capacity;

“Client” means any person which is a party to any Finance Document in a capacity as an assignor, seller, borrower, chargor or guarantor at any time;

“Finance Documents” means this Deed, each Security Document and each document to which a Bibby Company and the Client are party at any time pursuant to which assets are purchased or assigned, or credit or other facilities made available;

“Guarantees” means each document pursuant to which any person purports to guarantee, grant an indemnity in respect of, or stand as surety for any of the Secured Obligations;

“Guarantors” means each person who grants a Guarantee at any time;

“Obligors” means the Guarantors and the Clients from time to time;

“Secured Obligations” means

(i)

all present and future obligations (whether actual or contingent and whether owed jointly or severally or alone, as principal or surety or in any other capacity whatsoever and whether a Security Beneficiary shall have been an original party to the relevant transaction or document) of each Obligor to the Security Trustee (whether on its own account or on behalf of any of the Security Beneficiaries) or to the other Security Beneficiaries (or any of them) at any time;

(ii)

all reasonable costs, charges and expenses properly incurred by the Security Trustee or the Security Beneficiaries (or any of them) in connection with the preparation and negotiation of any Finance Document or any consent or waiver pursuant to, or amendment of, any Finance Document; and

(iii)

all costs, charges and expenses incurred by the Security Trustee and the Security Beneficiaries (or any of them) in connection with the protection, preservation or enforcement of their respective rights in respect of the Obligors, howsoever arising under any Finance Document,

provided that no obligation or liability shall be included in the definition of “Secured Obligations” to the extent that, if it were so included, this Deed (or any part of it) would constitute unlawful financial assistance within the meaning of sections 151 and 152 of the Companies Act 1985;

“Security Beneficiaries” means each of (1) the Security Trustee and (2) the Bibby Companies from time to time;

“Security Documents” means all documents executed by any person purporting to create a Security Interest in respect of any of the Secured Obligations at any time and all Guarantees and including in each case for the avoidance of doubt all documents acceding to them;

“Security Interest” means any mortgage, pledge, lien, charge, assignment by way of security, hypothecation, security interest, title retention, preferential right or trust arrangement or any other security agreement or arrangement having the effect of security;

“Trust Property” means all rights, titles and interests that may now or hereafter be given, granted, mortgaged, charged or assigned in favour of the Security Trustee by or pursuant to the Security Documents or any of them and the proceeds of any such guarantees and security.”

While it was, perhaps, not readily discernible from the terms of the Deed itself, the case of Bibby FS in the present action proceeded on the basis that documents entered into with Bibby FS which fell within the definition of “Security Documents” in clause 1 of the Deed entitled Bibby FS to recover losses in fact sustained by other members of the Bibby group, specifically, in the present case, Bibby ID.

I shall come, a little later in this judgment, to the particular circumstances surrounding the signing of the documents in question, but, shortly stated, the claims of Bibby FS in this action against each of Mr. Magson and Mr. Scott were said to be founded upon, first, a guarantee (a “Guarantee”) allegedly given by the individual concerned, and, secondly, an alleged warranty (a “Warranty”). Each of the alleged Guarantees and Warranties was, mutatis mutandis, in the same terms and was dated, on its face, 22 September 2008. In each document Bibby FS was referred to as “the Security Trustee”. Each Guarantee and each Warranty was, in the form in which it was presented in court, on its face signed as a deed, one each by Mr. Magson and one each by Mr. Scott. Although there were some minor modifications, with the exception of the expression “Client”, which was defined for the purposes of each Guarantee and each Warranty as meaning QCFS, any expression defined for the purposes of the Deed, as set out earlier in this judgment, which was used in either a Guarantee or a Warranty, was defined in a similar fashion for the purposes of a Guarantee or a Warranty as in the Deed. The Deed itself was referred to as “the Security Trust Deed”.

A Guarantee included the following provisions:-

“1.3

Trust

1.3.1

The Security Trustee shall hold the benefit of the covenants contained in this Deed and all its rights and claims under this Deed as trustee for the Security Beneficiaries from time to time on the terms set out in the Security Trust Deed.

1.3.2

Any reference to security being granted or executed or obligations being entered into “in favour of the Security Trustee” means such security being granted or executed or obligations being entered into in favour of the Security Trustee as trustee for the Security Beneficiaries from time to time.

…

3.

GUARANTEE AND INDEMNITY

3.1

The Surety, as principal obligor irrevocably and unconditionally:

3.1.1

guarantees to the Security Trustee full, prompt and complete performance of all of the Secured Obligations owing by any one or more of the Clients and the due and punctual payment of all the sums comprised in the Secured Obligations owing by each such Client as and when they become due;

3.1.2

undertakes to the Security Trustee that if any of the Clients fail to pay any sum comprised in the Secured Obligations on its due date it will pay such sum on demand as if it instead of such Client were the principal obligor in respect of those Secured Obligations; and

3.1.3

undertakes to pay to the Security Trustee as an additional and independent obligation on an indemnity basis an amount equal to all losses, damages, costs and expenses incurred by the Security Trustee or any other Security Beneficiary arising from any failure by any of the Clients to pay the sums comprised in the Secured Obligations as and when they fall due.

3.2

All sums of money which may not be recoverable from a Surety on the footing of a guarantee whether by reason of any legal limitation, disability or incapacity on or of any Client or any other fact or circumstances and whether known to the Security Trustee or not shall nevertheless be recoverable from such Surety as principal debtor and shall be paid by the Surety on the written demand of the Security Trustee.

3.3

The Surety acknowledges and agrees that its obligations under this Deed shall be continuing obligations and shall extend to cover the ultimate balance due at any time to the Security Beneficiaries from each Client.

3.4

If an amount is demanded under clause 8 (Costs and expenses) or the Surety shall fail to pay any amount under this Deed when it is due then such amount shall bear interest (after as well as before judgment and payable on demand) at the Default Rate from time to time from the day on which those monies were paid, incurred or charged by the relevant person or, in the case of an amount paid when due, from the due date, in each case until the date such amount is paid in full to the Security Trustee.

…

7.

RELEASE OF GUARANTEE

This Deed shall be a continuing security notwithstanding the death or disability of the Surety until three months after receipt by the Security Trustee of written notice from the Surety or the Surety’s personal representative to determine this Deed. On expiry of that notice period, the Surety’s liability shall be fixed at the amount recoverable from the Client at that date (including unascertained or contingent liabilities).

…

9.

CALCULATIONS AND CERTIFICATES

A certificate of the Security Trustee specifying the amount of any Secured Obligation due from the Client and or the Surety (including details of any relevant calculation thereof) shall be prima facie evidence of such amount in the absence of manifest error.

...

13.

THIRD PARTY RIGHTS

A person who is not a party to this Deed shall have no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Deed. This clause does not affect any right or remedy of any person which exists or is available otherwise than pursuant to that Act.”

Although not referred to in the body of a Guarantee, it contained a Schedule 4 in the following terms:-

“Limit on Recoverability

The total amount recoverable under clause 3 (Guarantee and Indemnity) of this Deed shall be limited to a sum equal to £25,000 (twenty five thousand pounds) together with interest calculated in accordance with the terms of this Deed and all costs, charges and expenses reasonably incurred by the Security Trustee or Security Beneficiaries in enforcing or attempting to enforce payment under this Deed.”

The expression “Default Rate” was defined in Part 1 of Schedule 1 of a Guarantee as meaning:-

“the higher of five per cent (5%) per annum above the base rate for the time being of Barclays Bank PLC and the discount charge, interest rate or other rate which the Bibby Company would otherwise charge on the Secured Obligations which gave rise to the amount payable hereunder or, in either case, such lower rate as the Security Trustee may specify at any time;”

For present purposes the material terms of a Warranty were:-

“1.3

Trust

1.3.1

The Security Trustee shall hold the benefit of the covenants contained in this Deed and all its rights and claims under this Deed as trustee for the Security Beneficiaries from time to time on the terms set out in the Security Trust Deed.

1.3.2

Any reference to security being granted or executed or obligations being entered into “in favour of the Security Trustee” means such security being granted or executed or obligations being entered into in favour of the Security Trustee as trustee for the Security Beneficiaries from time to time.

2.

WARRANTY

2.1

The Warrantor undertakes to pay to the Security Trustee on an indemnity basis an amount equal to all losses, damages, costs, expenses, claims, interest and demands which the Security Trustee or any other Security Beneficiary may suffer or incur in consequence of any breach by any Client of its obligations and liabilities to you from time to time where such breach arises out of any acts or omissions of a dishonest or deceitful nature, or out of any breach by the Warrantor or any Client of the obligations set out in clause 2.3.

2.2

For the purposes of this indemnity an act or omission of a dishonest or deceitful nature shall include:

2.2.1

the notification of a debt which is not a valid and enforceable obligation of a customer of any Client;

2.2.2

the failure to forthwith deliver to a Security Beneficiary any monies tendered by a customer in or towards the discharge of a debt notified to a Security Beneficiary by any Client pursuant to any agreement with a Security Beneficiary.

2.3

The Warrantor will or will procure that:

2.3.1

each Client keeps proper and full accounting records of all Debts due to the Client and sold to any Bibby Company; and

2.3.2

all monies received by a Client in respect of any Debt sold to a Bibby Company are kept separate from monies belonging to the Client and are dealt with promptly following receipt in accordance with the provisions of the Finance Documents; and

2.3.3

all Debts notified to a Bibby Company pursuant to the Finance Documents are bona fide existing obligations of the debtors arising out of a sale of goods or provision of services by a Client in the ordinary course of its business and further that the debtors are not associates of such Client; and

2.3.4

the issuing of all credit notes to debtors is for a valid reason and should not exceed the credit note limit agreed with the relevant Bibby Company from time to time without the prior written approval of such Bibby Company. In all circumstances credit notes should be promptly notified to the relevant Bibby Company; and

2.3.5

those employees of any Client who are responsible for issuing or collecting invoices to Customers of the Client are aware of and will observe at all times the terms of the Finance Documents; and

2.3.6

all signatories and statements contained or appearing in every order, debt schedule, offer or other document supplied to a Bibby Company and relating to a Debt shall be true and genuine.

2.4

The Warrantor further agrees to pay to the Security Trustee on an indemnity basis an amount equal to all losses, damages, costs, expenses, claims, interest and demands which the Security Trustee or any other Security Beneficiary may suffer or incur as a consequence of any negligent act or omission by any Client.

…”

The expression “Debt” was defined in clause 1.2 of a Warranty as meaning:-

“any present, future or contingent obligation of a person to make payment under a contract for the provision of goods or services by a Client to that person;”

A Guarantee could not exist in vacuo, but only made sense as a security for the performance by someone other than the guarantor of an obligation arising otherwise than under the Guarantee. Obligations under clause 2.3 of a Warranty were capable of existing in the absence of any obligation owed by someone other than the warrantor to the party having the benefit of the Warranty, but obligations under clause 2.1 presupposed that QCFS owed obligations capable of being breached by “any acts or omissions of a dishonest or deceitful nature”.

In the present case what was relied upon as giving rise to obligations on the part of QCFS to which a Guarantee and a Warranty were relevant was what was called a “Recourse Invoice Discounting Agreement” (“the Bibby ID Agreement”) signed on behalf of QCFS and dated, as so signed, 8 September 2008. Thus, somewhat curiously, Bibby FS sought relief against Mr. Magson and Mr. Scott pursuant to obligations entered into by each of them with Bibby FS in respect of alleged breaches by QCFS of obligations assumed by QCFS not in relation to Bibby FS, but, on the face of the Bibby ID Agreement, other than the execution page, in relation to Bibby ID. Even more strangely, although at the start of the Bibby ID Agreement the first party to it was identified in terms as Bibby ID, and no other Bibby group company was said to be a party, on the execution page the Bibby party signing was expressed to be Bibby FS and not Bibby ID.

The Bibby ID Agreement was in three parts. The first part (“the Special Terms”), numbering seven pages, contained material more or less specific to the circumstances of QCFS. In particular it included Section C, entitled “Particulars”, Section D, entitled “Special Conditions”, and Section E, entitled “Client Particulars”. However, the second part was standard conditions, entitled “Standard Conditions for the purchase of debts (Edition A/2004)” (“the Conditions”). The third part was an execution page.

Section C of the Special Terms included a number of provisions relevant to the proper understanding of the services provided to QCFS, the detail of such services being set out in the Conditions. For present purposes the material terms of Section C were:-

“1.

The Commencement Date is 29^th September 2008 (condition 2.1).

…

4.

This Agreement shall apply to the following categories of Debts: All Debts (condition 3.1)

5.

The Approved Funding Percentage is 85% (definition of “Available Funds” in condition 21).

6.

The Customer Concentration Percentage is 40% (condition 6.8.3).

…

11.

The Funding Limit is £450,000 (condition 6.8.2).

12.

The Credit Note Limit is £500 excluding Value Added Tax (condition 10.1.4).

13.

The Approval Period is 120 days from the date of the relevant invoice (condition 5.7).”

The provisions of the Conditions which were, for present purposes, particularly material to the services provided by Bibby ID, other than Conditions 10 and 11 to which I shall come, were:-

“3.1

This Agreement shall apply to the categories of Debts referred to in clause 4 of the Particulars and such other categories of Debts as we may agree in writing with you.

3.2

By this Agreement you assign to us with full title guarantee all Debts together with their Related Rights which are Outstanding on the Commencement Date until this Agreement is terminated. The ownership of each Initial Debt and its Related Rights shall vest in us on the Commencement Date. The ownership of each Debt coming into existence after the Commencement Date and its Related Rights shall vest in us automatically upon the Debt coming into existence.

…

3.9

Any credit note will be raised immediately when due and Notified to us on a Credit Note Schedule together with, if we tell you, a copy of the credit note within 2 days of its issue.

4.1

The Purchase Price of each Debt vesting in us shall be the amount paid to us in or towards discharge of the Debt less:

4.1.1

any Allowance due to or taken by the Customer; and

4.1.2

Factor’s Discount, Fees and any other amounts due from you to us under this Agreement or any other agreement.

…

5.7

An Approved Debt will immediately and without notice become a Disapproved Debt:

5.7.1

upon expiry of the Approval Period;

…

5.9

If an Approved Debt becomes a Disapproved Debt, you will forthwith repay any Prepayment made in respect of such Debt.

…

6.2

The anticipated Purchase Price of all Debts will be credited to your Sales Ledger Control Account. The amount credited may be equivalent to the Notified Value before deduction of the items referred to in conditions 4.1.1 and 4.1.2 and may be adjusted as necessary at any time.

…

6.7

You may request payments from us in or towards the Purchase Price of Debts. Subject to the terms of this Agreement and the amount of your Available Funds and the Funding Limit, we may make a:

6.7.1

Prepayment to you in respect of all Outstanding Approved Debts on the Working Day following the receipt of your Invoice Schedule relating to such Debts;

6.7.2

payment to you of the amount or balance of the Purchase Price of Debts equal to any Collection less any Prepayment made in respect of such Debts on the Working Day following receipt of such Collection.

6.8

We shall not be obliged to make any payments to you:

6.8.1

in excess of Available Funds;

6.8.2

if, having made such payment, the balance on your Current Account would exceed the Funding Limit;

…

21.1

The following words shall have the meanings as set out after each:

…

“Approved Debt” A Debt Notified to us:

(1)

which is within the relevant Credit Limit;

(2)

which has not become a Disapproved Debt pursuant to conditions 5.7 and 5.8; and

(3)

in respect of which we have not exercised our right of Recourse.

…

“Available Funds” An amount calculated by applying the Approved Funding Percentage against the aggregate value of Approved Debts and deducting from such sum the balance on your Current Account, and subject to the restrictions in clause 6.8

…

“Collection” Any form of payment made to us in cleared funds which is tendered in or towards the discharge of a Debt.

…

“Disapproved Debt” Any Debt which is not an Approved Debt

…

“Invoice Schedule” A form by which you will specifically assign each Debt to us.

…

“Notified Value” The amount of a Debt including VAT as stated in an Invoice Schedule and before deducting any Allowances.

“Notify” The specific assignment of a Debt by its inclusion in an Invoice Schedule or the inclusion of a credit note in a Credit Note Schedule. “Notified” shall be construed accordingly.

… ”

Condition 21 contained definitions of all of the expressions used in the Conditions which appeared introduced with capital letters. For present purposes the detail of such of the definitions as I have not set out were not important.

Condition 15 of the Conditions made provision for Bibby ID to terminate the Bibby ID Agreement in certain events. It was common ground that in the present case one or more of those events had happened. By Condition 15.3 on the occurrence of an event entitling Bibby ID to terminate the Bibby ID Agreement a consequence was that Bibby ID could require QCFS to pay the balance then outstanding on its current account with Bibby ID. The balance outstanding as at 8 April 2010 was £405,914.98. By a letter dated 8 April 2010 written on its behalf by its solicitors, Messrs. Paul Davidson Taylor (“PDT”), Bibby ID demanded that QCFS pay it that sum immediately. That sum was not paid. In the light of that default PDT made demand of Mr. Magson and Mr. Scott by letters each dated 9 April 2010 that each pay the sum of £25,000 to Bibby FS pursuant to the terms of the Guarantee into which each had entered. Neither Mr. Magson nor Mr. Scott paid the sum demanded.

This action was commenced by a claim form issued on 17 August 2010. In it Bibby FS claimed against each of Mr. Magson and Mr. Scott the sum of £25,000 pursuant to the terms of his Guarantee. However, that was not the only claim made against each of Mr. Magson and Mr. Scott.

In the Re-Amended Particulars of Claim in this action it was contended that QCFS had been in breach of obligations contained in Conditions 10 and 11 of the Conditions as follows:-

“10.

Your undertakings

You undertake, for the duration of this Agreement and until you have discharged all monies owing to us, that:

10.1

after Notifying a Debt to us:

10.1.1

you will not vary the terms of the Contract of Sale, any payment terms or settlement discounts (if any);

10.1.2

you will promptly perform all your obligations to the Customer under the Contract of Sale and, at our request, provide satisfactory evidence of the complete performance of the Contract of Sale;

10.1.3

you will owe no obligations to the Customer other than under the Contract of Sale;

10.1.4

you will not agree with the Customer to allow any credit against the Debt or issue a credit note for a sum in excess of the Credit Note Limit; and

10.1.5

you will not issue or agree with the Customer to issue any credit note against the Debt if we have notified you that you must not do so;

…

10.4

save as provided in condition 10.5, you will not include in any Invoice Schedule any Debt:

10.4.1

until the relevant Contract of Sale has been completely performed;

10.4.2

…

10.4.3

owed by a Customer from whom you purchase goods or services or with whom you have any contra accounting agreements;

10.4.4

which arises from a Contract of Sale containing terms that entitle the Customer to return the goods;

…

10.4.7

which arises under a Contract of Sale providing for the supply of goods in instalments or provision of services on a periodic basis unless the Contract of Sale is divisible and the Customer has agreed to pay for each instalment delivery or period irrespective of the performance of your further obligations under the Contract of Sale;

10.5

you will Notify us separately of each Debt which:

10.5.1

does not comply with the undertakings and warranties contained in this Agreement providing particulars of the relevant undertakings and warranties with which you are unable to comply;

…

10.6

you will tell us immediately of any:

10.6.1

breach by you of any undertaking or warranty given by you in this Agreement;

…

10.6.6

dispute between you and a Customer and provide us with full particulars of such dispute;

…

10.10

you will comply with any procedures which we communicate to you for the efficient day-to-day operation of our respective obligations under this Agreement;

…

11.1

In relation to each Debt included in an Invoice Schedule, by delivering the Invoice Schedule you will give all the following warranties to us:

11.1.1

the Debt arises under a genuine Contract of Sale made with one of your Customers in the normal course of your business, as stated in the Client Particulars;

…

11.1.4

your obligations under the Contract of Sale have been completely performed and the Customer will pay the Debt without raising any dispute, retention, set off or counterclaim;

11.1.5

you do not owe any obligations to the Customer which may reduce the Notified Value of the Debt payable by the Customer;

…

11.1.8

the details of the invoice(s) evidencing the Debt as set out in the relevant Invoice Schedule are accurate;

…

11.4

Your compliance with condition 10 and this condition 11 of this Agreement are of the essence of this Agreement.”

In the Re-Amended Particulars of Claim the Bibby ID Agreement was called “the Agreement” and QCFS was called “the Company”. The allegations of breaches on the part of QCFS of the Bibby ID Agreement were pleaded thus in the Re-Amended Particulars of Claim:-

“28.

In breach of the Agreement the Company has breached the warranties and undertakings referred to in paragraph 6 (1) – (3) above [those provisions of Conditions 10 and 11 which I have quoted] by notifying debts:

(1)

Where the Company’s obligations under the Contract of Sale have not been performed and the Customer will not pay the Debt;

(2)

Which did not arise under a genuine Contract of Sale;

(3)

For which there are no delivery notes or purchase orders;

(4)

For which no works were ever commenced;

(5)

Which were reduced by unauthorised credit notes.

29.

Particulars of the Company’s breaches are set out in the Schedule of Breach attached to these Particulars of Claim marked Schedule F.”

There was no clear correspondence between the particular sub-clauses of Conditions 10 and 11 of the Bibby ID Agreement pleaded in the Re-Amended Particulars of Claim and the breaches alleged. Many of the pleaded sub-clauses were not alleged to have been breached, whilst some alleged breaches, in particular notifying debts for which there were no delivery notes or purchase orders, seemed not to relate to obligations to be found in the Conditions. It has to be said that the nature of the case of Bibby FS was not made much plainer by reference to Schedule F to the Re-Amended Particulars of Claim (“Schedule F”). In Schedule F were set out some details of thirteen invoices (“the Invoices”) and two credit notes (“the Credit Notes”). The Invoices and the Credit Notes were identified by number, date, amount and addressee. They were each addressed to one of six identified customers of QCFS. Those were Thermotec Plastics Ltd. (“Thermotec”), Really Useful Products Ltd. (“RUP”), W. Hallam Castings Ltd. (“Hallam Castings”), Taylor Engineering and Plastics Ltd. (“Taylor”), Hallam Plastics Ltd. (“Hallam Plastics”) and Birkby’s Plastics Ltd. (“Birkby”). In this judgment I shall refer to each of the Invoices or Credit Notes individually by its number. The numbers of the Invoices or Credit Notes addressed to each relevant customer were:-

Customer Invoice or Credit Note numbers

Thermotec 2438D, 2439D

RUP 2413, 2414, 2480, 2669, 2671, 2673

Hallam Castings 2550, 2670

Taylor 2689, 2690

Hallam Plastics 2639 (Credit Note)

Birkby 1695c (Credit Note), 25540

Schedule F contained a column entitled “Reasons for non payment/debt no [sic] due”. The entries in that column were formulaic, that is to say identical forms of words were used in respect of more than one invoice. The formulas adopted and the invoices to which they were said to relate were:-

Formula

1.

“No Purchase Order. Invoices raised without goods/services delivered/supplied. Manipulation of Bibby’s aged debt ledger”.

That was adopted for Invoice 2438D and Invoice 2439D (collectively “the Thermotec Invoices”).

2.

“Invoices raised without goods/services delivered/supplied. Manipulation of Bibby’s aged debt ledger”.

That was applied to Invoices 2413, 2414 and 2480 addressed to RUP (collectively “the Early RUP Invoices”) and to Invoice 25540 addressed to Birkby.

3.

“Invoices raised without goods/services delivered/supplied.”

This formula was used in the case of the Invoice 2669, Invoice 2671 and Invoice 2673 addressed to RUP (collectively “the Late RUP Invoices”) and to Invoice 2689 and Invoice 2690 directed to Taylor (collectively “the Taylor Invoices”).

4.

“No Purchase Order. Invoices raised without goods/services delivered/supplied.”

That form of words was utilised in the case of Invoice 2550 and Invoice 2670 addressed to Hallam Castings (collectively “the Hallam Castings Invoices”).

5.

“Credit Note. Invoices raised without goods/services delivered/supplied. Not entered on sales ledger/SAGE.”

Those words were used in respect of Credit Note 2639 addressed to Hallam Plastics. With the second and third sentences transposed they were also used in respect of Credit Note 1695c directed to Birkby.

It was far from clear what subtleties underlay the relatively slight semantic differences in the formulae adopted in the cases of the Invoices. What they certainly did not highlight was what the case of Bibby FS proved at trial to be. That was explained by Mr. Clive Freedman Q.C., who appeared on behalf of Bibby, in his opening submissions. Mr. Freedman prepared, in the usual way, written opening submissions. At paragraph 53 of his written skeleton argument Mr. Freedman introduced the reader to the concept of “fresh air invoices”. He explained the significance of that concept, and the other matters upon which Bibby in fact sought to rely in this action, in this way:-

“53.

As regards the breaches in the nature of the notification of non-existent debts, which is referred to in the evidence as the issue of “fresh air invoices”, the following is said by way of background to the details of the breaches contained in the Schedule hereto.

54.

The amount available to the client to draw down is the balance on the current account at any time. This reflects movements on the client account and the sales ledger account for each client. The full price to be paid for debt (less fees) is credited to the sales ledger account. This is adjusted by way of debits to the sales ledger account for credit notes and other adjustments to which a customer is entitled. Payments made by Bibby to the client and fees due under the Invoice Discounting Agreement are debited to the client account. The balance on the current account is the balance on the sales ledger account less the balance on the client account at any one time. The client, in this case, QCFS, notifies each day invoices to Bibby which it wishes to assign through Bibby’s online E3 system.

55.

By issuing a non-existent invoice, the client obtains for himself the benefit of funding without an underlying debt to be collected. That leaves Bibby exposed in that it purchases the invoices assigned to it. Bibby does not want to buy debts which do not exist i.e. they are not debts at all.

56.

It will be noted that the invoice discounting arrangement which in this case operated until 23 February 2010, operated on the basis of an assignment of debts based on the declarations of the client, and so Bibby relied upon the integrity of the client that an assigned debt represented something which was a real debt.

57.

Where there is a “fresh air invoice”, there is not an underlying debt. This has the effect of showing an amount on the sales ledger account and thereby increasing the current account and therefore the amount available to the client to draw down. This is despite the warranties provided as above. As noted above, such a breach is a breach by the client under the Invoice Discounting Agreement, a breach by the Warrantor under clause 2.3.3 of the Deed of Warranty giving rise to damages and gives rise to the indemnity under clause 2.1 of the Deed of Warranty because it is an act deemed to be of a dishonest or deceitful nature (having regard to clause 2.2.1) and/or because it arises out of an act which is a breach by the Warrantor or a client of the obligations set out in clause 2.3.

58.

Further, Bibby does not want to continue to purchase debts which are unlikely to be paid, either because they are disputed or because the customer is unable to make the repayment. Bibby therefore agrees a period with each client after which any assigned debts which have not been paid will be disapproved. In this case, the period was 120 days: see Clause C.5 and Condition 5.7 of the Invoice Discounting Agreement. Where a debt becomes disapproved, any prepayment made in respect of it immediately becomes repayable: see Condition 5.9 of the Invoice Discounting Agreement …

59.

There were other manipulations, even where the debt existed. One of them was if after an invoice was assigned and to prevent it from being disapproved due to ageing ie 120 days, the client might change the date on an invoice to make it appear more recent than it was. The effect would be that the sales ledger figures would still reconcile but Bibby would not realise that this invoice should be disapproved because in truth the debt was more than 120 days old. The effect would be that the client’s available funds would not have been reduced by a debit to the sales ledger control account with a consequent reduction on the balance of the current account.

60.

Insofar as the above breaches are not proven, Bibby says that it is entitled to an amount equal to its losses, damages etc. as a consequence of any negligent act or omission by QCFS: see Clause 4 of the Deed of Warranty and para. 4 of Schedule G to the Particulars of Claim.

61.

There is an obligation to notify credit notes as soon as they are raised: see Condition 3.9. Failure to do so has as its effect an overstatement of the sales ledger account with a knock on effect on the current account. The consequence is that the client is able to draw down more money that [sic – presumably “than” was meant] should be available to it.”

The exposition of the case of Bibby set out in the paragraphs from the written skeleton argument of Mr. Freedman which I have set out gave rise to a number of points.

The first was that, despite the care which Mr. Freedman had taken to explain what a “fresh air invoice” was and what its implications were, in truth the concept was startlingly clear – a “fresh air invoice” was simply a false document produced to induce Bibby ID to make a payment. It was just about the most blatant fraud imaginable. The contentions advanced on behalf of Bibby FS were assertions of flagrant dishonesty. Consequently the evidence relied upon in support of those allegations required to be considered with appropriate care.

The second point was that, from the provisions of the Bibby ID Agreement which I have quoted, in particular Conditions 6.7 and 6.8, there was a limit upon the liability of Bibby ID to pay money in consideration of the assignment of debts by QCFS. The limit was that no more than £450,000 should be outstanding due to Bibby ID in respect of assigned debts at any one time. Once the limit was reached Bibby ID was not obliged to acquire any further debts unless and until it had recovered from customers of QCFS a sum or sums which reduced the amount outstanding below £450,000. Consequently, once the limit had been reached, as it was contended on behalf of Mr. Magson had been the case at all times material to the claims in this action, production of “fresh air invoices” was a futile exercise. They did not give rise to any entitlement of QCFS as against Bibby ID and, as they would never be paid, they could not have reduced the amount outstanding to Bibby ID in respect of assigned debts. To put the point more starkly, if, as was contended, the limit of £450,000 had been reached prior to the production of any of those characterised on behalf of Bibby FS as “fresh air invoices” and was not thereafter reduced by receipt of payment of some debt or debts, the production of those invoices would have been pointless, and, consequently, it was unlikely that the invoices stigmatised as “fresh air invoices” were in fact bogus. I shall come to consider what the evidence showed concerning the contention of Mr. Magson that at all material times the limit of £450,000 had been reached.

The next aspect of the part of the written skeleton argument of Mr. Freedman which I have quoted which requires comment is the reference to what, crudely, could be called re-dating – that is to say, re-issuing an invoice with a date later than that which it bore when originally issued. The purpose of doing that, in the context of the Bibby ID Agreement, Mr. Freedman indicated, was to avoid the consequence of the value of an assigned debt being disapproved because it had not been paid by the customer of QCFS within the prescribed period. Disapproval of an invoice in effect meant that the consideration paid by Bibby ID on the assignment of the debt to it by QCFS had to be re-paid – see Condition 5.9. However, if the invoice was bogus in the first place, as it seemed that it was the case for Bibby FS that all allegedly re-dated invoices were, the issue of re-dating seemed to be an irrelevance. The issue of re-dating, or re-aging, as it was sometimes put in the evidence, only arose to the extent that I found that an allegedly re-dated Invoice was, subject to the question of re-dating, genuine.

The matters raised by Mr. Freedman at paragraph 60 of his written skeleton argument were somewhat odd. The reference to “Clause 4 of the Deed of Warranty” seems actually to have been intended as a reference to clause 2.4 of a Warranty. However, the peculiarity of the point was that, although that term was pleaded in the Re-Amended Particulars of Claim, the Re-Amended Particulars of Claim itself contained no allegation of negligence as against QCFS. Schedule G to the Re-Amended Particulars of Claim (“Schedule G”) was incorporated into the Re-Amended Particulars of Claim by paragraph 37:-

“Particulars of the loss by reason of the matters aforesaid are that if the warranties and obligations of the Company and the Warrantor had been fulfilled, particularly the Debts being valid and enforceable obligations, the loss suffered by the Claimant and Bibby upon the insolvency of the Company would have been reduced by the full value of the invoices, namely the sum of £223,471.54: alternatively, the particulars of loss are set out in the Schedule of Breach/Loss attached to these Particulars of Claim marked Schedule G.”

Schedule G was principally a table setting out how alleged losses of £213,227.33 had been sustained by Bibby ID as a result of the alleged breaches of the Bibby ID Agreement about which complaint was made. However, it concluded with paragraph 4:-

“If, which is denied, the loss and damage claimed in paragraphs 2 and 3 herein [that is, of Schedule G] arose as a consequence of an [sic] negligent act or omission by the Company, the First and Second Defendants are liable to Claimant for the same amount under Clause 2.4 of the Warranties.”

That paragraph advanced no positive case, whether in the alternative to dishonesty or not, that QCFS had caused any loss to Bibby ID, or Bibby FS, by negligence. It seemed rather to postulate a contingency which could not arise unless and until Bibby sought to advance a positive case of negligence against QCFS.

The contention of Mr. Freedman in paragraph 61 of his written skeleton argument that QCFS had been in breach of an obligation to notify credit notes was not foreshadowed in the original Particulars of Claim at all. Condition 3.9 of the Conditions, to which Mr. Freedman referred, was not pleaded, nor was any alleged breach of that provision. The failure to plead Condition 3.9 was remedied by the introduction of paragraph 35D in the Re-Amended Particulars of Claim.

Attached to the written skeleton argument of Mr. Freedman was a Schedule (“the Freedman Schedule”). In the Freedman Schedule Mr. Freedman helpfully set out the principal evidence relied upon in relation to the contentions of Bibby FS in relation to each of the Invoices. It was also only really from the Freedman Schedule, and from the witness statements there mentioned, that the true nature of the case of Bibby FS in respect of each of the Invoices became apparent. That case was that all of the Invoices were bogus and none related to a genuine transaction. It was difficult, logically, to see any scope, however it might be put on behalf of Bibby FS, for an alternative finding that the issue of any of the Invoices had somehow been negligent. From the Freedman Schedule it appeared that the case of Bibby FS in relation to each of the Credit Notes was that the amount of it was in excess of the Credit Note Limit, and thus amounted to a breach of Condition 10.1.4 of the Conditions. Again, while Condition 10.1.4 of the Conditions was pleaded in the Re-Amended Particulars of Claim, there was no clear allegation of breach in the body of the Re-Amended Particulars of Claim.

Whilst, in the end, by the commencement of the trial it was tolerably plain what at least was the principal case in relation to the claims based on the Warranties Bibby FS wished to advance, it has to be said that there remained obscurities in subsidiary aspects of the case, and what was the principal case was not revealed comprehensibly until service of the witness statements relied upon on behalf of Bibby FS and the delivery of the written skeleton argument of Mr. Freedman.

In answer to the claims against them based on a Guarantee, and, indeed, a Warranty, each of Mr. Magson and Mr. Scott made a number of points. Some of them centred on the contention that the Guarantees and the Warranties upon which Bibby FS sued were not in the terms which the defendants, respectively, had agreed. It will be necessary to consider in some detail the relevant evidence, but it became clear from the witness statements of Mr. Magson and Mr. Scott that they contended that, on the occasion upon which the Guarantees and the Warranties had been signed, manuscript alterations to each document had been made before signature, yet the manuscript alterations did not appear on the versions of the Guarantees and the Warranties which were relied upon by Bibby FS. The respective Defences of Mr. Magson and Mr. Scott, to the material detail of which I shall come, were, perhaps, capable of being interpreted as indicating that their case was that terms agreed orally for the Guarantees and the Warranties had not been properly reflected in the Guarantees and the Warranties as relied upon, so that the issue was one of rectification. However, it became clear from the witness statements that the case in fact was that the terms actually agreed, and recorded in manuscript alterations to typed forms of Guarantee and Warranty, were not shown in the copies of the documents relied upon – in other words the issue was not so much rectification as what actually were the terms of the documents agreed. However, there was a further wrinkle. Each Guarantee and each Warranty on its face was intended as a deed. The contention of each of Mr. Magson and Mr. Scott was that, although each had signed a Guarantee and a Warranty as a gesture of good faith, the expectation of each, in the light of discussions at the time of signature, was that clean versions of each Guarantee and each Warranty, incorporating as part of the typed text amendments to take account of the manuscript notations, would be produced and versions in those revised forms would be signed afresh. Consequently, it was said, the signed versions of the Guarantees and the Warranties had not been dated or “released”. “Released” is not a term of art in this context. The traditional word used to describe that which has to happen once a deed has been signed and before it takes effect is that it be “delivered”.

The question of “delivery” was material to another point raised by the defendants. It was contended that the Bibby ID Agreement, also intended to be made by deed, had not been delivered because at the meeting at which the signature page of the version of that document put before Mr. Magson and Mr. Scott was signed by them, amendments to that document also were made in manuscript, with a view to a clean copy incorporating the amendments being produced to be signed subsequently. Thus the version of the Bibby ID Agreement relied upon had never, said the defendants, been delivered by QCFS. That was an important point, for, if it were well-founded, it seemed to dispose of the claims in this action. Bibby FS could not seek to enforce a Guarantee of obligations which QCFS had never assumed, and equally there could be no question of either Mr. Magson or Mr. Scott being liable in respect of breaches of obligations on the part of QCFS allegedly owed to Bibby ID which QCFS had never assumed. Another aspect of the issue of delivery of the Bibby ID Agreement was that it appeared that it had never been delivered by Bibby ID as it had never been signed on behalf of that company.

Four other types of question were raised by way of defence to the claims of Bibby. One was a simple, at least in concept, contention that, as a matter of fact, and assuming that the Warranties were enforceable in principle against Mr. Magson and Mr. Scott, QCFS had not actually been in breach of the version of the Bibby ID Agreement relied upon and Mr. Magson and Mr. Scott had not failed to procure that which, by clause 2.3 of each Warranty they undertook to procure. The second type of question focused on the issue of the entitlement of Bibby FS, as opposed to Bibby ID, to recover damages, or at any rate substantial damages, pursuant to the Guarantees and the Warranties. Next the issue was raised whether Bibby had proved, in respect of each Invoice the subject of this action, that the debt which that Invoice appeared to represent had, first, been assigned to Bibby ID, and, second, been “funded”. By the latter expression was meant that Bibby ID had paid a sum of money for the assignment to it of the debt represented by the Invoice. The fourth type of question was whether Bibby had proved for the purposes of the Guarantees that the losses of Bibby ID by reason of breaches of the Bibby ID Agreement amounted to at least the aggregate total of £50,000 claimed against Mr. Magson and Mr. Scott.

Mr. Scott had made a Part 20 claim against Mr. Magson in this action, but I was told that it had been agreed that that claim would not considered at the present trial. Consequently I say nothing more about that claim in this judgment.

It is convenient to turn next in this judgment to the evidence as to circumstances surrounding the signature of the Bibby ID Agreement, the Guarantees and the Warranties.

The background to the signature of the various agreements relevant to this action was the involvement of Mr. Magson with Esdale. Until becoming more heavily engaged in the actual business of Esdale Mr. Magson had operated in the invoice discounting industry. His first involvement with Esdale was simply as introducer of Esdale to Bibby ID as a possible client. Mr. Magson at the time was operating his own financial consulting business and he was approached by a Mr. Gary Ellis, who was interested in purchasing, through a company called MEBA Ltd., the issued shares in Esdale. Mr. Ellis was seeking to identify a source of funding for the business of Esdale in the shape of an enterprise which would purchase, at a discount, debts due to Esdale from customers of its business.

In the event MEBA Ltd. did acquire the issued shares in Esdale and Bibby ID entered into a recourse invoice discounting agreement (“the Esdale Agreement”) with Esdale dated 13 August 2007.

It appears that Mr. Martin Ellison was appointed by Bibby ID to act as client manager of the dealings between Bibby ID and Esdale. He subsequently performed the same role as between QCFS and Bibby ID.

The business of Esdale did not prosper following the acquisition of its issued shares by MEBA Ltd. Bibby ID became concerned both about the extent of its exposure to Esdale and about the character of Mr. Ellis. In November 2007 Mr. Andrew Darling, at that time using the title Head of Credit, but in fact called commercial director, of Bibby ID, approached Mr. Magson. Mr. Darling was called to give evidence in this action, for reasons which will emerge. He was asked in cross-examination about why he approached Mr. Magson in November 2007. It has to be said that his explanation was not very specific, but it did not matter for present purposes. The important points were that Mr. Magson was made aware, if he was not otherwise aware, of the financial situation of Esdale and of the fact that Bibby ID was seeking to bring its dealings with Mr. Ellis to a conclusion.

By a letter dated 11 January 2008 addressed to the directors of Esdale Mr. Ellison notified them that Bibby ID required repayment of all sums due from Esdale to Bibby ID under the terms of the Esdale Agreement by 31 March 2008.

By the beginning of 2008 Quay was, in effect, a joint venture of Mr. Scott and Mr. Magson. They decided that the situation of Esdale provided an opportunity. Mr. Magson considered that the underlying business of Esdale of tool-making was sound and that, if properly managed, the business could succeed, at least if Bibby ID continued to provide funding for the activities of Esdale. Consequently in February 2008 Quay acquired the issued shares in Esdale for the sum of £1.

Bibby ID was aware of the acquisition of the issued shares in Esdale by Quay and agreed, verbally, not to rely on the notice contained in the letter dated 11 January 2008.

From that point on the business of Esdale was effectively managed by Mr. Magson. The facility for which the Esdale Agreement provided continued to be made available by Bibby ID. However, neither Mr. Magson nor Mr. Scott was required to provide a Guarantee or a Warranty in relation to the Esdale Agreement. At the time of the making of the Esdale Agreement Mr. Ellis had entered into a Guarantee, but Mr. Darling accepted in cross-examination (Transcript, Day 2, page 36 lines 23 – 24) that by the summer of 2008, to the significance of which I shall come:-

“Certainly in personal guarantee terms I don’t think we had much reliance on that.”

The evidence was that the custom of Esdale was to invoice in three stages for work done or agreed to be done. The stages reflected the nature of the business of Esdale. The making of a bespoke tool necessitated the design of the tool, the acquisition of the materials with which to make the tool, the manufacture of the tool, and the delivery of the tool. After delivery the customer would want to use it for sample production of the items to be manufactured by the use of it. These various steps between the placing of an order for a tool and its acceptance were translated into three stages for payment of invoices. Stage 1, which in the ordinary course was, in effect, payment with order, was intended to cover the cost of acquisition of the materials necessary to manufacture the tool. Stage 2 was an invoice raised on delivery of the tool to the customer, for immediate payment. Stage 3 was an invoice raised at the same time as the Stage 2 invoice, but for payment after acceptance of the tool following test production by the customer. It appears that sometimes, at least, the three stages involved simply invoicing one-third of the agreed total price at each stage, but that in other cases a more sophisticated approach was adopted. That seemed especially likely to be the case if the cost of materials was a significant part of the agreed total price. Stage 1 occurred at the point at which the design of the tool had been undertaken and General Assembly (“GA”) drawings of the tool had been approved by the customer.

In the context of the acquisition of debts by Bibby ID from Esdale Stage 1 invoices neither necessitated nor attracted purchase, for the invoice was settled by immediate payment by the customer. Mr. Darling explained in cross-examination (Transcript, Day 2, page 28 lines 14 – 17 and 20 – 23) that, while, in its terms, the Esdale Agreement prohibited the raising of invoices in staged payments, in fact:-

“We would take the view on a staged payment that each stage, if you want to call it stage in that sense, would be an independent order in its own right, signed off, duly delivered, and we would be happy to fund that. …We would take --- there are varying types of stage payments in that sense, and we took the view on this kind that as long as it was signed off, stage 2 and 3 we would be happy to fund.”

Unhappily the business of Esdale under the management of Mr. Magson laboured under difficulties resulting from the previous conduct of it. In particular, there was a pension shortfall of some £3.2 million and an outstanding liability to HM Revenue and Customs (“HMRC”) in respect of Value Added Tax. As at 1 July 2008 Esdale owed Bibby ID some £411, 653. On 15 July 2008 HMRC presented against Esdale a winding up petition which was expected to be heard at the end of September or the beginning of October 2008.

It was the practice of Bibby ID from time to time to undertake an audit (an “Audit”) of the affairs of customers. An Audit of Esdale was undertaken on 1 July 2008 by Katie Todd. She made a report of that Audit. In a section of the Audit report for “Summary of Auditor’s Comments” she wrote:-

“… company now has severe cashflow difficulties and director [that is, Mr. Magson] is considering CVA.”

Later in the Audit report, in a section entitled “Any potential problems identified by auditor?” Katie Todd wrote:-

“Loads, severe paye and VAT arrears no money in business, it is difficult to understand how the company can continue to trade for much longer. It is unlikely that we will be able to collect on any of the Guarantees we hold and therefore a high level of vigilance is required when financing invoices to ensure that we effect a full ledger collect out.”

Mr. Magson sought advice from insolvency specialists RSM Tenon Ltd. (“Tenon”). Out of that consultation emerged a proposal the object of which seems to have been to free the business of Esdale from its existing debts, but to continue the actual business through a different corporate vehicle. Mr. Magson obviously retained his faith in the underlying profitability of the business. The proposal depended, it would appear, upon the approval of Bibby ID, and, in particular, upon Bibby ID continuing to offer to the renewed business the financing facilities previously provided in the form of the purchase of debts. However, the proposal also had attractions for Bibby ID independently of the merits, or otherwise, of having a new, and hopefully solvent, customer. If the renewed business was seen as a continuation of the business of Esdale by the previous customers of Esdale it was thought more likely that they would pay, without difficulty, or with less difficulty than would otherwise be the case, existing debts the beneficiary of which was Bibby ID. It seems that it is the general experience that those owing money to an insolvent company are not especially keen to discharge their obligations, but those who wish to have a continuing relationship with a successor to an insolvent company are less reluctant.

The proposal for what was to happen to Esdale and its business was what appears to be known as a “pre-pack”. What the proposal involved was identifying a corporate vehicle to which the business of Esdale could be sold following the appointment of administrators of Esdale and, as it were, pre-selling that business to the identified corporate vehicle prior to the appointment of the administrators, so that there was no significant lapse of time between the appointment of the administrators and the commencement of the renewed business.

In the present case the identified corporate vehicle was Harvard. It seems to have been identified by about 12 August 2008 and became a wholly-owned subsidiary of Quay. A resolution for the change of the name of Harvard to QCFS was passed at a general meeting of the members of Harvard held on 18 August 2008.

Mr. Magson gave oral evidence at the trial on his own behalf. In his first witness statement, dated 26 May 2011, he said:-

“28.

A factor critical to the success of the new business was securing QCFS’s funding going forward. As set out above, BIDL [Bibby ID] was kept entirely up to date with my attempts to restructure Esdale’s business, and an important part of this process was establishing a new funding arrangement with BIDL.

29.

Accordingly, on 13 or 14 August 2008 I had a conversation by telephone with Mr. Darling at BIDL, who indicated that BIDL would fund the new business on the same terms that it had funded Esdale and that no additional security would need to be provided.

30.

However, on 19 August 2008 I was told by Martin Ellison, a client manager at BIDL who worked for Adrian Barrington and was junior to Andrew Darling, in a telephone call, that personal security would be required for the new facility. This was the first time that any form of personal security had been mentioned and Mr. Scott and I were not willing to provide this, and so Mr. Ellison referred the matter to Mr. Darling.

31.

As a result, it was agreed with Mr. Darling on another telephone call that day that BIDL would charge a fee of £25,000 for terminating the existing facility/moving the funding across to the new company. This fee would be added to the balance on the facility under the Esdale Agreement, as would Tenon’s fees for the administration, which would be another £25,000 (BIDL would be appointing Tenon as the secured creditor, so, if the business failed, BIDL would potentially be liable for Tenon’s fees). Accordingly, BIDL required Mr. Scott and I to provide security for those fees until the finance provided to Esdale had been collected out by BIDL. This would mitigate any risk to BIDL around the proposed restructuring. It was agreed that covering these fees, i.e. a personal guarantee by each of Mr. Scott and I limited to £25,000 each, would be the limit of the personal security provided by me and Mr. Scott.”

The other feature of what was agreed with Mr. Darling, according to Mr. Magson, was that the security provided would only endure until Bibby ID had collected the sums which had been assigned to it by Esdale.

Mr. Ellison was not called to give evidence at the trial. Mr. Darling was asked in cross-examination about the conversations of which Mr. Magson spoke in the passage which I have set out. The following exchanges (Transcript, Day 2 page 64 line 18 to page 67 line 11) took place between Mr. Darling and Mr. David Alexander Q.C., who appeared on behalf of Mr. Magson:-

“Q. Yes. If we move on to the 19^th August. On that day Mr. Magson says that Mr. Ellison told him in a telephone conversation that personal security would be required for the new facility for QCFS. So it looks like it’s just before your paper, on 19^th August. Mr. Magson says that Mr. Ellison told him that personal security would be required for the new facility to QCFS.

A. I don’t know if that is the case or not.

Q. Only Mr. Ellison could confirm that, couldn’t he?

A. I would say yes.

Q. You have no reason to dispute what Mr. Magson says about that, do you?

A. No.

Q. No. Mr. Magson says that neither he nor Mr. Scott were willing to provide any personal security. Mr. Ellison referred the matter to you. Do you agree that that happened?

A. I don’t recall that specifically, no.

Q. Mr. Magson then says that on 19^th August 2008 he had a telephone conversation with you. Do you recall that?

A. Not specific details.

Q. Do you have any reason to doubt what Mr. Magson says about that?

A. No, not at that stage.

Q. Mr. Magson says that in that telephone conversation it was agreed that Bibby would charge a fee of 25,000 for terminating the existing Esdale facility.

A. There was a discussion along these lines and it was agreed that we would cap our termination fee at 25,000.

Q. Right. He says that it was agreed that that sum would be added to the balance due to Bibby under the old Esdale facility.

A. That sounds about right.

Q. And he says that a further 25,000 would be added to the old Esdale facility for Tenon’s fee for carrying out the administration of Esdale.

A. Again, I believe that to be correct.

Q. So, in broad terms, you agree with the whole of that conversation so far.

A. Certainly on the two 25,000 fees, yes.

Q. Mr. Magson says that because of the two 25,000 fees, you explained that personal guarantees for £25,000 each were required of Mr. Magson and Mr. Scott.

A. No. No correlation at all. The fact that 25,000 was the fee to the fact that 25,000 guarantee, purely coincidental.

Q. It’s purely coincidental that there are two fees for 25,000 and two guarantees for 25,000?

A. Yes.

Q. Mr. Magson doesn’t stop there, he goes further and he says that because of the two 25,000 fees, you explained that personal guarantees were required from them until the finance provided to Esdale had been collected out.

A. No.

Q. I suggest to you that conversation did happen and that you did agree that.

A. No.

Q. The collection out of the old Esdale facility was absolutely uppermost in your mind, wasn’t it?

A. It was one of the main features, yes.

Q. What was being added to the collection out of the old Esdale facility was another £50,000 worth of fees.

A. Yes.

Q. Mr. Magson said that that £50,000 of fees was directly linked to the two guarantees and the collection out of the old Esdale facility.

A. No.

Q. You don’t accept that?

A. No.”

Thus what, in the light of the cross-examination of Mr. Darling, he differed from Mr. Magson about concerning the telephone conversation which it seems was common ground had taken place between them on 19 August 2008, were, first, whether there was any link between the fees of Bibby ID and Tenon and the amounts of the guarantees being sought from Mr. Magson and Mr. Scott, and, second, whether the guarantees were only required until the debts assigned by Esdale to Bibby ID had been, as the expression was, “collected out” – that is to say, collected in full from the relevant customers of Esdale. The first of these points actually was not material to any issue in this action. The second, however, was fundamental, as it was alleged that the discussion on 19 August 2008 was the prelude to what was, according to Mr. Magson and Mr. Scott, discussed and agreed on 27 August 2008.

There were put in evidence on behalf of Mr. Magson and Mr. Scott three references in contemporaneous communications which it was contended were supportive of the evidence of Mr. Magson as to what he had agreed with Mr. Darling on 19 August 2008 in relation to the duration of the personal guarantees being sought.

On 19 August 2008 at 17:09 hours Mr. Magson sent an e-mail to Mr. Ruven Cohen of Messrs. James Owen, valuers acting on behalf of Tenon in connection with the proposal to transfer the business of Esdale to Harvard under a new name. The e-mail, which was copied to Mr. Scott, included two passages which were especially relied upon by Mr. Alexander:-

“Bibbys are happy to move over 25k fee which we have to guarantee until oldco collects out as directors.

…

Bibbys are willing to appoint Tenons in this situation and are fully aware of the matter, no other security as current business.”

Having discussed with Mr. Darling the requirement of Bibby ID for personal guarantees from Mr. Magson and Mr. Scott, Mr. Magson raised the matter with Mr. Scott. Mr. Scott replied in an e-mail sent at 17:26:22 hours on 20 August 2008:-

“I have too much other PGing [personal guarantees] at the mo[ment] – I won’t be able to do [sic] provide one.

Maybe pushed even to do the 5K one on Bibby.”

Mr. Magson replied at 17:41 hours the same day. His e-mail included:-

“Bibbys is only till oldco collected.”

The third reference was in a document entitled “Access to Funds Statement”. That document was said to be enclosed with an e-mail sent by Mr. Magson to Mr. Cohen at 15:56 hours on 4 September 2008. That e-mail was copied to Mr. Scott. The chain of e-mails with which that e-mail was included was forwarded by Mr. Magson to Mr. Darling at 13:20 hours on 8 September 2008. When asked about it in cross-examination I think that Mr. Darling suggested that the “Access to Funds Statement” may not have been attached to the chain of e-mails forwarded to him, but he did not positively assert that. Rather more material than whether Mr. Darling saw the “Access to Funds Statement” was what it actually contained. At the foot, under the rubric “Structure” appeared this:-

“No security on the old facility, new facility is to be limited to £25K for the duration of the collectout of the oldco by the directors.”

It was not suggested to Mr. Magson that the e-mails dated 19 August 2008 and 4 September 2008 to Mr. Cohen were not what they purported to be, or that the “Access to Funds Statement” was not attached to the e-mail of 4 September 2008 or was not in the terms of the copy which was adduced in evidence. It was not suggested that what looked like an e-mail exchange between Mr. Magson and Mr. Scott on 20 August 2008 was not what it appeared. What the documents relied upon on behalf of Mr. Magson and Mr. Scott plainly showed on their respective faces was that on 19 August 2008 and on 4 September 2008 Mr. Magson was asserting to a third party, Mr. Cohen, and to those to whom the e-mails were copied or forwarded, that his understanding was that the duration of the guarantees required in connection with the facility to be provided by Bibby ID to Harvard/QCFS was limited to the period until the “collect out” by Bibby ID of the debts assigned to it by Esdale. That same message passed between Mr. Magson and Mr. Scott on 20 August 2008.

Mr. Darling was asked in cross-examination about discussions between him and Mr. Magson concerning the duration of any Guarantee to be given. He said (Transcript, Day 2, page 72 lines 11 – 12), “As I say, there was no conversation around these matters”.

What happened following the e-mail exchange between Mr. Magson and Mr. Scott on 20 August 2008, according to Mr. Magson, he explained at paragraph 35 of his first witness statement:-

“Mr. Scott and I discussed this further on 20 August 2009 [sic – plainly 2008 was meant] and he suggested I raise with Mr. Darling a six month limit on the guarantee (in addition to the collect out limit). On the same day I discussed the personal guarantee again with Mr. Darling of BIDL and made clear our concerns about providing personal guarantees, especially when BIDL had no security in respect of the current business. Further to Mr. Scott’s suggestion, I raised the issue of an additional limitation against the personal guarantee of six months to which Mr. Darling was amenable. Accordingly, on 20 August 2008, Mr. Scott and I finally agreed with Mr. Darling, as a half-way house, that the security would be provided for a period being the earlier of 6 months or until collect-out of the old facility under the Esdale Agreement.”

In cross-examination Mr. Darling was asked about that alleged conversation. The material questions and answers (Transcript, Day 2, page 88 line 5 to page 90 line 23) were:-

“Q. Mr. Magson says that he and Mr. Scott then had a conversation which in the light of what is going on here I would suggest to you is quite likely?

A. Yes.

Q. Mr. Magson says that in that conversation Mr. Scott suggested that there be a six-month limit on the personal liability, in addition to the limitation about collecting out the Esdale facility. Mr. Magson says that he then spoke [to] you again that day. Any recollection of this?

A. No.

Q. He says that in that conversation he made it clear that he and Mr. Scott had concerns about providing personal guarantees. Have you ever had a conversation with Mr. Magson in which he has expressed the view that he and Mr. Scott had concerns about providing personal guarantees?

A. Not that I can recall, but I wouldn’t – I wouldn’t be surprised if they did express their concern.

Q. So you don’t remember any conversation?

A. No.

Q. But you wouldn’t be surprised if they had expressed a concern about providing a personal guarantee?

A. As most guarantors do.

Q. Yes, but you have also seen here that at this moment in time it is quite clear Mr. Scott was very concerned about providing one because he said he couldn’t afford to do so.

A. Again, I had no knowledge of that at the time.

Q. Of course, you didn’t at the time, but obviously we can now piece the pieces together and there is more information available. But it is quite clear that as at 20^th August, Mr. Scott had real concerns about providing a personal guarantee. It also, would it not, would be most unlikely if Mr. Magson didn’t tell you that Mr. Scott had those concerns? Correct?

A. I genuinely don’t know.

Q. Mr. Magson says he made it clear to you that he and Mr. Scott had concerns about providing personal guarantees when Bibby had no security for the current business. It’s right, isn’t it, you didn’t have anything from Mr. Magson or Mr. Scott at this stage?

A. We had no personal security but we had other security, i.e. the book debts, the debenture.

Q. Yes. I have to say, I had read Mr. Magson as meaning that he and Mr. Scott were not on the hook and you were –

A. Personally they were not on the Esdale business, yes.

Q. So they had concerns about providing personal guarantees when you didn’t have any security from them, as in the form of a personal guarantee, for the current business.

A. Yes.

Q. What I would suggest to you is actually Mr. Magson was basically running this business for about six months.

A. I was under that impression, yes.

Q. Yes. He says that with Bob Scott having raised with him saying, look, obviously having concerns about the guarantee, those concerns not being satisfied, it would appear from these emails, by being told that: don’t worry, the personal guarantee is only for so long as Bibby collects out the old Esdale debt. He says Mr. Scott said: ask for a six-month limitation as well, will you? Mr. Magson says he had that conversation with you and that you were happy with that.

A. No.

Q. You say “no”. Are you saying that did not happen or you do not remember?

A. I have had no discussions around time limitations on the personal guarantees.”

In anticipation of matters going forward Mr. Darling sent to Mr. Scott and to Mr. Magson as attachments to an e-mail sent at 15:06 hours on 20 August 2008 a draft debenture (“the Harvard Debenture”) to be entered into by Harvard with Bibby FS, a draft corporate guarantee (“the Cross Guarantee”) to be entered into by Esdale and Harvard with Bibby FS, and two draft board minutes. The detail of these drafts is not presently material. What is material is that each of those which purported to relate to the company which was to carry on in the future the business up until that time carried on by Esdale was named as Harvard. The short point is that, as Harvard was in the process of changing its name to QCFS, the final versions of the draft documents, where they referred to the company which Bibby ID was to finance going forward, would need to refer to QCFS, and not to Harvard. Mr. Scott executed those documents appearing to need to be executed by Harvard using the name of Key2D as a director and Key2S as the company secretary. Stamps of those respective companies were affixed in proximity to the signatures of Mr. Scott. There was a dispute, on the evidence put before me, as to when and in what precise circumstances the Harvard Debenture and the Cross Guarantee were signed and the stamps which I have mentioned affixed. I shall come to the evidence in question.

On or after 22 August 2008 Mr. Darling prepared a document (“the Proposal Document”) entitled “Bibby Group of Factors Proposal/Sanction/Review form” and which was itself simply dated August 2008. The fact that the Proposal was actually produced on or after 22 August 2008 emerged from references in the document to events occurring on that date. The Proposal Document began with a statement of its intended purpose: “To fund a pre-pack of our existing Client – Esdale Tooing [sic] Ltd.”. In the “Brief History” section of the Proposal Document Mr. Darling wrote, amongst other things:-

“We will take cross guarantees of newco/oldco + £50K worth of PG’s [sic – personal guarantees] from the Directors.

…

The transaction makes sense – essentially this will remove the “Ellis” Factor, the pension deficit and regrettably HMRC.

The transaction is of benefit to us to protect oldco debts and ensure continuity of collections.”

In the “Brief History” part of the Proposal Document Mr. Darling noted that:-

“New trading vehicle – QCFS Ltd. (currently at Companies House under name Christopher Harvard (Properties) Ltd.”

Later in the Proposal Document, in a section entitled “Legal issues” Mr. Darling noted that there were to be:-

“2 x £25K PG [personal guarantees] (Richard Magson & Robert Scott).”

The Proposal Document made no reference to any Warranty. When he was asked about that in cross-examination Mr. Darling said that a Warranty was a standard requirement and, as it were, did not need to be specified.

In a section of the Proposal Document entitled “Rationale for sanction and gut feeling” Mr. Darling included:-

“Newco protects our existing debt and provides continuity of collect out.

Recommended on that basis.”

In cross-examination (Transcript, Day 2, page 62 line 22 to page 64 line 17) these exchanges took place between Mr. Alexander and Mr. Darling:-

“Q. Yes. Would it be fair to say that when you were having discussions with anyone, the primary concern inside your mind would be: make sure we collect out on the old Esdale debt.

A. It was one of the considerations to our mind, for sure.

Q. Sorry, if you just go back to page 286 in 8A

A. Yes.

Q. Do you see sort of about a third of the way down, the funding limit of 450 is marked across both Esdale Tooling and Newco.

A. Yes.

Q. Can you explain to me what that meant?

A. Meaning that, hopefully, the existing Esdale facility marked at 450 would reduce while the new company made new sales and therefore increased.

Q. So what you are actually saying is that between the old Esdale debt and QCFS –

A. Yes.

Q. – Bibby’s exposure is not to go above 450,000.

A. Yes.

Q. So the only way QCFS gets any money is effectively as the old Esdale debt is reduced.

A. If the Esdale facility was fully drawn, which –

Q. If the Esdale facility was fully drawn. I think I have indicated to you a little while ago, we talked about it, it was probably rather overdrawn at this stage.

A. If that was the timing of it, yes.

Q. You are obviously very experienced in this. How long would you expect it to collect out the old Esdale facility, as at this stage?

A. We would track the debt turn, i.e. how many days it takes the customers to pay on average. We track that daily. You would take a view on that and maybe add another 20/30 days on top.

Q. Obviously you only tend to a fund for, I think Mr. Magson says, 120 days EOM [from the end of the month in which an invoice was raised].

A. That’s correct.

Q. That obviously would mean that you would expect to be getting debts in within a three-month-ish period.

A. That would be realistic.

Q. So from your perspective, at this stage, you would be thinking: we ought to be collecting out the old Esdale facility –

A. Yes.

Q. – within three, maybe four, months.

A. I would say that is right.”

On 26 August 2008 Mr. Darling sent a letter (“the Offer Letter”) to the directors of QCFS. Although addressed to the directors at the address of QCFS in Heckmondwike, West Yorkshire, it seems in fact to have been sent to the registered office of QCFS, which was the premises of the Firm. The evidence of Mr. Magson and Mr. Scott, who was also called to give evidence on his own behalf, was that the original letter was received by Mr. Scott on 27 August 2008. The letter included various “Security Requirements”. Those of particular relevance to the issues in this action were:-

“Personal Guarantee from:

Richard Magson limited to £25,000

Bob Scott limited to £25,000

Warranty from:

Richard Magson

Bob Scott.”

The copy of the Offer Letter which was put in evidence was a copy of the original. It bore upon it various manuscript markings in the hand of Mr. Magson. No markings appeared beside the words which I have just quoted. The significance of the markings is a subject to which I shall return. Mr. Magson signed the original on behalf of QCFS. The circumstances in which that happened is a matter to which I shall come. However, the original of the Offer Letter with the markings made by Mr. Magson was produced in this action from the files of Bibby.

At 08:41:07 hours on 26 August 2008 Mr. Darling sent Mr. Scott and Mr. Magson an e-mail in which he said:-

“Are you around Wednesday [that is, the next day] to sign the rest of the documents [that is, other than those already sent as attachments to the e-mail sent to Mr. Scott on 20 August 2008] (and also lunch!)

Venue – happy to go with your call – London or whatever suits?”

Mr. Magson replied in an e-mail sent the same day at 12:06 hours:-

“Would need to be late lunch say 3.00. For me, happy to work ropund [sic] venue. In leeds [sic] today and tomorrow am.”

In the event it was agreed that there would be a meeting in London, with Mr. Darling attending the offices of the Firm. After Mr. Darling had arrived, so it was common ground, Mr. Scott and Mr. Darling adjourned to “The Old Nick” public house (“the Pub”), which was convenient to the offices of the Firm, to await the arrival of Mr. Magson. It seemed that only social conversation took place in advance of the arrival of Mr. Magson.

In his first witness statement Mr. Magson gave this account of what happened on 27 August 2008 after he joined Mr. Darling and Mr. Scott in the Pub:-

“40.

At this meeting, Mr. Darling produced unbound hard copies of the documents he had emailed to myself and Mr. Scott on 20 August 2008 as referred to above, namely the Esdale cross guarantee, debenture and two sets of board minutes referred to at paragraph 36 above. However, each of these documents was, as before, in the wrong company name, i.e. CHPL [Harvard] rather than QCFS.

41.

Mr. Darling also produced copies of additional unbound documents, that had not previously been emailed to me, namely (i) two copies of a recourse invoice discounting agreement between BIDL and CHPL, (ii) a personal guarantee granted by myself in favour of BIDL, (iii) a personal guarantee granted by Mr. Scott in favour of BIDL, (iv) two copies of a corporate guarantee granted by Saracen in favour of BIDL, (v) a warranty granted by myself in favour of BIDL and (vi) a warranty granted by Mr. Scott in favour of BIDL. I recall that each document was stapled at the top left-hand corner.

42.

Finally, on the morning of 27 August 2008, Mr. Scott had received by post a letter … which set out the proposed terms of the new facility agreement (stapled on the top left corner) and enclosed BIDL’s bound standard terms and conditions … The offer letter and the enclosed terms and conditions were in the correct name (i.e. addressed to QCFS, not CHPL). Although the letter was addressed to QCFS at its trading address, it was actually sent in an envelope to QCFS’s registered address, which was Mr. Scott’s office in London, in anticipation of the meeting. The reason for only these documents being prepared in the first instance in the correct name was because until the exact terms of the offers were agreed “in principle”, there would be little point in finalising the full suite of documents. We were also having discussions around this time as to whether we might call QCFS “Esdales Limited” so, until this was sorted out, there would again be little point in rushing these through only to then have to do them all again.

43.

Once the three of us sat down to go through the documents, it became clear that there were errors in many of them. These errors and the way in which we dealt with them are described below:

Recourse invoice discounting agreement

44.

This agreement was stated to be between BIDL [Bibby ID] and CHPL. However, by this date (as I had informed Mr. Darling by phone previously as described above), CHPL’s name had been changed to QCFS.

45.

In addition, it had been agreed (in principle at least) that the terms of the new facility would, generally, be the same as those applied by BIDL in relation to Esdale, save for some minor variations.

46.

At the meeting on 20 [sic – 27 was meant] August 2008, however, many of the terms of the draft agreement presented to us at this meeting were inconsistent with this. The table below sets out the terms of the original facility, i.e. the Esdale Agreement (the second column below), the third column detailing the terms actually in operation as between BIDL and Esdale, the fourth column being the terms set out in the draft agreement provided to us at the meeting and the final column sets out the terms which were agreed between Mr. Darling, Mr. Scott and I at inception of our discussions and which were further reiterated when we discussed the document on 27 August 2008.

[It is not necessary for the purposes of this judgment to reproduce the table included in paragraph 46 of the first witness statement of Mr. Magson. It is sufficient to identify the subject matter of the items set out:-

1.

Concentration percentage – namely the percentage of the debts assigned to Bibby ID which could originate with a single customer of QCFS.

2.

Minimum base rate to be adopted for the purposes of the Bibby ID Agreement.

3.

Funding limit for the purposes of the agreement.

4.

Whether timesheets needed to be produced by QCFS.

5.

Whether management accounts were to be produced by QCFS.

6.

Whether stage invoices were permitted to be raised by QCFS.

7.

Whether debts arising from sale of capital assets could qualify for funding by Bibby ID.

8.

Whether GA drawings were to be held by QCFS to the order of Bibby ID.

9.

The length of the approval period.

10.

Payment terms between QCFS and RUP.

11.

Whether collection notes, rather than delivery notes, were acceptable to Bibby ID.]

47.

These amendments were marked up on both of the two copies of the document itself. The recourse invoice discounting facility agreement itself (as opposed to its terms and conditions) is a fairly short, 7 page document (plus signature page(s)). I recollect that each change was marked up by Mr. Darling or myself and then initialled by myself, Mr. Scott and Mr. Darling on both copies.

48.

Mr. Scott and I executed the signature page at the back of the marked up agreement referred to in paragraph 47 above on behalf of QCFS to show our intent to proceed with the new facility, despite the changes which needed to be made to the text and the fact that the execution page was in the wrong name (CHPL not QCFS). The agreement document was not signed by Mr. Darling on behalf of BIDL and was not dated or released to Bibby by QCFS. Mr. Darling assured me and Mr. Scott that the errors would be corrected on a new typed version of the body of the document, which could then be re-executed.

Personal guarantees

49.

The personal guarantee documents covered BIDL’s exposure up to £25,000 which as set out above had been agreed as directly linked to the termination fee on the old Esdale facility. However, they did not contain terms setting out either of the other two agreed limits, which as set out above were that the guarantees would expire on the earlier of collection-out of Esdale’s debt to BIDL or 6 months. This amendment was noted on Schedule 4 to the guarantee and initialled by myself, Mr. Scott and Mr. Darling.

50.

The personal guarantee documents covered BIDL’s exposure up to £25,000 which as set out above had been agreed as directly linked to the termination fee on the old Esdale facility. However, they did not contain terms setting out the other agreed limits, which as set out above were that the guarantees would expire on the earlier of collection-out of Esdale’s debt to BIDL or 6 months. This amendment was noted on Schedule 4 to the guarantee and initialled by myself, Mr. Scott and Mr. Darling.

51.

As with the facility agreement, whilst Mr. Scott and I both signed the personal guarantees and had them witnessed by the barman at the public house, we did not date or release them to Bibby. Mr. Darling agreed that the errors would be corrected and a new version of the body of the text produced, and we all agreed that the documents would only be signed by Bibby and released once the errors had been corrected.

Corporate cross guarantee

52.

The corporate cross guarantee relied upon by the Claimant should have stated (at page 5 – section 2) to expire on the earlier of collection out of Esdale’s debt to BIDL or 6 months. The corporate cross guarantee also included QCFS’s previous name, CHPL, in Schedule 3, and this needed amending. Schedule 2 of the corporate guarantee was also marked up in order to make Quay Consultancy a guarantor alongside Saracen because, as currently drafted, BIDL would only have had the benefit of a guarantee from QCFS’s sister company, Saracen, as opposed to a more valuable guarantee from its holding company, Quay Consultancy (which it was also intended would acquire the Esdale equipment and did with BIDL’s full knowledge and consent).

53.

Relevant amendments were marked up by hand on the two copies of the unbound corporate cross guarantee document and initialled by both parties. Whilst it was signed on behalf of Saracen, it was not dated or released to Bibby. Mr. Darling agreed that the errors would be corrected, and we all agreed that the documents would then be re-executed by all parties (or by Quay Consultancy at a minimum) and would only then be signed on behalf of BIDL and released once the errors had been corrected.

Esdale cross guarantee

54.

The cross guarantee to be granted by QCFS and Esdale in relation to each of their liabilities to BIDL should have stated (at page 5 – section 2) to expire on the collection out of Esdale’s debt to BIDL. This cross guarantee also included QCFS’s previous name, CHPL, in Schedule 3, and this needed amending. The guarantee was not limited in time as the purpose of this document was to protect BIDL upon a failure of the business at a time when the business and assets were moving between these two companies to the effect that BIDL would not be any worse off as a result of the business sale to QCFS. As neither Mr. Scott or I were providing a personal guarantee in this regard, there was no need to insert a quantum limit.

55.

Relevant amendments were marked up by hand on the two copies of the unbound cross guarantee document and initialled by both parties. Whilst it was signed on behalf of CHPL, it was not dated or released to Bibby. Mr. Darling agreed that the errors would be corrected, and we all agreed that the documents would then be re-executed by all parties (or by Quay Consultancy at a minimum) and would only then be signed by BIDL and released once the errors had been corrected.

56.

A copy of the Esdale cross guarantee referred to at paragraph 54 above (provided by the Claimant) appears at pages … This document appears to have been signed by Mr. Scott alone. I believe this must be one of the documents referred to at paragraph 37 above as it was only signed by Mr. Scott (as referred to in paragraph 27 above). Quay Consultancy only became a director of QCFS on 26 August 2008. It is interesting to note that this document has apparently been executed by BIDL and also dated (I assume by BIDL) on 22 September 2008 notwithstanding the fact that Esdale had already gone into administration on 18 September 2008.

Warranties

57.

Errors were also apparent in the warranties. These also should have been stated (at page 2 – section 2.1) to expire on the earlier of collection out of Esdale’s debt to BIDL or 6 months. It should also have been stated that each of Mr. Scott and my total liability under the personal guarantees and the warranties was limited to an aggregate upper limit of £25,000. The warranties also included QCFS’s previous name, CHPL, in the definition of “client”, and this needed amending.

58.

As with the other documents, amendments were marked up, initialled by both parties on the unbound documents, and the warranties were signed but not released or dated. Mr. Darling agreed that the errors would be corrected, and we all agreed that the documents would be signed by BIDL and released once the errors had been corrected.

Documents emailed to me on 20 August 2008

59.

Aside from the Esdale cross guarantee, which is dealt with above, there were also problems with all of the other documents emailed to me on 20 August 2008 … in that they contained the wrong company name, namely CHPL. Therefore, whilst we signed the unbound hardcopies at the meeting at BIDL’s request, they were not dated or released, and it was therefore agreed that these would be revised by Mr. Darling with the correct name.

Offer letter

60.

The offer letter which had been sent to Mr. Scott contained lists of the completion and operating requirements. We went through these together and marked them to confirm we would deal with them (many had not been previously discussed). We did not mark up all of the terms of the offer as set out in the letter itself, because the agreed terms had already been marked up in the recourse facility agreement and security documents themselves, as described above.

Terms and conditions

61.

The bound terms and conditions were, as set out in paragraph 42 above, in the correct name. As the terms and conditions were in standard form, they did not need amending. Accordingly, Mr. Scott and I executed them on behalf of QCFS, although they were not executed on behalf of BIDL or released to Bibby at that time.

62.

Mr. Scott and I were happy to sign all of these documents because the agreement of some form of funding arrangement was obviously crucial to the business. Bob Scott and I were therefore pleased that we had at least made some progress toward finalising the arrangements. At this stage there was no question in my mind about the terms of the arrangements, which had been discussed between myself and Mr. Darling on 20 August 2008 and further discussed, marked up and agreed by Mr. Darling, Mr. Scott and I together on 27 August 2008, and marked up in the text of the unbound documents.

63.

As can be seen from the email from Mr. Darling on 26 August 2008 referred to above … setting up the meeting and suggesting lunch, and the fact we eventually met in a pub, Mr. Darling, Mr. Scott and I got on very well on a personal level and were relaxed in each other’s company. This being so, I had no concerns when Mr. Darling took away the various sets of documents leaving me only with the marked up versions of the recourse facility agreement and the Saracen corporate cross guarantee (referred to at paragraph 52 above) – being out of the office, neither Mr. Scott nor I took copies of any of the other documents for our own records.”

The account of the meeting in the Pub on 27 August 2008 given by Mr. Magson was obviously detailed. At paragraph 4 of his witness statement dated 27 May 2011 Mr. Scott said:-

“I have seen and carefully read the unsigned but approved final witness statement of the First Defendant. It goes into great depth as to the formation and operation of the parties dealing with each other. I adopt entirely its contents and confirm that so far as the First Defendant’s evidence makes direct reference to me it is true.”

Beyond that, Mr. Scott said little in his witness statement about the meeting on 27 August 2008:-

“14.

I recall the First Defendant organising a meeting with him and Mr. Darling near my offices in Holborn to discuss what documents might be needed to be signed in support of the proposed facility for the Company. This meeting took place at The Old Nick public house on Sandland Street on 27 August 2008.

15.

Prior to this meeting I made it clear to the First Defendant that I had no desire, or indeed intention, of signing any guarantees. My involvement in the Company was going to be minimal – occasional company secretarial work and the odd legal issue to deal with in return for a minor shareholding in the Company. I had, at this time, a significant shareholding in another client of mine who was utilising by that time a significant invoice discounting line from Coface (of many millions of pounds). I had explained to that client and to Coface that I would not be prepared to provide a personal guarantee. In that instance, both the client and Coface accepted the position. I was therefore not minded to offer security in return for such a small position being taken in the First Defendant’s business.

16.

Furthermore, I am a partner in a solicitors [sic] practice which takes up all my time and is my principal source of income. Quite properly, our bankers asked for and got a personal guarantee from me for the sums borrowed from time to time by the practice. In mid-2008, the firm had (in effect) acquired the business of the Surrey offices of DKLL LLP from its administrators which meant that the overdraft had extended considerably. I was therefore already sufficiently exposed by the time.

17.

Accordingly, I made my reluctance to provide personal security clear to the First Defendant and also to Mr. Darling at the meeting. As I recall it, in conversations with the First Defendant prior to the meeting he was suggesting that I should not be concerned as any personal guarantee would be limited to £25,000 and that in any event it would be limited in time to the earlier of 6 months or collect out of the current ledger. I was confident that the company would collect out, so the risk to me – if I did execute a guarantee would be minimal.

18.

We covered the above in the meeting. I relied on the assurance that the personal guarantee (and warranty) was so limited. In the event, there were numerous errors in the documents that Mr. Darling brought with him to the meeting. I signed the back pages of the documents notwithstanding many errors in the documentation but this was not an issue for me at that time as all the documents were to be taken away by Mr. Darling to be corrected (presumably to be signed afresh). In the meantime, we did not release the documents to the Claimant.”

It was suggested by Mr. Freedman that the accounts of the events of 27 August 2008 given by Mr. Magson and Mr. Scott in their respective witness statements was rather different from their respective pleaded cases.

In his Defence, which he prepared himself, Mr. Magson made these allegations material to the events of 27 August 2008:-

“8.

The First Defendant accepts that an arrangement (the ‘Arrangement’) for the provision of invoice finance did occur between Bibby and the Company, as also agreed by the Defendants, however the terms asserted by the Claimant do not reflect the agreed terms between the Company and the Claimant or the agreements with any of the Defendants under any of the guarantees, indemnities or cross guarantees asserted by the Claimant.

9.

Paragraph 4 and 5 of the Particulars of Claim are denied. The signature page of the Arrangement was initially signed on the 27^th August 2008 but was neither dated nor released or delivered to Bibby. It was agreed by Bibby (acting by Andrew Darling) and the Company and all the Defendants on the 27^th August 2008 that variations of the terms of the document needed to be applied before the Arrangement could be released and delivered. This has been repeatedly advised by the First Defendant both orally and in writing, to the Claimant prior to action.

…

11.

The Claimant dated the incorrect document without the provision of the amended agreed terms of the Arrangement. This error, either intentional or otherwise, was discovered by the First Defendant when a copy of the Arrangement was requested by the First Defendant in January 2009, and upon receipt Bibby were advised with immediate effect.

…

14.

The First Defendant denies paragraph 6 is a true reflection of the Arrangement. The agreed terms of the Arrangement differ from the terms of the invoice discounting agreement, guarantees, warranties and cross guarantees asserted by the Claimant in the following key respects:

[There followed 19 identified respects, largely mirroring the table in paragraph 46 of the first witness statement of Mr. Magson, but including, at 15.13, “The personal guarantee and indemnity (warranty) from each of the First & Second Defendants were to be limited to £25,000, and limited to the earlier of six months, or collection of the old liability of Esdale to Bibby”]

…

19.

The First Defendant entered into this guarantee on the 27^th August 2008, in the presence of the other Defendants, Mr. Joshua Metzner (Witness) & Mr. Andrew Darling (Director – Bibby), on the express proviso that this ‘security’ would only apply for whichever was the earlier of 6 months or until collection of the previous liability of Esdale to Bibby. This liability has been repaid in full.

20.

In accordance with the Arrangement the First Defendant and Bibby (acting by Andrew Darling) expressly agreed to vary the terms of this guarantee at the time of execution of the documentation and any other reliance apart from such amended terms and conditions is a mis-representation by the Claimant.

21.

The First Defendant also refers to the executed offer letters on the facility which were initialled by Andrew Darling on behalf of Bibby and the First Defendant.

22.

Andrew Darling as noted above was the sole party with whom discussions were held on behalf of the Claimant with respect to the Arrangement.

23.

The First Defendant provided a copy of the initialled facility offer letter referred to in paragraph 21 in February 2009 at Bibby’s request to Mr. Andrew Darling (Director), together with a copy of the incorrect legal documentation reflecting the incorrect terms, and Bibby then agreed again to raise the correct documentation to reflect the actual Arrangement.

…

25.

The guarantees were dated by Bibby not the First Defendant and without authorisation by the First Defendant and no originals or copies were provided to the First Defendant at the time of or following execution save as stated at paragraph 11 above.

…

26.

Paragraphs 16 – 20 of the Particulars of Claim have no relevance to the First Defendant but we refer the Claimant to the agreed terms of the Arrangement that the security provided by the Third Defendant was for a period of 6 months or until collection of the previous liability of Esdale to Bibby whichever was the earlier/later. In addition, the document was signed at the same meeting on the 27^th August 2008 held between the [sic] Bibby but not dated/released or delivered by any of the Defendants.

27.

The First Defendant entered into this indemnity [a Warranty] on the 27^th August 2008, in the presence of the Defendants, Mr. Joshua Metzner (Witness) & Mr. Andrew Darling (Director – Bibby), on the express proviso that this ‘security’ would only apply for a period of, the earlier of, 6 months or until collection of the previous liability of Esdale to Bibby.

28.

Section 15(2) of the particulars of the agreement, as asserted by the claimant clearly states that this is a combined liability with the guarantee document and the caveats placed in paragraph 28. No other reference to security is present in the particulars as agreed with Bibby.

29.

The First Defendant varied the terms of the Arrangement as set out above with a director of the [sic] Bibby at the time of execution of the documentation and any other reliance on this documentation represents mis-representation by the Claimant.

30.

Andrew Darling acting for Bibby as noted above was the sole party with whom discussions were held on behalf of the [sic] Bibby by the Defendants with respect to the Arrangement.

31.

The First Defendant provided a copy of the initialled facility letter referred to in paragraph 22 in February 2009 at Bibby’s request to Mr. Andrew Darling (Director), together with a copy of the incorrect legal documentation reflecting the incorrect terms, and Bibby again agreed to raise the correct documentation to reflect the actual Arrangement.

…

33.

The [sic] were dated by Bibby not the First Defendant and without authorisation by the first Defendant. No originals or copies were provided to the First Defendant at the time of or following execution save as stated in paragraph 11 above. ”

It is obvious that Mr. Magson did not mention in the Defence the important facts alleged in his first witness statement that each of the documents signed on 27 August 2007 was the subject of manuscript alteration prior to signature. It is also the case that he did not mention in terms that he had in fact retained copies of the Bibby ID Agreement and the Saracen Guarantee following the meeting on 27 August 2008. However, at paragraphs 23 and 31 there was reference to Mr. Magson providing to Mr. Darling in February 2009 “a copy of the incorrect legal documentation reflecting the incorrect terms”. In his first witness statement Mr. Magson explained that what was then provided was his marked up copy of the Bibby ID Agreement and his marked up copy of the Saracen Guarantee.

The first time Mr. Magson gave any sort of formal account of the events of 27 August 2008 was in a letter dated 25 May 2010 to PDT written in response to the letter of demand dated 9 April 2010 addressed to him. In that letter he said this about 27 August 2008:-

“This document [his Warranty] was completed along with the personal guarantee, offer letter, and back page of the [Bibby ID] agreement on around 22^nd August 2008, when the old business Esdale Tooling Limited was still in existence. This meeting was held in the local public establishment over lunch with Mr. Andrew Darling & Mr. Robert Scott attending, and we signed an offer letter marking up the changes all needed to be made to the documents at this time also initialled by ourselves. I wish to note we completed the back page of the other documents although inaccurate due to be amended with the correct terms from the offer letter to be replaced and completed prior to the commencement of the facility by your client, with the correct and agreed terms and conditions of the facility. Furthermore we then completed further documents as per the enclosed email on 8^th September and I personally returned these to your client, and attended a meeting with Adrian Barrington and Tessa at your clients [sic] offices, whereby the documents were still being corrected at this stage, this was circa 8 days before commencement of the new facility.

As per the documents noted in clause 15.2 of your own alleged agreement clearly states that the indemnities were limited strictly to £25,000 and we refer you back to the offer letters initial [sic] by both parties and due to be changed by your client whereby they were only consented to by ourselves to remain only for the duration of the collection of the old facility or the initial 6 months. We had not been advised of this matter prior to the meeting with Mr. Darling in August, but consented to this on strict terms, due to the risks to your client at the time of the demise of the old business and a new facility being requested. I wish to note that on the Old Facility we had no security provided in the form of cross guarantees, personal guarantees and indemnities of any form, hence the requirement only for the initial 6 month period, and at no time was the terms and conditions provided to us.”

That account was plainly wrong in relation to the date of the meeting in the Pub and the time. It was at least unclear whether Mr. Magson was asserting that the versions of documents signed on that occasion were themselves amended. Mr. Magson seems to use the English language in somewhat idiosyncratic fashion, at least sometimes. He might have been intending to contend that documents were amended before signature, in using the words, “we signed an offer letter marking up the changes all needed to be made to the documents at this time also initialled by ourselves”, but not necessarily. It all seemed to depend on the intended meaning of the latter part of the words quoted. Certainly Mr. Magson did not seem plainly to be asserting that all the documents signed had been amended. The point made in the first sentence of the second paragraph of the passage quoted in the preceding paragraph of this judgment appeared to be inconsistent with the contention that there had been amendment to signed documents.

Matters were not really advanced in Mr. Magson’s letter to PDT dated 6 July 2010. In the first paragraph of that letter he wrote:-

“I refer you back to your client as you appear to have an incorrect representation of the facts, and I draw your attention to the agreement and the offer letter between both parties. The meeting held on or around the 28^th August 2008 was held with Mr. Andrew Darling, Director of Bibby Financial Services Limited and the individual with whom all discussions on this matter were held. At this time the documents were executed as per my correspondence of the 25^th May 2010. At no time did we date this document, and I have enclosed further email confirmation with Tessa Riley & Adrian Barrington on the documents we provided on the 8^th September 2008. As a consequence, Your Client has dated these original documents as the 8^th September 2008 and the 22^nd September 2008, and this was contrary to our agreement we signed these as an act of good faith to enable the documentation to be amended accordingly, and no time dated these for execution, as the terms of the arrangement were to reflect the agreed amendments which was comparable to our existing facility on Esdale Tooling Limited.”

There appeared to be no reference in that paragraph, or elsewhere in the letter, to documents having been amended in writing before being signed. In the last of his letters to PDT which is presently relevant, that dated 3 August 2010, again Mr. Magson repeated, as he had in the second paragraph of his letter dated 6 July 2010, his reference in the letter dated 25 May 2010 to clause 15.2 of the Special Terms.

During the trial at various points the originals of documents apparently signed on 27 August 2008, or by Mr. Scott before that date, were produced. One such document was the Saracen Guarantee. Mr. Magson asserted at paragraph 52 of his first witness statement that, in the form presented for signature, the Saracen Guarantee contained, incorrectly, the name of Harvard in Schedule 3 in place of that of QCFS. However, when the original of what was said to be the Saracen Guarantee was produced it was obvious that the signature page was on the reverse of Schedule 3, and that the imprint of the signature of Mr. Martin Bennison, on behalf of Bibby FS, on the signature page could be seen plainly on the reverse side showing in fact the name of QCFS in Schedule 3. Mr. Magson accepted in cross-examination (Transcript, Day 12, page 107 line 16 to page 108 line 23) that he had been in error in asserting that on the version he signed the name of Harvard had appeared in Schedule 3. However, Mr. Magson did not accept that with much good grace (Transcript, Day 12, page 108 lines 14 – 23):-

“Q. So the very page that you say had said Christopher Harvard (Properties) Limited but in fact we can see it says QCFS Limited?

A. I will concede the fact that that says QCFS. Maybe that was one document that was correct and the others weren’t. I cannot tell from that point of view. I thought I marked that up, however the document needed amending in full. It needed amending to changing to a limited guarantee. Maybe I didn’t get to page 17. I only got to page 16 before we finished marking it up. ”

Before leaving the so-called original of the Saracen Guarantee, a curious feature of inspecting it was that it seemed that, whilst Mr. Bennison had signed on page 18 with sufficient force for the imprint of his signature to be clearly visible in reverse on page 17, no imprint could be detected on page 16. If page 16 had been beneath page 18 when Mr. Bennison signed one might have expected that a firm imprint in reverse on page 17 would have been carried forward, at least to some degree, onto page 16.

One issue which arose on the Saracen Guarantee in the light of paragraphs 53 and 55 of Mr. Magson’s first witness statement and his cross-examination concerned how many copies of the Saracen Guarantee and the Cross Guarantee were before those at the meeting on 27 August 2008. I am not sure that that issue was ever really resolved. Mr. Magson appeared to say at one point, as in his first witness statement, that there were two copies of the Saracen Guarantee and at another that there were two copies of the Cross Guarantee. I do not think that it was suggested, at least before Mr. Magson’s final attempt to deal with the point, that there could have been two copies of each. The real question was what was the evidence of Mr. Magson as to which guarantee it was of which two copies were before the meeting. As close as one appeared to get to a final position was the exchanges between Mr. Freedman and Mr. Magson at Transcript, Day 13, page 61 line 7 to page 62 line 14:-

“Q. If we go to paragraph 55 of your witness statement:

“Relevant amendments were marked up by hand on the two copies of the unbound cross guarantee document and initialled by both parties.”

Which is correct? Is it correct, as you said in your evidence yesterday, that there were two copies of the Saracen document but only one copy of the cross guarantee? Or is it the case, as you say in your witness statement, that there were two copies of the unbound cross guarantee document?

A. The only two copies that I recollect that actually came from Mr. Darling which had come from Bibby were the Saracen plant hire and the Esdale – and the terms and conditions – sorry, the Esdale agreement. The terms and conditions compound with the letter. The offer letter. Mr. Scott printed off the documents on the 20^th. I presume there would have been two copies Mr. Scott would have printed off.

Q. You see I was specifically asking you, at page 104, I was saying that you were suggesting that there were two copies of the cross guarantee which is the QCFS/Esdales cross guarantee. And you say: no, two copies of Saracen, two copies of the particulars from the invoice discounting agreement, but not the cross corporate guarantee, no.

So which is correct? Is that answer correct or is the evidence at paragraph 55 in the first sentence correct?

A. I believe there was two copies, however, of the Esdale’s cross guarantee and that’s my understanding when I was asked yesterday. However, they were printed by Mr. Scott. You will have to confirm that with him. I didn’t sign that document.”

The issue of how many copies of what documents were before the parties in the Pub is an odd one. On Mr. Magson’s account Mr. Darling produced two copies of the Bibby ID Agreement and, on at least one version, two copies of the Saracen Guarantee. Producing two copies would seem an elementary courtesy – one copy for each side. However, it seems strange that Mr. Darling did not also produce duplicate copies of the Guarantees and Warranties which Mr. Magson and Mr. Scott were to be invited to sign. It was plainly up to Mr. Magson and Mr. Scott to produce as many hard copies as they wished of documents which had been sent to them as attachments to e-mails.

Mr. Magson also ultimately sought to leave to Mr. Scott the curious issue of the use of stamps on documents signed on 27 August 2008 or before that date. Mr. Scott had stamps in the names of Key2D and Key2S. He used those stamps when signing, on behalf of Key2D and Key2S, the Harvard Debenture and the Cross Guarantee. He did not, however, use them when signing the Saracen Guarantee or the Bibby ID Agreement. Each of the Harvard Debenture and the Cross Guarantee had been sent to Mr. Scott by Mr. Darling as an attachment to the e-mail of 20 August 2008. The Saracen Guarantee and the Bibby ID Agreement, however, were said to have been produced by Mr. Darling only at the Pub on 27 August 2008. The obvious conclusion was that Mr. Scott used the stamps when signing the Harvard Debenture and the Cross Guarantee because he signed in his office where he kept his stamps, and wrote on whose behalf he was signing in manuscript on the Saracen Guarantee and the Bibby ID Agreement because he was signing in the Pub, where he did not have his stamps. That conclusion was, perhaps, reinforced by the fact that Mr. Scott seems to have dated the Cross Guarantee on the title page 22 August 2008, which date had been obliterated by Tippex and the date 22 September 2008 substituted, as was apparent from an inspection of the supposed original. However, Mr. Magson would not have it. He contended that at least the Harvard Debenture was signed by Mr. Scott in the Pub. His evidence in cross-examination (Transcript, Day 12, page 89 line 6 to page 95 line 6) on both stamping and signing was very difficult to follow:-

“Q. …

What I suggest to you has happened here has been that these documents were executed on or about 22 August 2008 by Mr. Scott, with the stamp and were not executed at the pub?

A. There is no evidence either way to prove that is the case. All I can state from the documents was that Mr. Scott signed and dated documents whilst we were there, that they were ones that were printed off. The debenture he certainly wouldn’t have signed until he actually spoke to me and on that understanding, he was signing documentation on that date. These have been printed off by Mr. Scott and brought to the meeting.

He states in his e-mail to me that he signed some; I believe that that was the initial board meeting. However, I don’t know what extent he had signed unfortunately because I wasn’t party to the attachment to that document.

Q. We will come back to these documents in a moment. But what I would like to do in order to show that you are wrong is to go to bundle 5 at page 67 and to invite you to look at the Saracen corporate guarantee. This is in the bundle at tab 5, page 111, and this was a document that you would agree was executed at the pub, wouldn’t you?

A. Correct.

Q. If you go to page 130, we can see that this document is signed for Saracen Plant Hire Limited and could you tell us about the signature under “Director” where it says Key 2 Secretarial Limited?

A. The signature is by Mr. Scott and he’s written “Key 2 Secretarial Limited”. This document was provided to us on the time. I can only assume that his stamp maybe ran out of ink. It didn’t have too much ink, it was one of the stamps where he used to put it in a piece of ink to do. I don’t know from that point of view. But these were the pack of documents that I was then amending and annotating up and we passed them over. From my understanding and my recollection they were all signed at the time.

If a section of those documents had been signed previously that could have been the case. However, I wasn’t party to that. I was just party to these documents being handed to me and Mr. Scott asking was it okay to execute this document.

Q. You are making this up about the ink, aren’t you?

A. No, I am not.

Q. You don’t have a recollection that it was running out of ink, do you?

A. I don’t have a recollection of that. I don’t know why Mr. Scott didn’t use the stamp on this occasion.

Q. We don’t see that it’s faint, the ink, in the originals of the other documents that we looked at?

A. I can’t answer that question. I didn’t date – I didn’t stamp it. Mr. Scott will have to answer that question.

Q. The reason why the others are stamped and this isn’t stamped is because the others were executed at a different time; they were executed before the pub. This is executed at the time of the pub without the corporate stamp being in the pub?

A. All I know for a fact is that Mr. Scott was signing these documents and stamping them at the time in the pub. How many of these were done prior to that date, I’m afraid you will have to refer to Mr. Scott. I appreciate he had done some, as he stated in an e-mail. However, the attachment to that e-mail was not forwarded to myself. I don’t know the content of that. Mr. Darling was on that e-mail I believe.

Q. So you appreciate that there were documents that were executed before the pub?

A. I don’t know. No, they weren’t executed and delivered. Mr. Scott had the documents, he said he signed some. He didn’t say he has executed those documents. As a consequence, I must go off that. I wasn’t party to that transaction as I have said.

Q. So is it the case that you don’t have a recollection then that the debenture and that the cross guarantee of Esdale QCFS was signed at the pub?

A. My recollection is Mr. Scott signed some of the documents that had been provided to him previously. How much of those he had signed or whether he had stamped them and signed them or whether he just dated them in the pub I can’t actually concur with. I wasn’t the person who did that.

I had to sign the Esdale Tooling one, which he asked for my consent of. That’s all I can actually reflect because that’s what I was involved in at the time.

Q. So do you now withdraw your evidence that [you] gave earlier to the effect that the cross guarantee was executed at the pub?

A. No, I don’t withdraw that at all. Mr. Scott stated he signed some. He didn’t say he has executed the document and dated the document.

Q. Do you withdraw your evidence that those documents were signed at the pub, the cross guarantee of Esdale QCFS?

A. No, I don’t. He signed some of those documents. Which ones I’m sorry, I’m not party to and my statement states “some” of the documents.

Q. Let’s look at what your statement says. If we go to paragraph 40, please, so that’s bundle 3, page 9:

“At this meeting Mr. Darling produced unbound copies of the documents he had e-mailed to myself and Mr. Scott on 20 August 2008 as referred to above, namely the Esdale cross guarantee, debenture and two sets of board minutes referred to in paragraph 36 above. However, each of these documents was as before in the wrong company name i.e. CHPL rather than QCFS.”

On the basis that the cross guarantee had already been executed by Mr. Scott, or signed by Mr. Scott in the form that we have seen, there would be no purpose in having that redone on 27 August, would there?

A. Again, I don’t know what was signed or what wasn’t because Mr. Scott signed those documents. You will have to refer that to Mr. Scott. But that would make sense if that was the case.

Q. You would agree that if it had already been signed –

A. If that was the case.

Q. – there was no purpose in resigning it?

A. If that was the case.

Q. And you are not able to contradict that that was not the case?

A. All I know was that the documents handed to me by Mr. Darling to check I was okay with them, that’s all, which is what I have stated.

Q. And the same would apply to the debenture, wouldn’t it?

A. Mr. Scott I don’t believe would have entered into the debenture without speaking to me. I remember him asking me was it okay to enter into this transaction. I agreed it at the time.

Q. If it had been signed before 27 August there was no point in having it resigned on 27 August?

A. There would have been no need on that assumption, yes, correct.

Q. If we go to paragraph 59 of your statement.

“Aside from the Esdale cross guarantee, which is dealt with above, there were also problems with all of the other documents e-mailed to me on 20 August 2008 in that they contained the wrong company name, namely CHPL. Therefore, whilst we signed the unbound hard copies at the meeting at BIDL’s request, they were not dated or released and it was therefore agreed that these would be revised by Mr. Darling with the correct name.”

Let me ask you this: assume that they had been already signed; you have accepted that there would be no purpose in signing them at the meeting?

A. If that assumption is correct, correct.

Q. And you don’t remember, do you, if they were signed at the meeting?

A. I signed one of the documents, the Esdale Tooling document. The other documents that were provided to me, and I didn’t sign them, I wasn’t party to signing them. So correct.”

The Defence of Mr. Scott was somewhat more laconic than that of Mr. Magson. The material pleas seemed to be these:-

“4.

The Second Defendant admits paragraphs 4 to 6 (inclusive) of the Particulars of Claim to the extent that they properly replicate provisions in the documents relied upon by the Claimant. To the extent that the said documents are binding, the Second Defendant will refer to the documents at the trial of this Action for their full terms and true effect.

5.

It is denied that the documents referred to in paragraphs 4 and 5 of the Particulars of Claim [the Bibby ID Agreement] are true and/or validly executed.

6.

Further and/or alternatively, the said documents (whenever they were in fact generated) did not accurately record the terms agreed between the Claimant and the Company.

…

8.

Paragraph 10 of the Particulars of Claim [where the Guarantees were pleaded] is denied.

9.

The document annexed at Schedule C of the Particulars of Claim [copies of the Guarantees] cannot have been and, in fact, was not executed on 22 September 2010 [sic – the date it bore was 22 September 2008].

…

13.

Prior to 27 August 2008 (as repeated on 27 August 2008), the Claimant represented to the Second Defendant that such security as they would seek from the Second Defendant would be limited for a period of the earlier of 6 months or the collection of all sums due to the Claimant in respect of a facility given to Esdale Tooling Limited (“Esdale”) (from the collection of debts due from the customers of Esdale).

PARTICULARS

The Claimant, through its representative Mr. Andrew Darling, asserted to the Second Defendant on 27 August 2008 at the Old Nick public house on Sandland Street, London that the Claimant was in the process [of] collecting the Esdale ledger and;

1 that he just needed some paperwork to get the new facility for the Company in place;

2 that the paperwork would reflect the Letter of Offer, namely the [sic] “he would need a PG for £25K”;

3 it would be ordinary “bog-standard” documentation;

4 that the security would be just until Esdale had “collected out” and in any event would lapse after 6 month [sic] (in the event that they did not collect out);

Hereinafter, (“the Representations”).

…

16.

Induced by and in reliance upon the Representations (and the prior representations and assertions made by the First Defendant) on 27 August 2008 the Second Defendant signed the back page of a draft document. No opportunity was given to the Second Defendant to read and/or to study the said document, the Claimant’s representative asserting that it was “all pretty standard”.

17.

By reason of the matters set out above (and in the event that the Guarantee is otherwise binding), the Second Defendant is entitled to rescind the Guarantee.

…

19.

Paragraph 21 of the Particulars of Claim [where the Warranties were pleaded] is denied.

20.

The document annexed at Schedule E of the Particulars of Claim [copies of the Warranties] cannot have been and, in fact, was not executed on 22 September 2010 [sic].

…

23.

To the extent that the said Warranty is, on the face of it, valid, the Second Defendant denies that he is liable as alleged or at all.

24.

By the Representations, the Claimant asserted that the Second Defendant’s liability (in respect of the facility the Claimant was to give to the Company) was limited to £25,000; not an unlimited liability.

25.

Further, to the extent that it is found that the Warranty was properly executed, it is denied that the document is a “standard” warranty. The Second Defendant will refer to the terms of the said document at the trial of this Action for its full terms and true effect.”

The terms of the Defence of Mr. Scott are rather difficult to reconcile with the account of events on 27 August 2008 set out in the first witness statement of Mr. Magson in the passages which I have quoted. In particular the assertion in paragraph 16 that, “No opportunity was given to the Second Defendant to read and/or to study the said document” is not easy to reconcile with those present at the meeting going through marking up in manuscript the various documents put before Mr. Magson and Mr. Scott so as to incorporate the requisite changes. Indeed, the claim to rescind the Guarantee signed by Mr. Scott was more consistent with his case being that he had signed a document having been misled as to its contents than with it being that the terms of the Guarantee and the Warranty which he signed had been altered in manuscript, so that the terms of what he actually agreed to were different from the terms of the documents relied upon on behalf of Bibby.

In cross-examination Mr. Scott fleshed out his evidence to a considerable extent. He was first asked about the terms of his Defence. He accepted that the representations to which he had been referring were oral, not written. However, he then began to expand on his pleaded case and his witness statement (Transcript, Day 15, page 131 line 13 to page 133 line 24):-

“MR. FREEDMAN I will put it into the interrogatory. You say, “no opportunity was given to the second defendant to read and/or study the document”; isn’t it the case that that can’t be true because on the case that you are adopting it was studied and read in order to amend it?

A. Yes. Richard did it. Richard made all the amendments.

Q. You didn’t make amendments, you just stood there like some dummy, did you?

A. I sat there.

Q. What, just drinking beer?

A. With Mr. Darling, yes.

Q. Despite that fact that you are the lawyer?

A. Yes, well, I wasn’t wearing my lawyer’s hat that day. I am a private investor on this occasion.

Q. So despite the fact that you have a superior legal knowledge to Mr. Magson, you are sitting there doing nothing while these amendments are taking place, is that it?

A. We are not doing nothing, we are chatting away about industry gossip, rugby, whatever, that kind of jovial correspondence. Bearing in mind Mr. Magson was late, as always, so Andy and I had been sat in the bar for at least an hour by then. Richard turned up, we went from where we were sat by the window, found a table, I produced the documents for Richard to have a look at and then he basically went through them and did his usual sort of mad annotation at high speed while Andy and the three of us were all chatting, in earshot of each other, but Richard has done the marking up.

Q. Was Richard given an opportunity to read and/or study the document?

A. In a sense. The critical items for him were the commercial aspects, which were the invoice discount and agreement terms and the offer letter to make sure it matched up with the invoice discounting agreement.

Q. I have to seek greater precision on that. You say “in a sense”; was he or was he not given an opportunity to read and study the document?

A. He was given an opportunity to read the documentation.

Q. If he was given an opportunity to read and study the documentation then you must have been given the same opportunity?

A. Not really, because he had the pile of documents, he was annotating, he was chatting and – not shouting out, but talking to the three of us, whilst Andy and I were enjoying ourselves, and saying “this needs to be changed, that needs to be changed”. So I didn’t need to look at the documentation. The only thing I was concerned about was the fact that it had to be limited in time and limited in value.

Q. So it was not that you were not given the opportunity to read and/or study, it was that you preferred to have jovial chat, rather than read and study the documents?

A. Yes, but you have to remember this wasn’t a completion meeting, this is a – it is like a pathfinder meeting, some random documents came out of the blue from Andy’s bag, we were nowhere near completion, we had at least three weeks in which to get the deal away, because the winding-up petition was not for way over a month. So this was just three mates getting together to see how we take this thing forward.”

Mr. Freedman returned to the actual signature of the various documents by Mr. Scott the following day (Transcript, Day 16, page 12 line 21 to page 21 line 25):-

“MR. FREEDMAN: Could you now be provided with a copy of the personal guarantee you signed. (Handed).

Bundle 5, tab 69. Given that this personal guarantee was, on your case, amended and initialled, why did you not at the point of signature say “Signed, subject to amendments?

A. I did.

Q. Why did you not say, “Signed, subject to amendments”?

A. I did, I signed it. I haven’t written it on because Andy was going to take it away, get it amended, and we were going to re-execute it. It wasn’t finished, it wasn’t dated, it wasn’t delivered. This was all way in the beginning of the transaction. It’s just a draft, it was a draft document.

Q. If it was a draft document why did you not say it was signed as a draft?

A. I did. I just didn’t write it down.

Q. Why didn’t you write it down?

A. Because I didn’t. I was in a pub, in a friendly meeting, four pints in, with a guy I trusted, I’ve known him 15 years.

Q. What were the words that appeared in the amendment?

A. Richard changed schedule 4, so he put in “six months/collect-out”.

Q. What about schedule 3?

A. 3, yes, he changed that to QCFS, because it was Christopher Harvard at that point.

Q. Did he just say six months or collect-out?

A. Near enough. It was annotated so that Andy would know when he took it back to Basingstoke, or so he could remember when he got back to Basingstoke, what the changes would have to be. Andy wasn’t particularly aware whether the amendment would be by way of side letter or retyping the whole thing or whether a handwritten amendment would be fine or whatever.

Q. Presumably if it just said it in headline form, six months or collect-out, you would have expected in the final form for that to be put in the same type of formal language as you have in the rest of the document; is that right?

A. I personally was expecting a retyped version that would have legal language, if you like.

Q. So it would follow that you would want as a solicitor, as a person with a legal background, to see that revised wording to make sure you were comfortable with it?

A. Yes, but it never came back.

Q. I suggest to you that if that had been the arrangement then there was no point in you signing this document on 27 August in an unqualified form?

A. It was qualified. Yes, it could have gone back to Basingstoke unsigned, but Andy wanted it – remember this was the first time he’d got confirmation that in principle I would give a PG, albeit limited in time. This was the first time he’d got this, so to put it on his file effectively he’d quite like a signature; so we went through the process of signing it.

Q. Why, if this was simply a draft document, was the document witnessed?

A. Because Josh came over from the bar to our table at the time I was signing it.

Q. Does it not indicate, the fact that it was witnessed, that that showed that when you were signing it you were signing it in what you believed was the final form of the document?

A. No, not at all. This final form I thought would be tidied up. It had got the amendments that Richard had put on his, mine, so –

Q. So when the final form would come to you, you would then expect, would you not, to be re-signing the document?

A. Yes, probably – re-executing.

Q. And re-executing with a witness because it was a deed?

A. Yes.

Q. And until it was re-executed there was no guarantee, as far as you were concerned?

A. Correct.

Q. Therefore there was no point in signing this first document because it was just a draft?

A. For me there was no point. For Andy, it gave him something to take back to the team at Basingstoke.

Q. What I suggest to you is that you would not have gone through the lengths of signing it with a witness if it had been your intention at the time to treat this document simply as a draft?

A. It was just a coincidence that Josh came over to the table at the time. He was bringing our pints over.

Q. When barmen come to tables one does not, just because they happen to be there, get them to witness draft documents.

A. It was nothing more than the fact that Josh had come over, a guy I’d known for several years who had been at The Old Nick for a long time, and it was “Ha ha, come and sign this document.” It had no legal effect, it was a draft. The most important thing were the amendments that Andy was going to take away back to Basingstoke and get the thing re-executed.

Q. If you could now be handed the warranty, please. That is the warranty that you signed. It is at tab 70 of bundle 5.

A. Yes, that’s my signature.

Q. Where was the amendment to this document?

A. At the front, from recollection. Yes, the warranty bit, I think, and client. Client was down at that time as Christopher Harvard, so Richard crossed that out and put “QCFS” above it.

Q. Where was the amendment in respect of the warranty?

A. Next to the title in bold capitals with his sloping writing.

Q. It is again, is it, that it was just a telegrammatic amendment subject to it being put into legalese?

A. If you mean annotated shorthand, if you like –

Q. Yes.

A. – it wasn’t a full – as a lawyer would put, it wasn’t a full sentence or paragraph.

Q. So again you were expecting that that document would be put into formal legal language?

A. That’s what I was expecting, yes.

Q. Then re-executed?

A. Yes.

Q. What was the point then in signing this document and having it witnessed at page 9 of the document?

A. It was Andy’s insistence. I suppose, but this is complete speculation, he may have also thought that because we’re all in three different locations and there was an existing winding-up petition, there may be some great urgency at some point. That’s speculation.

It was certainly at Andy’s insistence that he got something with a signature that he could take back to Basingstoke, bearing in mind it was only on that day that I’d agreed in principle to give any limited security.

Q. Was that document bound?

A. No, it was loose, tagged in the corner.

Q. And the guarantee was bound, was it?

A. No. Well, my recollection is that it was tagged in the corner.

Q. Do you have a recollection?

A. I do have a recollection. This was the important bit for me.

Q. So far as the invoice discounting agreement is concerned, if you look in the bundle please – perhaps you could be given the original of that at tab 72. Apparently that is with the other side. Could that be provided to you? In the bundle it is tab 72 at page 244. (Handed)

On the evidence of Mr. Magson, this document required re-execution?

A. Are you saying – what do you mean by – it required on the day re-execution? What do you mean by that question?

Q. I’m simply reciting his evidence which you have confirmed. It’s paragraph 48 of his witness statement at page 13.

A. Which bundle again?

Q. Bundle 3, paragraph 48.

A. Bear with me, I’m trying to find it.

Q. Page 13.

A. I have the bundle. Which page?

Q. Page 13, paragraph 48:

“Mr. Scott and I executed the signature page at the back of the marked-up agreement to show our intent to proceed with the new facility. The agreement document was not signed by Mr. Darling on behalf of BIDL and was not dated or released to Bibby by QCFS. Mr. Darling assured me and Mr. Scott” –

A. I now understand your question.

Q. – “that the errors would be corrected on a new typed version of the body of the document that could then be re-executed?

A. I understand your question. Yes, that is correct.

Q. So it is correct. So what was the point then in executing this document given that another document was going to be re-executed?

A. Exactly the same as before: so Andy had something on his file.

Q. Is it the case that the amendments that were made were again summaries of the points rather than being put into a legal form?

A. Yes. This was the commercial – this is the commercial document that Richie in particular was keen on and he made a number of changes to it.

Q. These changes were going to be put into the formal language, were they, of the rest of the document?

A. Yes. Not the standard terms, they never change, but the particulars which change per transaction.

Q. Changes in the particulars?

A. Yes.

Q. So the way in which you left matters on 27 August was you expected that before any deal went through there would be brought back to you revised forms of which documents? Let us work out what the documents were.

So you have left the pub on 27 August and I just want to work out what are the documents that you are expecting to have to be revised.

First of all, there is your personal guarantee?

A. Yes.

Q. Secondly, there is the warranty?

A. Yes.

Q. Thirdly, there’s the invoice discounting agreement?

A. Yes.

Q. Fourthly, there is the Saracen corporate guarantee?

A. Yes.

Q. There’s the cross-guarantee of Esdales and QCFS?

A. That’s right, yes.

Q. And what about the debenture? What happened to the debenture?

A. The debenture was fine as I recall it, other than –

Q. When was the debenture signed?

A. That must have been in the pub as well.

Q. How do you know?

A. Because I took all four documents down that I was e-mailed on 20 August to the pub, and I believe that was one of the four documents.

Q. How do you know the debenture was not done already, was not signed already? We saw that e-mail of yours with the attachments on the 26^th which said “some”?

A. Yes, but “some” meant that they had been signed in the office and they were sat behind my chair on the shelf.

Q. How do we know that was the debenture?

A. Because, the recollection, if I’d said “all” then we’d have known that all four documents had been signed. “Some” means less than four. And the two documents I believe I signed were the simple administrative company secretarial-type documents which were the two board minutes.

Q. What amendments were made to the debenture at the meeting?

A. I can’t recall.

Q. Were there any amendments to the debenture?

A. I am not sure there were.”

What Mr. Scott said about the stamping of his signatures in cross-examination was set out conveniently in three answers in Transcript, Day 15 at page 163 line 11 to page 164 line 1, page 164 line 19 to page 165 line 4 (in answer to the question at page 164 lines 17 – 18), and page 166 lines 2 to 7 (in answer to the question at page 165 line 21 to page 166 line 1):-

“A. My recollection is that the board – the four documents came in on the 20^th, so I printed off by the 22^nd. Obviously I have done – I have completed the board minutes in readiness with the stamps, and then the two other documents I have taken down to the pub I might have stamped in the office, I might have taken the stamps with me. I don’t understand why the Key [sic – in fact Quay] Consultancy and Financial Services stamp hasn’t been used, because it’s a really long name of a company, so I can’t – all I recall is that the two more important documents I would have taken – I did take to the pub, because that required a lot more involvement with Richard, he was running the show, rather than board minutes which I can deal with as a sort of company secretarial item.

…

Q. And you don’t have an independent recollection, do you, of having in fact signed that document [the Cross Guarantee] at the pub?

A. I do. What happened was I printed off, probably on the 22^nd, maybe on the 21^st, the four documents. I put the stamp more than likely on the board minutes, put them in the usual pile behind my chair in the office, and the other two documents are more meaty, if you like, and of more interest to Richard.

So that would wait until Richard was next in the office to discuss, or what actually happened is that we had the meeting with Andy Darling, obviously Richard was late, it got adjourned to boardroom 2 and it was all done in there.

…

Q. That the cross-guarantee, CHPL/Esdale, was signed on a different occasion from the Saracen corporate guarantee, and the proof of that is that had it been on the same occasion, the corporate stamp of Key 2 Secretarial would have been put on the Saracen guarantee as it is on the other company cross-guarantee?

A. It doesn’t follow. A couple of explanations: I could have stamped it without signing it, and the thing that confuses me is why didn’t I use the Key [sic] Consultancy and Financial Services stamp if I have used the other two stamps, if that was the case. So my recollection is that both these were signed at the pub.”

The third person at the meeting on 27 August 2008 was Mr. Darling. He made two witness statements in relation to the events of that meeting. In the first, dated 26 May 2011, he said comparatively little about it:-

“15.

On 27 August, I attended a prearranged meeting at the Second Defendant’s Key2Law offices in London. The First Defendant was late for the meeting and the Second Defendant suggested that he and I adjourn to his other office, meaning the The [sic] Old Nick Public House in Sandland Street London. The first Defendant joined us and I gave to the First and Second Defendant the Agreement between Bibby and QCFS Limited, the Guarantees, the Corporate Guarantee and Warranties. Each of the said documents were bound and presented to the First and Second Defendants in their entirety. I confirmed to the First and Second Defendants that the terms of the Agreement mirrored the proposed terms set out in the offer letter. The first and second Defendants signed the Agreement, the Guarantees, the Corporate Guarantee and Warranties and their signatures were witnessed by Joshua Metzner, the barman at the public house. The whole meeting only lasted half an hour or 40 minutes. I recall that I and the Second Defendant had a couple of beers. The First Defendant only had one beer as he was late arriving, there was no discussion about the terms of the Agreement themselves and after a light hearted conversation, once the documents had been signed, the meeting concluded. Everybody slapped each other on the back and left in a cordial manner.

…

17.

I deny that I and the First and Second Defendants discussed any variation of the terms of the Agreement or any of the other documents within this transaction on the 27 August 2008 or at any time prior thereto. I deny that the Agreement, Guarantees, Warranties or Corporate Guarantee was signed on a proviso that any terms of the same would be varied by Bibby. I did not initial the letter of offer at the meeting on 27 August 2008. The offer letter was not present, never discussed and never produced, it was not relevant. I deny that I represented at any time that the Warranties would be limited to £25,000 or that the Warranties, Guaranties [sic] or Corporate Guarantees would be limited for a period of the earlier of 6 months or the collection of all sums due to the Claimant in respect of the invoice discounting facility granted to Esdale.

18.

On 27 August 2008, the Agreement, Guarantee, Warranty and Corporate Guarantee were not dated by the First and Second Defendants.”

In a second witness statement dated 17 June 2011, made after Mr. Darling had had an opportunity to read the first witness statement of Mr. Magson, he said rather more about the events of 27 August 2008:-

“5.

I sent out, by email of 20 August 2008, documents to the First and Second Defendants for signature and return. A true copy of the email and enclosures can be seen at pages 102 to 173 of Exhibit ‘RPM1’ to the First Defendant’s Witness Statement. There is now produced and shown to me marked “AD1” true copies of such of the originals of those documents held by the Claimant from its legal documents file for QCFS Limited [which were a photocopy of the Harvard Debenture, an original of the Cross Guarantee and an original of a resolution of Harvard].

…

7.

I recall that when I went to the office of the Second Defendant on the 27 August I collected the documents copies of which are exhibited at “AD1” prior to the meeting being adjourned to the Old Nick public house to await the arrival of Richard Magson.

8.

Where at paragraph 38 Mr. Magson indicates that he called me indicating that the documents were in the wrong name and needed to be re-raised, he is mistaken I received no such call.

9.

Where at paragraph 40 he states that I brought these documents to the meeting for signature in the pub, he is wrong I did not.

THE PUB DOCUMENTS

10.

There is produced and shown to me marked “AD2” true copies of the originals of the documents signed at the pub copied from the Claimant’s legal documents packet.

11.

The execution of the documents took place as I have already described in my earlier witness statement. There was no manuscript amendment of any document nothing was initialled or countersigned by myself, Richard Magson or Bob Scott.

INVOICE DISCOUNTING AGREEMENT

12.

Mr. Magson says that of the Invoice Discounting Agreement, pages 72 – 126 of “AD2”, the execution page was in the wrong name. It was not, the page can be seen at page 126 of exhibit “AD2” hereto. I gave no assurance to the First Defendant or the Second Defendant that there were any errors on the document, that any error would be corrected and a new typed version of the body of the document would then be re-executed. None of this happened. There were not two prints of the document. We did not mark up both copies of such a document. Nor did we initial any amendments. The original only was produced and signed. Where Mr. Magson says the document was not signed by me on behalf of BIDL, I should point out that I am authorised to sign such documents, but our procedure is for legal documents to be returned to our office, checked and then signed off. I seldom sign off the legal documents as I am often out of the office.

PERSONAL GUARANTEES

13.

At page 147 – 166 is a copy of the original of the Personal Guarantee signed by the First Defendant. At page 127 – 146 is a copy of the original Personal Guarantee signed by the Second Defendant. The Guarantees are in respect of QCFS as can be seen from pages 164 and 187 respectively. No amendment was necessary and no amendment was noted on Schedule 4 and nothing was initialled by myself and Mr. Scott or Richard Magson to either document. Neither the First or Second Defendant has ever said to me that the liability of the Defendants under these documents should be limited to expire on the collect out by the Claimant of the book debts of Esdale Tooling Limited (“Esdale”) or 6 months whichever is the earlier.

CORPORATE GUARANTEE OF SARACEN

14.

No amendments were needed to the Corporate Guarantee page 167 – 188 as described and nothing was marked up and initialled. Where the First Defendant says that the Corporate Guarantee also included QCFS’s previous name, CHPL in Schedule 3, this is incorrect. Nothing was said by either Defendant at the meeting on 27 August or before or after to me about the liability expiring on the collect out of the Esdale debt or 6 months whichever is the earlier.

CHRISTOPHER HARVARD (PROPERTIES) LIMITED – ESDALE TOOLING CROSS GUARANTEE

16.

This document, page 50 – 71of “AD1”, was not signed in the pub. In his Witness Statement Mr. Magson suggests that this document should have stated, at page 5 of section 2 page 58 of “AD1”, that it was to expire on the collect out of Esdale’s debt, this is not true.

17.

This document was not present at the pub, and there was no discussion about it whatsoever, had Richard Magson or Bob Scott suggested to me that the Cross Guarantee be limited until the collect out of the Esdale’s debt I would have seen no reason for any alteration to the document. It should be remembered that Esdale was proceeding into Administration and was insolvent, its business to be sold to QCFS Limited. Once Esdale’s book debts had been collected out QCFS Limited could have no liability. It was never expected, nor could it have been thought, that Esdale would ever be in a position to pay anything under its Cross Guarantee. It follows to my mind that the amendment to which Richard Magson speaks had it been put to me (which it was not) was unnecessary in the circumstances.

18.

There was no execution of this document in the pub. It had already been signed off, I believe I collected it before the meeting.

WARRANTIES

19.

It is said by Richard Magson that the warranties were to be limited to the collect out of the Esdale debt or 6 months whichever was the earlier but also Richard Magson adds that the total liability under the personal guarantee and the warranties was limited to an aggregate upper limit of £25,000. No such conversation took place, had it done so I would have informed both Magson and Scott that a Warranty was needed to support the book debt being sold to the Claimant by QCFS Limited against fraud. These warranties are commonly known in the Factoring and Discounting industry as fraud warranties as they come into play where there is deceit or dishonesty on the part of the company or the warrantors. Both Bob Scott and Richard Magson would understand this from their industry experience. Whilst it was not said it would not have been acceptable to the Claimant to limit the warranties on the QCFS Limited debt to expire on the collect out of the previous failed company’s ledger and/or 6 months. Whilst collect out of Esdale Tooling Limited’s book debt may not happen, 6 months will certainly pass which means the document creates no protection against deceit or dishonesty at all.

20.

If the liability under the Guarantee and Warranty is aggregate to an upper limit of £25,000 there would be no point whatsoever in taking in a Warranty where the same sum is covered under a personal guarantee. In simple terms, if the guarantee and warranty were to be aggregate the warranty becomes redundant as unnecessary.

21.

No amendment or marking up of the warranties took place, nor was it initialled by any parties of the meeting, the documents were simply signed as I have already stated.

22.

At paragraph 59 Richard Magson says that the documents emailed to him on 20 August were signed in the pub. They were not.”

In the light of the evidence contained in the witness statements of Mr. Darling, Mr. Magson and Mr. Scott it appeared that there was a straightforward, if dramatic, difference between the account of the meeting on 27 August 2008 given by Mr. Darling, on the one hand, and those of Mr. Magson and Mr. Scott, on the other. The resolution of what had in fact occurred essentially fell to be determined by what evidence I was persuaded to accept, and what evidence I decided to reject. At its most basic my task was to decide whether to accept the evidence of Mr. Darling in preference to that of Mr. Magson and Mr. Scott, or vice versa. Questions of demeanour were obviously important. However, there were other matters to be taken into account in reaching a conclusion. I have already mentioned some of the material evidence. Another aspect which needed to be taken into account in reaching a conclusion on this part of the case was the view which I took of the evidence of Mr. Magson in relation to the alleged breaches of the Bibby ID Agreement which were said to found the claims on the Warranties in the present action. That was because, as the trial unfolded, it appeared to be the case for Bibby that the particular breaches complained of were said to have been the result of the actions or instructions of Mr. Magson personally. In other words, the suggestion was that Mr. Magson had acted dishonestly in committing the breaches complained of. Plainly, if I reached the conclusion that that was so, that was a highly material consideration to take into account in assessing the evidence as to the events on 27 August 2008. I shall come to the evidence relevant to the alleged breaches, but it is convenient, before I do, to identify the other evidence which appeared to be more directly connected with the events of 27 August 2008.

The evidence of Mr. Magson and Mr. Scott, in contrast to the evidence of Mr. Darling, was that the documents signed on 27 August 2008 were not bound in plastic binders at the time of signature. As I have remarked, what were said to be the originals of the Bibby ID Agreement, the Guarantees, the Warranties, the Saracen Guarantee and the Cross Guarantee were adduced in evidence during the trial. Each document so adduced was presented in a plastic binder. The logic of the case of Mr. Magson and Mr. Scott had to be that the Bibby ID Agreement, each Guarantee and each Warranty, in the form produced at the trial combined a genuine signature page with sheets to which the signature page had been attached so as to present a document in each case the form of which was totally misleading.

In that context it was material to notice that one document, the Corporate Guarantee, sent as an attachment to the e-mail written by Mr. Darling to Mr. Scott and Mr. Magson on 20 August 2008, was presented in court in bound form. No explanation as to how that came to pass was provided as part of the evidence. Mr. Alexander asked Mr. Darling questions about it, but did not put the question, “How did this guarantee come to be bound?”. He did not need to. The obvious point was that Bibby ID or Bibby FS was capable of binding, after signature, a document which originally comprised loose pages. The material exchange (Transcript, Day 2, page 107 line 13 to page 108 line 11) was:-

“MR. ALEXANDER: Mr. Darling, what you collected were documents which had been emailed through previously, isn’t that right?

A. Yes.

Q. In AD1, which I will do by reference to the numbers in the exhibit itself, at pages 1 to 2 is the certified resolution of CHPL, so that is a two-page document.

A. Yes.

Q. At pages 3 through to 49 of the exhibit is the debenture.

A. Okay.

Q. At pages 50 to 71 is the corporate guarantee.

A. Okay.

Q. None of these documents were bound at the time when you collected them, were they?

A. No.

Q. The third of those documents is the corporate guarantee, the third of the ones we have just been talking about. I have the original and it’s bound now, isn’t it?

A. It is, if that is the original.

Q. Perhaps I can pass it to you and you can have a look at it. (Handed). So it was not bound on the day you collected it, but it has been bound since.

A. Correct.”

Mr. Darling also clarified in cross-examination (Transcript, Day 2, page 148 lines 8 – 20) his position as to whether the documents sent as attachments to the e-mail dated 20 August 2008 had been with him in the Pub or not:-

“Q. Can I just ask you: the 20^th August documents?

A. The email documents, yes.

Q. Yes. You say they weren’t in the pub at all?

A. They were in my bag in the pub but –

Q. They were in your bag?

A. They weren’t on display. Yes.

Q. Okay. So you had a bag with you, into which you put the documents from Mr. Scott’s. So they were in the pub, they were available to be discussed if that was what was wanted.

A. Yes.

Q. But you just say they never came out.

A. Never came out.”

It was, of course, not in dispute that the Harvard Debenture sought by Bibby FS had been produced, and was signed, in the name of Harvard. The original no longer survived, but a copy was disclosed. The copy was dated 3 September 2008. Why that was the date written on the Harvard Debenture, as opposed to some other date, was not established in evidence. None of the other documents said to have been signed at, or in advance of, the meeting on 27 August 2008 bore that date.

The signature of the six documents which Mr. Darling contended had been produced in bound form was something about which, when asked during his oral evidence, Mr. Darling was decidedly vague. There were, according to him, six documents needing to be signed. Of these two, a Guarantee and a Warranty, required to be signed by Mr. Magson and witnessed; two, a Guarantee and a Warranty, needed to be signed by Mr. Scott and witnessed; and two, the Bibby ID Agreement and the Saracen Guarantee, needed to be signed by each of Mr. Magson and Mr. Scott, but not witnessed. One might have thought that, in order to facilitate the signature of the various documents they would at some point, even if only in the Pub, have been divided physically so that Mr. Magson could sign, in the presence of the witness, the documents requiring to be signed by him and witnessed, Mr. Scott could do likewise in relation to the documents which only he needed to sign, and they could each sign the other two. Why what had actually happened about signature mattered was because it became clear, on production of the alleged original documents, that whereas Mr. Magson had signed three documents with a black pen, he had signed his Warranty with a blue pen. Mr. Scott signed the documents which bore his signature with a black pen, but the witness to the signatures of Mr. Magson and Mr. Scott on the Guarantees and the Warranties, signed with a blue pen. Mr. Alexander asked Mr. Darling about that (Transcript, Day 2, page 138 line 1 to page 139 line 10):-

“A. This one I have here is Mr. Magson’s warranty.

Q. Mr. Magson’s warranty?

A. Yes.

Q. He seems to have a different pen here, doesn’t he?

A. He does, signed in blue.

Q. So what is he doing? You say they just sat down and did a signing ceremony, and suddenly in the middle of the signing ceremony Mr. Magson switches pens?

A. These need to be witnessed, so it’s conceivable he got another pen when he went to the bar to have that witnessed.

Q. It’s pretty odd, though, isn’t it?

A. I wouldn’t say so.

Q. What I would suggest to you it’s consistent with is that this meeting went on much longer than you say. You were sitting around the table, you were going through the documents; is that not right?

A. No, not at all.

Q. You didn’t do that?

A. No.

Q. Then we go to Mr. Magson’s guarantee. (Handed). That seems to be in the same pen as the original –

A. Yes.

Q. –stuff [sic], doesn’t it?

A. Yes.

Q. What we have clearly got in relation to these documents is a situation where, in the middle of executing all these documents, if your version is to be believed, which is just basically a signing ceremony, Mr. Magson changes pens.

A. That is obviously what he did. It was a simple –

Q. I suggest to you that is just not very logical, is it?

A. It’s what happened.

Q. You remember that happening?

A. No, but clearly it was what happened.”

I asked Mr. Darling about the signing process. For present purposes the material exchanges were these (Transcript, Day 2, page 139 line 11 to page 141 line 9, omitting immaterial questions and answers):-

“Q. Do you have any clear recollection of the actual signing process?

A. No. No, to be honest, my Lord, no.

Q. Some of these documents needed to be signed by Mr. Magson, some by Mr. Scott and some by both of them.

A. Yes.

Q. Do you remember that there was, for example, a selection of which needed to be signed by which, so that you might have had three piles?

A. They would have just been presented in bulk and the guys would have split them up as required for signing.

Q. Do you have a picture of, as it were, Mr. Magson and Mr. Scott signing, with pens poised, as documents went from one to the other, or anything like that?

A. I just don’t recall.

Q. It does seem a funny thing that at one point Mr. Magson seems to have changed pens.

A. As I say, I think that document needed an independent witness, so I presume Mr. Magson moved from the table to have that done, and conceivably could have used the barman’s pen.

Q. I don’t know whether we have yet got to it, but there were two documents that needed to be witnessed, were there not?

A. Yes.

Q. The warranty and the guarantee.

A. Yes.

Q. Can you tell me whether the guarantee is signed by Mr. Magson in a blue pen or a black pen, or haven’t you got there yet?

A. It’s in a black pen.

Q. So he signed one document needing a witness in a black pen and the other document needing a witness in a blue pen, is that it?

A. It appears to be the case.

Q. Right. Do you have Mr. Scott’s guarantee and warranty there?

A. I do, my Lord.

…

Q. So Mr. Scott signed each of these in black and Mr. Metzner has witnessed in blue.”

Inspection of the so-called originals of the various documents signed by Mr. Magson and Mr. Scott in the Pub revealed that a number contained a page bearing the date 22 September 2008 which appeared to be a photocopy, notwithstanding that the date had apparently been applied in pen and might have been expected to bear on the reverse side, as did the reverse side of the signature page in the Saracen Guarantee, the imprint of the words written in pen. From this circumstance it appeared either that, at the point of signature by Mr. Magson and Mr. Scott of the relevant document, the pages comprising that document were unbound, or that, if bound at the point of signature, the pages were subsequently unbound for some purpose – perhaps photocopying – and then re-bound. Whichever of these possibilities were correct, it was plainly conceivable that the pages in the bound documents produced in court as so-called originals were not in truth the pages which were there at the moment of signature by Mr. Magson and Mr. Scott.

Another unusual circumstance the basic facts of which were not in dispute was that, whilst denying that the Offer Letter had been produced or discussed at the meeting on 27 August 2008, Bibby ID had on its files, as I have noted, the original Offer Letter bearing in manuscript markings made by Mr. Magson. Mr. Alexander asked Mr. Darling about that matter in cross-examination (Transcript, Day 2, page 132 line 23 to page 134 line 16):-

“Q. This is a document which you have said, and confirmed again, was not in the pub; correct?

A. Correct.

Q. It was a document which Mr. Magson had not seen prior to the meeting.

A. As I understand it, yes.

Q. It was a document to which you referred and said that the documents you were asking them to execute mirrored what was in the offer letter.

A. As would be the case.

Q. You say that Mr. Magson didn’t say, “Well, I would quite like to see the offer letter”.

A. He didn’t say that.

Q. And he didn’t see the offer letter, you say, in the pub.

A. No.

Q. If you go to the copy of the letter at 8A/279. Do you have that, the offer letter?

A. Yes.

Q. This document has plainly been marked up, hasn’t it?

A. This photocopy, yes, has the marks against various bits. Yes.

Q. Do you know whose handwriting that it is?

A. It looks like Mr. Magson’s.

Q. I have already referred you to the fact that in his witness statement what he said was that you went through the lists of the completion and operating requirements, together, and he marked them “to confirm that we would deal with them”.

A. No.

Q. If you just have a look at the markings, would you accept that the way in which the markings appear on here is entirely consistent with there having been a discussion about this letter in the pub between you, Mr. Scott and Mr. Magson?

A. They look entirely consistent with somebody going through it and looking at each condition bit by bit, but at what venue and with whom, I don’t know.

Q. I suggest to you that what happened was you did go through this letter and Mr. Magson made these markings whilst you were going through it in the pub.

A. No.

Q. I suggest to you that, contrary to what you have said, the offer letter plainly was in the pub.

A. No.”

The obvious question then was, if the markings were not made at the meeting on 27 August 2008, how did Bibby ID come to have the original Offer Letter with manuscript markings made by Mr. Magson. Mr. Alexander put the question squarely to Mr. Darling (Transcript, Day 2, page 142 line 22 to page 144 line 15):-

“Q. It has Mr. Magson’s manuscript on it in original form. How has Bibby got that if this wasn’t done at that meeting?

A. He would have sent that back to us.

Q. Why?

A. For the sake of completeness.

Q. Mr. Darling, I suggest to you that this [is] ridiculous. This offer letter was plainly in the pub that day.

A. No.

Q. Mr. Magson is absolutely right about that. He made these markings in that pub with the same pen with which he signed one of the documents, and you took this document away and added it to the Bibby file, whatever is there, and that’s why Bibby have still now got it with Mr. Magson’s original pen on it, isn’t it?

A. Not the case.

Q. So you say that Mr. Magson must have marked this up, this offer letter, some time after the meeting. Because, on your version, he hasn’t seen the offer letter, and there is no evidence of how the offer letter ever got to him, but at some stage after the meeting he went and got himself a copy of the offer letter, he marked it up and then, for completeness, he returned it to Bibby for no apparent reason.

A. He obviously returned it to us at some stage.

Q. In the pub –

A. No.

Q. – Mr. Darling.

A. No.

Q. [by the court, as were the other remaining questions quoted in this passage] Is there anything else, so far as you know, on your file associated with this copy of the offer letter which appears to have Mr. Magson’s markings on it? Was there, for example, a covering letter?

A. No cover letter, no.

Q. Or a compliments slip?

A. It wouldn’t be usual, my Lord, for anything like that to go out with it.

Q. This is being received back by you, you see.

A. Oh, in that sense? No. No, we have nothing to show that that had been received back by us.

Q. So it’s simply on your file alone, so far as you know.

A. Insofar as I am aware.”

On 8 September 2008 there was a series of e-mails between Mr. Magson, Mr. Scott and various representatives of Bibby ID. The e-mails were concerned with documents to be produced before Bibby ID could commence offering facilities to QCFS and also with information required in that context. In none of the e-mails which Mr. Magson wrote – Mr. Scott wrote none of them, but was the addressee of one and copied into others – did he mention to Mr. Scott, or chase Bibby ID for, the documents which it was contended it had been agreed at the meeting on 27 August 2008 would be produced in a revised version.

Each of Mr. Magson and Mr. Scott signed a letter in standard form addressed to Bibby FS dated 8 September 2008. The first paragraph of the letter was in these terms:-

“I confirm that I have had the opportunity to seek legal advice in respect of the guarantee to be granted by me in favour of Bibby Financial Services Limited (acting as security trustee) in respect of the liabilities of QCFS Limited (“Client”) to Bibby Financial Services Limited and other members of the Bibby Group from time to time. I understand the nature of the guarantee and the consequences of entering into it and therefore have elected not to obtain legal advice in respect of it.”

Each of Mr. Magson and Mr. Scott was cross-examined by Mr. Freedman as to why, given that he contended that he had not entered into a Guarantee, he had signed it. Each gave essentially the same explanation, put by Mr. Scott at Transcript, Day 15, page 150 lines 11 – 15 as:-

“Because that was a document prepared in anticipation of completion, the PG was still being amended, retyped, so it was all heading towards a completion date when the administration would be put in place and the pre-pack would go through. So it is in readiness, if you like.”

The Harvard Debenture was evidently tendered on behalf of Bibby FS to the Companies Registry for registration. By a letter dated 9 September 2008 the Companies Registry notified Bibby ID that the Harvard Debenture could not be accepted because the name of Harvard had changed to QCFS. Mr. Magson was told about that problem by Bibby ID. In an e-mail dated 10 September 2008 to Mr. Scott he wrote, in reference to “QCFS – debenture”:-

“We need to print, send back and sign tonight. Then also do on quay … Their debenture was rejected by companies she [sic – house was intended]”

No reference was made in that e-mail to other documents outstanding on the cases of Mr. Magson and Mr. Scott, in particular the Bibby ID Agreement and their respective Guarantees and Warranties. In an e-mail to Mr. Scott, copied to Mr. Ellison, sent on 15 September 2008 Mr. Magson asked Mr. Ellison to send over a corporate guarantee for execution on behalf of Quay, but made no mention of any other outstanding documents.

On 17 September 2008 Mr. Magson wrote an e-mail to Mr. Darling forwarding an e-mail which he had earlier sent to Mr. Barrington and Tessa Riley. The forwarded message was entitled “Batches”, but its detailed content is not presently material. The message to Mr. Darling was in these terms:-

“Thanks for your help, please see below … The fees for the collection should be takeable to income by the end of October, I will advise once I have completed the reconciliation for next months collections with Really Useful products.

Thanks boss, and resolving state and signing docs with Bob in London on Monday afternoon if you fancy a coffee, or jar.”

Mr. Freedman submitted that the concluding sentence in the message to Mr. Darling should be read as if there were a full stop after “Bob”. It was common ground that “state” referred to State Securities, a creditor of Esdale.

The facilities provided by Bibby ID to QCFS commenced on about 18 September 2008.

In an e-mail to Mr. Darling dated 24 September 2008 Mr. Magson wrote:-

“As we stated and agreed, can i have an email just to confirm, we are not on the hook for the CG with regards to fees, other than the £25K, and the second £25K to go to the administrators, rest is your own. Obviously that £25K will need to be added to the £62K, with potential for this amount collectable.”

Why Mr. Magson might have thought that he and Mr. Scott were “on the hook” for the guarantee apparently referred to was not explained in the e-mail.

Months then went past without there being any reference in any contemporaneous document to the issue of what had been agreed on 27 August 2008 or what documents were to be revised following that meeting. However, in an e-mail dated 22 December 2008 to Miss Claire Stainer, a client administrator employed by Bibby ID, and Mr. Ellison, Mr. Magson said this:-

“Tried to get Martin this morning, but can you both look at the following, this would have a significant effect and is charges on the account. The base rate as per your file and interest rate is 2.5% over bank base rate, yet in November period end this is still at 7.5%.

On 08 October 2008, bank rate was 4.5%, then 4^th November 3.0%, then 6^th December 2.0%, yet today this is still showing as 7.5% on our account, can you advise as this is contrary to my understanding.

We can deal with after xmas if easier, but had time to look at this aspect along with other bits as workload is slowing down for xmas. Will leave the oldco fee charges, but thought worth mentioning.”

Mentioning the matter of the applicable base rate rather suggested that Mr. Magson considered that having a base rate fixed with a minimum of 7.5% was contrary to what had been agreed with Mr. Darling. However, Bibby ID did not reduce the base rate, yet Mr. Magson did not pursue the issue, at least not in correspondence of which copies were adduced in evidence.

Another aspect of the events of 27 August 2008 is the issue of what happened to the second copy of the Bibby ID Agreement which Mr. Magson contended had been before the participants in the meeting and had been marked up. In his first witness statement Mr. Magson gave this explanation of why he no longer had it, or a copy of it:-

“85.

At the beginning of January 2009 I phoned Ms Stainer to ask again for copies of all of the contractual documentation. Ms Stainer told me that these were still with the new business team (i.e. Tessa Riley and her colleagues) but that copies would be provided shortly.

86.

On 23 January 2009, I received an email from Ms Stainer forwarding an email from Ms Riley asking for our certificate of incorporation for her file… I discussed this with Mr. Scott on 28 January 2009 and organised to collect the certificate from him … On Friday 30 January 2009 I collected the certificate from Mr. Scott. I then visited BIDL’s Basingstoke office and gave it to Ms Stainer together with some other documentation BIDL has asked me for.

87.

On 3 February 2009 I finally received by post at QCFS’s office in Wakefield the recourse facility agreement between QCFS and BIDL and the standard terms and conditions. These were incorporated into a single bound document. The recourse facility agreement itself was in the form now appended to the Particulars of Claim – not as signed by me at the meeting on 27 August 2008. It arrived in an envelope with a compliment slip. It appeared that BIDL had combined the recourse facility agreement (which had only been executed in the name of CHPL) and the terms and conditions, removed the execution page from the recourse facility agreement and included a new front page in the name of QCFS, not CHPL, but had failed to include any of the other changes agreed and marked up on 27 August 2008. It also appears that they had simply inserted the signed signature page from the standard terms and conditions, (which had been signed in the name of QCFS as per paragraph 61 above) at the back as if applicable to both documents.

88.

Following receipt, on 3 February 2009, I immediately telephoned Mr. Darling and discussed setting up a meeting to finalise the documentation, including the facility agreement and the personal and corporate guarantees. Mr. Darling said that Mr. Scott and I should visit their Basingstoke office the following day. However, late on the evening of 3 February 2009 Mr. Ellison rang and asked to delay the meeting because he would not be visiting the Basingstoke office that week, due to the snow and an internal audit.

89.

At 08:35 on 4 February 2009 I emailed Mr. Darling and Mr. Ellison to confirm this … My email [a copy of which was adduced in evidence] stated that the purpose of the meeting was to:

“…go over the likely scenarios for the heckmondwike business [i.e. QCFS] and the options and also to finalise the correct terms as per the original offer letters agreed between ourselves and AD [i.e. Andrew Darling], which appear slightly contrary to the recent legal documentation that has been supplied, when a copy was requested.”

90.

This was a reference to the terms as agreed with Mr. Darling in August 2008 and the version of the recourse facility agreement and terms and conditions which I had received by post, which did not show the correct terms of the agreement.

91.

On 5 February 2009, I received an email from Mr. Ellison asking me for a breakdown of expected payments from a variety of Esdale customers … He said that he needed this for the internal audit (which he had told me was one of the reasons why he had delayed our meeting about correcting the agreements).

92.

On 16 February 2009 I emailed Mr. Ellison and Ms Stainer to tell them that Key2Directors Limited, which was the company secretary of QCFS until this time, had effectively resigned as secretary of QCFS with effect on that date … Around this time I discussed finalising the contracts again with Mr. Ellison. Mr. Ellison told me that BIDL could not locate the versions of the contracts marked up by Mr. Darling, Mr. Scott and I on 27 August 2008. I therefore agreed to give BIDL my copies of the only amended agreements in my possession, namely the annotated, unbound recourse facility agreement and corporate cross guarantee (which were the only documents produced in duplicate at Mr. Scott and my meeting with Mr. Darling on 27 August 2008 (as per paragraph 41 and 63 above) in order to assist them in raising correct new agreements.

93.

On 17 February 2009, I tried to make contact with Mr. Ellison in order to arrange a time for a meeting to discuss post-dated cheques and the amended agreements …

94.

On 24 February 2009, first thing in the morning, I visited BIDL’s office in Basingstoke, I delivered various items of documentation which Mr. Ellison had requested. This included the unbound recourse facility agreement and corporate cross guarantee referred to in paragraph 92 above. I also returned the incorrect bound recourse facility agreement and terms and conditions which I had received by post as described in paragraph 87 above. When I dropped these off I saw Mr. Darling who also expressed surprise that this documentation had not been finalised.

95.

I kept copies of these two documents for my own records, while I then no longer had the original marked up copies of the recourse facility agreement and corporate cross guarantee referred to in paragraph 92 above, by scanning and emailing these to my account on the Esdale Microsoft Exchange server. I no longer have access to the Esdale server because Tenon took over possession of this server on appointment in September 2008 and, I understand, wiped the server before selling the business.”

Mr. Darling responded to what Mr. Magson said at paragraph 94 of his first witness statement at paragraph 23 of his second witness statement:-

“At paragraph 94 Mr. Magson suggests that he attended the Claimant’s Basingstoke office on 24 February and dropped in certain documents and met with me and we had a conversation to the effect that I was surprised that the documentation had still not been finalised. So far as I am concerned Mr. Magson did not attend the Claimant’s office on 24 February. I certainly did not meet him and I certainly did not have the conversation he alleges.”

Some flesh was added to what Mr. Magson said at paragraph 94 of his first witness statement by the contents of paragraph 21 of his second witness statement dated 25 June 2011:-

“Further, I understand that Mr. Darling denies me ever attending Bibby’s Basingstoke office as set out at paragraph 94 of my statement. He is wrong.

21.1

I attended Bibby’s Basingstoke offices on the morning of 24 February 2009. I brought with me an A4 size envelope containing the various items of documentation that Mr. Ellison had requested, which would have been marked for his attention or his and Ms Stainer’s attention. I also had a smaller white envelope containing RUP cheques it being quite usual for Bibby’s customers such as myself to attend its offices to drop off cheques.

21.2

I rang the bell on the office door as it was locked at this time. I gave the envelope with the cheques to the person who answered the door and enquired as to whether Mr. Darling was around. I did not expect to find Mr. Ellison there as he only attended the Basingstoke office one or two days per week but Mr. Darling worked from this location permanently (being the office head at the time together with Adrian Barrington). As Mr. Darling was around I was let in and I popped over to Mr. Darling’s office, said hello and (as is also set out at paragraph 12 of my Defence), I gave Mr. Darling the envelope containing the documents requested by Mr. Ellison. As stated in my first statement, Mr. Darling expressed surprise that the amendments to the documents still had not been done and that he would pass these to Mr. Ellison as he should have resolved this issue by then.”

Notwithstanding the certainty expressed at paragraph 23 of his second witness statement, when it came to cross-examination it seemed that Mr. Darling was no longer quite so sure whether Mr. Magson had attended the Basingstoke office of Bibby ID on 24 February 2009. The material exchanges between Mr. Alexander and Mr. Darling were these (Transcript, Day 2, page 178 line 3 to page 180 line 20):-

“Q. …

Then Mr. Magson says at paragraphs 94 to 95 that on 24^th February, first thing in the morning, he visited Bibby’s office in Basingstoke. He says he delivered various items of documentation which Mr. Ellison had requested. This included the unbound copies of those two documents. And he says that when he dropped these off, he saw you. Did he see you?

A. I don’t recall.

Q. You don’t recall it. He says that you expressed surprise that the documentation hadn’t still been finalised. Do you recollect doing that?

A. Not at all, no.

Q. Then if you go to paragraph 21of Magson 2, Mr. Magson’s second witness statement, which you will find in a separate bundle. Mr. Magson says that he understands that you deny that he ever attended Bibby’s Basingstoke office on 24^th February.

A. I just don’t recall that.

Q. You just don’t recall. So it’s not a question of you saying it didn’t happen, you just don’t remember it.

A. I don’t remember it.

Q. You don’t remember it. Okay. He says that he attended the offices on the morning of the 24^th February. He brought with him an A4-sized envelope containing the various items of the documentation that Mr. Ellison had requested, which would have been marked for his attention, or his and Ms Stainer’s attention. He also says he had a smaller white envelope containing RUP cheques, it being quite usual for Bibby customers such as himself to attend to the offices to drop off cheques.

A. It’s not uncommon.

Q. Not uncommon?

A. Richard was probably the main one that did that, but it has happened, yes.

Q. He says that he rang the bell on the office door as it was locked. Is that …?

A. That would be usual.

Q. He says he gave the envelope with the cheques to the person who answered the door, and enquired as to whether you were around. He said he didn’t expect to find Mr. Ellison there. Well, that is obvious, because he was in all likelihood in Manchester.

A. Yes.

Q. He says because he attended the Basingstoke office one to two days per week. Yours was one to two days a month. But you worked from this location permanently: correct?

A. Yes, but I am not always in the office. I have –

Q. Okay. That was the head office?

A. That is Bibby Invoice Discounting’s office, yes.

Q. He says that:

“As Mr. Darling was around, I was let in and popped over to Mr. Darling’s office.”

How far we [sic] he have to go? How big is this place?

A. Not that big. You are probably talking about 20/25 yards to get to my office from the main door.

Q. He says he said hello to you and gave you the envelope containing the documents requested by Mr. Ellison.

A. I don’t recall that.

Q. You don’t remember that?

A. No.

Q. It could have happened but you just don’t remember?

A. I just don’t remember it.”

It does seem somewhat remarkable that, on his account, Mr. Magson did not make any copies of the documents which he was handing over to Bibby ID, in the person of Mr. Darling, before parting with them. By this stage Mr. Magson knew that he no longer had access to the copies which he contended he had made on the Esdale server.

No copy of a contemporaneous document was adduced in evidence which appeared to show Mr. Magson pursuing the matter of correction of the Bibby ID Agreement, or any agreement apparently signed on, or in anticipation of, the meeting on 27 August 2008, between February 2009 and the appointment of the Administrators on 8 April 2010.

At paragraph 99 of his first witness statement Mr. Magson said:-

“Mr. Barrington was replaced by Eileen Creely as temporary Operations Director. I understood from Mr. Ellison that Ms Creely was appointed at the request of BIDL’s own funder due to internal issues. As a result, BIDL’s procedures for payment under the facility changed to be more stringent. At the end of May, Ms Creely came to visit QCFS’s premises in Wakefield, together with Mr. Ellison. I showed them the factory and explained how the business worked. During the visit, I raised with Ms Creely the fact that the recourse facility and other contractual documents still needed to be finalised and she said that she was aware of the position. Admittedly, this was not a lengthy discussion: I was focused on getting Ms Creely comfortable with QCFS’s business in order to secure BIDL’s continued support going forward.”

Mrs. Creely was called to give evidence on behalf of Bibby FS to deal simply with what Mr. Magson said in that paragraph. In a very short witness statement, dated 17 June 2011, Mrs. Creely said:-

“3.

At the relevant time I was Group Risk and Operations Manager for the Claimant and held the role of Interim Managing Director at Bibby Invoice Discounting in Basingstoke. Whilst at Basingstoke in February 2009 I met Richard Magson at the door of our office when he called to deliver a cheque. We had a conversation about the debtor.

4.

Towards the end of May I visited the premises of QCFS Limited in Yorkshire together with Martin Ellison. The purpose of the visit was to follow up on some audit issues. At no time during the visit was there any conversation with Richard Magson or anyone else about the legal documentation supporting the invoice discounting facility he certainly did not say to me that the recourse facility and other contractual documents still needed to be finalised and I did not say that I was aware of the position.

5.

During my time as Interim Managing Director I was never aware there was any issue whatsoever with the legal documentation and no one ever discussed with me or told me that there were any issues whatsoever.”

In cross-examination Mr. Alexander put to Mrs. Creely that the occasion upon which she had seen Mr. Magson in February 2009 was that upon which he had gone on to deliver to Mr. Darling Mr. Magson’s copies of the Bibby ID Agreement as amended and signed, and the Saracen Guarantee. However, Mrs. Creely was unable to say more about the occasion than that it was one upon which Mr. Magson had brought a cheque from RUP. Thus it was possibly, but not necessarily, the occasion of which Mr. Magson spoke.

Unsurprisingly Mrs. Creely was also asked about her visit to the premises of QCFS at the end of May 2009. Her position ultimately seemed to be that she did not recall any conversation about the terms of the agreements between Bibby ID and QCFS needing to be finalised, and she thought that she would, had there been such a conversation. The relevant exchanges (Transcript, Day 3, page 70 line 16 to page 72 line 8) were:-

“Q. I mentioned to you a minute ago that Mr. Magson says that during the visit which you had with him, he says that he raised with you the fact that the facility and other documents needed finalising, and you said you knew about that. As I said to you, to be fair to him he doesn’t put this like this was a major part of the discussion between the two of you, he makes it perfectly plain that the whole meeting was focused on getting you comfortable with the QCFS business.

Now, I think you say that the conversation did not take place?

A. I have no recollection of any conversation about the legal documents.

Q. You have no recollection of such a conversation?

A. I have no memory of that taking place at that meeting.

Q. You have no –

A. Or any meeting.

Q. I understand I understand that, you don’t remember such a conversation having taken place.

A. No.

Q. It’s possible it could, isn’t it?

A. Well, if I thought there was something wrong with the documentation, we would have had to do something about it and I would have had to sort out with the client, freeze the account or something, to make sure it was right.

That is why I think if it had been raised, with me at that meeting it would have registered and I would have done something about it.

Q. I can totally understand the logic of why you say that. Totally understand the logic of that. What I would just like to get to is you don’t remember such a conversation?

A. No.

Q. But can you categorically say that conversation never took place during the course of an hour long meeting, that something was raised?

A. Not that I heard. I did not hear anything about documentation.

Q. Right. I suggest to you that it did happen and that what has actually happened is that you just don’t remember that bit of conversation. Is that possible?

A. I don’t think that that is what happened.”

I have already explained the relevance of my findings concerning the Invoices and the Credit Notes to the factual issues which arose in connection with the events of 27 August 2008. In broad, general terms the case for Bibby in relation to each of the Invoices – the Credit Notes gave rise to different questions – was, at least at the start of the trial, that it was bogus, having been produced in circumstances in which QCFS was not entitled to raise an invoice, but with a view to raising money by selling the debt which the Invoice was said to represent to Bibby ID. The individual circumstances in which each Invoice appeared to have been produced needs to be considered, but there were a number of points which arose which applied, if not to all of the Invoices, at least to a number of them.

The first point was that each of the Invoices (and, indeed, each of the Credit Notes) was addressed to a company which was a genuine, current customer of QCFS at the time the relevant Invoice or Credit Note was raised. Consequently, the addressees of the Invoices and the Credit Notes were not invented.

It was an important part of the case for Bibby FS that, while each of the Invoices was fictitious, each of the Credit Notes was genuine. The point in relation to each of the Credit Notes was basically that it should have been notified to Bibby ID, but was not. Had it been notified, the effect of notification would have been to reduce the amount which QCFS was entitled to draw under the Bibby ID Agreement.

The evidence relied upon on behalf of Bibby FS in support of the contention that each of the Invoices was fabricated for nefarious purposes fell broadly within one or other of four categories. The first was the uncontested fact, in relation to each of the Invoices, that it had not been paid by the person to which it was addressed. The second was evidence, at second hand, from a representative of the addressee of each of the Invoices that that addressee did not consider that it was liable to pay the relevant Invoice, and why not. The third was negative evidence in the form of those who had searched on behalf of Bibby ID or Bibby FS not having discovered documentary evidence, in the form of an order, drawing, or otherwise, which appeared to justify the raising of the relevant Invoice. The fourth was information provided orally by former employees of QCFS to the effect that a particular Invoice should not have been produced in the circumstances prevailing in relation to the matters said to justify the raising of the Invoice at the time the Invoice was issued.

The evidence in the fourth category began with responses provided, in particular, by Mr. David Brown, Mr. David Hilton or Mr. Ian Marsden to questions raised by representatives of the Administrators. However, as matters developed, further questions were raised by Miss Laura Sutton, a solicitor employed by PDT, which were answered by former employees of QCFS, in particular, Mr. Brown, Mr. Hilton and Mr. Marsden. In the event Mr. Brown, but not any other former employee of QCFS, gave evidence at the trial. Mr. Brown had been employed by QCFS in the accounts department, with the particular function of raising invoices. Mr. Hilton occupied the position of the person in charge of production, while Mr. Marsden’s concern was sales.

The circumstances in which Mr. Brown came to give evidence were somewhat unusual. When first approached by Miss Sutton his position, as recorded in paragraph 74 of the first witness statement of Miss Sutton, dated 26 May 2011, was:-

“Finally, Mr. Brown confirmed that he would be unavailable during the trial window because he is on annual leave. Reference is made to Exhibit LAS8 page 4.”

At that page of the exhibit what Mr. Brown actually said was:-

“I confirm that this email may be included in the written evidence which will be placed in court and I am unable to attend because I go on holiday from the 7^th July 2011 for 8 calendar days.”

It is to be noted that the trial of the action in fact commenced on 28 June 2011. At that point the estimated length of the trial was four to five days. Thus there was no obvious reason why Mr. Brown should not be called to give evidence on behalf of Bibby FS, if that were considered to be advantageous. One reason why it might not have been thought to be particularly desirable to call Mr. Brown to give evidence may have been his response to a question put to him by Miss Sutton in an e-mail sent on 23 May 2011, namely, “4. Did you have any concerns about Mr. Magson’s ability to operate the business?”. The response which Mr. Brown gave, in an e-mail dated 24 May 2011, was:-

“Mr. Magson, increased the overheads way beyond what the business could afford, this included leasing a dozen or more vehicles, increased salaries, capital repayments on machines being re-financed and factoring charges. There was also large amounts of money being transferred to Key2Law for something known as “Barclays Fee earner”. Mr. Magson also frequently withdrew large amounts of cash for his own personal use, which also adding to the business’s woes. Much of the time QCFS was trading; in my opinion, it was making heavy losses and it could not service its debt.”

Mr. Brown certainly went on in that e-mail to deal with the various Invoices and with one of the Credit Notes in a manner, in each case, consistent with the case of Bibby FS at trial. However, in the passage which I have quoted the main focus of his attention seems to have been what he perceived to be general financial mismanagement, rather than out and out crookery.

What seems to have prompted Mr. Brown to have become anxious to appear as a witness at the trial was him being made aware that in his second witness statement Mr. Magson reported that he had been told that Mr. Brown had broken in to the factory premises previously occupied by QCFS and that he had been cautioned by the police in respect of theft of items from the factory. While it is right to say that the substance of what Mr. Brown said in evidence about the circumstances in which various particular Invoices were produced he had provided previously to those enquiring on behalf of the Administrators or Bibby ID, from the moment of his appearance in court to be cross-examined it was obvious that he felt a considerable degree of antipathy towards Mr. Magson. At various points during his cross-examination Mr. Brown was anxious to share with those in court information which he first took the opportunity to introduce whilst being asked questions by Mr. Alexander about a reference to him in an Audit report compiled on behalf of Bibby ID by Katie Todd. The material exchanges (Transcript, Day 8, page 35 line 4 to page 36 line 22) were:-

“Q. It is and she has recorded that you were not able to assist the auditor on queries.

A. Yes, but there is a reason for that and that reason is because he hadn’t paid any pay as you earn for the life of the business. His VAT returns were decidedly dodgy and he had taken out £142,000 of cash at the ATM machine. He had also transferred £77,000 to his holding company and he had also transferred £33,000 to Key 2 Law’s bank account and she was asking me about those transactions, so I decided to answer and said, “You need to speak to Richard”.

Q. All those points you have just made are not relevant to the question of whether – the issue in these proceedings in relation to the relevant invoices, are they? They are conduct that you do not approve of in relation to Mr. Magson, are they not?

A. Well the reason why I wasn’t – there is only one reason why I wouldn’t answer the questions. There was only one reason why I wouldn’t answer the questions and that’s because it wasn’t my mess. The business was in a calamitous state and it wasn’t my mess and I thought that rather than – I mean I was in a very tricky position because if I had have just – I don’t tell lies. I tell it as it is, so the reason – I could have either lied for him or I could have let him answer it himself and I chose to let him answer it himself.

By the way, he lied and said – and told Bibby at a later date that his holding company had paid all the pay as you earn and that was a blatant lie because it hadn’t. He didn’t pay any pay as you earn for the life of the business, apart from £18,500 and as at admin he owed £244,000.

Q. Now the note –

A. As well as £2 million to everybody else.

Q. Now the note there you see there says that, she records that

“He was not able to assist on queries”

Do you see that?

A. That’s correct because I wasn’t going to answer questions on fictitious invoices. The ledger had about 75 per cent of just total fictitious invoices in it so why would I want to answer those questions? Because I don’t tell lies so I left it with Richard to explain it.”

Mr. Brown repeated his statements that the ledger of QCFS contained 75 per cent fictitious invoices at Transcript, Day 8, page 65 lines 10 – 16; page 77 lines 4 – 19; page 117 line 23 to page 118 line 4 and page 134 lines 1 – 24. Unhappily for the credibility of Mr. Brown those assertions were demonstrably quite wrong. There was put in evidence a copy of an Aged Debtors Analysis of QCFS printed at 11:23:06 hours on 12 April 2010 (“the April Analysis”). The April Analysis showed that, at the date of printing, which for practical purposes could be treated as identical to the time as at which QCFS went into administration, the total value of invoices raised by QCFS, but not paid, was £680,810.65. In this action the total value of the Invoices and Credit Notes was alleged to be £223,471.54, 32.82% of the total value of the invoices listed in the April Analysis. Consequently it appears that it was not remotely the case that, at the date of the appointment of the Administrators, 75% of the invoices on QCFS’s ledger were fictitious. As it cannot possibly be the case that fictitious invoices were paid by those to whom they were addressed, it can never have been the case during the period in which QCFS carried on trading as a manufacturer of tools that 75% of the invoices raised were fictitious, unless the vast majority of those fictitious invoices had been subsequently cancelled by the issue of credit notes, or some other mechanism, to negative them. There was no evidence whatsoever of anything like that ever happening. The only proper conclusion, as it seemed to me, was that Mr. Brown’s evident desire to “get” Mr. Magson was of sufficiently enormous proportions to cause Mr. Brown’s judgment or recollection, or both, to become unbalanced. Certainly it did not seem to me that it was safe for me to rely upon any assertion of fact or expression of opinion by Mr. Brown which was not supported by independent contemporary documentary evidence. While the evidence of Mr. Brown was, to an extent, supported by the evidence of Mr. Hilton, Mr. Marsden and/or other former employees of QCFS, none of those others was called to give evidence. The vehemence of the oral evidence of Mr. Brown and his evident dislike of Mr. Magson at least alerted one to the possibility that former employees of QCFS also disliked Mr. Magson and wished to seek some form of retribution from him for the perceived ills which he had inflicted upon business of QCFS.

The April Analysis was an interesting document. It listed, if I have counted them correctly, 158 invoices or credit notes, addressed to one or other of 27 customers. The dates of the invoices, as recorded, ranged from 3 April 2009 to 7 April 2010. The amounts of the invoices were typically in hundreds, or low numbers of thousands, of pounds. The detail in the April Analysis provides a context within which to consider the Invoices and the Credit Notes. The Invoices seem typically to have been in amounts larger than the usual invoices raised by QCFS, but there seems to have been no obvious pattern in terms of date. It was not, for example, the case that, as the financial situation of QCFS became increasingly parlous towards the date of the appointment of the Administrators, the Invoices started to appear, while genuine work justifying genuine invoices fell off. Listed in the April Analysis were many invoices dated March or April 2010 which did not feature in Schedule F. The dates and amounts of the Invoices and the Credit Notes as set out in Schedule F were:-

It was, perhaps, noteworthy that there was no obvious bunching of Invoice or Credit Note dates. The Invoices were in sequence, except for Invoice 25540, which stood out as not falling within the pattern of the others, and the D suffixes to the Thermotec Invoices. The small value of Invoice 2673 suggested, just as a matter of common sense, that it was unlikely that it had been invented to justify a drawing from Bibby ID. Thus considering the Invoices and the Credit Notes in the context of the April Analysis indicated that it was necessary to adopt a degree of circumspection in considering the evidence that the Invoices had each been fabricated to defraud Bibby ID.

A further relevant consideration in evaluating the evidence concerning the Invoices was that, as seemed to be common ground at the trial, it is, as Mr. Ratten, who was called to give evidence on behalf of Bibby FS at the trial, put it in cross-examination (Transcript, Day 10, page 30 lines 14 – 16), generally speaking more difficult to get debtors of a company to pay up when the company is in administration than when it is outside administration. What this rather delicate form of words possibly somewhat conceals is that it is the experience of those who have sought to recover debts thought to be due to a company in administration that some debtors seek to avoid payment of that which is properly due, either by denying liability or by raising complaints as to the quality of goods or services supplied. Put simply, the point was that, just because someone considered to be a debtor of a company in administration, such as QCFS from 8 April 2010, denied any liability to pay, it did not follow that the denial was justified.

It appears that those who carry on the sort of business carried on by Bibby ID usually take steps to minimise their exposure to the risk of bad debts by engaging in a process described as “Verification”. On the evidence led before me Bibby ID did engage in Verification and a number of individuals were employed specifically to do that work. One of them was Miss Ellie Evans, who was called to give evidence on behalf of Bibby ID. She described her work in cross-examination in answer to questions put by Mr. Alexander. First, in answer to the question, “What did that role [that of credit controller] involve?” she said (Transcript, Day 7, page 2 line 22 to page 3 line 1):-

“I would make verification calls to the debtors of our clients and that would be to call up their debtors, just confirm receipt of invoices, confirm if the invoices were approved for payment and to check with them bank details that they had to make payment to.”

Later in her cross-examination Miss Evans elaborated (Transcript, Day 7, page 16 line 17 to page 20 line 13):-

“Q. Was your only job at that stage basically making verification calls on behalf of Bibby?

A. It was, yes.

Q. Was that their only job as well, the other three?

A. Yes. Lisa Watts was line manager for the other three.

Q. So is it fair to say that basically Lisa Watts was the boss and the other three of you worked for her?

A. Yes.

Q. Just picture yourself sitting at your desk and doing that job.

How do you know who to ring up?

A. I would have a – it would either have been – before it gets disclosed [that is, the fact of assignment of the debt disclosed to the debtor, which did not happen in the present case, at least not at a time relevant to this point], it would be, we would have a ledger, a detailed aged debt report, that we would go through once every quarter to each client and pick out the top 15 I think it was, might possibly be top 20 now, I don’t know and go through and ring the debtors.

We would keep track of what we were doing on a spreadsheet on the system but when it goes over to disclosed, it would be on our C3 system.

Q. Can we stick with the confidential one at the moment, not the disclosed one?

A. Okay.

Q. You said what you do is you would get an aged debtors list; is that right?

A. Yes.

Q. You would look at that and you would look at the 15 biggest?

A. We would normally pick top ten and then some randoms.

Q. Top ten and then some randoms. Did you say you do this once every three months?

A. Yes, we may have been doing it once every month back then. I know it changed later on. I’m not sure when it changed and we decided to do it in a cycle on three-monthly.

Q. Okay, you have an aged debtor thing in front of you, right. Do you make the decisions as to which ones are the random ones you pick or does someone else make that decision?

A. I make that decision.

Q. You make that decision. You have an aged debtor in front of you. Presumably that does not have a telephone number on it, does it?

A. Yes.

Q. It does have a telephone number?

A. Quite often. If it doesn’t then we have a contact list of contact names, telephone numbers of all of the debtors.

Q. So the job is quite simple. You have the aged debtor list in front of you, you pick the top ten, you pick five randoms, you have the telephone number there, you punch in the number to one of them and you ring them up?

A. Yes.

Q. What do you say when you ring them up?

A. “Good afternoon, good morning, [can I] speak to your accounts payable”. When we get through to there we would say, “Just calling up on behalf of your supplier, QCFS. We are doing some verifications on some invoices. Can you confirm to me if you have received -” go down the list of invoices. With each one they normally say yes, no, it is in dispute, never heard of this one, et cetera, and then we would keep a record of all of that on the spreadsheet on the system.

Q. With each customer you ring you would ask them about every invoice that was outstanding would you?

A. Yes, unless – yes.

Q. You would record, yes, no, in dispute, never heard of it or something like that?

A. Yes, whatever their response is to me asking if they’ve received the invoice.

Q. If they said yes, presumably that was good news?

A. Yes.

Q. If they have said no, what would you do?

A. They may have asked for copies. If they hadn’t heard of it before or they hadn’t – they’d perhaps received it but hadn’t received the tools, whatever they would say to me I would either go back to Richard and ask for copies of the invoices or ask him to provide a credit note. You know, sometimes they’d say they needed a credit note to be assigned against that invoice, so I would either go back to Richard or it would be a yes on the spreadsheet.

Q. So you are referring by Richard to Mr. Magson?

A. Yes, sorry.

Q. What you are saying is if you got a yes, everything was fine. If you got any of the others, you would go back to Richard Magson, right?

A. Yes.

Q. You would say to him, “I need a copy of the invoice” or you raise the credit note or problem or whatever, yes?

A. Yes.

Q. Presumably that would not be the end of your job because you would presumably follow that up?

A. Yes.

Q. You would expect to receive whatever you have asked for?

A. Yes.”

As I understand it, the spreadsheet mentioned by Miss Evans was a working document produced separately in relation to each customer of Bibby ID and was updated daily. However, the only version which survived in relation to QCFS and was able to be adduced in evidence covered the period starting on 16 March 2010 and continuing until the end of July 2010. In this judgment I shall refer to that version of the spreadsheet in relation to QCFS as “the Spreadsheet”.

Before coming to the significance for the purposes of this action of Verification it is material to observe that another step taken by Bibby ID with a view to reducing its exposure to the risk of bad debts was to undertake Audits from time to time of the records of customers, including QCFS. Such Audits resulted in the production of Audit reports. On 16 November 2009 Katie Todd of Bibby ID undertook an Audit of QCFS and produced a report (“the November Audit Report”). For present purposes what was material in the November Audit Report was, first, that it identified the top three debtors of QCFS at that time as Birkby, RUP and Thermotec, in that order. The debt due from Thermotec was noted as £62,637. Second, in a section of the November Audit Report for “Client Manager’s Comments”, Mr. Ellison had written, amongst other things, “We are picking up and verifying all high value transactions”.

In the period before Mr. Ellison left, by agreement, the employ of Bibby ID, consideration was being given to taking disciplinary proceedings against him. In that context Mr. Andrew Thompson, who started employment with Bibby ID as Risk Manager on 6 April 2010, undertook an investigation of matters possibly relevant to such disciplinary proceedings. Mr. Thompson produced a report (“the Ellison Report”) dated 29 June 2010, of which a copy was adduced in evidence. The Ellison Report included this paragraph:-

“Bizarrely in October 2009 and November 2009 we were able to verify the invoices on Thermotec Plastics Ltd. and Really Useful Products Ltd. On Thermotec, 2 invoices totalling £56,771.66 were originally assigned by the client on the customer McLaren Automotive. They were the end user of the product and were buying from Thermotec Plastics Ltd. who had asked QCFS Ltd. to quote for the making of the tool. QCFS Ltd. raised the invoices (1^st of 3 staged invoices) in the hope of getting the order, but they didn’t win the order and the invoices were fresh air. The client then moved the invoices in November 2009 from the McLaren Automotive account to the Thermotec Plastics Ltd. account but this was not picked up. We were able to verify the invoices in October 2009 with James Elliott at McLaren and the only reason could have been that they were getting the product via Thermotec Plastics Ltd. and therefore assumed our invoices related to this. On Really Useful Products Ltd. we verified invoices that were subsequently found to be fresh air in November 2009. The only explanation that can be provided is that the customer paid in instalments of £10,500 due to cash flow pressure which the client was not always allocating correctly and that this caused the invoices to be verified in error. I have subsequently seen correspondence from the customer to the client disputing these invoices at this time.”

For present purposes the materiality of that paragraph was the record that both the Thermotec Invoices and the Early RUP Invoices had been the subject of Verification and had apparently been verified. The Verification of the Thermotec Invoices with McLaren Automotive Ltd. (“McLaren”) had apparently been undertaken by Miss Evans.

Unsurprisingly Miss Evans was asked in cross-examination not only about the Verification of the Thermotec Invoices, but also about the Verification of the Early RUP Invoices, and Verification of “high value transactions”.

The exchange with Mr. Alexander concerning the Thermotec Invoices (Transcript, Day 7, page 26 lines 10 to 25) was:-

“Q. … Do you actually recall doing this verification exercise with McLaren?

A. No, I don’t remember it.

Q. But you have no reason to suppose you did not do it, have you?

A. No.

Q. So it looks like you went through the procedure which you described with McLaren in relation to this, does it not?

A. I don’t know. It was a long time ago, I don’t remember each individual call I made.

Q. But you have no reason to suppose that you would not have done the exercise that you described to my Lord, in the context of the telephone conversation with McLaren, would you?

A. No.”

Mr. Alexander then asked Miss Evans about Verification of the Early RUP Invoices (Transcript, Day 7, page 27 line 1 to page 28 line 13, and page 30 line 16 to page 31 line 7):-

“Q. If you go back to page 116, you will see that he was not just referring to a verification exercise having been carried out with McLaren. He also referred to a verification exercise having been successfully carried out with RUP as well, does he not?

A. Whereabouts are you looking, I’m sorry.

Q. The same paragraph we were looking at. It starts with the word “bizarrely”. Do you see that?

A. Yes.

Q. It says:

“We were able to verify the invoices on Really Useful Products Limited.”

Do you see that?

A. Yes.

Q. Do you know if it was you who carried out this exercise in relation to Really Useful Products?

A. I don’t remember.

Q. You do not remember. The only place we would get that answer from is the spreadsheet; is that correct?

A. I would imagine. I don’t know.

Q. Can you think of any other place one would get that information?

A. Not off the top of my head, no.

Q. The spreadsheet, if it was completed properly would record who had in fact done it, would it not?

A. We put our initials at the end of each note so that we know who’s done what.

Q. You said to me that when you made a call in relation to a customer, one would go through all the invoices that were outstanding from that customer and check them all as at the date of the call, correct?

A. Yes.

Q. It would look like a fair assumption that whoever did do this verification exercise in November 2009 in relation to RUP would have succeeded [in] verifying any invoices which were outstanding from RUP as at that date. Is that a yes?

A. Yes.

…

Q. So part of that verification exercise, if you just look at the date column here –

A. Okay.

Q. – on the basis of what you are saying would have included, if you look at Really Useful Products, 14 September 2009; do you see that one?

A. Yes.

Q. 15 September 2009; do you see that?

A. Yes.

Q. And 29 October 2009; do you see that?

A. Yes.

Q. What I am going to suggest to you is that the verification exercise in relation to RUP looks like it drew a positive result in relation to those three invoices as well.

Do you agree?

A. Yes.”

Later in his cross-examination Mr. Alexander asked Miss Evans about other Invoices addressed to RUP, 2669 and 2671 (Transcript, Day 7, page 37 line 9 to page 38 line 19):-

“Q. Really Useful Products.

A. Okay.

Q. Do you remember them as being one of the top three debtors?

A. I don’t know as top three but I know the name as being a big debtor.

Q. They probably would always will be in the group of ten, would they not?

A. I don’t remember.

Q. They are one of QCFS’s biggest customers?

A. I guess they were then, yes.

Q. Would you accept they were likely to have been in the top ten every time?

A. Yes.

Q. So if you carried out the verification process on a monthly basis there is going to be a monthly phone call to RUP?

A. Yes.

Q. If you look at the schedule and you will see six boxes down there is one numbered 2669?

A. Sorry, I thought we were on 19 of the schedule. What page are you on?

Q. It is the page before. Six boxes down, Really Useful Products –

A. Yes.

Q. – 2669 and you will see the date there is 28 February.

A. Yes.

Q. It is also for nearly £20,000. Do you think that’s likely to have been verified with RUP?

A. I would imagine so, yes.

Q. If you go to the next one down RUP [2671], 12 March 2010, £18,249; another large sum, is it not?

A. It is yes.

Q. Do you think that is likely to have been verified with RUP?

A. It is likely.”

Mr. Alexander also turned his attention in the cross-examination of Miss Evans to the Birkby Invoice 25540. After some preliminaries, and referring Miss Evans to the November Audit Report, the exchanges continued (Transcript, Day 7, page 33 line 22 to page 34 line 6):-

“Q. So its pretty likely that someone is going to have sought to verify this invoice with Birkby’s, is it not?

A. Yes.

Q. If they did not get a positive response and they got a “I do not know what this is about; this has nothing to do with us”, what would have been the response to that?

A. I would have contacted Richard, possibly. If they’d come back to me and said that they’d never heard of this invoice or seen this invoice, I’m pretty sure I would have spoken to or tried to speak to Richard about it.”

Mr. Alexander also asked Miss Evans about the Hallam Castings Invoices (Transcript, Day 7, page 38 line 20 to page 39 line 15):-

“Q. If you go over the page to page 19, you will see there is one, Hallam Casting, at the top of the page, 11 March 2010, 2670. Do you see that?

A. Yes.

Q. £23,000: a pretty large sum, is it not?

A. It is, yes.

Q. Likely to have been verified with Hallam Casting?

A. I would imagine so, yes.

Q. If that is likely to have been verified with Hallam Casting if you go back to the previous page, you will see there is another one to Hallam Casting. It is a smaller sum. It is only £7.093 but it is still outstanding, even now apparently.

A. Okay.

Q. You will see Hallam Casting. If a call was made to Hallam Casting in relation to the invoice we have just looked about they would have taken the opportunity to ask about this invoice as well, would they not?

A. Quite possibly.

Q. It is quite likely, is it not?

A. Quite possibly, yes.”

Thus the effect of the evidence of Miss Evans in cross-examination was that, if the Verification procedure which she described had been followed, and bearing in mind the indication in the November Audit Report that all high-value invoices were to be verified, ten of the thirteen Invoices should have been verified and found, at least in response to the enquiries made, to have been received and approved for payment. Mr. Alexander did not ask specifically about the small Invoice 2673, but the logic of the procedure would seem to apply to that Invoice as well. Because of the date of the Taylor Invoices no opportunity arose for any Verification.

In the affairs of mankind there is always the possibility of carelessness or error. However, subject to those possibilities it would seem, from the evidence of Miss Evans, that all of the Invoices, other than the Taylor Invoices, were the subject of Verification at least once. Those dated earlier than December 2009 would have been verified twice prior to the appointment of the Administrators, if Verification took place at quarterly intervals, but more frequently, if Verification took place at monthly intervals. If Verification took place at monthly intervals, then all of the Invoices dated January 2010 or earlier would have been verified at least twice.

It was not possible to say whether Miss Evans, herself, verified any of the Invoices, although it seemed that she did verify invoices numbered 2438 and 2439 after they had been rendered to McLaren. I was impressed by Miss Evans and I am satisfied that, insofar as it fell to her to undertake Verification, she did so conscientiously. However, as Verification of the Invoices, other than the Taylor Invoices, with which this action is concerned may well have been undertaken by one or more of her colleagues, it is appropriate to consider the nature of Verification and the likely risks of error. In fact the chances of a mistake in the Verification process seemed to me to be slim. The process was very simple. Someone undertaking Verification of the invoices rendered to a particular customer of the client of Bibby ID had simply to speak to someone in the accounts payable department of the customer and, in the first instance, to ask two straightforward questions about each invoice: had the invoice been received and had it been passed for payment? The answer to each question had basically to be yes or no. The answer had to be recorded and initialled. As I have noted, copies of the relevant spreadsheets upon which this would have happened were no longer available at the date of the trial, but the nature of the entries could be seen from the Spreadsheet. If the answer to either of the first two questions was negative, something else had to happen – essentially contact had to be made with either the client of Bibby ID or with the Bibby ID client manager to obtain copies of any missing invoices or to initiate some other sort of action. If a customer of the client of Bibby ID denied liability to pay a particular invoice, the ultimate consequence was that the invoice in question was disapproved. Evidence that that never happened in the case of any of the Invoices prior to the appointment of the Administrators was given by Miss Stainer. She told me that she had checked the position specifically for each of the Invoices on the relevant electronic system used by Bibby ID. She described the nature of the information held concerning disapprovals, but she did not produce copies of print-outs of the material concerning the Invoices. That notwithstanding, Miss Stainer was also, as it seemed to me, a careful and accurate witness, save in relation to a mistake as to whether one of the Credit Notes was in fact an invoice. I certainly accept without reservation her evidence that none of the Invoices had been disapproved prior to the appointment of the Administrators. That circumstance tended to confirm that each of the Invoices, other than the Taylor Invoices, had been verified.

In the result it was necessary, in considering the evidence relied upon as indicating that each of the Invoices was a fabrication produced simply to defraud Bibby ID into making a payment in respect of the debt which that Invoice was supposed to represent, to bear in mind that, on the evidence, it appeared to have passed the Verification process.

It is convenient to consider the Invoices for the purposes of this judgment not individually, but in batches in which the link between the Invoices is the addressee of the relevant documents.

I shall consider separately the question of the re-dating of Invoices and the Credit Notes.

It was quite plain from an early point in the trial that it was accepted on behalf of Bibby ID that the Thermotec Invoices had their genesis, at least, in a genuine project. That project (“the McLaren Project”) involved the production of tools to make luggage bins for a proposed motor car to be made by McLaren. The case for Bibby FS was that the McLaren Project did not result in the tools needed being produced by QCFS, and thus the issue of the Thermotec Invoices was not justified. According to Mr. Brown, who was asked about this both by Mr. Steven Colclough, an assistant manager employed by Tenon who assisted the Administrators, and by Miss Sutton, QCFS was asked to provide a quotation in respect of the McLaren Project, but that quotation was not successful. Mr. Hilton of QCFS confirmed to Mr. Colclough that the quotation had not been successful. Miss Sutton spoke both to Mr. Ian Thurman, financial director of Thermotec, and to Mr. Matthew Turner, in May 2011. Mr. Thurman denied that Thermotec owed any money to QCFS or Bibby ID. Mr. Turner, whose role I shall explain a little later, told Miss Sutton that a quotation was given to Thermotec in respect of the McLaren Project, but that that quotation had not been accepted. According to the Spreadsheet Miss Evans spoke to a woman called Elina at Thermotec on 25 March 2010. Miss Evans’s note read:-

“25/3 spoke to Elina she confirmed that as far as she is aware she owes nothing, almost had a fit when I mentioned the amount o/s said I would forward copies.”

The contemporaneous documents which were put in evidence which appeared to be relevant to the issue of the Thermotec Invoices included a quotation dated 2 September 2009 given by a company called Innov8es Ltd.(“Innov8es”) to McLaren for two tools (“the McLaren Tools”) some rather general details of which were set out in the quotation. Mr. Magson explained in his first witness statement that that quotation had been based upon a quotation given by QCFS to Innov8es. The price quoted for the first of the McLaren Tools was £69,900, and for the second £78,200.

According to Mr. Magson one of those behind Innov8es was Mr. Turner. In September 2009 Innov8es encountered financial difficulties. Mr. Turner, Mr. Magson said, established a new enterprise, called Futurcel, through which he intended to acquire a part of the business of Innov8es. So it came to pass that in an e-mail dated 20 September 2009 to Mr. Magson sent from a Futurcel e-mail address Mr. Turner informed Mr. Magson, so far as is presently relevant, that, “I need to discuss the 624 Demist Panel (new tool) and also there are 2 new tools for McLaren”. In his first witness statement Mr. Magson explained that those two new tools were the McLaren Tools. On 28 September 2009 at 12:04 hours Mr. Turner sent an e-mail to Mrs. Jill Brown at QCFS, with a copy to Mr. Magson, in which he said:-

“Please can you raise some quotes for McLaren for me? I’ve attached the quote and obviously need it on Esdale’s paperwork. Do need quotes for parts along with the tools. Please give me a call if anything isn’t clear – [he set out his mobile telephone number]

Perhaps you could email them to me and I can forward them onto my contact?”

QCFS produced at least a quotation addressed to McLaren, dated 28 September 2009, for item 001 of the McLaren Tools. It was described as for “P11 Luggage Bins” and in the sum of £69,900. No copy of a quotation for item 002 of the McLaren Tools addressed to McLaren was adduced in evidence, but a copy of a quotation for the other item, dated 13 October 2009 and addressed to Thermotec, was put in evidence. Simply from the documents, therefore, it seemed likely that Mr. Turner had provided to QCFS copies of the Innov8es quotation dated 2 September 2009 addressed to McLaren, and QCFS had produced two separate quotations dated 28 September 2009 addressed to McLaren in the sums quoted by Innov8es for the McLaren Tools.

At 4:04 pm on 28 September 2009 Mr. Magson sent an e-mail to Mr. Turner entitled “RE: McLaren Quote” and enquiring “Did this get completed …?”. The answer, contained in an e-mail sent one minute later, was:-

“Yes it did! I’ve got a meeting set up for next Wednesday AM at McLaren. They also want to talk to me about more tooling! Tried to call you but your phone doesn’t connect!”

In an e-mail sent to a number of people at QCFS, including Mr. Brown, Mr. Hilton and Mr. Marsden, at 22:32 hours on 28 September 2009 Mr. Magson notified them that:-

“For your information, this has been agreed along with the bentley job also, the data will be next week for maclaren, bentley this week, we need to sit down to manage workloads with Mathew attendance tomorrow afternoon.

…

We have been asked to look at 4 other tools for maclaren next week thus we need to firm capacities tomorrow between us all.”

It thus appears that, at that point, Mr. Turner had told Mr. Magson that the QCFS quotations for the McLaren Tools had been successful and that Mr. Magson shared that information with others at QCFS.

According to Mr. Magson, the ordinary terms of business of QCFS were that one third of the price of a job was payable with order. Consistent with those terms QCFS then, on 29 September 2009 raised two invoices addressed to McLaren, numbered, respectively 2438 and 2439. From the form of the invoices it seemed that it was the practice of QCFS to give a description of the whole of the work to which the contract under which the invoice had been raised related, rather than to the give a description simply of the matters said to justify the raising of the invoice. The legend on invoice 2438 was:-

“To manufacture 1 off tool to produce part DXM-0038679-001-001

Single cavity aluminium mould tool

Single hot feed

Multi movers for side holes

Tool price £69,900.00

Tool price to include

Moldflow analysis

Ureol checking fixtures

PPAP level 3”

However, at the foot of the invoice it was noted that it was “first third for materials” and due for payment at once. The amount claimed in the invoice was £23,300 (that is, one third of £69,900), plus Value Added Tax.

The legend on invoice 2439 was similar to that on invoice 2438, save that the part number was 002 rather than 001, and the actual full price was not noted. However, at the foot appeared the same words as on invoice 2438. The amount of the invoice was £26,066.67 (one third of £78,200), plus Value Added Tax.

It appears that it was these two invoices addressed to McLaren which were verified at some point by Miss Evans.

In an e-mail sent to someone called David, but copied to Mr. Turner, dated 14 October 2009 Mr. Magson said, so far as is presently relevant:-

“The mclaren order will commence next week, I will send across the sizes as soon as we know next week, this will be a back to back deal with Thermatec [sic] on the basis of Mclaren wanting track records with ourselves for the future, I will send those other documents over sometime later today.”

How Thermotec came on the scene did not clearly emerge from the copies of the contemporaneous documents which were put in evidence. In his first witness statement Mr. Magson explained his understanding of its involvement in this way:-

“135.

From whom the payment [for the McLaren Tools order] was to come from was not straight forward given the impending demise of Innov8es and at this stage another company, Thermotec, has become involved. Thermotec were a customer of Innov8es who supplied engineered solutions in vacuum forming and polyurethane mouldings. They were looking to build a relationship with McLaren and therefore approached McLaren to offer to do the moulding in place of Innov8es using the tools which QCFS were manufacturing.

136.

Originally the plan was that QCFS would contract with McLaren and sub-contract the moulding work to Thermotec. That was to what I referred when I said that the orders would be a “back to back deal” with Thermotec in my email dated 14 October 2009 … However, it was subsequently agreed that Thermotec would contract with McLaren and sub contract to us. I was happy to move the order across to Thermotec in order to confirm payment. I told Jill Brown at QCFS this in an email dated 16 October 2009 …

137.

On the same day, QCFS received an email from Ms Stainer of BIDL … asking for McLaren’s company registration number as part of her verification process in respect of the order. This email showed a debt of £56,771.67 payable by McLaren. The fact that BIDL were seeking to verify debts did not mean that BIDL had necessarily funded against them – BIDL’s verification procedures covered all debts notified to BIDL, whether or not they were funded.

138.

On around 18 October 2009 QCFS issued two work orders (one addressed to McLaren and one to Thermotec). …These are not dated but would have been issued around 8 weeks before the delivery date, which was stated on each order to be 18 December 2009.

139.

We were in the midst of the manufacture of these two McLaren tools, as shown by an email from Mr. Turner of Futurcel to me dated 21 October 2009 when he confirmed that the McLaren tools would be used for standard “ABS” plastic and therefore special materials were not needed to trial the tools …

140.

At the end of October 2009 Innov8es ceased trading. The failure of Innov8es was not necessarily an issue because McLaren was the ultimate purchaser. However, also at this stage there was a delay in the production of the car at McLaren’s end. As a result, the production of the tools at QCFS was placed on hold as we could not get the GAs signed off by McLaren or Thermotec.

141.

However, the customer was responsible for the two stage one invoices for each tool already issued. The Claimant has disclosed the two invoices described in paragraph 129 above, addressed to Thermotec and dated 29 December 2010. I assume that these were issued upon receipt by QCFS of a job number from Thermotec (these would not have been re-assigned to BIDL – the original assignment would have taken place in September 2009 as described above and this was just a question of changing the customer identify [sic]). Relevant emails are likely to be on the job files, which as explained above, I do not have access to.

142.

The delay in the manufacture of the McLaren car continued into spring 2011. I understood from Mr. Turner at Futurcel that production was due to re-commence in April, but in the intervening period QCFS ceased to trade.”

Copies of the documents to which Mr. Magson referred in the passage quoted were adduced in evidence. Also adduced in evidence were a number of copies, each with different manuscript additions, of the quotation dated 13 October 2009 in the sum of £78,200 for the manufacture of the 002 item of the McLaren Tools addressed to Thermotec. The narrative on the quotation was similar to the narrative on invoice 2439.

In his e-mail dated 16 October 2009 to Mrs. Brown Mr. Magson wrote:-

“On Monday we need to first stages on Monday when Matthew advises of thermatec [sic] order number, this will then need to be faxed and emailed across as per the previous, under no circumstances send prior to order number as this will be a wasted process as order number required for payment.”

In her e-mail to Mr. Magson dated 16 October 2009 Miss Stainer did seek the company registration number of McLaren, noting that the sum it owed was £56,771.67, the aggregate total of invoice 2438 and invoice 2439.

Undated works orders addressed to McLaren providing for production of 250 mouldings of each of the McLaren Tools were adduced in evidence. Each specified that the date for delivery was 18 December 2009.

In his e-mail of 21 October 2009 to Mr. Magson Mr. Turner did say that “McLaren is bog standard ABS”.

The Thermotec Invoices copies of which were disclosed on behalf of Bibby were dated 29 December 2009. Save for the date, the addition of the full price of £78,200 to Invoice 2439D, and the addition of the “D” suffix to the numbers of the invoices originally rendered to McLaren, the Thermotec Invoices were in identical terms to the invoices 2438 and 2439. The date payment was said to be due remained as 29 September 2009.

Having been asked about the Thermotec Invoices by Miss Sutton Mr. Thurman said, in an e-mail dated 13 May 2011:-

“Further to our previous conversations, I can confirm that we have indeed had dealings with Esdales but nothing like the amounts in question. I attach a screen dump of their ledger with us. Also attached is an email that our Business Director Dave Rose sent to McLaren which basically confirms cheaper prices then [sic] Esdales from another supplier. We were never awarded the business for this job but would not have bought the tooling from Esdales if we had been successful as they were £14K cheaper elsewhere.”

The e-mail sent by Mr. Rose which Mr. Thurman copied was dated 4 November 2009. In it Mr. Rose wrote:-

“Reference my previous correspondence, I can confirm the revised prices from our recommended supplier. The stipulation is that a minimum qty of 500 parts of each must be ordered (at this price).

They will honour the tooling prices originally received from Esdales, but will need to discuss slight modifications to the strengthening ribs due to undercuts in relation to the mould line of draw. We will require stage payments for tooling. The moulding tooling will be available to supply first off (T1) parts at 8 working weeks from receipt of CAD. Obviously we need to add on time for flock coating, and have an understanding of the buy-off criteria.

The prices (subject to VAT) are as follows:-

Front panel luggage bin

Tooling £64,000, parts £37.91 (flocked and delivered to Woking)

Rear panel luggage bin

Tooling £69,000, parts £38.60 (flocked and delivered to Woking)

I hope that this is acceptable to you, and we await your next instructions.”

The totality of the evidence put before me in relation to the Thermotec Invoices suggested that what had actually happened was that QCFS had indeed obtained a genuine order from McLaren for the production of the McLaren Tools, in effect substituting itself for the collapsing Innov8es through the good offices of Mr. Turner. At that point the invoices 2438 and 2439 were raised, addressed to McLaren, and the debts which those invoices represented were notified to Bibby ID. Bibby ID treated the debts represented by those invoices as having been assigned to it. The question of actual assignment is one to which I shall return, but, in practical terms, there was a problem in relation to Stage 1 invoices under the terms of the Bibby ID Agreement, because Stage 1 invoices were required to be notified, but, according to the evidence of Mr. Magson, the debts which they represented were not generally assigned, not least because, with the exception of Stage 1 invoices addressed to RUP, the amounts of the Stage 1 invoices were supposed to be paid to QCFS at once. In the instant case it appears that Bibby ID verified with McLaren invoices 2438 and 2439. Subsequently an arrangement of some sort was made for Thermotec to be substituted for McLaren as the purchaser from QCFS of the McLaren Tools. In those circumstances the Thermotec Invoices were raised, as variations of the original invoices addressed to McLaren, but with “D” suffixes. It seems that they were intended by QCFS to be treated as superseding the earlier invoices addressed to McLaren, and that the Thermotec Invoices themselves were not assigned to Bibby ID. Certainly Bibby ID, and Bibby FS, have ignored the existence of the “D” suffixes and treated the invoices addressed to McLaren as identical to the Thermotec Invoices. Production of the McLaren motor car for the manufacture of a part of which the McLaren Tools was required, was then suspended, and work on them at QCFS ceased.

It was in those circumstances that, when enquiries were first made of Thermotec in April 2010 as to the Thermotec Invoices, liability to make payment was denied. That, of course, continued to be the position at the date of the trial.

It is not for me, in this action, to determine whether or not McLaren or Thermotec, or anyone else, is liable to pay one third of the quoted cost of the McLaren Tools. However, assuming that QCFS contracted with McLaren on what Mr. Magson said were the standard terms of QCFS, it would seem, subject to whatever novation may have been agreed when Thermotec came on the scene, that McLaren was liable to pay the invoices directed to it. Certainly there were additional facts relevant to liability which were not established before me, but what seems quite clear is that the Thermotec Invoices were not fabricated simply for the purpose of enabling QCFS to draw funds from Bibby ID to which it was not entitled. The point made by Mr. Magson that the Thermotec Invoices, as such, were never assigned to Bibby ID was not countered on behalf of Bibby FS. Rather the Thermotec Invoices were not distinguished from the preceding invoices addressed to McLaren, so that actually the case of Bibby FS treated these two sets of invoices as indistinguishable. That, in my judgment, could not possibly be correct.

In his closing submissions Mr. Freedman focused, in relation to all of the Invoices, not so much upon the position adopted at the commencement of the trial that all of the Invoices were entirely bogus, but on the contention that it had not been demonstrated on behalf of Mr. Magson and Mr. Scott that each Invoice was underlain by a “valid and enforceable obligation”. Thus, in respect of the Thermotec Invoices, Mr. Freedman contended, at paragraph 79 of this written closing speech, so far as is presently material, that:-

“The fact that there was no valid and enforceable obligation is shown by the following matters: [there were eight, but for present purposes the important one is the first]

(1)

Stage 1 invoices are not valid if orders were not placed and materials were not ordered. There is no evidence that an order in respect of either tool was ever placed with QCFS, and, therefore, there was no entitlement to raise stage 1 invoices.”

The change of focus was unfortunate. It was not until it became apparent during the trial that the contention that each of the Invoices was completely fabricated faced substantial difficulties on the evidence, that the issue of the actual terms of any contract between QCFS and McLaren, Thermotec, RUP, Hallam Castings, Birkby or Taylor came to the fore. The evidence about any actual contractual arrangements was, at best, incomplete. Mr. Freedman based his attack principally upon what Mr. Magson said were the usual terms upon which QCFS traded, that the first payment in respect of any job was not due until GA drawings had been approved and materials for manufacture of the relevant tool or tools had been ordered by QCFS. Mr. Freedman contended that in respect of each of the Invoices it had not been proved that the necessary preconditions for the issue of an Invoice had been satisfied. However, as it seemed to me, that approach faced a number of difficulties. First, it was not in fact for Mr. Magson and Mr. Scott to prove that, under any relevant contract with a customer, QCFS had been entitled to raise an invoice – it was for Bibby FS to prove the contrary. Because the change of focus only occurred during the trial Mr. Magson and Mr. Scott were plainly put at a disadvantage in rebutting a case that the raising of each Invoice had not been justified pursuant to the terms of the relevant contract with a customer of QCFS, when the original case was that there were no relevant contracts and the Invoices were entirely spurious. The next point was that there was no justification in logic or on the evidence for extrapolating, as Mr. Freedman did, from Mr. Magson’s evidence as to the terms upon which QCFS usually dealt, that each relevant contract underlying an Invoice must have been on those terms. So far as the evidence went, that was not the position in relation to the Thermotec Invoices, whatever the actual contract was. Offer and acceptance as between QCFS and McLaren appeared, at least prima facie, to have been demonstrated, and the involvement of Thermotec was intended as in substitution for the involvement of McLaren in circumstances which pointed to the possibility of a novation. It seems unlikely that QCFS would have agreed to a discharge of a contract with McLaren without there having been some substituted agreement.

The Early RUP Invoices and the Late RUP Invoices (collectively, “the RUP Invoices”) all, on their respective faces, related to the production of tooling (“the RUP Tooling”) for a 64 litre box (“the RUP Box”). The case for Bibby FS was, in essence, that the RUP Tooling was never produced, and thus QCFS had never been entitled to raise any of the RUP Invoices. The position of RUP was explained by Carole Ann Crawford, finance director of RUP, in an e-mail dated 18 May 2011 to Miss Sutton:-

“Thank you for your letter, we were very surprised to receive this. The Invoices you are detailing were pre invoiced by QCFS, work was never commenced and as such nothing was delivered.

Please confirm these have been cancelled and the matter is now fully closed.

The attached email [an exchange between Mr. John Carpenter of Tenon, on behalf of the Administrators, and Mr. Mike Pickles of RUP in May 2010] details the whole fiasco we had dealing with the Administrators, the email of the 24^th May confirms that a full and final settlement was reached, also included in this email is the paperwork trail of the payment.

Your query relates to 64L box which was a bogus transaction which is indicative of why the company went into administration.

If you wish to take this further please contact the administrators but we consider this matter closed.”

It has to be said that, on the evidence adduced at the trial, the position of Carole Ann Crawford as explained in the e-mail dated 18 May 2011 was decidedly sporting. The e-mails attached to that e-mail made no reference at all to the RUP Invoices. Nor did they appear to record that “a full and final settlement” had been made between the Administrators and RUP. Rather the position as between Mr. Carpenter and Mr. Pickles appeared from Mr. Carpenter’s e-mail dated 24 May 2010 to be that RUP had paid to Bibby ID the total of a number of invoices raised by QCFS and the Administrators had permitted RUP to collect some tools. Mr. Carpenter went on:-

“In terms of what was on the Bibby ledger this only leaves the invoices relating to the 0.7 litre lid tooling which had been raised prior to completion of the tooling. I’ve let Bibby know your thoughts on this matter and we can pick up on this when we discuss the digital drawings later on.”

Thus, as at 24 May 2010, there was an outstanding, unresolved issue between RUP and Bibby ID in relation to the 0.7 litre lid tooling, not “a full and final settlement”. The e-mail of 24 May 2010 offered no indication of how the RUP Invoices had ceased to be “on the Bibby ledger”.

It seemed that RUP was an important customer of QCFS. As a consequence, according to Mr. Magson, in the case of RUP QCFS did not require that a Stage 1 payment of one third of the agreed price of a tool be paid with order. Rather, according to paragraph 146 of the first witness statement of Mr. Magson:-

“From establishment of the Esdale Agreement in 2007 through to 2009, funding was provided by BIDL upon first stage (materials), second stage (delivery) and third stage (sampling) submitted to RUP. These invoices were paid by RUP’s asset financier when the tool was complete, i.e. delivered and sampled. BIDL was fully aware of this and RUP’s financiers made payment in respect of invoices to BIDL directly. However, modification and repair work was paid directly to BIDL by RUP.”

Copies of contemporaneous documentation adduced in evidence seemed to support that account of Mr. Magson. In particular, in an e-mail to Mr. Ellison dated 23 February 2009 Mr. Magson explained the alteration in the terms agreed for business between QCFS and RUP:-

“Please see enclosed, with the new change of terms for RUP with payment for new work as per the schedule 45 days from delivery in preference to the previous 120 days. This should also help the business progression and I got agreed through the meetings two weeks ago with the customer.”

It seemed plain on the evidence that the RUP Box was a real project. Mr. Pickles of RUP copied to Mr. Magson an e-mail dated 6 September 2009 which Mr. Pickles had sent to a Mr. Arciniegas. The e-mail said:-

“We are looking at sourcing a new 64 litre tools [sic] – one for USA and one for UK – Delivery December 2009.

There is one massive change and that is that I want to change the tooling totally into split at the corners and moving away from cylinders.

This is really the traditional way of making containers.

I really want one single design and want USA to come up with this.

Richard to start this happening we need the 3D model of the design to USA. Please liaise with USA on this.

Once the design is approved then my proposal is that A1 [Mr. Arciniegas’s company] make a tool and Esdale make the European tool.

Your thoughts please?”

QCFS then produced a quotation dated 9 September 2009 numbered 11815QP in respect of the RUP Tooling. The price quoted was £81,600, but, “If we have the official order by 14^th September 2009, we can offer a discount on this tool price of £1450.00 for two impression tool”. The quotation also stated:-

“Payment Terms

Materials to be invoiced on delivery to QCFS Limited and paid within 120 days from receipt by QCFS Limited. Residual balance to be paid within 90 days or 45 days from satisfactory sampling, whichever is the sooner.”

Mark McLean of RUP sent an e-mail dated 14 September 2009 to Mrs. Brown of QCFS:-

“Richard I have spoken to Mike earlier and he would like to proceed with the 64L Box tooled in the same design as 48L Box. 14 week lead time.”

That e-mail would seem to amount to an acceptance of the offer contained in the quotation dated 9 September 2009 sent by QCFS to RUP.

What next happened was the issue of Invoice 2413. Whilst it was dated 14 September 2009, it provided for “1^st payment PAYMENT DUE 28/01/2010” and was in the sum of £9,465 plus Value Added Tax. A Works Order in relation to the RUP Tooling bore a date stamp of 15 September 2009. The work on the RUP Tooling was given the job number P11656.

Invoice 2414 was dated 15 September 2009. It provided for “2^nd payment PAYMENT DUE 28/01/2010” and was in the sum of £15,015.00 plus Value Added Tax.

On 29 September 2009 Mr. McLean enquired of Mr. David Eastwood of QCFS by e-mail:-

“When do you envisage having 64L Box GA [General Assemby drawing] and 48L XL Lid Component for approval?”

The answer appeared to have been given by Mr. Eastwood in an e-mail dated 12 October 2009 not to Mr. McLean, but to Mrs. Brown, Mr. Hilton and Mr. Magson:-

“The GA is done awaiting DE [David Eastwood] and Mark Maclean to discuss and approval received.”

Mrs. Brown sent an e-mail dated 27 October 2009 to Mr. Magson asking, in relation to the RUP Tooling:-

“Please could someone let me know as soon as this is OK to order. Then I can inform Crusteel.”

A number of drawings relating to job number P11656 were put in evidence, including one marked approved and dated 27 October 2009.

The next material development concerning the RUP Tooling was that Invoice 2480 was raised, dated 29 October 2009.

Technical exchanges concerning the RUP Tooling took place on 16 and 17 November 2009. Mr. McLean wrote to Mr. Eastwood on 16 November 2009 in the following terms:-

“I have met with Mike and Kevin and discussed the 64L Box Model. Regarding the 2.9mm wall thickness on the sides Mike would like this to be 2.3mm. Is there any reason that we cannot have this?

Mike is of the opinion that if the tool polishing is perfect and there are no undercuts then we will not need the extra wall thickness. Can we revert back to 2.9mm if this does not work?

If you are happy [with] this please can you change this model and send to Alfonso [Mr. Arciniegas].”

The response, sent on 17 November 2009, was:-

“Mike in response to this e-mail as you know all the 64L box tools have long sidewalls of 2.9mm.

These are two separate issues that are now being ignored. We are happy to make the sidewalls 2.3mm although due to the extent of the modelling there will be additional cost. There is an additional cost of remodelling the component £500, should you then wish to alter the tool after manufacture to accommodate the 2.9mm wall section there would be a modification cost of £3300 to re-cut the cavity sidewalls, polishing and programming. In the case where there is a ‘hanger’ in the tool to carry the folders it is preferable to take metal from core.

I am trying to save cost here Mike as I think that going to the 2.3mm wall section may not be the thing to do as it was problematic.”

In an e-mail dated 1 December 2009 of which a copy was put in evidence Mr. McLean asked Mr. Marsden, “Has the steel now been ordered for 64L Box?”

It seems that further work on the RUP Tooling was put on hold for a period after that e-mail. How matters developed from towards the end of January 2010 was revealed by a string of e-mails of which copies were put in evidence. The first was one dated 23 January 2010 written by Carole Ann Crawford to Mr. Brown:-

“All is quiet on the Esdale front, a bit confused by some of the recent invoices.

Please email me a statement of account … please ASAP.”

Mr. Brown did what he was asked and there followed a series of e-mails which had no particular relevance to the issues in this action. The story can be taken up with an e-mail from Carole Ann Crawford to Mr. Brown dated 1 March 2010:-

“I am currently reconciling the account and then Mike will approve payment for mods.

I require credit notes for 64L Tool as work [h]as not yet commenced (the invoices are Sept/Oct which cannot be correct) … please advise when I can expect them.”

At that point, at least, it seemed that Carole Ann Crawford accepted that the Early RUP Invoices were in principle properly raised, but, in effect, RUP wished to have longer to pay them because of the delay in the work being undertaken on the RUP Tooling.

Mr. Magson replied to Carole Ann Crawford in an e-mail of 2 March 2010:-

“The minor credits will be raised and then applied accordingly against the invoices and then re raised when applicable against the work done. These will be re raised in accordance with the order and terms, on the later delivery of product and materials.

With regards to materials, I believe the materials were on hold for significant period of time, but my understanding is that all documentation for manufacture is now approved as per discussions with mark [sic], and work commencing Monday on these goods.

We have no ability to cancel goods once ordered from steel suppliers hence the original raising of paperwork.

I would be grateful if payment will subsequently be released, thanks again for your continued support and business.”

Carole Ann Crawford replied the same day:-

“I have just had a discussion with Mike and he has requested we re-confirm our terms of purchase to you which have been established over many years of trade.

Our payment terms are 45 days from approval of tool – so no payment until we have approved mouldings.

There are currently two tools pending.

Please advise the status of each tool and revised delivery dates, so we can decide if your proposal for delivery are [sic] acceptable.”

Mr. Magson replied, in his turn, in an e-mail dated 4 March 2010:-

“The 0.7 litre box is complete the manifold has been purchased today and will be fitted next week. The 64 Litre box we have been awaiting confirmation to proceed which we received 1 week ago, and the materials are finally being delivered early next week with a 8 week manufacturing time. These were ordered in late October and ready for delivery mid November, but I understand approval of the tool had not been gained at this stage and finally in the last few weeks approved. Naturally if you wish ourselves not to proceed with this tool, the material value will be billed and you can collect yourselves on this basis and cancellation of this project.”

What happened concerning the Late RUP Invoices was not very clear on the contemporaneous documentation put before me. Invoice 2669 was dated, in typescript in the copy adduced in evidence, 11 March 2010, but it had been re-dated in manuscript, in circumstances and by whom were not explained in evidence, 28 February 2010. Invoice 2671 was dated on the copy presented in evidence, 12 March 2000, but it would seem that that was an obvious error. Invoice 2673 was dated in typescript 16 March 2010. In his first witness statement, at paragraph 168, Mr. Magson said, about Invoice 2669 and Invoice 2671:-

“Invoices 2669 and 2671 appear to be duplicates. I recall being told by Ian Marsden and Tony Carter in QCFS’s sales team with confirmation from Tony Carter [sic] in accounts that 2669, the first slightly larger invoice, had been raised in error with the wrong amount, and that accordingly a credit note was applied to the facility with BIDL to reduce it back down to the correct amount. The Invoice was for the steel plates for the tool. The last invoice numbered 2673 was for a final item ordered.”

As I have noted, one of the issues which arose in this action was whether Bibby FS could demonstrate that the debt represented by each of the Invoices had been assigned to Bibby ID. A principal purpose of Miss Stainer being called to give evidence was to try to deal with that issue. She produced documents in three categories. One was called “C3 Availability Movement Report” (“the Availability Report”) which showed, amongst other things, the total face value of the debts assigned by QCFS to Bibby ID on each day in the period 1 September 2009 to 30 April 2010. The Availability Report also showed the total amount of credit notes notified to Bibby ID each day by QCFS, the total amount disapproved by Bibby ID each day, the total sums received by Bibby ID in respect of assigned invoices each day and the total amounts paid out by Bibby ID each day to QCFS. A column indicated what, if anything, was the balance remaining which QCFS could draw under the facility.

The second category of document was called “Client Transaction History” (“the Transaction History”). The Transaction History comprised a number of sections. One section showed the date and timing of each assignment of debts to Bibby ID made in bulk by QCFS in the period 3 July 2009 to 7 April 2010. Obviously this information was also contained in the Availability Report. Also in the Availability Report was information contained in other sections of the Transaction History which dealt with credit notes notified between 15 July 2009 and 11 February 2010, receipts between 23 July 2009 and 22 January 2010 by Bibby ID of payment of debts assigned, and payments made by Bibby ID to QCFS between 18 September 2008 and 31 March 2010.

Miss Stainer also produced extracts from a document entitled “Total Company Balance Summary by Client” (“the Balances”) relating to QCFS over a period between 1 July 2009 and 30 April 2010.

From the Availability Report and the relevant section of the Transaction History it was plain that no credit notes were notified to Bibby ID by QCFS after 11 February 2010, so it could not have been the case that Invoice 2669 was cancelled by a credit note about which Bibby ID was informed. However, it was also not possible positively to see that the amount of Invoice 2669 had been assigned to Bibby ID at all. The problem of proving what debts had been assigned, and what not, arose out of the fact that, in principle, an assignment, when made, was made of a bulk of invoices. The bulk might include just one invoice, as for example, the assignment on 14 September 2009 of an amount of £10,884.75, the value of Invoice 2413. However, on 15 September 2009, the date of Invoice 2414 in the sum of £17,267.25, amounts of debt totalling £2,815.59 and £24,397.25 (assignments were made electronically and uploaded twice daily) were assigned, and logically this would have included the value of Invoice 2414. Miss Stainer was asked in cross-examination about the assignment of Invoice 2669 and the assignment of Invoice 2671 (Transcript, Day 11, page 106 line 10 to page 108 line 2):-

“Q. Invoice 2669, if you go to paragraphs 31 and 32 of your witness statement you say that you cannot say when this was notified, correct?

A. Yes that is correct.

Q. Which means that you cannot say when this was notified, correct?

A. I cannot say when, no.

Q. But what we do know is that it cannot have been assigned to Bibby between 28 February and 11 March 2010, can it?

A. I haven’t looked into that so I don’t know.

Q. Well –

A. Why not?

Q. If you go to –

A. No, you are correct.

Q. Yes?

A. You are correct.

Q. That’s correct?

A. Yes, yes, there isn’t any invoice for that value.

Q. Indeed the earliest it could have assigned, and we don’t know if this happened at all, is 17 March, correct?

A. Presuming it wasn’t before 28 Feb, yes..

Q. I am sorry?

A. Presuming it wasn’t before 28 Feb, yes.

Q. You say that the invoice was actually assigned on either 28 February or 11 March. That doesn’t look right either, does it?

A. No. I believe that is what Andy had put in his. I am not entirely sure.

Q. Sorry?

A. No, that is the date of the invoice.

Q. Okay. Invoice 2671, you say you uploaded that on 12 March. You say that at paragraph 33, don’t you?

A. Yes.

Q. But the amount isn’t actually the same, is it? It’s out by a penny?

A. 1p, yes.

Q. Can you tell me how you know it wasn’t uploaded on 17 March?

A. Again the same reason, because he needed the money.

Q. So you can’t tell me it wasn’t uploaded on 17 March, can you?

A.

I don’t believe it was.”

Elsewhere in her cross-examination Miss Stainer referred to Mr. Magson always needing money, and thus wanting to assign debts due to QCFS to Bibby ID as soon as possible, for example Transcript, Day 11, page 115 lines 14 – 15. This need seems to have made quite an impression upon her, and I accept that she is right about it. However, it creates a problem in relation to Invoice 2669. The face value of that invoice, £19,975, was exceeded by the aggregate total of debts assigned once only between 26 February and 7 April 2010, according to the Availability Report and the Transaction History, and that was on 17 March 2010, when £26,241.31 was uploaded. The debt represented by Invoice 2669 was either included in that sum, or it was never assigned. However, the face value of that invoice was a significant sum – a shade under £20,000 – and one would have expected the debt which it represented to be assigned as soon as the Invoice had been raised, if it was to be assigned at all. The case for Bibby postulated that there had been a delay in assignment of at least six days (if the invoice was properly dated 11 March 2010), and possibly as long as 17 days (if the proper date of the invoice was 28 February 2010). Not only that, but it also postulated that Invoice 2671, later in time, was assigned before Invoice 2669. That seems unlikely. The two Invoices cannot have been assigned together, because the aggregate total of the two was £38,224.99, and no total of that amount or more was assigned to Bibby ID by QCFS after 25 February 2010. In my judgment the only proper conclusion is that in fact the debt ostensibly represented by Invoice 2669 never was assigned by QCFS to Bibby ID. While Mr. Magson appeared to be in error as to the exact mechanism by which the benefit of that invoice was not assigned to Bibby ID, on the central point he seems to have been correct – the debt was not assigned.

Apart from speculation on the part of Bibby ID, the only evidence to suggest that in fact the debt apparently represented by Invoice 2669 had been assigned was reference to it in the April Analysis produced by QCFS – in fact Mr. Brown – and presented to the Administrators. It seems that the details of the invoice were simply included in the April Analysis in error. It was in that list that the face value of Invoice 2671 was recorded, inaccurately, as £18,250, when it was in fact £18,249.99. It seems possible, in the light of that error, that the debt apparently represented by Invoice 2671, was, erroneously, assigned to Bibby ID as a debt of £18,250. However, whilst it may appear to a reasonable person that a difference of 1p. in an amount of £18,249.99 is insignificant, to a computer that difference would produce a problem, for a payment of £18,249.99 against a recorded debt of £18,250 would not clear the debt and a balance of 1p. would continue to be recorded until the end of time, unless a human agency intervened. Anyone accustomed to working the accounting functions of computers would know this. Consequently there has to be a question mark over whether the debt apparently represented by Invoice 2671 was in fact assigned by QCFS to Bibby ID.

Miss Evans, after the appointment of the Administrators, sought to verify the invoices rendered to RUP by QCFS which Bibby ID believed had been assigned to it. The Spreadsheet recorded information which she obtained on enquiry on 13 April 2010 in respect of both Invoice 2669 and Invoice 2671 that, “invoice has not been received nor tools”. The fact that RUP had not received Invoice 2669 was consistent with that Invoice having been superseded. Miss Evans recorded nothing in relation to Invoice 2673. In the result, therefore, and contrary to my general conclusions concerning the process of Verification, it seems that Invoice 2669, at least, cannot have been verified.

Mr. Magson produced as part of his evidence a document entitled “Bill of Materials” relating to the RUP Tooling. He contended that it could be seen from the list of items included in that document that the materials for the production of the RUP Tooling had been ordered prior to the appointment of the Administrators and that most of those materials had also been delivered. I think that the suggestion was that, in those circumstances, the raising of Invoice 2671 and Invoice 2673 was justified. Mr. Magson’s interpretation of the Bill of Materials was disputed on behalf of Bibby, but somewhat at third hand. The different interpretation of the Bill of Materials came, via the evidence of Miss Sutton, from Mr. Marsden and Mr. Tony Carter, formerly of QCFS. It was not possible to resolve the difference between Mr. Magson, on the one hand, and Mr. Marsden and Mr. Carter, on the other, without hearing Mr. Marsden and Mr. Carter cross-examined on the points in dispute.

While it was difficult to assess what it meant, for it contained no list of any item or items delivered, there was put in evidence a copy of a delivery note issued by QCFS to RUP in relation to the RUP Tooling which recorded that something had been despatched on 11 March 2010 and that someone on behalf of RUP had signed the delivery note to acknowledge that fact.

In the end it was clear, as it seemed to me, that the assertion of Carole Ann Crawford in her e-mail dated 18 May 2011 that the RUP Box was “a bogus transaction” was quite untrue. It was a genuine project in relation to which it appeared that QCFS and RUP had concluded a contract. A colleague of Carole Ann Crawford, Helen Williamson, in a conversation with Miss Sutton recorded in an attendance note dated 17 May 2011, “confirmed that payments [in respect of the RUP Tooling] were split into 6 payments which is not unusual.” Implicitly recognising that the evidence was consistent with what was a genuine transaction, Mr. Freedman in cross-examination of Mr. Magson again rather shifted the focus onto whether, under the terms of the agreement between QCFS and RUP, QCFS had been entitled to raise the particular Invoices which it had when it had. That largely degenerated into arguments between Mr. Freedman and Mr. Magson as to whether, at the dates of particular Invoices, RUP had, or had not, approved GA drawings or QCFS had, or had not, ordered or received materials for the making of the RUP Tools. The arguments were really at the level of Mr. Magson asserting that any precondition necessary to be met before rendering a particular Invoice had been met, with Mr. Freedman pointing out that there was no documentary evidence in support of that which Mr. Magson asserted. Mr. Magson accepted, by and large, that the documents before the court did not demonstrate that which he asserted. So far as this trial was concerned, therefore, the issue depended, first, upon whether it was necessary to reach a conclusion on the issue of the justification of each Invoice rendered by QCFS to RUP which was said to have been rendered improperly, and, if so, how to resolve that issue. As I have pointed out in relation to the Thermotec Invoices, the case for Bibby FS as opened was that all of the Invoices were simply fabrications. There was no pleaded case at the commencement of the trial that an Invoice under a genuine transaction had been rendered prematurely or in advance of the achievement of some condition precedent to QCFS being entitled to render it. Mr. Magson had plainly not had a proper opportunity to meet the case in relation to the RUP Invoices as it developed. It seemed clear that other relevant documents might exist, and that cross-examination on the contributions emanating from RUP employees, such as Carole Ann Crawford, might shed illumination on what the arrangements between QCFS and RUP had actually been. In those circumstances I do not feel able to reach any definite conclusion as to whether any particular one of the RUP Invoices, other than Invoice 2669, was not properly rendered at the date of delivery. I do, however, note that the Early RUP Invoices seem to have been verified, that Invoice 2669 was never rendered or assigned to Bibby ID, that Invoice 2671 on its face was not due for payment until 28 May 2010, and that Invoice 2673 was of modest amount. It is true that Carole Ann Crawford sought, in her e-mail of 1 March 2010 to have the Early RUP Invoices cancelled by credit notes, apparently on the grounds of the dates upon them. She did not, however, suggest that they ought never to have been raised, or that it would not be appropriate for them to be re-issued with later dates for payment. Her mention, in her e-mail of 2 March 2010, of the terms of purchase of RUP, looked like an attempt to vary the contract which the parties had made. In the result I am not satisfied that the RUP Invoices, to use the expression favoured by Bibby witnesses, were “fresh air”. I am also not satisfied that it had been demonstrated by the evidence that Mr. Magson had acted dishonestly in causing to be raised the RUP Invoices, or any of them, at the times and in the manner in which he did.

The case for Bibby FS was that each of the Hallam Castings Invoices was simply fictitious, produced by QCFS without any justification whatsoever.

The copy of Invoice 2550 produced in evidence was dated 16 December 2009 and was said to relate to a job entitled “AMOT Tooling”. The narrative of the Invoice read:-

“Design and manufacture 4 imps to fit 1 bolster

Single impressions

P20 imps Nitrided

Pin ejection

Commercial finish

Bolsters etc supplied by Hallam”

The Invoice, on its face, was for the first third payment, due with order. The sum specified as due was £6,167.90, roughly one third of £18,500, plus Value Added Tax.

There was produced in evidence a quotation dated 7 December 2009, signed by Mr. Marsden on behalf of QCFS and addressed to Mr. Colin Woodruff of Hallam Castings. The quotation was for work precisely mirroring the narrative on Invoice 2550. The price quoted was £20,000 and the terms of payment specified were, “1/3 with order 1/3 on delivery 1/3 on approval max 60-days from delivery”. The quotation had been preceded by an e-mail dated 19 November 2009 sent by Mr. Marsden to Mr. Woodruff, in which Mr. Marsden said:-

“The components we looked at yesterday, all to go in one common bolster I would be looking at an 8/9 week delivery.

As there is only about 4 ½ weeks left this year delivery would probably be the last week in January.

At the £18500 price.

We could bring it forward by working premium time this would put the price up to £20000.

Have you got the order to place now and a suitable bolster set for them to fit in because to hit any of the dates we are going to have to move fast.

Let me know your thoughts.”

Before the quotation was sent on 7 December 2009 Mr. Marsden sent an e-mail to Mr. Raj Kodali of Hallam Castings at 13:59 hours that day, saying:-

“The official quote will be with you this afternoon.

We need order cover and first third deposit before we commence with the tooling as agreed with Richard.”

The response to the quotation was an e-mail sent by Mr. Kodali to Mr. Marsden at 10:50 hours on 8 December 2009:-

“As far as I am aware the agreement with Richard was GBP18,500. I think this price needs to be accepted by you guys to proceed further.”

Mr. Magson was notified of Mr. Kodali’s position. At 17:14 hours on 8 December 2009 he sent an e-mail to both Mr. Marsden and Mr. Woodruff:-

“I have agreed to proceed with this on this occasion at this price, but original agreement was this was the only costs the company could afford. Rob is stating that it will cost the additional funds for the sampling, product, isir [sic] and also work needed.

This is an eight week manufacturing and unless payment is in to our account cleared funds by Thursday this week to ourselves, we have limited options for steel supplies as 5 days delivery and drawing needed first, as many shut down the middle of next week for deliveries for the xmas [sic] period. They have deliberately lead [sic] this on for ten days now, as such the delivery is as specified and colin [sic] was in agreement with this earlier, which is contrary to the discussion I just had with Rob, about this having to be a January delivery … the manufacturing time is the manufacturing time.”

A revised quotation in the sum of £18,500 for the AMOT tooling was produced, which was also dated 7 December 2009. On the documents to which I have referred it appeared that a contract was concluded between Hallam Castings and QCFS for the design and manufacture of the AMOT tooling.

What happened after the exchanges to which I have referred was obscure. However, after the appointment of the Administrators Miss Evans sought to verify Invoice 2550, along with a number of other invoices with which this action is not concerned. One of the invoices which Miss Evans sought to verify was numbered 2111. On the Spreadsheet the note beside Invoice 2550 was “same as note on inv 2111”. The note on invoice 2111 was:-

“16/3 amount disputed EE 8/4 Robert Pickersgill has confirmed that this inv has been paid via cheque, he is coming back to me on 9/4 via email to let me know what date this has been cashed EE ”

At that point, therefore, according to what Mr. Pickersgill of Hallam Castings apparently told Miss Evans, Invoice 2550 was not merely genuine, but had been paid.

The copy of Invoice 2670 which was adduced in evidence indicated that the title of the job to which it related was “Street Lighting Tool”. The Invoice was dated 11 March 2010 and described the work to which the job related as:-

“To design and manufacture 6 off 1 impression die cast tooling.

To manufacture street lighting fittings as per your cad.”

The value of Invoice 2670 was £19,983.34, plus Value Added Tax, and that sum was said to be, “1/3 with order for materials”.

No contemporaneous documentary material was put before me in relation to Invoice 2670 other than the Spreadsheet. What Miss Evans there noted was:-

“16/3 not received yet EE 25/3 Richard told Carrie on the 16/3 that she [sic] wanted a statement sent and these invoices sent through Richard has not done this and called Carrie in a worry that she hadn’t received them before, told Martin and disputed in mean time EE 8/4 received call from Robert Pickerskill he is very concerned, doesnt [sic] know anything about this invoice or what it could be for, thinks Richard has created this on the sly, he is now concerned that he will not receive the tools he is awaiting EE 13/4 AT [Mr. Thompson] has confirmed admin[istrator]s say pre invoiced EE”

When asked by Miss Sutton to confirm that he had used the expression “on the sly” Mr. Pickersgill, as his name is correctly spelt and who is the managing director of Hallam Castings, declined to do so. In an e-mail dated 18 May 2011 he wrote:-

“I don’t recall using the term “on the sly” … and this is not a phrase that I have ever used; maybe the chap at Tenon paraphrased. The facts as they seem to us are that invoices for tooling for which no order had been placed and no work done were generated into the QCFS system and presumably used as a basis for drawing down cash.”

When Miss Evans was cross-examined she was confident that, notwithstanding what he said in May 2011, Mr. Pickersgill had used the expression “on the sly” in talking to her on 8 April 2010. Mr. Pickersgill was not called to give evidence and it is consequently impossible to reach any conclusion as to what was actually said. However, Miss Evans noted that in the conversation on 8 April 2010 Mr. Pickersgill was “now concerned that he will not receive the tools he is awaiting”. To what exactly that referred it was not possible to say. However, it did appear from two letters which Mr. Pickersgill had written, one dated 16 April 2010 to Mr. Colclough and another, undated, to Mr. Thompson of Bibby ID plainly, from its contents, written later, that Mr. Pickersgill was seeking to manoeuvre for advantage following the appointment of the Administrators.

In the letter dated 16 April 2010 to Mr. Colclough Mr. Pickersgill asserted that there was a balance in favour of Hallam Castings of £1,606.21 in relation to its dealings with QCFS:-

“Further to out [sic] telephone conversation this morning I set out below our summary of the amounts due for tooling supplied by the above company.

Invoice no 2111 £3,459, I confirm that we have no written guaranteed order from our customer for 10,000 components. This amount is only payable when 10,000 components have been produced from the tool, and so far less than 3.000 have been supplied.

Invoice nos 2394, 2477, 2614 and 2636 are invoices which we appear to be obliged to pay, totalling £2,992.50 plus, not on the Bibby ledger, invoice 2691 for £740.25 total £3,732.75. We need a copy of this invoice please.

Invoice 2585 £2,115 is disputed on the grounds that the inserts are not fit for purpose. This is being confirmed by an independent test by Mason Pinder toolmakers today (instruction letter attached).

There is a total of £2,108.01 in allocated payments from us on the Bibby ledger.

We have paid £3,231.25 on 9^th March which is not on the Bibby ledger.

This therefore reveals a net credit position for us of £3,732.75 less £6,339.26 being £1,606.21.”

However, in a letter to Mr. Thompson Mr. Pickersgill agreed a balance of £3,951.50 as outstanding in respect of amounts owing to QCFS:-

“Thank you for your letter of 23^rd April confirming an outstanding balance of £3,951.50 in respect of amounts owing to QCFS. I enclose our cheque for £501.50 herewith, and confirm that the balance owing, £3,450, will be transferred by BACS to your Barclays account [the number of which was set out] on or before 30^th June 2010.”

What prompted the change of position between the dates the two letters were written did not emerge in evidence. However, that there was a change did indicate that the assertions of Mr. Pickersgill as to the state of accounts between Hallam Castings and QCFS were not necessarily reliable. It was also notable that, despite the concern about receiving tools which, according to her, Mr. Pickersgill expressed to Miss Evans, neither of the letters which I have quoted made any reference to tools belonging to Hallam Castings which were said to be in the possession of QCFS. An obvious possibility, given that the concern was noted as expressed in the context of Invoice 2670, was that Mr. Pickersgill’s concern was that Hallam Castings would not receive the tool which was the subject of that Invoice if it paid it.

In the result it seemed that, in respect of Invoice 2550, there was at least an underlying transaction at the level that a quotation was given which was accepted for the AMOT tooling. The evidence, in the form of the Verification undertaken by Miss Evans, suggested that in fact the initial position of Hallam Castings was that it had settled Invoice 2550. That could only have been so if it was accepted that Invoice 2550 had been properly rendered. Later protestations of Mr. Pickersgill that Invoice 2550 was not raised legitimately need to be considered in the context of the correspondence which he generated which I have set out. I am not satisfied that Invoice 2550 was bogus, as contended on behalf of Bibby FS. Equally I am not persuaded that Invoice 2670 was not based upon a genuine transaction. Even Mr. Thompson, at least as recorded by Miss Evans, seemed to recognise by 13 April 2010 that Invoice 2670 represented a case of invoicing prematurely, rather than inventing a completely fictitious basis of claim. I am not in a position, on the evidence led before me, to reach a conclusion as to whether Invoice 2670 was in fact bogus. On the face of the invoice it was not, for it was noted as a payment due with order in respect of materials. Bibby FS did not discharge the burden of demonstrating that, if Invoice 2670, as I incline to think, was genuine, it was rendered at a time when, under the relevant contract between QCFS and Hallam Castings, no payment was due.

I shall deal separately with Credit Note 01695c which it was alleged was relevant to Birkby. The circumstances surrounding the issue of Invoice 25540 it has to be said were far from clear on the evidence adduced during the trial. It seems first to have surfaced in an Aged Debtors Analysis (“the November Analysis”) printed by QCFS on 4 January 2010 and relating to the position as at the end of November 2009, in which Invoice 25540 was described as dated 20 October 2009 and in the sum of £10,505.57. However, it did not appear in the preceding Aged Debtors Analysis (“the October Analysis”), which set out the position as at the end of October 2009. Having appeared in the November Analysis, it was noted in the Aged Debtors Analysis (“the December Analysis”) printed on 14 January 2010 which recorded the situation as at the end of December 2009, and in the succeeding month’s Aged Debtors Analysis (“the January Analysis”), with the same details. Invoice 25540 was noted in the Aged Debtors Analysis (“the February Analysis”) printed on 15 March 2010 concerning the state of play at the end of February 2010, with the date 20 November 2009, and had the same date in the April Analysis. However, the copy of Invoice 25540 which was put in evidence was dated 12 January 2010 and in the sum of €11,556.13. That was calculated as €9,835 plus Value Added Tax. Someone had noted on the copy of Invoice 25540 that the equivalent sterling value of €11,556.13 was £10,505.57. That equivalent would be based on an exchange rate of £1 = €1.10. The job title given on Invoice 25540 was “1 + 1 Imp Deck Side Trim Upper 64733/4”. The narrative on Invoice 25540 was:-

“TOOL NO. 12958

Design & manufacture 1 only – 1 + 1 imp. Injection mould tool to produce the – Deck Side Trim Upper. 64733/64734.

Impression materials High Hard P20 & P20.

Impressions cut directly into above plates, Other materials EN8, Side cores operated by angle pins.

Up & aways, Pin & sleeve ejection, Hydraulic ejection, 3 drop hotrunner [sic] feeding edge gates.

Cavity fine polish, Core standard polish.

Texture prep & sampling included in price.

Texture not included in price.

All as per your tool spec.

Original Terms – 80% Due January 2010, 10% Due February 2010, 10% Due March 2010.

Confirmation 12/01/10 MC/RM

Exchange rate 1.1 Euro to £1 Sterling as per the agreed meeting of the 12^th January 2010.

Payment dates 25,000 Euros by wk ending 16^th January 2010, 25000 Euros by wk ending 24^th January on account payment to be made against this specific project including Deck Side Trim Upper and Access Panel total 132,000 Euros plus Vat, and linked accordingly and invoice until conclusion of the SDS score.

Residual Balance in line with terms, subject to relevant approvals, part payments on account will apply with regards to the above noted linkage clause.

No mgmt [management] charges applicable.

Formal withdrawal of letter issued 11/01/10 to M Spence to apply

Separate invoice for Discrepancy in tooling value between both orders to be discussed between RM/MF to the value of 9835 euros plus VAT.”

On the face of Invoice 25540 it was for the amount of the “Separate invoice for Discrepancy in tooling value” discussed, it seemed, between Mr. Magson and Mr. Spence. The only illumination provided by what appeared to be a contemporaneous document of which a copy was put in evidence was what was said in a manuscript letter on Birkby headed paper dated 15 January 2010 and written by Mr. Robert Maxfield of Birkby to Mr. Magson. Mr. Maxfield wrote:-

“Please find enclosed your invoice ref. 25540, returned as I do not recognise the value of 9835 euros. Please note that this invoice has not been booked in to our system by the finance department. If you want to re-present it, please provide me with an explanation of the build up of the value. I am contactable on [telephone number given] if you wish to discuss.”

Whilst it was clear from the terms of that letter that Birkby did not accept Invoice 25540 as presented, the problem seemed to focus on the amount of it, perhaps in particular the Euro amount. However, it was contemplated that the invoice might be re-presented, as long as a breakdown of the calculation of the sum claimed was provided, and Mr. Maxfield was prepared to discuss the matter. It thus seemed that Birkby recognised that there was some substance in the Invoice, even if the amount was in dispute.

The case for Bibby FS was that there was no evidence that an order had been placed by Birkby with QCFS which justified the raising of Invoice 25540. It may be that no order had come to light, but, given the terms of the narrative of the Invoice itself and those of Mr. Maxfield’s letter, that did not seem to be to the point. On the face of Invoice 25540 there had been some discussion between representatives of QCFS and representatives of Birkby arising out of past dealings which were considered to have resulted on the QCFS side in an agreement to raise an invoice in the sum of €9,835 plus Value Added Tax. Consequently what mattered was what the agreement had been, rather than whether there was a particular order from Birkby.

In his first witness statement Mr. Magson gave some account of dealings between QCFS and Birkby, but I confess that it was difficult to relate his account to the narrative on Invoice 25540 or to Mr. Maxfield’s letter. What Mr. Magson said was:-

“193.

In May 2009 an agreement was reached with Birkby’s Plastics Limited (“Birkby’s”) for the provision of two tools for Borgers (the end user to be Toyota). The tools were to be designed and manufactured by QCFS.

194.

As well as the cost of the tools themselves, an additional £10,105 was to be paid by Birkby’s on the larger tool if the tool was produced by a certain date, referred to by us as “premium working time”, and another £9,844.70 of premium working time was payable on the other smaller tool.

195.

From September to December 2009, the tools were manufactured, delivered and sampled. The smaller tool was delivered on time and sampled successfully and an invoice for £9,844.70 in respect of the premium working time was raised and paid some time in January 2010.

196.

The larger tool was also delivered on time. However, Birkby’s encountered issues on sampling which led to modifications being required. We were due to be paid 80% of the price of the tools themselves in January 2010. However, on 7 January 2010 Lee Murgatroyd of Birkby’s informed me that he could not afford to pay QCFS until they were paid by their customer.

197.

As a result I emailed Mr. Murgatroyd on 7 January 2010 stating that “as it stands now we are working on the tool [i.e. sampling and modifications on the larger tool] but after Friday (8 January 2010) if no conclusion has been arranged we have been instructed to stop work and do other tools which we will be getting paid for” …

198.

A meeting was arranged with the customer for 9 January 2010 to discuss the situation. I attended and informed Mr. Ellison of what was happening by telephone. The agreement reached in the meeting was recorded in a note at (page 608). This noted that the total price for both tools (excluding premium working time) was E132,000 plus VAT, based on an exchange rate of £1 = E1.1. The price therefore equated to £141,000 (including VAT). They required us to credit all the various invoices raised so far, and reissue as two invoices, numbered 12959 and 12958, one for each tool. It was agreed at the meeting that Birkby’s would pay the existing invoice for the premium working time on the smaller tool, but that no premium working time charge would be applied as regards the larger tool. I stepped out of the meeting to phone Mr. Ellison who confirmed he was happy for me to agree to this and also payment terms over the course of January.”

While a copy of a note of a meeting dated 9 January 2010 was adduced in evidence, no note was produced of the meeting on 12 January 2010 referred to in Invoice 25540, and Mr. Magson gave no account of that meeting. The note dated 9 January 2010 was in very skeletal form and difficult to understand. It did appear to envisage or record an invoice numbered 12958 in the sum of €99,165 and an invoice numbered 12959 in the sum of €32,835. However, none of the Analyses (by which expression I intend to refer in this judgment collectively to the October Analysis, the November Analysis, the December Analysis, the January Analysis, the February Analysis and the April Analysis) recorded any invoices with either of those numbers or any value in euros or the sterling equivalent, at £1 = €1.10, of €99,165 or €32,835, respectively £90,150 and £29,850. Plainly Invoice 25540 did refer to a total sum of €132,000 being payable, and the note dated 9 January 2010 mentioned that as “BPL [that is, Birkby] Order Value Both Tools … Excluding Premium Time”. The note dated 9 January 2010 also recorded, as was stated in Invoice 25540, that €25,000 was to be paid in each of the week ending 16 January 2010 and the week ending 24 January 2010. At the conclusion of the note dated 9 January 2010 was recorded, “Esdale to formally withdraw letter issued 11/01/10 to Mark Spence”, something also referred to in Invoice 25540. The latter reference might suggest that in fact the note dated 9 January 2010 was mis-dated, and perhaps could refer to the meeting on 12 January 2010. However, that appeared unlikely, for those attending the meeting were listed as Mr. Magson, Mr. Marsden, Mac Flanagan and Nicky Rose, while the person to whom Mr. Magson spoke on 12 January 2010 appears to have been “MC”. Moreover, there was no reference in the note dated 9 January 2010 to an amount of €9,835.

Another puzzling aspect of the account of Mr. Magson was that, while the November Analysis did identify an invoice, numbered 01695a dated 20 October 2009, which was said to relate to “Premium Time” and was in the sum of £9,841.70, and so perhaps was that to which he intended to refer as an invoice in the sum of £9,844.70, that invoice, according to the April Analysis had not by the date of that Analysis been settled. It had, however, been re-dated 20 November 2009.

It was wholly obscure why Invoice 25540, the copy of which adduced in evidence was dated 12 January 2010, was mentioned in the December Analysis and the January Analysis as dated 20 October 2009 and then said in the February Analysis to be dated 20 November 2009. Mr. Magson was asked about that apparent re-dating in cross-examination. He said, simply, (Transcript, Day 14, page 179 line 6), “I don’t have any explanation why it was reaged”.

In the end I did not feel able to reach any conclusion concerning Invoice 25540 beyond that it was actually rendered, in the form of which a copy was adduced in evidence, to Birkby, eliciting the response from Mr. Maxfield which I have quoted. QCFS plainly thought that it was an invoice which it was right to deliver to the addressee, and presumably expected to be paid, otherwise there was no point in rendering it. It was not possible to reach any conclusion as to the underlying transaction or transactions, or what, in fact, had been agreed between Mr. Magson and a representative or representatives of Birkby. The difficulty to reconciling Mr. Magson’s account of the matter to the available contemporaneous documents meant that I was not persuaded that his account was accurate. Indeed his explanation appeared to be similar to other explanations which he offered, in particular in relation to the re-dating of invoices, to which I shall come, which seemed to be detailed and plausible, but which, on investigation, appeared either to be contradicted by contemporaneous documents, or at least not to be supported by them.

The Taylor Invoices proved in fact to be the least controversial of the Invoices, but for one point.

There was no dispute at the trial that Taylor had entered into a contract with QCFS under which QCFS was to design and manufacture three tools (“the Taylor Tools”) to enable a radiator cover (“the Taylor Cover”) to be produced. The Taylor Tools were one for the right hand side of the Taylor Cover (“the Right Side”), one for the left hand side of the Taylor Cover (“the Left Side”), and one for the top of the Taylor Cover (“the Top”). QCFS produced separate quotations, each dated 15 March 2010, in respect of the Right Side (Quotation No. 11939QP), the Left Side (Quotation No. 11938QP) and the Top (Quotation No. 11937QP). Copies of each of those quotations were adduced in evidence. The quoted price was negotiated down in each case, but Taylor then produced purchase orders in respect of each of the Right Side, the Left Side and the Top. The agreed price of the Right Side was £36,335.93, that for the Left Side £35,423.73, and that for the Top £38,220.34, a total of £109,980. For present purposes the purchase order in relation to the Right Side can be taken as typical. It was dated 15 March 2010, bore the order number NM 322950, and set out this narrative:-

“Radiator Cover RH

Single impression Alumec 89 (or agreed equivalent) structural foam injection moulding tool with full temperature control and ejection systems. Tool to be manufactured in accordance with TEP Tool Spec Sheet AO5, any deviations must be agreed by TEP. Delivery of the mould and any subsequent collection/redilivery [sic] (as necessary) to be made by Esdales. Payment terms: 1/3 payable on receipt of invoice, balance on approval and receipt of payment from TEP customer.”

Appropriate invoices were then raised by QCFS and paid by Taylor. A remittance advice recorded payments in respect of three invoices, all dated 18 March 2010, numbered, respectively, 2677, 2678 and 2679, and totalling £43,075.51, being made on 31 March 2010.

Somewhat surprisingly in the light of that to which I have already referred, in an e-mail dated 25 March 2010 Mr. Russell Cooper of Taylor said to Mr. Magson:-

“Following a conversation this morning between Ian Taylor and Tony Carter please use this e-mail as authority to proceed with ordering material & tool design for the Caterpillar Radiator top and Rad LH 7 RH [word illegible].

Your quotation state [sic] a lead time of 8-10 weeks for each tool, commencing Week 13 we would require a tool completion no later than week commencing 23 7^th June.

Also Tony has quoted £650 for additional work to the Rad top, would you please forward this quotation in writing or e-mail to myself, Ian Taylor & Ian Ashworth all @ tep.

Please confirm you are happy with this, I look forward to hearing from you.”

The most obvious explanation, although this is surmise, is that the e-mail related to a different radiator project. It may, however, be that the parties had agreed some postponement of the work on the Taylor Tools which the e-mail gave authority to remove.

Invoice 2689 on its face related to the QCFS Quotation No. 11938QP, whilst Invoice 2690 related to the QCFS Quotation No. 11939QP. Each of Invoice 2689 and Invoice 2690 was declared, on its face, to be “2^nd third on delivery” and to be due for payment on 25 May 2010. However, the amounts of the two invoices made no sense in the context of the Taylor Tools. Invoice 2689 was in the sum of £8,500 plus Value Added Tax, when one third of the agreed price of the tooling for the Right Side was £12,111.98, while Invoice 2690 was in the sum of £3,500 plus Value Added Tax, when one third of the price of the tooling for the Left Side was £11,807.91. In his first witness statement Mr. Magson said of these invoices, at paragraph 181, “They are stated to be second stage invoices but I believe that this was a mistake and they should have stated that they were first stage invoices”. I think that that explanation cannot be correct, because, as I have already noted, the Stage 1 invoices in respect of the Taylor Tools had been paid, and the sums were incorrect. For the same reason, that the sums were incorrect, it did not appear that the Taylor Invoices related to the Taylor Tools at all. Given the terms of the e-mail of 25 March 2010, it may be that the two Invoices were in fact Stage 1 invoices, but in relation to a different project.

At all events, it was common ground that the debts apparently represented by the Taylor Invoices were not assigned to Bibby ID, so it would seem that nothing much turns upon them, other than in the context of whatever light this issue may shed on the credibility of Mr. Magson. Actually, as it seemed to me, the obscurities as to the circumstances in which the Taylor Invoices were produced meant that this issue revealed nothing of value to the exercise of assessing the worth of the evidence of Mr. Magson.

The raising of the Taylor Invoices was said, on behalf of Bibby FS, to be an instance of rendering invoices prematurely. For the reasons which I have explained, I did not feel able to reach a conclusion on that point. However, the implicit allegation that the timing of invoices was influenced by their impact upon the ability of QCFS to draw down funds from Bibby ID leads one conveniently to an issue which it is appropriate to consider before coming to the Credit Notes, namely that of re-dating invoices.

There was but one source for the allegations of Invoices having been re-dated, or re-aged, as it was sometimes put, and that was the Analyses. What the Analyses showed was not in dispute. The Invoices allegedly affected were the Thermotec Invoices, the Early RUP Invoices and Invoice 25540. I have already commented on the evidence concerning the latter. What may be important in the present context which can be derived from the case of Invoice 25540 is the divergence between the information derived from the Analyses and what could be seen from the copy of Invoice 25540 which was put in evidence. Certainly in the case of Invoice 25540 the date on the copy of the Invoice adduced in evidence did not appear in the Analyses at all, and neither of the dates recorded in the Analyses appeared on the copy invoice. Those circumstances at least cast a degree of doubt on the accuracy of what was recorded in the Analyses.

Another respect in which what was recorded in the Analyses was obviously not entirely correct was the date of Thermotec Invoices. In the November Analysis and the December Analysis the material date was stated as 29 September 2009. As I have explained, that was in fact the date of invoices 2438 and 2439 as rendered to McLaren. The copies of the Thermotec Invoices put in evidence each bore the date 29 December 2009. That was the date which appeared in the February Analysis and the April Analysis, but in the January Analysis the date recorded for the Thermotec Invoices was 29 October 2009. Thus the date recorded in the November Analysis and the December Analysis was clearly wrong, that recorded in the February Analysis and the April Analysis appeared to be correct, and that noted in the January Analysis was a mystery.

The remaining Invoices which it was alleged had been re-dated, the Early RUP Invoices, appeared in the November Analysis and the December Analysis with the dates which the copies respectively adduced in evidence bore on their faces. In the January Analysis Invoice 2413 and Invoice 2414 had been re-dated from September 2009 to October 2009, but with the same day of the month as the originals. In the February Analysis each of Invoice 2413, Invoice 2414 and Invoice 2480 appeared with the original day of the month of invoicing, but now in December 2009. The December dates also appeared in the April Analysis.

The case for Bibby FS was that the purpose of re-dating was to prevent the amount of an unpaid debt becoming disallowed, for the effect of so doing would be to reduce the amount which QCFS was entitled to draw down from Bibby ID. If re-dating were done with that intention, it would plainly be dishonest. Mr. Magson’s explanation for re-dating the Thermotec Invoices and the Early RUP Invoices was, in each case, that there was a delay, after the rendering of the Invoice in question, in the relevant project – the McLaren Tools or the RUP Tooling. As a matter of fact, in each case, that seemed to be correct.

The Availability Report indicated that on 1 October 2009 the state of the current account of QCFS with Bibby ID was that the sum of £452,252.41 had been drawn down and remained outstanding. In other words, the facility limit had been exceeded. That meant that on that day no sum was available to be drawn down. As at the beginning of each succeeding month up to, and including, April 2010, the picture was essentially the same, the facility limit as at the beginning of the month was exceeded, save for an amount of £83 at the beginning of April. The figures were these:-

What that meant was that in each month QCFS could only draw down an amount to the extent that, first, existing assigned debts had been paid, so as to reduce the balance on current account, and, second, at the commencement of the period, the total face value of assigned debts which had not been disapproved exceeded £529,411.76, the sum 85% of which was £450,000. As from 4 February 2010 the percentage of the aggregate of net assigned debts which QCFS was entitled to draw down was reduced, progressively, from 84 to 75, the latter percentage being reached by 6 April 2010. The case for Bibby FS was that Invoice 2413 should have been disallowed on 15 December 2009, Invoice 2414 disallowed on 16 December 2009, the Thermotec Invoices disallowed on 30 December 2009, and Invoice 2480 disallowed on 29 January 2010, always assuming, which Bibby FS did not accept, that each of these Invoices was genuine.

The Balances showed that the net aggregate of debt assigned by QCFS to Bibby ID – that is, the total of actual assigned debts less the amounts disallowed – in the period 15 December 2009 to 12 February 2010 was:-

There was no clear evidence as to the precise date at which any of the Invoices re-dated according to the Analyses was re-aged. It was not necessarily on the date upon which it achieved the age of three months, but it must have been not later than the date of the production of the Aged Debtors Analysis which recorded the new date. Thus, for example, the re-dating of Invoice 2413 and Invoice 2414 and the Thermotec Invoices in the January Analysis may have been made as late as 12 February 2010. What one can see from the lengthy list of figures set out in the previous paragraph is, first, that as at 15 December 2009 the deduction from the net assigned debt of the amount of Invoice 2413, £10,884.75, would not have had the effect of reducing the amount available to QCFS to draw down. If one added the amounts of Invoice 2413 and Invoice 2414, £17,267.25, the aggregate is £28,152. Reducing the net assigned debt as recorded in the Balances by that amount would not have produced any effect until 4 January 2010, but that effect would have ceased on 7 January 2010 and not been felt again until 15 January 2010. It would then have endured until 5 February 2010, and been experienced again on 11 and 12 February 2010. Looking at the Thermotec Invoices, aggregating to £56,771.66, as at 30 December 2009 the effect of taking into account their value, as well as that of Invoice 2413 and Invoice 2414, in reducing the net aggregate debt figure would mean that from that date there would have been an effect on the sums available to QCFS to draw down. How much would have depended upon the excess of the net aggregate assigned debt above £529,411.76, but it was likely to be significant. At the figure of net assigned debt for 30 December 2009, £567,199.20, the effect would have been to reduce the total sum which could be drawn down to £409,934.20. The effect would have continued to have been significant until the appointment of the Administrators. The non-disallowance of the Thermotec Invoices and the Early RUP Invoices seems to have enabled QCFS to draw down continuing funds after 12 February 2010. The aggregate of those sums, from the payments section of the Transaction History, was £172,610.

The case for Bibby FS seemed to be that it was for QCFS to declare which debts should be disallowed by reason of not having been paid within 120 days of the date of the invoice, and that the mechanism by which that declaration was to be made was submission of an Aged Debtors Analysis by the middle of the month following the month to which it related. Although, in practice, an Aged Debtors Analysis was submitted each month, and about the middle of the month succeeding that to which it related, save for March 2010, I was unclear whether it was said to be a contractual obligation to submit an Aged Debtors Analysis by that time each month, including an identification of what debts assigned to Bibby ID had not been paid within 120 days of the date of invoice, and, if so, how such obligation arose. However that may be, if it was right that there was such an obligation, the effect of it would seem to be that re-dating of invoices only had an effect upon Bibby ID as from the date of submission of the Aged Debtors Analysis including the re-dated Invoice or Invoices. It does seem surprising that Bibby ID did not maintain some independent check of its own as to whether a debt assigned had not been paid within 120 days of invoice. After all, each month Bibby ID produced a reconciliation, in effect a check of the information contained in an Aged Debtors Analysis in the light of the other information in the possession of Bibby ID, and the amounts of all debts assigned to Bibby ID had to be paid into the bank account of Bibby ID.

Whilst, for the reasons which I have mentioned, I did not feel able to reach any conclusion as to whether Invoice 25540 had in fact been re-dated, the information in various Analyses being irreconcilable with the copy of Invoice 25540, I can think of no reason for the re-dating of the Thermotec Invoices, Invoice 2413 and Invoice 2414 not once, but twice, other than that for which Bibby FS contended. While Invoice 2480 was only re-dated once, in my judgment it should be considered against the background of the re-dating of Invoice 2413 and Invoice 2414, and consequently I have reached the conclusion that that, too, was re-dated in order for the debt to which it related to seem not to have been outstanding unpaid for more than 120 days. I might, perhaps, have come to a different conclusion had there been re-dating only once, but the explanations offered by Mr. Magson, if correct, would seem to have justified only a single adjustment of the date of each relevant Invoice.

It was clear from the evidence that QCFS was in increasingly desperate financial straits in the early part of 2010. I am satisfied that, in order to try to gain time and funding, Mr. Magson re-dated, or caused to be re-dated, the Thermotec Invoices and the Early RUP Invoices deliberately and dishonestly.

The first of the Credit Notes, that numbered 01695c dated 1 September 2009 in favour of Birkby, need not detain one long. It was a credit note, on its face, issued not by QCFS, but by Esdale. However it came to be issued, and notwithstanding that Esdale was in administration, or possibly liquidation, by the date of the Credit Note, there was not the slightest justification for treating the Credit Note as one issued by QCFS. On the face of the Credit Note the number of the company issuing it was 052520, whereas the company number of QCFS was 04855344. The Value Added Tax registration number of the company issuing Credit Note 01696c was stated on it to be 852 3591 19, whereas the VAT registration number of QCFS was 943 666 89. The directors of the company issuing Credit Note 01695c were stated on the document to be F. Eastwood, H. Brown and D.R. Brown. The director of QCFS was Quay. How those who decided on behalf of Bibby to pursue allegations in relation to Credit Note 01695c failed to notice that, on its face, it had nothing to do with QCFS was not illuminated by the evidence adduced at the trial.

The position in relation to Credit Note 2639 in the sum of £6,974.80 also appeared to be tolerably clear. The Credit Note was addressed to Hallam Plastics, was dated 25 February 2010, was said to relate to the QCFS quotation numbered 11794QP, and the narrative recorded that it was “Credit against manifold system”. The copy of the Credit Note which was put in evidence was stamped “Received 26 Feb 2010” and also “Matched”. It thus appeared that the copy in question had been obtained from Hallam Plastics and that within Hallam Plastics it had been matched against the invoice in respect of which it was a credit.

In his first witness statement Mr. Magson said this about Credit Note 2639:-

“190.

In late February the sampling process and related work in relation to the tool we had made for HP [Hallam Plastics] was completed, although HP also wanted some additional modifications to the product outside the original spec (at all times QCFS manufactured to the GAs). HP were concerned about QCFS’s solvency and therefore did not want to pay cash to QCFS for the additional modifications. HP therefore suggested that they paid one of QCFS’s other suppliers, a Canadian company which had provided a component for HP’s tool and to which QCFS still owed money. This assisted HP because they were concerned that if QCFS failed, the Canadian supplier would demand payment from HP.

191.

I recollect that I agreed to this in order to assist HP and because this did not affect QCFS’s balance sheet, which would benefit from having the debt to the Canadian company cancelled. We therefore raised an invoice to HP for £6,974.80 in respect of the modifications together with a credit note to HP for the same amount. A copy of the credit note is at page 603. Neither the invoice nor the credit note were submitted to BIDL.”

Thus it was not in dispute that QCFS had raised Credit Note 2639 in favour of Hallam Plastics or that it had not notified Bibby ID about its issue.

According to the April Analysis, at that stage QCFS had raised two invoices, numbered, respectively 2586 and 2601, to a total value of £55,420.82 addressed to Hallam Plastics which had been assigned to Bibby ID.

How the Credit Note surfaced seems to have been when Mr. Colclough, on behalf of the Administrators, made contact with Mr. Mick Owens of Hallam Plastics concerning payment of the sums apparently outstanding. After some exchanges of e-mails, a telephone conversation took place between Mr. Owens and Mr. Colclough on 27 April 2010. Mr. Colclough made a note of the telephone conversation, and a copy of that note was adduced in evidence. The material part of it was in these terms:-

“Telephoned Mick Owens to discuss outstanding balance owing on ledger and the content of his emails dated 19^th April 2010 and 16^th April 2010.

Mick confirmed that, despite his customer (Terraplus) refusing to make payment of the final two instalments to Hallam Plastics Limited (see email of 15 April 2010), he is still in a position to settle the balance owing to QCFS Limited as soon as we have agreed amount owing.

He sees the issue with Terraplus as a separate issue and will contact them following settlement with QCFS Limited.

His position remains that he is offering a full and final settlement of £17,815.92.

I have requested copy of credit note 2639 (£6,974.80) along with invoices and supporting paperwork relating to the contra (£15,789.85). Mick will fax/email over this afternoon.”

It thus appears that Credit Note 2639 was presented as outstanding in favour of Hallam Plastics in the context of a negotiation the focus of which, from the point of view of Hallam Plastics, was to reduce an apparent debt of £55,420.82 to something of the order of £18,000.

Mr. Magson asserted that QCFS and Hallam Plastics had mutual dealings, in which sometimes QCFS purchased from Hallam Plastics, and sometimes Hallam Plastics purchased from QCFS. A number of copy documents were put in evidence which demonstrated that that assertion was correct. In particular, copies of purchase orders numbered, respectively, 11333, 11440, 11484 and 11494 rendered by QCFS to Hallam Plastics were adduced. The contra amount identified in Mr. Colclough’s telephone note seemed to represent the value outstanding in favour of Hallam Plastics in respect of those purchase orders.

In the Spreadsheet Miss Evans noted this in relation to a telephone conversation with someone at Hallam Plastics on 25 March 2010 concerning invoice 2601:-

“this and 2586 should both have credit notes nothing is due to be paid, requested a copy anyway and she says she has lots more invoices there that we don’t appear to have on our system.”

If Hallam Plastics had more invoices raised by QCFS on its system than Bibby ID was aware of, that would seem to suggest that Mr. Magson’s account of there being a separate invoice from QCFS to Hallam Plastics in the sum of £6,974.80 which was in effect cancelled by the issue of Credit Note 2639 was at least possible. The possibility of that being correct seemed to me to be increased by the stamp “matched” on the copy of the Credit Note. The chance that Mr. Owens was using Credit Note 2639 creatively appeared to be enhanced by the fact that on the Spreadsheet it was recorded that in the event Hallam Plastics paid £25,000 in cash on 17 May 2010 which was received “on account” in the first instance, but then accepted in full and final settlement.

In the end, and notwithstanding my conclusion that Mr. Magson acted dishonestly in the respects which I have explained in re-dating some Invoices, I am not satisfied that Credit Note 2639 was not produced in the circumstances of which Mr. Magson spoke, or that the failure to disclose its existence to Bibby ID had any impact on the state of account between Bibby ID and QCFS or permitted QCFS to draw down funds which would not otherwise have been made available to it.

In his closing submissions Mr. Freedman contended that the difference between the accounts of what had transpired in the Pub on 27 August 2008 given by Mr. Darling, on the one hand, and Mr. Magson and Mr. Scott, on the other, were so stark, yet the circumstances for which Mr. Magson and Mr. Scott contended so unusual, that it must be the case that either Mr. Darling was telling lies about what happened, or Mr. Magson and Mr. Scott were telling lies. Regretfully I have come to the same conclusion. I certainly accept that, if the account of Mr. Magson and Mr. Scott were correct, it would be extraordinary if Mr. Darling did not have at least a general recollection of the circumstances.

Mr. Freedman submitted that the appropriate way in which to approach the assessment of the evidence as to what had occurred on 27 August 2008 was to begin by looking at the objective facts. By that I think that Mr. Freedman meant, in particular, the contemporaneous documentation. Against the background of the objective facts, the next step was to consider what one would have expected logically to follow, relevant to the matters in dispute, depending upon the respective contentions of the material witnesses as to what had occurred. Finally, in the light of the identification of the objective facts and what one would logically have expected to happen, depending upon the contentions of the material witnesses, the question of demeanour had to be addressed. I accept all of those submissions. It is a bold judge who reaches conclusions as to what evidence of witnesses to accept about disputed matters without starting with the objective facts and considering what logic and common sense would have expected to follow. In fact what Mr. Freedman articulated is, in my judgment and experience, the approach generally adopted judicially to the assessment of the evidence of witnesses where that evidence is contested.

Although I have set out something of the background of Esdale, for present purposes it is convenient to begin by noticing, as an objective fact, that, at least prior to the events of 27 August 2008, neither Mr. Magson nor Mr. Scott had undertaken any personal obligations towards Bibby FS or Bibby ID, notwithstanding that Mr. Magson had, by then, effectively been operating Esdale for some six months. Thus logic and common sense would suggest that neither of them would be agreeable to changing that position going forward, unless there was an appropriate incentive to do so.

The next objective fact was that Mr. Magson, no later than 19 August 2008, had considered, and discussed, in fact it seems with Mr. Darling, the issue of the provision of personal guarantees going forward, for he recorded his understanding of what was agreed and expected in that regard in his e-mail of that date to Mr. Cohen, copied to Mr. Scott. There is no sensible reason to suppose that Mr. Magson did not genuinely believe what he recorded in the e-mail at the time he wrote it.

Mr. Scott was plainly alive to the implications of providing a personal guarantee, and, from his e-mail to Mr. Magson dated 20 August 2008, reluctant to enter into such a guarantee. There was no obvious reason for Mr. Magson to inform Mr. Scott in his e-mail of 20 August 2008 that “Bibbys is only till oldco collected” unless he believed at that time that that was his understanding with Mr. Darling.

From the Proposal Form and the evidence of Mr. Darling in cross-examination it is clear that a major reason for Bibby ID being prepared to enter into an agreement with QCFS was to facilitate the collection of debts of Esdale which had been assigned to it. Mr. Darling said in cross-examination that he thought that that would take three to four months.

The Offer Letter was dated 26 August 2008 and was sent by post. It arrived on 27 August 2008, the earliest date upon which it could have arrived if entrusted to the Royal Mail, but not a date by which it could be guaranteed to arrive without making special arrangements, which was not done. The significance of that, as it seems to me, is that it could not have been assumed on the side of Bibby ID, in advance of Mr. Darling meeting Mr. Scott, that Mr. Magson or Mr. Scott had received, or had had an opportunity to consider, the Offer Letter. That consideration indicates, in my judgment, that it was rather unlikely that Mr. Darling would have assumed that the purpose of the meeting on 27 August 2008 was simply for Mr. Magson and Mr. Scott formally to sign documents which Bibby ID required to be signed in order to put in place the facility required for QCFS. It is much more likely that Mr. Darling anticipated that there would be discussion about the detail of the Offer Letter with a view to reaching agreement.

I shall return to the evidence as to what happened on 27 August 2008 itself, but in my judgment it is important to identify such objective facts preceding it as indicate the expectations of the parties in advance of the meeting and to consider, as a matter of logic and common sense, the spirit in which it is likely that the participants approached the meeting.

Mr. Freedman made no submissions concerning the contemporaneous documents put before me which indicated the understandings of the parties as to what was agreed in principle in advance of the meeting on 27 August 2008 or their anticipations of what was likely to happen at the meeting. He did, however, emphasise, rightly, that it was common ground that at the meeting Mr. Magson and Mr. Scott signed not only a Guarantee and a Warranty each, but also at least the Bibby ID Agreement and the Saracen Guarantee. Not only that, but each of the signatures of Mr. Magson and Mr. Scott on a Guarantee or a Warranty was witnessed by Mr. Metzner. The obvious point was why should these documents be signed at all, still less with the degree of formality appropriate for them to have immediate legal effect, if that was intended, unless that was indeed what was intended.

Whilst making no submissions about events prior to 27 August 2008 Mr. Freedman did make submissions as to objective facts and logic and common sense in the period after that date. One of the objective facts which he did not make submissions about was the fact that the Harvard Debenture was signed by Mr. Martin Bennison on behalf of Bibby FS and dated 3 September 2008. It was then submitted for registration to the Companies Registry. These facts were notable for two reasons. The first was that it was the only one of the documents signed on or before 27 August 2008 which was dated 3 September 2008, the others being dated 8 September 2008 (the signatures on behalf of QCFS in the Bibby ID Agreement) or 22 September 2008 (although the Cross Guarantee had originally been dated 22 August 2008). Mr. Bennison signed, and Karen Wallace witnessed, all of the other documents, save the Bibby ID Agreement, which both Mr. Bennison and Karen Wallace signed. The second remarkable feature of the submission of the Harvard Debenture for registration was that in fact the arrangements with QCFS did not come into effect until 29 September 2008, according to the Bibby ID Agreement, and no steps were taken to activate the facility until 18 September 2008, the day Esdale went into administration.

There were a number of e-mail exchanges on 8 September 2008 between, or copied to, Mr. Magson, Mr. Scott and Mr. Darling, or others at Bibby ID, yet in none did Mr. Magson or Mr. Scott make any reference to documents to be amended or re-signed. Mr. Freedman submitted, and it is a powerful point, that, if Mr. Magson’s and Mr. Scott’s account of what had happened on 27 August 2008 at the Pub were correct, one would have expected some chasing on their part for the relevant documents, but there was not. Moreover, on the same date Mr. Magson and Mr. Scott each signed a letter stating that he had had an opportunity to take legal advice in relation to a Guarantee, which, on his evidence, he had not then entered into.

By the letter dated 9 September 2008 from Companies House Bibby ID was notified that the Harvard Debenture could not be registered because the name Harvard did not match the then registered name of the company, QCFS. In his e-mail dated 10 September 2008 to Mr. Scott Mr. Magson explained that a fresh debenture in the name of QCFS needed to be signed and returned, but he made no comment about the need for other documents to be amended and re-signed. As the communication was between Mr. Magson and Mr. Scott, perhaps this omission is not especially significant, but it was possibly more remarkable that the e-mail of 15 September 2008, copied to Mr. Ellison, also made no reference to documents to be amended and re-signed.

Mr. Freedman relied heavily upon what he submitted was the correct interpretation of the sentence in Mr. Magson’s e-mail dated 17 September 2008 to Mr. Darling in which Mr. Magson said, “Thanks boss, and resolving state and signing docs with Bob in London on Monday afternoon if you fancy a coffee, or jar”. Mr. Freedman broke the sentence after “Bob”. So interpreted, the sentence was, first, an expression of thanks, but then a separate invitation to a celebratory meeting the following Monday. I think that that is most unlikely to be the intended meaning of the sentence. It was common ground that “state” was a reference to State Securities. A sentence which said, “Thanks boss, and resolving State Securities and signing docs with Bob.” made no sense. There was no evidence that Mr. Darling had done anything in connection with resolving State Securities or in signing documents with Mr. Scott which required him to be thanked. Mr. Darling did not sign any of the documents which Mr. Scott or Mr. Magson or both signed on 27 August 2008, and there was no suggestion that he had signed any other document which would have made it appropriate for him to be thanked. The syntax of the sentence relied upon is a little challenging, and not a tribute to the language of Shakespeare, but it seems to me that the expressed thanks was but a repetition of the thanks expressed earlier in the e-mail which seemed to be for assistance in setting up the mechanics of the facility. The remainder of the sentence appeared to me to be addressing the need to resolve the position of State Securities, which was a creditor of Esdale, in particular by the signing of appropriate documents along with Mr. Scott the following Monday, when Mr. Darling was welcome to join them.

The next document upon which Mr. Freedman placed reliance was Mr. Magson’s e-mail dated 24 September 2008 to Mr. Darling. Mr. Freedman made the point that it is difficult to understand Mr. Magson saying, “As we stated and agreed, can I have an email just to confirm, we are not on the hook for the CG [cross guarantee] with regards fees, other than the £25K, and the second £25K to go to administrators, rest is your own. Obviously that £25K will need to be added to the £62K, with potential for this amount collectable.” unless he considered that the Cross Guarantee was in force. In my judgment that was reading too much into this e-mail. It seemed to me that what Mr. Magson wrote was just as consistent with a prospective cross guarantee as with the Cross Guarantee having already come into force. However, it could fairly be said that the e-mail contained no reference to the need for amendment or re-signing of the Cross Guarantee.

Quite fairly Mr. Freedman identified as an objective fact that, after the e-mail of 24 September 2008, silence ensued at a time when one might have expected Mr. Magson or Mr. Scott to have been pursuing the need for production of revised documents and re-signing.

That period of silence came to an end with Mr. Magson’s e-mail of 22 December 2008 concerning base rate. In his written closing speech Mr. Freedman commented upon that e-mail:-

“d.

There was a communication in writing about base rate, but this did not say that the Invoice Discounting Agreement required re-execution or that it had not been agreed notwithstanding that that [sic] QCFS had been operating its agreement with C for a period of 3 months:”

That is entirely correct. However, as it seemed to me, another important aspect of the e-mail was the reference, “today this [the minimum rate payable by QCFS] is still showing as 7.5% on our account, can you advise as this is contrary to my understanding”. What Mr. Magson was contending in the e-mail was that the rate payable by QCFS was 2.5% over base rate and that base rate was then 2%. The rate for which the Bibby ID Agreement provided was 2.5% over base rate, with base rate being a minimum of 5%, so what was being charged was correct on the face of the Bibby ID Agreement. Consequently, had Mr. Magson known that the Bibby ID Agreement had come into force, there was nothing to debate. The terms of the e-mail thus indicated, in my judgment, that in fact Mr. Magson was not of the view, at that time, that the Bibby ID Agreement had come into force.

Mr. Freedman made the point that, if that were so, one would have expected Mr. Magson to pursue the issue of the rate being charged, which he did not. That point is fair so far as it goes, but the question remains, how did Mr. Magson think that it was worth raising the issue of base rate if the issue had been determined conclusively by the terms of the Bibby ID Agreement?

Another issue of the same sort was raised in connection with the reference in Mr. Magson’s e-mail to Mr. Darling of 4 February 2009 in which he mentioned a desire to “finalise the correct terms as per the original offer letters agreed between ourselves and AD, which appear to be slightly contrary to the recent legal documentation that has been supplied”.

In his written closing speech Mr. Freedman said:-

“f.

On 3 February 2009, when D1 says that he received the invoice discounting agreement without the changes marked on it, there ensues a particularly bizarre part of the story of D1. On his story, D1 still had a copy of the invoice discounting agreement signed by him, so that he was able to demonstrate that the amendments were on the document, and that it was wholly wrong of BIDL to provide a document which did not have these amendments. On his case, one would have expected a long letter or a detailed email from D1.

g.

In fact, on his case, at no time did he point to the difference between the retained invoice discounting agreement and the one sent by BIDL on 3 February 2008 [sic]. On 4 February 2009, he wrote an email about a meeting [Mr. Freedman then quoted the words set out in the preceding paragraph].

h.

If there had been a difference between that which was amended on the contractual documentation in August 2007 [sic] and the documentation said to have been provided to him in February 2009, then D1, now having both documents, would undoubtedly have shown the contradiction by contrasting expressly the documents.

i.

Instead of referring to differences between different versions of the contractual documentation, the difference identified is between the markings on the offer letter and the contractual documentation sent on 3 February 2009. This accords with the letters of D1 of 25 May 2010 and thereafter to the extent that the failure was to record the matters in the offer letter rather than discrepancies between two versions of the contractual documentation. This is yet further evidence of the fact that the story about amendments and initialling on the contractual documentation is one of recent invention.”

The e-mail of 4 February 2009 and Mr. Freedman’s submissions about it emphasise, as it seems to me, the need, when looking at objective facts (the e-mail and its terms), common sense and logic, to bear in mind what is the evidence between which the court has to choose. The matters to which Mr. Freedman drew attention were very properly raised. However, they focused simply on one side of the coin. In the e-mail Mr. Magson asserted that there had been “original offer letters agreed between ourselves and AD”. It was not the evidence of Mr. Darling that there had been discussion or agreement concerning the contents of the Offer Letter. His position was that the Offer Letter was never produced in the Pub and its contents never discussed. Thus, on the one hand, it could be said, as Mr. Freedman did, that the reference was to the Offer Letter rather than to any amendment of the documents signed on 27 August 2008 – inconsistent with the evidence of Mr. Magson at the trial. However, on the other hand, Mr. Magson was asserting an agreement with Mr. Darling which Mr. Darling totally denied.

I am not sure that any serious point was made concerning the reference in Mr. Magson’s e-mail of 4 February 2009 to what had been agreed being “slightly contrary to the recent legal documentation”. What mattered was that Mr. Magson was contending that the document a copy of which had been supplied diverged from what had been agreed. Obviously that could not possibly be so if Mr. Magson had signed a version of the Bibby ID Agreement identical to that which was relied upon in this action.

In the result, therefore, the e-mail of 4 February 2009, like the e-mail of 22 December 2008, provided some support for the evidence of Mr. Magson at the trial, but the points which Mr. Freedman made about each were well made, and, on the face of it, inconsistent with the evidence of Mr. Magson.

Mr. Freedman pointed out, correctly, that later communications between Mr. Magson and those at Bibby ID, principally Mr. Ellison, did not make any mention of divergence between the copy document sent to Mr. Magson and what had been agreed, or the need for further documents to be executed. That was surprising, given that by now Mr. Magson had become aware, if his evidence were correct, that what Bibby ID was relying upon as the agreement with QCFS was different in terms from what Mr. Magson thought had been agreed.

Next in his written closing submissions Mr. Freedman asserted, starkly:-

“The suggestion that on 24 February 2009 D1 delivered to BIDL various documents including the marked and initialled Invoice Discounting Agreement and Saracen Corporate Guarantee is simply fantastic.”

I am not sure about “fantastic”, but it is certainly very surprising. Given that it was plain by this time that Bibby ID was contending for a form of agreement with QCFS which diverged significantly, and to the disadvantage of QCFS, from what Mr. Magson contended had been agreed, it seems reckless in a high degree to have parted, without making a copy to which he had access, with the only documents which were said to demonstrate that what had been agreed was different from what Bibby ID asserted.

Barring the alleged involvement of Mrs. Creely, to which I am about to come, it seems that between about February 2009 and the appointment of the Administrators there was no further correspondence on the subject of the terms to which QCFS had agreed in respect of its relationship with Bibby ID. Again, it is a remarkable circumstance, if the evidence of Mr. Magson as to what had happened in the Pub on 27 August 2008 were correct.

The involvement of Mrs. Creely in the matter of documentation was, as it seemed to me, another of those rather puzzling circumstances from which it was difficult to draw any particular conclusion. Mrs. Creely’s name did not surface in this action until Mr. Magson referred to her at paragraph 99 of his first witness statement. It could be thought to add a little colour, and thus credence, to what Mr. Magson asserted had happened, but it was also unnecessary, if the story was invented, and accompanied by risk. It is true that by the date of service of the first witness statement of Mr. Magson Master Leslie had made an order in this action on 25 May 2011 restricting the evidence which could be led on behalf of Bibby in this action to that served by 4.30 pm on 27 May 2011. However, it must have been obvious that that order could be varied, in particular by the trial judge, if necessary in the interests of justice. I did vary it to permit Mrs. Creely to give evidence. Thus, if Mr. Magson’s evidence about Mrs. Creely were untrue, it was in the nature of an unforced error.

I have already noted that Mrs. Creely, in the end, said that she could not recall the conversation about documentation with Mr. Magson which he alleged, but thought that she would, had it taken place, because of the action which she was likely to have had to take in consequence. However, as it seems to me, that would rather depend upon how the matter was put to her. I am sure that she would have remembered if it had been put to her that documentation remained outstanding and there was a serious dispute about it. If, however, it was something mentioned as a matter needing to be dealt with, but which was in hand, she may very well not have recalled it. It is a matter concerning which Mr. Ellison might have been able to shed some light, had he been called to give evidence. He might also have been able to shed light on the contention of Mr. Magson that he had delivered to Bibby ID his copy of the Bibby ID Agreement as amended, the Saracen Guarantee as amended, and the copy of the Bibby ID Agreement which had been sent to QCFS.

The last major points made by Mr. Freedman in support of his submissions that I should not accept the evidence of Mr. Magson and Mr. Scott as to the events in the Pub on 27 August 2008 focused on the responses of Mr. Magson and Mr. Scott to the claims made against them as set out in their replies to letters of claim and in their res pective Defences. I have already set out the principal passages upon which Mr. Freedman relied, and commented upon them.

Although, as I have indicated, I accept without reservation the approach commended to me by Mr. Freedman as that to be adopted to determination of the question what witness evidence to accept, rather unusually, in my experience, I found myself, having considered the relevant contemporaneous documentation and the inherent probabilities, in the light of logic and common sense, with no firm opinion as to the evidence which I was inclined to accept. In the end, therefore, I made my decision based upon my assessment of the demeanour of the relevant witnesses and my view of the likelihood of what happened in the Pub, constrained, as I was, to choose between the competing accounts. I make the latter point because it did seem to me that some of the material which I have rehearsed suggested that there might have been discussion in the Pub, and, perhaps, a marking of documents, falling short of that for which Mr. Magson and Mr. Scott contended. Various references to the Offer Letter were, perhaps, consistent with a discussion based solely upon that document, possibly as a prelude to a signing of documents. However, that was not the account which Mr. Darling gave, and the contentions of Mr. Magson and Mr. Scott were that matters did not stop with discussion and marking of the Offer Letter, but proceeded to marking and initialling of, I think, all but one of the documents before the participants at the meeting.

I have to say that I was very unimpressed by Mr. Darling as a witness. Not only did his account lack any real detail, but it was inherently improbable. As he would have it, he produced out of his bag in the Pub six documents which neither Mr. Magson nor Mr. Scott had seen before, but there was no discussion about them, neither Mr. Magson nor Mr. Scott looked through any of the documents, but they simply signed them. I shall come to express my views of both Mr. Magson and Mr. Scott, but for the present it is enough to say that it was clear that neither of them was an idiot, and they would both have had to have been idiots if Mr. Darling’s account of events in the Pub were correct. Mr. Magson was experienced in the invoice discounting business, so he was generally aware of what sort of document Bibby ID would want to have signed. However, he also knew that most of the terms of an agreement like the Bibby ID Agreement were standard, and that the part which was specific to a particular customer was the Special Terms. That was a part of the document which was quite short and not very dense. It was easy to absorb the contents quickly. So far as a Guarantee or a Warranty was concerned, what was important in commercial terms was not the detail of the individual clauses, but the liability, or, more particularly, the limitation of liability. The relevant provisions were contained either in a short schedule or in a particular clause which someone familiar with this type of document could readily identify. In other words, a person familiar with documents of the types in question could quickly assess whether appropriate provision had been made, and, if not, note what needed to be changed. Again, Mr. Scott was not merely a solicitor, but one with a great deal of experience of invoice discounting. It simply defies belief that neither Mr. Magson nor Mr. Scott looked through the documents produced by Mr. Darling for the first time at the Pub. Given his concern about giving a personal guarantee, the one thing one can be entirely confident about, as it seems to me, is that Mr. Scott looked at the liability provisions in his Guarantee and Warranty.

Another aspect of the evidence of Mr. Darling which bordered on the absurd was what he said about the Offer Letter. At its most straightforward the point was that in the files of Bibby ID was the original of the Offer Letter, complete with Mr. Magson’s handwriting. How did it get there? The alternatives offered by the evidence were, on the one hand, Mr. Magson and Mr. Scott gave it to Mr. Darling at the Pub after Mr. Magson had made such of his markings on it as appear, whilst, on the other, that it appeared in the form in which one now sees it through the post, with no covering letter or compliments slip. What would have been the purpose of sending the original Offer Letter with Mr. Magson’s markings to Bibby once the documents signed on 27 August 2008 in the Pub had been signed, if Mr. Darling’s account of the signature of the various documents were correct? The only possible answer is that it would have been the waste of a stamp.

Considering, simply from the perspective of logic and common sense, the accounts of Mr. Magson and Mr. Scott, there are a number of points in favour of what they said. First, the documents signed in the Pub had not been produced before the meeting, so it is inherently likely that there would have been a consideration of them, and, perhaps, a discussion about the contents. Second, there was no obvious urgency in signing binding versions of the various documents that day, as demonstrated by the dates put on the documents by Bibby ID or Bibby FS when executed by them. Third, given that a significant reason for entering into the transaction with QCFS was to collect debts assigned by Esdale which remained outstanding, which was expected to take three to four months, and given that neither Mr. Magson nor Mr. Scott was under any existing personal liability to Bibby ID or Bibby FS, it is at least possible that Mr. Darling would have agreed to each of them accepting a liability limited to a period until collection of the outstanding debts assigned by Esdale, or 6 months, because that represented an improvement on the existing position, from the point of view of Bibby ID and Bibby FS.

Turning to the form of the original documents adduced in court, it was obvious, and in the end may not have been in dispute, that the documents as currently bound had, at some point in the past, but after signature by Mr. Magson or Mr. Scott or both, not been bound. Were that not so, the photocopies of pages bearing dates apparently applied by Bibby ID or Bibby FS would not be included in what were initially presented as original documents. At very least, if bound when signed, the documents had been unbound to be photocopied, and, in the process of assembling the papers for binding, photocopied pages had been incorporated in place of original pages. However, there were grounds for supposing that at least the Saracen Guarantee may have been assembled for binding with a page, page 16, or pages incorporated which had not been there when the execution page, page 18, had been signed on behalf of Bibby FS. In addition, the change in the colour of pen used by Mr. Magson from black, used for most of the documents he signed, to blue, for the Warranty only, indicated that what had happened in the Pub was not that the documents were presented to Mr. Magson and Mr. Scott, who then each just signed what was put before him one after the other as quickly as a signature could be applied, but that, at least before Mr. Magson signed the Warranty, there was a pause of sufficient length for him to put down one pen in a location in which it was not conveniently to hand when he wished to sign the Warranty.

I have already found Mr. Magson to have been dishonest in relation to the re-dating of the Thermotec Invoices and the Early RUP Invoices. It does not, of course, follow, that because Mr. Magson was dishonest in the way I have found, everything he has said or done which is relevant to this action has been dishonest, although that was the thrust of the case of Bibby FS. However, Mr. Freedman in his closing submissions accepted that people may do things in extremis when the business of their company is in dire jeopardy which they might not otherwise do. I think that that was the case in relation to Mr. Magson and the re-dating which I have mentioned. However, I did have more general concerns as to the reliability of the evidence of Mr. Magson. His manner in court was quite forbidding. He spoke confidently, but very loudly and usually at some speed. He presented some accounts of matters which he gave as answering points put to him which were extremely difficult to follow. In his closing submissions Mr. Freedman contended that Mr. Magson adopted the role of a master of detail, but then set out to obscure by the volume of material which he assembled to deal with a point, in effect hoping that the lack of logic, or gaps in the material, would be lost in an enormous fog. That was definitely the effect of some of his answers, and I am afraid that I formed the view that that was intentional. When confronted with an inconvenient truth, for example that Schedule 3 to the Saracen Guarantee was on the reverse side of the signature page, so that it could not have been the case that Schedule 3 named Harvard at the date of signature by him, Mr. Magson showed an impressive facility to continue unphased by the fact that that which he had confidently asserted was plainly wrong (see Transcript, Day 12, page 111 line 21 to page 112 line 21). In the end I did not feel able to accept the evidence of Mr. Magson save to the extent that it was corroborated by other evidence or was inherently probable.

Had it been necessary in this case to decide between accepting the evidence of Mr. Darling or that of Mr. Magson I should have found the matter very difficult. It may be that I should have resorted to the last refuge of a court, the burden of proof on each relevant point in difference. Happily, however, I was not placed in the position of deciding between Mr. Darling’s evidence and that of Mr. Magson as to the events of 27 August 2008 with no other material. I have already identified factors which seemed to me to favour the account of Mr. Magson and others which demonstrated that, in my judgment, the account of Mr. Darling could not be correct. My confidence in my ultimate conclusion to accept, in substance, the evidence of Mr. Magson as to what occurred in the Pub on 27 August 2008 was greatly enhanced by the favourable impression made upon me by Mr. Scott. In some ways Mr. Scott took me by surprise. His witness statement, terse in comparison with those of Mr. Magson, supplied only a limited amount of detail, and his Defence seemed to focus on an aspect of the case which never really featured at trial, rectification. However, once he was in the witness box and being cross-examined, he described an event which one could imagine happening in the real world. Essentially there were three friends in a pub. They had business together, but there was no antagonism, no confrontation, no formalism. The picture which Mr. Scott presented was of Mr. Darling producing documents from his bag which were relevant to the transaction which they were discussing. Mr. Scott’s main interest was in his personal liabilities. Mr. Magson, on the other hand, was going to run the business of QCFS and much more concerned about the detail of the particular provision suggested for the facility intended to be afforded to QCFS. Thus, on Mr. Scott’s account, Mr. Magson went through the relevant parts of the documents which Mr. Darling had produced, and wrote on them what changes he wanted, as he went through. He focused, it seems, particularly on the Special Terms, but also noted the liabilities under the various guarantees and Warranties. The amendments were not drafted out as words to replace or add to what was there already, but were in the nature of notes of what needed to be attended to. Meanwhile Mr. Scott and Mr. Darling drank beer and discussed industry gossip, rugby and such like. When Mr. Magson presented notes on the documents to Mr. Darling and Mr. Scott for them to indicate agreement, they each initialled the relevant note. When Mr. Darling said that he wanted the documents to be signed as some sort of comfort for his colleagues, although they were to be amended, Mr. Magson and Mr. Scott obliged. From a legal point of view that was a course which was unwise, but, as presented by Mr. Scott, the thing was that his friend wanted signatures for the benefit of his colleagues although the documents were to be replaced. In human terms one can understand how it could have happened.

In the result, therefore, I accept the evidence of Mr. Scott as to what transpired at the meeting in the Pub on 27 August 2008 and the evidence of Mr. Magson, insofar as it was consistent with the evidence of Mr. Scott.

The legal consequences of my findings as to what had occurred at the meeting on 27 August 2008 were not in dispute. Each of the Guarantees and Warranties which Mr. Magson or Mr. Scott signed and which formed the bases of the claims against them in this action was, in form, a deed. So was the Bibby ID Agreement which it was said gave rise to the liabilities of QCFS which were the subject of the Guarantees and due performance of some of the obligations in which were said to have been warranted by the Warranties. Thus each of the Guarantees and the Warranties, as well as the Bibby ID Agreement, was required to be executed in the manner required by law.

In the case of a deed executed by an individual it is provided, so far as is presently material, by Law of Property (Miscellaneous Provisions) Act 1989 s.1(3) that:-

“An instrument is validly executed as a deed by an individual if, and only if –

(a)

it is signed -

(i)

by him in the presence of a witness who attests the signature; …

(b)

it is delivered as a deed by him or a person authorised to do so on his behalf.”

So far as limited liability companies are concerned, Law of Property Act 1925 s.74A provides that:-

“(1)

An instrument is validly executed by a corporation aggregate as a deed for the purposes of section 1(2)(b) of the Law of Property (Miscellaneous Provisions) Act 1989, if and only if –

(a)

it is duly executed by the corporation, and

(b)

it is delivered as a deed.”

Thus, in order for a document to be enforceable as a deed, whether executed by an individual or a limited liability company, it is necessary for it to be delivered as a deed. What amounts to delivery of a deed in English law has been established for over 400 years. It was explained by Popham J in Hawksland v. Gatchel (1601) Cro. Eliz. 835 at pages 835 – 836:-

“For if, upon delivery, the words spoken by the obligor purport that it shall not be his deed, it is clear that it is not: as where one causeth an obligation to be written and sealed in my name, and brings it unto me, and prays that I would deliver it as my deed, and I say, “Do you such a thing, and take it as my deed, otherwise not;” it is clear, that it is not my deed until the thing be performed. So if the obligor saith, “Take it to you, I will not deliver it as my deed;” it is not his deed. Wherefore in the principal case, when the obligation is delivered as an escrow, by express words, it is not possible that it should be his deed, for the words are not sufficient to make it so until the condition be performed.”

The critical thing is that the person who has signed the deed must have separately indicated that he intends to be bound by the deed. Mere signature is not enough. Nor is it enough that what looks like a deed has been given to the person who appears to be the beneficiary of it – the issue is not whether the document has been physically handed over to the beneficiary, but whether the person whose deed it is supposed to be intended to be bound by it. The point was explained by Sir Charles Hall V.C. in Watkins v. Nash (1875) LR 20 Eq 262 at page 266:-

“You cannot deliver the deed to the grantee himself, it is said, because that would be inconsistent with its preserving the character of an escrow. But if upon the whole of the transaction it be clear that the delivery was not intended to be a delivery to the grantee at that time, but that it was to be something different, then you must not give effect to the delivery as being a complete delivery, that not being the intent of the persons who executed the instrument.”