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
CHANCERY DIVISION (Mr Justice Rimer)

		Royal Courts of Justice Strand, London, WC2A 2LL
		12 December 2002

Lord Justice Jonathan Parker :

1. This is an appeal by Mr Norman Hayward, the defendant in the consolidated action, from an order made by Rimer J on 22 January 2002, whereby he entered judgment for Lloyds TSB Bank plc ("the Bank"), the claimant in the action, in the sum of £704,855.54. The judge refused permission to appeal, but permission was granted by Aldous LJ on 17 May 2002.
2. Mr Hayward is a former Chairman of, and substantial shareholder in, The Bournemouth and Boscombe Athletic Football Club Ltd ("the Club"). In the action, the Bank claims against Mr Hayward payment of sums allegedly due from him to the Bank under three guarantees dated respectively 24 October 1991, 23 June 1992 and 20 October 1992 whereby he guaranteed the indebtedness from time to time of the Club to the Bank, subject to limits of £500,000 (under the first guarantee), £100,000 (under the second guarantee), and £50,000 (under the third guarantee): a total potential liability of £650,000.
3. Each of the guarantees contained a clause enabling the Bank to vary any facilities given or to be given to the Club without Mr Hayward's consent and without affecting his liability as a guarantor, and providing further that the guarantee should not be discharged, nor Mr Hayward's liability under it affected, by anything which would not have discharged or affected his liability had he been a principal debtor to the Bank instead of a guarantor.
4. On 2 July 1966 the Bank demanded repayment by the Club of the full amount of its then indebtedness to the Bank, on the footing that it was in default under current loan arrangements; and on the following day, 3 July 1996, it made demand on Mr Hayward under his guarantees.
5. Mr Hayward contended that he was not liable to meet that demand, and the Bank accordingly commenced proceedings in relation to the three guarantees. Among other defences raised, Mr Hayward contended that in September 1991, the Bank entered into, but then breached, an oral agreement to make an overdraft of £3.2m available to the club. Secondly, Mr Hayward contended that in a letter dated 3 October 1996 the Bank agreed that it would not vary the loan arrangements without Mr Hayward's consent; that it had breached that agreement; and that his liability as guarantor was consequently discharged.
6. The Bank denied that it had agreed to increase the overdraft limit as alleged by Mr Hayward. As to Mr Hayward's second contention, the Bank accepted that by the letter in question it had agreed that it in certain specified respects it would not vary the loan arrangements without Mr Hayward's consent, and that Mr Hayward's consent had not been sought to any proposed variation. However, it denied that there had been any subsequent variation of the loan arrangements and consequently that there had been any breach of the agreement. It further contended that if (contrary to its primary case) there was a subsequent variation of the loan arrangements, it was not a variation which required Mr Hayward's consent; and that in any event any such breach as was alleged by Mr Hayward would not have had the effect of discharging his liability as guarantor but would merely have entitled him to nominal damages.
7. The judge rejected Mr Hayward's first contention, holding that the Bank had not agreed to increase the overdraft limit as Mr Hayward had contended. There is no appeal against that part of the judge's decision, and accordingly I need not consider that aspect of the case further.
8. The judge also rejected Mr Hayward's alternative contention, holding that there had been no variation of the loan arrangements after new arrangements had been agreed in the course of a lengthy meeting between representatives of the Bank and of the Club which had taken place on 23 September 1994 ("the 23 September meeting"). This conclusion was in turn based on a finding that the particular term which Mr Hayward had alleged was introduced by the Bank after the 23 September meeting, by way of a new term varying the arrangements which had been agreed at the meeting, had in fact been agreed at the meeting and accordingly did not constitute a subsequent variation of the arrangements.
9. In the result, therefore, the judge found that the Bank was entitled to judgment against Mr Hayward on his guarantees.
10. On this appeal, Mr Hayward contends that the judge's crucial finding of fact (viz. that the term which Mr Hayward had sought to characterise as a variation of the loan arrangements was not a new term varying the previous arrangements since it had been agreed at the 23 September meeting) is flawed. There are two bases for this contention. The first basis is the absence of any findings by the judge in relation to a particular contemporary document which, he contends, could (depending on the findings made) have been of the greatest significance and weight in resolving the evidential conflict as to whether the term in question had been agreed at the 23 September meeting or subsequently. The document in question is an undated manuscript note made by Mr Thomas (the officer of the Bank with responsibility for the Club's account), the contents of which are prima facie consistent with Mr Hayward's case and inconsistent with the Bank's case. I will refer to it hereafter as "the Thomas note". Mr Hayward contends that it was incumbent on the judge to make findings in relation to the Thomas note; in particular, a finding as to when it was prepared, since if it was prepared after the 23 September meeting then it would provide powerful support for Mr Hayward's case that the term in question was not agreed at the meeting, but was introduced thereafter as a variation of the existing arrangements.
11. The second basis for Mr Hayward's challenge to the judge's finding that the term in question was agreed at the 23 September meeting is a substantial concession made by the Bank at a late stage in the trial which (he contends) materially undermined the oral evidence of Mr Thomas and of his assistant Mr Coombs that the term in question was agreed at the 23 September meeting. Mr Hayward contends that in accepting that oral evidence as the basis for his finding the judge failed to pay any, or any sufficient, regard to that concession.
12. The Bank, on the other hand, contends that the judge cannot be criticised for making no findings in relation to the Thomas note; that in any event the absence of any such findings does not materially affect the judge's finding that the term in question was agreed at the 23 September meeting; that even if (contrary to its primary contention) there was a subsequent variation of the loan arrangements as agreed at the 23 September meeting (a) the variation was not such as to require Mr Hayward's consent, and (b) even it did require Mr Hayward's consent, the Bank's failure to obtain that consent entitles Mr Hayward at the most to nominal damages.

THE FACTUAL BACKGROUND

13. The judge rehearsed the factual background in considerable detail. I rehearse it again below only to the extent necessary to set the scene for this appeal.
14. Clause 8 of Mr Hayward's first guarantee is in the following terms (the other two guarantees contain clauses to similar effect):

"The Bank may without any consent from me/us and without affecting my/our liability hereunder grant renew vary increase or determine any advances accommodation or facilities given or to be given to the Customer [ie the club] or any other person and agree with the Customer or any such person as to the application thereof hold renew modify or release or abstain from taking perfecting or enforcing any security or guarantee or right now or hereafter held from or against the Customer or any other person in respect of any liability hereby secured and grant time or indulgence to or compound with the Customer or any other person and demand or enforce payment from any one or more of us irrespective of whether or not it shall take similar action against the remainder of us and this guarantee shall not be discharged nor shall my/our liability under it be affected by anything which would not have discharged or affected my/our liability if I/we had been a principal debtor to the Bank instead of a guarantor."

15. By early 1994 the Club was in a precarious financial situation. Its overdraft at the Bank had risen from £1.2M in 1989 to more than £2M. The Bank had the benefit of a number of other guarantees of the Club's indebtedness to the Bank, in addition to Mr Hayward's three guarantees.
16. In April 1994 the Bank, which was becoming increasingly concerned at the level of its exposure, agreed an overdraft limit of £2.3M until 31 August 1994. (As I mentioned earlier, Mr Hayward's assertion that in 1991 the Bank had agreed to an increase in the overdraft facility to £3.2M was rejected by the judge.)
17. By mid-1994 Mr Hayward was looking to sever his connection with the Club. He gave notice of his intention to resign as a director, and started looking for a purchaser for his shares.
18. By early August 1994 negotiations were on foot between the Bank and the Club for the conversion of the Club's indebtedness into a term loan, with annual repayments of £250,000, to be secured by additional guarantees. On 12 August 1994 the Bank wrote to Mr Hayward to clarify how repayments of the proposed loan would affect his liability as guarantor. In that letter the Bank confirmed that he would be called on as guarantor only after the Club had failed to meet the annual repayment or, subsequently, the proposed new guarantors had failed to do so.
19. On 24 August 1994 Mr Thomas wrote to Mr Hayward (with copies to his co-directors) imposing a deadline of 9 September 1994, by which time he expected to receive "the Club's deliverable proposals for future funding", failing which the Bank would consider the Club in default and would take appropriate action.
20. On 9 September 1994 the Bank made formal demand on the Club, followed, on 12 September 1994, by demand on the guarantors (including Mr Hayward).
21. The next relevant event was the 23 September meeting. It lasted from about 11 am until about 10.30 pm, and not all of those who attended were present throughout the meeting. The representatives of the Bank who attended the meeting were Mr Thomas and Mr Coombs. The Club's representatives included Mr Hayward. His solicitor, Mr Meldrum of Coles Miller, was also present for part of the meeting..
22. In the course of the 23 September meeting it was agreed that the demands on the Club and the guarantors be treated as withdrawn, and that new financing arrangements be entered into between the Club and the Bank. At some stage during the meeting, a formal facility letter was signed, but it is common ground that in oral discussion further terms were agreed, some of which were inconsistent with the terms of the facility letter. It is also common ground that the joint effect of the facility letter and the oral agreement was to convert the existing overdraft into a term loan of £2.35M, comprising "Tranche A" amounting to £1.85M and "Tranche B" amounting to £500,000, the entire loan to be repayable over nine years; and that the new arrangements were conditional (inter alia) on a new guarantee being provided by Mr Ken Gardiner (another director of the Club who subsequently took over from Mr Hayward as Chairman) in the sum of £250,000, secured by the deposit of cash of that amount in a bank account in Jersey ("the Gardiner cash deposit"). Mr Gardiner signed an appropriate form of guarantee ("the Gardiner guarantee") in the course of the meeting, and in due course the Gardiner cash deposit was provided.
23. So far as repayment of the loan was concerned, it is common ground that no repayments were required to be made during the period to 30 June 1995, but that in each year thereafter during the term of the loan the Club was required to make quarterly payments of £60,000 or repayments totalling not less than £250,000, with Tranche A being repaid first. There is, however, a dispute as to the circumstances in which the Club would be regarded as in default under the new arrangements if it failed to make the required repayments during the year ending 30 June 1996.
24. It is Mr Hayward's case that it was orally agreed at the 23 September meeting:

that his liability under his guarantees should be reduced pound for pound not only by any repayments made by the Club in reduction of Tranche A (as expressly provided in the facility letter) but also by an amount equal to any sums recovered by the Bank under the Gardiner guarantee; and

that the Bank would not treat the Club as being in default (so as to trigger a liability for the immediate repayment of the entirety of the outstanding indebtedness) if it failed to make the required repayments in the year ending 30 June 1996, on the basis that any shortfall as at that date would be made good by calling on the Gardiner guarantee; and accordingly that the earliest date on which the Club could be in default, and thus the earliest date on which a call might be made on Mr Hayward's guarantee, was 1 July 1997 – almost three years in the future.

25. The Bank's case at the commencement of the trial was as follows:

It was agreed at the 23 September meeting that the Gardiner cash deposit would be applied to cure any failure by the Club to pay the full £250,000 for the year ending 30 June 1996 if, and only if, a replacement guarantee (with appropriate security) was in place by, at the latest, 1 July 1996 covering the payment of £250,000 due to be made in the year to 30 June 1997.

It was also agreed at the 23 September meeting that if no replacement guarantee was in place by 30 June 1996 the Bank was entitled to apply the Gardiner cash deposit to a suspense account, rather than apply it in making good the shortfall for that year.

Subsequent correspondence referring to the requirement that there should be a replacement guarantee was merely confirmatory of the terms agreed at the 23 September meeting and conferred no new rights on the Bank (i.e. there was no subsequent variation of the terms agreed at the 23 September meeting).

26. At the conclusion of the evidence, however, the Bank conceded that any recourse to the Gardiner cash deposit would have the effect of reducing Mr Hayward's liability as guarantor. Given that in the event the Bank had recourse to the entirety of the Gardiner cash deposit, the effect of that concession was to reduce Mr Hayward's maximum liability as guarantor by £250,000, from £650,000 to £400,000. This is the concession to which I referred earlier, as forming one of the two bases of Mr Hayward's challenge to the judge's findings as to what transpired at the 23 September meeting.
27. Given the concession, the primary issue before the judge was whether the requirement for a replacement guarantee was agreed at the 23 September meeting (as the Bank contends) or in subsequent correspondence (as Mr Hayward contends).
28. I turn, then, to the subsequent correspondence. The judge reviewed this correspondence in paragraphs 44 and following of his judgment. The relevant passages from his judgment are as follows:

"44. On Monday 26 September, Mr Thomas wrote a letter to Mr Gardiner. He marked it "strictly private and confidential", but also sent a copy to Mr Meldrum, Mr Hayward's solicitor. He referred to Mr Gardiner's guarantee given the previous Friday and said that he was "writing to confirm its terms". He said it was to be fully supported by collateral in the Jersey account and he continued in paragraph 2 as follows:

"2. The Guarantee is given within the terms of the facility letter agreed between the Bank and the Club, also dated 23rd September 1994 and is payable in the following circumstances:-

a) Default by the Club, prior to 1st July 1997.

b) The Club has committed to provide £60,000 per quarter debt reductions commencing 30th September 1995 so that a minimum of £250,000 per annum in the year to 30th June 1996 and 30th June 1997 is achieved. If the Club do not meet this commitment then your Guarantee will be called in part, or full, to achieve the £250,000 per annum. If any call is made on the Guarantee prior to 1st July 1997 then you will reinstate the Guarantee to £250,000, with supporting security, for the remainder of that period.

Provided no default has occurred then the Guarantee will be released 1st July 1997 subject to the Club debt, tranche (a) being reduced to £1.35m on or before that date."

45. ……… On 30 September, Mr Griffiths, replied to Mr Thomas, saying that Mr Gardiner had shown him his letter. He proposed a revision to paragraph 2(b), with the second sentence reading "If the Club do not meet this commitment then your Guarantee will be called in part or in full up to a total of £250,000.00 being the total sums guaranteed by you under the above Guarantee." That revision reflects the terms of the written agreement more accurately: in particular, it cut out the suggestion that Mr Gardiner was expected to provide any replacement guarantee in the circumstances contemplated in Mr Thomas's letter.

46. As a result of that, on 3 October 1994, Mr Thomas wrote a revised letter to Mr Gardiner, again purporting to confirm the terms of his guarantee. This time he wrote as follows:

"2. [Opening words as before]:

a) [as before]

b) The Club has committed to provide £60,000 per quarter debt reductions commencing 30th September 1995 so that a minimum of £250,000 per annum in the year to 30th June 1996 and 30th June 1997 is achieved. If the Club do not meet this commitment then your Guarantee will be called in part, or full, to achieve the £250,000 per annum.

c) It is a condition of continued Bank support that each of the first two years' repayments are guaranteed. If, therefore, any call is made, in part or in full, prior to 1st July 1996 then replacement Guarantees in an acceptable form to the Bank, of equivalent level will be put in place to secure the repayment due in the year to 30th June 1997. If these are not available the facility will be considered in default.

d) Your personal liability is limited to £250,000, as outlined in the Guarantee document.

Providing no default has occurred then the Guarantee will be released 1st July 1997 subject to the Club debt, tranche (a) being reduced to £1.35m on or before that date.

Any variance to the terms of the Club facility letter of 23rd September 1994 will render this letter invalid.

Please sign and return the attached copy in acknowledgment."

47. Mr Thomas sent copies of his letter to Mr Griffiths and Mr Meldrum. On 21 October, Mr Gardiner signed and returned a copy of the letter confirming his agreement to its terms……

[48 – 49].

50. Mr Thomas also wrote to Mr Hayward on 3 October. This letter was to confirm the bank's acceptance of and agreement to the arrangements Mr Thomas then set out. He wrote at the end of it:

"2. That your Guarantee liability with us in relation to the Football Club borrowing shall reduce in line with the facility letter of 23rd September 1994 Appendix 11 i.e. reduction by The Club of its borrowing with the Bank to the extent that for every pound that Tranche (A) reduces below the sum of £1,850,000 your Guarantee liability to the Bank will be reduced by a pound.

We acknowledge and understand the contents of the letter from The Club to you of even date, a copy of which is annexed hereto, in respect of any renegotiation of the loan arrangements between the Bank and the Club and confirm that we will not agree any such matters as referred to in this letter without your consent in writing.

This letter cancels any previous arrangements between the Bank and yourself."

51. The annexed letter there referred to is from the club to Mr Hayward and reads as follows:

"In the event that [the club] or [the bank] should seek to either:

(a) Renegotiate the loan arrangements between the Club and the Bank as set out in the Facility Letter from the Bank to the directors of the Club and dated 23rd September 1994 or

(b) Enter into any new alternative or other loan arrangements of whatsoever nature

Then and in either case the Club agree that no such arrangements shall be effected without the consent in writing of [Mr Hayward] where the renegotiation may result in the guarantee repayment schedule set out in the Facility Letter being altered to the detriment of [Mr Hayward] for the period whilst liability to the Bank in respect of the Club's facilities may be outstanding Provided That in any event [Mr Hayward's] consent shall not be necessary where the putting into effect of any such arrangements would result in an absolute discharge of any liability [Mr Hayward] may have to the Bank." (My emphasis)

52. On 26 October, Mr Griffiths sent the bank the facility agreement which by then had been formally executed by the club. Again, nothing turns on that since both sides are agreed that the bank and the club had become committed to its terms on 23 September."

29. I should also refer at this point to a file note made by Mr Thomas of what transpired at the 23 September meeting. The note was typed up shortly after the meeting from manuscript notes which he took during the meeting. The manuscript notes themselves have not survived, subject only to the possibility (suggested by Mr Thomas in the course of his oral evidence) that the Thomas note may have been part of them. The typed file note contains the following:

"Hayward has obtained a side undertaking from the Club, that should they seek to renegotiate with the Bank at any stage they will have to replace his Guarantees so that the rate of reduction, as per the facility letter, i.e. £250K per annum commencing 30/6/95 is not jeopardised. .... A new Guarantee has been taken from Ken Gardiner .... Guarantee remains in force until 30th June 1997 and underwrites £250k per annum repayments due in year 2 and 3. Any call on the Guarantee during year 2 will require its enhancement back to £250k for continuation in year 3. Cash support may be replaced by alternative collateral acceptable to the Bank."

30. As I have already mentioned, in the event the Club made no repayments during the year ended 30 June 1996 and the Bank accordingly had recourse to the full amount of the Gardiner cash deposit. On 2 July 1996 it demanded payment by the Club of the full amount of the outstanding indebtedness in the sum of £2.35M plus interest of some £11,000. On the following day, the demand on the Club being wholly unsatisfied, the Bank made a demand on Mr Hayward under his three guarantees. No replacement for the Gardiner guarantee was ever tendered by the Club. Thereafter the financial position of the Club deteriorated still further, and on 25 July 1996 HM Customs & Excise presented a winding up petition against it. Further demand was made by the Bank on 2 January 1997, and on 9 June 1997 the Club entered into a voluntary arrangement with its creditors. That was a further event of default under the loan arrangements, and on 23 December 1997 the Bank made a further demand on the Club. It also made further demands on Mr Hayward on 29 December 1997 and 23 January 1998.

THE THOMAS NOTE

31. I turn next to the Thomas note. As I said earlier, it is in Mr Thomas' handwriting, and it is undated. It reads as follows:

"Ken Gardiner Gtee

YR to 30/6/95 - no problem

to 6/96 a) Club pays £ 250K - no problem

b) Club pays £150K

Gtor pays £100K - 100K light in g'tees

for 1/7/96 – 6/97

Require £100K new g'tees.

c) Club pays N.I.L.

Gtor pays £250K - 250K light in gtees

for 1/7/96 – 6/97

Require £250K new g'tees to avoid demand in year 3.

If new g'tees not forthcoming :-

Club needs to find £250K by 30/6/97 to avoid default

Demand made 1/7/97

Appendix 20 – Gtee returned when £500K repayt made by 3/6/97.

Facility letter needed a clause if demand made on KG in year before 30/6/96 then replacement g'tee of that level, up to £250K need for year to 30/6/97." "

32. As the judge observed in paragraph 49 of his judgment, the sense of the Thomas note would appear to be that the failure of the Club to pay the required £250,000 during the year ending 30 June 1996 would not be treated as an event of default for the purposes of the facility letter, and (contrary to paragraph 2(c) in the Bank's letter to Mr Gardiner) that the Bank's continued support was not conditional on a replacement guarantee being provided. Hence if the Thomas note was written after the 23 September meeting it would provide clear support for Hayward's case as to what was agreed at the meeting.
33. Both Mr Thomas and Mr Coombs gave oral evidence at the trial, and, as will appear, the judge found the evidence of each of them to be "reliable and convincing" (see paragraph 75 of his judgment).
34. In cross-examination, Mr Thomas was asked by Mr Malek QC (appearing for Mr Hayward, as he does on this appeal) about the Thomas note. When Mr Malek put it to him that from its terms it looked as if it must have been prepared after the 23 September meeting, Mr Thomas replied (transcript 24 January 2002 p.12, line 41) that he could not say whether he had prepared it before of after that meeting. After taking Mr Thomas through its terms, Mr Malek put to Mr Thomas that what the Thomas note indicated was that the Club had until 30 June 1997 to come up with £250,000 in order to avoid being in default, and that because of that the Bank needed a replacement guarantee in the event that recourse was had to the Gardiner guarantee in respect of a shortfall in the year ending 30 June 1996. Mr Thomas replied (ibid. p.13 line 50):

"That is obviously what I thought then, yes."

35. The transcript continues as follows:

"Q. That is completely inconsistent with the case that you are putting to the court, that there was already a commitment to put a replacement guarantee and that if that replacement guarantee was not put in place the Club would be in default at that point of time. This note clearly indicates that in the event of a call, a failure to pay in relation to year two, the Club had until 30th June 1997 to avoid a default. That is right, is it not? A. That is what I have written at that time.

Q. And this is the best evidence, is it not, of what you thought at the time? A. Correct.

Q. What you say at the bottom is this, you have looked at the facility letter and you have seen that there is a gap in it and what you are saying is this, is that the facility letter "needed" that suggests, does it not, that this note was prepared after the meeting, does it not? A I don't know whether it refers to that meeting or a previous facility letter, but it suggests that it is after I have seen whether it be a draft or the final facility letter.

Q. Now, that is not right is it? A. I understand "needed".

Q. Let us just see what you thought the facility letter needed:

'If demand made by KG in year before 20^th June 1996 then replacement guarantee of that level up to 250K needed for year to 30^th June 1997.'

Do you see that? A. I do see that, yes.

Q. And what that indicates, does it not, is that you had appreciated after the meeting of 23rd September that there was a gap that needed to be filled, namely this replacement guarantee? A. Without a date on there I can't be certain. It could be a note that I did during the course of the meeting. You asked where the notes from the meeting went earlier on, this might have been one page out of it.

Q. That is not right, is it Mr Thomas? This note was prepared after the meeting. You appreciated that there was a gap and this is what you dealt with subsequently with Mr Gardiner to fill in the gap and to put in the replacement guarantee and a new default, and to take away from the Club's right to make payment of that third annual payment on 30^th June 1997. A. That's your opinion. My opinion is borne out in my file note of 23^rd September.

Q. But that is what this file note seems to indicate. Do you accept that? A. I understand the point you are making, yes.

Q. It is not a question of understanding. That is what the note indicates ? A. But I cannot tell you the date of this note, and without knowing the date of this note I cannot say whether – I understand why you have concentrated on the word "needed" as well, but that could just as easily be during the course of the meeting when we were looking through the facility letter during the course of the day."

36. Mr Thomas went on to accept that the facility letter as signed did not in fact contain a clause in the form of, or having the effect of, the clause proposed in the Thomas note.

THE BANK'S CONCESSION

37. Next, I return to the Bank's concession. At the conclusion of the oral evidence, Mr Lerego QC (appearing for the Bank, as he does on this appeal) addressed the judge as follows (transcript 25 January 2002 p.2 line 11):

"MR LEREGO : .... As your Lordship will recall, Mr. Thomas gave evidence on Wednesday and Thursday of last week. He was followed by Mr. Hayward's evidence. Mr Thomas had been thinking about the evidence that he gave, having heard Mr. Hayward's evidence and thought about matters more. My instructions are that it is Mr Thomas' view now that Mr. Hayward could have left the 23^rd September meeting thinking that he, Mr. Hayward, would have his guarantee liability reduced if the Gardiner guarantee and collateral was called and not replaced.

Mr Thomas remains of the recollection that at the meeting there were discussions on what would happen of the Gardener Guarantee would be called for year one. That is for 30^th June 1996 payment. His recollection is that in that event what was discussed and agreed would be that the club would have to produce some replacement security for the second payment due on 30^th June 1997 to avoid a default. But, having thought about it a great deal, his feeling is that Mr. Hayward may well have had the impression that if those events occurred his liability (Mr. Hayward's guarantee liability) would reduce by the amount of what I will call the Gardiner payment…….

In the light of that development, my instructions are not to pursue what we call issue 3, the question whether there should be credit for that £250,000. I could stand here and address an argument to your Lordship on the construction of the documents and to cite precedents, but my instructions are not to pursue an argument of that nature. What I am told by Mr. Thomas is that he thinks that Mr. Hayward could have left the meeting with that impression.

MR JUSTICE RIMER : You concede issue 3 then?

MR LEREGO : Yes, so that my claim is now a claim for £400,000 plus interest...."

38. Mr Malek then indicated that he would wish to ask Mr Thomas some further questions, and Mr Thomas was accordingly recalled. In the course of his further evidence in chief, Mr Thomas said this with reference to the 23 September meeting (transcript 25 January p.3, line 53):

"I have no doubt whatsoever that we are talking about the two year deal, that we are talking about the club guaranteeing that two years' repayments would be made. No doubt whatsoever. What I have got doubt about is what the intention was as to who should have the benefit of the first payment. That means was Norman Hayward's liability £650,000 or £400,000? Even though the legal documents suggest that what the bank did to recover £650,000 was correct, on reflection I cannot be 100% certain that that was the intention, because of my doubt about the terms of that letter of 12^th August."

39. Mr Thomas was then cross-examined further by Mr Malek as follows (ibid. p.4, line 31):

"Q. ..... Let us go through where we are now. First of all, you accept that it is likely that there was a discussion about how Ken Gardiner's guarantee would operate? A. During the course of 12 hours we covered many what if's.

Q. That would have been one of the matters that was discussed? A. Yes.

Q. Your understanding of the outcome of the discussions on 23rd September was that Norman Hayward's guarantee liability would be reduced by the £250,000 on 0^th June 1996? A. I can say that I think that was an eventuality that was discussed.

Q. You accept that Norman Hayward believed that? A. I could understand him believing that, yes.

Q. It follows from that that there was no question of the Jersey monies going into a suspense account. I think you confirmed that a moment ago. You said that you would go to reduce the club's indebtedness in respect of that first annual payment? A. We did not go into the legal mechanics, but effectively what I am saying is if the "250,000 Gardiner guarantee was called, it was reducing the clubs indebtedness to the bank. If I go back to the letter of 12^th August, that was also reducing Mr. Hayward's liability.

……………..

Q. Let us go to the area of what you said in terms of this question of the replacement guarantee. As I understand the evidence that you are now giving to the court, what you are accepting is that the first annual payment could, in effect be met from Ken Gardiner's guarantee. A. There was certainty that the first annual payment would be met either by the club or the guarantee.

Q. What I think you are saying is that so far as the second annual payment on 30^th June 1997 is concerned, the club did not have that period until 30^th June unless a replacement was put in place. Is that your evidence? A. My evidence would be that what the eventual documentation produced was what the bank was entitled to do. We were looking, at that meeting, to get two years' repayments guaranteed. We had one year repayment guaranteed in amount and I thought we had two years' repayments guaranteed in action. Therefore, the amount was the point at issue. So that if the club had paid £250,000 out of its own resource, there was not a problem. If the Gardiner guarantee was called and the club put a replacement in, there was not a problem. The issue that we were all faced with here and that developed is what happened if the club did not pay and Gardiner was called and the club did not put a replacement guarantee in?

Q. So the difference between us is that on Mr. Hayward's case the club had until 30^th June 1997 to make the second annual payment, but on your case that was conditional upon a replacement guarantee being put in place. A. The club could have made a capital repayment by 30^th June 1997 because that was still within their power, but there was meant to be in place a guarantee at the start of the year to cover that second repayment. I think that is in my file note of 23^rd September."

THE JUDGMENT

40. In the course of his careful and detailed judgment, the judge referred to the Thomas note and to the Bank's concession. In relation to the Thomas note, the judge said this (in paragraph 49):

"There was some investigation during Mr Thomas's oral evidence as to whether he made that note before, during or after the [23 September meeting], but the evidence was inconclusive."

41. And in paragraph 64 he said this:

"[Mr Thomas] acknowledged that in [the Thomas note] he had suggested that there was no requirement for a replacement guarantee to be provided, and that there would only be a payment default if the club did not pay £250,000 by 30 June 1997. However, he could not remember at what point in the story he wrote that note. The thrust of his evidence was, however, that it was improbable that it was written after the [23 September meeting] since part at least of it was inconsistent with what he said had been agreed at the meeting. He was referred to the last part of the note .... and it was put to him that he had appreciated that there was a gap in the facility which needed filling. The further suggestion to him was that he sought to, and did, fill it by his letter of 3 October to Mr Gardiner. He disputed that, because he said that at the meeting he concluded what he called a "two-year deal", that is one under which both payments of £250,000 due on 30 June 1996 and 1997 were supported by secured guarantees...."

42. As to the Bank's concession, in paragraph 2 of the judgment the judge recorded that the concession had been made, and in paragraph 55 of the judgment he said this:

"55. He asserts, first, that he was told that his liability under his guarantees would be reduced pound for pound not just by any annual payment of (or up to) £250,000 made by the club, but also by any payment of (or up to) that amount made by Mr Gardiner under his guarantee. Mr Gardiner's guarantee was in due course called and satisfied in full, and Mr Hayward claims that he is at least entitled to the benefit of a credit for that realisation. As I said in paragraph 2 above, this was in issue until the bank conceded the point at a late stage in the trial. The concession was made because, having considered matters further after he had concluded his oral evidence, Mr Thomas recognised that Mr Hayward could well have left the meeting with the understanding that he was to be entitled to such a credit."

43. Having defined the issues which remained for decision, and having completed his review of the oral and documentary evidence before him, the judge turned to the crucial issue as to what was agreed at the 23 September meeting. In paragraphs 65 to 70 of his judgment he said this:

"65. Mr Hayward's case is that it was an oral term of the facility agreement made on 23 September that if the club did not pay the £250,000 due by 30 June 1996 it would not commit a payment default entitling the bank to make a call on his guarantees. The bank could and would look to Mr Gardiner's secured guarantee to satisfy that particular payment obligation; and the club would only commit a payment default rendering Mr Hayward liable under his guarantees if it also failed to pay the £250,000 due by 30 June 1997.

66. The bank denies that. It claims that it was an oral term of the facility agreement that a payment default by the bank by 30 June 1996 would at least entitle it to call in the Gardiner guarantee; but that, provided a replacement guarantee was in place by 1 July 1996 (at one point Mr Thomas says by 30 June 1996, but I regard the weight of the bank's evidence as pointing to 1 July 1996), the bank would not regard the club as being in payment default for the purpose of exercising any wider remedies. If, however, such guarantee were not in place by then, a payment default by 30 June 1996 would entitle the bank to exercise all its remedies, including against Mr Hayward.

67. In considering these rival accounts, it is important to remember that the main outcome of the meeting on 23 September was the signing of the formal written facility agreement. The terms of that agreement form the core of the agreement between the bank and the club. As I have said, neither party argued that it was not open to the other to prove that additional terms were agreed orally. But in reviewing the rival accounts, I consider it is of assistance to see how they can be reconciled with the agreed written terms. For example, if a written term provides for one thing, and an alleged oral term provides for something inconsistent, that may pose a difficulty as to which must be made to yield to the other. More fundamentally, it may cast doubt on the probability of any such oral term having been agreed at all.

68. Mr Hayward's account appears to me to raise problems of this nature. Under the terms of the written facility agreement, a payment default by the club by 30 June 1996 would entitle the bank to demand payment by the club of all money due from it. That is the combined effect of clauses 7.1 and 14(a). The further consequence is that the bank would be entitled to call in both Mr Gardiner's secured guarantee and Mr Hayward's three unsecured guarantees. Yet Mr Hayward's case is that there was a collateral oral agreement between the bank and the club under which it was agreed that the payment default would entitle the bank only to call in Mr Gardiner's guarantee, whereupon the default would immediately be treated as waived. The oral agreement is therefore one which deprived the bank of a material slice of the legal rights conferred on it by clauses 7.1 and 14 of the written agreement; and it is not clear that the bank even received anything in exchange for such a concession.

69. In so far as I have to take account of the probabilities of Mr Hayward's account being correct, I have to say that I regard it as improbable that the bank would have made such an agreement. But if it had, I should have thought it obvious that it involved such a fundamental, and important, dilution of its rights under the written agreement that both the club and Mr Hayward (or at any rate his solicitor, Mr Meldrum) would have been anxious to include an appropriate amendment to that agreement. There would have been no difficulty about that, and all that would have been needed was a suitable proviso to clause 14(a) limiting the extent of the bank's rights on a payment default by the club by 30 June 1996. The club and Mr Hayward each had their solicitors there, and Osborne Clarke (the bank's solicitors) were available at the end of a telephone. Instead of that, Mr Hayward's case requires the court to prefer the view that none of the club, Mr Hayward or Mr Meldrum sought to ask the bank to acknowledge this concession in writing but that they were apparently content for a facility agreement to be signed which was inconsistent with it, and to leave the proof of the alleged concession to depend on their unrecorded recollections.

70. I have, however, anyway come to the conclusion that I am unable to accept Mr Hayward's version of what was orally agreed. On his own admission, he is not a "details" man. He was giving evidence about a meeting held over seven years ago, of which he made no notes. His witness statement was in various respects shown to be unreliable and to be the work of a man for whom accuracy is of secondary importance. As I have said in relation to the £3.2m overdraft issue, I did not find him a convincing witness, and I would not be prepared to place reliance on his evidence on controversial matters save where it is supported by other reliable evidence. He did adduce any supporting evidence for his version of events. In particular, I did not hear from any of the other club representatives who were at the meeting, or from Mr Meldrum. I have not overlooked the undated note made by Mr Thomas, which contains a statement consistent with Mr Hayward's case and on which Mr Malek naturally placed great reliance. But since I regard the date when, and circumstances in which, that note came to be made as wholly uncertain, I am unable to regard it as providing supporting evidence for what Mr Hayward says was agreed at the meeting". (Emphasis supplied.)

44. I have emphasised the last two sentences of paragraph 70 of the judgment since they represent the focus of Mr Malek's submissions based on the absence of any findings in relation to the Thomas note.
45. The judge then went on to reject an alternative argument advanced by Mr Lerego to the effect that a requirement for a replacement guarantee is to be found in the terms of the facility letter itself, and in particular clause 14 (c) of the facility letter (a view which was not shared by Mr Thomas: see his oral evidence quoted earlier).
46. The judge then continued as follows :

"75. I do, however, accept the evidence of Mr Thomas and Mr Coombs that an oral agreement along the lines they assert was concluded on 23 September. I found the evidence of each to be reliable and convincing. I regard the making of such an agreement as consistent with, and supported by, Mr Thomas's file note of the meeting. Mr Thomas's subsequent letter of 3 October 1994, which Mr Gardiner appears to have been content to sign without demur, is also consistent with it. Mr Thomas's letter of 26 September is also essentially consistent with it, save that he admits he made a mistake in that letter in suggesting that any replacement guarantee had to be provided by Mr Gardiner rather than by anyone else the club might procure to be a guarantor. I find that the letter of 3 October 1994, counter-signed on 21 October 1994, did no more than reflect an oral agreement earlier made on 23 September 1994, being an agreement forming part of the new facility agreement then made. I find, therefore, that there was no subsequent variation of that agreement. I therefore reject Mr Hayward's defence based on the proposition that there was.

76. Mr Lerego also had a further point. Mr Hayward's claimed gateway to the invocation of the Holme v. Brunskill principle is the express agreement which the bank made with him in its letter of 3 October 1994 that, without his consent in writing, it would not "agree any such matters as referred to in" the club's letter to Mr Hayward to which the bank referred. I have earlier quoted the terms of the latter letter. Mr Malek's submission was that the effect of this agreement ("the Hayward agreement") was to qualify the effect of clause 8 in the first guarantee (also quoted) and the like clauses in the other guarantees and to limit the bank's rights accordingly.

77. Mr Lerego's point was that, even if the letter of 3 October 1994 to Mr Gardiner did introduce a variation to the prior facility agreement, it did not involve a breach by the bank of the Hayward agreement. He submitted that, on the true construction of the Hayward agreement, all the bank was agreeing was that it would not, without Mr Hayward's consent, agree to a variation where it "may result in the guarantee repayment schedule set out in the Facility Letter being altered to the detriment of Norman Hayward for the period whilst liability to the Bank in respect of the Club's facilities may be outstanding …". Mr Lerego submitted that the reference to the "guarantee repayment schedule" can only be to clause 7.1 of the facility agreement and that the new term (if that is what it was) in the Gardiner letter of 3 October 1994 did not purport to alter that schedule, or at any rate not to Mr Hayward's detriment. True it is that Mr Hayward did not give his written consent to it, but as the new term did not involve any breach of the Hayward agreement, there was and is no reason to regard it as depriving the bank of the benefit of its right under clause 8 of the guarantee. Having rejected Mr Hayward's case as to what he says was orally agreed at the meeting of 23 September, I accept that submission.

78. Alternatively, Mr Lerego submitted that the Hayward agreement did not supersede or qualify clause 8 of the first guarantee; and even if, contrary to his primary argument, the bank breached that agreement, that would at most have entitled Mr Hayward to damages, but would not have deprived the bank of the benefit of clause 8. However, Mr Hayward had not sought to prove any damage flowing from such breach, so that any damages would be merely nominal. I find it unnecessary to express any view on that argument."

47. In the result, therefore, the judge concluded that the Bank was entitled to judgment against Mr Hayward on his guarantees, subject only to giving credit for £250,000 representing the Gardiner cash deposit (as conceded) and a further sum of £40,000 (as to which there had never been an issue).

THE GROUNDS OF APPEAL

48. Mr Hayward appeals on the primary ground that the judge ought to have found that he was discharged from liability as guarantor by reason of the fact that the loan arrangements as agreed at the 23 September meeting were subsequently varied without his consent and to his prejudice by the introduction of the requirement for a replacement guarantee in clause 2(c) of the Bank's letter dated 3 October 1994 to Mr Gardiner ("the Gardiner side-letter"); and that the judge's finding that such a requirement was agreed at the 23 September meeting was against the weight of the evidence and/or was plainly wrong. In support of this primary ground of appeal Mr Hayward relies on the Thomas note and on the Bank's concession. Mr Hayward also challenges the judge's acceptance (in paragraph 77 of the judgment) of Mr Lerego's submission that, on the assumption that the requirement for a replacement guarantee was introduced for the first time in the Gardiner side-letter and thus constituted a variation of the loan arrangements as agreed at the 23 September meeting, the variation was not one which required Mr Hayward's consent. Mr Hayward contends that that conclusion was wrong and that the failure to obtain Mr Hayward's consent was a breach of the agreement contained in the Bank's letter to him dated 3 October 1994 ("the Hayward side-letter"); and that the judge, instead of finding it unnecessary to express any view on the question (see paragraph 78 of the judgment), should have gone on to conclude that Mr Hayward was discharged from liability as guarantor.

THE RESPONDENT'S NOTICE

49. By a Respondent's Notice, the Bank relies on a number of additional grounds in support of the judge's rejection of Mr Hayward's case based on a variation of the loan arrangements.
50. It contends:

that the Gardiner side-letter did not alter the repayment schedule in the facility letter to Mr Hayward's detriment and accordingly did not require his consent;

that the judge ought to have accepted the Bank's submissions as to the true construction of clause 14(c) of the facility letter (submissions which the judge rejected in paragraphs 73 and 74 of the judgment);

that the "overwhelming weight of the evidence" supported the judge's findings as to what was agreed at the 23 September meeting;

that the judge was right to conclude that he could make no findings about the Thomas note;

that if (contrary to its primary case) the requirement for a replacement guarantee was not agreed at the 23 September meeting, the Gardiner side-letter did not, nor did it purport to, vary the agreement between the Bank and the Club but related merely to the Gardiner guarantee;

that on its true construction the Hayward side-letter does not require Mr Hayward's consent to be obtained to the terms of the Gardiner side-letter;

that by failing, when he knew that the Bank was continuing to rely on his guarantees, to assert that the Gardiner side-letter required his written consent Mr Hayward waived any right to treat the Gardiner side-letter as discharging him from liability under his guarantees;

that the Hayward side-letter is not, on its true construction, effective to remove the protection afforded to the Bank by clause 8 of Mr Hayward's first guarantee (and by the corresponding clauses in his other two guarantees) in displacing the general rule as to the circumstances in which a guarantor is discharged from liability; and

that in any event Mr Hayward has suffered no loss by reason of any variation of the loan arrangements and would accordingly be entitled to nominal damages only.

THE ARGUMENTS ON THE APPEAL

51. Mr Malek submits that at trial there was a clear overlap or interplay between (on the one hand) the issue whether the requirement for a replacement guarantee was agreed at the 23 September meeting or subsequently, and (on the other hand) the issue whether it was agreed at the 23 September meeting that the Bank was obliged to give credit to the Club (and hence to Mr Hayward) in respect of its recourse to the Gardiner cash deposit. The status of any recourse to the Gardiner cash deposit is, he submits, intimately connected with Mr Hayward's position as guarantor and hence with any requirement for a replacement guarantee.
52. He submits that the judge should have taken proper account of the fact that until the concession was made it had been the Bank's case, supported by the evidence of Mr Thomas and Mr Coombs, that at the 23 September meeting it had been agreed that credit would not be given to Mr Hayward in respect of the Bank's recourse to the Gardiner cash deposit; and that although the concession was framed in terms which suggested concern on the part of the Bank that Mr Hayward might have misunderstood what had been agreed at the 23 September meeting, the substance of the concession was such as to throw doubt on the reliability of the recollections of Mr Thomas and Mr Coombs as to what had been agreed in the course of a lengthy meeting which had taken place more that seven years earlier; and conversely, to corroborate the recollection of Mr Hayward in that respect. Yet, he submits, there is no indication anywhere in the judgment that the judge regarded the concession as having any relevance to the remaining issue of fact which he had to decide, or that he attached any weight to it in addressing that issue.
53. Turning to the other basis on which Mr Hayward challenges the judge's decision, Mr Malek submits that the terms of the Thomas note are consistent only with its having been prepared after the 23 September meeting, and that the judge ought to have made such a finding. Had he made that finding, submits Mr Malek, he must have concluded that the recollections of Mr Thomas and Mr Coombs as to what had been agreed at the 23 September meeting were faulty. At the very least, he submits, the Thomas note was a potentially highly significant piece of contemporary evidence and the judge ought to have made findings about it; if only on the balance of probabilities. As it is, the judgment ducks the issue entirely, merely dismissing the evidence about it as "inconclusive" (see paragraph 49 of the judgment). Accordingly, he submits, the judge's finding that the requirement for a replacement guarantee was agreed at the 23 September meeting is fatally flawed and the judgment should accordingly be set aside.
54. Should that submission be accepted, Mr Malek submits that it would be inappropriate for the case to be remitted for a retrial since the Thomas note speaks for itself and demonstrates beyond question that the requirement for a replacement guarantee was first introduced by the Bank's letter to Mr Gardiner dated 3 October 1994. He accordingly invites this court so to declare.
55. I turn now to Mr Lerego's submissions. (I will summarise later Mr Malek's responses to the submissions made by Mr Lerego in support of the additional grounds set out in the Bank's Respondent's Notice.)
56. As to Mr Malek's submissions based on the Bank's concession, Mr Lerego points out that in the course of his further oral evidence following the making of the concession Mr Thomas continued to maintain that the requirement for a replacement guarantee was agreed at the 23 September meeting. In his evidence, Mr Thomas relied on the reference in his file note of the 23 September meeting to the Bank requiring "enhancement back to £250k for continuation in year 3" as confirming his account. Mr Lerego submits that the evidence of Mr Thomas and Mr Coombs was not in any way undermined by the concession; he submits that the fact that Mr Thomas was concerned that Mr Hayward may have misunderstood the true position reinforces the judge's assessment of him as an honest witness. Mr Lerego also points out that the judge was alive to the possibility that the concession might affect Mr Thomas' evidence in relation to the requirement for a replacement guarantee, and that Mr Thomas dealt specifically with this in his further oral evidence.
57. In response to Mr Malek's submissions based on the Thomas note, Mr Lerego submits that the judge was fully entitled to accept the evidence of Mr Thomas and Mr Coombs and to find that the requirement for a replacement guarantee was agreed at the 23 September meeting. He submits that the judge cannot be criticised for having, in effect, declined to undertake an impossible task in attempting to decide, on the basis of the "inconclusive" evidence before him, when the Thomas note was prepared (and in particular whether it was prepared after the 23 September meeting). He disputes that the terms of the Thomas note are only consistent with its having been prepared after the 23 September meeting. In particular, he submits that the word "needed" indicates no more than that Mr Thomas (who is not a lawyer) considered that the facility letter in its then form required alteration; but that may equally well have occurred before or in the course of, rather than after, the 23 September meeting. Equally, he submits, the reference to the Gardiner guarantee is equally consistent with the guarantee being then in prospect, as with its being already in existence. In any event, he submits, it is plain from his references to the Thomas note in his judgment that the judge had it well in mind when making his findings.
58. Turning to the additional grounds raised in the Bank's Respondent's Notice, Mr Lerego submits that even if the judge had found that the requirement for a replacement guarantee was introduced for the first time in the Gardiner side-letter, that would not have had the effect of discharging Mr Hayward from his liability as guarantor. He submits firstly that the Hayward side-letter, on its true construction, proceeds on the basis that the new loan arrangements are as set out in the facility letter itself. Further, he submits, the (assumed) introduction of the requirement for a replacement guarantee did not alter the "guarantee repayment schedule", which, he submits, must be a reference to the provision in the facility letter (in paragraph 11 of Appendix A) that Mr Hayward's liability was to reduce pound for pound in line with repayments of Tranche A. He submits that, properly construed, the Gardiner side-letter did not operate to displace clause 8 of Mr Hayward's first guarantee (or the corresponding clauses in his two subsequent guarantees). Mr Lerego also advances the argument which the judge rejected (in paragraphs 72 to 74 of his judgment, quoted earlier) based on the terms of the facility letter.
59. Mr Lerego further submits that Mr Hayward is barred either by affirmation or by waiver or both from asserting that he is discharged from liability by reason of the (assumed) introduction, after the 23 September meeting, of the requirement for a replacement guarantee. He took us in detail through the contemporary correspondence in order to demonstrate that both Mr Hayward and his solicitor Mr Meldrum received copies of all relevant documentation, and were fully au fait with the developing situation in relation to the Bank's requirements.
60. In the alternative, Mr Lerego submits that paragraph 2(c) of the Gardiner side-letter amounted to no more than a statement by the Bank that in one specific identified situation the Bank would not exercise its strict legal right to terminate the facility. That, he submits, was a statement which was capable of giving rise to a promissory estoppel, but there is no evidence that it was ever relied on by Mr Hayward or by the Club, since there is no evidence that a replacement guarantee was ever tendered nor was any change to the terms of the facility letter ever authorised or approved by the Board of the Club. Nor, for that matter, did the requirement for a replacement guarantee operate to the detriment of Mr Hayward.
61. In the further alternative, Mr Lerego submits that Mr Gardiner counter-signed the Gardiner side-letter not on behalf of the Club but merely in his personal capacity as guarantor.
62. Mr Malek submits that it is entirely artificial to construe the Gardiner side-letter as referring only to the provisions of the facility letter, in circumstances where, as is common ground, an oral agreement was reached at the 23 September meeting which supplemented, and in some respects varied, the facility letter. He also supports the judge's rejection of the argument based on the terms of the facility letter. He submits, further, that the introduction of the requirement for a replacement guarantee was plainly to Mr Hayward's detriment since it gave rise to an additional risk of the Club being in default on 1 July 1996 amd (in consequence) of his being called on as guarantor.
63. As to Mr Lerego's submission that Mr Gardiner did not sign the Gardiner side-letter on behalf of the Club, Mr Malek points out that by October 1994 Mr Gardiner was the Chairman of the Club, and that the Bank, in its Reply and Defence to Counterclaim, relies on the Gardiner side-letter as evidencing an agreement between the Bank and the Club. Further, Mr Malek points out that in the course of his oral evidence Mr Thomas conceded that it was signed by Mr Gardiner in his capacity as Chairman of the Club (see transcript 24 January 2002, p.18 line 10).
64. As to affirmation and/or waiver, Mr Malek points out that the Hayward side-letter required Mr Hayward's written consent, and that under cross-examination Mr Thomas, under repeated questioning, eventually accepted that the Bank had made no attempt to obtain his written consent. In any event, Mr Malek submits, there is no evidence of any reliance by the Bank on the absence of an assertion by Mr Hayward that he was discharged from his guarantees. Indeed, Mr Thomas wrote to Mr Meldrum on 16 November 1994 seeking Mr Hayward's confirmation that the Bank could continue to rely on his guarantees, and that confirmation was not forthcoming (Mr Meldrum's response dated 18 November 1994 being addressed to an entirely different point). At that point, Mr Malek submits, it was up to the Bank to follow the matter up.

CONCLUSIONS

The Thomas note

65. In my judgment, the judge was in error in not making findings in relation to the Thomas note, and in particular as to whether it was prepared after the 23 September meeting. Given that the oral evidence before the judge on the crucial issue as to what was agreed at the 23 September meeting consisted of the evidence of witnesses who were relying on their recollections of what was said at a lengthy meeting which had taken place more than seven years previously, any contemporary document was of necessity of potentially significant weight in resolving the conflicts of evidence between Mr Thomas and Mr Coombs on the one hand and Mr Hayward on the other. And none more so than the Thomas note, in my judgment. Had the judge found that the Thomas note was prepared after the 23 September meeting, that must, in my judgment, have at the very least provided a significant degree of corroboration of Mr Hayward's evidence, and thrown a corresponding degree of doubt on the reliability of the recollections of Mr Thomas and Mr Coombs.
66. As to Mr Lerego's submission that there was simply not enough evidence before the judge to enable him to make a finding as to when the Thomas note was prepared, it seems to me that, given its potential significance, it was up to the judge to make the best finding he could on the evidence before him (including the terms of the document itself). Where an issue of fact arises which is peripheral to the dispute which the court is required to resolve, and the evidence in relation to that issue is equivocal, the trial judge may well take the view that it is unnecessary to deal with that issue. It is, after all, a trite proposition that a trial judge is not required to resolve every dispute of fact which may arise in the course of the trial. But where, as here, the issue as to when the Thomas note was prepared, far from being peripheral, is central to the issue which the court was required to resolve (that is to say the issue whether the requirement for a replacement guarantee was agreed at the 23 September meeting or introduced for the first time thereafter) the judge ought in my judgment to have tackled the issue head on and made a finding about it. His failure to do so leads me to the conclusion that his finding that the requirement for a replacement guarantee was agreed at the 23 September meeting is fundamentally flawed.
67. I have anxiously considered whether it would be appropriate for this court to undertake that task itself and, in effect, make its own finding of fact as to when the Thomas note was prepared. However, I have come to the conclusion that that would not be an appropriate course for this court to take. The Court of Appeal is not a fact-finding tribunal: that is the function of the court of first instance. It seems to me that only in the most exceptional circumstances, e.g. where the evidence is so clear that a retrial would simply be a waste of time and money, should the Court of Appeal take upon itself the discharge of that function. I cannot see that the instant case falls within that category. It is, in my judgment, for the court of first instance to remedy what I regard as the fundamental defect in the judge's judgment. A finding that the Thomas note was prepared after the 23 September meeting would inevitably raise a doubt as to the reliability of the evidence of Mr Thomas and Mr Coombs, but it must in my judgment be for the trial judge to assess whether, despite that doubt, their evidence should be accepted. Accordingly, unless Mr Lerego succeeds on one or more of his arguments that even if the requirement for a replacement guarantee was introduced for the first time in the Gardiner side-letter nevertheless Mr Hayward is not discharged as guarantor, there will in my judgment have to be a new trial.

The Bank's concession

68. As to Mr Malek's reliance on the Bank's concession, I agree that there is nothing in the judgment to indicate that the judge took the concession into account when deciding to accept the evidence of Mr Thomas and Mr Coombs as to what was agreed at the 23 September meeting. On the other hand I cannot regard the absence of such an indication as being of anything like the same degree of seriousness as the absence of findings about the Thomas note. It is clear that the judge was alive to the possible knock-on effect of the concession on the reliability of the evidence of Mr Thomas and Mr Coombs, and it may be that (although he did not expressly say so) he took this into account in deciding whether to accept their evidence. At all events, I would not for my part regard this in itself as a defect in the judgment justifying a new trial.

The additional arguments of the Bank

69. I turn then to Mr Lerego's various arguments to the effect that even if the requirement for a replacement guarantee was introduced after the 23 September meeting, nevertheless Mr Hayward is not discharged as guarantor.
70. On these arguments I accept the submissions of Mr Malek. In the first place, Mr Lerego's suggested interpretation of the Gardiner side-letter as referring only to the terms of the facility letter seems to me to be far too restrictive, given that all parties knew that the terms of the facility letter had been supplemented and varied in a number of respects at the 23 September meeting. Moreover the judge was in my view right to reject Mr Lerego's argument based on the terms of the facility letter itself, for the reasons he gave in paragraph 73 of the judgment.
71. In my judgment, if paragraph 2 (c) of the Gardiner side letter was a variation of the loan arrangements as agreed at the 23 September meeting, it was a variation which required Mr Hayward's written consent pursuant to the Hayward side-letter. I accept Mr Malek's submission that the requirement for a replacement guarantee was plainly to Mr Hayward's detriment.
72. Secondly, the inference seems to me to be clear that (as Mr Thomas effectively accepted in evidence and as the Bank asserted in its pleading) Mr Gardiner counter-signed the Gardiner side-letter not merely in his personal capacity as guarantor but as Chairman of the Club.
73. Thirdly, the arguments based on waiver, estoppel and affirmation seem to me to have no evidential basis. It is accepted by the Bank that it never sought Mr Hayward's written consent (as required by the Hayward side-letter), and there is no evidential basis for the assertion that Mr Hayward waived that requirement. Nor can I spell out of the contemporary correspondence any representation by Mr Hayward that he would not subsequently assert that the introduction of paragraph 2 (c) of the Gardiner side-letter discharged his liability as guarantor. Indeed, as pointed out earlier, the Bank asked for Mr Hayward's confirmation that he remained liable under his guarantees, and that confirmation was not forthcoming. Nor is there any evidence that the Bank relied on such a representation.
74. Nor, for that matter, can I discern any point of time at which it could be suggested either that Mr Hayward was put to his election in that respect, or that he acted in a way which was consistent only with his having abandoned reliance on the requirement for a replacement guarantee as discharging him from liability.
75. In my judgment, therefore, each of the additional arguments raised in the Respondent's Notice fails.

RESULT

76. In the result, therefore, with very considerable regret and with a full awareness of the obvious care with which the judge approached the case, I have concluded that the appeal should be allowed, the judge's order set aside, and a retrial directed.

Lord Justice Thorpe:

77. During the course of submissions the court made clear its reluctant conclusion that a re-trial was inevitable. Mr Ali Malek, when replying to Mr Lerego's submissions, made a forceful attempt to persuade the court that he was entitled to outright victory. I found much of his argument persuasive. For instance on its face the Thomas note hardly seems to be pre-date the 23 September meeting. The possibility that it was made during that meeting hardly seems to me strong. That leaves but one alternative.
78. Second my experience of fact-finding, admittedly in a different field of litigation, has led me to the general conclusion that a long lapse of years together with the natural human tendency to subjective or self-serving recall obliges the court to be guided by surviving contemporaneous documents. Indeed my understanding of the operation of my own memory indicates the same conclusion. By the date of any retrial the events under investigation will be probably nine years stale. The judge may be largely reliant on the documents and thus will be in no better position than this court to decide the probabilities.
79. However I have since read the judgment of my lord, Jonathan Parker LJ, in draft. I am in complete agreement with all his conclusions. I accept that both as a matter of principle and as a matter of justice to the bank a retrial is inevitable.
80. No doubt the parties have throughout been mindful of the advantages of compromise. But in exceptional circumstances such as these I urge on the parties the option to mediate rather than to re-litigate. This court's ADR scheme is of particular relevance to these appeals which in their success lead only to a second trial. I would suggest that this is a case in which a letter of invitation to mediate should be addressed to each of the parties by the Civil Appeals Office with a request that any refusal should be duly reasoned.

Dame Elizabeth Butler-Sloss, P. :

81. I agree with the judgment of Jonathan Parker LJ which I have had an opportunity to read in draft. I agree with his conclusion that this appeal should be allowed and, with regret, that the case has to be remitted to the High Court for a retrial. I wish however to add a few comments of my own on the issue of the 'Thomas note' and the reason why a retrial is unfortunately necessary.
82. The judge said at paragraph 49 of his judgment

"There was some investigation during Mr Thomas' oral evidence as to whether he made that note, before, during or after the meeting on 23 September, but the evidence was inconclusive."

83. At paragraph 64 the judge set out a brief summary of Mr Thomas' evidence under cross-examination. He said that Mr Thomas could not remember at what point in the story he wrote that note. In his conclusions at paragraph 70 the judge said

" I have, however, come to the conclusion that I am unable to accept Mr Hayward's version of what was orally agreed……..

I have not overlooked the undated note made by Mr Thomas, which contains a statement consistent with Mr Hayward's case and on which Mr Malek naturally placed great reliance. But since I regard the date when, and the circumstances in which, that note came to be made as wholly uncertain, I am unable to regard it as providing supporting evidence for what Mr Hayward says was agreed at the meeting."

84. All trial judges face from time to time, extreme difficulty in deciding issues during the hearing of a case. Some issues are not of sufficient importance to make it necessary for them to be resolved one way or other. A decision on other issues may have a real and substantial bearing on the outcome of the case. The question when the 'Thomas note' was prepared is, in my judgment, in the latter category. The witnesses were relying on their recollections of more than seven years before and a contemporary written note was possibly of great significance and could well assist in the difficult task of deciding between conflicting accounts given by the Bank witnesses and Mr Hayward about the 23^rd September meeting. If it was written after the 23^rd September, it had the potential to provide considerable support for the account given by Mr Hayward and was central to the main issue to be decided by the court, that is to say, the issue whether the requirement for a replacement guarantee was agreed at the 23^rd September meeting or was raised after the 23^rd September. The issue as to the date when the 'Thomas note' was written became, therefore, one that, in my judgment, had to be resolved and could not properly be sidelined. The judge recognised, from the passage I have set out above, that the 'Thomas note' was consistent with Mr Hayward's case. He had a duty to make a finding as to the date and decide whether the contemporary written evidence did or did not support Mr Hayward's case. His failure to do so fatally undermines his finding that the requirement for a replacement guarantee was agreed at the 23^rd September meeting and therefore his judgment cannot stand.
85. It is, for the reasons set out in the judgment of Jonathan Parker LJ, not possible for this Court to come to a conclusion as to the effect that the 'Thomas note' would have had on the decision of the trial judge if it had been found to have been written after the 23rd September. In those circumstances, I agree with regret that there has to be a retrial of the action and that the appeal should be allowed.
86. I have also had an opportunity of reading the judgment of Thorpe LJ in draft. I share his concern about the implications, particularly the financial implications of a retrial, and would endorse his observations about seeking a compromise of this long running dispute.
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THE PRESIDENT: For the reasons given in the judgments which have been handed down, this appeal is allowed and we remit the case to be heard by another High Court judge. Therefore, it is a retrial.

There seem to be three separate matters that need to be dealt with, which we have just been discussing outside court. The first is obviously the costs here, the costs below, and indeed the costs of enforcement.

MR LEREGO: Yes.

THE PRESIDENT: The second is, it seems to me, the question of the House of Lords.

MR LEREGO: Yes.

THE PRESIDENT: The third is what should be the scope of the trial judge when you get back there, if you cannot agree it in between.

MR LEREGO: Absolutely, yes.

THE PRESIDENT: So, Mr Lerego, you are the applicant, I think, in respect, and we might take the House of Lords first.

How can you get to the Lords on a case where, we say, the facts were not found?

MR LEREGO: In answer to your Ladyship, yes, if the House of Lords were to take the view, which I unsuccessfully argued before your Ladyship, that it was not necessary for the judge to make a finding of fact on an issue on which he felt the evidence was inconclusive.

THE PRESIDENT: That is not the sort of thing the Lords will give leave on. If they do, I really do not see why we should give leave for that.

This is a factual matter and what we have said is that the judge failed to pick up some facts that we thought were significant, and in the absence of doing that, his judgment was flawed.

MR LEREGO: I say in response the judge was conscious of the point and --

THE PRESIDENT: Of course he was conscious of it. He just did not decide it. That is what we have said.

That is the basis, surely, of our judgment, that he did not decide it?

MR LEREGO: I make the application.

THE PRESIDENT: No.

MR LEREGO: Thank you.

THE PRESIDENT: Permission to appeal to the Lords is refused.

Yes?

MR LEREGO: Would you like me to deal with costs or ambit of retrial first?

THE PRESIDENT: I think maybe we had better ask Mr Malek what he is asking for by way of costs.

MR MALEK: As far as the costs below are concerned, if the Court turns to our draft order, we had a section saying "instructions awaited", and although my client is most unhappy, it seems to us that what my learned friend says in his argument is correct, and therefore that the appropriate order is the one that he advanced in paragraph 4, which is that the costs of the action, including the costs of the trial before the Honourable --

THE PRESIDENT: Let us take it in stages. There are three separate sets of costs. The costs of the trial seem to us at the moment, subject to what you both say, to be costs that should be reserved to the trial judge.

MR MALEK: We are agreed upon that.

THE PRESIDENT: Two quite separate matters arise, however, in relation to the costs of trying to enforce it pending appeal, and also I would have thought the costs of appeal.

MR MALEK: That is correct.

THE PRESIDENT: So we say the costs of trial reserved --

MR MALEK: Yes, and as far as the --

THE PRESIDENT: -- to trial judge.

MR MALEK: Yes.

THE PRESIDENT: Now, the costs of enforcement?

MR MALEK: In our respectful submission, for the reasons set out in Mr di Mambro's submissions on the draft order, this whole exercise was completely unnecessary.

THE PRESIDENT: That is what I thought you would say. What about the costs of appeal?

MR MALEK: We submit that we should have those. We have won.

THE PRESIDENT: Let us now hear what Mr Lerego says about that.

MR LEREGO: My Lady, I deal with this under my sub-paragraph 5 in submissions. As my learned friend says, he has won, but it has been a partial success. He was going for outright allowing the appeal and dismissing the action. The Court has held there should be a retrial. So he is a partially successful appellant.

In those circumstances, my submission is that the appropriate order is costs in the case, which will have the effect that if Mr Hayward succeeds in the end, he will recover his costs. If the Bank is successful, then it should have the costs of the appeal, which has been occasioned not by any default in the way the Bank conducted the trial, but because of the trial judge's failure to make necessary findings.

THE PRESIDENT: What about the costs of enforcement?

MR LEREGO: So far as enforcement is concerned, I say it is wrong to order the Bank to pay the costs for three reasons. First, no application was made to the Court to stay execution, and on general principles a successful judgment creditor is entitled to take enforcement action.

THE PRESIDENT: Did you take the enforcement action after you knew that they had appealed .

MR LEREGO: Yes, yes, yes.

THE PRESIDENT: That is rather relevant.

MR LEREGO: Certainly.

LORD JUSTICE JONATHAN PARKER: Up to the date when the appeal was fixed, I think.

MR LEREGO: Yes, yes.

LORD JUSTICE JONATHAN PARKER: You may be entitled to do it, but you do it at your own risk, do you not?

MR LEREGO: If we --

THE PRESIDENT: The answer is yes.

MR LEREGO: That is a question that in a sense your Lordship has to answer.

LORD JUSTICE JONATHAN PARKER: The answer is yes.

MR LEREGO: If that is your Lordship's provisional view. I say the second reason, no, is if we succeed on a retrial, then it follows that the order -- and the steps to enforce would have been properly made.

The third point I make is that, in relation to enforcement, the actual costs have been inflated by the defendant's failure to attend with documents on one occasion, but I accept that may be a point that comes out in the wash on an assessment.

THE PRESIDENT: Was it when he failed to attend on the enforcement proceedings?

MR LEREGO: That is what I understand, yes.

THE PRESIDENT: It is quite arguable that you should not have taken them anyway.

MR LEREGO: If we should not have taken them, he nevertheless still, in compliance with the order, ought to have attended and complied with the order, unless he was applying to stay it.

I am simply anxious on this aspect, that this Court should not make an order that precludes us on an assessment from arguing that the costs have been --

THE PRESIDENT: Surely the taxing judge is able to deal with that point, even if we say broadly that the costs of enforcement should be paid by the Bank, because you could say that those costs have been inflated, and therefore they should be cut down?

You do not believe that would stop you, do you?

MR LEREGO: Your Lordship has said it, and it is now on the transcript.

THE PRESIDENT: You do not need me on the transcript. Costs judges know about these things much better than I do. I have not actually taxed a bill of costs for about 25 years.

MR LEREGO: I am simply anxious that the position should not be the subject of doubt when the matter comes before a costs judge.

THE PRESIDENT: Thank you.

We will just deal with the costs point.

MR LEREGO: May I just make one point on costs of appeal? If you are against me on that, then in my submission any order for costs should only run from the date when Aldous LJ gave permission to appeal because the criticism that is made against us is that once the appeal was lodged and leave had been granted, we should have collaborated with the appellant in coming to the Court and achieving a dismissal by consent. Because the effect of what was being sought was the allowing of an appeal, the Court will not allow an appeal by consent, and certainly will not order a retrial, unless it is satisfied that it is a proper case.

So had we done what the defendant says we should have done, then he would still have been obliged to incur the costs of making his application to Aldous LJ.

THE PRESIDENT: It is very ingenious, that. I have not had that one said before on appellate costs.

MR LEREGO: Thank you for the compliment. In my submission, it is a good point.

THE PRESIDENT: Thank you very much. We all have to go to other courts. This was intended to be a hand down by one judge and it has now turned into being a conflict, but I am concerned about the third matter, which is how the trial is to be conducted.

MR LEREGO: Yes. I had on costs a further point, which was outlined in our note, that again because there are outstanding costs orders in our favour, there should be no -- any order for costs should be stayed and there should be no order for immediate payment, but possibly I would rather spend time -- although it is a point I want to make, I would rather be spending time on the --

THE PRESIDENT: How are you suggesting that if you have to pay the costs of the appeal and the costs of the enforcement, and Mr Hayward owes you money -- how are you suggesting that that should be dealt with?

MR LEREGO: I am suggesting there should be a stay.

THE PRESIDENT: Why a stay? Why not a set-off?

MR LEREGO: Yes, a set-off.

THE PRESIDENT: That is a completely different matter from a stay.

MR LEREGO: Very well. Of course, after a retrial there may be further; but, yes, I am content to a set-off.

I have copies of the costs order. They are not in a sense small or minor items.

THE PRESIDENT: Mr Malek, this is a practical point that I really do not see at the moment that we should be involved in, but if we can perhaps smooth the wheels. It there any reason why there should not be a set-off?

MR MALEK: No.

THE PRESIDENT: I cannot see any reason at the moment, if we make the order, why there needs to be a stay. I do not see why you cannot get on and get your bill taxed, but if in fact there are costs owed by you, and if the bill has for that been taxed --

MR MALEK: Yes, we have to pay.

THE PRESIDENT: -- you have to pay, and it would be very silly for you each to be writing cheques.

MR MALEK: Exactly. We agree with that.

There was one point that I did not address the Court on, which is that we are seeking a payment on account in respect of costs and I have not given my submissions on that.

THE PRESIDENT: You have given a bill in.

MR MALEK: Yes. That is right.

THE PRESIDENT: How much are you looking for?

MR MALEK: As much as possible.

MR LEREGO: Yes. If there is a set-off, how much do you owe, broadly? Give or take a few thousand, what do you owe?

MR MALEK: No more at the most of about £20,000.

THE PRESIDENT: Do you agree?

MR LEREGO: I am not in a position to agree or disagree.

THE PRESIDENT: You said it was quite substantial?

MR LEREGO: Yes.

THE PRESIDENT: Yes.

MR LEREGO: I cannot put a figure.

THE PRESIDENT: It seems to me that whatever figure you ought to get on account, if you should, might be reduced by that.

MR MALEK: Yes.

THE PRESIDENT: Mr Lerego, do you think that it is reasonable there should be a payment on account?

MR LEREGO: My Lady, my submission is no, given that there are in any event monies to be set off in our favour.

THE PRESIDENT: I have just dealt with that. So that does not apply. So if they are asking for £91,000, and they want as much as possible -- just take £91,000 as an example -- it would be that less the £20,000 that is due to you.

MR LEREGO: It will come down on an assessment, or at least experience tells us that it will come down on an assessment, and there is --

THE PRESIDENT: What about the principle of a payment on account?

MR LEREGO: My Lady, I do not think I can say any more.

THE PRESIDENT: Very well. Thank you.

Very well. I will deal with the costs point next. Our view is the costs of the trial should be reserved to the trial judge, who takes the next stage of this trial. The costs of enforcement should be paid by the Bank. The costs of the appeal should be paid by the Bank, and we consider that there ought to be a payment on account. If we take the figure at approximately £91 000, we take the figure of what is owed by Mr Hayward to the Bank as approximately £20,000. That brings it down to approximately £70,000, and we think that Mr Hayward should have £35,000 payment on account.

Right. Now, Mr Malek, how do you want to play this on the next occasion, if you come before the trial judge?

MR MALEK: In the way that this Court has ruled, which is that there is essentially one issue.

THE PRESIDENT: Yes, but what we are all three of us very concerned about is circumscribing the judge because you can both agree, if you want to, that you will not litigate certain issues, or that those issues are sufficient on the transcripts you have. That is a matter for you. But for us to say to the trial judge: "you will only try this, you will not try that", something may come up. The witnesses may say something completely different.

MR MALEK: Yes.

Let me put it this way. Everything depends on the view that should be taken about this Court's rejection of the points taken in the respondent's notice. As I understand it, what my learned friend is saying is that those findings, or the rejection of those arguments in the respondent's notice, may carry great weight, but are not conclusive.

In our respectful submission, that point is unarguable.

LORD JUSTICE JONATHAN PARKER: They are conclusive on the evidence as it was before the judge.

MR MALEK: Exactly.

LORD JUSTICE JONATHAN PARKER: But the evidence at the retrial may not be the same evidence as was before the judge.

MR MALEK: The question then arises: how do we prepare for the retrial? What are the issues between the parties?

THE PRESIDENT: I think you will need directions before the trial judge.

LORD JUSTICE JONATHAN PARKER: You will need a CMC, will you not?

MR MALEK: Quite.

THE PRESIDENT: Is it really necessary?

MR MALEK: As long as it is open at the CMC for me to argue that the findings made by this Court are binding --

THE PRESIDENT: You can argue that and Mr Lerego could probably argue that they are not.

MR MALEK: Then that is fine and we can argue that --

THE PRESIDENT: All we are doing is sending it back for a retrial. What I do not want to do, and I have never done on appeal and I do not want to start now, is telling the trial judge how to try the case. If you limit it to a particular issue and something comes out, and the witness absolutely changes his mind, or another document becomes available in a bottom draw somewhere, or something suddenly comes out which may have a completely different complexion on the case, is the judge then, by the Court of Appeal, to be precluded from dealing with it?

MR MALEK: I just want to check one point.

May I take the Court to paragraph 50 of the judgment by my Lord Jonathan Parker LJ.

There are a number of points there, which have been raised in the respondent's notice and rejected, which are points based on constructions. In my respectful submission, no evidence is going to change the construction, the true effect of those documents.

It is paragraph 50.

THE PRESIDENT: I have just seen it. I have actually read all of Jonathan Park LJ's judgment, but the completed one I have been given goes from paragraph 43 to paragraph 69.

LORD JUSTICE JONATHAN PARKER: It lists the arguments set out in the respondent's notice.

MR MALEK: That is right.

THE PRESIDENT: Why can you not deal with it on the pretrial directions, or whatever the Chancery equivalent is?

MR MALEK: I am happy with that, and I do not want to take up the Court's time taking bad points, and if my position is in effect protected and I can argue all these points at the CMC, that is fine.

THE PRESIDENT: Mr Lerego, how do you feel about this?

MR LEREGO: Your Ladyship and Jonathan Park LJ have made the points I would have been making in argument, essentially, at the retrial, the trial judge must decide the case on the evidence that is placed before him.

THE PRESIDENT: I think it would be very useful to see if you can get before the judge who is going to try the case on directions, if that is possible in the Chancery Division, as I assume it is?

LORD JUSTICE JONATHAN PARKER: Anything is possible in the Chancery Division.

MR LEREGO: Again, now that is on the transcript. That is helpful.

THE PRESIDENT: I think it is very important that the trial judge sees this in advance, has time to read it, looks at what we have said, and then hears your submissions and then decides how he is going to try it.

MR LEREGO: Yes.

THE PRESIDENT: I do not want him confined by us.

LORD JUSTICE JONATHAN PARKER: As my Lady has said, the parties can decide to limit the number of issues, and the best thing they can do is to decide to have no issues at all and compromise upon it.

MR LEREGO: The timetable is really try ADR; if ADR fails, case management conference in front of a judge who is assigned in the Chancery Division to retry the action.

THE PRESIDENT: I think so, but could I just make this point that has been made by Thorpe LJ in just judgment very succinctly, and is very much the view of Jonathan Parker LJ, I think, and myself: this case is getting very expensive.

To go third time around, with the possibility that whoever did not like it would try and come back here, is going to exhaust some part, even of the available funds of a big bank like Lloyds TSB, and there is a real possibility that it would put Mr Hayward into very considerable financial difficulties if he lost at the end.

I just do really think that you ought to go away and say to your respective clients, you and Mr Malek, enough is enough. There is other work that the Courts can do and this one is getting, without -- if you argue at the pretrial review before the judge the issues are going to be dealt with, you are going to end up, it seems to me, with probably more issues, rather than fewer, and a great deal of money and no real knowledge, and you do not know at the moment what the outcome is because you do not know how the judge will find on this memorandum.

Mr Malek is superbly confident it can only go one way, but even he must see that this is a game of chance.

Just see what you can do. I think this case has had enough time in the Courts. Thank you all very much.