England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
(Mr Justice Langley)

		Royal Courts of Justice Strand London WC2A 2LL
		Monday, 13th March 2000

Lord Justice Nourse:

Introduction

The primary issue in this appeal is one of fact. Did Mr Leslie Sage commit perjury in giving evidence to Hirst J on 20th November 1989 at the trial of an action ("the first action") between Orion Insurance Co Plc and Sphere Drake Insurance PLC? Hirst J found that Mr Sage's evidence was truthful and his finding was upheld by this court (Lloyd and Mann LJJ, Stuart-Smith LJ dissenting); see [1990] 1 Lloyd's Rep. 465 and [1992] 1 Lloyd's Rep. 239. But in later proceedings to which another insurance company was also a party ("the Baloise action") Moore-Bick J found that Mr Sage did commit perjury in giving evidence to Hirst J; see [1998] 1 Lloyd's Rep. (Insurance & Reinsurance) 35. That has resulted in the present action, in which Sphere Drake claims that the judgment of Hirst J should be set aside on the ground that it was procured by fraud. Having found that Mr Sage did not commit perjury in giving evidence to Hirst J, Mr Justice Langley dismissed the action. Against that decision Sphere Drake now appeals. An appeal by Orion against the decision of Moore-Bick J was compromised by an order in the Tomlin form made shortly before the hearing of this appeal started.

At first sight these different findings made by three different judges of the Commercial Court, the cost of which to Sphere Drake, we have been told, is something of the order of US $160m, are perplexing. But it is important to emphasise that the evidence was not the same at each of the three trials. By the time of the trial before Moore-Bick J Mr Sage was dead. On the other hand there was a limited amount of material then available which was not before Hirst J, in particular an affidavit sworn by Mr Sage in 1986 and the oral evidence of Mr M E Burtonshaw. Before Mr Justice Langley there was a vast amount of additional material which was not before Moore-Bick J, in particular the oral evidence of the solicitors and counsel who had acted for Orion in the first action and contemporary documents from the solicitors' files.

Mr Justice Langley gave a very careful judgment running to some 210 pages. Although his decision of the perjury issue in favour of Orion was a sufficient basis for the dismissal of the action, he quite rightly went on to decide three further issues. The second, which he called the attribution issue, was mainly a question of law. He held that even if Mr Sage did commit the alleged perjury, the law required that at least one of those responsible for the management of Orion or the conduct of the litigation on its behalf should have procured him to do so, or at the least relied on his evidence to deceive the court in the knowledge that it was perjured. Having found that Sphere Drake had wholly failed to establish a case of such knowledge on the part of anyone, he decided the attribution issue, like the perjury issue, in favour of Orion. That part of the judge's decision is also attacked by Sphere Drake in this court.

The third issue decided by Mr Justice Langley was the materiality issue. On the footing that he was wrong on the first two issues, he held that Sphere Drake would only be entitled to an order setting aside the judgment of Hirst J if the perjured evidence was such that it entirely changed the aspect of the case. He held, in favour of Sphere Drake, that that test was satisfied on the facts. That part of the judge's decision has not been questioned by Orion in this court. The same can be said of the fourth issue, the election/affirmation issue, which the judge also decided in favour of Sphere Drake.

The facts of the case as they stood before Hirst and Moore-Bick JJ sufficiently appear from their reported judgments. Mr Justice Langley's judgment has not been reported, but the additional evidence before him is referred to in detail in the judgment to be delivered by Lord Justice Brooke. In the circumstances, a further extensive rehearsal of the facts and the evidence is unnecessary. I will confine myself to essentials. Although both Sphere Drake and Orion have changed their names since the hearing before Mr Justice Langley, it is convenient to refer to them by their old names.

The 1975 agreement, the Russell Record and the Flint Note

Mr Sage's evidence was given in reference to a meeting in London on 23rd April 1975 attended by representatives of Sphere and Drake (then separate companies), Sphere's holding company Alexander Howden & Swann Ltd ("Howden"), Orion and a Swiss insurance company which, for brevity, has been referred to simply as Baloise. The representatives of Orion included Mr Sage, who was then a director and its general manager. At that meeting an oral agreement ("the 1975 agreement") was made between Sphere and Drake, Orion and Baloise, its background and purpose being described by Mr Justice Langley as follows:

"Between the mid-1950s and 1975 these companies had been concerned together in various capacities (as pool members, shareholders and reinsurers) in insurance business underwritten in London and by 1975 were engaged in the run-off of that business to which they were exposed in various proportions of some complexity. In 1975 it was believed that estimates could be made for the future run-off of all the business and the April 1975 agreement provided for contributions to be made to those estimates by each company to be paid to the company which was to be responsible for administering the run-off of the particular business in question."

There are extant two documents which purport to record the whole or part of the April 1975 meeting. The first, known as "the Russell Record", is a typed record prepared by Mr C F Russell of Sphere and Drake, circulated some weeks after the meeting and signed by the representatives of the parties, including Mr Sage on behalf of Orion. The second, known as "the Flint Note", is a manuscript note made at the meeting by Mr R J Flint of Sphere and Drake, which was disclosed on discovery in the first action in 1987 but did not attract the attention of Orion's advisers until the beginning of May 1989, some six months before the trial was fixed to start.

The principal issue in the first action was whether the 1975 agreement was made with the intention of creating legal relations and was thus a binding contract. Orion contended that it was not binding and Sphere Drake that it was. Hirst J found that it was not binding. Both before him and at every stage thereafter the Russell Record and the Flint Note have been documents of crucial importance. I refer to them in turn.

The Russell Record is expressed in its heading to be a record of the April 1975 meeting. It starts by listing those present and in attendance who, in addition to Mr Sage, Mr Russell and Mr Flint, included Mr F Baumli of Baloise and Mr W N Rousell and Mr L J Heritage of Orion. Mr R C Comery of Howden is recorded as being in the chair. Paragraph 1 reads:

"The Chairman referred to the meeting of 13th December 1974 which established the principles to govern the run-off of liability attaching to certain continuing accounts of 'Orion' and 'Sphere'. He said that the object of the present meeting was to agree the final figures involved and the basis for cash settlement."

Having referred to an attached memorandum, already circulated, detailing the respective outstanding liabilities at 31st December 1974 and the basis of assessment thereof, paragraph 2 reads:

"After discussion it was agreed by the interested parties:-

(a) that the figures detailed in the schedule attached to the memorandum of 22nd April 1975, represented, subject to the general reservation in para. 3 below, the final liabilities of the parties involved."

Sub-paragraphs (b), (c) and (d) of paragraph 2 provide for the currencies in which the liabilities are to be settled, for settlement to be made in specified percentages between 30th June 1975 and 30th June 1978 and for all settlements to be made through the agency of Howden. Paragraph 3 is in these terms:

"It was understood that the present agreement, as recorded above, did not preclude the re-opening of discussion on the sharing arrangements if actual settlements increased to an extreme degree the commitment of any party as presently calculated and as evidenced in the memorandum attached hereto."

Paragraph 4 notes that statistics recording the development of accounts involved in the agreement will continue to be exchanged if the previously agreed figures become seriously distorted.

The Flint Note starts by recording the date, the time of the meeting (3.00 p.m.) and those attending. The main part of it is written partly in shorthand. The agreed transcription of that part, giving names where initials appear in the original, is as follows:

"Sphere Termination Agreement

LESLIE SAGE Goodwill agreement and not a legal contract

R. C. COMERY (1) Bill Rousell/Charles Russell - Been fair in applying common yardstick. Have arrived at final figures. After this meeting a major factor affects the issue. It is fair to leave the spirit there.

LESLIE SAGE Agrees it is essential to spirit of meeting/agreement.

FRANZ BAUMLI Agreed and will notify his successors (he retires shortly).

R. C. COMERY (2) Simple agreement on payments, 35%, 25%, 20%, 20%.

LESLIE SAGE Agrees in cash. Bill Rousell - 30th of June each year. 35%, 25%, 20%, 20%. R. C. Comery agreed 30th of June 1975.

LESLIE SAGE Accounts in dollars. Should be fully funded in original currencies, ie Sterling, US $ and CAN $.

C. F. RUSSELL Will draft record of meeting."

Although it must always have been tolerably clear that the Russell Record was a record of an oral agreement and not an agreement in itself, it was only to be expected that once the dispute between Orion and Sphere Drake had begun to emerge at the end of 1983 a great deal of time and thought would be devoted to ascertaining the effect of the 1975 agreement on the footing that it was fully and correctly recorded in the Russell Record. The essence of the problem was, in the words of Mr Justice Langley, that there was an obvious tension between paragraphs 2(a) and 3, with paragraph 2(a) recording an agreement on the figures in the attached memorandum in terms which would usually be read as terms of final settlement, yet being expressly subject to the general reservation in paragraph 3 which suggested that any such agreement was qualified or conditional. The preponderance of judicial opinion, to which I would myself subscribe, has been in favour of the view that the agreement recorded in paragraph 2(a) was intended to be binding, while that recorded in paragraph 3, being at its highest no more than an agreement to discuss, could not be binding and, moreover, left the agreement recorded in paragraph 2(a) unimpaired. Accordingly, if Hirst J had found that the Russell Record fully and correctly recorded the 1975 agreement, judgment in the first action would have been given in favour of Sphere Drake. However, the agreement having been oral, it was open to either side to adduce evidence to the effect that the Russell Record did not fully or correctly record it.

The Flint Note does not purport to be a full record of the April 1975 meeting. By far and away its most important feature is that it starts by attributing to Mr Sage the words "Goodwill agreement and not a legal contract". It is not disputed that he spoke those words. A critical question in the first action was whether they were spoken in relation to the 1975 agreement as a whole or only in relation to that part of it which is recorded in paragraph 3 of the Russell Record.

Mr Sage's evidence

In paragraph 65 of his witness statement before Hirst J Mr Sage said of the April 1975 meeting:

"I made the point at the outset that this (meaning the agreement as a whole) was a goodwill agreement and could not be a legal contract. (Indeed, I could not override the earlier agreements ratified by the Orion Board except with its authority and in the proper form. So far as I was aware, the other persons present were in the same position.) I believe this was clearly understood and agreed by the other parties."

The crucial part of Mr Sage's cross-examination took place on the morning of the fifth day of the trial, 20th November 1989. The four passages relied on by Sphere Drake are set out in full in the judgment of Lord Justice Brooke and I repeat the most telling exchanges below. In giving judgment, Hirst J said, under the heading "Mr Sage's evidence" [1990] 1 Lloyd's Rep. 501:

"Mr Sage affirmed clearly that his testimony concerning his crucial statement at the outset of the April 23, 1975 meeting was based on his recollection, confirmed by the Flint note when he first saw it in the summer of 1989."

At that point the judge referred to Mr Sage's answer to his "hey presto" question (see below) and continued:

"The crux of Mr Mance's attack upon Mr Sage is that this evidence was an afterthought: that Mr Sage did not and cannot have had any independent recollection whatsoever, and that he embraced the Flint note when it first came into his hands, which is why the evidence in his written statement which I have quoted above ('I made the point at the outset . . .') is drawn almost verbatim from the Flint note."

Having dealt individually and at some length with these and other points made by Mr Mance, Hirst J stated his conclusion as to Mr Sage's evidence at p. 503:

"I therefore reject Mr Mance's suggestion, which is central to the attack on Mr Sage's evidence, that his testimony on this point was an afterthought, and I find that he has ever since 1975 held this in his memory, although of course, as he himself acknowledged, such recollection was confirmed and strengthened once his attention was drawn to the Flint note."

These passages are of importance as showing Hirst J's understanding of what Mr Sage had been telling him, a topic to which I will return.

The lie alleged

Although in the early stages of this action it may not have been clear exactly what lie or lies it was alleged Mr Sage had told to Hirst J, there can be no doubt about how the matter stood by the close of the trial. In stating his conclusions on the perjury issue, Mr Justice Langley said:

"The allegation of perjury is (as it must be) in precise and limited terms. It is that Mr Sage lied in saying he had a long-held recollection independent of the Flint Note of using the words the Note attributed to him at the April 1975 meeting. It is not alleged that he lied in saying that he had always believed that any agreement made at the April 1975 meeting was only a goodwill agreement nor in claiming a present recollection at the trial of using the words prompted by the Flint note."

That is an important passage in the judge's judgment, in that it sets out not only the lie which was alleged but two different lies which might have been, but by that stage at any rate were not, alleged. The lie alleged was that Mr Sage had a long-held recollection, independent of the Flint Note, of using the words the note attributed to him at the April 1975 meeting. That has continued to be the lie alleged by Sphere Drake on this appeal.

In that state of affairs Mr Sumption QC, in opening Sphere Drake's appeal, suggested that the issue of fact could be reduced to three essential questions which I have slightly reformulated as follows:-

(1) Did Mr Sage in fact have a long-held recollection, independent of the Flint Note, of using the words the note attributed to him at the April 1975 meeting?

(2) Did Mr Sage claim in his evidence to Hirst J that he did have such a recollection?

(3) If he did make such a claim, did he know that it was false?

I have found a consideration of these questions to be a most helpful means of arriving at a conclusion on this unusually difficult issue of fact, though I prefer to consider the second before the first.

Did Mr Sage claim that he had the recollection?

Mr Justice Langley did not find it easy to be sure exactly what Mr Sage was saying (or understood he was saying) in his evidence about his recollection about the April 1975 meeting and the relationship of that recollection to the Flint Note. With respect to the judge, who seems to have attached undue weight to what Orion's counsel and solicitors thought Mr Sage had been saying, I agree with Mr Sumption that that was a remarkable conclusion for him to arrive at in the light both of the passages in Mr Sage's cross-examination on which Sphere Drake relies and of the view which Hirst J evidently took of what Mr Sage had told him.

The most telling exchanges as recorded in the transcript of the fifth day of the hearing are the following:

1. "Q. Has it always been your recollection that there was specific agreement that the whole agreement was not to be legally binding, was not to be more than a matter of mere goodwill and not to be a legal agreement. Is that always your recollection?

A. Yes, and for one specific reason . . ." (p. 17G).

2. "Q. . . . it is your recollection, is it, that throughout you have always thought and understood and remembered that any agreement made on 23rd April 1975 was expressly agreed not to be a legally binding agreement?

A. Yes." (p. 24A).

3. "MR JUSTICE HIRST: What I think is being suggested to you is not that you made this up but that you never thought about it or remembered it as a goodwill agreement until you suddenly saw this document in August when you said 'Hey presto, of course that is what I said after all', is that correct?

A. No, not in its entirety, my Lord, in the sense that I had it in mind - in my mind - and this did, perhaps, confirm - only confirm - my recollection was correct . . . it is not correct [that in the first sentence of paragraph 65 of my proof I was relying heavily on the Flint Note.] I remember the circumstances of that meeting and what was said. Both notes confirmed my thoughts on the matter - my remembrance of the matter - it was not in itself more than that." (pp. 27F to 28B)

4. "MR JUSTICE HIRST: Are you saying quite categorically that your clear recollection is that you did open off with that remark?

A. It is quite clear in my mind, my Lord." (p. 31B)

Although the fourth exchange was in terms directed to Mr Sage's current recollection, it is clear to my mind, in the light of the previous exchanges and especially the third, that in his evidence before Hirst J Mr Sage was claiming that he had always recollected using the words of the Flint Note attributed to him at the April 1975 meeting.

That that was the view of Mr Sage's evidence taken by Hirst J appears clearly from the passages I have read from his judgment. At p. 501 he said that Mr Sage had affirmed clearly that his testimony concerning his crucial statement at the outset of the meeting was based on his recollection confirmed by the Flint Note, at which point he referred to Mr Sage's answer to his 'hey presto' question. He then examined the crux of Mr Mance's attack upon Mr Sage, ie. that his evidence was an afterthought and that he did not and could not have had any independent recollection whatsoever. In rejecting that attack, the judge found, at p. 503, that Mr Sage had ever since 1975 held this in his memory, although such recollection was confirmed and strengthened once his attention was drawn to the Flint Note. So the judge's understanding was that Mr Sage had told him he had recollected making his crucial statement at the outset of the meeting ever since 1975 and that the Flint Note had confirmed, not generated, his recollection.

In my judgment this question is one to be objectively determined on the transcripts of what was said by Mr Sage and Hirst J's understanding of it and not on what, some ten years later, Orion's counsel and solicitors thought he was saying. The material I have referred to convinces me that Mr Sage did make the claim that Sphere Drake say he made.

Did Mr Sage in fact have the recollection claimed?

I return to Mr Sumption's first question which, like the third, involves a consideration of the vast amount of additional material which was before Mr Justice Langley. In regard to both questions Lord Justice Brooke has set out in detail both the relevant evidence and the submissions of Mr Sumption for Sphere Drake and Lord Grabiner QC for Orion. I gratefully adopt his account of those matters.

In relation to the first question it is, as Mr Sumption submitted, essential to distinguish between Mr Sage's belief as to the effect of the 1975 agreement and his recollection of using the words attributed to him by the Flint Note. For my part, I am quite prepared to accept that Mr Sage always believed that the agreement was not legally binding. To put it in the simplest way, he could well have believed that that was the effect of the part of it which is recorded in paragraph 3 of the Russell Record. But the question whether, in 1989, he had always recollected using particular words, however important, at the outset of a meeting in 1975 is one which requires a far more rigorous enquiry. On the evidence before him Hirst J was satisfied that Mr Sage did have that recollection. He saw "nothing improbable in such an important matter for Orion sticking in his memory", see p. 503. But now we have extensive documentary evidence of the preparations for the trial on Orion's side.

Our primary concern at this stage of the enquiry is to look for contemporary evidence of Mr Sage's recollection having been articulated in some way before the Flint Note first came to the notice of Orion's advisers in May 1989. As Lord Justice Brooke has demonstrated, not only is there no such evidence; the evidence that there is establishes that Mr Sage did not have the long-held recollection that he later claimed. That means that Mr Sumption's first question must be answered in the negative. Moreover, the fact that until the end of July 1989 Mr Sage had no independent recollection of what was said at the April 1975 meeting must be of great significance in any consideration of Mr Sumption's third and crucial question, to which I now turn.

Did Mr Sage know that his claim to the recollection was false?

On this question, after the most careful reflection, I have come to the same conclusion as Lord Justice Brooke. While conscious that such a view can only be safely formed on the basis of convincing evidence, I am satisfied, on the balance of probabilities that Mr Sage did commit perjury in the respect alleged against him. In general I am content to adopt the analysis and reasoning of Lord Justice Brooke. I subscribe in particular to the importance he attaches to the contemporary documents; to his observations on the significant differences between the hearings before us and in the court below; to his account of the determined efforts made by Orion's senior management to make Mr Sage feel that he was working as a member of a team for the purpose of winning the case, "the charm offensive" and so forth; and to his treatment of Mr Justice Langley's reasons for concluding that Mr Sage did not commit perjury. While it is unnecessary for any of this ground to be covered again, I must nevertheless state in my own words the essentials of the reasoning that has led to my conclusion.

I can start with the meeting on 11th July 1989. I agree with Lord Justice Brooke that it is clear that the whole of Mr Sage's draft witness statement was considered at that meeting, and that the existence and content of the Flint Note were then drawn to his attention, even if the note itself may not have been produced. I also agree that it seems clear that Mr Sage was asked about the words "not a legal contract" in the Flint Note, and that he did not then recollect having used those words at the April 1975 meeting. The most probable explanation is that Mr Sage, having come to the meeting underprepared, was asked to go away and give detailed answers later to the specific questions raised in paragraph 36 of the draft statement.

I have found it very difficult to reconcile Mrs Good's evidence, accepted by the judge without qualification, that she had a visual memory of Mr Henshaw coming down the corridor with the Flint Note, soon after the shorthand had been interpreted by his secretary on 10th May 1989, with her apparent unconcern for its significance before July of that year. This has caused me to wonder whether the event described by Mrs Good did not occur until much later. However, since the outcome of that particular speculation could not be decisive of anything we have to decide, I explore it no further. The important point is that the "vital" significance of the Flint Note was not drawn to Mr Sage's attention until he received Mrs Good's letter to him of 27th July 1989.

It is clear that by the time that she wrote that letter, if not before, Mrs Good, no doubt encouraged by the view expressed by Mr Boyd QC in consultation on 24th July, was well aware of the significance of the Flint Note. In drawing Mr Sage's attention to it, in particular to his having said "Goodwill agreement and not a legal agreement", she said:

"All of this is consistent with what you have told us about the intention of the meeting. It is vital to our case that we establish that what was agreed on 23rd April 1975 was a goodwill agreement only and not a legally binding full and final settlement. I trust this note may help to confirm what you have already told us."

Although it is important in other respects, further quotation from the letter is unnecessary. In my judgment Mr Sage's response to it casts more light on the factual issue we have to decide than any other single feature of the case.

Mr Sage's response consisted of an amended draft witness statement containing many manuscript deletions and additions, together with a manuscript note in which he said that the Flint Note "certainly supports Goodwill and not legal agreement. I have enlarged in my evidence." We know that between 31st July and 7th August, when the amended draft and the note were delivered by hand to Mrs Good, Mr Sage spent more than 20 hours in making the amendments. In answer to the specific questions raised in what was now paragraph 43, he noted in the margin, first that it was consistent with his recollection that he said words to the effect of "Goodwill agreement - not a legal contract"; secondly, that he was referring to the 1975 agreement as a whole, not just the "let-out" clause; and, thirdly, that the other persons at the meeting agreed. He then inserted the following words written on a separate sheet of paper:

"I recall clearly that I made the point that this, meaning the agreement as a whole, was a goodwill agreement and could not be a legal contract. I could not override the earlier agreements ratified by the Orion Board except by their authority. (This also, I would suggest, applied to all the parties.) The reaction of other parties was one of agreement."

Accordingly, the position at that stage was that Mr Sage was saying that he recalled clearly using the words the Flint Note attributed to him at the April 1975 meeting. But even assuming that the Flint Note had prompted some recollection in him to that effect, it plainly cannot have been a clear recollection. The evidence that any recollection that he had must have been unclear is overwhelming. Most recently, Mrs Good had said as much in the comments she made on Mr Sage's witness statement in her instructions to counsel of 14th July. Moreover, if, as is plain, Mr Sage's recollection was unclear, he must have known that it was unclear.

The inescapable conclusion is that Mr Sage was prepared, some three and a half months before the trial, falsely to improve his evidence on a point which Orion's solicitors had told him was vital to its case. True, it is not alleged that he perjured himself when, in the fourth exchange above quoted, he gave similar evidence as to his current recollection at the trial. Indeed, it is possible that everything that had happened in between, especially in the last three weeks of August, had produced in him an honest belief that his recollection was then clear. But his earlier readiness falsely to improve his evidence must be of great importance in deciding whether he falsely improved it in a further and different respect at the trial.

On one copy of the typed up sixth draft of Mr Sage's witness statement dated 27th August, against the words "I recall clearly", Mr Legg wrote the words "how clearly". In the seventh draft dated 30th August the words "I recall clearly that" had been deleted and, as appears above, they did not reappear in paragraph 65 of the final statement put before Hirst J. I agree with Lord Justice Brooke that at their proofing meeting on 30th August Mr Henshaw must have told Mr Sage that he could not say that he recalled clearly that he made the point. Mr Justice Langley did not think that it was of any significance that all four words had been deleted and not just the word "clearly". He said:

"I can well understand why the words were considered inappropriate after 14 years and the effect of their deletion was not (as Mr Sumption seemed to suggest but Mr Henshaw rightly denied) to put the resulting draft outside the realm of recollection but only outside the realm of clear recollection. Mr Legg said he thought it was a drafting point. So do I."

Even if the judge's view of the insignificance of the deletion of all four words is accepted, I nevertheless think that his adoption of Mr Legg's description of it as a drafting point is very curious. It shows, I believe, that he failed to appreciate the importance of what Mr Sage had been prepared to say as to the clarity of his recollection after he had received Mrs Good's letter of 27th July but before it had been questioned by Mr Legg. I remain of the opinion that that point must be of great importance in deciding whether Mr Sage falsely improved his evidence in a further and different respect at the trial.

As to that crucial point, I see the matter in this way. At the beginning of August Mr Sage must have known not only that his recollection was unclear but also that it had only been prompted by the Flint Note. He must therefore have known that during the intervening period he had had no recollection at all. While it is possible that by the time of the trial he had come honestly to believe that his current recollection was clear, it is not in my judgment possible that in less than four months he had honestly forgotten his previous lack of recollection. I am convinced that Mr Sage was again falsely prepared to improve his evidence in a vital respect, and that on this occasion he did so.

The legal consequences of Mr Sage's perjury

My conclusion on the perjury issue, coupled with the judge's undisputed decision on the materiality issue, makes it necessary to proceed on the footing that the judgment of Hirst J in favour of Orion was procured by Mr Sage's perjured evidence. But it does not at all follow that Sphere Drake is entitled to have the judgment set aside on that ground. Orion, not Mr Sage, was the plaintiff in the first action. Accordingly, Sphere Drake must establish, as a matter of law, either that it is unnecessary for the perjured evidence which procures the judgment to be the evidence of a party to the proceedings or that Mr Sage's evidence can be treated as having been the evidence of Orion itself. Mr Justice Langley dealt with both alternatives under the description of the attribution issue, although it seems that it is only the second of them which can accurately be so described.

Does the perjured evidence have to be that of a party?

For the reasons given in the judgment to be delivered by Lord Justice Buxton, which I gratefully adopt, I agree with him that it is necessary for the perjured evidence which procures the judgment to be the evidence of a party to the proceedings. In his reply Mr Sumption, correctly as I believe, submitted that the real question on the authorities is whether the certiorari cases state the modern law as to the effect of perjured evidence in terms which apply, beyond the procedural boundaries of certiorari, to a collateral action such as the present. While I was much attracted by Mr Sumption's argument on that question, I have come to the conclusion that we in this court are precluded from acceding to it both by the origins of the fraud of a party rule as an exception to the doctrine of issue estoppel (see The Duchess of Kingston's Case (1776) 2 Smith LC 644, 168 ER 175) and by the subsequent authorities, in particular the decisions of this court in Abouloff v. Oppenheimer & Co (1882) 10 QBD 295 and Boswell v. Coaks (5th November 1892 - unreported).

Can Mr Sage's evidence be treated as the evidence of Orion?

It is clear both in principle and on authority (see eg. McIlkenny v. Chief Constable of the West Midlands [1980] QB 283, 333, per Goff LJ) that the fraud of a party rule applies where a judgment is procured by the perjured evidence of a party to the proceedings, being a natural person. It is also clear in principle and undisputed by Orion that the rule applies where the party is a corporation, provided that the perjured evidence can be treated as having been that of the corporation itself. That raises a question of company law on which the authorities cited to us cast no direct light.

Orion's arguments on the legal questions were presented primarily by Mr Griffiths. After exchanges between the court and Mr Griffiths, followed by Lord Grabiner, and a period for reflection, Lord Grabiner formulated Orion's submissions on this question in six propositions, the first five of which were to the following effect. (The sixth is not directly material and need not be stated.) First, in order that the perjured evidence may be treated as that of the company, the company must either procure it to be given or adopt it with knowledge of the perjury. Second and in consequence, the rank or status within the company of the person who gives the perjured evidence, is not necessarily decisive. Third, in order to determine whether the company has the requisite knowledge for it to procure or adopt the perjured evidence, the directing mind and will test (see Lennards Carrying Co Ltd v. Asiatic Petroleum Co Ltd [1915] AC 705, 713, per Viscount Haldane LC) is applicable. Fourth, the knowledge of a person to whom the conduct of the litigation on behalf of the company is delegated is probably (I would think certainly) sufficient, even though that person is not part of its directing mind and will. Fifth, if the person who gives the perjured evidence is part of the directing mind and will of the company, albeit not a person having the conduct of the litigation, the rule would in principle also apply.

In my judgment those five propositions, some of which are unobjectionable in themselves, do not adequately address the problem which confronts us in this case. I am of the opinion, shortly stated, that, for the purposes of the fraud of a party rule, it is in certain circumstances possible for perjured evidence to be treated as that of a company, even where it is neither procured or knowingly adopted by the company nor given by someone who is part of the company's directing mind and will or a person to whom the conduct of the litigation has been delegated.

It is necessary to state or repeat three further propositions, which I take to be obvious. First, the company cannot give evidence itself. Second, a person who gives evidence on behalf of a company does not do so as its agent. Third and on the other hand, there would be an unacceptable shortcoming in company law if evidence given on behalf of a company was incapable of being treated as the evidence of the company itself. So the question is when and in what circumstances it ought to be so treated.

A good starting point is an illuminating passage in the judgment of the Privy Council delivered by Lord Hoffmann in Meridian Global Funds Management Asia Ltd v. Securities Commission [1995] 2 AC 500, 507, where, after referring to a company's primary rules of attribution (generally found in its constitution) and the general principles of agency, he said:

"The company's primary rules of attribution together with the general principles of agency, vicarious liability and so forth are usually sufficient to enable one to determine its rights and obligations. In exceptional cases, however, they will not provide an answer. This will be the case when a rule of law, either expressly or by implication, excludes attribution on the basis of the general principles of agency or vicarious liability. For example, a rule may be stated in language primarily applicable to a natural person and require some act or state of mind on the part of that person 'himself', as opposed to his servants or agents. This is generally true of rules of the criminal law which ordinarily impose liability only for the actus reus and mens rea of the defendant himself. How is such a rule to be applied to a company? . . . . there will be many cases . . in which the court considers the law was intended to apply to companies and that, although it excludes ordinary vicarious liability, insistence on the primary rules of attribution would in practice defeat that intention. In such a case, the court must fashion a special rule of attribution for the particular substantive rule. This is always a matter of interpretation: given that it was intended to apply to a company, how was it intended to apply? Whose act (or knowledge, or state of mind) was for this purpose intended to count as the act etc. of the company? One finds the answer to this question by applying the usual canons of interpretation, taking into account the language of the rule (if it is a statute) and its content and policy."

Although Lord Hoffmann's language was no doubt influenced by the particular task of interpreting a statutory provision whose operation depended on a company's knowledge of a certain state of fact, his statement of principle is of general application. Thus in the present case we are concerned with a substantive rule of judge made law which applies to a company, and the question, in Lord Hoffmann's words, is:

"Whose act [ie. the giving of perjured evidence] was for this purpose intended to count as the act of the company?"

In answering that question we must take into account the policy of the substantive rule, which is that a person who procures a judgment to be given in his favour by fraud ought not to be allowed to profit from the fraud.

The question whether perjured evidence should, for the purposes of the fraud of a party rule, be attributed to a company depends on the facts of the particular case. Here they must be unusual. On the one hand, Mr Sage's evidence was neither procured or knowingly adopted by Orion nor was it given at a time when he was still part of its directing mind and will. On the other hand, Mr Sage, as a director and the general manager of Orion, was both part of its directing mind and will at the time and personally responsible for the transaction about which he gave the evidence in support of its case. Moreover, in 1989, although no longer an officer or servant of Orion, he was paid £50 an hour as a consultant to it for the purposes of the first action, and as a member of the team which took decisions as to how its case was to be presented at the trial.

On those facts Mr Sumption submitted that Mr Sage's evidence should be attributed to Orion. The basis of his submission was that Mr Sage was a person who had, in relation to the first action, a connection with Orion that was so close as to make it unjust that it should be entitled to disavow the evidence even though it had no knowledge that the evidence was perjured.

Although it makes no difference in the result, I do not myself feel comfortable with a test whose satisfaction depends on the injustice of the company's being entitled to disavow the perjured evidence. The question is one of fact and degree which must be determined on a realistic assessment of the particular circumstances. I prefer a test I have found helpful in the past, by reason of its requirement that the acts of the natural person should be identified as the acts of the company. That is the test which was adopted by Eveleigh J in delivering the judgment of the Criminal Division of this court in R v. Andrews-Weatherfoil Ltd [1972] 1 WLR 118, 124:

"It is necessary to establish whether the natural person or persons in question have the status and authority which in law makes their acts in the matter under consideration the acts of the company so that the natural person is to be treated as the company itself."

On that view of the matter the question, ultimately, is this. For the purposes of the fraud of a party rule, did Mr Sage have the status necessary to make his evidence the evidence of Orion? I refer only to his status, because the concept of authority adds nothing in the present context and, moreover, is potentially misleading where the natural person is neither the agent of the company nor someone who has been suborned to commit the perjury.

The principal objections to the test embodied in Lord Grabiner's five propositions are that it is insufficiently flexible to reflect the policy of the fraud of a party rule and that it can in certain circumstances be capricious in its results. Thus, under the first objection, in the case where nobody but the perjurer knows of the perjury the company would be allowed to profit from the fraud unless, at the time that the evidence was given, the perjurer happened to be part of the company's directing mind and will or a person to whom the conduct of the litigation had been delegated. Under the second objection, though the rule would have applied if the trial had preceded Mr Sage's retirement in 1980 or if his retirement had been deferred until 1990, it would not have applied if the trial had taken place shortly after, even one day after, his retirement or if he had retired shortly before, even one day before, the trial took place in 1989. These objections are fatal to the acceptability of Lord Grabiner's test and confirm the need for a more pragmatic test such as I have suggested. It is also to be noted that in the Meridian case the Privy Council were of the opinion that the directing mind and will test had not been expounded by Viscount Haldane LC as "a general metaphysic of companies", and that the difficulty of applying it in some of the subsequent cases had been caused by concentration on the particular phrase rather than on the purpose for which it had been used; see [1995] 2 AC, at pp. 509-511.

Applying the test suggested, I am satisfied that, at the time that he went into the witness box in November 1989, Mr Sage did have the status necessary to make his evidence the evidence of Orion. In my judgment the two most important considerations are, first, that he was the witness, above all others, on whose evidence the success of Orion's case had come to depend. He was its "vital" witness. There is nothing fanciful, adopting the words of Eveleigh J, in treating Mr Sage as having been, for the purposes of the trial, Orion itself. Of equal importance is the consideration that he had acquired that status not simply because his evidence related to a transaction for which he had been personally responsible as part of Orion's directing mind and will at the time, but also because in the six months or so before the trial he had been a committed member of the team which took decisions as to how Orion's case was to be presented. The evidence established that Orion deliberately sought, as Mr Sumption put it, to make Mr Sage feel part of a team which was helping to row it to victory. Whatever the rights and wrongs of that may have been, Orion succeeded in identifying him with its own interests and thus with itself.

While I have expressed discomfort with a test whose satisfaction depends on the injustice of the company's being entitled to disavow the perjured evidence, in following the Privy Council's precept that we must fashion a special rule of attribution for the particular substantive rule I fervently agree with Mr Sumption that technicalities cannot be allowed to defeat substantial justice. On a view of the case as a whole, it would in my judgment be unjust if Mr Sage's perjured evidence could not be treated as the evidence of Orion. If that requires an extension of the principles of company law as they are at present understood, so be it. In support of such an extension Mr Sumption offered the interesting and valuable analogy of the development of the principles of vicarious liability in order to meet the justice of cases such as Lloyd v. Grace, Smith & Co [1912] AC 716.

Conclusion

I would allow Sphere Drake's appeal and set aside Hirst J's judgment in the first action.

Lord Justice Brooke:

Like Nourse LJ, I will call the claimants by their original name "Sphere Drake" and the defendants by their original name "Orion".

This is a most unusual piece of litigation. It is centred on the events which took place at a fairly short meeting at Orion's offices in the City of London on the afternoon of 23rd April 1975. In November 1989 Hirst J conducted a 13-day trial and made findings which were determinative of the legal effect of what took place at that meeting: see the report of his judgment at [1990] 1 Lloyd's Rep 465. His judgment was upheld by this court, after a 12-day hearing, in August 1991: see [1992] 1 Lloyd's Rep 239. In October and November 1996 Moore-Bick J conducted a 27-day trial, in which a different party was involved, and at which he received evidence that was to some extent different from that tendered to Hirst J. He came to precisely the opposite conclusion to Hirst J: see [1998] Lloyd's Ins Rep 35. We were scheduled to hear an appeal by Orion against Moore-Bick J's judgment during the fortnight which preceded the hearing of the present appeal, but that appeal was settled on undisclosed terms in September of this year shortly before it was due to be heard. Sphere Drake were, in effect, the losers on both occasions. We have been told by Mr Sumption QC that the estimated cost to them of these mutually inconsistent findings is in the region of US$160 million.

They brought the present action in an endeavour to rectify in their favour what they see as the unhappy situation created by these two conflicting judgments. Lord Grabiner QC discouraged us from having too much sympathy with Sphere Drake on this account, since it would have been open to them to appeal against Moore-Bick J's judgment and they chose not to do so. Mr Sumption riposted that his clients did not appeal against that judgment because they considered that it was correct.

It was the evidence of Mr Leslie Sage, who was the general manager and an executive director of Orion in April 1975, which persuaded Hirst J to find in their favour in the first action. Mr Sage had died before the second trial took place, and Moore-Bick J, for his part, not only declined to put the same weight on his evidence but expressly held that Mr Sage had lied in a material respect. In the present action Sphere Drake seek an order setting aside the judgment of Hirst J on the grounds that it was procured by fraud. After a trial lasting 17 days Langley J found that Mr Sage had not lied. He went on to hold that even if he had lied, he was a mere witness and his lie could not be imputed to Orion so as to deprive them of the fruits of their judgment. He also dismissed Sphere Drake's contentions that two senior representatives of Orion, along with their leading counsel and two of the solicitors who had acted for them in connection with the first action, had been parties to the alleged fraud, and there is no appeal against that part of his judgment. The lie attributed to Mr Sage is that he told Hirst J that it had always been in his recollection that he had said at the outset of the critical meeting that any agreement made at that meeting would be a goodwill agreement only and that the other parties had assented to this proposition. This came to be described as "the goodwill agreement exchange".

The judge held that this part of Mr Sage's evidence was material, in the sense that it entirely changed the relevant aspect of the case, for four reasons. First, the documents, and in particular the documents described in the earlier judgments as the Flint Note and the Russell Record, were not conclusive and contained material on which each side could probably rely. Nourse LJ has quoted the salient parts of these two documents. Secondly, the probabilities seemed to him to have been nicely balanced. Thirdly, he thought that the oral evidence at the trial before Hirst J, apart from Mr Sage's evidence, was either neutral or self-cancelling. After considering the judgments of Hirst J and the majority in the Court of Appeal the judge believed that the focus of the trial, and even more the focus of the appeal, was centred on the reliability of the evidence Mr Sage had given to the effect that it was understood at the meeting that the discussions were not to result in a legally binding agreement. This was the issue to which the allegation of perjury was directed, and the length and existence of Mr Sage's recollection became an important part of the attack on his reliability. Finally, the consideration of the documents and the probabilities by Hirst J and the majority of the Court of Appeal not only led them to different conclusions about whether the parties were driving towards finality but were substantially conducted in the context of testing and reaching an assessment of Mr Sage's reliability.

In these circumstances the judge considered that it would be artificial to suggest that a lie by Mr Sage about the length of his recollection would not have affected an assessment of the fact of his recollection itself. Furthermore, whilst the point was not conclusive, it was persuasive that Moore-Bick J, having found that Mr Sage had been untruthful about his recollection, had reached the opposite conclusion to Hirst J as to the binding nature of the agreement.

We did not hear argument from the parties on the way in which the judge expressed his reasons on this point, since Orion did not seek to challenge his conclusion that Mr Sage's evidence about the length of his recollection was material in the requisite sense. They merely contented themselves by submitting a short written note explaining why Hirst J and the majority of the Court of Appeal were willing to accept that, whatever might have been the position in December 1974, by 23rd April 1975 it might no longer have been the case that the parties were set on finality.

The background facts of this dispute have been extensively set out in the reported judgments of Hirst J, the Court of Appeal and Moore-Bick J at [1990] 1 Lloyd's Rep 465, 466-481; [1992] 1 Lloyd's Rep 239, 240-252; and [1998] Lloyd's Ins Rep 35, 39-48.

They are more briefly summarised in the judgment under appeal, which has not yet been reported. Nourse LJ has quoted a paragraph of that judgment which goes to the heart of the matter. I consider that it is not necessary to repeat them again here. It was common ground that the meeting on 23rd April 1975 was concerned with an effort, started the previous November, to bring to an end the outstanding loose ends that were left over from a number of unsuccessful insurance ventures in which the parties represented at that meeting (Orion, Sphere, Drake, Howden and Baloise), had been involved, in one capacity or another, in the 1950s and early 1960s. The dissenting judgment of Stuart-Smith LJ in the appeal in the first action and the judgment of Moore-Bick J set out cogent reasons, based on many contemporaneous documents, in support of their conclusions that those who had participated in the April 1975 meeting had intended their agreement to be legally binding, even though they had also committed themselves to reopening their discussions if the situation subsequently deteriorated to an extreme degree. Apart from Lloyd LJ, all the judges who have considered the effect of this ancillary commitment have held that it was binding in honour only.

The points that are material to the view of the evidence set out in Orion's short written note are to be found in the judgments of Hirst J at pp 496-7, Lloyd LJ at pp 269-70 and Mann LJ at pp 295-6 and do not call for any great elaboration here. They rely in particular on some of the contents of a six-page memorandum prepared for Orion by Mr Heritage and Mr Rousell in February or March 1975, which Mr Rousell had discussed with Mr Russell on 21st April 1975, and on some of the language used by Mr Russell of Sphere Drake (who were then separate companies) in his memorandum of 22nd April 1975 which formed the agenda for the critical meeting the following day. For example, phrases like "cut-off", "full and final settlement" and extinguishing liabilities", which had appeared in Mr Russell's record of the meeting on 13th December 1975, no longer appeared, and the word "premiums" was replaced by the word "cash payments".

These points did not carry the same weight with Stuart-Smith LJ and Moore-Bick J, and they do not explain why Mr Baumli of Baloise, who was not a party to the discussion between Mr Rousell and Mr Russell, remained oblivious of the fact that on 23rd April the parties did not reach the finality he was seeking if Hirst J's view of the matter was correct. It is not, however, necessary for this court to express its own opinion on these matters other than to say that the judge's unchallenged finding as to the materiality of Mr Sage's evidence about the length of his recollection was clearly right.

On the hearing of the present appeal the two leading counsel encouraged us to adopt widely differing approaches to the evidence before Langley J. This evidence had consisted in part of contemporaneous documentary evidence, and particularly that relating to the years 1985, 1986 and 1989, when Orion was preparing for the trial which eventually took place before Hirst J in November 1989, and in part of oral evidence by Orion's senior executives and their lawyers who were engaged in telling the judge towards the end of 1998 what they then recollected of events which had taken place for the most part more than ten years earlier. Lord Grabiner QC encouraged us to rely quite heavily on this oral evidence, particularly because all Orion's witnesses had impressed the judge as being witnesses on whose evidence he could safely rely. Mr Sumption QC, for his part, argued that however much these witnesses might be attempting in good faith to recollect these events that had occurred so long ago, the judge ought to have recognised that their evidence was inherently unsafe. He advised us to concentrate most of our attention on the contemporary documents. He cited in this context a passage in the speech of Lord Goff of Chieveley in Grace Shipping Inc v CF Sharp & Co (Malaya) Pte Ltd [1987] 1 Lloyd's Rep 207, 215-6, PC.

In that case the trial judge had been faced with the task of assessing the evidence of witnesses about telephone conversations which had taken place over five years earlier. In such a case, Lord Goff said, memories might well be unreliable, and it was of crucial importance for a judge to have regard to the contemporary documents and to the overall probabilities. Lord Goff referred with approval to what he had himself said in The Ocean Frost [1985] 1 Lloyd's Rep 1, where he had said that it was his experience that it was essential in cases of fraud, when considering the credibility of witnesses, always to test their veracity by reference to the objective facts, proved independently of their testimony, in particular by reference to the documents in the case, and also to pay particular regard to their motives and to the overall probabilities.

Mr Sumption suggested that there were three essential questions at the heart of this appeal:

(1) Did Mr Sage in fact have a prior recollection independent of the Flint Note of the goodwill agreement exchange?

(2) Did Mr Sage claim in his evidence that he had such a recollection?

(3) Did he appreciate, when making this claim, that it was unjustified?

He said that the answers we should give to these questions are: (1) No; (2) Yes; (3) Yes.

He first set out to show us why he contended that up to the end of July 1989 Mr Sage had never suggested to anyone that he possessed any such recollection. He said that the evidence on this point fell into five self-contained stages in the development of Mr Sage's views on what took place in 1975.

The first of these stages occurred between 1980 and 1984, and arose out of the evidence given by Mr Burtonshaw to Moore-Bick J

In the late summer or early autumn of 1980 Mr Sage had been asked for the first time to recall the arrangements that had been made in April 1975. In 1978 Mr Burtonshaw had joined the defendant company in the capacity of joint managing director with Mr Sage. In that capacity Mr Sage had remained responsible until his retirement in September 1980 for the London market side of Orion's affairs, and the existence and nature of the 1975 arrangements had cropped up when Mr Burtonshaw was being briefed by Mr Sage about that side of the company's business before taking over as sole managing director.

Mr Burtonshaw did not give evidence before Hirst J. He gave evidence on behalf of Orion at the trial of the second action before Moore-Bick J. In his witness statement in that action, signed in March 1996, he described how Mr Sage had discussed with him the complex arrangements and working relations which had evolved over several years between Orion, Sphere, Drake, Baloise and Howden. His witness statement continued:

"In particular I remember him stating that some liabilities of Baloise had been capped under a cut off agreement which I understand to be the agreement entered into in April 1975 between Orion, Sphere, Drake and Baloise in relation to the parties' respective liabilities arising out of a marine insurance pool ... and ... a special excess of loss account known as the Sphere X Account.... This agreement had been accompanied by a gentleman's agreement to the effect that should claims paid subsequently escalate far beyond the levels contemplated at the time of the cut off Sphere Drake and Baloise would continue to contribute to those claims. I do not remember seeing any written instrument recording this gentleman's agreement. I do not remember any more specific detail."

In his oral evidence Mr Burtonshaw told Moore-Bick J that he thought the words "capped" and "cut off agreement" were his, not Mr Sage's, but that Mr Sage had used words to that effect. It was Mr Sage who had used the words "gentleman's agreement". He added that he had not discussed in terms with Mr Sage whether the whole agreement was a gentleman's agreement or whether it was only the agreement to reopen the matter in the event of the escalation of claims that was so characterised. He said that Mr Sage had mentioned the way in which the parties had estimated their liabilities, how some money had changed hands as a funding operation in order to ensure the easy handling of the run-off, and how this was accompanied by a gentleman's agreement to say that should the claims experience deteriorate very significantly the parties would come back to the whole matter.

On 21st August 1984 Mr Burtonshaw discussed this matter again with Mr Sage at a lunch meeting which was also attended by Mr Rousell. This was at a time when the claims were escalating, and the defendants were considering whether there were any effective steps they could take to limit their losses.

Mr Burtonshaw could not recall what Mr Sage had said at this meeting, and said that he was no wiser after the lunch than he had been before it. It is clear, from a contemporary note by Mr Rousell, that Mr Sage suggested to Mr Burtonshaw that he should study the board minutes of the 1966-7 period to see if they contained any helpful material.

Mr Burtonshaw did not give evidence before Langley J. Orion did not apparently wish to call him, and his evidence at the second trial was adduced by Sphere Drake pursuant to the provisions of the Civil Evidence Act.

Mr Sumption derived from this evidence, such as it was, the contention that when Mr Sage was first invited to recollect what had happened in 1975 he did not say that he remembered that it had been expressly agreed at the meeting that anything that was decided then would not be legally binding. On the other hand he appeared to be saying that what came to be described as "the let-out clause" represented a gentleman's agreement along the lines recalled by Mr Burtonshaw in his evidence.

The next time Mr Sage was invited to recall what had happened in April 1975 was on 1st March 1985 when he attended the offices of Orion's solicitors, Linklaters and Paines. Orion had sought advice from that firm in September 1984 and this meeting formed part of the evidence-gathering exercise which had to be carried out before the solicitors could put the papers before counsel. Mr Harris of Linklaters had told Mr Rousell that Mr Sage's recollection of the agreement might be crucial if there was a dispute as to its construction. Mr Tapsfield and Mrs Good were by now handling the matter on behalf of Linklaters, and Mr Sage was accompanied to the meeting by Mr Rousell and Mr Heritage, who had also attended the 23rd April 1975 meeting on behalf of Orion. In March 1985 Mr Rousell (as well as Mr Heritage) was still employed by Orion and was acting on their behalf in giving instructions to their solicitors. Mr Tapsfield was a litigation partner in Linklaters, while Mrs Good had been an assistant solicitor in their litigation department for only two and a half years at this time. When Langley J saw her 13 years later, he described her as careful, impressive and obviously intelligent.

When she gave evidence to him, Mrs Good told him that Mr Sage had done most of the talking at the meeting. She said that he was a coherent, intelligent and articulate man but one with a tendency to ramble on. He was 66 years old at the time and still held a number of consultancy positions with insurance companies. She added that the meeting lasted a couple of hours.

Mrs Good's notes of the March 1, 1985 meeting include references to:

stopping the flow of paper; coming to an arrangement adjustable in certain events; principle: no one wins or loses; if 10% too much/too little then paid back; trusted each other to account, trust re accurate accounts and reserves; they trusted us to re-open if we were wrong, can't now suggest a fixed settlement, go back to November 1974 participation.

Mr Tapsfield's notes include :

reserve very prudent (over egged). Stop mass of paper. ?Trusted each other to account. Arrangements adjustable in certain events. Remembers variation by 10% mentioned. Fairly sure. Rousell think £10,000; don't want to hurt each other, if proves inequitable we'll re-open; re-negotiate - friendly - no one to lose or gain. You'd go back to the formula on the sheet. We'd re-open all accounts and go back to a cash basis; why have para. 4? Sage can't recall

and a comment by Mr Tapsfield to himself:

Keeps going back to 65/66/67 principles.

After the meeting Mrs Good prepared the first draft of Mr Sage's statement, which was to be sent to counsel in due course after Mr Sage had approved it. She sent it to him on 6th March, and he returned it, heavily annotated with three riders written in his own handwriting, on 12th March. He said he had looked carefully at the papers Mrs Good had sent him, and he hoped that the alterations he had made would give a clearer picture. Mrs Good had included in her draft references to the pool being based on an underlying intention that no single party was to make a profit or loss which was not shared by the other parties in the agreed proportions, and to the same spirit underlying the discussions which began in December 1974. Mr Sage left those references untouched, but he altered a reference to the parties seeking a "settlement agreement" in 1974 to seeking "a method to avoid unnecessary administrative procedures and cash".

The April 1975 agreement was dealt with in paragraphs 9-11 of this six-page draft. As drafted, one sentence read "I cannot remember precisely but I have a recollection that a figure of 10% was mentioned ..." Mr Sage redrafted this so as to read: "I recall that the trigger amount (to cause readjustment) was discussed. I am reasonably certain that a figure of 10% was mentioned ...".

After she received Mr Sage's suggested amendments, Mrs Good spent a day at Orion's Folkestone offices going through old files, and on 19th March she wrote to Mr Sage suggesting she should give him a call to discuss his statement once he had had the chance to consider some relevant documents she had bespoken. She had in fact found nothing which shed any light on the nature and status of the arrangement which had been entered into in April 1975, but there has survived a draft of the statement which must be attributed to late March 1985 which contains a number of changes and additions to the wording approved or suggested by Mr Sage on 12th March, no doubt following the telephone call foreshadowed in Mrs Good's letter.

On 2nd April 1985 Mrs Good sent Mr Sage a new clean draft of his statement, which now ran to nine pages. She told him that the purpose of the statement was to inform both counsel and her firm as fully as possible in respect of his recollection. She added that it was most important that they had a record of his recollection in the absence of full documentation.

Mr Sage responded two days later. He said he had gone through the statement very carefully with Mr Rousell and made various comments. He told her that if she wished to see him he was sure they could arrange a suitable time.

Notwithstanding the work that had already been done, Mr Sage made a large number of suggested alterations to the wording on the first six pages of the draft. He left the description of the April 1975 agreement unaltered. It was now contained in paragraphs 12-14 of the draft and read:

"I attended a meeting at Orion's offices on 23rd April 1975 a note of which (prepared by Mr Russell of Drake) is attached hereto as Annex 2. At that meeting an agreement was reached (the "Settlement Agreement") whereby cash payments were to be made on a deferred basis to avoid any material advantage to Orion through holding cash before settlement became due. This agreement was made subject to a reservation that if actual settlements increased the agreed commitment of any party "to an extreme degree", then the sharing arrangements would be re-opened. I remember that there was a discussion as to what would constitute "an extreme degree". It was the clear intention of all parties at that meeting, in line with the spirit of the Agreements, that if the then estimates proved to be wrong then no single party should suffer because too much or too little had been paid under the cash adjustment. Some risks underwritten were very long-term and it was understood that the agreed figures were best estimates only and that the run-off might prove to be substantially less or more onerous than anticipated. The meeting agreed that in that event the contributions of parties to the run-off would have to be adjusted. It was for this reason that the general reservation in paragraph 3 of the note of the meeting was included and that paragraph 4 provided for exchange of statistics if the previously accepted figures became "seriously distorted". I recall that the level which would call for re-adjustment was discussed. I am reasonably certain that a figure of 10% was mentioned, namely that if the outstandings proved to be more than 10% out of line (plus or minus) with the agreed figures then the position would have to be re-opened.

Mr Flint, the Secretary to Sphere, subsequently circulated the note of the meeting (Annexe 1) together with the memorandum (Annexe 2) which each party then signed by way of agreement.

In my experience as an underwriter the amount of the losses which are now being incurred in the course of the run-off in relation to product-related hazards, and in particular asbestosis, are of an extreme degree whatever measure is applied. The losses presently being incurred were wholly unforseeable by the Market in 1974. The Settlement Agreement thus requires adjustment as was the original intention and the three parties should now continue the run-off in accordance with the original percentage contributions under the Agreements on the basis of good faith and trust."

Mrs Good was still in the course of incorporating the suggested amendments when Mr Sage telephoned her on 10th April 1985. She noted that he told her:

"that in his view the matter was very simple and that the [Russell Record] was merely the practical application of a principle which had been established and operated for some long time between the three parties with their cross shareholdings, the assets (sic) being that the agreement was to share losses pro rata to the shareholdings."

Mr Sumption derives from this evidence (which represents the second stage of the history he was inviting us to consider) the contention that when Mr Sage was being invited to recall the April 1975 meeting ten years after it had taken place he had no memory that anything had been said in express terms at the meeting about the discussions being on a goodwill basis only, or that there would not be a legal contract. His recollection then was to the effect that the parties all trusted each other and were dealing with the problem of the run-off in accordance with the principles they had agreed between 1965 and 1967. The judge himself noted that there was no suggestion at all in the draft, as sent back by Mr Sage (in fact, on two separate occasions), that it had been expressly agreed at the meeting that any deal was to be only a gentleman's agreement and not legally binding.

Mr Sumption's third stage of the history occurred in July 1985.

On 4th July 1985 a conference took place with junior counsel (Mr Roderick Cordara). Mr Tapsfield and Mrs Good attended, along with Mr Heritage and Mr Rousell. Mr Sage did not attend the conference, because he had retired and counsel were not then permitted to discuss a case with witnesses.

Mr Cordara advised that Orion's prospects of recovery were less than 50%. He mentioned possible arguments that could be raised, but in general he took the view that the April 1975 agreement was legally binding and that Clause 3 of the Russell Record was too vague to be enforced. On 5th July Mrs Good sent Mr Sage a note of this conference, and on 8th July Mr Sage rang her in response. He told her that he felt very strongly that the agreement constituted an accounting exercise only, this being one of the possibilities which Mr Cordara had considered. On 9th July Mrs Good wrote again to Mr Sage because counsel had asked her to check with him whether his reference to a 10% drift had been agreed by the other parties present at the meeting. She asked whether he could recall any agreement, whether verbal or even indicated by a nod of the head.

On 12th July Mr Sage prepared his own written comment on this letter and the conference note. His account of the agreement was to the same effect as he had described it before. He also referred to the underlying principle always being proportionate sharing with no advantage or disadvantage to any one party. He said that there had indeed been a discussion between the parties of a 10% variation plus or minus on the outstanding figures This was put forward as an acceptable basis for triggering a readjustment and there were no dissenters. On 16th July Mrs Good asked for further details of this discussion. Mr Sage responded on 22nd July to the effect that after they had discussed in the Orion Board Room the matter outlined in the [Russell Record], most, if not all, the participants moved into his office, perhaps to allow the Board Room to be prepared for lunch. He believed he then raised the subject of the "trigger point" and he did not recall any adverse reaction. He was sure there was none.

Mr Sumption submitted that if Mr Sage had recollected (before he saw the Flint Note) that he had said at the April 1975 meeting that this was a gentleman's agreement only, these exchanges would have provided him with a golden opportunity to say so.

Mr Sumption's fourth stage related to the preparation of the affidavit which Mr Sage eventually swore in May 1986. The history of this affidavit runs along the following lines.

During the course of 1985 counsel advised that proceedings should be issued on the basis that Sphere Drake would not be able to rely successfully on the April 1975 agreement, although they were not particularly sanguine about the prospects of success. Because of concerns about Mr Sage's age and state of health it was decided that he should be invited to swear an affidavit setting out his recollection of events, in case he was unavailable to give evidence at the trial. At an Orion board meeting on 9th October 1985 it was reported that Mr Sage had been most co-operative and was willing to swear the suggested affidavit.

Mrs Good and her assistant Mr Reid met Mr Sage on 22nd November to discuss the proposed affidavit, and on 17th December 1985 he was sent a draft affidavit on which he was asked to comment. This draft was based on the statement prepared earlier in the year, supplemented by what had been said at the November meeting.

Mr Sage responded on 18th December. He told Linklaters he had gone through the draft and had made alterations "which I believe truly reflect the position as I recall it". The draft had been composed in much the same terms as the earlier statement, and Mr Sage made very few amendments to it.

Following a further meeting in March 1986, and some further exchanges with Mr Sage, the draft affidavit was approved by Mr Sage in April. In this draft the April 1975 agreement was described as a Termination Agreement rather than a Settlement Agreement. The third, fourth and fifth sentences of what had become paragraph 20 now read as follows:

"This agreement was made subject to a reservation that if actual settlements increased "to an extreme degree", then the sharing arrangements would be re-opened. I remember that there was a discussion as to what would constitute "an extreme degree". All parties at that meeting agreed in line with the spirit of the Agreements, that if the then estimates proved to be significantly wrong then no single party should suffer."

Apart from this change the three paragraphs describing the 1975 agreement were reproduced in substantially the same terms as they appeared a year earlier, except that the last two sentences of the main paragraph were completely excised. The documents before the court show that these words were removed at a late stage in the drafting process after a paragraph which had been inserted the previous autumn had also been removed. This had said: "I remember that the meeting, which had been very friendly, ended shortly before lunch. We all had drinks and then lunch in the Orion Board Room".

Once again, Mr Sage said nothing during this renewed drafting process about recollecting that it had been expressly agreed at the meeting that any agreement that might be made would be of a goodwill nature and would not constitute a legal contract.

Shortly before he approved his affidavit in these terms, Mr Sage had reiterated in writing to Linklaters his belief that the original agreement in 1966 to "save" Sphere and Drake was the underlying reason for all that happened later. The affidavit was now 18 pages long, and Mr Sage had suggested quite a large number of changes and additions at a fairly late stage of the drafting process.

Before Mr Sage swore his affidavit on 6th May 1986 the word "Arrangement" was substituted for the word "Agreement" on the advice of junior counsel. In the instructions to counsel, Linklaters had explained that the affidavit was fuller and more detailed than might otherwise have been the case because of the concerns for Mr Sage's health.

This evidence reflected the way in which Mr Sage recollected, at different moments between 1980 and 1986, the events of 1975. The next time he was invited to turn his mind to the circumstances of the April 1975 agreement was in 1989, nearly 14 years after the critical meeting. Mrs Good told the judge that after 1986 the action moved slowly because there was no real impetus behind it, or instructions from the client, for a long period.

It is convenient to explain at this point that between 1984 and 1989 there had been a number of changes in Orion's senior personnel. Mr Burtonshaw left the company in September 1985, and Mr Fordyce, who had spent over 30 years in the insurance industry, joined Orion as Managing Director in May 1986. During that year Mrs Atkins, a young chartered accountant with Coopers and Lybrand, had spent a lot of time with Orion helping them to resolve their computer problems, and eventually she joined the company as Assistant General Manager (Accounts) in July 1987. In that capacity she was given day to day responsibility for liaison with Linklaters in connection with this litigation, reporting to Mr Fordyce. Mr Heritage retired in December 1986 and Mr Rousell retired as Orion's Assistant General Manager in October 1987.

One consequence of all these changes was that nobody in Orion's senior management now had any direct knowledge of the events with which the litigation was concerned. They were heavily dependent on Mr Sage, who celebrated his 70th birthday in April 1988. Mrs Atkins described in her witness statement how Orion's organisation was so hierarchical that it would have been regarded as inappropriate for her to contact Mr Sage directly. She first met him at a lunch in Orion's boardroom to which the chairman, Mr Smith, had invited him in late November 1988. Although Mr Sage had previously asked for payment from Orion if he was to go on helping them, Mrs Atkins told counsel in December that Mr Sage appeared to be very pro-Orion and keen to help, and that he did not discuss money. Mr Fordyce, for his part, described in his witness statement how relations between Mr Sage and Orion had not been particularly good since his departure. He added that it was clear that preparing the matter for trial would need a lot of work from him. He recalled giving Mr Sage lunch at the City of London club two or three times during 1989 as part of a public relations exercise.

The fifth stage in Mr Sumption's history is set against this background.

The trial of the action was fixed to start in November 1989, and in late January 1989 Mrs Good set about the task of preparing witness statements in advance of the trial. On the morning of 13th March she had a long telephone conversation with Mr Sage in this connection. She recorded that:

"[Mr Sage] is very spirited and alive to the issues and is anxious and pleased to help Orion. He tells me that he has no doubt whatsoever that the intention of the arrangement entered into in April 1975 was that if extreme degree was reached, the arrangement ... would fall away and the parties would go back to square one .... He is satisfied that the parties left open the opportunity to negotiate but that was negotiation from pool liability on existing percentages rather than from no liability for Sphere Drake. He is quite convinced that the whole spirit and intention of the pooling agreement (which was carried through to the arrangement in April 1975) was that no party would lose out and that accordingly in the event of extreme degree there would be recourse to Sphere Drake."

Once again Mr Sage made no reference to any express agreement being made at the April 1975 meeting to the effect that any agreement they made would be only a goodwill agreement.

Mrs Good sent him a file of documents and a copy of his affidavit on 17th March, and in early April 1989 she gave a thorough briefing on the case to Mr Henshaw. He had qualified as a solicitor in October 1986, and he was now rejoining Linklaters after a period in the United States. Mrs Good herself was due for transfer to the firm's Brussels office as soon as she could be released from London. The judge described Mr Henshaw as careful, straightforward and professional in the best sense of the word.

On 19th April 1989 Mr Henshaw met Mr Sage for the first time, in the company of Mrs Good and of Mr McDonnell, who was another junior solicitor in the office. This meeting was planned to start at 10.30 and continue all day, if necessary. Mr Henshaw's notes of the meeting include references to Mr Sage saying that the 1966 arrangements were not overridden and that it was implicit that "we won't let each other down", that Sphere Drake had an obligation to pay the original proportions which were the starting point if and when clause 3 came into effect, that it was not such a big deal because nothing had changed and there was no abrogation of agreements, and that if it had been a final termination the Orion Board would have had to approve it and solicitors would have been used.

Mr McDonnell's notes include references to

"'relationship was a gentleman's club and not hurt any one'; 'appears legal agreement but friendly termination - all friendly or all legal'; 'what's said we not hurt each other. Implicit as 66/67 Agreement'; 'Any Agreement has the force of law'; 'nothing changed - administrative matters'; 23/4 meeting fairly short; 'Subject to Board Approval'; no visual recollection of the meeting; 'discussion of extreme degree: can recall nothing at meeting - only 10% afterwards'."

Once again, there is no indication that Mr Sage had yet told his solicitors that he remembered saying anything expressly at the April 1975 meeting about the discussions being on a goodwill basis only.

After that meeting Mr Henshaw took over the work of preparing Mr Sage's witness statement for exchange in advance of the trial.

He was also involved in considering the documents that had been disclosed on discovery by Sphere Drake two years earlier, and on about 4th May he came across "the Flint Note" for the first time. Since it was written in shorthand, he had to ask his secretary to interpret it. Her interpretation of the first line of the note was that it read:

"Leslie Sage: Goodwill agreement: not a legal contract."

The discovery of the note did not cause Mr Henshaw to alter the wording of the current draft of Mr Sage's witness statement. Instead, he asked a number of questions about its significance in the relevant section of the draft, which ran to 31 paragraphs in all. (He also raised questions in the text about other matters). This draft read, so far as is material (starting at paragraph 27):

" We discussed [Mr] Russell's memorandum dated 22nd April, and agreed on the figures and a series of payments to be made on a deferred basis .... we hoped and believed that the estimates of outstanding liabilities, on which the figures were based, would prove to be reasonably adequate. At the same time all parties recognised, as any prudent insurer would, that it was possible that actual liabilities might turn out to be seriously out of proportion to the estimates, and it was understood and agreed that, if this proved to be so, no single party should suffer. Consequently, we agreed that one party would not ask another party, pursuant to the Pooling agreements, for further contributions to pool business claims, unless the claims situation deteriorated to an extreme degree. There was some discussion of the meaning of "extreme degree", although the concept was not precisely formulated as between the parties. In the event that the claim situation did so deteriorate, then the liabilities under the Pooling agreements would continue. [Similarly, the contribution arrangements made in relation to the sale of shares in Sphere, and through the Manor reinsurance, would come back into play.] In this way, it would be ensured that no party would be out of pocket, consistent with the essential general principle underlying all these arrangements, including the Pooling agreements themselves, and the Sphere termination arrangements.

28. Neither I nor any of the other Orion representatives at the meeting agreed to abrogate the Pooling agreements. We did not accept, or give any indication of accepting, that the "settlement" was in any way a final, irrevocable termination of the parties' underlying obligations to share liabilities in the appropriate proportions. In the event that "extreme degree" was reached, the parties would be obliged to meet those liabilities: this would be the starting point of any discussions of the kind referred to in paragraph 4 of [Sphere's] note of the meeting (referred to in paragraph 30 below).

29. [Qs - the first line of the contemporaneous manuscript notes made at the meeting (Exhibit 39) (see also L&P's retyped version, immediately following the copy of the one in the file) appears to indicate that you said words to the effect of "Goodwill agreement - not a legal contract". Is that consistent with your recollection? If so, (a) were you referring to the termination agreement as a whole, or only the "let-out" clause? (b) what was the reaction of the other persons at the meeting? Are you able to reconstruct the approximate sense of the remainder of the note, (where the interpretation of the shorthand is unclear)? (This point is significant, because Orion, in its pleadings, does not admit that the arrangements made at the meeting were intended to be legally binding. It would be of great assistance if we could establish, with the note as corroboration, that the parties actually accepted this point at the meeting.)]

30. Mr Flint, the Secretary of Sphere, subsequently circulated a note [the Russell Record] of the meeting together with the memorandum (Exhibit 40), and asked each party to initial them. [I] initialled the note for Orion...."

Ten further lines of questions then followed.

On 17th May Mrs Good sent Mr Sage a copy of this 29-page draft for his comments. She also enclosed with it forty exhibits. The Flint Note was No 39. She warned him that the draft statement would require a great deal more work and consideration and described it as a "working draft for further discussion". She described the present state of the litigation in some detail and invited him to a team meeting on 26th May when many different aspects of the litigation would be discussed, and at which Mr Smith, Mr Fordyce and Mrs Atkins were all likely to be present.

On 18th May Linklaters sent instructions to counsel. Mr Henshaw prepared these instructions. They stated, as regards the April 1975 meeting, that Orion's position was that

" if any binding agreement was reached, it was subject to a definite reservation that the pre-existing sharing arrangement would revive if "extreme degree" was reached."

They continued:

"The recollection of the Orion representatives at the meeting, Messrs. Sage, Rousell and Heritage, is that it was understood and agreed that if the agreed figures for outstanding liabilities did prove to be seriously under estimated, then no single party should suffer - ie, further contributions under the sharing arrangements would be made. Mr Sage's firm view is that the settlement reached at the meeting was not a final, irrevocable abrogation of the Pooling agreements, and if the claims situation did deteriorate to 'an extreme degree', Sphere and Drake would be obliged to make further contributions in accordance with the sharing arrangements.

In terms of reconciling this with the note of the meeting, counsel will note that the part of the note, paragraph 2(a), which records the alleged agreement that the agreed figures represented the parties' final liabilities, is expressly made subject to the reservation in paragraph 3 of the note ....

Orion has, in its pleadings, not admitted that a binding agreement was reached at the meeting. The documents produced on discovery include a manuscript note, apparently made at the meeting by Mr Flint of Sphere Drake. (Counsel's papers include, immediately following the copy of the note, a re-typed version prepared by instructing solicitors which attempts to translate the shorthand parts of the note.) The first line indicates that Mr Sage stated that the 'settlement', or possibly some part of it, was not intended to be legally binding. Instructing solicitors will be reviewing this note with Mr Sage as part of the work to be done on his witness statement, including the question of whether the comment referred to the arrangements as a whole (as opposed to, for example, the 'extreme degree' reservation only), and whether it was concurred in by the other persons present at the meeting.

No reference to the arrangements or prior negotiations appears in the board minutes of Orion, Sphere or Drake."

During the course of May, after taking counsel's advice, Orion agreed to pay Mr Sage, Mr Rousell and Mr Heritage at agreed hourly rates for all the time they devoted to this case in the lead-up to trial. There had been some quite acrimonious exchanges before this issue was resolved. Mr Sage was to be paid at the rate of £50 per hour. I will return to this matter later in this judgment.

On 26th May 1989 Mr Sage attended the team meeting, along with Mr Rousell and Mr Heritage, Mr Smith, Mr Fordyce and Mrs Atkins on behalf of the present management of Orion, and the three Linklaters solicitors he had met the previous month. This meeting lasted seven hours. The judge found that it was most improbable that the Flint Note was referred to. He said it was not that type of meeting. This finding was not disputed on the appeal. Mr Sage told Linklaters again that Mr Grob, the chairman of Howdens, had had lunch with them after the meeting on 23rd April 1975 (he had mentioned this on 19th April), and this detail was included when his draft statement was next revised.

Following the meeting Mr Sage sent Mr Smith, Mr Fordyce and Mrs Good a "memorandum" dated 29th May which said nothing about the Flint Note. He said he had not been able to stop thinking about the matter since the meeting. The memorandum repeated and amplified the point about administrative simplification. He also said that it had just come to his mind that "the most important and relevant point" which he should have recalled earlier was the verbal agreement between Philip Gilbert (in his capacity as Chairman of Howdens, Sphere, Drake and Orion) and Jan Van der Velden, a director of Orion and later the President of its Dutch parent company, in the 1960s to the effect that the shareholders of Sphere and Drake would bear losses incurred in proportion to their shareholdings, and that this verbal agreement "had been the underlying basis on which all decisions thereafter were made".

On 14th June there was another team meeting, which was attended by almost everyone who had attended the previous one. Mr Sage's statement was the last of the seven items on the agenda, and Mr Henshaw appears to have reached paragraph 19 of the draft before time ran out. Once again the judge, basing himself on a note made by Mr McDonnell, found that nothing immediately material to the present issues was recorded as having been discussed. Again, this finding was not challenged on the appeal.

Mr Legg, a senior assistant solicitor, had joined the Linklaters team in May, and on 11th July 1989 he and Mrs Good met Mr Sage to continue the preparation of his witness statement. He had with him a work-book in which he wrote notes which covered about a page and a half of the book. He also made a number of notes in the 4th July draft of Mr Sage's witness statement, which now ran to 32 pages. Paragraph 29 of the May 1989 draft had become paragraph 36 of the new draft.

The events of this day assumed much greater significance on the appeal than appears to have been the case before the judge, and it is necessary to consider Mr Legg's notes in some detail.

The annotations on the witness statement appear to contain a mixture of Mr Legg's notes for his internal purposes and items of fact which Mr Sage seems to have told them. For instance, on page 1 of the statement the name of the other joint general manager of Orion is added. Page 2, on the other hand, which contains a description of the original pooling arrangements, has a note against it: "agreed Statement of Facts?". Page 3, similarly, contains a note: "Effect - matters of law. Intention - he cannot know - do we want this anyway?" Some of the other notes reflect drafting changes to improve the flow of the text, or to correct typing errors.

Some of the questions which Mr Henshaw had inserted in the text of the statement received answers and some did not. For instance, detailed questions on documents which came into existence in 1967 and 1970 remain unanswered in paragraphs 18 and 20, whereas a question in paragraph 22 is deleted and a note relating to this paragraph appears in the work-book. Notes based on what Mr Sage must have told the solicitors on that occasion continue to the very end of the statement. There are examples of these against paragraphs 22, 23, 26, 28, 31, 32, 35 and 37, occasionally supplemented by notes in the work-book. Against one of Mr Henshaw's questions, in paragraph 29, appears the note "Can't recall".

This draft contained the story, which Mr Sage had told Linklaters on 26th May, that the April 1975 meeting took place in the morning, that they had lunch after the meeting at which they were joined by Mr Grob, and that there was a further discussion of "extreme degree" at the lunch. Mr Legg, however, noted at the top of the relevant page: "NB: Flint note times meeting at 3.00pm".

The notes on the statement clearly show that on 11th July Mr Sage was making comments on the final seven paragraphs of his statement which covered the April 1975 meeting and its aftermath. Relevant notes include:

[Q - do you remember why Grob was not there?] "Had another engagement". (Para 32).

"Cannot recall agreement reached on 10% - certainly said it". (Para 33, relating to the lunch discussion).

"Nor was it mentioned or raised by either party. The point was simply not in issue - it was not what the meeting was about" (para 35, relating to the fact that the Orion representatives did not agree to abrogate the Pooling Agreements).

"If legal binding document intended would have involved solicitors" (para 36, above the list of questions which arose from the Flint Note).

"Cannot recall any discussion on note. Seemed to reflect what was agreed on goodwill system - not a legal agreement" (para 37, relating to the circulation of the Russell Record, in answer to some of Mr Henshaw's questions in the text).

"A note was not unexpected - unusual for it to be initialled [May acquire a quasi-legal status]. Was intended to be a lasting ag[reement]" (against two more of Mr Henshaw's questions in the text of para 37).

Mr Legg's work-book note supplements the note he had made against paragraph 36. It reads:

"para. 36 goodwill = good spirit between parties - beginning with Philip Gilbert (10/66) - no friction between parties.

very important: 'not a legal contract' - wished to deal with outstanding matters in a way that was sensible - if problems then would expect contribution on basis of original pooling agreements as amended in accordance with note of 10/66.

Third attempt at dealing with this problem - but got it wrong; first attempt was Sphere share sale".

The next draft of Mr Sage's witness statement was prepared by Linklaters on 13th July 1989. The paragraphs relating to the April 1975 meeting and its aftermath were now numbered 37-45. Mr Henshaw's questions about the Flint Note, now in paragraph 43 of the renumbered text, remained unanswered.

This draft now contained a new paragraph which read:

"I am uncertain whether the meeting took place in the morning or afternoon but I note from what appears to be a note of the meeting, taken I believe by Mr Flint, that the meeting is timed at 3.00pm."

In the next paragraph of the text there is a sentence which had appeared in square brackets in the previous draft. Although Mr Legg made no note on the text of that draft or in his work-book, the square brackets have now been removed.

The passage relating to the discussion about the meaning of "extreme degree" has now been substantially rewritten. Paragraph 40 contains, in essence, an explanation of the text of the relevant part of the Russell Record. Paragraph 41 reads:

"Although Mr Grob was not present at the meeting I do recall that I had some discussion with him as to the meaning of 'extreme degree'. Mr Grob may have joined me for lunch, possibly on 23rd April 1975. I suggested to him that if any parties' overall commitment diverged by more that 10% from the figures approved, that would constitute 'extreme degree'. I cannot recall Mr Grob's reaction to this suggestion, but so far as I can remember the meaning of 'extreme degree' was never precisely formulated."

The passage dealing with the non-abrogation of the pooling agreements, which now appears in paragraph 42, has been redrafted to include the comments Mr Sage had made on 11th July. Paragraph 43 (the former paragraph 42) is, as I have said, unaltered, but there are significant changes to what is now paragraph 44, to reflect the answers which Mr Sage had given to the questions raised by Mr Henshaw in the text of the former paragraph 37. In his comments on the Russell Record, Mr Sage now says

"Although it was not unusual for a note of a meeting to be prepared and circulated in this fashion, it was unusual for it to be initialled. I certainly did not consider that we were entering into a legally binding arrangement; that certainly was not my intention either at the meeting on 23 April 1975 or when I subsequently initialled the note on behalf of Orion. To my mind it was no more than a goodwill arrangement and as such the note seemed to me to reflect what was agreed at the meeting on 23 April."

Although he had answered all Mr Henshaw's questions on the former paragraph 37 on 11th July, they are all reproduced again in this draft following the words ".. on 23 April".

None of the alterations incorporated in this draft of the statement were enclosed in square brackets or otherwise marked so as to make it easier for Mr Sage to be invited to confirm their accuracy on the next occasion he was asked to consider the correctness of the draft.

On 14th July Mrs Good sent Mr Sage a copy of this revised draft, and invited him to read through it very carefully to ensure that he was happy with it. On the same day she prepared a further set of instructions for counsel. She was mainly concerned to seek their advice on evidence.

Page 4 of these instructions drew the attention of counsel to "the (seemingly) contemporaneous" Flint Note and to the understanding that the first line read "Goodwill agreement and not a legal contract". It was added that "this interpretation of the first line of the note, if correct, supports Orion's contention that the arrangement reached on 23rd April 1975 was not a binding legal agreement".

Mrs Good had included with the instructions a copy of Mr Sage's revised statement. She made the following comment on this statement:

"[Mr Sage] ... can speak to the events of the Sphere Share Sale Agreement, the Manor reinsurance arrangements and the events of 1974 and 1975, although it must be said that his recollection of all these events is not very clear. That said, his conviction that Sphere Drake would be liable in the event of extreme degree is strong."

Five days later Mrs Good, Mr Henshaw and Mr Legg travelled to Orion's offices at Folkestone to continue the work of preparing witness statements for Mr Rousell and Mr Heritage. When asked about the Flint Note Mr Heritage said that the reference to a goodwill agreement did not ring much of a bell with him. Mr Rousell for his part could not recall any discussion about the matters which became paragraphs 3 and 4 of the Russell Record when he was asked about it.

On 24th July Mrs Good, Mr Henshaw and Mr McDonnell attended a consultation with leading and junior counsel. Stewart Boyd QC, who had only recently been instructed in this matter for the first time, expressed the view that the Flint Note was arguably evidence of an understanding that the arrangement made at the April 1975 meeting was to be a goodwill agreement only. He therefore proposed that the Points of Reply should be appropriately amended.

Two days later Mrs Good stated in a brief for the insurance experts whom she proposed to instruct for the trial that Orion's case was that the April 1975 agreement "was no more than a goodwill agreement", but that if it was legally binding it was subject to a reservation that in the event of extreme degree the parties would continue to be liable under the pooling agreements.

Mr Sumption laid heavy stress on the fact that up to this time, over 14 years after the critical meeting, and throughout the five different stages of the history which he had showed to us, Mr Sage had never at any time told anybody that he remembered saying at the meeting words to the effect that any agreement that was made would be a goodwill agreement and not a legal agreement. He did not even say it at the meeting on 11th July 1989 when Mr Sumption said there must have been a general discussion of the issues raised in what was then paragraph 36 of his draft witness statement. Mr Sumption submitted that it was completely clear that the very first time Mr Sage professed to such a recollection was after he had received a letter which Mrs Good sent in identical terms to him and to Mr Rousell (with a copy to Mr Heritage) on 27th July. This letter included the following passages:

" We will be serving our amended pleading (tomorrow) in response to the amended defence and counterclaim. I will let you have a copy of this in due course. The contents do not affect your evidence but rather reflect the evidence you have given us....

The main purpose of this letter is to assist you in preparing your draft statement.... I have been going back through the discovery documents to see whether there are any further documents which may assist in reminding you of events at the time. I enclose the following:

(1) The manuscript note seemingly prepared by Richard Flint during the meeting on 23rd April 1975. (You have, I believe, seen this before). It contains certain notes in shorthand. We are obtaining the opinion of a short-hand expert as to what these notes mean and we understand that the first line refers to LS having said:

"Goodwill agreement and not a legal agreement."

There are also various references to the "spirit" of the agreement. All of this is consistent with what you have told us about the intention of the meeting. It is vital to our case that we establish that what was agreed on 23rd April 1975 was a goodwill agreement only and not a legally binding full and final settlement. I trust this note may help to confirm what you have already told us....

(3) A number of documents which make it clear that the meeting was first fixed to take place at 3pm on 23rd April in Ken Grob's office. At the last minute the arrangements were changed to Orion's offices but still at 3pm..."

On 28th July Linklaters sent to Sphere Drake's solicitors their proposed Amended Points of Reply. Paragraphs 5 and 5A (a new paragraph added by amendment) of this pleading were in these terms:

"5. It is admitted that the meeting referred to at paragraph 20 of the Amended Points of Defence occurred. Any such agreement as was reached at the meeting (as to which no admission is made) was a goodwill agreement only and not intended to be a legally binding agreement. Without prejudice to the foregoing denial, insofar as any legally binding agreement was reached at the said meeting it was agreed, inter alia, as follows:

(a) That, subject to the general reservations set out at sub-para (b) below, the figures set out in sub-paragraph 20(a) of the Amended Points of Defence were deemed to represent the final liabilities of the parties to the Pooling agreements;

(b) in the event that the actual settlements falling due to be made in respect of the run-off under the Pooling agreements thereafter increased to an extreme degree the commitment of the parties to the Pooling agreements or any of them, any such agreement as was made at the said meeting or otherwise would be determined and, in such circumstances and/or in default of any subsequent agreement otherwise, the arrangements prevailing prior thereto, namely the Pooling agreements as referred to in the Points of Claim, would continue to apply to the rights and obligations of the parties.

5A Save insofar as hereinafter set out, the last two sentences of paragraph 20 of the Amended Defence are denied. A draft minute relating to the discussions of 23 April 1975 was drawn up by C. F. Russell acting on behalf of the Defendants. Some 5 to 7 weeks after the meeting, it was circulated and initialled. No admission is made as to the accuracy of the said minute. At no material time was it the intention of the parties that the said minute would constitute a written legally binding agreement. Alternatively, if and insofar as the effect of initialling and exchanging copies of the said minute was to constitute or evidence a written legally binding agreement (which is denied), the Defendants are estopped from alleging or relying upon the same. At the meeting of 23rd April 1975 it was expressly agreed and understood by all parties that the discussions which then occurred could only lead to a goodwill agreement which was not legally binding, and it was upon this basis that the minute thereof was initialled."

Words added by way of amendment are in italics.

On 1st August Mrs Good sent Mr Sage a copy of this pleading. Among other matters she pointed out to him that Orion was arguing at paragraph 5 that the April 1975 arrangement was a goodwill arrangement only, but that if it was binding it was subject to the reservation as to reopening.

(It may be appropriate at this stage to mention that although unsuccessful at first instance Orion obtained leave from the Court of Appeal to make these amendments shortly before the trial before Hirst J began.)

Mr Sage came to see Mrs Good on 7th August. He brought with him the latest draft of his witness statement, heavily annotated with deletions and suggested additions. In a covering letter he commented that the Flint Note supported goodwill and not legal agreement and that he had enlarged in his evidence. He added that Mr Comery's comment also referred to the spirit of the agreement.

In notes written in the margin of the text of his statement, he answered the questions which Linklaters had posed to him three months earlier in these terms:

"Is the Flint Note consistent with your recollection?" "Yes."

"If so, (a) were you referring to the termination agreement as a whole, or only the let-out clause?" "Agreement as a whole."

"(b) what was the reaction of the other persons present?" "They agreed."

He added, on a separate sheet of paper, the following rider:

"I recall clearly that I made the point that this, meaning the agreement as a whole, was a goodwill agreement and could not be a legal contract. I could not override the earlier agreements ratified by the Orion Board except by their authority. (This also, I would suggest, applied to all the parties). The reaction of the other parties was one of agreement."

This was the origin of what became paragraph 65 of Mr Sage's witness statement at the trial. The words "I recall clearly that" remained in the draft witness statement when the sixth draft was prepared on 27th August. Mr Legg then annotated this draft with the words "how clearly". These four words did not appear in the next draft, prepared on 30th August.

Mr Henshaw had conducted a very long proofing meeting with Mr Sage that day. He could not remember how the words came to be deleted. The relevant part of his evidence ran along these lines:

"I mean, speaking from how I would go about this sort of change ... I would have wanted to find out really what I thought, or how clear I thought the recollection was. If, having done that, it seemed that to say 'how clearly' was overstating it, then I think it would have been natural to take that passage out ...

Q. The result of that process on 30th August must have been that Mr Sage decided, after discussion with you, to delete the words 'I clearly recall'.

A. Well, I think we are talking about two different issues here. One issue is whether he has an independent, let us say a refreshed, recollection. The other issue is whether to say 'clearly' is an overstatement. This seems to me to go to the second one.

Q. Let us look at this in stages. First of all, we can assume, can we not, that if the words 'I clearly recall' disappeared, it is because Mr Sage considered, in the light of the discussions that you had on the point on 30th August, that those words were unjustified and had to be deleted?

A. Well, if you are right and, as it appears if the discussion was of the question how clearly, then the process would have been, 'let us try to ascertain how clear this recollection is'. If the upshot was that it really is overdoing it to say 'clearly', which I think is quite natural given the lapse of time, then the phrase would have come out." (T8/48-50).

Mr Henshaw went on to say the same thing in different words at T8/51 (lines 4-9) and T8/52 (Lines 6-8). At T8/53-54 he said:

"All that is happening here, as far as I can tell, is that one is thinking about how clear this recollection is. We have concluded that 'clearly' is going too far, so the phrase has come out."

At T8/55 (lines 12-16), he said:

"Again, I do not remember the process, but if we remained satisfied that he had a recollection but we felt that to say 'clearly' was over-egging it, then I think what has happened here is the right end result."

Even if Mr Henshaw had not given this evidence, it does not need much imagination to conclude that he must have told Mr Sage that he could not say that he recalled clearly making the point mentioned in his statement, with the result that those four words were omitted from the next draft. Given Mr Henshaw's evidence on the point, the conclusion is irresistible.

In its final form, as signed by Mr Sage, the paragraph read:

"I made the point at the outset that this (meaning the agreement as a whole) was a goodwill agreement and could not be a legal contract. (Indeed, I could not override the earlier agreements ratified by the Orion Board except with its authority and in the proper form. So far as I was aware, the other persons present were in the same position). I believe this was clearly understood and agreed by the other parties. My comment appears to be reflected in notes made by Mr Flint of Sphere Drake, partly in shorthand, of which I have subsequently seen a copy."

The final sentence was subsequently deleted from the witness statement by order of Sir Peter Pain.

The judge was of the view that he did not think the deletion of the words "I recall clearly" was of any significance. He said he could well understand why the words were considered inappropriate after 14 years. He accepted Mr Henshaw's evidence that the effect of their deletion was to put the resulting draft not outside the realm of recollection, but only outside the realm of clear recollection. He also accepted Mr Legg's evidence that this was a drafting point and nothing more.

Mr Henshaw said, and the judge accepted, that Mr Sage's note "I recall clearly" represented the first occasion on which Mr Sage had said to him, and so far as he was aware to anyone, that he had actually said at the April 1975 meeting that the discussions could not lead to a legally binding agreement.

It is convenient to mention at this stage that although Mrs Good had told Mr Sage what she understood the first line to mean, the expert shorthand writers whom she consulted on counsel's advice were by no means so positive about the meaning of the hieroglyphics between the words "Goodwill agreement" and the word "legal" in the first line. The first firm she consulted commented, in a letter dated 31st July, that the shorthand was not very good. The best they could do with the first line was "LS Goodwill agreement ? not a legal contract".

A second firm was then instructed, and on 11th August a representative of that firm told Mr McDonnell that the note was essentially a summary of minute of a meeting that had not been written at speed. It was a fairly well written piece of basic shorthand but had not been written by an expert. He interpreted the first line as reading:

"LS Goodwill agreement all [of] in legal contract."

He was positive that the line did not say "not a legal agreement" and gave reasons for this view. He was most surprised that an interpretation of "not" had been given. He confirmed this opinion in a letter dated 16th August in which he expressed the view that the three shorthand outlines on the first line were more probably "all in a" than anything else. Again, he supported this opinion with technical reasons.

By this time, however, Linklaters had contacted Mr Flint himself who interpreted the line as saying "goodwill agreement and not a legal contract" and this was the basis on which the matter went forward to trial.

The only reason why I have mentioned this history is that when Mrs Good and Mr Henshaw were asked in 1998 about their reaction to Mr Sage's "I recall clearly..." statement, they both told the judge they were not surprised by it. The history shows, however, that on 7th August there was a justifiable doubt whether the Flint Note did indeed record the whole of what Mr Sage was professing he recalled clearly, and this doubt must surely have increased in the days that followed. This point was not, however, put to the witnesses. I only mention it to illustrate the problems that are bound to occur when witnesses are asked to recall their reactions to events so many years after they have happened.

Mr Sumption also relied on part of the evidence relating to what came to be called "the Tardis meeting" in support of his contention that Mr Sage had no recollection of the April 1975 meeting until he was reminded of it by the Flint Note. This was a meeting which took place during the course of the hearing before the Court of Appeal in July 1991. As a result of some observations made by Stuart-Smith LJ the Orion team thought it would be helpful to convene a meeting at their office near the Law Courts (which was nicknamed "the Tardis") in order to consider whether there might be any merit in Orion waiving privilege so as to show the Court of Appeal that Mr Sage had been saying that the 1975 agreement was not legally binding long before the pleadings were amended to this effect in July 1989. Mrs Good flew over from Brussels to attend the meeting.

The judge heard a great deal of evidence about this meeting. He set out his findings at pp 126-142 of his judgment. I will be considering aspects of the meeting in greater detail later in this judgment. It is sufficient for present purposes to record that Miss Barttram, who was at that time a trainee solicitor with Linklaters, made a lot of notes in manuscript as the meeting progressed on which she based the five-page minute which she and a junior solicitor then prepared, and that Mrs Good compiled her own six-page minute of the meeting four days later, following her return to Brussels. Mr Boyd attended the first part of the meeting, but once it had been agreed that there should be no waiver of privilege he left in order to continue preparing his submissions for the Court of Appeal the following day.

Part of Mrs Good's note of the meeting is in these terms:

" DFG [= Mrs Good] summarised by saying that Sage had always talked about the context of relations between Orion and Sphere Drake, the spirit of good faith and trust which were laid down in the golden rules of 1966 and the fact that he would never have entered into an agreement of this kind without a 'let out'. She was certain that Sage believes he had always told us that the agreement reached in l975 was a goodwill agreement. As he said in the witness box, he had it in his mind and it is possible that this was what he was always trying to explain in a rather unfocused manner. Stewart Boyd went on to say that once we had the Flint Note this was better evidence than Sage trying to remember what had been said. Sage had, in fact, gone too far in the witness box in saying that he recalled saying this at the outset of the meeting and had always said so."

Mr Boyd denied that he had said that Mr Sage had gone too far in the witness-box, and the judge found that he might well be right in maintaining that this comment was not rightly attributed to him in Mrs Good's note. The reason for this observation is that Miss Barttram's contemporaneous manuscript note ascribed to the part of the meeting which had followed Mr Boyd's departure the words:

"Prob - Sg carried away in W. Box. 'I recall and have always recalled it'"

Mr Sumption observed to us that if Mr Boyd did not say that Mr Sage went too far in the witness-box, Mrs Good must have said it, and for reasons I will explain later in this judgment it is reasonably clear that she did make this remark, although not in the sense that Mr Sumption interpreted it.

He also referred us to an earlier part of Miss Barttram's notes, which recorded events that took place before Mr Boyd's departure. This part of her notes appeared to show that Mr Fordyce, the managing director of Orion, had inquired why there would be a problem if Sphere Drake saw these privileged documents. Someone is recorded as replying that the problem was that Mr Sage had told the judge that he had always said and always remembered that it was goodwill and not a legal contract, and that this was not true.

Someone then said that this was Stuart-Smith LJ's problem. There is then a note of what was agreed to be a bit of play-acting, with Mr Sage saying "I said" and Mr Rokison (who was then Sphere Drake's leading counsel) responding by saying "no you did not: prove it by earlier pleading, meeting or note". There follow the words:

"What we have demonstrates Sg told untruth in w/box Abomination. re cred'ty"

Mrs Good's note summarised these exchanges in these terms:

"Stewart Boyd said that he could not argue any of this without waiving privilege. To waive privilege would be a 'disaster'. The documents would show that there is no clear record that Leslie Sage had always told us that he said that this was not a legal contract at the outset of the meeting. To waive privilege in these circumstances would destroy Sage's credibility."

Mr Sumption submitted that this note shows that Mr Boyd clearly saw that disclosure of the privileged documents would discredit Mr Sage in the eyes of the court. His credibility would be destroyed and Stuart-Smith LJ's scepticism would have been shown to be fully justified. The reason for this, as Mr Boyd recognised from what Mrs Good was telling him, was that the privileged documents quite clearly showed what, Mr Sumption said, we now know to be the truth, namely that Mr Sage had never recalled the exchange at the April 1975 meeting until very shortly before the trial.

Mr Sumption described as arid the dispute that had arisen before Langley J as to whether the words "What we have ..." formed a further part of the play-acting or not. He argued that on any showing the words must have represented part of Mr Boyd's response to Mr Fordyce's question. Either Mr Boyd himself thought that Mr Sage was telling an untruth (a matter on which the judge accepted Mr Boyd's denial) or he recognised that the Court of Appeal would think so if they were allowed to see the privileged files.

The final extract from Miss Barttram's notes on which Mr Sumption relied in the present context related to the second part of the meeting, after Mr Boyd had left. It is clear that Mr Fordyce was asking some fairly searching questions about the reasons for the lateness of the amended pleading. He seems to have said that he appreciated the undesirability of waiving privilege, but he asked whether it was correct to say that waiver of privilege would reveal that Mr Sage said it was a goodwill agreement [ie before he saw the Flint Note].

Mrs Good appears to have responded "no" quite emphatically. She referred to "the principles" meaning that they were gentlemen, but this was in the context of paragraph 3 and not of the agreement as a whole. She referred again to the point about "understanding" [i.e not understanding what Mr Sage was telling them]. A little later she is recorded as saying that one could not believe how difficult Mr Sage was to pin down. He would not come to meetings by himself, and no progress was made with Mr Rousell and Mr Heritage. The note continued by recording that Mr Rousell had a recollection of the meeting which was false. He recalled lunch and champagne, and Mr Grob's presence at the meeting, and the meeting being on Tuesday am, not Thursday at 3pm. Mr Sage did not remember at all: just the general atmosphere and the principles. He remembered the 1966 meeting with Van Der [Velden] very clearly. Even if he had said it, there was no corroboration and the documentation [the Russell Record] was to the contrary. It was possible that Mr Sage had in mind a gentleman's agreement, but the truth was that he did not remember the meeting and could not say that: "I tried and tried to get him but couldn't".

Mrs Good is recorded as having gone on to say that whatever had been agreed in 1966 did not help, because on the day the parties could change their minds and enter a legally binding agreement. It was fair to say that Mr Sage did go on about a gentleman's understanding. He did not see the Flint Note as a revelation, but said "now you'll believe what I say". She is said to have added:

"The only way [I] could make sense of what he said about a gentleman's agreement was by reference to paragraph 3 [of the Russell Record]."

In her own note of the meeting Mrs Good wrote of the 1985 period that at this early stage of the proceedings Mr Sage had no "vivid" recollection of the April 1975 meeting.

Most of this passage recorded by Miss Barttram is devoted to Mrs Good's efforts to explain to Mr Fordyce why the Linklaters team had not been willing to take seriously Mr Sage's assertions to them that the April 1975 meeting had not resulted in a legally binding agreement. Mr Sumption, however, fastens on it for two points. The first is that Mr Sage is noted as saying that he had no memory of the meeting at all, apart from the general atmosphere and "the principles". The second is that Mrs Good said she had tried and tried to get him to remember the meeting but she could not.

On the latter point the judge said that he accepted unhesitatingly Mrs Good's rejection of Mr Sumption's suggestion that it was at the meeting on 11th July 1989 that she had "tried and tried" to persuade Mr Sage "to adopt the Flint Note". The judge said that the context (the pleading point), the words themselves and the documents all pointed to Mrs Good referring to the early stages of the matter, leading to the original pleading of the case. That was the time when Mr Sage had been hard to pin down and had kept on talking about 1966. The judge added that if Mrs Good had indeed sought and failed to get Mr Sage to adopt the Flint Note in July 1989, but had then seen that he did adopt it on 7th August 1989, it would have been bound to have impacted on her. He said she could hardly have thought, as she did, that Mr Sage had been trying to say as much before.

Mr Sumption submitted that the judge had been wrong not to ascribe the "tried and tried" episode to the 11th July 1989 meeting. The possibility that there had been an express statement at the meeting that it was a goodwill agreement did not arise until the Flint Note came to light in May 1989, and the 11th July meeting was the only occasion prior to 7th August 1989 when this could have been discussed with Mr Sage. Moreover, Mr Sumption said, to ascribe all this effort to the 1985-6 period would have involved Mrs Good in trying to get Mr Sage to say something then which was contrary to her own view of the meeting at that time, namely that the agreement made at it was binding.

At all events, whichever theory was right, he said that this evidence showed that at some stage in the pre-August 1989 history, whether it was in 1989 or much earlier, Mrs Good had tried to get Mr Sage to say that the 1975 agreement was a goodwill agreement by reference to some recollection of the meeting on his part, and he would not do so. Mr Sumption submitted that the force of the point was much the same, whether this episode took place earlier or later. Not only did Mr Sage never say before August 1989 that he had expressly said at the 1975 meeting it was a goodwill meeting, in spite of all the opportunities he had had, but he had resisted attempts on Mrs Good's part to get him to say it because he could not remember.

Mr Sumption accepted that what was remembered at the Tardis meeting was of less evidential value than the contemporaneous notes made between 1985 and 1989. It was, however, of some evidential value, and he submitted that it supported the proposition that Mr Sage in fact had no recollection of the 1975 meeting before seeing the Flint Note which could enable him to attach a context to it, and indeed no recollection in relevant respects of the meeting at all.

These, in short, were the reasons why in answer to his first question, Mr Sumption urged us to hold that Mr Sage in fact had no prior recollection of having said anything at the meeting about a goodwill agreement independent of the Flint Note.

I have not included in this summary of his argument the efforts made by Mr Sumption to persuade us that the judge was wrong to find that Mr Sage's consistent view, whether or not he expressed it clearly to the lawyers, was that the 1975 agreement did not have a legally binding effect. Mr Sumption accepted that there were passages in the documents which pointed the other way, and in my judgment this is an issue on which it would be impossible for this court to reverse the judge's clear findings.

There was force, however, in Mr Sumption's contention that on every occasion before May 1989 (for which I would substitute August 1989) when Mr Sage professed his belief that the 1975 agreement was not legally binding, he gave three reasons for that belief which had nothing to do with any recollection of what was said at the meeting.

The first of these reasons was that although he had informally consulted the Dutch owners of Orion before the 1975 meeting, he would have needed the authority of Orion's board before he could bind Orion. The second was that he would have consulted the company's solicitors if he had intended it to be a binding agreement. The third, and perhaps the most significant of all, was that to have made it binding would have been contrary to the spirit of the four principles that had been agreed at the time of the Sphere Drake rescue in 1966-7.

Mr Sumption's second question, "did Mr Sage claim in his evidence that he had such a recollection?", turned on an examination of four passages in the transcript of Mr Sage's evidence while he was being cross-examined by Mr Mance QC on the morning of Day 5 of the trial, read against the background of paragraph 61 of Mr Sage's witness statement which formed part of his evidence in chief. These passages read:

"(1) Q. Has this always been your case, Mr Sage? Has it always been your recollection that there was specific agreement that the whole agreement was not to be legally binding, was not to be more than a matter of mere goodwill and not to be a legal agreement. Is that your recollection?

A. Yes, and for one specific reason. We were terminating board approved arrangements and I had the choice of accepting an informal arrangement like this with mutual trust at that time, or to make it a fully binding agreement. Do remember the pressure at that time - we are looking at this in hindsight - the pressure at that time was to firm the figures up for 1974 balance sheets and have a full legal agreement taking care of all the possibilities that could happen, it wasn't one that I felt in those circumstances should be done. That is why it is mentioned in the manner it has been."

(T5/17A to 18A).

"(2) Q. It is your recollection, is it, that throughout you have always thought and understood and remembered that any agreement made on 23rd April 1975 was expressly agreed not to be a legally binding agreement?

A. Yes.

Q Well, I put it to you that that is not the thought process throughout, Mr Sage, and that in fact what has given rise to the recollection to that effect is a much more recent matter and that is the discovery of the significance of Mr. Flint's note .

MR. JUSTICE HIRST: That is near a suggestion of doctoring his evidence - is that intended?

MR. MANCE: No, my Lord, certainly not. What it is intended to suggest is that once one reviews the matter and puts in that factor it is easy in utmost good faith, Mr. Sage, to convince oneself that not only was that said but also that it had a certain meaning which, in fact, at the time, if one had been present, it did not bear. I am not for the moment suggesting that you are not giving your evidence in perfect good faith, what I am suggesting is that you have convinced yourself, albeit in fact, wrongly, that certain words in a memorandum of Mr Flint's had a certain meaning and were to a certain effect.

A. I am not sure of the question or ----"

(T5/24A-E)

(3) MR. JUSTICE HIRST : Does this [the first line of the Flint Note] accord or disaccord with your recollection of what you said at the start of that meeting?

A. It is, my Lord.

Q. It accords with your recollection?

A. It does, my Lord, yes.

MR. MANCE: Now, when was the first time you saw - well, the note - and have interpreted to you its significance? When was the first time you saw the note?

A. I can't recall when I saw the note. I know I have seen it.

Q. Was it recently or a long time ago?

A. Probably three to four months ago, but I cannot be specific and, indeed, it is by deduction and not by remembrance. But I have seen the note.

Q. And at about the same time or at the same time you were given a transcription, were you, of the wording?

A. That came later, yes.

Q. And on 25th August the point was raised with us - and I am suggesting to you that this has been in point of fact very influential in your reconstruction of what you think now happened on 23rd April and in particular if one takes paragraph 65 [of Mr Sage's witness statement] I suggest to you that the first sentence of that paragraph is really due in its entirety to the Flint Note, is it not?

A. No, it is not. I remember at that meeting stating that it was a goodwill agreement but as to legal contract of agreement to me they don't vary.

MR. JUSTICE HIRST: What I think is being suggested to you is not that you made this up but that you never thought about it or remembered it as a goodwill agreement until you suddenly saw this document in August when you said "Hey presto, of course that is what I said after all", is that correct?

A. No, not in its entirety, my Lord, in the sense that I had it in mind - in my mind - and this did, perhaps, confirm - only confirm - my recollection was correct.

MR. MANCE: The way in which the first sentence is formulated "I made the point at the outset that this [meaning the agreement as a whole] was a goodwill agreement ... and could not be a legal contract". Firstly, it appears - the relevant sentence of the Flint Note - "at the outset", secondly it says "goodwill agreement" and then thirdly it says "and not a legal contract" and that order of events is represented precisely in the first sentence of paragraph 65 of your proof, and I suggest to you that can only be because you are relying heavily on Mr. Flint's note, is that correct?

A. No, it is not correct. I remember the circumstances of that meeting and what was said. Both notes confirmed my thoughts on the matter - my remembrance of the matter - it was not in itself more than that."

(T5/27B to 28B)

(4) MR. JUSTICE HIRST: Are you saying quite categorically that your clear recollection is that you did open off with that remark?

A It is quite clear in my mind, my Lord."

(T5/31B-C)

Mr Sumption submitted that there was no room for doubt that Mr Sage was being asked whether he had remembered the exchange recorded in paragraph 65 of his witness statement before he saw the Flint Note, and what role that note had played in the formulation of that paragraph of his evidence.

In this context he drew our attention to the fact that Mr Sage had been warned beforehand that he should expect to be cross-examined along these lines. This came about in the following way. On 14th August 1989 Mr Henshaw and Mr Legg went to see Mr Cordara in conference and showed him the notes Mr Sage had given them a week earlier. Mr Cordara advised, both in relation to paragraph 32 (the December 1974 meetings) and paragraph 50 (which later became paragraph 65: the April 1975 meeting), that Mr Sage should be asked if he had any independent recollection of these meetings, with particular reference to the Flint Note in the latter case. Mr Henshaw made a note of this advice. Mr Legg, for his part, marked up the then current draft of Mr Sage's witness statement with a note against paragraph 50: "Did he remember this before or after he saw the Flint Note". He told Langley J that he took the view that this point had to be covered with Mr Sage.

Mr Henshaw conducted two proofing sessions with Mr Sage on 22nd and 24th August, and he noted Mr Sage's answers to the questions suggested by counsel on his own note of those questions. It can be seen from this note that Mr Sage gave a single answer which referred to both paragraphs 32 and 50:

"Q Say whether any independent recollection of the meetings.

A Documents mainly. Remember 23rd April 1975 not detail."

In his evidence at the trial Mr Henshaw told the judge that he formed the impression at these proofing sessions that the Flint Note had jogged Mr Sage's recollection. He did not think that Mr Sage had ever claimed to have an independent recollection that he had made the comment about the goodwill agreement at the meeting before he saw the Flint Note.

The next draft of Mr Sage's witness statement was dated 27th August 1989. Paragraph 50 had now become paragraph 65, and it still began with the words: "I recall clearly that I made the point at the outset ...". I have already described how the first four of these words were removed three days later.

Mr Sage was invited to revisit these issues four days before the trial started. In those days Linklaters, like other City solicitors, had a practice of inviting witnesses at a forthcoming trial to attend a video session at their offices. This was not for any improper purpose, but to enable them to be given standard hints about how to comport themselves in the witness-box, and then to watch a video film which showed them the extent to which they had succeeded in practice in following the advice they had been given. What is important in the present context is that on the previous day Mr Cordara had prepared for Mr Sage a list of questions he should expect to be asked in cross-examination, to which Mr Henshaw added a point of his own:

"1975, actual recollection of what is said at 23rd April 1975 meeting, binding nature of extreme degree resolution, accuracy of Russell Record paragraph 3 and paragraph 4."

Mr Henshaw told the judge that the object of this exercise had been to identify potential lines of attack in cross-examination and to explain them to Mr Sage so that he could think about them and in due course deal with them at the trial. So far as his additional point was concerned, he had felt it was an obvious area for cross-examination. Because the 1975 meeting had happened 14 years ago, and the pleadings had been changed so recently, he thought it was obvious that Mr Sage would have to be ready to deal with questions about exactly what he remembered and for how long he had remembered it. He accepted that he would probably have told Mr Sage that he needed to bear in mind that Sphere Drake would be suggesting to him that the Flint Note was an afterthought which had come into his mind very late in the day, and that he had no independent recollection of what was recorded in it.

In these circumstances, Mr Sumption said, Mr Sage was completely ready for the questions which Mr Mance and Hirst J put to him on the morning of Day 5, since he had been told to expect them and encouraged to think about them beforehand.

The reason why Mr Sumption devoted some time to showing us these passages was that Langley J, who did not himself hear Mr Sage give evidence, came to a different conclusion about the effect of those four passages of his evidence to that reached by Hirst J who did. Hirst J said at p 501 of the report of his judgment:

"Mr Sage affirmed clearly that his testimony concerning his crucial statement at the outset of the 23rd April 1975 meeting was based on his recollection, confirmed by the Flint Note when he first saw it in the summer of 1989 (see answer quoted in full above from T5/27F).

The crux of Mr Mance's attack upon Mr Sage is that this evidence was an afterthought; that Mr Sage did not and cannot have had any independent recollection whatsoever, and that he embraced the Flint Note when it first came into his hands, which is why the evidence in his written statement which I have quoted above ('I made the point at the outset ..') is drawn almost verbatim from the Flint Note. This is underlined, Mr Mance says, by Mr Sage's failure to correct the agreed record of the meeting, and by the fact that neither in the Rousell correspondence from 1983 onwards, nor in Linklaters' letters, nor in the pleadings, until July 1989, is Mr Sage's statement mentioned or relied upon."

Hirst J said at p 502 that all in all he had found Mr Sage to be a most impressive witness, who answered the questions put to him clearly and candidly, and with no disposition to avoid concessions, even though adverse to Orion's case. He added, at p 503:

"Moreover, and most significantly, his evidence as to his opening remark is corroborated by the Flint Note, the cardinal importance of which I have already stressed. The fact that he did not embrace the rest of the Flint Note in his evidence is, for the reasons I have given, favourable to his credibility, and also supports his evidence that he is, in truth, drawing on his recollection and not relying solely on the Flint Note. I see nothing improbable in such an important matter for Orion sticking in his memory.

I therefore reject Mr Mance's suggestion, which is central to the attack on Mr Sage's evidence, that his testimony on this point was an afterthought, and I find that he has ever since 1975 held this in his memory, though of course, as he himself acknowledged, such recollection was confirmed and strengthened once his attention was drawn to the Flint Note."

Those findings, by a judge who saw Mr Sage in the witness-box, weighed very heavily with the majority of the Court of Appeal: see Lloyd LJ at pp 266 and 268 and Mann LJ at pp 292, 297 and 300.

Langley J, however, said he did not find it easy to be sure exactly what Mr Sage was saying or understood he was saying in his evidence about his recollection of the 1975 meeting and the relationship of that recollection to the Flint Note. It is clear that he was heavily influenced in this regard not only by the heavy burden that lay on Sphere Drake to establish their charge of perjury against Mr Sage, but also by the evidence given to him by Orion's lawyers and senior executives nine years after Mr Sage gave his evidence at the trial before Hirst J. Langley J believed that it was possible that Mr Sage was only claiming that he had always had a recollection that the substance of the April 1975 agreement had given rise to a goodwill agreement; alternatively that he had a present or refreshed recollection, derived from the Flint Note, of using the words attributed to him. On pp 105-108 of his judgment he summarised the effect of the evidence given to him by Mr Boyd, Mr Henshaw, Mrs Good, Mr Cordara, Mrs Atkins, Mr McDonnell, Mr Legg and Mr Fordyce before concluding:

"Whilst I think some of the passages in Mr Sage's evidence are open to the interpretation which Sphere Drake seeks to put on them, the very fact that Mr Boyd, Mrs Good and Mr Henshaw, all experienced in litigation, could, as I am sure they did, honestly express those views about what he had said, coupled with the importance of the precise allegation made against him, at the least raises real doubts and is a most unpromising basis for an allegation of perjury."

All Orion's witnesses said that they believed that Mr Sage had given truthful evidence. Mr Boyd told the judge that he had read Mr Sage's evidence many times and had never been quite sure exactly what he was saying. Mr Henshaw, who was not himself present in court on the fifth morning of the trial, said that when he read the transcript later it did not strike him that Mr Sage was saying he had always recalled an express agreement at the outset of the 1975 meeting that it was a goodwill agreement. If he had thought that that was what Mr Sage was saying it would have given him a jolt because he did not believe that Mr Sage had always recalled this. Mrs Good, for her part, thought that Mr Sage had given a very careful answer to Hirst J when he spoke about things being on his mind:

"What I thought he was being asked about was the nature of the agreement and whether or not he remembered that, and the extent to which that had been affected by the Flint Note, and in any event what he is saying is that the Flint Note confirmed - only confirmed - that his recollection was correct. ... As to his recollection ... of the words that were actually used that seems to have been prompted by the Flint Note."

Mrs Good could not say whether the Flint Note had brought forth something which he had in the back of his mind before "or something that happened inside his own head". She told Langley J, who accepted her evidence without hesitation, that she did not think Mr Sage had said that he had always remembered using the words attributed to him in the Flint Note at the outset of the meeting but only that he did remember doing so when he gave his evidence.

Mr Sumption suggested, on the other hand, that it was perfectly clear from the transcripts of the four crucial passages what points were being put to Mr Sage and what his answers were, and that these were the very points that Linklaters had warned him to expect. He also suggested that Hirst J had also understood the point very well, from the interventions he made, and that he had been very concerned that Mr Sage should understand precisely what was being put to him.

We were shown the transcript of Mr Boyd's final address to Hirst J at the end of the first trial. He was addressing the criticism that Orion had amended its pleading so very late. Without waiving privilege, he suggested a number of reasons why it might not have been considered appropriate to tie Orion to reliance on an express agreement as to the goodwill nature of what was being discussed in April 1975 until such a very late stage. Mr Sumption observed that this submission was not addressing the possibility that Mr Sage might, before July 1989, have thought for some other reason that the agreement was non-binding. It was addressed to the point, pleaded for the first time in July 1989 on the basis of the Flint Note, that he had said so in terms at the outset of the meeting.

Mr Sumption said that Mr Boyd could only have made this submission on the footing that everyone, including Hirst J, realised that Mr Sage had in fact been claiming a prior recollection of the Flint Note exchange. This was the basis on which all three members of the Court of Appeal approached the case: see Lloyd LJ at pp 255-6 and 264-6; Stuart-Smith LJ at p 283, and Mann LJ at p 297. If Mr Sage had simply been saying that he had always believed the agreement was non-binding, neither Hirst J nor the majority of the Court of Appeal would have found his evidence so persuasive, because Mr Baumli and Mr Russell, whom Hirst J also regarded as honest witnesses, gave evidence that their belief was to the opposite effect.

The third and final main issue which Mr Sumption invited us to consider was whether Mr Sage appreciated, when he made a claim to a long-standing recollection of the goodwill agreement exchange, that this claim was unjustified.

The judge's findings on this issue appear in the section of his judgment headed "the Perjury Issue" (see numbered paragraphs (1) to (7) on pp 204-8). He said:

"(1) There are real doubts about what Mr Sage did say or should fairly be taken to have said in his evidence about the state of his recollection and the effect upon it of the contents of the Flint Note. The allegation of perjury is (as it must be) in precise and limited terms. It is that Mr Sage lied in saying he had a long-held recollection independent of the Flint Note of using the words the Note attributed to him at the April 1975 meeting. It is not alleged that he lied in saying that he had always believed that any agreement made at the April 1975 meeting was only a goodwill agreement nor in claiming a present recollection at the trial of using the words prompted by the Flint Note.

(2) The reasons for the limited terms of the allegation are not hard to find and on my findings of fact no wider allegation could possibly have been sustained. There is no dispute that Mr Sage did speak the words attributed to him by the Flint Note at the meeting. The evidence is that he had said and at the least honestly believed before anyone had discovered the Flint Note that the substance of any agreement made at the meeting was that it was only a goodwill agreement. Thus the perjury allegation is in essence an allegation that Mr Sage, reading the Flint Note, dishonestly characterised as recollection what was in truth reconstruction his evidence that he used the words which he did in fact use in a context which was consistent with what he did recollect had been the substance of the outcome of the meeting. That is a long way from what might be considered the usual case in which an allegation of perjury is made where there is evidence often documented that the alleged perjurer has contradicted himself and one of the two accounts must be false and probably deliberately untruthful. Sphere Drake's case is only that Mr Sage dishonestly claimed to have a recollection he did not have.

(3) One of the key planks in Mr Sumption's submissions in support of the allegation of perjury was that the discovery of the Flint Note and the circumstances in which, in August 1989, Mr Sage came to include it in paragraph 65 of his witness statement could not have been forgotten by Mr Sage at the time he came to give his evidence only some three months later in November 1989. Hence, it was submitted, that this was a case where the witness must have been conscious of what was reconstruction and what was recollection about the words attributed to him. However, on my findings, it is clear that the Flint Note did not make an impact on Mr Sage. There was no conversion, Damascene or otherwise, on the part of Mr Sage (unlike, maybe, the lawyers) when he saw it, as Mr Sumption submitted was the case. Nor, like Mr Fordyce and Mrs Atkins, did Mr Sage see as important a distinction between using the words the Flint Note attributed to him and what he had been saying from the start or at least believed he had been saying from the start namely that the meeting had given rise only to a goodwill agreement. There can be no other sensible explanation of his leg-pulling of Mrs Good and Linklaters & Paines about the Flint Note: perhaps you will believe me now. For the same reasons Mr Boyd's submission that there was no half-way house between Mr Sage being right or telling lies can now be seen, as Stuart-Smith LJ and indeed Mr Mance saw it, as a forensic success but wrong.

(4) Once it is accepted that Mr Sage did use the words attributed to him by the Flint Note and did believe before seeing the Note that the April 1975 agreement had resulted in only a goodwill agreement and that he had said so, I do not find it in the least surprising and certainly cannot exclude the real possibility that, whatever in fact happened at the April 1975 meeting, Mr Sage could honestly have convinced himself and believed he recollected that he must have used the words about the whole agreement and indeed that as the let out was to him the epitome of the agreement the precise context in which the words were used was unimportant. That, as it seems to me, also deprives of much of its force Mr Sumption's argument that Mr Sage was a man well able to express himself who could and would have said much earlier that he recalled using the words in the Flint Note if he truly had done so.

In my judgment this is the not uncommon case, where, almost by definition, there is always a real risk that a witness may honestly fail to distinguish between original recollection, a refreshed recollection and reconstruction, and one of those is a far more probable explanation of Mr Sage's evidence than an allegation that he perjured himself in claiming to recollect what he knew he had only reconstructed.

(5) Mr Sage has never faced the serious allegation now made against him. He was expressly accepted by Sphere Drake as an honest witness at the trial. Those who heard him give evidence and those who took part in its development and preparation without exception expressed the opinion, which I am sure in each case was honestly held both at the time and when they gave evidence, that Mr Sage was an honest witness and gave his evidence honestly. That is true of counsel, Mr Boyd and Mr Cordara, of the solicitors, in particular Mrs Good and Mr Henshaw, but also Mr McDonnell and Mr Legg, and of Mr Fordyce and Mrs Atkins. It is also of course true of Hirst J and, in a sense of Mr Mance and so Sphere Drake. That is not of course conclusive but it is compelling particularly so when those concerned were mostly well placed to make and experienced in making such judgments.

(6) Mr Sumption never came close to providing a satisfactory explanation for why Mr Sage should have given perjured evidence and indeed done so on what is, however important in the event, a very narrow point. The suggestions were that Mr Sage did not care for being questioned about the reliability of his recollection and so was going to see Mr Mance off; that he believed strongly in Orion's case and thought Sphere Drake's refusal to pay was extremely caddish; that if Sphere Drake was right Mr Sage had made a disastrous deal for Orion and he wanted to vindicate his reputation; and possibly that he wanted to make money out of the case. Insofar as these suggested motives were put to the witnesses they were rejected save that Mrs Good acknowledged that Mr Sage believed that justice was very much on the side of Orion. For my part, leaving aside the question of payment which I have already rejected, I see nothing exceptional in any of these suggestions to explain why a 71 year old man of unblemished personal reputation should give dishonest evidence on oath. Apart from the possible heat generated by cross-examination (which is not of itself a promising basis for an allegation of perjury) the other suggestions, if truly a motive for perjury, would one might have thought have led Mr Sage to leap upon and adopt the Flint Note (which he did not) and not to turn round and blame Linklaters & Paines for not believing him before (which he did).

(7) I would add that whilst the standard of proof is not important to my conclusion it serves to confirm it. I have already referred to my rejection of most if not all of the matters on which Sphere Drake relied in support of the perjury allegation. In particular I reject the interpretation Sphere Drake seek to put on what was said at the meeting in the Tardis.

It, of course, follows from my conclusion that Mr Sage did not commit perjury that Sphere Drake's claim fails and must be dismissed."

Mr Sumption forcefully attacked the judge's reasons. He said that the present inquiry was not concerned with the impact which the discovery of the Flint Note had made on Mr Sage's view of the merits. It was concerned with the impact which it had made on the contents of Mr Sage's evidence. Even if it did not have a significant impact on his view of the merits, it was now clear that it was only as a result of seeing it that Mr Sage claimed to be in a position to give evidence about what had been said at a meeting 14 years before, when it had been said, and in what context.

Mr Sumption said that an honest witness would have acknowledged this fact. He reminded us that Mr Rousell, too, had thought that the 1975 agreement was not legally binding, but he had confessed that he could not remember anything about what was recorded in the Flint Note. Orion decided not to call him to give evidence to Hirst J. Mr Russell had adopted a similar approach on the other side. He had always believed that the agreement was legally binding, but he could not deny or confirm that Mr Sage had said what is recorded in the Flint Note, because he simply could not remember one way or the other. Mr Sumption suggested that an honest man in Mr Sage's shoes would have said of the Flint Note: "This accords with my view about what the result was, but I honestly cannot remember the exchange".

Even if Mr Sage had persuaded himself, on seeing the Flint Note, that he had used the words recorded there in a context which showed that he was talking about the whole agreement (as opposed to the Clause 3 let-out), it did not follow that he also persuaded himself that he had recalled these things before seeing the note, and an honest man would have acknowledged this. The importance of this distinction was reflected in the way Mr Boyd had argued the case in the Court of Appeal, where he had told the court that Hirst J had been very conscious of the importance of distinguishing between recollection and reconstruction, and had taken some care to ascertain which it was.

Whether Mr Sage regarded himself as reconstructing or remembering was not really the point. The point was that the court would have been in a position to form its own view about this matter if Mr Sage had been candid about the actual sequence of events which had led to him giving the evidence he did. What he could not properly say was that he had always had a recollection of the goodwill agreement exchange even before he saw the Flint Note.

Mr Sumption next submitted that the evidence to which the judge had referred could not be reconciled with a suggestion that Mr Sage had been honestly deceiving himself. He repeated that it was quite clear on the evidence that Mr Sage had never told anyone that he recalled saying the words attributed to him in the Flint Note until he received Mrs Good's somewhat insistent letter of 27th July, and he had drafted what became paragraph 65 in his own hand in response to that letter only three months before he stepped into the witness-box. Mr Henshaw's warnings about the potential line of cross-examination made no sense unless both he and Mr Sage realised that Mr Sage had never said that he had this recollection before he saw the Flint Note.

The only way in which one might attempt to reconcile the history of Mr Sage's statement on this issue with honesty would be to argue that at the beginning of August 1989 the Flint Note had served to jog a pre-existing recollection of these exchanges. This is what Mr Henshaw had suggested at the trial.

Mr Sumption encouraged us to reject the memory-jogging theory for three main reasons. The first was that the Flint Note had been made by someone other than Mr Sage, so that it was not a case of someone being reminded by the contents of a contemporary note he himself had made. Mr Sage might have been asked "does the phrase, goodwill agreement and not a legal contract, bring anything back to your mind", but there was a serious difficulty about the notion of someone's recollection of an oral exchange at a meeting being jogged by such a question when he is asked it 14 years later, when he had never mentioned the exchange at all in the intervening period. Mr Sumption suggested that the fact that Mr Sage had no such memory when he spoke to Mr Burtonshaw in 1980 made the memory-jogging theory impossible to support.

The next reason was that between March 1985 and July 1989 Mr Sage had had to think about the 1975 agreement from time to time with varying degrees of intensity, and if he really did have such a memory waiting to be jogged, it was scarcely conceivable that it would not have been jogged at some time or other during that period. If, as the judge held, Mr Sage had always thought that the agreement was non-binding, he had had plenty of opportunities, when asked about his memory of the meeting, to recall what he now maintained he had said at the outset of the meeting, but he never did. Mrs Good had told the judge that her firm had set out in March 1985 to discover what Mr Sage remembered of the meeting.

Thirdly, it was also the case that Mr Sage himself never claimed that his memory had been jogged. The words "I clearly recall" disappeared from his witness statement on 30th August 1989 without replacement. He had been prepared in advance for the line of questioning in fact adopted by Mr Mance at the trial, but he did not respond to it by saying that the Flint Note had jogged his memory. Instead, he said that the note was merely confirmatory of something he had always recalled. This was the evidence which had impressed Hirst J and the Court of Appeal, and Mr Sumption submitted that it was completely untrue.

Mr Sumption then attacked the four other reasons given by the judge for his findings on this point. The first related to the evidence given by the Orion witnesses about their belief in Mr Sage's honesty. Mr Sumption submitted that in so far as these witnesses misunderstood the evidence Mr Sage had given, their evidence was irrelevant, and in so far as they correctly understood it, it was of no weight unless they had personally taken part in the process of proofing Mr Sage. It was only Mr Henshaw and Mrs Good, who were actually present at the moment at which Mr Sage had first claimed his recollection, and alone knew about this new development, who might have any useful evidence to give.

Of these two witnesses Mr Henshaw was not present in court when Mr Sage gave the critical evidence. He did not think there was anything wrong with it when he read the transcript at the weekend. He believed that Mr Sage was only giving evidence about the consistency of his beliefs, and not about the consistency of his recollection about what he had said. As I have already said, Mr Henshaw told the judge that if he had thought that Mr Sage was claiming a prior independent recollection of the exchange, he would have received a jolt. In these circumstances Mr Sumption submitted that if we were satisfied that Mr Sage did in fact make this claim, the weight the judge had attached to Mr Henshaw's general belief in Mr Sage's honesty was wholly destroyed.

Mrs Good, for her part, had been present at the meeting with Mr Sage on 7th August 1989 but had left the Linklaters team shortly afterwards to take up her new post in Brussels. Although she returned in the interests of good client relations to hear Mr Sage give the critical evidence on the fifth day of the trial, she was by then absorbed in her new duties. According to the evidence before the judge, the first time she was asked to reflect on the implications of Mr Sage's evidence was just before the Tardis meeting, nearly two years after she left the case, and when she had been involved in many other matters in the meantime.

Although the judge accepted that Mrs Good believed in Mr Sage's honesty, Mr Sumption reminded us that from her own note of the Tardis meeting (which was supported by Miss Barttram's note) she must be taken to have realised that he had gone too far in claiming a continuous recollection of what had been said. It was certainly the case that she thought Mr Sage was perfectly honest when he claimed that he had always believed that the agreement was not binding, but that was a different matter, and at a critical point in his judgment in his paragraph (4) at p 206 the judge confused the two concepts. Moreover, at the Tardis meeting Mrs Good is recorded as having told Mr Fordyce that the disclosure of the privileged material would destroy Mr Sage's credibility in the eyes of the Court of Appeal.

In these circumstances Mr Sumption submitted that the judge was wrong to place so much reliance on Mrs Good's views about Mr Sage, which were essentially those she expressed at the Tardis meeting long after the relevant events had occurred, and at which she said, in effect, that there were serious difficulties about Mr Sage's evidence that he had always remembered the goodwill agreement exchange.

In these circumstances Mr Sumption said that the judge ought to have concentrated on the task of drawing inferences from the primary material, represented by the contemporary records of what Mr Sage said about the 1975 meeting between 1985 and 1989. If he had done this, there would have been only one conclusion he could properly have derived from this evidence.

Mr Sumption also encouraged us to discount the evidence about Mr Sage's reported comments to representatives of Linklaters during 1989 and thereafter. I have already mentioned how he told Mrs Good after the Flint Note was discovered "Now, perhaps you will believe me". After that, he used to pull their legs about their earlier unwillingness to accept what he had told them about the agreement being non-binding. The judge referred in the same context to an incident which occurred when Mr Sage called at Linklaters' offices in August 1991 to pick up a copy of the Court of Appeal's judgment. In a conversation with Miss Barttram about the importance of the Flint Note, Mr Sage talked to her about the way in which he had always said that the agreement with Sphere Drake was a goodwill agreement. When Miss Barttram explained the difficulties Linklaters had experienced at a time when the documents and the evidence of Mr Heritage and Mr Rousell did not support Mr Sage, Mr Sage said he was aware of this, but he would continue to pull their legs. The judge referred to this episode as adding further support to Mr Sage's own belief in the evidence he gave before Hirst J.

Mr Sumption submitted that all that this evidence reveals is that Mr Sage thought he had been correct all along in his belief that Orion was entitled to seek further contributions from Sphere Drake, and possibly also in his belief that the agreement, for whatever reason, was not legally binding. It did not assist at all in answering the question whether Mr Sage had been honest in the role he had ascribed to the Flint Note in his evidence about his recollection of what was actually said at the meeting. Mr Sumption criticised the judge for taking his eye off the ball on this occasion, too, by asking himself the wrong question.

Next, he argued that it was quite wrong for the judge to place any reliance on the fact that Mr Sage's honesty was not challenged at the trial before Hirst J. Mr Mance did not have the material on which to make such a challenge. Orion's disclosure of Mr Sage's affidavit in the second action had made a small amount of the relevant material available to Moore-Bick J, but by far the greater part of the relevant material was disclosed for the first time on discovery in the present action.

Mr Sumption said that the judge might well have been influenced by the fact that Mr Sage was dead, a fact he mentioned more than once in his judgment. Orion had been arguing that there was something dishonourable about impugning the honour of a man who was dead, and Mr Boyd had made the same point in his evidence to the judge. Mr Sumption submitted that the court was engaged in the process of finding facts, and that if it concluded to the requisite standard of proof that Mr Sage had committed perjury, it should not be dissuaded from making such a finding simply because Mr Sage was dead.

Finally, he suggested that when the judge found it difficult to identify a motive which might have induced Mr Sage, a man of hitherto unimpeachable record, to tell a lie, he was being a little unworldly. Mr Sumption accepted that Mr Sage had no direct financial interest in the outcome of the case. On the other hand, he said that witnesses may become emotionally committed to the fortunes of the party who calls them, particularly if they have been bound up in four years' worth of preparation for a major piece of litigation. Furthermore, if Sphere Drake were right, Mr Sage was the man who had bound Orion to a closure of accounts which had, in retrospect, proved to be a disaster. There were many plausible motives for a lie in such circumstances. Mr Sage might have lied because he felt under pressure to secure victory for Orion: we were reminded of the unhappy word "vital" in Mrs Good's letter of 27th July 1989.

The commonest reason of all, Mr Sumption suggested, why witnesses lie under cross-examination is simply the exigencies of the process of cross-examination itself. It is a highly adversarial process, and a witness under cross-examination may develop during the course of it a degree of personal commitment to his own evidence which makes it very difficult for him to confess inconsistency. It might be particularly difficult for a proud man like Mr Sage to make such a confession. In the event he wished to reinforce the strength of his own evidence by asserting for it a consistency which he knew it did not have.

Mr Sumption concluded his submissions on the facts by saying that if the judge had looked dispassionately at the contemporary material which showed the evolution of Mr Sage's evidence and the way in which he came to say what he did to Hirst J, he could not have doubted, as Mrs Good had said at the Tardis meeting, that when Mr Sage claimed that prior independent recollection, he went too far. Once one accepted, as the judge did, that this evidence altogether changed the aspect of the case, there was a compelling case to be made for Sphere Drake's submissions on the appeal.

Mr Sumption, as I have said, concentrated our attention mainly on the contemporary documents. Lord Grabiner, for his part, urged us to take very seriously the evidence which his clients' witnesses had given to the judge. The judge had found that they were all honest witnesses. He had accepted what they told him, and had placed considerable reliance on their evidence when he came to prepare his judgment. Given this fact, and the heavy burden that rests, even in a civil case, on a party which sets out to prove perjury, Lord Grabiner urged us to be very slow to disturb the judge's findings. He said it was clear that the judgment had been composed with great care by a judge who was alive to all the issues. He described it as a superbly crafted and absolutely unanswerable rejection of the totality of Mr Sumption's case.

Because Lord Grabiner was anxious that we should understand the details of the evidence on which the judge relied, Orion's legal team prepared for the benefit of the court an admirable 180-page paper, replete with references to the documents and the transcripts, which enabled the court to understand their case clearly without a great deal of time having to be taken up in court in oral exposition of detailed facts. In this way, although there were more than 5,000 pages of documents and 17 days of transcripts of evidence before the court - quite apart from four ring-binders of legal authorities - the oral hearing of the appeal was concluded in only seven of the ten days originally estimated for it. It was a model of the way a party's case in an appeal of this complexity should be prepared, and it was of the greatest assistance to the court. I have considered all the references with which we have been supplied, and if the length of this part of my judgment is only a fraction of the length of the paper we received, this should be attributed to the desirability of concentrating on the main issues and not to a failure to take into account all the points which Orion invited us to consider.

At the centre of Orion's case on the appeal was their detailed analysis, in chronological order, of the evidence which was before the judge. It will be convenient to consider this analysis first before I go on to refer to Lord Grabiner's response to the points Mr Sumption made to us, although I will deal with the relevant issues in a fairly summary way when I am willing to accept Orion's arguments on the point in question.

So far as Mr Burtonshaw was concerned, the judge had been fairly dismissive of the effect of Mr Burtonshaw's unsupported evidence, and I accept that he was entitled to adopt this approach. Mr Burtonshaw, for instance, told Moore-Bick J at the second trial that Mr Sage had himself used the words "gentleman's agreement", and that he did not go into the matter in sufficient detail with Mr Sage to say whether he was speaking of a gentleman's agreement in full, or simply a legal agreement with a gentleman's agreement to reopen it in the event of extreme legal liabilities.

Lord Grabiner accepted that Mr Sumption was correct when he said that Mr Sage had not told anyone before 7th August 1989 that he recalled what has been called the goodwill agreement exchange at the April 1975 meeting. This was also common ground before the judge, as the judge acknowledged in his judgment. In these circumstances a large part of Orion's analysis of the events that happened between 1984 and August 1989 was devoted to showing us that Mr Sage had been consistently expressing the view that the 1975 meeting was not legally binding, and that Orion's lawyers had misunderstood the effect of what he was saying. I can deal with this analysis quite briefly, since that issue was not particularly significant on the appeal, and I have found it quite impossible to disturb the judge's findings in favour of Orion in this respect.

The main matters on which Orion relied in this respect were to be found in the evidence of Mrs Good and Mr Tapsfield, which the judge accepted, about their March 1985 meeting with Mr Sage; the evidence of Mr Cordara, which the judge accepted, about the 4th July 1985 conference, coupled with what Mr Sage told Mrs Good on 8th and 12th July 1985; Mr Sage's reaction in August 1985 to the view expressed by Mr Bathurst QC; Mr Sage's emphasis in both December 1985 and April 1986 of the importance of the 1966 agreement; and the fact that Mr Sage did not describe the 1975 agreement or arrangements as binding in the affidavit he swore in May 1986. I accept that in the light of the judge's findings on all these matters, he was entitled to form the view that Mr Sage had stuck consistently throughout this period, despite the lawyers' scepticism, to his opinion that the 1975 meeting was not legally binding.

Orion did not, however, attempt to rebut Mr Sumption's case that Mr Sage never spoke on any occasion about the goodwill agreement exchange. They suggested, however, that the events of the meeting were not very fully explored, because of the view the lawyers had adopted about the potent effect of the Russell Record. This was, of course, quite contrary to what Mrs Good said at the Tardis meeting about how she had tried and tried to get Mr Sage to remember the events of that day.

Orion then drew our attention to the judge's findings in relation to the meeting on 19th April 1989, which was the next occasion on which Mr Sage had been invited by Linklaters to recall what had happened in 1975. The judge had noted that Mr Sumption had executed a complete about-turn in his submissions about this meeting, and I accept that on the evidence he was entitled to make a firm finding that whatever the contentious words in Mr McDonnell's note may have referred to, they did not relate to the April 1975 meeting or to any arrangement made at that meeting. The judge recorded in passing Mr Henshaw's evidence that Mr Sage could not, or at least did not, say how the substance of what had happened at the 1975 meeting had been expressed on that occasion.

Next, Orion drew our attention to the evidence given by their witnesses after Mr Henshaw discovered the Flint Note in the first week of May 1989. I have already recorded Mrs Good's reaction. She told the judge that Mr Sage did not focus on it in the sense of it having an impact on his recollection, because he had felt this was what he had been trying to describe to the lawyers all along. The effect of her evidence was confirmed, often at second hand, by other Linklaters witnesses. Mr Cordara, for his part, said that the discovery of the Flint Note had helped to make sense of what the Orion witnesses had been saying about the effect of the 1975 arrangements. The judge said he accepted the evidence of the Linklaters witnesses. He also found Mr Cordara's evidence compelling.

Orion went on to analyse the evidence in such a way as to show that it pointed to Mr Sage not having studied the Flint Note during May or June. There had been no reference to it at the meetings on 26th May or 14th June. They observed that in the draft of Mr Sage's witness statement dated 4th July the questions relating to the Flint Note remained unanswered. The judge had found compelling Mr Henshaw's evidence that these questions were not reached on 14th June, because he had been taking Mr Sage through the story in chronological order and time had run out, and I do not consider we can interfere with the judge's approach.

Orion was anxious that we should study carefully what Mrs Good and Mr Legg had told the judge about the meeting on 11th July. This was the occasion on which Mr Legg had noted "If legally binding document would have involved solicitors" on the top of the page of the witness statement which contained Mr Henshaw's questions about the Flint Note. It was also the occasion on which he had written the notes on paragraph 36 in his workbook which suggested that the language used in the first sentence of the Flint Note had indeed been discussed.

Mr Legg's evidence was that Mr Sage had probably made the remark about the involvement of solicitors at the meeting on 11th July. He thought it unlikely that they had looked at the Flint Note itself. He obtained the sense, from the paucity of the notes, and from the way in which the statement had been marked up, that Mr Sage had come to this meeting underprepared. He could not actually remember one way or another, but having been the author of the notes, he thought his explanation a real probability. Both he and Mrs Good said that if they had indeed asked Mr Sage questions posed in paragraph 36 of the witness statement, they would have recorded his answers to them, whatever they were. The judge said he accepted their evidence without hesitation. It was supported by the fact that the questions remained in the next draft of the witness statement which was prepared after the meeting.

Orion reminded us that the judge had also accepted unhesitatingly Mrs Good's rejection of Sphere Drake's suggestion that it was on 11th July 1989 that she had "tried and tried" to get Mr Sage to remember the 1975 meeting. When he came on to consider Sphere Drake's criticisms of Mrs Good's conduct during July (criticisms which are no longer pursued), he found that Mr Sage had already told her (before she wrote to him on 27th July) that the intention of the April 1975 meeting had been to achieve a goodwill agreement, not a legally binding agreement.

Orion maintained that the manuscript notes Mr Sage delivered to Linklaters on 7th August revealed his honest recollection of the events at the 1975 meeting. It was agreed that he had in fact uttered the words attributed to him in the Flint Note. He had also been consistently saying that the meeting had not given rise to a legally binding agreement. In these circumstances, they suggested that it was entirely likely that the Flint Note had jogged or prompted his memory as to the actual words he had used, and the moment at the meeting when he had used them.

Mr Henshaw told the judge that his reaction on 7th August was that he believed that Mr Sage in fact had a recollection of having said the words attributed to him in the Flint Note. He thought he probably took some comfort from the fact that Mr Sage had gone away and thought out the whole thing in his own time and had come along with the statement contained in his note. He was sure that his firm did discuss this point with Mr Sage a great deal, and that they had satisfied themselves which parts of it were and which were not recollection. He was sure Mr Sage did remember the goodwill agreement point.

He accepted that what Mr Sage was saying in August clearly went beyond what he had said in April. This, he said, was prompted no doubt by the Flint Note. He was now saying he had a recollection of certain things which were said at the meeting. Mr Henshaw did not remember thinking that there was any difference in terms of substance or consistency. The judge accepted this evidence. We were shown other passages of Mr Henshaw's evidence, from which it is clear that he was saying that Mr Sage had a recollection refreshed by the Flint Note.

Orion then reminded us that when Mr Sage was asked whether he had any independent recollection of the 1975 meeting at the proofing meetings on 22nd and 24th August, his answer had been noted as "Docs. Mainly. Rmbr. 23/4/75 mtg, not detail". I have already described how the words "I clearly recall that ..." were probably removed from Mr Sage's witness statement on 30th August because the use of the word "clearly" was an overstatement. Mr Legg, for his part, said he could understand that the Flint Note could well have jogged Mr Sage's memory and that he then said "yes, I can recall". He could not recall very much, but looking at the documents did help him to recall.

Another part of the evidence to which Orion drew our attention related to two incidents which occurred during the trial. First, Mr Sage spoke to Mr Henshaw on Friday 24th November, and the latter made a note which included the words "goodwill agreement, told [Mrs Good] right from the word go". The judge accepted this evidence, which he thought was of considerable importance. He could not think that Mr Sage would have made such a remark to Mr Henshaw unless he had believed it to be true.

Mr Henshaw then prepared a note for Mr Boyd, which is dated 27th November, in which he said:

"Sphere Drake appear to intend to argue that Sage did not recollect the goodwill agreement point until the Flint Note was discovered: See 8/28. It would be possible for Diana Good to give firm evidence to the contrary. On the other hand (a) this could open a Pandora's box as to why the point was not explicitly pleaded earlier, and (b) Sage seems to have given a very firm rebuttal already, so that on balance it would probably be better not to try to re-open this matter (even if it were possible): do you agree?"

The judge commented on this evidence in these terms:

"Mr Henshaw said in evidence that the reference to what Mrs Good could say was a reference to her belief that Mr Sage had always said it was a goodwill agreement, not that he had always remembered the words he had used at the April 23, meeting. Mr Henshaw said he was concerned that there had been a very strong challenge to the effect that Mr Sage had never thought of it as being not legally binding until the discovery of the Flint Note, and he believed that was wrong and could be refuted by Mrs Good. I accept that evidence. I see nothing in the reference to 8/28 to contradict it as Mr Sumption submitted.

Mr Henshaw was entirely straightforward in saying that Mr Sage had not said he had expressly raised the matter at the meeting before he did so on August 7 l989. So too was Mrs Good. Mr Henshaw could not have meant to suggest that Mrs Good could say that. There is also every reason to give credence to this note, written to counsel as it was, as an accurate expression of Mr Henshaw's understanding at the time. It is further compelling evidence that Mrs Good (and so also Mr Henshaw) did believe that Mr Sage had recollected the goodwill agreement point prior to discovery of the Flint Note."

It is important, of course, not to confuse what the judge called "the goodwill agreement point" with what I have called "the goodwill agreement exchange".

Although the events at the Tardis meeting did not play such a prominent part in the appeal as they did at the trial, Orion was anxious that we should understand some of the evidence which was before the judge, and the judge's findings on that evidence.

A consultation had been held in counsel's chambers on 19th June 1991, shortly before the hearing of Sphere Drake's appeal. A note of the consultation shows that Mr Boyd identified the difficulty he was likely to face because it was not until July 1989 that Orion's pleadings had been amended to raise the point on which they had eventually succeeded. It was decided that Linklaters should examine their files in order to see if there was any evidence that Mr Sage had put the goodwill argument at a much earlier date, and that Orion's lawyers had chosen not to pursue it. Mr Boyd gave a warning, however, that they did not want the other side to be able to look at privileged documents. He said they were on thin ice in saying that Mr Sage had claimed it was goodwill all along, but that his solicitors had not taken the point up and pleaded it. (The question whether Orion should be directed to disclose privileged documents had indeed been raised shortly before the end of the trial at first instance, but the matter was then satisfactorily resolved without the point being pressed).

The hearing before the Court of Appeal began on 8th July. Mr Rokison QC opened the appeal for Sphere Drake, and Mr Boyd's submissions began on 16th July. Although there is no surviving transcript of the argument, notes were taken by solicitors, and the judge also heard oral evidence about what took place. He described how Mr Boyd had started his submissions by referring to Mr Rokison's attack on Mr Sage's reliability. Mr Rokison had said that Mr Sage had reconstructed his evidence when he saw the Flint Note. Mr Boyd made the point that there was and had been no attack on Mr Sage's sincerity, and that since Mr Sage had seen the Flint Note only a few months before the trial, he could not possibly have forgotten his thought processes when he saw it. It followed that if he was wrong when he said his reference to a goodwill agreement had been always in his mind, he must have been lying. Langley J commented that in other words Mr Boyd was making the forensic point that it had to be either a lie or the truth, and that Sphere Drake did not suggest it was a lie.

From the moment Mr Boyd began his submissions, Stuart-Smith LJ had expressed concern about the reliability of Mr Sage's evidence. The judge recorded the following note taken by a member of the Linklaters team:

"SS - What does 'in my mind' mean - hadn't been mentioned for 15 years.

SB - don't accept that - Orion were looking for doc[umentary] support. SD orig[inal] pleading = reliance on Dec[ember] [l9]74 meeting. No-one could find that at Orion. Without Flint Note, any case based solely on Sage's ev[idence] - stone dead, a non-starter. However reliable, intelligent, trustworthy he was, w/o corrobora[tion] of Flint Note we w[ould] have been disbelieved.

KR - interrupts - seeks clarification. [A prelude to a possible further discovery application]

SB - don't want c[our]t to draw any inference ab[out] what Sage said. It is pure specula[tion]. Don't want to waive privilege + have trawl thro[ough] doc[ument]s.

SS: proof from LS in 86? SB: C[oul]d have done + wasn't.

Need to address you later re inferences to be drawn."

This was the background to the Tardis meeting. Stuart-Smith LJ's concerns were still apparent on 18th July. The court rose early that day, and Mrs Good flew over from Brussels to attend the meeting. Those present were Mr Boyd (for part of the time), Mrs Good, Mr Collings (a junior solicitor from Linklaters) and Miss Barttram (a trainee), along with Orion's managing director, Mr Fordyce. The judge said that there was no dispute that the main purpose of the meeting was to decide whether there would be any advantage to Orion in waiving privilege.

Orion complained that Sphere Drake's approach to the notes of this meeting in their pleadings and at the trial was to rely on highly selective passages, which were then taken out of context. They also complained that Sphere Drake repeatedly ignored other passages in the notes, and the evidence of the participants at the meeting, which were wholly inconsistent with their version of what had taken place, and that they were continuing this approach in their argument before us.

In his judgment the judge quoted extensively from Mrs Good's typed note of the meeting which she prepared after her return to Brussels. He said that he considered that the important points which emerged from the note were that:

"1. All the participants at the meeting qualified to do so, in their evidence to this court, expressed belief in the honesty of Mr Sage, despite the fact that none of them thought he had expressed a recollection of what he had said at the meeting before seeing the Flint Note. The note of the Tardis meeting is not just consistent with but supports that evidence and belief. Further Miss Barttram, Mr Collings and Mr Fordyce each said they did not understand anyone at the meeting to be suggesting otherwise. I accept that evidence.

2. Equally, the same participants believed Mr Sage had been saying, or at least trying to say, that the whole agreement was only a gentleman's or goodwill agreement. The most telling proof of this is Mrs Good's reference to Mr Sage's reaction to the Flint Note as perhaps you will believe me now."

The judge said that in reaching these conclusions he had in mind the particular passages in Miss Barttram's notes of the meeting on which both parties relied.

Because of the strength of Orion's anxiety that we might be tempted to draw conclusions from words noted by Miss Barttram at the Tardis meeting without having had the benefit of hearing all the evidence which was before the judge, it is necessary to review some of this evidence quite carefully.

Mrs Good said in her witness statement that her last day in the office in 1989, before her move to Brussels, was 1st September, but that she had been preoccupied with her move before that. She did not recall the meetings with Mr Sage on 22nd and 24th August, although she gave quite detailed evidence about the earlier meeting on 7th August. She had attended the fifth day of the trial, and thought that Mr Sage had come across as a man of integrity and authority. She had no reason to suppose that Mr Sage would lie or that he was lying, and nothing which he said caused her to question the truthfulness of his evidence at the time.

Although she was sent a copy of the judgment, she heard nothing more about the case until she was summoned out of the blue to London at very short notice to attend the Tardis meeting. She asked for some documents to be put out to await her arrival, but she had little time to read them before the meeting. She landed at Heathrow at 12 noon, and it took over an hour to reach the office: the meeting started at another venue at 3.15pm.

She did not take any note herself at the meeting, and she was not shown the manuscript notes taken by Mr Collings and Miss Barttram. When she wrote her own note on 22nd June, four days later, she relied on her memory of what had happened and Miss Barttram's typed note, of which she had rather a poor opinion.

Five of the six pages of Mrs Good's note were devoted to an account of what took place at the meeting before Mr Boyd left. (Mr Collings noted that he left at 4.20pm).

She said that she had started the meeting by saying that it had been suggested to her that it might be helpful if she were to give some background to Mr Sage's evidence. Mr Boyd, however, interposed by saying that unless there was evidence that Mr Sage did in fact tell Linklaters before the Flint Note came to light that he had said at the outset of the 1975 meeting that this was a goodwill agreement, there was little point in discussing the background. He explained that the only way in which they could put the background before the Court of Appeal would be to waive privilege - an undesirable step except in the most compelling circumstances - and to call Mrs Good as a witness.

The next three pages of her note were devoted to the explanation she gave, notwithstanding Mr Boyd's earlier remarks, of the context in which Mr Sage's evidence had been obtained. She said she was depending on her own recollections and the notes which she, Mr Tapsfield and, later, Mr Henshaw had made.

She told the meeting that Mr Sage was already retired and an old man when they had first interviewed him, ten years after the critical events had taken place. His recollection was poor, and it was very difficult to get him to focus on events and read the documents. Orion had very little documentation prior to the preparation of the pleadings which were served in 1986.

She then referred to a number of the events in the history which have already been summarised in this judgment. She wrote that at the time of the 1st March 1985 meeting Mr Sage had "no vivid recollection" of the 1975 meeting.

She said it was important to understand the circumstances at Orion in March 1985. Mr Sage had not left the company in entirely happy circumstances: there were joint managing directors and he was the one to go. He was not in good physical shape and tended to be rather the worse for wear after lunch. This was the origin of the anxiety that he should swear an affidavit at an early stage in case he died. Mr Sage talked about anything but the detail they were asking for. It was very hard to get him to focus on any level of detail. He would not do his "homework", and they had very little documentation to work on.

She said there was then a period of some months during which Orion had no management and it was difficult to get instructions. Once the new management was up and running, they had experienced a period of some months during which Mr Sage, Mr Rousell (who had been made to take early retirement) and Mr Heritage had refused to help at all unless they were paid. All of this went to explain why it was relatively late in the day before Mr Sage's evidence began to take proper shape.

She said there was a striking change in Mr Sage when he started to do his "homework". When he actually started to do the work which was necessary to refresh his memory, she recalled him saying how much he enjoyed the work because it had got his mind going. He was a changed man.

She explained how the discovery of the Flint Note had made more impact on her firm that it did on Mr Sage. She added that there were two other important factors which affected Mr Sage at that time. The first was the discovery of a note written in 1966 about the four (golden) principles. This was most important to Mr Sage and he wrote her a letter on the subject (dated 29th May 1989). The second was a conversation she had had [in July 1989] with Mr Grob, whom Mr Sage greatly admired. She said that Mr Grob had corroborated Mr Sage's evidence and had independently used the phrase "we do not want to hurt each other". This news had given Mr Sage a considerable morale boost.

Although Mr Grob eventually furnished a statement to Linklaters supporting much of what Mr Sage said about the relationship between the parties while Howdens remained the owners of Sphere Drake, he was vague on what the legal position was following that change of ownership, and it was eventually decided that he should not be called as a witness.

Mrs Good said in her note that Mr Boyd then commented that he could not argue any of this without waiving privilege, and that to waive privilege would be a "disaster". He repeated his point that the documents would show that there was no clear record that Mr Sage had always told Linklaters that he had said at the outset of the 1975 meeting that this was not a legal contract. "To waive privilege in these circumstances would destroy Sage's credibility".

The most important passage on the fifth page of her note, so far as this appeal is concerned, starts halfway down that page. I have set it out verbatim earlier in this judgment. It begins with the words "DG summarised...".

It was this passage of her note on which Mr Sumption placed such heavy reliance before us. Accepting as he did Mr Boyd's denial that he had said the words in the last sentence, he argued that it could only have been Mrs Good who had said that Mr Sage had gone too far in the witness box.

The final page of the note was taken up with Mrs Good's record of the answer given to Mr Fordyce when he referred to a question Stuart-Smith LJ had asked in court that day. He had asked why Orion had not relied on the Flint Note until 1989 although it had been in their possession since 1986. The details of Mrs Good's answer do not matter for the purposes of this appeal, apart from the following extract, to which Mr Sumption had also referred us:

"Mr Fordyce again asked why the goodwill agreement had not been pleaded originally. DFG repeated what Boyd had said, that without documentary evidence even if Sage had been clear, it would have been dangerous to plead the point. As it was Sage was unclear."

Miss Barttram's typed note adopted the same structure. She noted that Mrs Good had said that at the outset Mr Sage had been "unbelievably difficult to pin down". Of the atmosphere in 1985 she added the detail (which does not appear in her manuscript note) that Mrs Good had said Mr Sage often attended meetings drunk (as did the other two). He was arrogant, and regarded anyone who was not an underwriter as menial. He had therefore dismissed what Mr Rousell and Mr Heritage said, and was very pleased when Mr Grob (whom he saw as of equal intelligence to himself) supported him.

Mr Collings's manuscript notes covered only four pages. They have the same structure as the two typed notes which were made after the meeting. They end with a note that Mrs Good told Mr Fordyce:

"Bill Rousell (sic) had recollection of meeting. Sage didn't remember it at all - just general atmosphere of goodwill agreement. Remembered [19]66 meeting very clearly. Didn't tell us the [19]75 agre[eme]nt = gentleman's agr[eemen]t."

This, therefore, is a record that Mrs Good said in terms in July 1991 that when she first took instructions from Mr Sage in 1985 he did not remember the 1975 meeting at all. (In her own note four days later Mrs Good used the expression "no vivid recollection").

There were 18 pages of Miss Barttram's manuscript notes. They contain a note that Mrs Good said, of the 1985-6 period, that the reason why Mr Sage's affidavit said so little was that at that stage Mr Sage did not remember much about it. When she moved to the 1989 period, she is recorded as saying that in Mr Sage's mind it was always clear it was not a binding agreement. This was part and parcel of the principle that "we do not hurt one another", but until he did his homework he had no clear recollection of the 1975 meeting.

Of Mr Boyd's response, once Mrs Good had given her account of the history, the judge summarised the effect of Miss Barttram's note (coupled with the oral evidence he received) as recording that he told Mr Fordyce that discovery of privileged documents would be a disaster because Mr Sage would be cross-examined as to why there was no clear record of "what he says he always said". The judge accepted Mr Boyd's evidence that the "disaster" was the "appalling thought" of what would happen to the conduct of the appeal if privilege was waived.

Miss Barttram's note shows that the discussion between Mr Boyd, Mr Fordyce and Mrs Good lasted for rather longer than is reflected in Mrs Good's note. Mr Boyd is shown as leaving on the thirteenth page of Miss Barttram's notes. The passage which attracted most attention at the hearing of the appeal appeared on the tenth page. The judge's findings in relation to this passage were in the following terms:

"The next passage ... doing the best I can to follow it, records someone expressing the problem to be that Mr Sage had said he had always remembered saying it was a goodwill agreement and not a legal contract and that was not true and that was the same as Lord Justice Stuart Smith's 'problem'. Mr Boyd, Mrs Good and Miss Barttram each said that what followed was 'hypothetical' or a bit of 'play acting' as to how the argument might develop against Orion with Mr Rokison saying 'if you always said it, prove it by producing an earlier document'. Miss Barttram's note then records

What we have demonstrates Sage told untruth in witness box. Abomination re credibility.

Both Mr Boyd and Mrs Good said these remarks must also have been part of the play-acting: Miss Barttram's evidence was that the play-acting ended before it. As I accept the evidence of all three (and Mr Fordyce) that no one at the meeting suggested or gave the impression that he or she thought that Mr Sage was lying or had lied, this conflict (even if it was properly so described) is of no importance, because whether as actors or participants none of those present were expressing their own view as to Mr Sage's credibility in the words recorded."

A little later the judge said he thought it would be wrong to make anything of the words recorded beyond what was not in real issue. Mr Sage had not said before 7th August that he had said at the outset of the meeting, or at any time during its course, that it was a goodwill agreement and not a legal agreement. Even if he had, he had not done so clearly, and there was and is no document to show that he had.

On the eleventh page of Miss Barttram's note there was another passage to which the judge attached importance. He said that it recorded Mrs Good's belief that Mr Sage had not invented the idea that the whole agreement was a goodwill agreement. It was in his mind, and those who had spoken to him had let him down in not understanding what he had tried to say.

The judge said he found these comments both revealing and perceptive. The passage brought together what he thought were some of the important strands of the evidence required to assess Mr Sage's veracity. The judge had no doubt that Mr Sage was convinced that Orion was in the right and was entitled to pursue the claim against Sphere Drake.

A little later he added:

"Further if, as it must be, the Flint Note was accepted as demonstrating that Mr Sage did speak the words 'goodwill agreement and not a legal contract' at the April 1975 meeting, then it was not difficult to see how Mr Sage could at the least honestly convince himself that he remembered using them and that they must have applied to the whole agreement."

The next passage of Miss Barttram's notes to which our attention was drawn on the hearing of the appeal appeared on the sixteenth page of her notes. On the previous page she, too, had noted that Mrs Good told Mr Fordyce that in contrast to Mr Rousell, Mr Sage did not remember at all, "just general atmosphere and principles".

The judge transcribed the passage that follows in these terms:

"As transcribed by Miss Barttram, with some interpolation, the passage read (the speaker is Mrs Good):

It is possible that Mr Sage had in mind saying it was equal to a gentlemen's agreement. The truth is though he did not remember the meeting and could not say that. I tried and tried to get him to but he could not. Whatever agreement was made in 1966 could not help Orion because on the day people can change their minds and enter into a legally binding agreement.

Fair to say Sage did go on about a gentlemen's understanding. He did not see the Flint Note as a revelation but said [now] you will believe what I say. Only way [I] could make sense of what he said about a gentlemen's agreement was paragraph 3.

As I have mentioned when considering the Proofing Meeting on July 11, 1989 Mr Sumption asserted that this passage ("I tried and tried") related to Mrs Good seeking to persuade Mr Sage to adopt the Flint Note at that meeting. As I have also said there I accept unhesitatingly Mrs Good's rejection of this suggestion. The context (the pleading point) and the words themselves and the documents all point to Mrs Good referring to the early stages of the matter leading to the original pleading of the case. That was the time when Mr Sage was hard to pin down and when he kept on talking about 1966. Moreover had Mrs Good sought and failed to get Mr Sage to adopt the Flint Note in July 1989, but then seen that he did adopt it on August 7, it would have been bound to have impacted on her and she could hardly have thought, as she did, that Mr Sage had been trying to say as much before."

Finally, on the seventeenth page of her note, Miss Barttram records the words:

"Prob Sg carried away W.Box. 'I recall & have always recalled it'."

The judge limited himself to a remark that this note suggested Mr Boyd might well be right in saying that this comment was not rightly attributed to him.. This formed the foundation for Mr Sumption's submission that it must be Mrs Good to whom the opinion should be attributed (as recorded in her own note of the meeting) that Mr Sage had in fact gone too far in the witness-box in saying that he recalled saying the critical words at the outset of the meeting and had always said so.

In her evidence to the judge Mrs Good said that at the time of the Tardis meeting she did not think Mr Sage had been untruthful in the witness-box. She thought it was possible that she had been trying to recapitulate what Mr Boyd had said earlier, using the same format. In other words, she was restating the problem which faced Orion and which might run against them in the Court of Appeal.

Miss Barttram told the judge that she did not understand anybody at the meeting to be suggesting that Mr Sage had given lying evidence to Hirst J. Mr Fordyce said he had no recollection that he had appreciated that it was being said that Mr Sage had gone too far in the witness-box and that what he said had not been truthful. All this evidence assisted the judge in acquitting Mr Fordyce, Mr Boyd and Mrs Good of the improprieties which were being charged against them on the basis of the notes of the Tardis meeting. The judge accepted the Orion witnesses' evidence and dismissed all the allegations made against them. He said they were without foundation.

In this part of his judgment the judge said, among other things, that he unhesitatingly accepted Mr Boyd's evidence as a reliable account of how he saw the matter after attending the Tardis meeting. Mr Boyd had also told the judge he was quite satisfied Mr Sage had given honest answers at the trial, and his belief in Mr Sage's evidence had never wavered since he had seen and seen him give it. The judge, who appears to have been impressed by Mr Boyd's evidence, noted one answer he gave in cross-examination:

"it is very unfortunate [Mr Sage] is not here. You would know exactly what I mean if you saw him."

The final item of evidence, not noted elsewhere in this judgment, which Orion wished us to consider, is to be found in a letter Mr Sage wrote to Mr Smith, the chairman of Orion, in October 1991, offering his services, as well as those of Mr Rousell and Mr Heritage, for the prospective trial on quantum. In this letter he noted for the record that he had advised Linklaters in his 1986 interviews with them that it was a goodwill agreement, and that he had stressed the same point when he had met Mr Smith for lunch in December 1988. He said that it appeared that the advice given to Linklaters was that such a pleading was not strong enough for the case to succeed, but then in early 1989 the Flint Note was discovered.

The judge commented that this letter suggested that Mr Sage was not even at this time seeing a significant distinction between the agreement being a goodwill agreement and his saying and everyone accepting as much at the meeting. He said the letter did not have even a suspicion of the authorship of a man who had given perjured evidence and been believed, "but rather of one who has been rightly vindicated".

At the forefront of his oral submissions Lord Grabiner placed particular emphasis on the many findings of fact made in Orion's favour by a judge who had seen all the witnesses. He suggested that Mr Sumption was inviting us to forget the judgment and forget all the oral evidence the judge had received, and to start again on a brand new basis. He said that this was wholly inappropriate in a case where what was in issue was the question whether a man of absolutely impeccable character gave lying testimony to a high court judge. The relevance of the fact that Mr Sage was dead was not that this entitled him to some special plea, but simply that he could not be here to defend himself.

Lord Grabiner also complained that notwithstanding the fact that Sphere Drake had now abandoned all their allegations of impropriety against Orion's lawyers, Mr Sumption was still asserting in this court that Mr Boyd had told the Tardis meeting that Mr Sage had given false testimony. He had made this assertion, notwithstanding the fact that Mr Boyd had returned to the Court of Appeal the following day and had continued to argue the case on the footing that Mr Sage's testimony was good, valid and honest. This was a most serious charge against Mr Boyd, just as the charge against Mr Sage was most serious. Lord Grabiner said that they were far too serious to be dealt with in the cavalier manner Mr Sumption had displayed. He went on to caution us to be careful to test any finding of perjury we might be disposed to make by reflecting what impact such a finding would have on the way in which we should consider the conduct of Orion's lawyers who believed in Mr Sage. The judge had been impressed by them. He found that they were honest and intelligent, not dishonest or stupid.

Lord Grabiner was also anxious that we should understand the way in which Sphere Drake's case about the formulation of the lie they attributed to Mr Sage had developed. It is not necessary for me to summarise the effect of the different references he gave us, but Lord Grabiner asked us to remember this changing front when we considered some of the criticisms that had been made of the judgment. He said it was unfair to criticise the judge for dealing with an issue which had in fact been put to him, even if it was no longer a live issue on the appeal. I would add that one of the duties of this court, of course, is to be satisfied, whatever other points may have been taken in the court below, that the point on which Mr Sumption now seeks to rely was in fact pleaded against Orion and was canvassed at the trial.

Lord Grabiner then took us through the salient points in the chronology contained in Orion's written paper, which I have already summarised.

He drew specific attention to a note Mrs Good made of the meeting with Mr Sage on 19th April 1989 which read "gentleman's agreement between Sage and Grob".

Mr Grob was not in fact at the 23rd April 1975 meeting at which he was represented by his deputy. Mrs Good told the judge that she thought it most unlikely that Mr Grob could not have known what was agreed, or maybe even what was going to be put forward and mooted at the meeting, because he was the man in charge, and vice versa. She thought it was possible that this note referred to the agreement that was reached on that day between the parties who were in fact present.

Lord Grabiner described this meeting on 19th April 1989 as critically important. Mr Sage was fitter and more alert, and this meeting took place before Mr Henshaw had spotted the Flint Note and realised its significance. He therefore counselled us to read very carefully the judge's findings of fact about what took place at the meeting, and I have already said that I consider that the judge was entitled to make those findings.

In response to Mr Sumption's point that at this April 1989 meeting Mr Sage had no memory of the crucial meeting in 1975, Lord Grabiner showed us a passage in Mr McDonnell's note which has a circle with "S" [Sage] at the top and "C" [Comery] at the bottom, against the note "23/4 mtg [meeting] fairly short". This showed that at least Mr Sage had a recollection of sitting opposite Mr Comery across a round table. Mr Sumption had also relied on the note "Discussion of ED [Extreme Degree]: can recall nothing at mtg [meeting]: 10% afterwards". Lord Grabiner suggested that it was far more probable that Mr Sage was saying that he could remember no discussion of the definition of "extreme degree", and that this was something which was subsequently going to have to be discussed between the parties. Mr Sage was not saying he could not remember any discussion at all.

In support of this contention Lord Grabiner took us to the draft of Mr Sage's witness statement which followed this meeting. This contained in paragraph 27 the words: "There was some discussion of the meaning of extreme degree although the concept was not precisely formulated as between the parties".

When he came to address us on the meeting of 11th July, Lord Grabiner reminded us of the documentary evidence and the evidence given by Mr Legg, and suggested that the most probable explanation of what had taken place was that the Flint Note was never even referred to at this meeting. He relied on the judge's findings and on the description Mr Legg had given about his working methods. He said that there was not a scrap of evidence to show that the lawyers took the Flint Note and debated it with Mr Sage on this occasion. Their evidence was that this did not happen.

Following questions by the court, Lord Grabiner returned to the evidence about this meeting when he resumed his submissions on the fifth day of the hearing. By then he had had an opportunity to review all the evidence given by Mr Legg and Mrs Good about this meeting, and he now acknowledged that Mr Legg had expressly accepted that the quotation in the first line of the Flint Note had indeed been discussed with Mr Sage, and that his responses were recorded in his note. Both Mr Legg and Mrs Good, however, had refused to accept the suggestion that they had asked Mr Sage what his recollection of these words was and then failed to record them, and the judge had accepted their evidence.

Lord Grabiner suggested that there was nothing new in the manuscript note "If legal binding document intended, would have involved solicitors". Mr Sage had said this before. There was no indication from this note that paragraph 36 of the witness statement was the subject of debate, or that the questions in it were actually put to Mr Sage. When I asked what the note was doing there, Lord Grabiner frankly admitted that he had not the faintest idea. There was no reason to suppose that Mr Sage would not have said something along those lines - he had said it previously - but without necessarily answering the questions posed in paragraph 36.

Lord Grabiner returned to this topic again the following day. The first point he made now was that this was another occasion on which Sphere Drake had altered its case in the court below. He then showed us a passage in Mr Legg's evidence in which he had suggested, based on his working practice, that no documents were actually referred to during the course of his meeting (although he in fact accepted that they might have examined the Russell Record with Mr Sage as the answers noted against paragraph 37 reveal). After showing us some more extracts from Mr Legg's evidence, Lord Grabiner submitted that all this evidence was consistent with the lawyers having considered the "goodwill agreement - not a legal contract point" with Mr Sage without having asked any questions about Mr Sage's actual recollection of having said these words.

When he came to Mrs Good's letter of 27th July 1989 and Mr Sage's written notes which followed it, Lord Grabiner submitted that the notes revealed Mr Sage's honest recollection of the events 14 years earlier. Mr Sage had consistently said that the meeting had not given rise to a legally binding agreement, and it was entirely likely that the Flint Note had jogged or prompted his memory as to the actual words he had used and when he had used them.

He reminded us that Mr Henshaw had told the judge that he believed Mr Sage did in fact have a recollection of having made this point at the meeting.

Lord Grabiner invited us to compare the chance memories which other witnesses had had. Mr Russell remembered the phrase "common yardstick" when shown the Flint Note. Mr Heritage remembered the words "We don't want to hurt each other". It had never been suggested that the memories of either of these men were artificial. Lord Grabiner challenged the idea that one had to be the author of a document for its contents to jog one's memory. The fact that Mr Sage had never seen the Flint Note before 1989 made it more likely that when he did see it, the opportunity to read and reflect on its contents would jog his memory. This, Lord Grabiner said, was what Mr Sage had meant when he used the words "only confirmed" in answer to Hirst J.

Lord Grabiner emphatically rejected any suggestion that Mrs Good wrote her letter of 27th July in order to get Mr Sage to claim a recollection he did not in fact have. There was no suggestion in that letter that she had previously discussed the Flint Note with Mr Sage. Although she had regretted the use of the word "vital", her reaction to the suggestion that she would have sought to tell or influence Mr Sage as to what he should say, or that he would be influenced by her or by anything she said, had been one of genuine incredulity, as the judge, who accepted her evidence, reported. The judge added that Mrs Good's description of Mr Sage as a fair minded person, well capable of taking his own view about things and expressing it, fitted his own picture of Mr Sage.

Lord Grabiner submitted that when Mr Sage was asked to put it all in his own words and produced his notes in the first week of August as a result of this request, we could not infer, from the material before us, that he did this dishonestly. He suggested that if any of the lawyers had had any sense at the time that what Mr Sage was saying was critically inconsistent with anything he had said to them before, they would not have allowed it to go into his witness statement. Mr Henshaw did not think Mr Sage was lying, and this is why the judge's view of Mr Henshaw was so important. Lord Grabiner argued that the most probable explanation was that when Mr Sage rolled up his sleeves and got down to work, he produced his honest recollections, and his honest recollections had been triggered by the Flint Note. An alternative innocent explanation, which could not be excluded, was that he was honestly mistaken about his recollection. In his dissenting judgment, Stuart-Smith LJ had adopted this theory. He had said it was by no means unlikely that Mr Sage had been misled by the Flint Note into thinking that he made the remark recorded in it at the outset of the meeting.

Mr Sage had always believed that the agreement was not a binding contract. It was a very simple step to take, albeit mistakenly, to say "I remember the words". This was nowhere near perjury. The most that might be said against Mr Sage was that he probably underestimated the effect of the Flint Note on his recollection of the actual words he had used. This, in effect, was how the judge had expressed this possibility, which he was unable to exclude, on p 206 of his judgment (see paragraph (5)). Lord Grabiner reminded us in this context of Mr Sage's exchange with Miss Barttram and his letter to Mr Smith which I have mentioned earlier in this judgment. He submitted that this evidence was suggestive only of honesty.

These submissions were made in answer to a contention, which Mr Sumption did not in fact make on the hearing of the appeal, that Mr Sage had lied when he claimed to have a recollection of saying the critical words at the meeting. When Lord Grabiner came to respond to the contention which Mr Sumption had in fact made (a lie as to the length of his recollection) Lord Grabiner complained that against the background of the moving target to which he had referred earlier, this was a highly semantic, unworldly and unfair debate.

He submitted that Mr Sage had never told Hirst J that he had always remembered saying these words at the forefront of his mind. What he had said was that he always remembered the nature of the agreement to be a goodwill agreement; that the Flint Note only confirmed this view; and that he had a current recollection, at the time he gave evidence, of saying the words at the outset of the meeting. He had never said that he had always recalled the precise words used at the forefront of his mind, before seeing the Flint Note, and that he had always said this to Linklaters.

Lord Grabiner developed this argument by referring us to the points made in another part of Orion's paper about the effect of what had been said during Mr Sage's cross-examination on the fifth day of the trial. He reminded us of Langley J's comments on the critical questions and answers:

"The overall impression it makes on me is that many of the questions appear to have been lengthy, involving, as Mr Sumption put it, multiple options, and not always easy to follow, and the consequent judicial interventions sometimes did not improve the flow of the exchanges or make for an easy understanding of precisely what was being asked or being said by Mr Sage.

Read in the context that the allegation of perjury against Mr Sage (however significant in the context of this dispute) is a closely and narrowly defined one, this is of some relevance."

Lord Grabiner reminded us that although Hirst J regarded Mr Sage as a most impressive witness, he was 71 years old and in failing health when he was giving his evidence 14 years after the event which was being inquired into. We were also reminded that at the trial Sphere Drake had been contending that in addition to the agreement in April 1975, the agreement in December 1974 had also been legally binding, and that Mr Mance had only withdrawn that contention on the fourth day of the trial. Furthermore, Mr Sage was being cross-examined on the basis that the words attributed to him in the first line of the Flint Note had never been uttered by him at all. Stuart-Smith LJ had observed correctly in the Court of Appeal that the issues were not presented to Hirst J with the same clarity with which they had been presented on the appeal.

Lord Grabiner then urged us to consider exactly what was meant by expressions such as "in my mind" or "in the back of my mind", which Mr Sage had used. There was undoubtedly a distinction between having an active recollection of some incident at the forefront of one's mind and having the ability to recall an incident which is at the back of it until one's recollection is triggered. On the other hand, both these states of mind are different from a situation in which a person has entirely forgotten the facts and has no ability to recall them even when something jogs his memory. He may then be obliged to reconstruct a past event, of which he has no memory, by references or deductions from the information provided to him.

Lord Grabiner next invited us to take account of the points made in Orion's detailed written critique when we considered the effect of what Mr Sage had said to Hirst J during the critical passages on the fifth morning of the trial. For instance, Mr Sage was not a lawyer and would not necessarily have appreciated what a lawyer meant by an express agreement. He had also been careful to qualify the answers he gave to the judge, for example, by use of the expression "No, not in its entirety" in response to what became known as the "Hey Presto" question.

Lord Grabiner submitted that the fourth of Mr Sumption's extracts, which was never pleaded against his clients, clearly referred to the state of Mr Sage's present recollection, and not to the length of it.

Lord Grabiner also showed us a passage in Mr Sage's evidence, when he was recalled on the eighth day of the trial before Hirst J (T8/26E-27C), which showed that when he, Mr Sage, simply could not remember something, he honestly said so. When he was invited to speculate about what he would have said at the time, the answer he gave was one of substance. This, it was suggested, was not comparable with the idea that he was actually quite a sophisticated liar.

Lord Grabiner reminded us that Hirst J had had the advantage of being able to assess Mr Sage during two days of cross-examination. He had concluded that Mr Sage was reliable and impressive. In those circumstances, Lord Grabiner suggested, Sphere Drake could not undermine the possibility that his memory had been jogged.

Next, Lord Grabiner relied on the evidence of Orion's witnesses about Mr Sage's honesty, which had been carefully set out in the Orion paper. Mr Sumption had not challenged any of Orion's witnesses, apart from Mrs Good and Mr Henshaw, about their belief in Mr Sage's honesty in relation to the four critical extracts from his evidence. Mr Henshaw and Mrs Good, who had been involved in the proofing process, were indeed challenged, but their evidence had stood up to cross-examination, and the judge accepted it. The judge also spoke of these two witnesses more generally in glowing terms, as I have already noted.

Lord Grabiner invited us to attach weight to the fact that with one exception none of the witnesses at the trial had told the judge they thought Mr Sage had been lying. The single exception was Sphere's in-house lawyer, who said she had not thought so originally, but that Moore-Bick J's judgment had convinced her. We were invited to consider carefully the evidence given on this issue by the other witnesses, which Orion had helpfully reproduced in their paper. Lord Grabiner placed particular reliance on the evidence of Mr Boyd. His evidence was to the effect that if Mr Sage was to be taken to have said he always remembered the critical words, then his own doubts extended only to doubts about the accuracy of this recollection. He had never questioned Mr Sage's honesty.

During his evidence, Mr Boyd had said:

"As to Mr Sage's evidence generally, I do not find it surprising that over the course of approximately two full days in the witness-box Mr Sage said something during cross-examination which departed from the text of any proofs of evidence or witness statements which he provided in the past. It is simply unrealistic to expect blind adherence to the text of such documents in the context of the stress of cross-examination. It is a long way from accepting this fact of life to suggesting that Mr Sage was in any way untruthful. That question never occurred to me. It never crossed my mind that this was a matter in which I might consider withdrawing from acting. ... I do not know whether he remembered the exact words he had used at the meeting until he saw the Flint Note. Nevertheless, I regarded his evidence on this matter as truthful and conscientious."

Lord Grabiner then addressed the question of motive. He repeated the point, already made in the Orion paper, that there was still no really convincing argument as to the motive Mr Sage might have had for lying. Hirst J had said of Mr Sage that he had answered the questions put to him clearly and candidly, and with no disposition to avoid concessions even though they were adverse to Orion's case. Lord Grabiner submitted that it was one thing to say Mr Sage might have responded badly under the pressure of cross-examination. It was another thing to say that in a wholly Machiavellian way he had set out to lie in a calculated fashion at the beginning of August 1989, when he was under no pressure of cross-examination at all. It was essential to face up to the proposition: why could not this behaviour be consistent with an honest mistake and nothing more?

Lord Grabiner then took us back to the dangers of over-reliance on the documents and the way in which Sphere Drake's case at the trial had changed from time to time when it had been shown that their reliance on a particular document had become untenable. He gave us some examples of the way this had happened.

As to Mr Sumption's five stages or milestones, I need not say anything more about Mr Burtonshaw. In relation to the second stage, Lord Grabiner reminded us of the evidence given by Mr Tapsfield and Mrs Good in relation to the March 1985 period. If Mr Sumption was still suggesting that Mr Sage was saying then that the 1975 agreement was binding, the evidence of these two witnesses pointed in the opposite direction. I accept this contention, but Mr Sumption's point on the appeal was a rather different one.

As to the third stage, it was pointed out that Mr Cordara had picked up on the flavour of what Mr Sage was in fact trying to say. As to the fourth stage (Mr Sage's affidavit), although the affidavit had heavily influenced Moore-Bick J, it had diminished in significance in the course of the trial before Langley J. Lord Grabiner said that the affidavit was drafted by the lawyers in their belief that the 1975 agreement was legally binding; that it was possible to discern clear indications in it that Mr Sage did regard the 1975 agreement as a non-legally binding administrative agreement; and that there was no indication in it that he regarded only part of that agreement as not legally binding. Again, Mr Sumption's main point on the appeal was a rather different one, and one which Lord Grabiner had conceded at the outset of his submissions.

Lord Grabiner added that the affidavit was "essentially a cut and paste job" done off the back of the original drafting of whatever the lawyers had gleaned from Mr Sage up till then, long before he got down to the detailed homework which he did not carry out until three years later.

As to the fifth and final stage, Lord Grabiner was content to remind us of what Mrs Good had said in a note to Mr McDonnell on 13th March 1989, following a telephone conversation with Mr Sage:

"[Mr Sage] tells me that 'he has no doubt whatsoever' that the intention of the arrangement entered into in April 1975 was that if extreme degree was reached, the arrangement would fall away ....

He is quite convinced that the whole spirit and intention of the pooling agreement (which was carried through to the arrangement in April 1975) was that no party would lose out and that accordingly in the event of extreme degree there would be recourse to Sphere Drake "

Lord Grabiner said that this note belied Mr Sumption's suggestion that Mr Sage's view at that time was that there was a binding agreement with a non-binding let-out. He said that Mr Sage was in fact maintaining that an arrangement had been made whereby the original pool agreements remained intact.

I have already described how Lord Grabiner accepted that Mr Sage never told anybody before 7th August 1989 that he had any recollection of anything being said about "goodwill agreement, not a legal contract" during any of the five stages of the history to which he referred us. Lord Grabiner, of course, was concentrating on a rather different point. He accepted that Mr Sage did not say anything about the words used at the meeting, but added: "not least because he never seems to have been asked about it".

Next, Lord Grabiner developed his submissions about the consequences for Orion's lawyers if we were to entertain the idea that Mr Sage had been guilty of perjury. He submitted that such a finding would carry the inevitable inference that the lawyers either procured false evidence and were in gross breach of their duty to the court, or that they were extremely stupid. He accepted, however as a third possibility, a suggestion made by Nourse LJ in the course of the hearing that it was possible for very experienced lawyers to be misled by clients who were not telling the truth.

He emphasised, however, that this case was concerned with people who were extremely experienced in the process of proofing a witness. The judge had accepted their evidence that they would not have allowed anything to go forward which they were not satisfied was right. They had tested what Mr Sage was saying by reference to the documents and to the other things he had told them, and they had carried out this exercise with enormous care and in great detail through all the numerous drafts. Against this background, Lord Grabiner submitted that it was a very strong thing to say that they had been unable to see he had told a lie, given the standard of proof required in a case of this kind.

The judge had rejected Mr Sumption's argument that Mr Sage had been saying mutually inconsistent things from 1985 onwards. This argument was not borne out by the documentary material.

At the end of July 1989 Mr Sage was being asked to go back many, many years into history to try to recall what had happened. He was given a contemporary document, and this was the first time he had studied it properly. It was only at this stage that he got down to do his own homework, and his time-sheets showed how many hours he devoted to this exercise. He then came back with his own drafted-up manuscript notes of his recollection of the relevant discussions. This was a perfectly fair interpretation of the facts, Lord Grabiner suggested, and if it might be correct, that was the end of the debate and the appeal should be dismissed.

We were then taken once again to moments in the history when Mr Sage should be taken to have been advancing his view about the nature of the 1975 agreement which he maintained at the trial. Lord Grabiner also referred us in this context to the note prepared by Mr Henshaw for Mr Boyd on 27th November 1989, after he had read the transcript for Day 5.

Lord Grabiner submitted that Mr Henshaw's understanding that Mrs Good would be able to give firm evidence to contradict Sphere Drake's arguments was flatly inconsistent with the proposition that Mr Sage had been saying between 1985 and 1989 that it had been a binding agreement with or without a binding let-out. It was pertinent to note at this point that the judge regarded this as compelling evidence that Mrs Good - and so also Mr Henshaw - believed that Mr Sage had recollected "the goodwill agreement point" (by which, as I have said, he meant that it was an agreement of that type, not that he had used the critical words at the meeting) before the Flint Note was discovered. Lord Grabiner derived a similar argument from the words used by Miss Barttram, who had been working more or less exclusively on this case for ten months, when she had her discussion with Mr Sage following the Court of Appeal's judgment, and from an in-house Linklaters note made by a member of the team two months earlier.

Lord Grabiner concluded this part of his submissions by observing that the solicitors at the centre of this part of the case were all highly reputable. They were not being untruthful. They were not suborning perjury. They were not stupid. They were not just saying or repeating what Mr Sage had told them without testing it. Their evidence served to corroborate Orion's case that Mr Sage had been telling Linklaters throughout that this was a goodwill agreement.

Lord Grabiner came next to the Tardis meeting. The judge had examined all the testimony and all the notes with great care and had rejected Sphere Drake's case that the notes showed that Mr Boyd and Mrs Good both knew that Mr Sage had lied at the trial. This part of their case had not been resurrected on the appeal. Mr Sumption was now saying that Miss Barttram's note of the meeting showed that these two witnesses thought that if the Court of Appeal knew what they knew, it would conclude that Mr Sage had lied in his evidence. In his oral submissions Mr Sumption had conceded at one point, however, that perhaps not much weight could now be given to the Tardis notes, as I have recorded earlier in this judgment.

Lord Grabiner submitted, in this context, too, that if the notes did lead to the suggested conclusion then the lawyers must have known it. Although Mr Sumption said he was not now making any more allegations against the lawyers, the simple fact was that either they realised Mr Sage was lying or they did not. There was not much scope for any alternative conclusion.

Lord Grabiner then took us through points made in Orion's paper about the Tardis meeting, including the two-point summary composed by the judge, which I have set out earlier in this judgment. He emphasised that the reference to "credibility" was not Mr Boyd giving his own opinion of Mr Sage's credibility: it was part of the play-acting. Mr Boyd had not examined the privileged material himself. He had continued to rely on his instinctive reaction, which was that he did not want to get into the question of waiving privilege. He had expressed the same view on two previous occasions, and the judge had found that Mr Boyd had been "laying it on thick" because he was keen to get on with preparing his submissions for the next day. Lord Grabiner suggested that if Mr Boyd had really told the meeting, in effect, that Mr Sage was a liar, it was simply not possible to contemplate someone of his calibre returning to the Court of Appeal the following day and conducting the case on a dishonest basis. He said that Mr Sumption now accepted this when he said he was making no allegations against the lawyers.

As to the words "went too far" in Mrs Good's note, Lord Grabiner restricted himself to showing how Mr Boyd had left the meeting before this remark was made.

We were invited to take into account the fact that Mrs Good had been given very little time to refresh her memory of the files before coming to the Tardis meeting, where she had to deal with rather an irate client after Mr Boyd had left.

In relation to the words "tried and tried again" Lord Grabiner reminded us of what Mrs Good had said of Mr Sage's condition in the 1985-6 period. His condition was better, she said, when he got down to what Lord Grabiner described as the serious business of looking at the story.

When he was invited to respond to Mr Sumption's demonstration of the thorough way in which Mr Sage had annotated the draft statement prepared for him in March 1985, Lord Grabiner referred us to part of the evidence given by Mr Tapsfield, who had been the solicitor in charge of the case at that time (T13/53-57). Mr Tapsfield said he did not know whether there had been any other meeting with Mr Sage before Mrs Good produced the final draft of his statement in mid-May 1995. He had no recollection of this period, and he was told that the documents did not reveal any such meeting. It would have been wrong to deduce from this that he had felt he had gone as far as he could in his interview with Mr Sage in extracting his recollection. If he had felt that a further interview would have been useful, he would have expected Mrs Good would have had one, although it was likely she would have discussed this with her first.

He was surprised that there was not a further interview at this stage. It might well be that they had envisaged a much more detailed proofing process in the autumn, after they had been to counsel. It would have been necessary to have this initial meeting to get an initial view of the witness on the issues, then go and hunt for documents, and then, after the documents were analysed, they would be put to the witness and a much more detailed statement would be developed.

Mr Tapsfield was quite sure that at the meeting on 1st March 1985 he would have asked Mr Sage some questions on the issue whether the agreement was intended to affect legal relations, but he did not know whether he would have gone into the matter in depth, particularly if Mr Sage had wanted to talk about other aspects of the case.

Lord Grabiner reminded us that there had been only three meetings with Mr Sage in the 1985-6 period, on 1st March and 22nd November 1985 and 12th March 1986. There had not been a further proofing meeting before the papers were first submitted to counsel, and Mr Bathurst then advised against reliance on the argument that this had been a non-binding accounting exercise. Following the meeting in November, Mr Sage had made only three manuscript alterations to the draft affidavit that had been sent to him. There was then the final meeting the following March when the draft affidavit was discussed and a redraft prepared. Lord Grabiner said it was a very limited exercise indeed. This supported the proposition that Mr Sage did not really get down to the exercise until a much later period.

In concluding his argument on the facts Lord Grabiner invited us to imagine what Mr Sage would say if he were still alive. He might say "the Flint Note jogged my memory". He might add: "Look at my answer to Hirst J's 'hey presto' question. This is what I was saying, it confirmed my recollection". Alternatively, he might say that he was sorry for causing all this trouble because he was certain in his mind what the real nature of this deal had been. He knew that those words were spoken, because everyone agreed they were spoken, and that they were spoken by him, and they appeared in a note made by the other side's secretary, who was present at the meeting. He was sorry if he went too far, but he was honestly mistaken.

Lord Grabiner said that if either of these scenarios was valid, then the correct solution was to dismiss the appeal because the requisite standard of proof had not been, and could not be, achieved.

In his reply, Mr Sumption submitted that the case was a great deal simpler than Lord Grabiner had been prepared to acknowledge. The single issue to be determined by us was whether Mr Sage had lied in claiming a recollection of the Flint Note exchanges which was prior to and independent of his seeing that note. This issue required the court to answer the single question: Was Mr Sage honest in his account of the role the Flint Note played in his recollection of the discussions at the meeting?

Orion had not challenged the reasons the judge gave for his finding that Mr Sage's evidence on this point was material in the requisite sense. I have summarised those reasons at the beginning of this judgment. If Mr Sage had been willing to accept before Hirst J that he had no recollection of the goodwill agreement exchange till he saw the Flint Note in the summer of 1989, then Sphere Drake would have had a very powerful case to the effect that Mr Sage was simply reconstructing from the Flint Note. Hirst J had been very much alive to the importance of distinguishing between recollection and reconstruction. The essence of the lie of which complaint was now made was that it had deprived Hirst J of the opportunity of assessing the case on the basis that Mr Sage had not actually recalled the exchange until very recently.

It was not Sphere Drake's case that Mr Sage lied when he said he had always believed that the nature of the 1975 agreement was that it was non-binding. Nor was it their case that Mr Sage lied when he said he recalled, when he gave his evidence in November 1989, that the non-binding nature of the agreement had been expressly agreed at the 1975 meeting. Their case was, and always had been, that he had lied when he told Hirst J that he had always recalled that this had been expressly agreed at the meeting. The judge understood this quite well: see his judgment at p 204:

"The allegation of perjury, as it must be, is in precise and limited terms. It is that Mr Sage lied in saying he had a long-held recollection independent of the Flint Note of using the words the Note attributed to him at the April 1975 meeting. It is not alleged that he lied in saying that he had always believed that any agreement made at the April 1975 meeting was only a goodwill agreement nor in claiming a present recollection at the trial of using the words prompted by the Flint Note."

It was therefore not relevant on this appeal to argue about Mr Sage's belief as to the nature of the agreement, as recorded from time to time. Nor was it directly relevant to argue about the question whether his evidence at the trial represented reconstruction or a refreshed, jogged recollection. This only went to the issue whether he thought in November 1989 that he recalled the exchange at the meeting. The important question was whether he had remembered the exchange before seeing the Flint Note, and the implications of this question was one of the matters on which Mr Henshaw had advised him to think carefully only a week before he started giving evidence to Hirst J.

Mr Sumption criticised Lord Grabiner for devoting so much time to dealing with points which Sphere Drake were not in fact making.

We were reminded once again of the critical findings by Hirst J at pp 501 and 503 of his judgment, which demonstrated the great importance that a judge who actually heard Mr Sage give evidence had attached to what Mr Sage told him on the point. This was the kind of issue on which the impression of a trial judge was particularly valuable, and Hirst J's understanding of what Mr Sage was telling him had to be given great weight. It was an error of principle by Langley J to think that he could do better than Hirst J on this issue.

We were shown in this context the way in which Hirst J had intervened from time to time during Mr Mance's cross-examination to ensure both that Mr Sage understood the points that were being put to him and that he, the judge, understood the answers he was being given. The questions Mr Mance was asking him were questions which Mr Sage had been warned to expect, and if his answers to Mr Mance were not clear enough, his answer to the judge's "hey presto" question made the position quite clear. Everyone agreed that Mr Sage was an intelligent, alert man, notwithstanding his years. Because Mr Henshaw had warned him what questions to expect, one could be doubly confident that Mr Sage had understood what was being put to him.

At the hearing in the Court of Appeal it was taken for granted by those who had been at the trial that Mr Sage had claimed and had intended to claim an unbroken recollection of the exchange, just as Hirst J found he did. This was reflected, for instance in the opening remark attributed by Mrs Good to Mr Boyd at the start of the Tardis meeting:

"Stewart Boyd started by saying that unless we have evidence that Sage did in fact tell us before the Flint Note came to light that at the outset of the meeting on 23rd April 1975 he said that this was a goodwill agreement and not a legal contract, there was little point in discussing the background."

It was also reflected in the remark attributed to Mr Boyd in answer to Mr Fordyce's inquiry about the nature of the problem that faced them:

"Problem: Sage said, always said and always remembered goodwill, not legal contract: not true."

Mr Sumption then turned to Lord Grabiner's alternative submission, which was than one could not rule out the possibility that Mr Sage honestly believed he had a long-held recollection of the exchange.

The test, he said, was whether on the totality of the admissible evidence perjury remained distinctly more probable an explanation than any other: see Langley J's judgment at p 180. It was not sufficient, by way of rebuttal of the perjury charge, to identify some other possible explanation for Mr Sage's evidence.

Mr Sumption submitted that the quality of the evidence before the judge was very much influenced by the tendency of even honest witnesses to gloss facts in the interest of the line they were now supporting. He showed us how the witnesses had admitted they recalled very little of these far off events. This was true of Mr Tapsfield (W/S paras 2, 5 and 6); Mrs Good (W/S paras 13, 16, 22, 33, 42, 59, 97 and 113); Mr Legg (W/S paras 10,12 and 17); Mr McDonnell (W/S para 2.8) and Mr Henshaw (W/S paras 5, 16, 48 and 60).

We were also shown some of the passages in the transcripts in which these witnesses were purporting to recollect their feelings at the relevant time, notwithstanding the lack of recollection they had professed in their witness statements. In the case of Mrs Good we were shown passages at T9/25-27, T10/13 and T10/48. Although Mrs Good denied the charge at T9/26-27, Mr Sumption submitted that we should treat this evidence as classic reconstruction. The same could be said of any positive evidence given by Mr Legg, particularly in view of his admission at T11/8 that he did not think he had an independent recollection. Mr McDonnell, too, had admitted that to an extent his evidence was based on construction from documents (T7/5: at T7/64 he admitted he was trying to reconstruct). Mr Fordyce said at T12/139 that he had no recollection of the Tardis meeting. Mr Henshaw, for his part, had had some brief involvement with this saga in late 1996, in connection with the action before Moore-Bick J, when he had been asked to look at some of the documents. He found he had been heavily dependent on the documents when he had then been asked to recall what had happened seven years earlier, although he had some aspects of recollection which were at the forefront of his mind without seeing the documents. He agreed that it was exceptionally difficult for him to remember when it was that he had a particular thought, and in the absence of a relevant document he had been able to say very little or nothing or at all. He had tried to work out what he remembered and what he could figure out from the documents.

Mr Sumption submitted that where these witnesses were not talking about their regular practice, their evidence in these circumstances consisted simply of retrospective reconstructions of what was recorded in the documents and should be entitled to very little weight by comparison with the documents. Unfortunately, although this point was put to the judge, there was no indication in the judgment that he had made any allowance for this factor. In this respect his approach to the lawyers' evidence about far off events differed from his approach to Mr Sage's evidence, since in that context the judge had made the valid point at p 206 that not uncommonly a witness might honestly fail to distinguish between original recollection, a refreshed recollection and reconstruction.

Mr Sumption submitted that this failure by the judge had led him to devalue the most reliable category of evidence before him, namely the contemporary documents, in which Mr Sage's views and recollections were actually recorded as he expressed them.

He also challenged the value of the witnesses' testimony about Mr Sage's integrity and honesty on the grounds that they did not appear to have thought about what Mr Sage's evidence in this crucial respect really meant. They did not appear to have considered Mr Sage's evidence in the light of his various statements about the 1975 meeting at any time before the Tardis meeting. In those circumstances it would be wrong to attribute much weight to the evidence of Mrs Good, who had had little time to refresh her memory from the files before she expressed her view about Mr Sage's honesty at the meeting. Mr Boyd, for his part, knew virtually nothing about the proofing history at the time of the Tardis meeting.

In all the circumstances Mr Sumption urged us to concentrate our attention on the documentation, coupled (as Lord Goff has said) with the inherent probabilities.

We should start from the undisputed fact, as the judge found, that Mr Sage revealed for the first time in his note on 7th August 1989 that he had actually said at the 1975 meeting that the discussions could not lead to a legally binding agreement. This finding, which the judge repeated twice more, was founded in the total silence in any of the documents that had come into existence before that date as to any recollection by Mr Sage that such an exchange had taken place at the meeting. Mr Sumption said that Mr Sage had had plenty of opportunities to recall such a memory if he had one. He instanced three of them: the meetings on 1st March 1985, and 19th April and 11th July 1989. Mr Sumption added that it was simply not true that Mr Sage had only really got down to work in 1989: he did a good deal of work when his original statement and his affidavit were being drafted. On the only occasion before August 1989 when Mr Sage thought that he could recall a discussion on 23rd April 1975 he had got things all wrong: he had thought that there had been a lunchtime discussion about the definition of "extreme degree", following a morning meeting. (In fact, as I have shown in this judgment, Mr Sage reverted more than once to this confused memory of events, giving different versions of them at different times, in the four years prior to August 1989).

We were also reminded how on 19th April 1989 Mr Sage had said he had no visual recollection of the meeting (apart from the fact that he was sitting opposite Mr Comery) and could not remember a discussion about "extreme degree" at the meeting: only the discussion (about 10% plus or minus) after the meeting had ended. Whatever Lord Grabiner said about it, Mr McDonnell, the note-taker, had confirmed (T7/56) that this seemed to be the correct interpretation of his note.

As to the meeting on 11th July 1989, Mr Sumption reminded us of the evidence of both Mr Legg (T11/16) and Mrs Good (T10/50) that they would probably have had a bundle of all the documents, including the Flint Note, in front of them. At T11/11 Mr Legg said that his note on the top of the relevant page of the witness statement probably reflected a remark Mr Sage had made at the meeting, and that it also suggested that they had touched on the question whether the April 1975 agreement was legally binding or not. The evidence from Mr Legg's workbook was also very important in this context, and Mr Sumption repeated his contention that the two lawyers must have gone through Mr Henshaw's questions with him, and that Mr Sage had nothing to say in response other than to give his own interpretation of the words used in the note.

In any event, whether they asked him Mr Henshaw's questions or not, the salient fact about this meeting was that it was obviously an occasion on which Mr Sage might have volunteered a recollection that he had used some such words, and he did not do so.

Moreover, whether the occasion(s) on which Mrs Good had tried and tried to get Mr Sage to give an account of the 1975 meeting that would throw light on whether it was binding were in 1985-6 or July 1989 (as Mr Sumption still maintained), the result of all this effort was the same. Mr Sage simply could not remember saying anything relevant at the meeting, however hard Mrs Good had tried.

In those circumstances, Mr Sumption submitted that it would be very difficult for us to conclude, if we found that Mr Sage did claim a prior recollection when he was in the witness-box, that he might have been honestly mistaken. This would require us to suppose that in November 1989 he had forgotten everything that had happened in the case since he received Mrs Good's letter of 27th July, including his receipt of the amended pleading by a letter dated 1st August, and all he had done in preparing his notes for Linklaters in advance of the meeting on 7th August. A major new point had just been introduced into the litigation, which was not reflected at all in the draft of the witness statement he was engaged in re-writing. Mr Sumption said it was really impossible to suggest that when he was giving evidence about this three months later, he had forgotten the way in which what everyone agreed was a critical new point had been drafted by Mr Sage himself.

This was the point which had impressed the majority of the Court of Appeal, and what we now know (following the disclosure of Orion's privileged documents), Mr Sumption said, tended to reinforce the correctness of that view. It was also a point which had impressed Moore-Bick J.

Mr Sage would also have had to forget the discussions he had had with Mr Henshaw, both about the clarity of his recollection and about the implications that might be drawn from the fact that this version of events was introduced into the pleadings so late. These discussions took place at the proofing sessions on 22nd, 24th and 30th August and at the video session on 9th November. Mr Sumption made it clear to us that he was not arguing that it was implicit in the evidence the judge had received about the conversation between Mr Henshaw and Mr Sage on 9th November that the two men agreed that Mr Sage's evidence was untrue. The relevance of all this was that they both realised that the first time he had claimed a relevant recollection was at the beginning of August, and that Mr Mance was likely to challenge him about this.

Mr Sumption concluded his submissions on the facts by encouraging us to dismiss the possibility advanced by the judge that the reason why Mr Sage might have persuaded himself that he had always remembered making the crucial remark at the outset of the 1975 meeting was that he had always thought that it was indeed a goodwill agreement. He conceded that it was possible, if Mr Sage had always thought it was a goodwill agreement, that he might have persuaded himself when he saw the Flint Note that he had indeed used the words recorded, and that he had used them about the agreement. He might possibly have persuaded himself that his memory had been jogged by seeing the Flint Note, so that something he had previously forgotten had come back to him. But he could not possibly have persuaded himself that he had recalled the goodwill agreement exchange even before he ever saw the Flint Note and tried to work out its meaning.

Mr Sumption submitted that in the critical passage in paragraph (4) on page 206 of his judgment the judge addressed the wrong issue and the wrong lie. He had identified the relevant lie two pages earlier, but he had now lost sight of it. The crucial question, as he had said before, was this: what role did the Flint Note play in Mr Sage coming to give this evidence? The judge's reasoning in this part of his judgment was directed to a different point.

This is not a "jogged memory" situation, Mr Sumption said, because Mr Sage was saying he had a full recollection before he saw the Flint Note, and his memory did not need to be jogged. This was apparent, too, from the sentence in paragraph 65 of his witness statement, which he approved but Sir Peter Pain deleted, in which he said of his account of the matter: "this is consistent with [the Flint Note]". This, too, gave the impression that the Flint Note simply came in as a buttress to a recollection which was independent of it.

There were a number of different ways in which Mr Sage could have dealt with the problem about his evidence on which Mr Henshaw had warned him to expect cross-examination. In the end he chose a way which was untrue and which he must have known was untrue. Mr Sumption accepted that it was possible that Mr Sage did not realise how critical that untruth would be to the result, but as the judge found, it was evidence which entirely changed the aspect of that part of the case.

Those were the submissions we received. I come now to express my own views. I have found it convenient to consider the issues of fact which arise on this appeal in the order which Mr Sumption suggested. First, however, I must say something about some significant differences between the hearing before us and the hearing in the court below.

The judge was concerned not only with the allegations of perjury which we have had to consider but also with the allegations of impropriety that were made against Mr Boyd, Mrs Good, Mr Henshaw and Mr Fordyce: the case against Mrs Atkins had been dropped at the start of the trial. These allegations were founded largely on the contents of the notes of the meetings between representatives of Orion, their former employees and their legal advisers. It is notoriously difficult to build up a case on such materials, since the makers of the documents, as here, may give explanations of them which persuade the judge that he should not make any adverse inferences from their reported comments.

It is clear that the judge was impressed by the evidence of the five people I have named, and the other members of the Orion legal team who supported them. He also made adverse comments on the way in which Sphere Drake changed its case from time to time. Examples can be found on pages 57, 59, 66 and 114 of his judgment. Because of all the other issues the judge had to decide, the evidence on the perjury issue against Mr Sage was much more difficult for him to disentangle from the rest of the evidence than it was for us. He faced the added difficulty that the impropriety charges gave the trial at first instance an emotional tension that was wholly lacking on the appeal. A very unhappy exchange between leading counsel which is recorded in the transcript of Day 10 of the trial shows just how taut the atmosphere must have been.

In the circumstances, at each stage of the history the judge had to weigh up the effect of the evidence not only in relation to the light it shone on the state of Mr Sage's memory at the relevant time, but also in relation to its relevance to the impropriety allegations. To this extent we had a considerable advantage over the judge. On the other hand he had the advantage of seeing and hearing the witnesses give evidence, even though they were being asked to recollect events that had occurred many years ago. We must also remember that it is not our job to retry the case on the transcripts.

I turn to the evidence against that background. I share the judge's opinion that little can be gained from a study of the evidence which relates to Mr Burtonshaw's two conversations with Mr Sage. The judge did not see Mr Burtonshaw, and before Moore-Bick J answers were elicited from him in cross-examination which watered down what he had said in his witness statement. The most that can be said of this evidence is that Mr Sage professed to no memory of any oral assent at the April 1975 meeting to a proposition that any agreement made at that meeting would not have any legal effect, and that in 1984 the best he could do was to suggest to Mr Burtonshaw that a study of Orion's board minutes in the 1966-7 period might contain helpful material. In other words, as Mr Tapsfield noted in March 1985, Mr Sage believed at that time that the agreements made in the mid 1960s provided the answer to the question whether the 1975 agreement was binding. If he had recalled the remark attributed to him in the Flint Note, he would not have had to go so far back into history to seek the solution Orion was seeking.

In my judgment, a careful study of the evidence relating to the 1985-6 period casts much more light on the state of Mr Sage's memory at that time. For this purpose there are three sources of evidence available to us: the contemporary documents, the remarks ascribed to Mrs Good at the Tardis meeting, and the evidence given by witnesses to the judge at least ten years after the events recorded in the documents had taken place.

I see no value at all in reopening the question whether Mr Sage was telling the solicitors in 1985-6 that the 1975 agreement had binding effect subject to the let-out clause. Although the events of 1985-6 were a very long time ago in 1998, the judge was disposed to believe Mrs Good, when she attested to her reactions in May 1989 when the Flint Note was discovered. Other witnesses, whose evidence the judge also accepted, attested to her reactions at that time and confirmed her evidence. It is also the case that in 1985 Mr Cordara spotted a discrepancy between Mr Sage's initial statement and the general tenor of his instructions, and the judge accepted the evidence Mr Cordara gave to him about this. In my judgment the judge made findings of fact on this topic which are not inconsistent with one interpretation of the contemporary documents, and which were supported by the evidence to which I have referred. We should not disturb those findings.

What is very much more significant, in my judgment, is that the impression Mrs Good gave at the Tardis meeting of Mr Sage's comparative unwillingness to help Orion during the year or so after she first met him is belied by the contemporary documents. We are in just as good a position as the judge was to assess the care with which Mr Sage considered the drafts that were sent to him. He would return them, usually with very detailed comments, very quickly. This was true not only of his original statement, prepared in March-May 1985, but also of his affidavit, particularly when the solicitors asked him to consider points in which his statement differed from the recollection of other witnesses, or from the solicitors' reconstruction of the effect of contemporary documents: the Russell Record, for example. Mrs Good only met him three times during this period: at the trial all she said about his drinking habits was that he was not very sober at the lunch which followed their first meeting.

I have considered with care every draft of Mr Sage's original statement, and every draft of Mr Sage's affidavit, for the light they shine on what Mr Sage was in fact telling the solicitors about the 1975 meeting at different times. In my judgment, the judge should have paid much more attention, as Lord Goff advised, to the evidence given by these drafts than to the solicitors' attempts to recollect events over a decade later.

From the outset Linklaters were aware, as Mr Harris told Mr Rousell in the autumn of 1984, that Mr Sage's recollection of the 1975 agreement might be crucial if there was a dispute as to its construction. Mrs Good told the judge in terms that in March 1985 they needed to find out from Mr Sage what had happened at the 1975 meeting. I see no reason to dispute the judge's findings that it was in relation to this period that Mrs Good recalled at the Tardis meeting that she had tried and tried to get Mr Sage to remember the 1975 meeting. For all practical purposes the effort was a failure.

When invited to recall that meeting ten years later Mr Sage put it in the morning, followed by lunch. This is apparent from the fact that when he was pressed by Mrs Good in July 1985, on counsel's advice, about the state of his memory as to any agreement about "the 10% drift", he placed the relevant discussion in his office after the meeting, while Orion's Board Room was being prepared for lunch. I have noted how the two sentences which described the events of that morning (a meeting, followed by drinks, followed by lunch) were later included in, and then deleted from, drafts of his affidavit before it was sworn in May 1986. He returned to the same subject twice, giving a different version of events, in April and May 1989. All these muddled memories were excised from the evidence the judge heard at the trial.

While I would put no weight on the comment attributed to Mrs Good at the Tardis meeting to the effect that Mr Sage was saying that he had no recollection of the 1975 meeting (she corrected this to "no vivid recollection" in her minute of the meeting), it is abundantly clear that despite Linklaters' best endeavours the actual events of that day were lost from his memory, or, at best, confused. He was quite wrong when he put the meeting in the morning, followed by lunch. At one point he recalled a discussion of "extreme degree" in his office after the meeting but before lunch which could not have happened like that. He returned repeatedly to the 1966-7 period as an answer to the questions he was being asked. He supplemented that answer by saying that he would not have bound his board without a board meeting (a proposition which Mr Tapsfield greeted with scepticism) or, alternatively, without consulting the company's solicitors. There is no trace of any recollection by Mr Sage of any remarks made by him at the outset of the meeting or, indeed, at all.

The evidence reveals the same picture when Mr Sage was invited to revisit these events between March and July 1989. Another four years had passed since his original meeting with Linklaters. His memory was just as erratic as before.

Like the judge, I would reject Mr Sumption's efforts to elevate the words "any agreement had the force of law" from Mr McDonnell's note of the April 1989 meeting so as to place on them a connotation they cannot properly be made to bear. What is much more significant, in my view, is the fact that apart from mentioning his belief that he was sitting opposite Mr Comery across a round table, Mr Sage confessed that he had no visual recollection of the meeting, although he did purport to recall the discussion of the meaning of "extreme degree" in a room in Orion's headquarters after the meeting. He was still talking of a lunch, associated with champagne, at this time, with a query about Mr Grob's presence.

I see no reason to disturb the judge's finding that Mr Sage did not consider the ramifications of the Flint Note properly until the end of July 1989, even though he had been sent a copy of it, along with many other documents, before the end of May.

The shakiness of Mr Sage's memory is once again evidenced by the fact that on 26th May 1989 he reverted to his story about a discussion over lunch after the meeting. He said that Mr Grob had indeed joined them for lunch. He was saying now that the "extreme degree" discussion took place during lunch and not, as he had said in 1985, in his office while the board room was being prepared for lunch. This point of detail appeared and then disappeared in the drafts of his witness statement prepared in 1989, much as its earlier version had appeared and then disappeared in drafts three years earlier. It is also significant that although Mr Sage confessed on 29th May that he had not been able to stop thinking about the matter since the meeting three days earlier, he still went back to the agreement in the 1960s as the solution for the problem.

The meeting on 11th July demands, in my judgment, much more detailed attention than that accorded to it by the judge. It is quite clear that the whole of Mr Sage's draft witness statement was considered at this meeting, since he gave detailed answers to the questions posed by Mr Henshaw in relation to paragraph 37, which was at the end of the draft they were then considering. The judge was entitled to accept Mr Legg's evidence that if Mr Sage had given detailed answers to the questions posed in paragraph 36, his answers would have been noted in the margin or in Mr Legg's work book. On the other hand, there seems to be overwhelming evidence that the existence and content of the Flint Note was in fact drawn to Mr Sage's attention at this meeting, even if the note itself may not have been produced, and even though he appears to have been given the opportunity of going away to think about the matter again before giving answers to Mr Henshaw's questions. As I have recorded, Mr Legg formed the impression from the documents that Mr Sage had come to this meeting underprepared. The judge placed weight on the fact that the paragraph 36 questions appeared again in the next draft of the statement, but so did the paragraph 37 questions which, as I have said, were certainly dealt with that day.

It is important, in this context, to bear in mind the content of the instructions Mrs Good prepared for counsel the following day. Given the judge's assessment of her professional competence, it appears to be safe to say that she could not possibly have sent counsel, without comment, the 13th July draft of Mr Sage's witness statement unless it reflected the instructions he had given her, even if she was at the same time inviting him in a separate letter to say whether he was happy with the precise words Linklaters had used in this draft. She also told counsel in terms that Mr Sage's recollection was not very clear.

The fact that Mr Sage must have had his attention drawn to the contents of the Flint Note is evidenced by the changes now made in the 13th July draft which reflected the fact that Mr Flint had recorded that the meeting started at 3pm, as Mr Legg had noted on the draft witness statement. Mr Sage continued to maintain in this draft that he had had a discussion with Mr Grob about the meaning of "extreme degree", but since the correct timing had now been pointed out to him, he was now suggesting that he might have had lunch with Mr Grob in advance of the meeting. He also said that he was uncertain whether the meeting took place in the morning or in the afternoon. All these uncertainties had completely disappeared by the time he gave evidence to the judge.

The comments Mr Legg noted against paragraph 36 in the margin of his statement and in his work book are little different from the comments Mr Sage had made, off and on, over the last four years. In my judgment, it is completely clear that on 11th July he was asked about the words in the Flint Note "not a legal contract". He evinced no memory of having used those words at the meeting.

It follows from this analysis that the answer to Mr Sumption's first question ("Did Mr Sage in fact have a prior recollection independent of the Flint Note of the goodwill agreement exchange?") is unquestionably "no". It is of course the case, as I have already said, that it was common ground at the trial that he had not told anyone before 7th August 1989 that he recalled the goodwill agreement exchange at the April 1975 meeting, and Lord Grabiner made no attempt to re-open this issue on the appeal. It has been necessary,

however, to analyse the evidence about the condition of Mr Sage's memory at different times between 1984 and July 1989 quite carefully as a necessary prelude before I go on to answer Mr Sumption's critical third question.

I turn now to Mr Sumption's second question. "Did Mr Sage claim in his evidence that he had such a recollection?" There can be no doubt at all that Hirst J, who heard Mr Sage give the crucial evidence on the fifth morning of the trial, believed that Mr Sage did make this claim. Indeed, his judgment turned on his acceptance of Mr Sage's claim in this regard: see p 503. There can also be no doubt that both leading counsel who heard him give this evidence argued the case in the Court of Appeal on the basis that he had made this claim, and the two judges who dismissed the appeal were heavily influenced by the fact that the trial judge saw Mr Sage give evidence and interpreted his evidence in the way he did: see Lloyd LJ at p 266 and Mann LJ at pp 297 and 301.

The critical exchange is the third exchange to which Mr Sumption referred us at T5/27B to 28B. Of this passage Mann LJ said at p 297 that the real flavour of Mr Sage's answer to the judge's "hey presto" question with its two parentheses could only be appreciated by hearing it. This was the consideration which determined his "swing vote" on the appeal.

I agree with Lord Grabiner that the first two of the four exchanges could not be regarded as providing conclusive evidence on this issue in the context of a perjury charge. Expressions like "specific agreement" and "expressly agreed" may mean one thing to a lawyer and another thing to a layman. For different reasons, the fourth exchange, which was never pleaded against Orion, is not directly relevant, because it relates to the state of Mr Sage's memory on the fifth morning of the trial, and not to the state of his memory before he saw the Flint Note.

The third exchange falls into a different category. The judge started by asking Mr Sage questions about the present state of his memory. Mr Mance then asked him when he saw the Flint Note for the first time. Mr Sage thought that this was about three to four months earlier (ie July-August), although he could not be specific.

Mr Mance then concentrated his fire on paragraph 65 of Mr Sage's witness statement ("I made the point at the outset that this ... was a goodwill agreement and could not be a legal contract..."). He suggested that this sentence was really due in its entirety to the Flint Note. Mr Sage replied that it was not. He said that he remembered saying at the meeting that it was a goodwill agreement. The judge's "hey presto" question could, perhaps, be interpreted as referring to the length of time Mr Sage had believed that it was a goodwill agreement (as opposed to what he had said at the meeting). Mr Mance, however, took the witness back to the words he used in paragraph 65 of his witness statement, and suggested that those words (including the words "I made the point at the outset") could only have appeared there because Mr Sage was relying heavily on the Flint Note. Mr Sage then gave the critical answer:

"No, it is not correct [that I was relying heavily on the note]. I remember the circumstances of the meeting and what was said. Both notes confirmed my thoughts on the matter - my remembrance of the matter - it was not itself more than that."

Although Hirst J did not quote this follow-up answer on p 484 of his judgment, this additional answer puts it beyond doubt that Mr Sage would have known that he was being asked about the length of his memory of what he said at the meeting, and not merely about the nature of the agreement that was made there. I have already referred to the evidence which shows that Mr Sage was warned by Linklaters to expect to be questioned along these lines. The judge understandably and correctly concluded that Mr Sage was telling him that his opening remark at the meeting had stuck in his memory, even though that memory was later confirmed and strengthened once his attention was drawn to the Flint Note (see the judgment at p 503). Mrs Good told the judge that Mr Sage gave the answers recorded between T5/27E and T5/28B slowly and carefully.

Langley J concluded that Mr Sage may have told Hirst J something different from what Hirst J believed he was being told. At pp 105-108 of his judgment he recited the evidence he had been given by Orion's witnesses nine years after Mr Sage gave that evidence. He did not divide up his analysis of the issues in the compartmentalised way suggested by Mr Sumption, which I have found to be helpful. Instead, he merged together the witnesses' personal beliefs about the meaning of Mr Sage's evidence with their beliefs about Mr Sage's honesty and concluded that this evidence in combination formed a most unpromising basis for an allegation of perjury.

For my part, I would not give the evidence given by Orion's witnesses the weight attributed to it by Langley J when answering Mr Sumption's second question. Whatever they may have believed, whether at the time Mr Sage gave his evidence or in retrospect, I see nothing in their evidence which should tend to weaken the conclusion that Mr Sage did in fact say what Hirst J understood him to be saying.

I would therefore answer "yes" to Mr Sumption's second question and turn, finally, to the third question: "Did he appreciate, when making this claim [to a prior recollection independent of the Flint Note of the goodwill agreement exchange] that it was unjustified?"

Although Sphere Drake's pleadings are not particularly elegant, I am satisfied that the point Mr Sumption has sought to argue on this appeal was effectively and precisely set out in the pleaded case against Orion. At the second trial Moore-Bick J had held at p 65 that Mr Sage was not telling the truth when he told Hirst J that his evidence was based on a long held recollection independent of the Flint Note. Sphere Drake referred to this finding in paragraph 9 of their Points of Claim, and after pleading the materiality of this evidence, they contended in paragraph 11 that in the premises Hirst J's judgment was procured by Mr Sage's perjured evidence. In response to a request for particulars Sphere Drake identified the passages of Mr Sage's evidence they were relying on - viz the first three passages mentioned by Mr Sumption - and contended that "the relevant evidence was untruthful because Mr Sage's evidence as to what was said at the relevant meeting was not based upon a long held recollection independent of the Flint Note". They then cross-referred to a different paragraph of the Amended Points of Claim and to voluminous amended further and better particulars furnished under that paragraph, most of which were of no relevance at all to this plea. The precise thrust of the perjury charge was, however, clearly pleaded, and it was correctly restated by the judge on page 204 of his judgment in the terms I have recited earlier in this judgment.

In order to answer Mr Sumption's third question, it is necessary to go back a little into the history prior to August 1989, the time when Mr Sage asserted for the first time that he recalled using the remarks attributed to him by the Flint Note. In doing so I will be taking into account certain aspects of the unchallenged evidence of Orion's witnesses which was not considered quite so fully by the judge in his judgment. They relate to the determined efforts made by Orion's senior management to make Mr Sage feel that he was working as a member of a team for the purpose of winning this case.

It is clear from this evidence that between May 1988 and May 1989 Orion's new management and their solicitors realised that they had an increasingly tricky situation on their hands. Mr Fordyce and Mrs Atkins had read enough about their new company's case to be persuaded of the rightness of their cause. They also realised how much money was potentially at stake. The dilemma they faced was that they knew that they could only win the action if Mr Sage, Mr Rousell and Mr Heritage were willing to co-operate, and they were experiencing a lot of difficulties in this respect. Mr Sage's relationships with the previous senior management of Orion had been not at all good, and Mr Rousell and Mr Heritage were both resentful about certain aspects of their severance terms, particularly those relating to their pension entitlements.

The documents which describe the way in which Orion successfully resolved these problems disclose a state of affairs which would have astonished judges and experienced litigators on both sides of the legal profession a generation ago.

I have described how Mr Harris and Mr Tapsfield of Linklaters had seen from the outset that Orion would only have any reasonable chance of succeeding in reopening the 1975 "settlement" if their representatives who had been present at the April 1975 meeting could give evidence which would have the effect of displacing the uncompromising effect of the Russell Record. Whatever the status of the Clause 3 "let-out", the record purported to evidence a binding agreement between the parties.

I have also described how in the 1985-6 period Orion's solicitors endeavoured to obtain from Mr Sage, to no avail, a memory of the events of the critical meeting which would improve Orion's chances in this respect.

The judge described how Mr Sage happened to have a talk at a social occasion in May 1988 with Mr Park, who was a senior litigation partner with Linklaters. He then wrote a letter to Mr Park which demonstrated that he understood his importance to Orion as a witness. He described Mr Rousell and himself as the two key witnesses for the company. He added that so far as he was aware, there were no credible witnesses directly involved in the 1974 negotiations on the other side.

He complained to Mr Park that he had encountered a total lack of information on developments in the case. He asked if it was likely to proceed, and if so, when. If it was indeed going to proceed, he inquired about the arrangements for paying him and Mr Rousell their expenses, plus a fee for the time they spent on the case. He asked if fees of £500 per day for himself and £300 per day for Mr Rousell would be appropriate. He also thought that, in view of the amount likely to be involved, a success fee would not be inappropriate, although he realised that it might not be possible, for what he described as technical legal reasons, for Orion to agree, or even to suggest, such an award before the case was settled.

Mr Park explained to him in his reply that a success fee was out of the question. He said that a witness was entitled to his reasonable expenses and to reasonable compensation for loss of time in attending court, but not for any time spent preparing his evidence unless he was an expert witness rather than a witness of fact. He said that payment for more than out of pocket expenses, together with reasonable compensation for loss of time, might be seen as an inducement amounting to a bribe. There was a general rule, which existed to avoid the risk of damaging the credibility of an important witness of fact, that payments were not made to witnesses of anything more than their out of pocket expenses, together with fairly nominal compensation for their loss of time, except where they suffered an actual loss of income, or where they had to pass on any payment to their employer. Mr Park said that he was afraid that the rates Mr Sage had suggested greatly exceeded his out of pocket expenses, even though they were a perfectly reasonable basis on which he might charge if he was acting as a consultant, rather than as a witness of fact.

The judge then described how on 3rd October 1988, Mr Sage wrote to Mr Smith, the new chairman of Orion. He expressed the opinion in his letter that, on the facts as he knew them, he did not believe that Sphere Drake had a defensible case. He suggested that a task force should be created consisting of himself, Mr Rousell and Mr Heritage, in effect to handle the case for Orion.

This suggestion was discussed at a consultation with Mr Bathurst and Mr Cordara on 1st November 1988 at which Mr Smith, Mr Fordyce, Mrs Atkins and Orion's company secretary, Mr Wright, were all present. The consultation had been arranged to discuss the weaknesses of Orion's case, the deployment of witnesses, the strategy Orion should employ, and the conduct of their case generally. Contemporary documents contain references to the weakness of Orion's case and to the "degree of reliance on Sage, Rousell and Heritage". Counsel advised that although Mr Sage's evidence was relevant, there was no need for Orion to set up a task force. They also advised that Mr Sage might be compensated for his time and expenses in respect of any preparation that Linklaters or counsel considered was necessary prior to trial. Orion's prospects of success in the litigation could not be put higher than 50%.

The judge then described how on 4th November 1988 Mr Smith invited Mr Sage to lunch. This took place later in November. Mrs Atkins described how this three-course lunch, with wine, was up to Orion's usual excellent standards. It was not intended as a "question and answer" session. Their concern at the time was to ensure that Orion's witnesses were happy. The invitation from the new chairman was intended to show Mr Sage that his help was valued.

The scale of the difficulties which Orion and their solicitors faced the following spring with their three key witnesses was reflected in the evidence given by Mr Henshaw and Mr Legg, who joined the Linklaters team between March and May 1989. Mr Henshaw recalled being told by Mrs Good that the three men felt "hard done by" by Orion. He received the same impression when he met them himself. Mr Legg recalled that he was told by Mrs Good that relationships were strained, and that the three men did not feel too well disposed towards Orion. They felt that they were being asked to take on an incredible burden, with no recognition for this fact from Orion. Although their relationship with Linklaters was fine, it was felt that they would need very careful handling if they were to be effective and valuable witnesses. Mrs Good told the judge that when she spoke to Mr Sage's wife, she was very frosty about the amount of time her husband was devoting to the case.

In April 1989 Mr Sage attended the meeting with the solicitors at which it was clear that he still had very little actual recollection of the April 1975 meeting. The question of payments for the three witnesses blew up again at the end of April, and Mrs Atkins asked Mrs Good to give Orion firm written advice on the topic. Mrs Good discussed the problem with a number of her litigation partners. They were all, of course, of the view that it would be a very serious matter indeed if an unwilling witness were to be given any kind of hand-out to persuade him to alter his evidence in any way. Previous experience within the firm, however, revealed that there had been cases in which it had been considered appropriate and justifiable to pay a retired witness an hourly or daily rate at a fairly reasonable (but not excessive) fee, equivalent, in rough terms, to market rates in relation to his usefulness and seniority were he still being employed by his firm.

Mrs Good told Mrs Atkins that there was therefore a certain amount of room for manoeuvre, but that the rates suggested by Mr Sage were beyond the appropriate line. An appropriate rate would be more like £20 or £25 an hour.

The judge recorded the events that followed in these terms:

"Mr Sage was due to attend a further meting on his statement on 12th May. On 3rd May Mrs Atkins told Mrs Good Mr Sage would not come on 12th May because he had been affronted by Mrs Atkins' speaking to him (presumably about payment) rather than Mr Fordyce and he wanted his pension and termination deal with Orion re-opened. Mrs Good's note of this conversation recorded that Orion reckoned that this was tantamount to blackmail.

On 5th May Mrs Good had a long telephone conference with Mr Cordara. It was noted that Mr Bathurst could not conduct the hearing and it was intended to instruct Mr Boyd in his place. It was also noted that Mr Sage, Mr Rousell and Mr Heritage all claimed they had been effectively sacked by Orion and were not invited to any parties given by Orion and did not receive proper pensions, and that they were not anxious to give up their retirement work to work up the case. Orion's annoyance was noted and the fact that both Mr Sage and Mr Rousell had nonetheless been helpful on 19th April."

Orion clearly had a crisis on its hands. The trial was due to start in November, they had been advised that their prospects of success were less than 50%, and their three key witnesses were in a state of rebellion. There was also a very large amount of money at stake in the litigation. Mrs Atkins told the judge that during this period she was very unhappy about the case as a whole, and that she had a fairly heated discussion with Linklaters about this time. She added that Mr Fordyce was extremely exercised about things. He told her that he thought Mr Sage's conduct was quite improper. Mr Fordyce, for his part, said it was fair to say that the three men were regarded as difficult. They had never been easy, but Orion was anxious to keep them amenable for the purposes of their importance as witnesses in the case.

They therefore decided to confront the problem by mounting a charm offensive. They were willing to pay the three men hourly rates which were about double what the combined experience of the partners in Linklaters' litigation department had thought appropriate, according to Mrs Good's letter. Although they considered that all three men had been sacked, and although Mr Fordyce expressed the opinion that Mr Sage's conduct was tantamount to blackmail, they invited them all to lunch and hoped that this would cool the air. Mrs Atkins and Mr Fordyce were willing to attribute the difficulties to the three men's poor relationships with Orion's previous senior management team, who had now all left the company.

When Mrs Good explained this problem to Mr Cordara, she reiterated Linklaters' view that payments at the rate of £25 per hour should be offered. Mr Cordara advised her, however, that he considered that Orion's suggested rates were reasonable, and matters proceeded on that basis, with Mr Sage being paid at the rate of £50 per hour (or £500 for a ten-hour working day) and the others £35 and £30 per hour respectively. No advice seems to have been sought from the Bar Council or the Law Society about the propriety of what was being done, and neither Sphere Drake nor, in due course, Hirst J, knew anything about it. Mr Fordyce instructed Mrs Good that the payments should be made with retrospective effect, and that a generous interpretation should be given to past time and effort spent. No concession was, however, made on pension arrangements.

In her oral evidence over nine years later Mrs Good thought that she had also consulted Mr Bathurst about the propriety of these payments, and that her partners thought that payments to a witness at the rate of £50 per hour were appropriate. Although she kept meticulous notes, there is no evidence in any of them of this additional support for Mr Cordara's opinion - the idea of instructing alternative leading counsel, for a number of reasons, seems to have been raised on 28th April and on 5th May Mr Boyd's name was mentioned as Mr Bathurst's successor - and the judge made no findings on the issue.

The charm offensive achieved its purpose, although Mr Sage again raised the question of a profit commission at the lunch with Mr Fordyce on 8th May (at which an allegation of blackmail was again made which upset him), and Mrs Good had to spend the better part of a day on 12th May in tactful negotiations. The matter was not finally resolved until shortly before the team meeting on 26th May. One decision taken at this time, indeed, had been to make the three witnesses feel "part of the team" by inviting them to team meetings with Orion's lawyers, although their role was simply to give evidence of fact. Mrs Atkins explained in her witness statement that they were included in these meetings to make them feel important and valued.

Mr Fordyce had no recollection of the two very long meetings at Linklaters offices on 26th May and 14th June. He suspected that the reason why his chairman, Mr Smith, was invited to the first of these meetings was "to give those present the sense that they were valued and being taken seriously". Similarly, he suspected that as managing director he was asked along to the second meeting too, was to demonstrate to the three witnesses that the company was taking the matter seriously and was grateful for their co-operation.

At that time the Bar still maintained the rule that witnesses (other than the parties and experts or professional witnesses who were instructing counsel) should not be present at consultations or conferences with counsel, and that counsel should not interview such witnesses before or during a trial (see W W Boulton, Conduct and Etiquette at the Bar, 3rd Edition, 1961 for one formulation of the rule). The rule never, of course, affected solicitors, and this is how it came about that Mr Sage, Mr Heritage and Mr Rousell all attended two very long meetings with Orion's senior management and the Linklaters team at which all the current problems in the case were discussed and possible solutions suggested. Mr Sage subsequently charged Orion for eight hours at £50 an hour for attending the first of these meetings and for nine and a half hours (including 90 minutes of travelling and/or waiting time, charged at the same rate) in respect of the second, although the meetings had nothing to do with the preparation of his evidence, save for the final part of the second meeting.

The judge found that there was nothing to suggest that Mr Sage, any more than Mr Rousell or Mr Heritage, was in any way influenced by the fact that he was receiving payment in the evidence he gave or his attitude to the proceedings or the issues, and Sphere Drake did not challenge that finding on the appeal. The evidence the judge had heard about Mr Sage's character suggested to him that his concerns that he should be treated with the respect and courtesy due to a former managing director of Orion, and that Mr Rousell and Mr Heritage should be treated properly, were just as, if not more, important to him as being paid, or the amount of any payment. Again, there was no challenge to this finding.

I have set out this unusual evidence at some length because it forms the background against which Mrs Good's letters of 27th July 1989 to these three witnesses were written. They had all been subjected to the charm offensive to which I have referred. They were all aware of the strengths and, more particularly, the weaknesses of Orion's case after attending the two long team meetings. And their memory of the meeting on 23rd April 1975 was, in the case of each of them, singularly unhelpful. The trial date was now only four months away, and witness statements had to be served on or before 1st September.

Mr Sage was now 71. Mr Heritage was 64, and Mr Rousell nearly 60. They had been 56, 50 and 45 respectively when the critical meeting took place. Mr Sage's recollection of the events of that day was muddled and patchy. Mr Rousell, when proofed at Folkestone on 19th July, could not recall any discussion about the matters which became paragraphs 3 and 4 of the Russell Record. Mr Heritage, confronted with the Flint Note the same day, said that the reference to a goodwill agreement did not ring much of a bell with him.

On 27th July Mrs Good knew the current state of each man's recollection of the events of that distant day. She had also been present at the meeting with leading counsel on 24th July. She knew that it had been decided to amend Orion's pleading on the basis of the Flint Note. She also knew that her clients did not at that time possess a single witness who could say that what was written in that note was in fact said at the meeting.

Her letter of 27th July was not only sent to Mr Sage. It was written in identical terms to Mr Rousell, although she knew that he could not assist, with a copy to Mr Heritage, who also, to her knowledge, could not assist. I know that I have not seen Mrs Good, and that she made a very favourable impression on the judge. On the other hand, I also know that she accepted that she told the Tardis meeting that she had "tried and tried" to get Mr Sage to remember the 23rd April meeting, although she attributed all these efforts of hers (and the judge accepted her evidence) to the 1985-6 period. If she remembered those efforts in June 1991, a fortiori she would have remembered them two years earlier.

Although the judge acquitted Mrs Good of any conscious impropriety - and it is necessary to remember that for all her responsibilities she had only had seven years' experience as a qualified solicitor in July 1989 - I am bound to say, viewing the matter objectively, that I find the terms of her letter to these three witnesses very surprising. She knew that all their memories of this far distant meeting were rocky, to say the least, but here she was, in a letter whose express purpose was to assist them in preparing their draft statements, telling them that it was "vital" to "our" case that "we" establish that what was agreed on 23rd April 1975 was a goodwill agreement only. I make due allowance for the fact that Mrs Good told the judge that she regretted using the word "vital", explaining that it was a word she used from time to time in an effort to galvanise people into action , and that she had formed the impression that Mr Sage had not done his homework in advance of the 11th July meeting.

Notwithstanding these allowances it is not easy to understand what she was hoping to achieve by that part of her letter, particularly so far as Mr Rousell and Mr Heritage were concerned.

There is another remarkable feature of this letter, although it was not explored with Mrs Good when she gave evidence. A few paragraphs later she had referred its recipients to a letter written by Mr Russell to Mr Flint a fortnight before the critical 1975 meeting which strongly suggested that he was keeping information back from Orion. It was understandable that Mrs Good should ask these three witnesses if they had any idea of what Mr Russell was proposing to hold back. It was much less understandable that she should add, in a letter written to witnesses of fact who had not yet finished preparing their witness statements:

"If this amounts to non-disclosure we may be able to make very good use of this against Sphere Drake in as much as they argue that this was a legally binding agreement."

Lord Grabiner was unable to explain to us how it could have been appropriate for Mrs Good to write to witnesses in these terms.

Although the judge accepted as genuine her incredulity at the suggestion that she should have sought to tell or to influence Mr Sage as to what he should say (or that he would be influenced by her), this was not, in my judgment, a letter which a litigation solicitor ought to have written to her clients' crucial witnesses of fact at such a time, given what she knew about the condition of their memories. I repeat that the judge acquitted her of conscious impropriety, and there was no appeal against that finding. It was, however, the effect of this letter on its reader that matters.

These considerations have led me to exercise great caution in relation to the judge's findings about Mrs Good's reactions to events, particularly during the critical July-November 1989 period. He appears not to have appreciated the way in which, no doubt through inexperience, she was engaged in drawing them much too much into the centre of the litigation team, and failed to realise that she must not consciously or unconsciously pressurise witnesses into adopting a particular memory of long ago events by telling them that it was critical to their side's success in the litigation that they should do so. Such a witness's evidence, given no less than nine years after the events of 1989, should, in my judgment, have been appraised very much more cautiously by the judge than appears to have been the case.

As I have said, the judge acquitted Mrs Good of any conscious impropriety over the use of the word "vital" in this letter, and Mr Sumption did not challenge this finding. Mr Sumption invited us, however, to consider carefully the effect that this letter would have had on Mr Sage.

Mr Sage was an intelligent man. He knew exactly why Orion's solicitors wished him to be more forthcoming in his memory of what occurred on 23rd April and why they hoped that the sight of the Flint Note would help in this regard. He was being treated as a member of the team, and accorded the respect due to a former managing director. He was being paid for every hour he put into the case. For the reasons he had explained to Mr Tapsell and Mrs Good in 1985, he believed strongly that the meeting in April 1975 had not resulted in a settlement which was legally binding on Orion. He also believed, as Mrs Good told the judge, that the new management of Sphere Drake were morally wrong to defend the action. It was against this background that he devoted six hours on 31st July, and fourteen and a half hours between 2nd August and 8am on 7th August, to rewriting his witness statement.

Before he embarked on this exercise he had been invited by the solicitors again and again to try to recall what had happened on 23rd April 1975. He had been quite unable to help, except in a rather muddled way. He now came up for the first time with a totally new remembrance of the events of that day:

"I recall clearly that I made the point that this, meaning the agreement as a whole, was a goodwill agreement and could not be a legal contract. I could not override the earlier agreements ratified by the Orion Board except by their authority. ... The reaction of the other parties was one of agreement, reflected in Mr Comery's reference to the 'spirit', recorded in Mr Flint's notes."

He also gave the answer "yes" when asked whether what was recorded in the Flint Note was consistent with his recollection. I see no reason to suppose, in the light of the judge's findings, that he did not honestly believe now that he had some recollection of having made the point at the meeting, although it cannot have escaped his memory that he had never remembered this before. Nor would I condemn as dishonest his use of the word "clearly", in his evident enthusiasm for his cause, up to the moment when Mr Henshaw queried whether it was an appropriate word to use. Lay people are not always careful with their use of words until lawyers warn them that they must be.

I have described the iterative process that continued throughout the month of August before Mr Sage's witness statement was settled in its final form. He devoted about 50 hours to working on the case between the time of the meeting on 7th August and the end of the month.

His use of the words "I recall clearly" was plainly inappropriate, and he must have realised how inappropriate these words were as soon as Mr Henshaw asked him about them at the end of August. They were then excised from the text. This change, in my judgment, was a change of substance, and not a mere drafting change, as the judge believed. As I have said, I accept that Mr Sage may have thought by now that he had a memory of saying the words attributed to him at the meeting. He could not, however, have held an honest belief that he had a clear recollection of saying them, and he must have realised this as soon as Mr Henshaw raised the point with him.

I have had the opportunity of reading the judgment of Buxton LJ in draft, and I have seen the emphasis that he places, at a rather later stage of the history, on the absence of any evidence that the solicitors positively warned Mr Sage, in view of his state of memory, that he could not properly claim a clear recollection. I accept that there was no written evidence of such a warning: it would have been surprising if there had been. I do not place much weight, one way or another, on the absence of oral evidence of a warning. After all, the trial took place so many years after these events took place that I am not surprised that Mr Henshaw could not remember whether any such warning was given. I have already found irresistible the conclusion that he must have told Mr Sage on 30th August that he could not say that he recalled clearly saying that he made the point mentioned in his draft statement.

Mr Sumption accepted that Mr Sage might honestly have believed by now that he did in fact remember what took place at the meeting in the Orion boardroom that afternoon 14 years earlier, because he had been required by Linklaters to go over the same ground again and again so often. I remind myself that Mr Sumption's case, however, was that Mr Sage must have known that he was not telling the truth when he told Hirst J that he possessed a recollection of what he had said at the outset of the meeting independently of the Flint Note, and that the Flint Note merely confirmed the recollection he already possessed.

It will be remembered that Mr Boyd, who heard Mr Sage give his evidence, succeeded in the Court of Appeal because he persuaded the majority of the court that Mr Sage had either given this evidence truthfully or he was a liar, and Sphere Drake did not say that he was a liar. Both Lloyd LJ at p 266 ("either his explanation was the truth or he was lying. There is no other alternative") and Mann LJ at p 297 ("the inference would have the unacceptable consequence that Mr Sage was lying"), with their massive combined experience of heavy litigation, were persuaded that Mr Boyd's submission was well-founded. Mr Sage had seen the Flint Note so recently that he could not possibly have forgotten the state of his memory of what he said at the meeting before he saw it. In much the same way as Langley J considered that Hirst J may have misunderstood what Mr Sage was telling him, he also considered that Lloyd LJ and Mann LJ may have been misled by Mr Boyd's forensic skills into reaching a conclusion they need not have reached. He rationalised this conclusion by saying that the privileged material showed that the discovery of the Flint Note did not have the same effect on Mr Sage as they thought it must have had.

Against this background it is necessary to consider with some care the reasons Langley J gave for his conclusion that Mr Sage did not commit perjury when he "went too far", as Mrs Good put it forensically at the Tardis meeting.

I have already considered and rejected his first reason, which was that Hirst J was incorrect in his understanding of the effect of what Mr Sage was telling him about the state of his recollection, independently of the Flint Note.

His second reason was that the Flint Note did not make much of an impact on Mr Sage, since he had been maintaining from the outset that the meeting had given rise only to a goodwill agreement: hence all the leg-pulling. This, in my judgment, is not the point. I do not understand how Mr Sage could possibly have forgotten that he had had no memory of using these words at the meeting until he saw the Flint Note.

Langley J's third reason was that it was now accepted that Mr Sage used the words attributed to him by the Flint Note, and that before he saw it he had believed (and told Linklaters) that the April 1975 agreement had only resulted in a goodwill agreement. In these circumstances, he could not exclude the real possibility that Mr Sage could have honestly convinced himself and believed he recollected that he must have used the words about the whole agreement. This, too, is not, in my judgment, the point. Mr Sumption conceded that Mr Sage may have convinced himself that he had this recollection once he saw the Flint Note. The nature of his complaint is, and always has been, that Mr Sage could not honestly have told Hirst J he had such a recollection before he ever saw the note.

Langley J said in this context that it was far more likely that Mr Sage honestly failed to distinguish between original recollection, a refreshed recollection and reconstruction, than that he perjured himself in claiming to recollect what he knew he had only reconstructed. Again, in my judgment, he was not addressing the correct issue. For the purposes of Mr Sumption's argument it is accepted that Mr Sage may have reconstructed in November 1989 a memory of the events of April 1975. The crucial issue is whether in November 1989 he could possibly have forgotten all those meetings between March 1985 and July 1989 when the solicitors had pressed him to remember more of what took place at the critical meeting, and when he had been quite unable to help them.

The judge's fourth reason was founded on the impression of honesty which Mr Sage conveyed to so many people, including Hirst J. He said that this consideration was not conclusive, but that it was compelling, particularly so when those concerned were mostly well placed to make, and experienced in making, such judgments.

This is, of course, a matter that must be taken very seriously into account. The state of a man's memory, however, is a matter peculiarly within his own knowledge, and none of these witnesses had the advantage the court has had of being able to consider all the events between 1984 and November 1989 which cast light on what Mr Sage was saying from time to time about the state of his recollection.

The history of criminal justice in this country over the last 30 years has been littered with cases in which apparently honest police officers are so convinced that they have charged the right person that they are willing to say things they know not to be true in order to achieve success. I accept Mr Sumption's submission that of these witnesses it was only Mrs Good and Mr Henshaw who had seen very much of the unfolding picture of Mr Sage's recollection. Mrs Good, who had been away from the case for three months, did not believe that Mr Sage was in fact telling the judge what I, together with the other members of this court, am quite satisfied he did tell him. Mr Henshaw, for his part, was not present in court at the time, and when he read the transcript he did not believe he had made the claim of which Sphere Drake makes complaint. He said it would have given him a jolt if he thought he had. In my judgment these considerations greatly diminish the value attributed to their evidence by the judge, and I have already given my reasons for being cautious about the weight to be placed on Mrs Good's evidence during this critical period.

Next, the judge said he could not think what motive Mr Sage might have had for telling a lie. After considering some suggestions that Mr Sumption had made, he said:

"For my part, leaving aside the question of payment which I have already rejected, I see nothing exceptional in any of these suggestions to explain why a 71 year old man of unblemished personal reputation should give dishonest evidence on oath."

I regret that I do not experience the same difficulty as the judge had in understanding why Mr Sage should have lied in this respect. Mr Sage believed in the rightness of Orion's cause, and he wanted Orion to win. He had been paid for the help he had given them (although he was not corruptly influenced by it). I do not for one moment believe that what I have described as "the charm offensive" created in him ipso facto a state of mind which would lead him to commit perjury. On the other hand, it converted him from being a "mere witness" into being someone in the centre of a close-knit litigation team which was conducting a case in which he genuinely believed that the other side was trying to escape liabilities that were rightly theirs and that their defence had no moral basis. He also knew, because Mrs Good had told him so, that his evidence about what happened at the 23rd April meeting was vital if Orion was to succeed.

Mr Sage clearly understood the importance of the point the judge and Mr Mance were putting to him on the fifth day of the trial. He was an intelligent man, and he had been warned to expect it. Unfortunately, as was said in the play-acting at the Tardis meeting, "he went too far". I know that we are concerned in this case only with two answers given during a long cross-examination, and that in this sense the case is most unusual. The fact that it is unusual should not, in my judgment, deter us from making a finding of perjury if we consider that a finding that those answers were, to Mr Sage's knowledge, untrue, is a distinctly more probable explanation of what took place during those critical five minutes of the trial than any other.

That Mr Sage was willing to go too far in his evidence is in fact also reflected in the fourth exchange cited by Mr Sumption, although it is not directly germane to the perjury charge. Mr Sage knew that he did not have a clear recollection of the events at the outset of the meeting - he had been warned by the solicitors less than three months earlier not to use language like this in his witness statement - but he nevertheless told the judge that it was quite clear in his mind that he did open off with the remark recorded in the Flint Note.

Mr Sumption was correct to remind us of the antagonistic nature of cross-examination in the context of litigation like this. Mr Sage knew he was the key witness for his side, and he was being pinned down by both counsel and the judge on a matter which he knew to be vital if Orion was to win. Unhappily, in my judgment, he gave untruthful answers. The fact that he may not subsequently have attached great importance to the untruthfulness of these short answers in the context of a long, gruelling two-day cross-examination may have been reflected in his conduct after the case was all over.

The judge's final reason was that whilst the standard of proof required for perjury was not important to his conclusion, it served to confirm it. It was common ground before us that we should only be willing to find perjury proved if, in the circumstances of the case, it remained a distinctly more probable explanation than any other. Even taking into account the witnesses' testimony about their belief in Mr Sage's honesty, which Hirst J evidently shared, and the fact that Mr Sage is now dead and cannot defend himself, I am satisfied that Sphere Drake has satisfied the standard of proof required of them. I am satisfied to that standard that Mr Sage did claim to Hirst J that he did have a free-standing recollection of the words he used at the outset of the April 1975 meeting, a recollection which was merely confirmed when he saw the Flint Note, and I am satisfied that he knew that that claim was untrue.

Notwithstanding Lord Grabiner's able advocacy, I do not consider that this conclusion casts any aspersions on the integrity, honesty or professional competence of Orion's able team of lawyers, although I have questioned, on an objective basis, the propriety of Mrs Good's letter of 27th July. This court has been far better placed than most of them to follow the story of Mr Sage's recollections of the events of 1975 during the long months when he was being pressed to recall them 10-14 years later. They faced understandable difficulties when invited to give a completely objective assessment of a member of their litigation team whom they had known and admired, particularly when most of them were having to combat charges of impropriety themselves.

In this judgment I have been willing to adopt almost all the judge's primary findings of fact, since he had the advantage of seeing the witnesses, albeit they were giving evidence about events so long ago. Where my approach differs from the judge is that I also attach very great importance to the contemporary documents. "The devil is in the detail", and a detailed study of the wording of the successive drafts prepared for Mr Sage by Linklaters in 1985, 1986 and 1989, among other things, has convinced me that Mr Sage could not in November 1989 have held an honest belief that his recollection of words spoken at the meeting had existed for more than about three and a half months at most.

So far as the law is concerned, there is nothing I wish to add to the reasons given by Buxton LJ, with which I agree, for his conclusion that nothing less than the fraud (or perjury) of a party will be sufficient to displace the general rule that final judgments should be accorded finality.

On the other hand, where the fraud (or perjury) is the fraud of an artificial person like a company, then I would wish, unless bound by authority, to follow the modern trend of liberating principles in company law which was pioneered by Lord Hoffmann in Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 1 AC 500 ("Meridian") and developed by Nourse LJ in his judgment in the present case. In the past, common law judges have from time to time impeded the natural development of the law by those who understand the twists and turns involved in pinpointing responsibility in the company law field far better than they do, and I do not want to add to their number unless I have to.

For example, when Lord Diplock suggested in Tesco Supermarkets Ltd v Nattrass [1972] AC 153 at pp 199E-200A that "the obvious and only place" to look in order to discover by what natural persons a corporation's powers are exercisable, when deciding whose acts were to be identified with a corporation was its articles and memorandum of association, within 12 months a Law Commission working paper was castigating as "undesirable in principle" this "failure to take account of the realities of the situation". Seventeen years later the relevant definition in the Law Commission's Draft Criminal Code ranged more widely than anything comprehended in Lord Diplock's philosophy (see A Criminal Code for England and Wales (1989) Law Com No 177, vol 1 cl 30 and vol 2 para 10.7). The writers of that report commented at para 10.8 that one suggested reform by which they were attracted would depend upon the existence of "a clearer rationale for corporate criminal liability than English law has yet developed".

I therefore approach the criminal cases relied on by Buxton LJ with a predisposition to avoid being bound by them if it is intellectually possible to do so. In principle, I would be anxious if the natural development of the civil law in accordance with the thinking of leading judges in this specialist field on the way in which responsibility should be attributed to corporate bodies today had to be cribbed, cabinned and confined by decisions of the House of Lords in the criminal law arena.

In this case we are concerned with principles developed by the judges in a different field of law. The governing rule is that finality should be achieved in civil litigation by final judgments of the court. Only exceptional circumstances suffice to displace that rule. The cases show that one of those exceptional circumstances arises when a judgment has been procured by the perjured evidence of a party in a material particular. I believe that the judges who recognised this exception would have been very disconcerted if they had thought that they were thereby putting the development of the law in a straitjacket, so far as corporate parties were concerned, because criminal lawyers insisted that because they were borrowing a concept from the criminal law, the law in this field could only develop at the pace permitted by decisions in criminal cases, however long ago.

When one comes to look at the criminal cases, one very rapidly identifies a shoal of artificial features that have little to do with the civil law issues with which we are concerned. For a variety of reasons, the identification of the principles on which criminal liability should be attributed to corporate bodies took a long time to mature in this country, and when they did come of age, the birthday party was overshadowed by the judges' reluctance to attribute absolute liability to a corporation for a criminal offence (subject only to any statutory defences that might be available to it).

One needs to remember that the approach of the criminal law to questions of corporate liability is fundamentally different in some respects from that of the civil law. In the civil law, a company's liability is often established by calling in aid principles of vicarious liability. In the criminal law doctrines of vicarious liability, in general, find no place. As Lord Raymond CJ said in Huggins (1730) 2 Ld Raym 1574 at p 1580:

"He only is criminally punishable, who immediately does the act or permits it to be done. So that if an act be done by an under-officer, unless it is done by the command or direction, or with the consent of the principal, the principal is not punishable for it."

There were, incidentally, two exceptions to this rule in the days when the common law judges were developing the criminal law. The first was an odd one in the field of criminal libel, where the innocent proprietor of a newspaper which contained a personal libel could be held not only liable in a civil suit but also criminally liable until Parliament intervened by enacting Section 7 of the Libel Act 1843 which provided him with an appropriate statutory defence. See, for this branch of the law, the judgment of Lush J in R v Holbrook (1878) 4 QBD 42 at pp 46-49.

The other exception related to the old common law offence of public nuisance. In R v Stephens (1866) LR 1 QB 702 the owner of premises on which his servants had created a nuisance was held to be criminally liable. The ground for the court's decision, however, was that the proceedings, although criminal in form, were essentially civil in nature. In his judgment Blackburn J said at p 710 that he wished to guard himself against "it being supposed that ... the general rule that a principal is not criminally responsible for the act of his agent is infringed." By the time of Chisholm v Doulton (1889) 22 QBD 736 the law had moved on and Field J said at p 740 that Stephens must be taken to stand upon its own facts.

Apart from this difference of approach, there were influences abroad which obstructed the natural development of the criminal law in relation to crimes committed by corporations. At common law, for example, a corporate body could not be indicted for a criminal offence: see Anon (1701) 12 Mod 559, Case 935, note, per Holt CJ. Part of the reason for this rule was that the accused had to be physically present at assizes or quarter sessions. In Evans & Co Ltd v London County Council [1914] 3 KB 315 it was held that this antique rule did not prevent a corporation being brought before a court of summary jurisdiction under the Summary Jurisdiction Act 1848. (The rigour of the old common law rule was mitigated, however, by the practice of issuing a writ of certiorari to remove the indictment into the Court of King's Bench, which allowed appearance by an attorney - see, for example, Birmingham and Gloucester Railway Company (1842) 3 QB 223 - and in modern times the rule was extinguished by the enactment of Section 33(2) of the Criminal Justice Act 1925).

Another antique rule provided that a corporation could not be indicted for a felony like perjury. That rule did not go until the distinction between felonies and misdemeanours was abolished by Section 1 of the Criminal Law Act 1967. For these and other reasons our great Victorian judges did not get themselves involved in developing the principles by which corporations might be held responsible for serious crime in the eyes of the criminal law.

Setting on one side these archaic oddities, the natural place in which corporations might be found guilty of criminal offences was in statute law, and there, of course, the way in which corporate responsibility might be identified turned on the proper interpretation of the statute in question. In 1827 Parliament provided that in the absence of a contrary intention the word "person" in a statute extended to corporations (see Criminal Law Act 1827 s 14). In Pearkes, Gunston & Tee Ltd v Ward [1902] 2 KB 1 the Divisional Court can be seen applying this principle, now re-enacted in Section 2 (1) of the Interpretation Act 1889, to the issues in a criminal case.

Many of the criminal cases decided in the present century have been concerned with statutes which imposed absolute criminal liability (a concept abhorrent to common law judges), but permitted a defendant to escape liability if, in effect, it could show that the offence was committed without fault on its part. The judges always applied a presumption that orthodox principles of mens rea should be applied, but they accepted that this principle had to be displaced if the language of the statute permitted no conclusion other than that Parliament intended to impose absolute liability.

Cave J set out the relevant ground rules in Chisholm v Doulton (1889) 22 QBD 736 at p 741:

"A master is not criminally liable for a death caused by his servant's negligence, and still less for an offence depending on his servant's malice; nor can a master be held liable for the guilt of his servant in receiving goods knowing them to have been stolen. And this principle of the common law applies also to statutory offences, with the difference, that it is in the power of the legislature, if it so pleases, to enact ... that a man may be convicted and punished for an offence although there was no blameworthy condition of mind about him."

In every case the courts had to interpret the statute in question to see if Parliament did intend to impose the harsh rule of absolute liability, regardless of fault, and to place the burden on a defendant company to prove that it could properly avail itself of whatever statutory defence, if any, was available.

Against this unpromising background, the development of modern criminal law in this field can be traced back to the civil case of Lennard's Carrying Company Ltd v Asiatic Petroleum Company Ltd [1915] AC 705.

Section 502 of the Merchant Shipping Act 1894 provided a defence to a shipowner to a civil claim for the loss of cargo if he could show that the casualty occurred "without his actual fault and privity." In that case the cargo was destroyed by a fire caused by the unseaworthy condition of the ship's boilers. The defendant's only business was the ownership of ships, and the same man was responsible for running the business in general and for the functions which corresponded to those of a shipowner in relation to the state of the boilers. It is hardly surprising in those circumstances that the House of Lords held that the shipowning company could not say that the casualty had occurred without its actual fault and privity. It was in this context that Viscount Haldane LC said at p 713-4:

"It must be upon the true construction of that section in such a case as the present that the fault or privity is the fault or privity of somebody who is not merely a servant or agent for whom the company is liable upon the footing respondeat superior, but somebody for whom the company is liable because his action is the very action of the company itself."

In Meridian Lord Hoffmann deplored at p 509F the way in which Viscount Haldane's speech, which included a reference to a company's "directing mind and will", had subsequently been interpreted on the basis that he was expounding a general metaphysic of companies. After mentioning Denning LJ's well-known "brains and nerve centre" metaphor in HL Bolton (Engineering) Co Ltd v TJ Graham & Sons Ltd [1957] 1 QB 159, Lord Hoffmann commented at p 509G:

"But this anthropomorphism, by the very power of the image, distracts attention from the purpose for which Viscount Haldane LC said, at p 713, he was using the notion of 'directing mind and will', namely to apply the attribution rule derived from Section 502 to the particular defendant in the case:

'For if Mr Lennard was the directing mind of the company, then his action must, unless a corporation is not to be liable at all, have been an action of the company itself within the meaning of Section 502.'"

There have been many criminal cases in which the courts have applied the "directing mind and will" rule in their search for ways in which they could find that Parliament did not intend to impose criminal liability on a company in the absence of mens rea. That Tesco Supermarkets Ltd v Nattrass [1972] AC 153 was such a case is clear from the speech of Lord Reid at pp 169F-170C. Seaboard Offshore Ltd v Secretary of State for Transport [1994] 1 WLR 541 is another. Lord Keith of Kinkel, giving the only reasoned speech, showed his distaste for the imposition of absolute liability when he said:

"It would be surprising if by the language used in section 31 [of the Merchant Shipping Act 1988] Parliament had intended that the owner of a ship should be criminally liable for any act or omission by any officer of the crew or member of the crew which resulted in unsafe operation of the ship, ranging from a failure by the managing director to arrange repairs to a failure by the bosun or cabin steward to close portholes."

For my part, I would not allow a line of authority concerned with the unwillingness of the House of Lords to find that particular statutes, on their proper interpretation, prima facie imposed absolute liability on companies in criminal cases to obstruct the natural development of the civil law on the lines set out in the speech of Lord Hoffmann in Meridian and in the judgment of Nourse LJ in the present case.

I end by expressing satisfaction that my view of the law accords with my sense of the justice of the case. If the original case had been tried in 1979, and Orion had won as a result of the perjury of their managing director in a material particular, I do not understand how it could be sensibly argued that their judgment should not be set aside on that ground. It would, in my judgment, be an affront to justice if they were entitled to retain the spoils of such a victory merely because another ten years, and the retirement of their managing director, had intervened before the action was tried.

I have considered carefully whether one should cling timorously to the coastline in search of a defining principle before being willing to right such a wrong. For my part, the scale of the wrong that would be done if we are not able to correct it prompts me to be willing to strike out, with Nourse LJ, for the open sea. The result appears to me to accord with justice as well as with the natural development of the law.

For these reasons I, too, would allow this appeal.


Lord Justice Buxton:
Introduction, and the structure of this judgment


This is a case of substantial anxiety and difficulty. Its central feature is the finding that we are asked to make that Mr Sage committed perjury in the trial before Hirst J in 1989. I have the misfortune of not being able to agree with my Lords that we should so find, though I have reached that conclusion only with some hesitation. It is therefore necessary that I should set out my reasons for my opinion on the questions of fact that arise in this appeal in some detail. Further, since I also differ from my Lords as to one aspect of the law applicable to the facts that they find to have been proved, I need also to deal extensively with the legal issues.

However, I would find it impossible to add anything to the account of the history of the case, and of its development before this court, that is to be found in the judgment of Brooke LJ. Nor do I need to add anything to the statement of the issues in the case that is to be found in both of my Lords' judgments. Their labours enable me gratefully to proceed directly to the substance of my judgment.

I approach the matter as follows. In sections I-III of the judgment I deal with certain general issues affecting the whole case. In sections IV and V I address the first two questions in the case, namely whether Mr Sage had a long-held recollection of using the words attributed to him in the Flint note at the April 1975 meeting; and whether he claimed in his evidence to Hirst J to have such a recollection. I deal with both of those issues comparatively shortly, since I am in broad agreement with the approach to them adopted by my Lords. I then turn to the central question of whether in making such a claim Mr Sage knew it to be false. In section VI I summarise what seem to me to be the issues in the case that illuminate that question; in sections VII-VIII I deal with a number of factual and evidential problems that touch on those issues; and in section IX I set out my conclusion on the question of Mr Sage's alleged perjury. Some parts of this treatment may overlap with others, and other parts need to be seen against the structure of the case as a whole; again, however, that structure needs little further mention from me since it has been fully addressed by my Lords. In sections X-XIII I deal with the issues of law.

I. The trial and the appeal


Brooke LJ has pointed out that our task is narrower, and simpler, than that of the judge. I agree. We are not called on to make findings about the allegations of impropriety that were originally made against leading counsel, Orion's solicitors and one of its senior executives. No doubt for that reason, and also because of the different circumstances of an appellate hearing, we were also spared the unfortunate atmosphere of contention that, as Brooke LJ has noted, increased the already considerable burden on the trial judge. All that said, however, two further points need to be made.

First, everything in the case, at trial as well as on appeal, turned on whether Mr Sage had committed perjury. There is no indication in his judgment, or otherwise, that the judge lost sight of his mission in that respect, or that he was distracted from a proper consideration of that question by the other allegations that were before him. I did not in fact understand it to be argued that any of the judge's conclusions on that central issue were affected, in any inappropriate way, by the admittedly strong opinion that he formed as to merits of all of the rest of Sphere Drake's original case; and I for my part approach the judge's reasoning and conclusions on the perjury issue as if they stood alone in his judgment.

Second, although the formal allegations against the lawyers have been abandoned, no little part of the argument before us continued to subject their conduct, and in particular that of the solicitors, to critical scrutiny. That was because much or all of the evidence as to what Mr Sage had said and thought at various stages of the story, and much of the speculation as to what his motives might have been for committing perjury, was based on contemporary documents drawn up by, and the mode of discharging their task adopted by, Orion's solicitors. The reliability of their evidence about the meetings and other transactions recorded in those documents thus remained a live issue in the appeal. That is demonstrated by the fact that my Lords have reached a conclusion significantly different from that of the judge as to the conduct and reliability of at least one of the solicitors who gave evidence before him, Mrs Diana Good; and that, as I shall seek to demonstrate, some of the findings as to events leading up to the trial are difficult to reconcile with the evidence, accepted by the judge, of another solicitor, Mr Andrew Henshaw.

Further, it was a significant element in Sphere Drake's argument before us that since the solicitors had been facing serious allegations made against them by Sphere Drake (allegations that the judge rejected in a series of findings none of which Sphere Drake has appealed) their evidence as to the course that the preparation of the case had taken was liable to be unreliable as being, however unconsciously, self-justifying. Because of that continuing criticism, therefore, much of what the judge said was germane to the investigation of the facts in relation to the issue of Mr Sage's perjury as well as to the resolution of the case against the lawyers themselves; and remains of great importance in this appeal.

II. The proper approach to the evidence


The factual investigation undertaken by Langley J was extremely unusual. The events in question happened many years ago. The witnesses who gave evidence to the judge made it clear in their witness statements that they did not claim current recollection of many of the events, but had to rely on their memories being prompted by, and on interpretation of, notes and working documents brought into existence at the time. And whilst the central question in the case was the state of mind and intentions of Mr Sage, not only was he not available to give evidence but he had never been asked about, and thus necessarily had never expressed any opinion about, the particular allegation laid against him in these proceedings. These problems are multiplied in this court because the judge made clear and specific findings of fact that we are asked to overturn without the benefit that he had of hearing the extensive oral testimony, or of seeing the witnesses who gave it.

Sphere Drake said that in these admittedly difficult circumstances Langley J had taken a wrong approach to his enquiry into the facts. The basis of that criticism was set out in paragraph 31 of Sphere Drake's skeleton argument:

"Much of the oral evidence given to him consisted of reconstruction by witnesses analysing documents, of the thoughts and impressions which they believed that they or others must have formed at the time the documents were created. As such, it is strongly influenced by their understandable desire to defend their own conduct, and their own view of the merits. This was reflected in a degree of advocacy in the course of interpreting documents which ought to have been allowed to speak for themselves."

Sphere Drake said that the correct approach should have been for the judge to be guided by what was said by Robert Goff LJ in this court in The Ocean Frost [1985] 1 Ll.R.1 at p.57, and adopted by the Privy Council in Grace Shipping v CF Sharp [1987] 1 Ll.R.207 at p.215:

"And it is not to be forgotten that, in the present case, the Judge was faced with the task of assessing the evidence of witnesses about telephone conversations which had taken place over five years before. In such a case, memories may very well be unreliable: and it is of crucial importance for the Judge to have regard to the contemporary documents and to the overall probabilities. In this connection, their Lordships wish to endorse a passage from a judgment of one of their number in Armagas Ltd v Mundogas SA (The Ocean Frost) 1 Lloyd's Rep 1 when he said at p. 57:-


Speaking from my own experience, I have found it essential in cases of fraud when considering the credibility of witnesses, always to test their veracity by reference to the objective facts proved independently of their testimony, in particular by reference to the documents in the case, and also to pay particular regard to their motives and to the overall probabilities. It is frequently very difficult to tell whether a witness is telling the truth or not: and where there is a conflict of evidence such as there was in the present case, reference to the objective facts and documents, to the witnesses' motives, and to the overall probabilities can be of very great assistance to a Judge in ascertaining the truth."

That observation is, in their Lordships' opinion equally apposite in a case where the evidence of the witnesses is likely to unreliable: and it is to be remembered that in commercial cases, such as the present, there is usually a substantial body of contemporary documentary evidence."


I do not presume to question the importance and, if I may be permitted to say so, good sense of these observations, but I cannot think that Sphere Drake was right in characterising them as a statement of principle, apparently to be applied indifferently in all cases where oral and documentary testimony is or may be in conflict. As in the case of any other formulation couched in general terms, it is illuminating to consider the context in which the formulation originated. Both of the cases were commercial cases, in the sense of being disputes about transactions between businessmen or merchants: hence the reference at the end of Lord Goff's observations. In The Ocean Frost the judge had been faced with conflicting oral testimony from two witnesses, both of whom he found to be substantially unreliable, but acted on the evidence of one of them to accept an account of the transaction that was directly contradicted by the contemporary documents and produced an outcome that the court thought to be incredible in the light of the previous dealings between the parties. In another part of the case he acted on evidence from a witness whom he found to be wholly reliable, but whose evidence was in fact contradicted by unchallenged expert evidence that some of the documents on which she had based her evidence had been forged. In Grace Shipping the judge acted on the evidence of an inexperienced employee as to whether a company named in the commercial documents was intended to be a party to the transaction, when the conclusion asserted by the witness was contradicted not only by the form of contemporary telexes passing between the parties but also by his own notes made at the time.

Reflection suggests that the force of contemporary documentation will vary according to its nature. Formal commercial documents, of the type principally in mind in Grace Shipping, are likely to speak for themselves. And where a particular individual has recorded something as being his view, even if not in a formal document, then it will be difficult years later to gainsay that that was what he then thought or that he had not given attention to the matter written about: an example in our case is the comments made by Mr Sage on successive drafts of his witness statement, which have been analysed in his judgment by Brooke LJ. In a very different category, however, are notes taken at meetings which are not an agreed record, and which are subsequently relied on principally for what they do not say. Whilst it was a piece of forensic exaggeration for Lord Grabiner to describe the documents most relied on in this case as scribblings on bits of paper, many of them are certainly notes taken for reference and record purposes by particular persons. It is entirely reasonable, and in no way to derogate from anything said by Lord Goff, for the judge to take note of, and if he thinks it reliable to act on, the account given by the makers of those notes, once they had reconsidered the history in the light of such help as their contemporaneous record is able to give them. In that respect, these documents are quite different from, for instance, the majority of the commercial documents to which Lord Goff was referring.

The attraction for an appellant in this court of an argument based on documents is that it can be said that we are as well placed as was the trial judge to decide what those documents tell us. That contention however loses much of its force if the documents are not a part of formal commercial exchanges, but were used at the trial as aids to, or as means of challenging, oral testimony. Then, the estimate of the trial judge of the witnesses' explanation of the documents and of their reaction to challenge on them becomes, of course not decisive, but at least important. It may have been for this reason that Sphere Drake appeared to come close to arguing that it was not only possible, but obligatory, to read the documents in this case in the abstract, with what the maker said about them to be regarded as very secondary, if not suspect. That in my view, in the circumstances of this case, is a wholly artificial exercise, and one very likely to mislead, provided of course that the maker is in his evidence neither dishonest nor self-deluded: a matter to which I now turn.

As I have already noted, Sphere Drake argued that Langley J should have discounted, or at least should have been much more sceptical about, the evidence of, in particular, Orion's lawyers, and of what they said about the documents, because their conduct was under scrutiny, and they were likely, albeit unconsciously, to be influenced by the need to excuse themselves. Mr Sumption particularly took objection to Langley J's comment on the evidence of Mrs Good, who was plainly an important witness to the events and beliefs leading up to Mr Sage's testimony at the trial before Hirst J. Langley J said (Judgment, p 32):

"Mr Sumption accepted that her evidence was given honestly (as it obviously was) but sought to submit that she was "unconsciously deceiving herself" in the evidence she gave. That was not an attractive submission, it is also, I am sure, quite unjustified and wrong."

Mr Sumption's complaint was that the judge's apparent dislike of the nature of the submission had caused him not to warn himself as he should have done about the circumstances of Mrs Good's evidence and the particular danger that it threatened. Mr Sumption did not actually use the word in this context, but I think that here also, as in the case of the judge's analysis of Mr Sage's possible motives for committing perjury, he would characterise the judge's approach as unworldly. Certainly, he suggested that the judge's comment could only be explained by his not having experience of an honest witness reconstructing documents in his own favour, or alternatively that the judge thought that that was not something that witnesses do.

I shall have to return later in this judgment to a particular aspect of Mrs Good's evidence that remains in contention in this appeal. However, on the more general issue, it is possible that Langley J found the case as put against her unattractive because Sphere Drake's pleaded case was not that she was merely guilty of understandable wishful thinking, but rather that she should have positively known that Mr Sage's evidence was unreliable; and had been party to causing Hirst J and the Court of Appeal to proceed on a mistaken basis by failing to acknowledge Mr Sage's perjury. However that may be, I am quite unable to draw from this passage of the judgment the implication that Sphere Drake would attach to it. The judge did not say that he was rejecting the submission because it was unattractive, or not such as he was prepared to entertain. He rejected it, as he said, because, having heard the evidence and seen the witness, he found it to be wrong.

It should also be borne in mind that the judge reached that conclusion after hearing the allegation put to Mrs Good in direct terms; and after the matter had been investigated before him in great detail and (I do not need to say, and indeed it is impertinent for me to say) with the greatest possible ability and resource. The suggestion that in those circumstances an experienced commercial judge would simply forget about, or permit himself to be blinded to, an obvious potential problem about the evidence does not in my view bear examination.

This issue does not stop there. In his reply Mr Sumption undertook to demonstrate from the proceedings before Langley J that not only Mrs Good but also Messrs Tapsfield, McDonnell, Legg and Henshaw were all of them guilty of glossing the facts in the way alleged in Sphere Drake's skeleton argument. That enterprise entirely failed. Mr Sumption mainly pointed to repeated statements in all of their witness statements that they had no current recollection of many of the incidents, together with frequent references in their evidence to what the documents revealed to have occurred or, in the light of their normal practice as to note-taking and the silence of the documents, not to have occurred. Mr Sumption said that such evidence was simply reconstruction, even though the witnesses (for instance, Mrs Good transcript, Day 9, pages 26-27) when asked to think carefully about their thought-processes denied that that was so. Such features of the evidence of course require meticulous attention from the judge before he acts on it, attention that Langley J brought to bear on this case. But the matters to which Mr Sumption took us did not start to establish any specific example of what they were said to demonstrate in general terms: that the evidence had been an unconscious gloss by people anxious to defend their own conduct and to promote the cause in which they believed.

III The relevant lie; and other issues


Langley J was well aware that the only act of perjury relied on by Sphere Drake was that Mr Sage lied in saying that he had a long-held recollection independent of the Flint Note of using the words attributed to him at the April 1975 meeting (Judgment, p 204); indeed, it is one of Mr Sumption's major criticisms that Langley J lost sight of that point when analysing the evidence and reaching his conclusions on it. There was accordingly a tendency on Sphere Drake's part to suggest that the accuracy or otherwise of other claims made by Mr Sage, and in particular his assertion that he had always believed that the agreement had been a goodwill agreement, was at most of secondary importance.

I entirely agree that it is necessary to keep very firmly in mind the actual charge made against Mr Sage. However, the question of whether he had even believed that the agreement was a goodwill agreement before seeing the Flint Note played some considerable role in the judge's reasoning, and remained in contention before us. In particular, Sphere Drake argued, on the basis of one phrase in a note of the meeting of 19 April 1989, that Mr Sage had then specifically acknowledged that the April 1975 meeting had resulted in a binding agreement. On that issue, I agree with Brooke LJ as to the conclusive nature of the judge's clear finding (Judgment, p 204) that Mr Sage

"had said and at least honestly believed before anyone had discovered the Flint Note that the substance of any agreement made at the meeting was that it was a goodwill agreement."




As is apparent from the judge's judgment, and as will become clear later in this judgment, that was a finding that played an important role in the judge's reasoning on the perjury issue, and which is generally of continuing significance in the case.

IV. Did Mr Sage have a long-held recollection?


The evidence, fully and clearly set out, if I may say so, in Brooke LJ's judgment, reveals no claim by Mr Sage before his 7 August 1989 draft to recall what he said at the April 1975 meeting. That was despite there having been a number of occasions on which, if he had had such a recollection, he would have been likely to have volunteered that fact. I agree with Brooke LJ that that evidence strongly points in the direction of Mr Sage not having had any such recollection. I do not think that there is anything that I can usefully add on that issue.

V. Did Mr Sage in his evidence claim to have a long-held recollection?


I agree with my Lords that the judge's excursus into the evidence of what Orion's advisers thought that Mr Sage said or might have said was inappropriate. The proper approach is to look objectively at the trial transcript, illuminated if necessary by the understanding obtained from the evidence by the trial judge.

On that basis I agree with my Lords that Mr Sage did make a claim to have had a long-held recollection of the words that he used at the April 1975 meeting; and that Hirst J understood him to have done so and, and acted on that evidence. That the claim was an important factor in Hirst J's reasoning is underlined by the analysis that led Langley J to conclude that the statement alleged to represent the relevant lie had clearly been a significant consideration in assessing Mr Sage's reliability both for Hirst J and for the majority in the Court of Appeal. (Judgment, pp. 209-210). Nor am I impressed by any suggestion that Mr Sage may have misunderstood the thrust of Mr Mance's questions. Quite apart from anything that appears from the transcript, we now know that in the pre-trial rehearsal on 9 November, which I refer to in more detail in the next part of this judgment, Mr Henshaw very probably warned Mr Sage that an attack based on the length of time for which he had claimed his memory, or something very like that, would be made. Everyone agrees that Mr Sage was capable of taking a point; and it is therefore unlikely that he was surprised, or bemused, when something of the order of what he had been warned about some ten days earlier came to pass.

All that said, however, there are three further observations that need to be made about this part of the case.

First, at the trial before Hirst J it was Sphere Drake's case that, even if the words had been spoken at all (which was then still in dispute), they had not been used at the beginning of the meeting, and thus were likely to have applied to clause 3 of the agreement recorded in the Russell Record, and not to that agreement as a whole. The stage at which Mr Sage claimed the words to have been used was therefore seen as vital. That is clear from questions the answers to which are relied on in this case by Sphere Drake, which have already been set out by Brooke LJ. Thus, in extract 1 Mr Mance asks:

"Has it always been your recollection that the whole agreement was not to be legally binding?"

And in extract 4 Hirst J asks:


"Are you saying quite categorically that your clear recollection is that you did open off with that remark?"

I have in both cases added the emphasis.

Second, Mr Mance's principal line of attack was that Mr Sage had no (current) recollection at all, and had merely embraced the Flint Note: see Hirst J's account of Sphere Drake's case, [1990] 1 Ll.L.R. at p. 501. Hirst J found that unlikely in itself, because if Mr Sage had been simply parroting the Flint Note he would have been more likely to lift the whole of it into his witness statement, which conspicuously he did not do. Hirst J made this point both at the start and at the end of his analysis of Mr Sage's evidence: see [1990] 1 Ll.L.R. at pp. 501 and 503.

Third, I agree with Brooke LJ that the only stage in his evidence at which Mr Sage can be said with the confidence necessary for a perjury case to have stated the relevant lie was in extract 3 from his cross-examination, which is again set out in full in Brooke LJ's judgment. Like Brooke LJ, I consider that Lord Grabiner was justified in submitting that the use of the expressions "specific agreement" and "expressly agreed" in the first of the two extracts relied on by Sphere Drake does not sufficiently identify a claim as to the actual words used as opposed to a claim as to the legal effect of the agreement.

The crucial passages from extract 3 need to be set out again:

"Hirst J: What I think is being suggested is not that you made this up, but that you never thought about it or remembered it as a goodwill agreement until you suddenly saw [the Flint Note] in August when you said "Hey Presto, of course that is what I said after all". Is that correct?
A: No, not in its entirety, my Lord, in the sense that I had it in my mind-in my mind-and this did, perhaps, confirm-only confirm-my recollection was correct.
Mr Mance: The way in which the first sentence [of paragraph 65 of your witness statement] is formulated "I made the point at the outset that this [meaning the agreement as a whole] was a goodwill agreement...and could not be a legal contract" I suggest to you that can only be because you are relying heavily on Mr Flint's note. Is that correct?
A: No it is not correct. I remember the circumstances of that meeting and what was said. Both notes confirmed my thoughts on the matter-my remembrance of the matter-it was not in itself more than that."


Hirst J said, [1990] 1 Ll.L.R. at p. 503:

"[Mr Sage's] evidence as to his opening remarks is corroborated by the Flint note....The fact that he did not embrace the rest of the Flint note in his evidence is... favourable to his credibility, and also supports his evidence that he is, in truth drawing on his recollection and not relying solely on the Flint note. I see nothing improbable in such an important matter for Orion sticking in his memory.
I therefore reject Mr Mance's suggestion...that his testimony was an afterthought, and I find that he has ever since 1975 held this in his memory, though of course, as he himself acknowledged, such recollection was confirmed and strengthened once his attention was drawn to the Flint note."

In so holding, Hirst J may well have had in mind extracts 1 and 2 from the cross-examination, as well as extract 3: the difference or possible difference between their terms and impact not having been subjected before him to the intense scrutiny that they have received before us. There is, however, no doubt that he saw Mr Sage as saying what he did say in extract 3, that he had had since 1975 a memory of the words used at the 1975 meeting.

The relevant lie, important though it was, was therefore that Mr Sage had always had in his mind or memory a recollection of some sort of what he had said at the beginning of the April 1975 meeting, and that the function of the Flint Note had been to bring out or confirm that memory or recollection. He denied what Mr Mance had strongly put to him, that his evidence was dependent solely on the Flint Note. Since, as I agree with my Lords, Mr Sage had not had such memory or recollection throughout the process, this part of Mr Sage's evidence cannot, objectively, have been true. It will however be important to bear in mind the terms and context of the evidence in considering the crucial question in this case: whether Mr Sage committed perjury, by giving evidence that he knew not to be true. To that issue I now turn.

VI The allegation of perjury


Allegations of perjury pursued to judgment in civil proceedings are uncommon at the best of times. This case, however, added several further features that were strikingly unusual. Not merely had Mr Sage never been convicted of the alleged perjury, he had never even been accused of it in his lifetime. The perjury consisted, as we have seen, of one or at the most two replies in a long cross-examination, and not in anything standing in evidence in chief or which had the outward appearance of having been the subject of mature consideration. The lie was not about an objective fact, but about the state of the witnesses mind. There was no readily obvious motive for Mr Sage, a man of distinction and assumed probity in his profession, to perjure himself.

It was because of these difficulties that it was only possible for Sphere Drake to pursue the allegation of perjury by minute examination of the course of preparation of Mr Sage's evidence and of his association with the case, in order to seek to illuminate what must have been the state of his mind when he went into the witness-box. That examination formed the basis for an argument that was the obverse of the argument with which Orion prevailed in the Court of Appeal. There, as Lloyd LJ set out the effect of Mr Boyd's argument ([1991] 1 Ll.L.R. at p 266), Mr Sage's reply that the Flint Note only confirmed what had been in his mind all along was important because

"Mr Sage had only seen the Flint Note for the first time a few months before. He could not have forgotten what had been in his mind before he saw the Flint Note. Either his explanation was the truth, or he was lying. There is no other alternative. Yet it was never put to Mr Sage that he was lying."

In these proceedings it is Sphere Drake that asserts that Mr Sage could not have forgotten what was in his mind before seeing the Flint Note, and that the evidence demonstrates that nothing germane to the relevant lie was in his mind.

That submission was reinforced before us, I think perhaps more fully than before the judge, by the further argument that Mr Sage could not have forgotten the process whereby the claim to recall the words used at the April 1975 came into his evidence, by the effect of the 27 July letter and of his own draft of 7 August. Mr Sumption put it thus (Day 7, page 94):

"What we know is that he knew that a major new point had just been introduced into the litigation. He knew that it was a point that was not reflected at all in the draft of his witness statement that he was rewriting. He knew that in his own hand he was writing brand new matter to insert into it....It is really quite impossible to suggest that when he was giving evidence about this only three months later, in November, he had forgotten the way in which what everyone agreed was a critical new point had been drafted up by himself."

This argument therefore concentrates upon the events that occurred comparatively shortly before Mr Sage gave his evidence. As Mr Sumption further put it (Day 7, p85):

"[the argument that in claiming a prior recollection Mr Sage may have been honestly mistaken is] a very difficult conclusion for your Lordships to arrive at on the facts because it requires your Lordships to suppose that Mr Sage had forgotten everything that had happened about this case in the past three months before he gave his evidence. It is not a question of expecting Mr Sage to delve back 14 years in his recollections. All he had to do was remember the last three months or so."

In what follows I shall therefore examine what appear to be the principal events relevant to that latter period. In so doing, however, I do not overlook the precursor to those events, rightly if I may say so stressed by Brooke LJ, which was of a series of meetings between 1985 and 1989 in which Mr Sage was pressed to remember more about the detail of the April 1975 meeting, and was unable to do so. While it is understandable that Sphere Drake concentrated on the apparently more dramatic events of the summer of 1989, which certainly require close attention, the previous meetings are also of importance.

VII Some features of the factual history


The general development of this matter is set out in the judgment of Langley J, and has been expounded by Brooke LJ in the light of the issues before us in terms to which, as I have already said, it would be superfluous for me to add. It will I trust be sufficient if I concentrate on some matters that seem to me to be of particular importance.

The "charm offensive"


I adopt this expression conveniently used by Brooke LJ to identify the efforts made by Orion, with the knowledge and support of their lawyers, to persuade various witnesses, and in particular Mr Sage, to adopt a more co-operative attitude to their participation in the case. I do not think it necessary for present purposes to comment on the propriety of what was done, more particularly because the relevance of this matter is only to its effect on Mr Sage's motivation, and as Brooke LJ has emphasised it is not suggested that Mr Sage acted corruptly.

What these events are, I think, said to demonstrate is that Mr Sage was made to feel wanted and part of the "team"; that that reinforced his commitment to Orion's cause; and that manifested itself not only in a willingness to respond to the urgings of Orion's lawyers, but also in the eventual form of his evidence: in all of which process, as Mr Sumption put it, Mr Sage got too close to the case.

I have to express some reserve about the force of these claims. The steps taken by Orion were directed at converting a position bordering on hostility to one of willing co-operation. No doubt, additionally, Mr Sage was glad to be made much of, and interested to take part in the preparation of the case. It is, however, a considerable step to suggest that that state of mind would lead an honest man to commit perjury. The most, I think, that can safely be said is that by the time Mr Sage gave his evidence there was no aspect of his attitude to the case or to Orion that could be put in the balance as a counter-indication to his having committed perjury if the latter allegation appeared to be otherwise established.

The meeting of 11 July


This was an important stage in the process of preparation of Mr Sage's evidence in chief. I again gratefully adopt Brooke LJ's account of the evidence relating to this meeting. There are two significantly different conclusions that might be drawn from that evidence. Sphere Drake put it thus in paragraph 20(3) of its skeleton argument:

"Either Mr Sage said nothing on 11 July 1989 about his recollection of what was actually said at the [April 1975] meeting, or he said that he had none."

The distinction is of importance, because if it was apparent on 11 July that Mr Sage was unable to give any useful account of the April 1975 meeting, then the claim that he made in his 7 August draft to recall clearly what he said and why he said it should have evoked deep scepticism: indeed, it could hardly have been true. Further, Mr Sage, knowing that he had tried and failed on 11 July, must have realised when in the witness box that his claim to recall the meeting only dated from August: a matter of obvious significance in regard to the relevant lie and to whether Mr Sage knew that what he said was not the truth.

It will be recalled that the then current draft of Mr Sage's witness statement, sent to him for comment before the meeting with a large number of papers, one of which was the Flint Note, asked at paragraph 36 a number of pertinent questions about the Flint Note, including the crucial (for the present case) questions already set out by Brooke LJ about what Mr Sage had said at the April 1975 meeting. Mr Legg's work-book for the meeting had entries in respect of paragraph 36, which indicated that the paragraph must at least have been mentioned, but there is no note of any specific reply to the questions, which passed in the same form into the next draft of the statement. Sphere Drake said that, particularly in view of the importance attached to it by the solicitors, the Flint Note must have been discussed with Mr Sage. The absence of any recorded reply indicated that he had nothing helpful to say about it, and in particular had not been able to indicate what he had said and in what context at the April 1975 meeting.

The judge did not set out the issues in the detail with which they have been pursued before us, but he concluded (Judgment, p 76) that the note in Mr Legg's book did not reveal one way or another whether the Flint Note had been discussed, as opposed to the general issue of the nature of the April 1975 agreements being raised. It appeared from the notation beside the paragraph containing the questions that something had been said as to the nature of the 1975 agreement, but it did not necessarily follow from that that the specifics arising from the Flint Note had been pursued.

I agree that it is surprising if the Flint Note was not discussed in detail on that occasion, since, by the questions in the draft and by the possession of copies of it both on the part of the solicitors and on the part of Mr Sage, it was clearly on the agenda, and had been seen as important by the solicitors. However, both Mr Legg and Mrs Good were firm in their evidence that if Mr Sage had addressed the questions, even in terms of saying that he could add nothing, that would have been noted. In so saying they were appealing to their normal practice and professional way of doing things, evidence of a kind that Sphere Drake said we should discount in favour of the documents. This incident however illustrates the dangers of the latter approach. If the documents were a formal inter partes record or legal document, such as the telexes or charterparties in The Ocean Frost, then attempts by their authors to explain them away may not carry much weight. But in this case it is impossible to know how to interpret internal documents that are relied on for what they do not say without assessing the normal practice in drawing them up. Mr Sumption suggested that, even accepting the solicitors' evidence, on this occasion Mr Legg's normal practice might have deserted him. There is no reason to think that, and every reason not to, in view of the solicitors' perception, stressed by Sphere Drake, of the importance to the case of understanding the Flint Note.

I therefore would conclude that while the Flint note was before the meeting on 11 July, and while the general nature of the April 1975 meeting was mentioned, Mr Sage did not address the specific questions raised by the solicitors. I respectfully agree with Nourse LJ that the most obvious explanation is that Mr Sage came to the meeting underprepared, and was asked to go away and give specific consideration to the questions raised in relation to paragraph 36. Moreover, the scepticism that might on first sight seem appropriate in regard to that conclusion is in my view largely offset by the fact that the questions persisted in the same form into the next draft of Mr Sage's statement. I do not think that that was just an accident, since in the case of the next following paragraph such replies as had been obtained were put into the text, though since they did not address the specific questions the latter were also retained. If the questions in paragraph 36 had been addressed, and Mr Sage had said that he could not help, I do not see how they could simply have been repeated, in entirely unaltered form, except in pursuit of an improper hope on the part of the solicitors to get Mr Sage to do better on another occasion. That allegation was indeed made at the trial. The judge rejected the charge, and it is not repeated before us.

Mr Sumption said in his reply that whatever the true position was about the 11 July meeting, it was sufficient for his case to point out that, whatever then occurred, Mr Sage did not volunteer, as if he held it he surely would have done, his clear recollection of what he had said. That is a strong point as to Mr Sage's actual state of recollection; but it is plainly different from saying that it became clear at the meeting that Mr Sage had no such recollection.

The amendment of the pleadings and the 27 July 1989 letter


I would not characterise the decision to amend the pleadings in advance of holding a full statement from Mr Sage as improper, though it may have been premature. It is however important to note what in fact was pleaded, and the context in which the point arose. The issue was whether the agreement had been a goodwill agreement. It is of course now obvious how important in support of that contention was Mr Sage's evidence, once given, that he remembered that being said in terms. But in July 1989, before (as is Sphere Drake's case) the lawyers knew that Mr Sage was going to say that, they were still wrestling with the first question of the nature of the agreement. They having, apparently, been told at the meeting of 11 July that the Flint Note supported Mr Sage's previous claims as to the agreement having been binding in honour only, it may have been over-zealous immediately to amend, but it is well possible to see why that happened. And what in any event is quite clear is that if, as alleged, it had been apparent at the 11 July meeting that Mr Sage could not endorse the solicitors' deductions from the Flint Note, it would have been extraordinarily rash, and improper, to permit counsel to advise on the amendment without telling him that.

I agree with Mr Sumption's submission that the danger of pleading a case without full instructions from the most important witness is that, the witness being told that the case is now thus and so, he will be tempted, even innocently, to conform his evidence to that case. That is what is said to have happened here, mainly because of Mrs Good's letter of 27 July, the relevant parts of which have been set out by Brooke LJ. As to that letter, it is important to note two things. First, it concentrates on the nature of the agreement, and not on the particular words used by Mr Sage. It was on the former point that Mrs Good said that the Flint Note was consistent with what Mr Sage had already told the solicitors; and on the judge's findings she was right to say that.

Second, the judge had the advantage, which this court has not, of seeing the terms and context of the letter investigated directly with Mrs Good. His conclusion was as follows (Judgment, p 81-83):

"Although Mr Sumption said Sphere Drake was not making any submissions on whether the letters were proper letters for a solicitor to write his submissions about them plainly amounted to a serious criticism of the author, Mrs Good.


The thrust of that criticism was that Mrs Good having failed to get Mr Sage or Mr Rousell to "endorse" the Flint Note was now putting them under insistent pressure to persuade them to do so and to adopt the new pleading, in particular by saying that the Flint Note and the amended pleadings were consistent with what they had already said and stating that it was "vital" to Orion's case to establish that the April 1975 agreement was not legally binding.

The underlying theses of this criticism were that (1) Mr Sage had in fact already told Linklaters & Paines at the April 19 meeting that the agreement was legally binding (2) that Mr Sage must have focused on the Flint Note before and yet it had made no impact on him, and (3) that Mrs Good had "tried and tried" on July 11, only a fortnight earlier, to get Mr Sage to adopt the Flint Note but he had not done so but had done the opposite. I reject all of these theses.

The first is derived from the notes of the April 19, 1989 meeting and I have considered and rejected it there. The second is in my judgment both accurate and inaccurate. It is accurate in that the Flint Note did not make any significant impact on Mr Sage when he first saw it. It is inaccurate if it is intended to suggest that Mr Sage had yet paid any great attention to it. The third I have also considered and rejected when addressing the July 11 meeting.
Having seen and heard Mrs Good give evidence I accept unhesitatingly her evidence that had Mr Sage or Mr Rousell to her knowledge or belief said anything inconsistent with the contents of her letter she would not have written it in the terms she did. She, like Mr Legg, said her impression was that Mr Sage had not yet worked on the documents and the documents before me give me the same impression. She also said frankly that she regretted the use of the word "vital". Revealingly, her reaction to the suggestion that she would have sought to tell or to influence Mr Sage as to what he should say or that Mr Sage would be influenced by her or anything she said was one of genuine incredulity."

Brooke LJ in his judgment views the letter, and Mrs Good's conduct in writing it, in a markedly different light. His concern about the propriety of what was written leads him to think that the judge should have taken a much more cautious and sceptical approach to Mrs Good's evidence in general than, as the passage from his judgment quoted above shows, the judge in fact did. I of course respect my Lord's concern, but I do not see that it assists us in relation to the issues in this case. Mrs Good's oral evidence, apart from her explanation of the documents, related to whether she had sought to over-persuade Mr Sage to give evidence that he could not properly give, and, as she volunteered, what her assessment was of the likely success of any such endeavour. To the extent that such evidence assists our enquiry (and its value is in fact limited) by far the best person to assess its reliability is the judge who saw and heard it given: and given in circumstances where, as the judge said, in reality the propriety of Mrs Good's professional conduct in relation to the 27 July 1989 letter was being subjected to the severest of criticism.

It would therefore be a strong thing for this court to form a view on the reliability of Mrs Good's testimony different from that of the judge. Nor indeed was it Sphere Drake's case that the terms of the 27 July 1989 letter threw any light on the reliability of that testimony, since as the judge recorded in the passage that I have just quoted Sphere Drake disclaimed any criticism of the propriety of the letter. What is however submitted before us is that, even though unintentionally, the letter conveyed to Mr Sage that he was expected to support the implications as to what happened at the April 1975 meeting that could prima facie be drawn from the Flint Note; and that he conformed to that requirement by claiming, for the first time, a recollection of the words used by him that was a genuine recollection and not something reconstructed from the Flint Note. That, it was said, was done by Mr Sage in his draft witness statement of 7 August 1989.

Mr Sage's draft of 7 August 1989


It was alleged that the process of Mr Sage producing the evidence that the solicitors looked for was to be found in the paragraph of his witness statement drafted by himself which has been set out by Brooke LJ. The paragraph was important not least because, as the judge found (Judgment, p 135):

"Mr Sage had not said before August 7 that he had said at the outset of the meeting or at any time during it that it was a goodwill agreement and not a legal agreement, and, even if he had, he had not done so clearly, and there was and is no document to show that he had."

The judge accepted the evidence of Mrs Good, who unlike himself and ourselves had had extensive dealings with Mr Sage when he was still alive, that Mr Sage certainly would not have been influenced by her to say something that was not the case. Unless we are entirely to discount the view that the judge formed of Mrs Good, whom he found to be careful, impressive and obviously intelligent (and I have already indicated my conclusion that we should not do so) that evidence cannot be simply ignored. It goes to an important issue in the case, Mr Sage's intentions and knowledge at the time that he drew the controversial paragraph of his witness statement. Although Sphere Drake stressed that it was not essential to its case to demonstrate that Mr Sage knew that he was lying in the 7 August document, it seems to me, as it does to my Lords, that such a finding, if it had been made, would have been of considerable significance in determining the ultimate issue of whether Mr Sage lied at the trial.

I say that for the following reason. Mr Sumption properly pointed out that the lie contained in the 7 August draft, if it was one, was different from the relevant lie on which he relied as Mr Sage's act of perjury. He however said that if he had to express an opinion on the matter, Mr Sage's claim that he recalled clearly making the goodwill point at the outset of the meeting was likely to have been untruthful. That was because it could only have been true if the Flint Note had jogged his memory of that fact, something that was very unlikely to have occurred. I of course accept Mr Sumption's statement as to the limits of his case. The importance of the point, however, is that if Mr Sage knew in August that he was lying when he said that he recalled the words that he used in 1975, it is much more difficult to think that he may not have known in November that he was lying when he said at the trial that he had always recalled his statement.

That therefore requires us to look closely at the circumstances of Mr Sage's August witness statement. The judge did not directly address the question of whether Mr Sage was telling a calculated untruth in August: perhaps because, since the case before him at least came close to alleging deliberate and not, as before us, improperly incompetent subornation of Mr Sage, the issue was not as important as it now would seem to be. He did however discuss Mr Sage's possible motives for lying to Hirst J. Sphere Drake said that he should not have done so since motive was irrelevant. I do not agree, not least because of what was said by Lord Goff in The Ocean Frost:

"It is frequently very difficult to tell whether a witness is telling the truth or not; and where there is a conflict of evidence...reference to the objective facts and documents, to the witnesses' motives, and to the overall probabilities, can be of very great assistance to a Judge in ascertaining the truth."

That must of course be a fortiori the case where the issue is not whether a witness that the judge has heard was lying to him, but whether a man whom he has not heard was lying to someone else.

I have already touched on the issue of motive when discussing the "charm offensive". Of the motives suggested by Sphere Drake the potentially most plausible, as it seems to me, was that Mr Sage, after a period of difficult relations with Orion, was now keen to assist his former employers' cause, appreciative of their respect for him, convinced of the justice of their case, and perhaps anxious to justify his role in events even though they were now fourteen years in the past. But I repeat that it is a long step from any of those states of mind to infer a deliberate decision to lie in that behalf. The person to whom the allegedly lying statement was made in the first place, Mrs Good, was found by the judge to have reliably concluded, in an account given to him that he characterised as wholly truthful, that Mr Sage's judgement had not been overborne. The judge said (Judgment, page 83):

"[Mrs Good said that Mr Sage] was a fair minded person. He was well capable of taking his own view about things and expressing it. His view was that he had been trying to tell me that this was, in different words, not a legally binding agreement, a goodwill agreement, and it was my fault that I had failed to understand it."

And even granted Mr Sage's apparent determination to persuade the solicitors that the agreement had been a goodwill agreement, it does not follow that he would decide to lie about the evidence that demonstrated that fact.

I therefore conclude that it is far from established that Mr Sage lied in his statement of 7 August when he said that he remembered making the point recorded in the Flint Note. I have not of course overlooked Mr Sumption's argument that Mr Sage could only sensibly be acquitted of lying on that point if the Flint Note had jogged his memory of the meeting, and that that was very unlikely. That is certainly so in respect of the question of whether what Mr Sage said was objectively correct. But I am here concerned with the different question of whether Mr Sage knew that what he said was incorrect, but decided to say it nonetheless.

"I recall clearly"


That however is not the only issue that emerges from Mr Sage's draft of 7 August 1989. In that draft, the original version of what became paragraph 65 of his witness statement, Mr Sage did not merely say that he recalled saying at the April 1975 meeting that the agreement was a goodwill agreement, but said that he remembered clearly saying that. Two important arguments have been based on his use of that word. The first relates to the process whereby Mr Sage was persuaded to omit this passage from his eventual statement, and the light that that is said to throw on Mr Sage's state of mind, and the beliefs of Orion's solicitors about that state of mind. The second, which is emphasised in his judgment by Nourse LJ, considers the implications for Mr Sage's general veracity of his original willingness to say that he remembered the April 1975 meeting clearly. I address those issues in turn.

The amendment of the witness statement


The introductory words to Mr Sage's own draft were removed from his witness statement after discussion with Linklaters. Sphere Drake suggested that it was significant that the whole phrase and not just the word "clearly" had gone.

"The whole of that part of his witness statement which laid claim to an independent recollection" had been removed, the implication being that the solicitors did not believe, or at least did not believe with confidence, that Mr Sage had the recollection that he claimed. That, if correct, is of course a point of some significance, since it would indicate that skilled observers thought that Mr Sage knew that his claim was false; and that Mr Sage had had that brought home to him.

Here again, however, the point is only plausible if we confine ourselves to deductions from the documents, without regard to the evidence of those responsible for documents. Mr Henshaw, who oversaw the preparation of the witness statement, said that he could not recall why the deletion had been made, but that he thought it might have been because the claim as formulated by Mr Sage was thought to be overstated in the context of a gap of fourteen years. He however said that even after that amendment this part of the witness statement, now starting "I made the point at the outset", continued to claim recollection, was intended to do so, and would be read by others as doing so. He was adamant that in the preparation of evidence a clear distinction was to be made between recollection and reconstruction. Where a witness was only making a reconstruction from documents, that should be stated. Mr Henshaw's professional standards as a solicitor would not permit him to put a claim forward that would be assumed to be recollection if in truth it was or might be only reconstruction. (Transcript, Day 8, page 54).

This evidence was given by a man whose conduct as a solicitor and general reliability had been tested before the judge in the most pressing of circumstances over a long period, and whom the judge found to be (Judgment, p 55):

"careful, straightforward and professional in the best sense of that word. He was a witness in whose honesty and reliability I had complete confidence."

It is therefore scarcely surprising that the judge found this part of Mr Henshaw's evidence compelling in putting the change in the terms of Mr Sage's witness statement in its proper light. The judge said (Judgment, p 90):

"Although Mr Sumption sought to suggest that it was of some significance that all three words were deleted and not just the word "clearly", I do not think it was. I can well understand why the words were considered inappropriate after 14 years and the effect of their deletion was not (as Mr Sumption seemed to suggest but Mr Henshaw rightly denied) to put the resulting draft outside the realm of recollection but only outside the realm of clear recollection. Mr Legg thought that it was a drafting point. So do I."

The judge's reference to the effect of the change clearly reads back to Mr Henshaw's evidence which I have just set out. To describe the point as one of drafting perhaps unfortunately appears to trivialise what was potentially a matter of some importance. The judge's finding is however entirely clear. The evidence that he heard and accepted showed that the documents could not bear the weight that Sphere Drake sought to place on them.

There is, however, another aspect of this matter. Brooke LJ draws the inference that the solicitors, and Mr Henshaw in particular, specifically warned Mr Sage that he could not properly claim a clear recollection of the 1975 meeting. If such an exchange had taken place, that would be a significant pointer to Mr Sage's having been aware that what he said to Hirst J about the length of his memory could not be true. I do not, however, think that such an inference is open to us.

That such a warning had been given does not seem to have been raised with Mr Henshaw at the trial. I make that observation not just as a technical point of procedure, or even of fairness, but because it is very difficult for an appellate court to reach conclusions about the details of a particular transaction when those details have been explored at the trial with neither of the parties to the transaction: Mr Sage because he was dead, and Mr Henshaw because he was never asked about it. The point however is not to be viewed merely in these negative terms. That Mr Henshaw gave Mr Sage such a warning would seem to be positively inconsistent with Mr Henshaw's evidence at the trial. In the light of what happened later, and of what Mr Sage said before Hirst J, it is very difficult to think that a perceived obligation to give a specific warning would not have remained in Mr Henshaw's mind: even if, which seems unlikely, such a step on his part had not been noted at the time in the almost pedantically detailed notes kept by Linklaters. In those circumstances Mr Henshaw, found by the judge to be a reliable solicitor and an honest man, would have felt obliged to make the fact of the warning clear to Langley J. He could not have left the evidence in the state that it is, giving really very little assistance in assessing why the alteration was made in Mr Sage's statement and what that indicates as to Mr Sage's own state of mind about his evidence.

Did Mr Sage demonstrate a propensity to lie?


Nourse LJ points out that when Mr Sage made the claim to clear recollection he must have known that, even if the Flint Note had prompted some recollection, it could not have been a clear recollection. He had therefore been prepared to give false evidence on a point that Orion's solicitors had told him was vital to the case. By the time of the trial he may genuinely have thought he had a clear recollection, and therefore it did not follow (and was not alleged) that when at the trial he claimed clear recollection he was perjuring himself. But the readiness to give evidence on that point at a time, in August, when Mr Sage knew that what he said was false was of great importance in determining whether he would have been prepared to give false evidence in respect of the relevant lie at the trial. This was thus evidence, and strong evidence, not of the alleged lie itself but of propensity to lie on Mr Sage's part.

The judge did not deal with this aspect of the evidence. That was because this construction of what occurred does not appear ever to have been put to him, the argument centring on the removal of the whole phrase, as discussed above, rather than on the word "clearly". Nor, I think, did the present argument form part of Sphere Drake's case before us. It is, however, a strong and important argument, to which I have given anxious consideration.

I am not, however, able to agree that Mr Sage's proffered evidence in August is a sufficiently compelling demonstration that he was prepared to perjure himself. Mr Sage was writing when the issue uppermost in everyone's mind was still whether the April 1975 agreement had been a goodwill agreement at all. The Note confirmed his stated view on the latter point, a view about which the solicitors had been until then strongly sceptical. At that stage, and in the process of preparation of evidence, the distinctions between the nature of the agreement; how the agreement had been negotiated; Mr Sage's recollection of the latter process; and the length of time for which he had held that recollection; now all so clear to us, cannot have presented themselves to the protagonists with that same clarity. In those circumstances, I am not able to find it a signal mark of dishonesty that Mr Sage, faced with the Flint Note, should have said that he clearly remembered what was set out in it.

When addressing the dishonesty, as opposed to the factual inaccuracy, of a claim to clear recollection, it is also important not to overlook the considerations already set out that apply to Mr Sage's claim to have had any recollection at all. To hold that Mr Sage was deliberately lying in his witness statement involves holding that the professionals who dealt with him simply did not realise that that was the case. As I have already set out at length, the attack before us on the judge's acceptance of those professionals' evidence in my view plainly failed. I cannot therefore keep that evidence out of the balance in seeking to determine, again without any examination of Mr Sage himself, what his motivation and intentions were when he drew his witness statement.

The conclusion that Mr Sage knowingly lied in his August witness statement, being on grounds of propensity an important demonstration that he committed perjury at the trial, must for that reason be established with the certainty necessary for a perjury allegation. I do not consider that it has been so established.

The Tardis meeting


What transpired at this meeting was the basis of the allegations made by Sphere Drake in their pleadings and at the trial that Mr Boyd QC, Mrs Good and Mr Fordyce, the managing director of Orion at the time of the trial before Hirst J and of the appeal therefrom, had acted in breach of their duty not to mislead the Court of Appeal. The trial was therefore concerned with investigating those allegations, none of which are pursued before us. I have warned myself against assuming that, because the case now is or may be different, this court can, as it were, start again from scratch by reviewing the raw material without regard to the evidence that was given about it or the judge's findings about it.

It may, however, be that the real as opposed to the formal issues have not much altered. Sphere Drake's eventual submission before Langley J, as recorded by the judge at p 140 of the Judgment, was that, Mr Boyd and Mrs Good being persons of integrity, were not charged with consciously misleading the Court of Appeal, but rather with failing to apply their minds to the implications of what was being said for the proper discharge of the duty that they owed to the Court of Appeal. How that made them still guilty of the breach of duty alleged in the pleadings is not immediately apparent to me, but that point is now academic. More substantial is the judge's justified comment that that way of putting the case was unfair, because it hid a reluctance to face the implications of the criticism in fact made. Even leaving aside Mr Fordyce, both Mr Boyd and Mrs Good as professional lawyers must have been acutely aware that if they had reason to think that the evidence on the basis of which they sought to hold Hirst J's judgment was unreliable, and much more so if Mr Sage had committed perjury, they could not just let things lie and carry on as if nothing had changed. Mrs Good indeed emphasised that point about the Tardis meeting in her witness statement. It hardly needs to be specifically articulated in the case of leading counsel.

The point indeed goes further in the case of Mrs Good. She was not just a senior lawyer who was surveying the case from the outside. Unlike Mr Boyd, she had been closely concerned with the preparation of Mr Sage's witness statement, and knew what he had said and when he had said it. If she accepted at the Tardis meeting that Mr Sage had lied, she must have known that all along.

It was in that context that the judge said (Judgment, p 140) that

"there were no [adverse] implications arising from anything said at the meeting; had there been, having seen those who attended give evidence, I am sure that the matter would have been raised and discussed. That it was not is a further reason why I conclude that Sphere Drake's submissions about the Tardis meeting and the records of it are misconceived."

That conclusion remains relevant to the task confronting this court, and, again, cannot in my view be lightly discounted.

The role now played in the case by the Tardis meeting was summarised by Mr Sumption, at least in the context of what was allegedly said by Mr Boyd, in submissions on Day 2 of the appeal (transcript, p109):

"the contemporaneous note, whatever may have been suggested nine years later to Langley J , pretty clearly demonstrates that Mr Boyd was advising that Mr Sage told an untruth in the witness box, and for that reason it was not appropriate to waive privilege. The reason why this is, in fact, an arid dispute is a point which I also made in relation to Mrs Good's note. Mr Boyd, whatever his own view...did not think that there was much prospect that the Court of Appeal would believe in Mr Sage if it saw...the privileged material. Either Mr Boyd thought that Mr Sage was telling an untruth, or he recognised that the Court of Appeal would think so if they were allowed to see the privileged files. For my purposes, it may not matter a great deal which is right."

The first of those alternatives is however excluded by Mr Sumption's concession before us that he made no criticism of Mr Boyd's submissions to the Court of Appeal: quite apart from the judge's analysis of the implications of, and his rejection of, any such argument. The second alternative ignores the agenda of the Tardis meeting, which was to determine whether there was any self-contained record of Mr Sage previously saying what he had said to Hirst J, which could be put before the Court of Appeal without contingently opening up the whole of Linklaters' dealings with him: a prospect that the judge fully understood Mr Boyd to regard as in any event out of the question on the third day of a heavy appeal. It also ignores Mr Boyd's evidence that what he feared on the part of the Court of Appeal was not so much an adverse conclusion as to Mr Sage's veracity as an adverse conclusion as to his reliability: transcript, Day 6, page 52. In the context of Mr Boyd's decision about the tactics of the appeal, that was of course a distinction without a difference. In the context of the submissions made to us the difference is extremely important.

There is, however, an issue arising out of the note settled by Mrs Good some days after the Tardis meeting. In that note there is attributed to Mr Boyd both the observation that to waive privilege would destroy Sage's credibility; and the observation that "Sage had gone too far in saying that he recalled saying this at the outset of the meeting and had always said so". Mr Boyd told the judge that he did not make either remark: Judgment, p 132. Mr Sumption said, with reason, that if Mr Boyd did not make the remarks, they must have been made by Mrs Good.

At the trial, Mrs Good continued to assert that Mr Boyd had made in particular the second of these remarks. It does not seem to have been directly put to her that that was inconsistent with Mr Boyd's evidence. Rather, she was asked to accept or agree with what was asserted to be Mr Boyd's acceptance at the Tardis meeting that Mr Sage had lied: broadly, the allegations that I have just addressed. Mrs Good rejected these suggestions, and indeed the suggestion that anyone at the Tardis meeting had thought Mr Sage to have been lying, in a passage that Mr Sumption submitted to the judge had displayed her defensiveness and tendency to wishful thinking. The judge, having seen and heard that part of Mrs Good's cross-examination, did not accept that submission. Apart from that, the trial does not seem to have focused on the fact that Mrs Good wrongly asserted that she had not made the particular remarks. That in principle raises an issue about her reliability, though I would be reluctant to conclude that, if that had been made apparent to the judge, it would have altered his otherwise favourable view of Mrs Good.

On the substance of the issue, I would observe as follows. First, although Mr Boyd did not have detailed knowledge of the previous exchanges (a factor that Sphere Drake relied on in inviting us to discount his impression of Mr Sage's honesty), Mrs Good did. In reality, she could hardly have thought that scrutiny of those exchanges would show Mr Sage to be a liar without it being the case that she had permitted an appeal to be pursued on the basis of evidence that she knew to have been, in one respect at least, perjured. As we have seen, that allegation was not made against her even by the end of the proceedings before Langley J, and it certainly is not made before us.

Second, we have to assess what we now know to have been Mrs Good's observation about Mr Sage having gone too far without the benefit of her having been cross-examined about what she meant. I do not say that by way of criticism, because Mrs Good continued to assert or assume that it was Mr Boyd who had made that remark; and thus any confusion arising from the form of the note was, if it was anyone's fault, the fault of Mrs Good. We do however in those circumstances have to do the best that we can. If what she said was indeed that Sage went too far in saying that he recalled saying this at the outset of the meeting and had always said so; then, first, the last phrase was a mistaken report, because whatever else Mr Sage had said in his evidence he had not claimed always to have said that he remembered; and second, if Mr Sage had made that claim, everyone at the meeting would have recognised that it was wrong. That last point was indeed the very issue that had caused the meeting to be called: to try to isolate a piece of documentary evidence that showed Mr Sage telling Linklaters the detail of what he told Hirst J.

Looking at the probabilities, as I have to do, it seems to me that no more is established than that it was recognised that documentary support for the detail of Mr Sage's evidence was not available. Any other interpretation of these passages almost inevitably implicates Mr Boyd and Mrs Good in the breach of their duty to the Court of Appeal that is no longer asserted against them.

That leaves Mrs Good's observation at the Tardis meeting that she had "tried and tried" to get Mr Sage to say that the April 1975 agreement had been a gentleman's agreement, but he would not do so. This exchange is of course important in relation to the factual issue of Mr Sage's actual length of recall. As to the position of Mrs Good, however, the judge was in my view plainly justified in accepting her evidence that the remark was made in relation to the period in 1985 and 1986, and did not relate to the 11 July 1989 meeting. When Mrs Good made this observation at the Tardis meeting she was under pressure from Mr Fordyce as to the late pleading of the "non-binding agreement" claim, and it made complete sense that she should explain the origins of the unamended pleading, and made no sense (and would have displayed a considerable degree of, at best, deviousness) that she should say that the evidence was known to be still unavailable when it was decided to amend the pleadings.

Mr Sumption said that Mrs Good's explanation could not be right, first because the issue of there having been an express statement as to the non-binding nature of the agreement at the April 1975 meeting did not arise until the discovery, in 1989, of the Flint Note; and second that Mrs Good's expressed desire to establish that the agreement had been non-binding went against her own view in 1986 that the agreement was binding. The first of these criticisms overlooks the limited nature of the issue that was under discussion at that stage of the Tardis meeting. Mr Fordyce was complaining about the pleading. Mrs Good was saying that the case as pleaded in 1989, positively asserting the non-binding nature of the agreement, could not have been pleaded in 1985 because she could not obtain from Mr Sage any useful instructions to that effect. The point was not limited to the exchanges or lack thereof at the April 1975 meeting. The second criticism would appear to invert Linklaters' thought-processes. So far as I can trace it through the documents and evidence, Linklaters appear to have concluded that the agreement was binding because they could not find reasons for arguing otherwise: and not that they would not search for such reasons because they were convinced that the agreement was binding. That also was the conclusion of the judge, who had to consider an allegation of this order when assessing the criticisms made of Linklaters' conduct of the case.

I have gone into this matter in some detail because if Mrs Good had made her "tried and tried" remark in relation to the 11 July meeting it would be powerful evidence that she knew that Mr Sage did not recall what had been said at the April 1975 meeting, and thus powerful evidence that she did indeed seek in her letter of 27 July 1989 to get him to say something that she and he knew that he could not say; and that he knew that when he responded to that letter with his statement of 7 August 1989. As it is, however, the judge was in my view right, and was certainly well outside any area in which this court can interfere, when he accepted Mrs Good's evidence that none of that was the case.

The 9 November rehearsal


I do not use the description "rehearsal" in any pejorative sense. The encounter between Mr Sage and Mr Henshaw shortly before the trial is however of importance, as indicating what Mr Sage may have been expecting to occur at the trial. Mr Henshaw's evidence was that he did not remember the session, but he accepted from looking at the list of questions drawn up for it that he would probably have warned Mr Sage that it would be suggested to him that the evidence based on the Flint note was an afterthought, of which Mr Sage had no independent recollection. Not only was that Mr Henshaw's professional assessment, but also such a warning to Mr Sage was made the more likely because Mr Henshaw was well aware that Mr Sage had before 7 August said nothing about any specific agreement that the April 1975 agreement should be non-binding, as opposed to being adamant that it was for various other reasons non-binding.

This exchange between Mr Henshaw and Mr Sage is of some significance when considering whether Mr Sage committed perjury in terms of the relevant lie at the trial; to which issue I now specifically turn.

VIII Is it established that Mr Sage committed perjury?


A high standard of proof is required before a charge as serious as one of perjury will be found to have been made out. Mr Sumption and the judge certainly did not understate the rule when they accepted (Judgment, p 180) that for perjury to be established it must be shown to be a distinctly more probable explanation for what had occurred than any other. While it is accepted that the standard of proof is not the criminal standard as such, as Ungoed-Thomas J put it in Re Dellow's Will Trusts [1964] 1 WLR 451 at p455 (a statement cited with approval by the majority of the House of Lords in In Re H (Minors) [1996] AC 563 at p586G):

"the gravity of the issue becomes part of the circumstances which the court has to take into consideration in deciding whether or not the burden of proof has been discharged. The more serious the allegation the more cogent is the evidence required to overcome the unlikelihood of what is alleged and thus to prove it."

And while there are some allegations more serious than an allegation of perjury, they are not many in number.

The judge in fact went further than merely referring to the standard of proof, since he appears to make a positive finding at page 7 of the judgment that Mr Sage did not commit perjury. I have to say that the evidence comes nowhere near to justifying such a finding. Indeed, in a case where the witness has said something that is agreed not objectively to have been the case, it will always be difficult to make a positive finding that he did not lie without hearing evidence in explanation from him. But that is hardly the point. The issue for us is whether, despite the judge's conclusion, Sphere Drake has demonstrated to the necessary high standard that Mr Sage did perjure himself.

Sphere Drake's case had two aspects. First, that the judge simply misdirected himself, and addressed the wrong factual issues, in the lengthy passage in his judgment where he explained his conclusion that Mr Sage did not commit perjury. Second, that in the light of the history the overwhelming probabilities were that Mr Sage must have known that what he was saying was false.

The judge's findings


The judge set out his conclusions on the question of perjury at some length, at pages 204-208 of his judgment, in a passage that has already been quoted in extenso by Brooke LJ. Sphere Drake say that, quite apart from his errors over the factual findings on which this analysis is based, the judge's conclusions fall because they do not address the correct issue. Most of what he says, and in particular sub-paragraphs (3) to (7), is directed at the question of whether Mr Sage always believed the agreement to have been a goodwill agreement: which was not the relevant lie.

The judge opened his exposition with an absolutely accurate statement of the relevant lie. He again accurately set out the relevant lie as the allegedly perjured matter on which the case turned when he returned to the further question of whether the relevant lie, if it was a lie, had been material to Hirst J's decision: Judgment, p. 209. However, I am driven to conclude that in paragraph (3) and following he did lose sight of that as the essential issue. I venture to suggest that there were two reasons for that. The first is the judge's scepticism, or at least uncertainty, as to whether Mr Sage had uttered the relevant lie at all. Although the judge dealt with the perjury issue on the basis that Mr Sage had in fact used the words alleged, his belief in the elusive nature of the allegation of perjury, expressed in paragraph (2) of his reasons, seems to have led him to concentrate more on other aspects of Mr Sage's evidence. The second important aspect of the evidence was Mr Sage's belief as to the nature of the April 1975 agreement.

It will be convenient to repeat paragraph (3) of the judge's reasons, where he addressed that latter point and its implications:

"(3) One of the key planks in Mr Sumption's submissions in support of the allegation of perjury was that the discovery of the Flint Note and the circumstances in which in August 1989, Mr Sage came to include it in paragraph 65 of his witness statement could not have been forgotten by Mr Sage at the time he came to give his evidence only some three months later in November 1989. Hence, it was submitted, that this was a case where the witness must have been conscious of what was reconstruction and what was recollection about the words attributed to him. However, on my findings, it is clear that the Flint Note did not make an impact on Mr Sage. There was no conversion, Damascene or otherwise, on the part of Mr Sage (unlike, maybe, the lawyers) when he saw it, as Mr Sumption submitted was the case. Nor, like Mr Fordyce and Mrs Atkins, did Mr Sage see as important a distinction between using the words the Flint Note attributed to him and what he had been saying from the start or at least believed he had been saying from the start namely that the meeting had given rise only to a goodwill agreement. There can be no other sensible explanation of his leg-pulling of Mrs Good and Linklaters & Paines about the Flint Note : perhaps you will believe me now. For the same reasons Mr Boyd's submission that there was no half-way house between Mr Sage being right or telling lies can now be seen, as Stuart Smith LJ and indeed Mr Mance saw it, as a forensic success but wrong."

The judge was I think here dealing with two matters. The first was Sphere Drake's claim as to the impact on Mr Sage of the process of production of his witness statement in the summer of 1989, a matter to which I shall have to return. The second was the circumstances in which Mr Sage used the words said to constitute the relevant lie.

As I sought to show in Part V of this judgment, the context and importance of the exchange in which Mr Sage used the words said to constitute the relevant lie was all about whether the whole agreement, or only part of it, had been binding in honour only. It was appropriate that the judge should emphasise that Mr Sage had always been clear on that point, and therefore might not have attached the importance to the questioning about the length of his memory of the words used at the meeting that it now bore in the case. However the actual dishonesty alleged relates to Mr Sage's claim that he had always had a recollection of using the words at the meeting. Whilst the matters set out here by the judge are, for reasons that I will develop later in this judgement, important in that connection, it is in the context of the relevant lie that they have to be addressed. That is not done with sufficient clarity in the present passage in the judge's judgment.

I conclude, therefore, that the judge's approach did not satisfactorily demonstrate that the charge of perjury was not made out. That, however, is not the end of the matter, since it is still necessary for the appellants to demonstrate that, on whatever approach is taken to them, the facts of the case compel a finding of perjury. To that issue I now turn.

Facts argued to demonstrate Mr Sage's perjury


I have already set out the way in which Sphere Drake concentrated on the period in the summer of 1989, comparatively shortly before the trial, and on the developments that took place in Mr Sage's evidence in chief, including in particular his volunteering of the new draft of 7 August once he had seen and considered the Flint Note. That was said to have been so striking a departure from Mr Sage's previous posture that he cannot have forgotten three months later, when tested on the point in cross-examination, that his claimed recollection was dependent, and wholly dependent, on the Flint Note. I venture to repeat how Mr Sumption put this point in argument:

"What we know is that he knew that a major new point had just been introduced into the litigation. He knew that it was a point that was not reflected at all in the draft of his witness statement that he was rewriting. He knew that in his own hand he was writing brand new matter to insert into it....It is really quite impossible to suggest that when he was giving evidence about this only three months later, in November, he had forgotten the way in which what everyone agreed was a critical new point had been drafted up by himself."

Mr Sumption stressed that this argument did not rest on establishing that Mr Sage had acknowledged at the meeting on 11 July that he had no recollection of the matters set out in the Flint Note, and had that in mind when drawing up his draft: though he submitted that the overwhelming probability was that Mr Sage did say that at the 11 July meeting, and did therefore know that his 7 August draft contained a lie. Mr Sumption said that it was enough to establish that Mr Sage, when drawing his draft, knew of the great importance attached by Orion's lawyers to the point, which had been introduced into the case for the first time by the Flint Note.

This would be an extremely powerful argument were its premises correct. Those premises must however include the assumptions that Mr Sage

(i) realised from Mrs Good's 27 July letter that she was urging him to adopt what was for Orion a new case; and
(ii) decided because of her urging of that case to improve his evidence by claiming to recollect what he had said at the April 1975 meeting.


Had that been shown to have been the origin of and reason for the appearance of the claim in paragraph 65 of Mr Sage's witness statement, then I agree that that history would have remained in his mind until the trial. It is, however, very difficult to assert that those were Mr Sage's thought-processes without assuming that what Mr Sage wrote in his witness statement in August was known by him to be untrue. For the reasons set out in an earlier part of this judgment, I do not find it to be sufficiently established that Mr Sage decided to lie in his August statement. Nor can I accept with sufficient confidence that the case that he was asked by Mrs Good to support, if that indeed was the objective effect of her letter, was different from that which he had previously put to Linklaters. When Mrs Good said that the Flint Note opened her eyes to what Mr Sage had been saying all along, she was talking about the issue that in my judgement she was also talking about in the 27 July letter: that the 1975 agreement had indeed been a goodwill agreement. As the judge said, that was no new point, no Damascene conversion, for Mr Sage.

I am therefore not prepared to hold that Mr Sage had what must be characterised as guilty knowledge arising out of the exchanges in July and August 1989; must therefore have had imprinted on his mind that he had never recalled the details of the April 1975 meeting until he reconstructed them from the Flint Note; and cannot have been other than acutely and uncomfortably aware of that when he gave evidence to Hirst J in November 1989. But all of those steps in the argument must be established if the principal ground on which Sphere Drake argue that Mr Sage must have known that he was lying is to be accepted.

Mr Sumption further argued that the case in support of Mr Sage's dishonest knowledge was reinforced by what happened at the pre-trial rehearsal with Mr Henshaw on 9 November. I agree with Mr Sumption that the judge should have devoted more attention to this exchange, occurring as it did only a week before the trial, and I myself have been exercised by it and by its implications.

It will be recalled that Mr Henshaw had no recollection of the meeting or of what was discussed at it, but agreed on the basis of the note prepared for the meeting that he would probably have told Mr Sage, amongst other things, that a line of attack on his evidence was likely to be that the Flint Note had put the matter into his mind very late in the day, and that he had no independent recollection of what it described: in the event, the very attack made by Mr Mance (Trial transcript, Day 8, p63). Mr Sumption argued before us (Day 7, page 105) that Mr Sage would not have needed such a warning unless it was apparent to both men that Mr Sage had not remembered the content of the Flint Note until he came forward with his statement of 7 August.

I am afraid that I do not see that that follows. No doubt Mr Henshaw gave the warning because he was concerned on the point. That this was raised then with Mr Sage is one of the reasons why I consider that the claim that he may not have fully understood what the issue was when Mr Mance actually challenged him on the point is not possible to sustain. But, other than that, Mr Henshaw could not recall anything about what was actually said by him, or for instance whether he told Mr Sage of the precise nature of his concerns. Nor do we know what Mr Sage thought, or said, if anything, in response to Mr Henshaw's warning. If Mr Sage had already decided to lie about his recollection, he no doubt would have kept his counsel when faced with Mr Henshaw. But if he had when drafting his statement persuaded himself that he did independently remember the meeting, then Mr Henshaw's warning may well have made no great impact. Of course, if Mr Henshaw had said to Mr Sage in terms that it was plain that he had had no recollection before seeing the Flint Note, and Mr Sage had agreed or at least not protested, then I would readily agree that Mr Sage could hardly have honestly said otherwise a week later. But there is no evidence to that effect and the likelihood is strongly against it: since, as in the case of the suggested earlier warning in connection with the form of Mr Sage's witness statement, Mr Henshaw would have been struck by the discrepancy between Mr Sage's understanding at the 9 November meeting and his evidence a week later, and would have felt obliged to say so both in connection with the original trial and appeal, and before Langley J.

In the event, therefore, I am unable to accept that we know enough about this incident for it reliably to add anything to our knowledge of Mr Sage's state of mind.

That however leaves the less circumstantial but still substantial point that Mr Sage could not in any event have forgotten his state of mind before the discovery of the Flint Note (as the Court of Appeal thought without the benefit of the material just reviewed), and therefore must have known that what he said about his long-held recollection was untrue. Important in that consideration are not just the exchanges in the 1989, already referred to, but also the long history of Mr Sage failing to give any useful account of the April 1975 meeting to which Brooke LJ has drawn attention. It is in the context of those facts that I set out my conclusions on the allegation of perjury.

IX Conclusions on the allegation of perjury


I first deal with some preliminary points.

First, much was made by Orion of the possibility that Mr Sage's memory might have been "jogged" by the Flint note: as indeed Hirst J appears to have thought him to be saying. Mr Sumption was, however, quite right in saying that a memory can only be jogged if it exists in the first place. If Mr Sage's memory had indeed been jogged, then what he said in the witness box would have been objectively the truth, irrespective of whether or not he thought it to be the truth; but one is driven to the conclusion in this case that Mr Sage had no relevant memory. Second, while I do not entirely discount the fact, relied on by the judge, that experienced litigators, whose probity is not now questioned, thought Sage to be an honest man and an honest witness, I would not be prepared to rest my judgment on that fact if objective indications pointed in a different direction. Third, the judge was not right to say that Mr Sage had no motive to lie, at least in the sense that I think the judge really meant, that Mr Sage's perjury was inexplicable. Brooke LJ has set out the factors that make the telling of a lie, if it was told, understandable. But, as I have already said, I do not see the element of motive as going further than that. It has no positive probative force standing on its own. Fourth, as to motive, as to many other matters, our task would be a great deal easier if any evidence, or even any extra-curial statement, were available from Mr Sage himself. I do not of course think that it is in some way wrong in itself that Mr Sage should be accused of perjury when he is not alive to defend himself: Sphere Drake cannot be prevented from pursuing their case just because of the accident of Mr Sage's death. But time and again I have found myself confronted with doubts as to Mr Sage's motives and intentions that would ordinarily be resolved, or be shown to be incapable of resolution, by evidence from, or a deliberate decision not to give evidence by, the person whose state of mind is under scrutiny.

All that said, I return to the judge's statement of the problem:

"there is always a real risk that a witness may honestly fail to distinguish between original recollection, a refreshed recollection and reconstruction, and one of those is a far more probable explanation of Mr Sage's evidence than an allegation that he perjured himself in claiming to recollect what he knew he only reconstructed."

As I have already indicated, I cannot agree with the judge that an honest failure on Mr Sage's part to distinguish between recollection and reconstruction is a far more probable explanation of his evidence than that he perjured himself. But has that explanation been excluded with the degree of certainty necessary to establish a charge of perjury? In my view it has not been. I fear that to some extent that must be a matter of impression, but I would mention a number of factors on which my doubts are based.

First, for reasons that I have already indicated at length, I am not sufficiently confident that Mr Sage's repeated failure to remember what it is now agreed that he did say at the April 1975 meeting must have been so strongly present to his mind at the trial for it to follow more or less as of course that he knew that he was lying when he claimed long-held recollection.

Second, further consideration needs to be given to the circumstances in which the relevant lie was told. For a perjury charge to be based, and based solely, on one or at the most two answers in a very lengthy cross-examination is unusual enough in itself, but I put that consideration on one side. What is more important is that, as I have sought to demonstrate in Part V of this judgment, that exchange occurred during an examination the main thrust of which was, first, to establish that the words, if said at all, were spoken in relation to the clause 3 "get out", and not in relation to the whole agreement; and secondly to establish that Mr Sage had no (current) recollection at all of the April 1975 meeting. It will indeed be recalled that extract 1 and 4 were directed at the former point; and that extracts 1 and 2 were, or may well have been, directed at the latter point.

It is of course easy enough for us now to see that the crucial extract 3, on which the perjury charge rests, was talking about something significantly different: the words actually used at the meeting, rather than the status of the agreement that resulted. But can we assume that that was apparent, and dishonestly apparent, to Mr Sage, who had claimed to assert throughout that the agreement had been a goodwill agreement? It was for this reason that the judge was right to revert in his concluding observations to Mr Sage's belief as to the goodwill nature of the agreement, though as I have already indicated I accept that the terms in which he addressed the issue are open to criticism. The significance of the point is rather that Mr Sage, having had a long-held belief that the agreement was binding in honour only, may honestly have been led by that belief to think or assume that he had also always thought that he had used words to that effect at the start of the meeting.




Third, while, again, the significant contrast between Mr Sage's recollection as he claimed it to exist on the fifth day of the trial, and his recollection as it had existed over the previous years, could hardly be clearer to those involved in this case, we must I think be cautious before attributing a similar clarity to Mr Sage. By that I do not mean that Mr Mance's question in extract 3 was not clear; nor that Mr Sage did not then understand what he was being asked. But if Mr Sage had in August honestly persuaded himself that he did indeed then recall the terms of the April 1975 meeting (and for the reasons that I have given at length it is not established to my satisfaction that that was not the case), then one may not be able to conclude with certainty that a claim that that belief had always been held by him was dishonest.

Fourth, the exchange in extract 3 seems to have made little subsequent impact on Mr Sage, and his behaviour thereafter in relation to the case and in relation to the solicitors was not that of a man who knew that he had lied. That may well indicate, as Brooke LJ suggests, that Mr Sage attached little importance to the extract 3 exchange in the context of a long and demanding cross-examination. However, from that a number of sharply contrasting conclusions might follow. On one view, Mr Sage might have thought that it did not matter whether he gilded the lily because the gilt would make little difference. On another view, Mr Sage as an honest man was relaxed about his evidence because he believed all of it to have been true. One could well wish that he had been available to be interrogated about those objectively equally plausible alternatives. In his absence, this aspect of the case has to remain at the level of speculation: and speculation should not be a feature when the charge is one of perjury.

None of these considerations are conclusive in either direction. Mr Sage's evidence undoubtedly misled Hirst J. I am however unable to find that he gave that misleading evidence honestly is excluded with sufficient certainty to establish that in giving that evidence Mr Sage perjured himself.

X The issues of law


If, as I consider to be the case, it had not been satisfactorily established that Mr Sage committed perjury, then the question of the legal effect of such perjury had it been proved would not arise. However, since my Lords are satisfied that Mr Sage did commit perjury, the remainder of this judgment must proceed on that basis.

This part of the case gives rise to two issues:

1. In order to set aside a judgment in previous proceedings on grounds of fraud, does the fraud in question have to be that of a party to those previous proceedings? I am of the opinion, which I understand to be shared by my Lords, that the answer to that question has to be in the affirmative. I deal with that aspect of the case in section XI below.
2. On the assumption that the fraud in question has to be that "of" a party, was Mr Sage's perjury the perjury of Orion, or in law to be counted as the perjury of Orion? Mr Sumption introduced this part of the argument in the following terms, in paragraph 41 of his skeleton before this court:


"If, however, it is necessary to establish a connection between the perjured witness and the party calling him or benefiting by his evidence, it is submitted that the relevant connection should be one which gives effect to the policy underlying this jurisdiction......The correct approach, if attribution be required, is to ask whether the connection between the perjured witness and the party benefiting from his conduct is such that justice requires that the judgment should be set aside."

Mr Sumption particularly emphasised that such an approach was required in a case, such as the present, where the party concerned was a corporation. That circumstance demanded, or at least it strongly demonstrated the wisdom and justice of, the wider approach to the concept of fraud "of" a party for which Sphere Drake contended. By contrast, Orion contended that, once the fraud of a party test was accepted, whether the fraud was that of Orion was to be determined by accepted and orthodox rules that determined when and whether the act of an individual became in law the act of a corporation.

I approach this dispute in the following way. In section XII I set out the criticisms made by Sphere Drake of the results that the orthodox approach produce in this case, and would produce more generally, and describe the alternative rule proposed by Sphere Drake. I indicate why I consider that, even apart from authority, the rule proposed by Sphere Drake should not be adopted. In section XIII I deal in more detail with the particular case of attribution of the acts of an individual to a corporation, and draw attention to authority binding on this court which, in my view, prevents our taking the course urged by Sphere Drake of treating the perjury of Mr Sage as the perjury of Orion.

XI Does the fraud have to be that of a party?


Mr Sumption argued that it was not correct that in order to set aside a judgment the fraud or perjury that was the effective cause of that judgment had to be shown, by the rules of attribution adopted by Orion, to be the fraud or perjury of the party that had secured the judgment. It was enough in itself that such perjury had taken place. His contentions in support of that proposition can be summarised as follows:

(i) There is no authority binding on this court that establishes that rule. Most of the cases have spoken in terms of fraud "of a party", but that did no more than reflect the reality that where the party was an individual the perjury would almost always have been committed by him, and if not by him then by his subornation.
(ii) There was clear authority that a judgment of an inferior court would be set aside by certiorari on grounds of perjury, without the requirement that the perjury should be that of a party. There was no good reason why the difference in procedure between certiorari and a collateral action to set aside should lead to a difference in the substantial law applied. The certiorari rule should be adopted in this case by analogy; or as showing what Mr Sumption characterised as the modern attitude to judgments secured by fraud.
(iii) The rule contended for by Sphere Drake would not cause excessive relitigation of judgments, or insecurity of judgments, because of the very stringent requirements as to proof of the perjury, and as to its effect if proved, that had to be fulfilled before a judgment would be set aside.
Authority


I agree with Mr Sumption's submission that most of the cases, both in this jurisdiction and in the Commonwealth, merely restate the rule without analysing it or needing to analyse it for the purposes of their decision. The matter has therefore to be considered as one of principle.

It is agreed on all sides that the doctrine is as originally expressed by De Grey CJ in The Duchess of Kingston's Case (1776), reported at page 651 of Smith's Leading Cases:

"a direct and decisive sentence on the point...[stands] as conclusive evidence upon the Court, and not to be impeached from within; yet, like all other acts of the highest judicial authority, it is impeachable from without; although it is not permitted to show that the court was mistaken, it may be shown that they were misled."

The case is the origin of the doctrine of issue estoppel and, as the quotation demonstrates, the possibility of setting aside a judgment on grounds of fraud is an exception to that doctrine. The essence of issue estoppel is, however, that it operates only between the parties to the original suit: it is unreasonable and unjust to permit the same issue to be litigated afresh between the same parties (New Brunswick Rly Co v British and French Trust [1939] AC 1 at p 20, per Lord Maugham LC). In that context, it can be seen as not merely accidental, but as springing from the essential nature of res judicata, that the protection obtained by the successful party can only be taken away by his fault.

That consideration may well also lie behind the explanation given by Lord Coleridge CJ and Brett LJ in Abouloff v Oppenheimer (1883) 10 QBD 295, not only of the rule as to refusal to enforce foreign judgments obtained by fraud, but also of the exception to the res judicata principle recognised by Grey CJ: that in either case to permit the successful party to rely on the judgment would be to permit him to take advantage of his own wrong. These latter statements were no doubt strictly speaking obiter in relation to the setting aside of English judgments, but they were considered explanations of the latter process that, far from being arbitrary, or merely matters of policy, focus on the importance in res judicata of the position and thus of the conduct of the previously successful party.

I therefore regard Abuloff v Oppenheimer as strongly persuasive authority, in this court, in support of the rule contended for by Orion. That is also true of Boswell v Coaks (1892), of which we have a transcript of the judgment taken from the House of Lords papers.

The losing party in a previous action sought to have the verdict against him set aside because of fraud on the part of one (only) of the opposite parties, the defendant Coaks. The action failed in any event because the alleged fraud was found not to have been proved. However, the judgment of this court (Lindley, Bowen and AL Smith LJJ) continued:

"As regards the point taken...for the other Defendants viz that the judgment can only be set aside if at all against those who procured it by fraud and it is not suggested that the other Defendants had anything to do with the fraud alleged this point appears to us to be fatal as regards all the Defendants except Coaks and we think it would be fatal to any further action to set aside the sale of the whole."

Sphere Drake said that this passage was obiter. That, as I understood, was not because the court's observations were not seen by it as necessary for the decision of the point that they were addressing; nor was it suggested that this was one of the cases in which the fraud of a party rule was simply recited without analysis, and merely as a statement of the facts of the particular case. Rather, the contention was that this ground of decision was obiter because the action failed in any event because there had been no finding of fraud. However, it seems clear that the Court of Appeal regarded the failure to allege fraud or procurement of fraud against the defendants other than Coaks as fatal to the case against them, whatever was proved against Coaks himself. That was a distinct reason for the court's decision in their cases, carrying equal weight as, and not subordinate to, the finding of no fraud. As such, it was not obiter. And even if on one view of the rules of precedent the Court of Appeal's statement can be argued to have been obiter, it was only such in the most technical sense, and thus, in particular as a judgment of a conspicuously strong constitution of this court, one that I would only be prepared to depart from for very good reason.

The court in Boswell v Coaks spoke in terms of procurement of fraud because that was how the argument was put to them. The burden of their judgment was, however, that the fraud must either be that of a party or be procured by a party. That in my view remains the law.

I would add that I do not see the substance of that rule as undermined by decisions that, where it is sought to set aside a will or similar instrument, the document will be set aside generally, and not only as against the person responsible for the fraud. As Cozens-Hardy LJ put it in Birch v Birch [1902] P 130 at p 138, the will is either good or bad against all the world. For that reason, therefore, the requirement stated by this court in Boswell v Coaks, which the Lord Justice cited, could not be applied in a probate action. That the rule in Boswell v Coaks was distinguished in this court in Birch v Birch, and not said to be wrong or an incomplete statement of the law as it applied to actions in personam, is in my view some further indication that the fraud of a party requirement was seen as binding in the latter category of case.

Sphere Drake's criticism of the "fraud of a party" rule


Sphere Drake argued that the concentration, noted in Abuloff v Oppenheimer, on the need to deprive the successful party of the fruits of his wrong was in modern terms an incomplete statement of the relevant policy considerations. As it was put in Sphere Drake's skeleton argument:

"There is a public interest, extending beyond the private interest of the parties to any one action, in the proper administration of justice. Where the proper function of the courts is perverted by the dishonesty of those appearing before them in whatever capacity, the integrity of the system of civil justice can be vindicated only by treating the resulting decision as voidable."

I would make a number of comments on this formulation.

First, if, as I incline to think, the fraud of a party rule was recognised as a matter of ratio in Boswell v Coaks, then even if the policy that may have inspired the rule is now outdated, the rule still binds. The maxim cessante ratione cessat ipsa lex may guide the House of Lords, but at any lower level precedent cannot be departed from just because the reason which led to the formulation of the rule embodied in such precedent seems to the court to have lost its cogency: Miliangos v Frank [1976] AC 443 at p 476B, per Lord Simon of Glaisdale.

Second, as I ventured to suggest when discussing Abuloff v Oppenheimer, it is far from clear that the reason given for the rule in that case was a matter of policy, or at least only of policy. It is at least equally likely that it was seen to spring from the common root of the rule in the law of res judicata.

Third, on the level of policy it is simply not correct that corruption of the judicial process by perjury can only be vindicated by treating the resulting decision as voidable. The most obvious way of asserting the need to protect the judicial process from perjury and of deterring those who commit perjury is by criminal prosecution. That is a fortiori the case when the perjury is of a non-party. Were Mr Sage still alive, these proceedings against the party for whom he gave evidence would of course be greatly unwelcome to him, and a source of public exposure, but they would not impose any formal sanction on him. On the factual assumptions made for this part of the argument, within the civil proceedings the person who had committed a criminal offence would go unpunished; the successful, but in relation to the perjury itself innocent, party would be deprived of his judgment.

I am therefore very doubtful indeed as to the major premise of this argument. Mr Sumption said however that the argument had been accepted in the certiorari jurisdiction, and that it was mere formalism that prevented its recognition in setting aside cases that addressed the same factual problems as certiorari. I therefore turn to that area of jurisdiction.

The effect of fraud in certiorari


Mr Sumption relied strongly on a case in Northern Ireland, R(Burns) v County Court Judge of Tyrone [1961] NI 167 in which it was sought to set aside an affiliation order because it had been obtained by the perjury of a witness who was not a party and could not be shown to have been suborned by a party. Lord McDermott CJ said, at page 172:

"The supervisory jurisdiction of this court is not at large; but the general aim of that jurisdiction is to promote the due administration of justice, and if a distinction is to be drawn between cases where a decision is procured by perjury and cases where a decision is procured by perjury to which one of the parties is privy, it ought to rest on some basis of principle. I am unable to discern any such basis here....If certiorari does not lie in such circumstances there is no other redress and an order undoubtedly founded on perjury remains effective. In my view this court is not bound to accept that situation merely because of a lack of authority....This order has manifestly been procured by fraud and that, I think, is enough to allow this court to intervene."

These remarks were subsequently referred to with apparent approval in a number of English public law cases.

We heard considerable argument from Orion as to whether in either Burns or the English cases the formulation of Lord McDermott was a matter of ratio, and whether in any event such a rule could stand with what appeared to be remarks limiting the jurisdiction to fraud of a party in the earlier English case of R v Ashford JJ ex p Richley (No 2) [1956] 1 QB 167. I do not discuss these arguments, because I regard them as beside the point. The Burns rule does not affect these proceedings not because of any question of whether or not it is valid in English public law (which I am prepared to assume it is); but because parallels drawn from the certiorari jurisdiction are simply inapposite in relation to the private law jurisdiction to set aside judgments on grounds of fraud.

As is apparent from the English cases in which Burns has been referred to, the certiorari jurisdiction proceeds on a quite different basis from the setting aside jurisdiction. As it was put by Erle J as long ago as 1848 in R v Gillyard (1848) 12 QB 530, the Court of Queen's Bench has authority to correct all irregularities in the proceedings of inferior tribunals. That is because, as Lord McDermott said, the jurisdiction is supervisory, and thus can be and is exercised in cases that although they made be seen as akin to fraud go beyond actual fraud, and include for instance other forms of misconduct on the part of a prosecutor. That was recognised by the Divisional Court in R v Leyland JJ ex p Hawthorn [1979] QB 283, a case mentioned with Burns in R v Knightsbridge Crown Court ex p Goonatilleke [1986] QB 1; as this aspect of the supervisory jurisdiction was also recognised in the House of Lords in Al-Mehadawi v Secretary of State for the Home Department [1990] 1 AC 876. I endeavoured to summarise the effect of these authorities in the above terms in R v Burton on Trent JJ ex p Woolley [1995] RTR 139 at p 155.

Even more pressingly, the certiorari jurisdiction can be exercised in cases of error of law on the part of the inferior tribunal. Citation of authority for that proposition is no doubt otiose, but I would venture to mention the observations of Lord Browne-Wilkinson in Ex p Page [1993] AC 682 at p 701F. That means that the supervisory jurisdiction is exercised in precisely the way that the jurisdiction to set aside by collateral action cannot be: to adopt the language of The Duchess of Kingston's case, in certiorari it is permitted to show not only that the court was misled, but also that it was, at least on a point of law, mistaken.

This comparison suggests that recourse to the certiorari jurisdiction as a guide to the limits of the jurisdiction to set aside a judgment by collateral action is simply inept. Were the comparison to be followed through, the whole agreed basis of the setting aside jurisdiction would be subverted. Mr Sumption said that that objection was misconceived. The fact that a certiorari court could deal with a wide range of irregularities that went beyond fraud did not mean that, when it was dealing with a matter involving fraud, the principles that it applied should not extend to collateral actions addressed to the same problem in the same type of dispute. But the principles appealed to are an inherent part of the supervisory jurisdiction; cannot be understood abstracted from that supervisory jurisdiction; and cannot be limited in their extent to one only of the wide range of factual situations to which they apply.

Burns and similar cases therefore give no guidance as to how the different jurisdiction of the collateral action should be exercised. If the certiorari principles were to be extended to collateral actions that could only be properly done by extending the whole reach of those principles. That would simply and obviously be destructive of the basis of the collateral action, by taking it into areas that have always been agreed to be barred to it. I am therefore of opinion that recourse to the jurisprudence of certiorari does not undermine, either directly or by analogy, the traditional view that the fraud on which a collateral action is based must be the fraud of a party.


That renders it strictly speaking unnecessary to consider the third aspect of this argument, that to extend the jurisdiction to set aside a judgment from cases of perjury of a party to cases of perjury of a "mere" witness would not undermine the principle of res judicata, because of the stringent requirements imposed before a collateral action can be brought. However, that argument itself has some illuminating features, and since it was fully debated before us I should say something about it.

The limitations on the collateral action


The res judicata principle appealed to is familiar, and stated concisely by Lord Upjohn in Carl Zeiss v Rayner & Keeler (No 2) [1967] AC 853 at p 946:

"res judicata is founded upon the twin principles so frequently expressed in Latin that there should be an end to litigation and justice demands that the same party shall not be harassed twice for the same cause."

Sphere Drake did not of course challenge the importance of that proposition, though they did say that it ought in an appropriate case to yield to the need to correct the injustice done to a party who was bound by a judgment obtained by fraud. It will be appreciated that logic does not take us far in this argument. Justice might be thought to demand that any judgment that can be shown to be wrong should be set aside, and that a party cannot complain if he is harassed twice for the same cause if the cause had first been wrongly decided; but practicality prevents the carrying through of that logic in all but exceptional cases. The problem is to decide what those cases should be.

Sphere Drake said that an extension, if indeed it was an extension, of the jurisdiction to cases of perjury by mere witnesses would not in practical terms undermine the res judicata principles, because such allegations would in any event be rare, and would be subject to stringent limitations. The principle of finality was vindicated by the requirement, originally found in the speech of Lord Cairns in Phosphate Sewage v Molleson (1879) 4 App Cas 801 at p 814, that the new evidence relied on must be such as entirely changes the aspect of the case: the latter test, it will be observed, being more stringent than that for the introduction of new evidence on appeal as set out in Ladd v Marshall [1954] 1 WLR 1489.

I would venture the following comments.

First, the principle enunciated applies in all cases where it is sought to set aside a previous judgment: see Lord Diplock in Hunter v Chief Constable [1982] AC 529 at p 545E. The Phosphate Sewage rule was, for instance, relied on by this court in a case concerned with a very different branch of the law of collateral action, where it was sought to argue that civil proceedings were, abusively, collateral as an attack on a previous decision of a criminal court of competent jurisdiction: Smith v Linskills [1996] 1 WLR 763 at p.771G. It is therefore already recognised that a jurisdiction that seeks to question previous decisions by action rather than by appeal must be subject to strict control, even before there is sought to be added to that jurisdiction allegations of fraud committed by a non-party.

Second, as Mr Griffiths argued for Orion, the apparent stringency of the evidentiary rule may in any event be in practical terms misleading. What is required is that the evidence will entirely change the aspect of the case. It was found by Langley J, and the finding is not challenged, that the evidence of Mr Sage's perjury, if accepted, has that effect. But that conclusion is of course established not by what is alleged but by what is proved. Another reason for being doubtful about the relevance of the certiorari cases is that the public law court that decides them is not, generally, a fact-finding tribunal, and therefore only acts on allegations that are plainly proved by external means. Not so the collateral action. That is an action, which can be commenced on allegation alone, and which the court for that reason alone has to adjudicate upon. The courts are therefore likely to be burdened with claims that evidence exists that satisfies the Phosphate Sewage test when they still have to decide whether that evidence is reliable, and what it means.

These difficulties are likely to be multiplied when the allegation is not of fraud by, or suborned by, or known about by, a party, but of perjury committed independently by a non-party. That may be thought to be illustrated by this very case. Sphere Drake necessarily argue that this action satisfies the Phosphate Sewage limitation, and so it does on the state of facts eventually found in this court. That has however only been achieved after the consideration of some thirteen days of oral evidence and, before this court, of over seven thousand pages of documentary material. Of the four judges who have adjudicated on the matter, with the assistance of the most skilled and detailed possible of expositions, two have concluded that Mr Sage committed perjury, and that therefore the Phosphate Sewage requirements are fulfilled in this case; and two have concluded, in somewhat different terms from each other, that those requirements are not fulfilled. Weight and difficulty of this order is of course far from unique to this case, and is not an excuse for not recognising a jurisdiction that is supported by otherwise good reasons. It is, however, an unpromising context for claims that the jurisdiction asserted in this case will not overburden the courts.

Third, because the collateral action is an action like any other, it is not subject to any leave requirements, or to any prior control other than that provided by CPR 24.2. Nor, because it is a claim of fraud, is it subject to any rule of limitation. All of these aspects of the action suggest that a substantial degree of scepticism must be brought to bear upon any assumption that extension of the action will not unreasonably undermine the principle of finality. As Langley J said, that principle must yield when the fraud is that of a party. Like him, I see the balance as much less obviously turning against finality when the fraud is not that of a party.

XII Sphere Drake's second submission


It will be convenient to recall the terms of this submission: that, on the assumption that it is necessary to establish a connection between the perjured witness and the party calling him, the question should be whether

"the witness responsible for misleading the court was so closely connected with the party calling him or with that party's conduct of the case that it is unjust that that party should be allowed to retain the benefit of the judgment...the perjury or subornation of perjury must be that of a person who has, in relation to the particular proceedings, a connection with the party calling him that is so close as to make it unjust that that party should be entitled to disavow his actions, even if he did not realise that perjury had been committed."

It is necessary, when considering this submission, to have well in mind a preliminary difficulty. The rule on which this court acted in Boswell v Coaks, which I have held to continue to be the law, is that the fraud or perjury must be that of the party himself, or at least be suborned by or knowingly relied on by that party. It is not possible to bring the present formulation under any comprehensible statement of that rule. The authorities that I have cited in section XI of this judgment permit of no wider rule than that the party himself must commit the perjury. And the policy considerations adduced against the fraud of a party rule, which equally I have discussed in section XI of this judgment, would if (as I consider not to be the case) they were well-founded, go a long way towards supporting a rule formulated in the terms summarised above.

Before discussing further this submission on the part of Sphere Drake it is therefore necessary to make clear that in my view it is precluded by authority. I will nonetheless, because of the importance of the submission, review it in this section of the judgment. The submission is, however, also important in a more particular respect. It will be recalled that Orion argued that, once it was accepted that the fraud had to be that "of" a party, that question was determined, in the case of a corporate party such as Orion, by the orthodox and general rules governing the attribution of the acts of an individual to a corporation. The present submission on the part of Sphere Drake strongly emphasises objections on grounds of policy to the approach adopted by the judge when applied in the case of a corporate defendant. Therefore, although it may not have been so argued in terms, it is fair to take Sphere Drake as submitting that, whatever the general force of its complaints, they did at least justify the application of the rule set out above to determine the issue of attribution when the defendant was a corporation.

I will therefore, in the remainder of this section XII, deal with Sphere Drake's argument in general terms; and then, in section XIII, draw attention to authority that in my judgement precludes us in any event from accepting Sphere Drake's formulation even in the limited context of the attribution of the acts of an individual to a corporate party: in this case, the characterisation of Mr Sage's perjury as the perjury of Orion.

Sphere Drake's criticism: the injustice and absurdity of the "fraud of a party" rule


Mr Sumption said that the judge's approach was inadequate in modern conditions and in the particular circumstances of a case like the present. It was unjust that the perjury of a man like Mr Sage, so closely involved in the preparation and conduct of the case, should not be attributed to Orion, even if it was the case that the company's managing director and its lawyers knew nothing of the perjury. And the test produced absurd results. If Mr Sage had still been General Manager when he gave his evidence, his perjury would be attributed to Orion even if no-one else knew of it, because he was as General Manager not only the witness but also the directing mind and will of the company. But if he had ceased to be Managing Director the day before he testified, Orion would be freed of any attribution of the perjury. Similarly in the case of Mr Fordyce. If he and not Mr Sage had made the agreement in 1975, and his evidence about it had been the same as Mr Sage's, the company would be fixed with his knowledge because of the accident, irrelevant to his role in 1975, that he had become Managing Director by the time of the trial. And if Orion had had, as Mr Sumption felicitously put it, the good fortune to go into liquidation before the trial, its senior officers could perjure themselves without attaching liability to Orion because they would have been displaced, as the directing mind and will, by the liquidation. The rule should recognise, as Sphere Drake's formulation did, the factors that explained why Mr Sage was in the witness box, and how he came to be giving this particular evidence for this particular party. First, Mr Sage was General Manager of Orion at the time of the dispute, and was giving evidence to support Orion's case about a transaction for which he had been personally responsible. Second, he was a consultant for the purposes of the litigation, paid as such and a member of the "team".

These are serious considerations, even if in some respects their practical force may be doubtful. For instance, in the case of the recently retired Managing Director, or the Managing Director of a company now in liquidation, he would have to have kept and to keep his intention to commit perjury very strictly to himself, and make sure that it was not apparent to his successors, to avoid their being fixed with knowledge of the perjury. That might be hard for him to achieve. Nevertheless, the potential problems are not to be ignored. I was for long attracted to Sphere Drake's argument, even whilst recognising the difficulties facing it in terms of authority that I have already set out. However, further reflection has persuaded me that the case is far from as clear as I at first thought.

The contention is that the touchstone should be the justice of the case. But an appeal to justice without regard to other considerations leads to the conclusion that every mistaken judgment, and certainly every judgment based on perjured evidence, should be recalled: but that is not the law. It is therefore necessary to keep those other considerations in mind.

First, the rule contended for by Sphere Drake is very wide. Mr Sumption said that there would be excluded someone who really was a mere witness. He gave the example of a malicious or mad person who gratuitously volunteered fictitious evidence on a frolic of his own. If so unlikely an occurrence is indeed the limit of the rule, almost every case of perjury or (more threateningly from a practical point of view) alleged perjury will fall within it.

Second, a rule that urges the justice of making a connection between the perjurer and the party for whom he gave evidence makes it difficult to avoid investigation of the motives of the perjurer. In the present case the rule is said justly to implicate Orion because Mr Sage committed perjury to assist Orion. As Mr Sumption put it, he got too close to the case: the implication I think being that Orion could not complain at being fixed with Mr Sage's improper enthusiasm because of the "charm offensive" and other encouragements that the company held out to him to co-operate. But that conclusion might not follow, or at least the reasons for implicating Orion would not be so simple, nor so attractive in terms of an appeal to justice, if the witness had lied because he had a long-standing grudge against Sphere Drake; or wished to have endorsed his own good judgement in the transactions contested in the case, without any concern about or commitment to his former employers' present interests; or had been carried away by irritation or by a desire to be allowed to leave the witness-box; or had simply lapsed from his previous standards of honesty because of old age. To the extent that the perjurer's motives enter into the equation (as on the basis of an argument that rests upon considerations of the justice and fairness of the person on whose behalf he gave evidence retaining his judgment it would seem that they must) difficult issues are immediately threatened: even when the case does not involve investigation of the motives of a man who had been dead for five years before the trial opened.

Thirdly, I pass from general disquiet about a rule that relies or may rely on investigation of the perjurer's motives to the issue in the present case. In the previous paragraph I accepted as a working hypothesis the contention that Mr Sage committed perjury because he wanted to advance Orion's case. But as there stated there are other plausible explanations of what occurred, not least a desire on the part of Mr Sage to demonstrate that his own conduct of affairs had been justified. On the evidence in this case; and again, one has to say, in the absence of any evidence from and cross-examination of Mr Sage himself; I cannot have any confidence that I know enough about Mr Sage's motivation, and its connection with Orion's interests, to be able to conclude that under a general rule of justice Orion should be fixed with responsibility for Mr Sage's perjury.

It is the lack of definition and of any sort of certainty that causes me the most difficulty with the merits, as opposed to the basis in law, of Sphere Drake's proposition. The rule for which the respondents contend would attack the finality of judgments in a way that the rule of res judicata and the exception to it recognised in The Duchess of Kingston's case do not permit. And for the reasons already given, the practical impact of the rule cannot be assumed to be effectively limited by the Phosphate Sewage principle. Quite apart from those considerations, however, I find myself unable to say that Sphere Drake's second proposition is open to this court as a matter of authority.

That we are being invited in this part of the argument to take the step that I have declined to take under Sphere Drake's first submission, and hold that the jurisprudence of the collateral action extends beyond the fraud of a party, is further demonstrated by another attractive submission made by Mr Sumption. He invited us to look at the analogy of vicarious liability. There are cases, of which Lloyd v Grace Smith [1912] AC 716 is perhaps the most accessible example, where the fact that a principal had put an agent in a position where he was able to commit a tort was sufficient to fix the principal with liability for that tort, even though that would not have been achieved by application of the normal principles of agency. Mr Sumption said that the law of vicarious liability had thus developed as a reaction of the courts to the inadequacy of the pure rules of agency or attribution as a means for imputing liability. It was essentially a question of legal policy. So it is. And it is policy that reaches outside the area of corporate liability, as demonstrated by the fact that the defendant in Lloyd v Grace Smith was not a corporate body, but a one-partner firm of solicitors. However, in the present area of the law, the collateral action, we are in my view precluded by authority, or at least by long-held understanding of the limits of the collateral action jurisdiction, from taking a policy-driven step analogous to that taken by the House of Lords in Lloyd v Grace Smith. And not even the civil law's doctrine of vicarious liability, and much less any analogy of it, can be used to implicate a company in a criminal offence: as Sphere Drake's argument in this appeal seeks to do. I now address that particular aspect of this case.

XIII Attribution of criminality to a corporate body: the rule in Tesco v Nattrass


Orion's case was that perjury only became the fraud of a party if, by the usual rules of attribution, he was responsible for it. Responsibility entailed either committing the perjury himself; or suborning the perjury; or permitting the court to act on evidence that he knew to have been perjured even though he had not suborned it. In the case of a corporate party, such as Orion, that required those faults to have been committed either by a person who could be identified as the directing mind or will of the company, under the rule stated by Viscount Haldane in Lennard's Carrying Co v Asiatic Petroleum [1915] AC 705 and adopted in Tesco v Nattrass [1972] AC 153; or by a person to whom the company had delegated control of or responsibility for the conduct of the litigation; or by the company's lawyers. Lord Grabiner explained the last point, which might seem to go beyond the normal range of corporate liability, by saying that where a company had handed the conduct of litigation over to its lawyers it was unrealistic, and not something that an honourable company should do, to distance itself from their fault; and that in any event the court would not allow a judgment to be retained that had been achieved by subornation of perjury on the part of solicitors as its officers.

With the exoneration by the judge of all of Mr Henshaw, Mrs Good, Mr Fordyce, Mrs Atkins and Mr Boyd from the allegation made at the trial that they had had sufficient awareness of Mr Sage's perjury to be responsible on behalf of Orion for the judge and Court of Appeal being misled by it; and the abandonment before us of any such allegation; the case could only be maintained by Sphere Drake showing, not as was originally contended that responsible officers or lawyers of Orion suborned the perjury of Mr Sage or permitted it to happen, but that the act and mind of Mr Sage in committing perjury were directly the act and mind of Orion itself.

The reasons for attributing Mr Sage's perjury to Orion are set out by Nourse LJ. I venture to repeat two passages in or in relation to previous cases that Nourse LJ saw as being of assistance:

"In the present case we are concerned with a substantive rule of judge made law which applies to a company, and the question, [in the words of the Privy Council in Meridian at p507] is:
Whose act [ie the giving of perjured evidence] was for this purpose intended to count as the act of the company?
In answering that question we must take into account the policy of the substantive rule, which is that a person who procures a judgment to be given in his favour by fraud ought not to be allowed to profit from the fraud.
[Relevant] is the test which was adopted by Eveleigh J in delivering the judgment of the Criminal Division of this court in R v Andrews-Weatherfoil Ltd [1972] 1 WLR 118, 124:
It is necessary to establish whether the natural person or persons in question have the status and authority which in law makes their acts in the matter under consideration the acts of the company so that the natural person is to be treated as the company itself.
On that view of the matter the question, ultimately, is this. For the purposes of the fraud of a party rule, did Mr Sage have the status necessary to make his evidence the evidence of Orion?


It will be convenient to set out by way of summary my own view on this issue:

1. Authority binding on this court obliges us to apply the principle stated in Tesco v Nattrass to determine whether Mr Sage's perjury was the perjury of Orion
.
2. Even if that were not so, in no case have the acts of a person who, at the time of acting, was neither an officer or an employee, nor even an agent, of the relevant company been attributed to that company.
3. The proposed rule is, as already set out in section XII above, in any event open to objection of grounds of uncertainty, and in the present case liability under the rule cannot be said to have been established on the facts.


Before explaining those points in detail, it will be necessary to set out as a framework the rules as to the criminal liability of corporations; and to explain why that is indeed necessary. That is necessary because perjury is a criminal offence, and therefore if Mr Sage's perjury is attributed to Orion by this court, Orion is thereby held by this court to have, as a company, itself to have committed the crime of perjury. The case is different from that principally made at the trial, that Orion was responsible in law for the perjury of a third party, Mr Sage, because various of its officers or lawyers knew or should have known of the perjury: which was the case that the judge addressed at page 186 of the judgment below.

I accept that this is not a criminal, but a civil case. My Lords are of the view that, in such a case, we should not be constrained by the rules of the criminal law, whatever they may be, when considering whether to attribute criminality to a corporation. I cannot agree. Just as a significantly different standard of proof is required when criminality has to be alleged in order to succeed in civil proceedings, so the other implications of a finding of criminality in a civil action cannot be ignored.

The point may perhaps be tested in this way. Whilst a conviction for the relevant crime is not a necessary precursor to the making of the same allegation in civil proceedings, that is an order of events that is not infrequently seen as appropriate. Assume therefore that, before these proceedings were launched, a criminal prosecution for perjury had been brought against Orion. Such a prosecution, being against Orion, would not have been excluded by the mere fact of Mr Sage being dead. On the facts now accepted, that prosecution of Orion would have had to be for perjury as a principal offender, since the allegations that it was necessary to make against Orion's officers and lawyers in order to implicate Orion as an accessory to the perjury of Mr Sage have been withdrawn. For the reasons that I will set out, such a prosecution of Orion as a principal offender would have been bound to fail.

I do not of course suggest that that of itself concludes the issue in subsequent civil proceedings, whether on grounds of res judicata or more generally. I do, however, consider that it is not an acceptable outcome for a company to be characterised as a principal offender in perjury in civil proceedings when that outcome could not be achieved against it in a criminal prosecution.

The criminal liability of corporations


"There is in fact no such thing as the company as such, no 'ding an sich', only the applicable rules": Meridian at p507A, per Lord Hoffmann. Therefore, the company as such cannot perform the actus reus nor have the mens rea necessary for conviction of a crime. Liability for criminal offences can accordingly only be imposed on companies by the creation of specific rules making companies responsible for the acts of individuals. That has been achieved in three ways.

The first is when, by a process of reasoning regarded by Lord Reid in Tesco v Nattrass [1972] AC 153 at p173G as anomalous, a company subject to a statutory duty is held to have delegated responsibility for the performance of that duty to a manager or other servant. The most obvious examples arise in the enforcement of licensing laws: see Vane v Yiannopoullos [1965] AC 486. It is important to note that this head of liability is quite different from the concept of vicarious liability in the law of torts, which makes a company generally liable for the acts of its agents. The criminal law knows no such doctrine. As Lord Diplock put it in Tesco v Nattrass [1972] AC at p199B-D:

"Under the law of agency the physical acts and state of mind of the agent are ascribed to the principal, and if the agent is a natural person it matters not whether the principal is also a natural person or a mere legal abstraction...But...the concept [of vicarious liability] has no general application in the criminal law. To constitute a criminal offence, a physical act done by any person must generally be done by him in some reprehensible state of mind...criminal law regards a person as responsible for his own crimes only. It does not recognise the liability of a principal for the criminal acts of his agent: because it does not ascribe to him his agent's state of mind."

Second, statutory terms such as "sell" or "possess" have been interpreted as encompassing sales by a servant or agent on behalf of a company. An early example was Coppen v Moore [1898] 2 QB 306: sale by a shop assistant of goods in breach of the Merchandise Marks Act 1887 held to be a sale by the company that employed him. Such cases did not, however, involve any consideration of mens rea, and therefore no issue arose as to whether and how a corporation could be said not merely to have acted but also to have so acted with a guilty mind. In an offence at common law therefore, such as perjury, before the company could be convicted there had to be identified an individual who had committed the acts forbidden by the offence with the necessary guilty state of mind, and his acts and mind had to be identified with and be counted as those of the company. That is what Lord Reid meant in Tesco v Nattrass [1972] AC 153 at p170F when he drew a distinction between acts of an individual that are identified as the acts of the company, and acts of an individual who is acting merely as the company's servant or agent. As Lord Reid put it, where the individual is the embodiment of the company:

"his mind is the mind of the company. If it is a guilty mind then that guilt is the guilt of the company. It must be a question of law whether, once the facts have been ascertained, a person in doing particular things is to be regarded as the company or merely as the company's servant or agent. In that case any liability of the company can only be a statutory or vicarious liability."

What then should be the test for the identification of an individual's acts and mind as those of a company?

If the range of individuals eligible for that purpose were set too widely, the requirement that the actual accused should have a guilty mind would be undermined: since guilt would be attributed on the basis of the state of mind of individuals who could not realistically be said to be "the company". Brooke LJ has described the uncertain origins of this third, and separate, form of corporate liability. Its present form and limits are however to be found in a series of more recent cases start with, and follow, the judgments in the House of Lords in Tesco v Nattrass [1972] AC 153. The ruling principle, consistent with the objective just set out, is that the individuals whose acts and intentions are attributed to the company as the company's own acts and intentions must be part of the "directing mind and will" of the company. If Mr Sage's perjury is to be in law the perjury of Orion, that can only be achieved by the application of this, third, form of liability: which I now discuss in more detail.

The attribution to companies of the criminal acts of individuals


Mr Sage was plainly not the directing mind and will of Orion at the time of the trial. He was not an employee, officer nor even an agent of Orion, let alone being in a position to direct or control the policy of Orion. In order, therefore, to bring Mr Sage's perjury into the category of acts that can be directly attributed to Orion it is suggested that such liability might be imposed in relation to the culpability of a wider circle of individuals than those envisaged in Tesco v Nattrass: the basis of that development being the advice of the Privy Council in Meridian. In my view, however, first Meridian does not directly address the present issue; and secondly we are in any event obliged in this court to apply the rule in Tesco v Nattrass in a case where it is sought to attribute criminality to a company.

Meridian itself, although admittedly a case about statutory regulation, was not a case in which what was sought to be attributed to the company was the commission of a criminal offence. Nor were any of the cases cited by the Board in Meridian apart from Tesco v Nattrass. The Board's analysis is, therefore, at best an imperfect guide to the correct approach to the rule for attribution of a crime: not least because, as Lord Diplock said in the passage cited above, the rule of vicarious liability is much wider in civil than in criminal liability. I of course appreciate that the Board regarded Tesco v Nattrass as having been decided according to the same policy-driven approach as it brought to civil cases: see [1995] 2 AC at p508B-E. I have however respectfully to disagree with that analysis of the decision of the House of Lords in Tesco v Nattrass.


The question in Tesco v Nattrass was whether a manager of one of the defendant company's stores was "another person" [other than the company], so as to enable the company to rely on the defence of default of another person provided by section 24(1) of the Trade Descriptions Act 1968. The House of Lords approached that issue as involving consideration of which persons' acts could be attributed to the company: since if the manager's acts could be attributed to the company, he could not be another person.

Lord Reid, having set out the background to the question at p 170F, in terms that I have already cited, went on to answer that question at p171E by limiting the persons who in acting were to be regarded as "the company" to persons who, in the words of Lord Denning in HL Bolton (Engineering) Co Ltd v TJ Graham [1957] 1 QB 159, represent the directing mind and will of the company and control what it does. And at p173F Lord Reid approved the unreported judgment in the same sense of Lord Parker CJ in Magna Plant v Mitchell.

Viscount Dilhorne held, at p188B, that the manager "cannot properly be regarded as part of the appellants' directing mind and will and so can come within the reference to 'another person'". And Lord Diplock held, at p199Hff, that

"the question: what natural persons are to be treated in law as being the company for the purpose of acts done in the course of its business, including the taking of precautions and the exercise of due diligence to avoid the commission of a criminal offence, is to be found by identifying those natural persons who by the memorandum and articles of association or as a result of action taken by the directors, or by the company in general meeting pursuant to the articles, are entrusted with the exercise of the powers of the company."

True it is that Lord Diplock, in the passages cited in Meridian, referred to the consonance of the result at which he had arrived with the policy of the Act that he was applying. But that result was arrived at by application of the rule of law formulated by him and by Lord Reid and Viscount Dilhorne in the terms set out above, and not by the direct application of policy considerations.

In considering the attribution to a company of responsibility for crimes committed by an individual, we are therefore bound by Tesco v Nattrass to apply the "directing mind and will" formulation, or something very near to it.

I am fortified in that view by the subsequent decision of the House of Lords in Seaboard Ltd v Secretary of State for Transport [1994] 1 WLR 541. By section 31(1) of the Merchant Shipping Act 1988 it was the duty of the owner of a ship, enforced by criminal penalties, to take all reasonable steps to secure that the ship was operated in a safe manner. The justices held that the defendant company had caused the ship to be operated in an unsafe manner by not allowing the chief engineer sufficient time to familiarise himself with the ship before it sailed; but no finding was made as to which of the defendants' employees was responsible for that failure. The justices posed for consideration of the High Court the question:

"Does the principle of law governing the criminal responsibility of corporations confirmed by the House of Lords in Tesco v Nattrass apply to section 31 of the Merchant Shipping Act 1988?"

The status and generality of the rule in Tesco v Nattrass was therefore plainly in issue. Before the House of Lords it was accepted that the question concerned the direct liability of the defendant company: that is, had the owner himself failed to take the necessary steps. Lord Keith of Kinkel, with whom the whole House agreed, referred to the passage from the speech of Lord Diplock in Tesco v Nattrass set out above, and said:

"Where the owner...is a corporation which can act only through natural persons, the natural persons who are to be treated in law as being the corporation for the purpose of acts done in the course of its business are those who by virtue of its constitution or otherwise are entrusted with the exercise of the powers of the corporation."

That passage seems to me to demonstrate that, in relation to criminal matters at least, the rule approved by the House of Lords remains that only the acts of a person who is the directing mind and will of the company can be attributed to the company itself.

I have carefully considered what is said by Brooke LJ in his judgment with regard to the status of the "directing mind and will" rule within the criminal law. To the extent that he considers that the rule or principle is to be explained as an expedient adopted to enable companies to escape from the imposition of absolute liability, and only has authority within that context, I cannot agree. While Tesco v Nattrass certainly, and Seaboard arguably, concerned offences of strict or absolute liability, I venture to suggest that the account of Tesco v Nattrass given above demonstrates that, in determining within the structure of those offences what in a criminal case could count as the act "of" a company, the House on both occasions expounded a general test of attribution unconstrained by the facts of the cases that were being instantly addressed. Indeed, as I again ventured to suggest, a narrow formulation of the limits of the theory identifying individuals with the corporation is necessary precisely to avoid corporations being convicted of mens rea crimes when in truth they have no guilty mind.

It is also the case that the formulation adopted in Tesco has since been understood as a being, for good or ill, an authoritative formulation of the present and binding law of corporate liability both by the Law Commission in the Criminal Code Report cited by Brooke LJ, Law Com No 177, vol 2, para 10.7; and in a number of cases.

The Criminal Division of this court regarded Tesco v Nattrass as the binding authority in relation to a charge against a company of corruptly making payments (a mens rea offence) in R v Andrews-Weatherfoil [1972] 1 WLR 118 at p124. In Essendon Engineering v Maile [1982] RTR 261 the charge against the company was of knowingly issuing a false motor test certificate. Woolf J, as he then was, said, at p263 D, that Tesco v Nattrass was

"perhaps the leading authority as to what has to be established before a company, in circumstances such as this, will be liable for the commission of an offence. This offence is not one of absolute liability, but one which specifically required the company to have a state of knowledge of the events before it would be guilty."

Woolf J then set out a lengthy passage from Tesco v Nattrass and demonstrated that the justices, in convicting the company, had not established that the officer of the company who had the necessary guilty mind fell within the limits set out by Lord Reid in that case.

In Attorney-General's Reference No 2 (15 February 2000, so far unreported), the Criminal Division of this court had to consider the present law relating to corporate manslaughter, the reference having arisen out of the prosecution in respect of the Southall rail disaster that failed on the direction of the trial judge. The court held that the test for liability for manslaughter was (objective) gross negligence. The court however went on to hold that the basis of corporate liability remained the identification theory, that there must be an identified employee whose conduct could be held to be that of the company; and such employee had to be identified by the application of the test set out in Tesco v Nattrass. Rose LJ, at page 17 of the transcript, made a distinction between statutory and common law offences, and concluded that Meridian, with which the court had been strongly pressed, related only to the former category. He said of statutory offences that

"In each case it was held that the concept of directing mind and will had no application when construing the statute. But it was not suggested or implied that the concept of identification is dead or moribund in relation to common law offences....It therefore seems safe to conclude that Lord Hoffmann...did not think that the common law principles as to the need for identification have changed. Indeed, Lord Hoffmann's speech in Meridian, in fashioning an additional special rule of attribution geared to the purpose of the statute, proceeded on the basis that the primary "directing mind and will" still applies though it is not determinative in all cases. In other words, he was not departing from the identification theory but re-affirming its existence."

I therefore see no escape from the conclusion that the directing mind and will requirement, as set out in Tesco v Nattrass, is the binding law with regard to corporate liability for common law crimes such as is perjury. I readily accept that there is by no means unanimity that the rule is ideal in its formulation and limits. Brooke LJ has cited the criticisms of it made by the Law Commission shortly after Tesco v Nattrass was decided, criticisms that were renewed by the Commission when they proposed a different approach in the draft Criminal Code. However, like Rose LJ in Attorney-General' Reference (No2), I fear that those complaints for our purposes only go to demonstrate the present authority of the rule. They do not, for the reasons that I have already indicated, give this court licence to depart from the rule when attributing criminality in civil proceedings when the rule would prevent that same attribution in criminal proceedings. Orion were right to rely on the rule in Tesco v Nattrass as the test of whether Mr Sage's acts and mind were the acts and mind of Orion. I do not think that we are free to depart from that rule by attributing the perjury of Mr Sage to Orion.

The approach in Meridian and this case


I will however assume that all of the foregoing is mistaken, and that we are free to apply the approach of the Privy Council in Meridian to this case. Serious difficulties still remain.

First, I am not aware of any case in which there have been attributed to a company the acts and thoughts of individuals who at the time of acting were not employees of the company, nor even its agents. That attribution is limited to employees or agents does indeed appear to be assumed in the opinion in Meridian, where at p506F-H of the report Lord Hoffmann emphasises that a company cannot act itself, but only through servants or agents: the issue of attribution being to determine which of the acts of those servants or agents count as the acts of the company itself. That consideration in itself would seem to preclude the acts and intentions of Mr Sage, at the time of his relevant acts and thoughts neither a servant nor an agent of Orion, from being in law the acts and thoughts "of" Orion for the purposes of the rule in Boswell v Coaks.

It is necessary in this connection also to say more about Andrews-Weatherfoil. The guidance given in that case that is cited by Nourse LJ was given in the context of applying Tesco v Nattrass. When the court spoke of the "status" of the individual it was referring to the question of whether the employees whose acts were said to implicate the company had sufficient status within the company to satisfy the Tesco v Nattrass test. It was not extending that investigation to the connection with the company of a (currently) non-employee by reason of history, sympathy, payment or importance to the company's case.

Second, the Meridian approach was formulated in the context of, and is most easily understood in the context of, the application of statutory rules. It is, as the Board says, a question of construction. Applying the Meridian approach to a rule of the common law is much less easy. That is not merely a pedantic objection, but reveals a real difficulty in the present case.

The rule of the common law that has to be applied in this case is the rule of Boswell v Coaks: that the fraud must be that of the party whose judgment it is sought to have set aside. But that rule, as so stated, gives no guidance at all as to the relevant policy to be adopted, under the Meridian approach, to the construction of the concept of fraud of a corporate body. That policy cannot relevantly to this case be that a person who procures a judgment to be given in his favour by fraud ought not to be allowed to profit from the fraud, because whatever else may have been proved against Orion there is, now, no suggestion that the company or anyone for whom the company was responsible procured Mr Sage's perjury. Rather, the relevant policy (and equally therefore the content) of the fraud of a party exception to the rule of finality of judgments has to turn more widely on the justice in the particular case of the successful party either holding or being deprived of his judgment: as my Lords have demonstrated. But, as Sphere Drake's argument revealed, that is to apply and construe, not the fraud of a party rule, but the competitor to that rule proposed by Sphere Drake: which, for the reasons that I have set out in section XII of this judgment, is not the law. I again see no escape from the conclusion that the objections, on grounds of authority, to Sphere Drake's rule of general justice prevent those same considerations being reintroduced at the later stage of the application of the fraud of a party rule to a case involving a corporation.

Third, because of this general appeal to considerations of justice it does not seem to me possible to apply the Meridian approach to a case of perjury without being satisfied as to why the perjury occurred. That is because the mere fact that Mr Sage was an important witness for Orion cannot in itself be enough to justify depriving Orion of its judgment. If that were so it would seem to follow that any judgment gained by the perjury of a witness should be recalled, which we know is not the law. Nor should it be enough that Mr Sage was subjected to blandishments and payment in order to persuade him to give evidence (but not, it should be noted, in order to persuade him to perjure himself). The connection must surely at least be that the effect of those blandishments was in fact to cause Mr Sage to decide to perjure himself in the cause. But for the reasons already set out in section XII I do not think Mr Sage's motivation to have been sufficiently demonstrated: indeed as a matter of evidence or decision it has not been demonstrated at all. Even therefore if it were possible in logic or on authority to apply Meridian to its full extent in the present case, the factual basis necessary for attributing Mr Sage's perjury to Orion has not been established.

Conclusion


I fully appreciate that, once it is accepted that Mr Sage perjured himself, and once it is accepted that his evidence was very important to Orion's success, it may appear unattractive to allow Orion to retain its judgment. I certainly do not ignore or undervalue the concerns in that respect that are entertained by my Lords. I am however driven to conclude that the combined authority of Boswell v Coaks and Tesco v Nattrass deprives this court of the necessary freedom to act on those concerns by setting aside the judgment obtained by Orion.

XIV Disposal of the appeal


I do not consider that it has been adequately established that Mr Sage committed perjury. Although my Lords have found that Mr Sage did commit perjury, I do not consider that his perjury was that of the successful party, Orion, as the law requires before a judgment can be set aside by collateral action. For each of those separate reasons I would dismiss this appeal.

Order: Appeal allowed and judgment and order of Hirst J set aside; counsel to agree a minute dealing with consequential matters; liberty to both parties to apply to this court; order not to be drawn up pending resolution of outstanding question on costs; general permission to appeal to the House of Lords granted.