England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice, Rolls Building Fetter Lane, London, EC4A 1NL
		13 October 2014

Mrs Justice Asplin :

1. This case concerns a hot strip steel mill ("HSM") on land in Newport, South Wales (the "Site") and arises from the sale of the Site together with the HSM by the administrators of Alphasteel Limited ("Alphasteel") the registered owner of the Site itself, to the Defendants. The trial is as to the issue of liability only.
2. In about 1991, the Claimant ("Lictor") a Liechtenstein Anstalt, purchased or was engaged to purchase the parts required to assemble the HSM. Lictor sourced the parts and they were shipped to the Site in about 1997. Lictor permitted Alphasteel to assemble the HSM at the Site and to use it to manufacture steel products.
3. It is alleged that on 3 April 2000 Alphasteel and Lictor entered into an agreement (the "April Agreement") which amongst other things, purports to regulate the basis upon which Alphasteel would use the HSM.
4. On 20 December 2007, Alphasteel entered administration. In July 2008, the Administrators sold the Site, together with the HSM and other assets, to the Second Defendant ("Libala") by means of the purchase by Libala of a "hive down" company, Mir Steel UK Limited ("Mir"). Mir was created for the purpose of the purchase by Libala pursuant to a hive down agreement (the "HDA"). Libala, a company incorporated in Cyprus, lent Mir the purchase price of approximately £57.3 million which was paid to Alphasteel on the same day. On 14 July 2008, Libala purchased the share capital of Mir for £1, to complete the transaction.
5. In summary, Lictor's case is that by virtue of the April Agreement, Lictor retained ownership of the HSM and rights over it including the right to come upon the Site and remove it. It is said therefore, that the sale of the Site together with the HSM was a breach of the April Agreement, which the Defendants knowingly procured. Lictor asserts that the HSM is a chattel or collection of chattels, and therefore Lictor retains title to the HSM, which was not passed to the Defendants upon transfer of the Site. In the alternative, Lictor claims that Alphasteel, Mir and Libala conspired together to cause damage to Lictor by the use of unlawful means, being the breach of the April Agreement by Alphasteel, resulting in the loss of Lictor's rights to the HSM.
6. Libala has played no part in these proceedings, and default judgment was granted against it on 10 March 2011.
7. In December 2011, David Richards J gave judgment on an application by Mir (a) to join Alphasteel and its Administrators to the action as Part 20 Defendants under CPR 20.7(3)(b), and (b) for summary judgment on the two economic tort claims. The neutral citation of the judgment is [2011] EWHC 3310 (Ch). Both of Mir's applications were dismissed. Further, in November 2012, the Court of Appeal dismissed Mir's appeal against David Richards J's judgment in relation to the joinder of Alphasteel and the Administrators. The neutral citation of the Court of Appeal judgment is [2012] EWCA Civ 1397.
8. Before going into administration, Alphasteel was represented by Mr Paul Webb of Taylor Wessing LLP (formerly Taylor Joynson Garrett). At the relevant time, the Administrators were represented by Mr Jeremy Scott at Withers LLP and Werta Anstalt which controlled Lictor ("Werta") was represented by DLA Piper UK LLP ("DLA"). During the negotiation of the sale of the Site, Libala was represented by Clyde & Co. Clyde & Co also represent Mir in these proceedings.

The Witnesses

9. For the most part, I consider that the witnesses were honest and endeavoured to do their best to assist the court. I found Mr Haydn Swidenbank the present Operations Director and an Executive Director of Mir who worked for Alphasteel as an accountant from 2002 until late 2006 ("Mr Swidenbank") to be an entirely honest and straightforward witness and accept his evidence. Mr Steven Preece, a technical consultant with considerable experience in the steel industry who worked for Alphasteel from 1978 until 1985 and returned in 1993 in order to re-commission the HSM at the Site ("Mr Preece") also sought to assist the court. However, I am unable to accept his evidence as to the level of activity in a second hand market in used HSMs. In his second witness statement he described second hand HSMs as being "regularly" advertised for sale. In cross examination he accepted that the word "regularly" should not have appeared in his evidence. I will return to this matter below.
10. However, I found Mr Robert Drennan, an accountant who is a consultant and was a former partner of Rawlinson & Hunter which advised Lictor as to its tax affairs ("Mr Drennan") to be evasive and defensive at times and I approach his evidence with some caution. Further, I found Mr Paul Taylor, a solicitor and partner in the firm of Fox Williams LLP ("Mr Taylor") to be a very defensive witness who on numerous occasions sought to argue the case on behalf of Lictor rather than answer the questions put to him. Mr Jeremy Scott, a solicitor formerly of Withers LLP who advised the Administrators at the relevant time, ("Mr Scott") was a very careful witness. However, at times, he appeared unable or unwilling to answer the questions put to him in cross examination. I accept that to some extent such reluctance arose from a desire to avoid a waiver of his clients' legal professional privilege.
11. Mr Mark Fry is a licensed insolvency practitioner, a partner in Begbies Traynor (Central) LLP and was appointed as a joint administrator of Alphasteel ("Mr Fry"). Although I found that he too was for the most part, an honest witness, he was nevertheless, extremely defensive of his role in the sale of the Site and adopted an argumentative style in cross examination.
12. With regard to Mr Fry, Mr Scott and Mr Taylor they each accepted that in relation to the discussions at some of the meetings which they attended, they were dependant upon the notes of those meetings for their recollection to varying degrees. In each circumstance where this is the case, I treat their evidence with some caution.
13. Mr Ali Hosseini is the Chief Executive Officer of Adpico, a company incorporated in Abu Dhabi ("Adpico") and of Alita Trading DMCC, a steel trading company incorporated in Dubai ("Alita") ("Mr Hosseini"). Adpico is a company controlled by Mr Rostami-Safa ("Mr Rostami-Safa"), an Iranian industrialist who is also Mr Hosseini's father in law. Mr Hosseini's interest in Alphasteel and the Site arises from the fact that his father in law was running a company known as Satico Ltd ("Satico") at the time it purchased the interests of Werta in Alphasteel, Lictor and Technoplan Anstalt ("Technoplan"). In addition, Werta sold its claims against Satico in relation to that purchase to Alita. I refer to these matters in more detail below. I found Mr Hosseini to be an unsatisfactory witness. He sought to make a set speech and otherwise was generally evasive and often failed to answer questions in cross examination. In particular, I found his answers when questioned about the possibility of false accounts having been prepared for Lictor lacked credibility. Overall, I am unable to accept his evidence unless it is consistent with the oral testimony of others and/or the documentary evidence.
14. Both Mr Batt, Lictor's expert and Dr Luke, Mir's expert gave evidence by way of their reports, their agreed list and orally during the site visit which took place on the second day of the trial. Mr Batt also sought to assist in cross examination. Dr Luke was not cross examined and his evidence is therefore, unchallenged.

The Facts in more detail

Acquisition of the HSM by Lictor

15. Alphasteel was a steel manufacturer incorporated in 1974 and originally was controlled by Werta which itself was in the ultimate ownership of a wealthy Greek family, the Angelopoulos family. In addition to Lictor, Werta also controlled another Liechtenstein Anstalt, Technoplan which owned an area of land adjacent to the Site known as the Slobland which was used for storing waste from the Site.
16. When first incorporated, Alphasteel manufactured rolled steel at the Site using a different hot strip mill (the "Original HSM"). In the 1980s the production of steel in Europe was regulated by a quota system under the European Steel Plan, and in around 1985 Alphasteel agreed to sell approximately 10 years' worth of its quota to British Steel. As a result, Alphasteel could no longer use the Original HSM for the production of steel in the UK. In fact, the Original HSM was moved to Indiana, where the Angelopoulos family incorporated a new company, Beta Steel, to commence production in the USA.
17. After steel quotas were abolished in the early 1990s, Werta decided to recommence the production of hot rolled steel at the Site, and Lictor was engaged to place a number of orders for the parts necessary to assemble the HSM. Lictor placed orders with a total value of £27,561,224.28.

Early Advice

18. By a letter dated 31 March 1993, Trexim AG (the Angelopolous family's holding company) wrote a letter to Alphasteel on behalf of Lictor stating that certain motors, (the "Large Motors") were to be despatched to Alphasteel's premises at the Site. The letter made clear that the Large Motors were intended to remain the property of Lictor. It is not in dispute that the Large Motors were to be used in conjunction with the HSM but are not part of the claim.
19. At the time, Rawlinson & Hunter, a firm of accountants, was advising the Angelopoulos family. On 18 June 1993, Mr Mark Harris of Rawlinson & Hunter sent a letter to Mr Jean-Pierre Bozzolo, a Swiss accountant with Fortax AG who attended Alphasteel board meetings in the early 1990s. The relevant parts of the letter are set out below:

"Alphasteel will shortly be taking delivery of a steel mill costing about £50million. The steel mill is owned by a Liechtenstein Company ("LCO") and we have been considering the most efficient way from a tax and financial perspective of transferring it to Alphasteel…"

In evidence, Mr Drennan accepted that the sum of £50 million stated in the letter was different from the figure of £27 million odd that Lictor is said to have spent on the HSM. He stated that he would have been given the figure of £50 million by his client, and that he did not know why it was so different to the figure now raised. I accept his evidence in this regard.

20. On 5 July 1993, Mr Drennan and Mr Mark Harris of Rawlinson & Hunter attended a conference with Mr Stephen Allcock QC at which Mr Allcock gave advice relating to the tax issues surrounding the HSM. A note of the conference dated 7 July 1993 states amongst other things:

"By way of background, [Mr Drennan] explained that … [t]he mill is free-standing, although it will be bolted to the floor, and can be dismantled as has happened for a previous mill.

Turning to the specific questions asked of Counsel, Mr Allcock advised:

…

c) That the Liechtenstein Anstalt ("LCO") should not be liable to UK tax on any profits realised by virtue of the [proposed hire-purchase] contract with Alphasteel. Mr Allcock . . . concluded that, in the facts in this situation, LCO will not be held to be carrying on a trade in the UK through a branch or agency and will not therefore be liable to UK corporation tax on any profit it realises from the HP contract.

…

One aspect that concerned Counsel is whether the steel mill represented "land", since if it did income tax would be due on the rental payments. On the basis that it is movable plant, as described above, this should not represent a problem. However, when the solicitors are advised to draft the [hire-purchase] agreement they should be asked to confirm this point from a property law perspective. In particular, they should ensure that the right to move the equipment anywhere is granted under the [hire-purchase] agreement. . . ."

21. Thereafter, Rawlinson & Hunter prepared a report entitled "A Group Rolling Mill Project: Synopsis of UK Taxation Implications", dated 2 February 1995. The background section of the report stated:

"1. The A Group ("AG") has purchased the constituent elements of a hot strip mill in 1992. The purchase was made via Lco, which is a Liechtenstein Anstalt.

2. It is not clear at present whether Lco was acting as principal or was acting as an undisclosed procurement agent for Bco, a Belgium company…."

22. Mr Drennan's evidence was that at the time of this report, he was not aware of "Lco"'s name, or that it was Lictor. Despite his evidence that the HSM had been owned by Lictor since the early 1990s, Mr Drennan stated that the reference to "via Lco" in paragraph 1 to the background of the report meant that the Angelopoulos family had purchased the HSM through its subsidiary and explained that when referring to it acting as an undisclosed principal for a Belgian company he was merely reciting what he had been told by his client. It seems to me that the extract from the Rawlinson & Hunter report is inconsistent with Mr Drennan's definitive evidence as to the ownership of the HSM which in the light of the content of the report, I reject. In any event, Mr Drennan as an adviser was only able to form a view on the basis of the facts available to him and the information provided by his client which he accepts was the basis for the second paragraph of the report quoted above.
23. On 27 February 1995, Mr Drennan sent a fax to Dr Meierhans, a Swiss lawyer, who acted as the Angelopoulos family's homme d'affaires. The fax set out the options open to Lictor after the supply by GEC, a UK company, to Lictor of the Large Motors in 1992 and their subsequent delivery to the Site in May 1993. The fax set out the perceived legal position that GEC ought to have charged VAT on the transaction and left the customer to reclaim it and that as a result of not having done so GEC was now liable to a penalty and interest. Thereafter, three possible courses of action were set out. Mr Drennan accepted in cross-examination that Solution A would have involved a fraud on HMRC and that the reason this option was not followed was due to the risk of being caught. He also accepted that Solution B was illegal and dishonest, and that the risk he addressed in his letter of advice was that Lictor would get caught. It was also accepted that Solution C, required Lictor to register for VAT in the United Kingdom in the circumstances of a one off transaction where Mr Drennan accepted that there was no intention to make further VATable supplies in the United Kingdom in the future.
24. In any event, after being held in storage for a period of time, the HSM itself was shipped in its component parts to the Site in about 1997. On 18 June 1997, Lictor wrote to Alphasteel in the following terms:

"Storage of EQUIPMENT FOR A HOT STRIP MILL

Dear Sirs,

We would like to confirm herewith our mutual agreement that you will store these goods at your premises for our account free of charge.

For avoidance of any doubts we wish to make it clear that these goods will remain our full property and we also bear the entire risk as to loss, damage, etc. during the storage period.

The shipment of the goods to your premises will start end of June 1997."

Further, a hand written note on Alphasteel headed notepaper, also headed "D.S. ECONOMOU Director" provides inter alia as follows:

"2) Drennan

Ask whether we can commence on erecting the plant which presently belongs to LICTOR. Do we need a letter from AMMAN telling us to proceed with the erection process while negotiations for the transfer of ownership continue."

25. Thereafter, by a letter of 12 August 1997, Lictor gave permission for Alphasteel to commence installation of the new HSM in the following terms:

"ERECTION OF EQUIPMENT FOR A HOT STRIP MILL

Dear Sirs,

We herewith confirm that you are entitled to start with the erection of the equipment for a Hot Strip Mill which is presently being stored for our account at your premises. This is always provided that a mutual agreement on the final terms and conditions for the sale of the equipment to you can be reached between our two companies. It is also understood that you would be fully liable for any loss or damage to equipment being erected if no final agreement for the sale could be reached."

(the"1997 Letter")

26. On 21 August 1998, Mr Drennan sent a fax to Mr Walter Ammann, a director of Trexim AG and Lictor, copied to Mr Dimitri Economou, ("Mr Economou") a director of Alphasteel, in which he stated that:

"I understand from discussions with Alphasteel that the progress with the installation and commissioning of the mill is proceeding. Has any decision been taken as to when the mill should be sold by Lictor to Alphasteel? . . . . .

I would be concerned if the mill was to be brought into operation whilst still in the ownership of Lictor, as that could have UK tax consequences for Lictor. At present, Lictor is "trading with" the UK. If operation of the mill commences whilst still in the ownership of Lictor then there is a risk that it will be "trading in" the UK, through a permanent establishment, i.e. the mill at Newport."

27. Mr Drennan prepared a draft letter to Mr Economou dated 20 July 1999, and sent it to Mr Economou under cover of a letter dated 21 July 1999 setting out advice in relation to a proposed joint venture. The draft stated amongst other things:

"1.1 Lictor Anstalt owns a flat product mill which it has been in discussions with Alphasteel about installing at its Newport site. Although installations had been completed, the terms of ownership and operation of the mill have yet to be formally agreed between Lictor and Alphasteel. To date discussions have centred around:

a) Alphasteel purchasing the mill from Lictor and operating it in its own right

b) Lictor leasing the mill to Alphasteel for operation

c) Alphasteel and Lictor operating the mill on a joint venture basis…"

28. On 22 February 2000 Mr James Aughterson of Rawlinson & Hunter prepared a file note entitled "Consideration of tax issues surrounding the new steel mill equipment" (the "2000 File Note"). The relevant parts of this note are set out below:

"Background

At Alphasteel's (AS) site in Newport there is milling equipment belonging to a related entity resident in Liechtenstein (Lictor (LCO)) with a cost and value in the region of £50 million. This equipment has been on the site for several years without having been brought into use. The equipment has been incorporated with other equipment belonging to AS [Alphasteel] (the cost of this equipment to AS to date is in the region of £16 million). The combination of this equipment is now believed to be ready to operate as a coil steel mill. The problem is structuring the ownership of the equipment currently owned by LCO so that AS is able to use the equipment in its trade without creating an adverse UK tax position. It is not desirable for AS to purchase the equipment as the financing costs would suffer withholding tax if funded from overseas and would be too expensive if obtained from a UK lender.

…

It is considered that an operating or finance lease between LCO [Lictor] and AS would achieve the desired purpose…

Summary of Tax Position of LCO

It is assumed that LCO currently has no UK activity which could compromise the following comments.

If LCO writes a lease for the equipment to AS there would appear to be two possible UK taxation pitfalls which may arise. . . . .

One point that should be clarified here is whether the ownership of the equipment that will be subject to the lease can be readily identified and is indisputably the property of LCO under UK property law. There are potentially two problems in this respect in that firstly the equipment has been incorporated with equipment belonging to AS and may not be readily identifiable and secondly that the extent that the equipment is fixed to the ground could affect its status in UK property law. These questions should be answered by the lawyers."

29. The next day, Rawlinson & Hunter attended a meeting with Taylor Johnson Garrett, ("the 2000 Meeting") the agenda for which states:

"1. Intention to draw up an operating lease/finance lease/hire purchase agreement between LCO and AS.

2. Agreement should stress, if possible, that the transaction is an investment from LCO's point of view.

3. Confirmation is required of any "other" activities of LCO that could compromise the arrangements.

4. To avoid LCO having a taxable presence in the UK, the contract should be concluded outside the UK.

5. Any arbitration clause in the contract must be exercisable outside the UK.

6. The contract should state that LCO has the right to move the equipment anywhere in the world, subject to consent not unreasonably withheld if necessary from LCO.

7. Prior to concluding the contract, advice is required on the following:

i) LCO's equipment has been incorporated with equipment owned by AS to form the complete mill. Could this compromise LCO's ownership rights under UK law?

ii) Are there any circumstances where the degree of fixation between the equipment and the building or land housing it could result in payments for the rental of the equipment being re-categorised in UK Property Law as being for the use of the land. If this could be so, Income Tax could be deductible from the rental payments."

30. In cross examination, Mr Drennan said that he would have been surprised if the issue of annexation was not discussed at the 2000 Meeting, but that it was the area of expertise of Mr Martin Dillon of Taylor Joynson Garrett, ("Mr Dillon") rather than his own. He did not recall there being any mention at the meeting of seeking specialist property advice. He also accepted that from a tax perspective, it was better for Lictor if the HSM was moveable.
31. On 24 February 2000, Mr Dillon sent a letter (by fax) to Mr Economou, and copied it to Mr Drennan and Mr Aughterson at Rawlinson & Hunter, to which he attached the following documents in draft form:

i) A letter from Alphasteel to Lictor confirming that Lictor is the owner of the HSM (being the first draft of the April Agreement);

ii) A letter from Alphasteel to Lictor offering to buy the HSM (the "2000 Offer Letter"); and

iii) A comfort letter from the shareholders to the directors of Alphasteel (the "Comfort Letter").

32. The relevant parts of Mr Dillon's letter stated:

" . . . . . .

At our meeting yesterday you explained that Lictor had agreed in autumn 1998 to Alphasteel installing Lictor's equipment at Alphasteel's premises in Newport at Alphasteel's own expense. . . . .

I know that you are concerned to see that everything is documented properly. You will see that in my draft of the letter for Alphasteel to write to Lictor confirming Lictor's ownership of the equipment I have referred to Lictor having consented to Alphasteel installing the equipment at the premises in Newport at Alphasteel's own expense and that this consent has been given on the basis that once the equipment has been commissioned and is ready for production, Alphasteel may use it to roll steel and may then sell the resulting products."

33. On 25 February 2000, Mr Drennan sent a letter to Mr Economou setting out what Rawlinson & Hunter and Taylor Wessing jointly advised in the 2000 Meeting in relation to Alphasteel's operation of the HSM (the "2000 Letter of Advice"). There is no note of the meeting and in cross examination Mr Drennan stated that he did not make notes of meetings for all of his clients. He added that Lictor was a client for which he did not make notes and therefore, the content of the 2000 Letter of Advice was intended to encapsulate the outcome of the 2000 Meeting.
34. The relevant parts of the 2000 Letter of Advice are set out below:

"1. Background

1.1 Lictor acquired the mill during or before 1993 from various suppliers. The total cost of the components approximated £40m and was financed from Lictor's equity rather than from third party loan finance.

…

2. Tax Issues

…

2.3 We have considered Lictor and Alpasteel not entering a formal lease but Alphasteel having the right to use the plant for no reward to Lictor, whilst acknowledging Lictor's partial interest in the ownership of the plant. It is debatable whether this would be a transaction that needed to be reported as a related party transaction other than at arm's length by Alphasteel in its UK Tax Return but it still leaves the position uncertain and does not in our view avoid the Revenue challenging the arrangement."

35. On the same date, Mr Economou signed a letter on behalf of Alphasteel, addressed to Lictor, being the 2000 Offer Letter. The letter stated:

"We refer to our letter to you of today's date in which we confirmed that you are, and will remain, the owner of the equipment described in the schedule attached to that letter (the "Equipment").

We are writing to make it clear that, if you were prepared to sell the Equipment, then we should be prepared to buy it at its current market price. If you are prepared to sell the Equipment, would you please write and let us know at what price you would be prepared to sell it and at the same time would you please specify the payment terms that you would be prepared to accept."

36. That same day, Mr Economou sent to Dr Vetsch of Lictor draft letters to be completed by each shareholder of Alphasteel (Pacific Corporation, Ikon Corporation, Werta and Solva Corporation Establishment) which confirmed that the shareholders "will provide [Alphasteel] with all the necessary finance to ensure that [Alphasteel] may continue to trade as a going concern and that it may pay its debts as and when they fall due". It also appears that in or around this time, Mr Economou also made manuscript amendments to the first draft of the April Agreement which did not contain any amendment to sub-paragraph (k) by changing the recipient and address to which it was to be sent, inserting 3 March 2000 as the date and heading the draft "ALPHASTEEL".
37. In fact, it was not until 3 March 2000 that Mr Drennan responded to Mr Dillon's email of 24 February 2000 to which the three drafts, including the first draft of the April Agreement had been attached. He recommended that the word "agreed" be added to sub-paragraph (k) in the draft of the April Agreement. Mr Dillon passed on the message to Mr Economou at Alphasteel by a faxed letter of 6 March 2000 in which he stated that the two draft letters intended to be sent by Alphasteel to Lictor, namely the April Agreement and the 2000 Offer Letter, could now be sent if Mr Economou had not already done so.
38. Fax cover sheets suggest that the draft without correction to sub-paragraph (k) was forwarded to Dr Vetsch by Mr Economou on 30 March 2000 and that the final version, dated 3 April 2000 and signed by Mr Economou was forwarded by fax and by post to Dr Vetsch on 3 April 2000. The same letter also bearing the signature of Professor Dr Dr Batliner on behalf of Lictor bears the same date. There is no documentary evidence which sheds any light on the date on which the Professor signed the document. Furthermore, a copy of the April Agreement in its executed form was not sent to Mr Drennan at any stage prior to its rediscovery in 2008.
39. Mr Drennan could not provide an explanation as to why the advice that Lictor should sell the HSM to Alphasteel set out in the 2000 Letter of Advice was not acted upon. He said that it was for the client to make the ultimate decision, and furthermore he could not give evidence as to a positive decision on the part of Lictor to lease the HSM to Alphasteel for zero rent, and whether this decision was taken for tax purposes. He also accepted that it was to Lictor's advantage that the HSM be treated as a moveable for the purposes of capital allowances and avoiding the tax consequences of any suggestion that it was in receipt of rent in relation to an immovable or that it was trading in the United Kingdom.
40. In any event, by April 2000 the HSM had been completely installed at a cost to Alphasteel of around £19.8 million. It had been commissioned and was ready to commence production. In May of that year, Mr Aughterson of Rawlinson & Hunter sent a fax to Mr Economou of Alphasteel concerning the treatment of the HSM for the purposes of capital allowances in which he made reference to the ability to make various claims as long as Alphasteel rather than Lictor continued to own the HSM. In cross examination, Mr Drennan suggested that this was a reference to the expenditure referable to installation.

The April Agreement itself

41. It is alleged on behalf of Lictor that the terms agreed between Lictor and Alphasteel as to how the HSM was owned and was to be operated were set out in the April Agreement which is contained in the letter dated 3 April 2000 from Alphasteel to Lictor, signed by Mr Economou on behalf of Alphasteel and countersigned by Professor Dr Dr Batliner on behalf of Lictor. The relevant terms of the April Agreement are as follows:

"Until about October 1998 we [Alphasteel] were storing for you at our premises in Newport the equipment described in the attached schedule (the "Equipment"). The Equipment when being stored was in crates. It is and has always been your property. Starting October 1998 we have with your consent and at our expense, started to assemble the Equipment. The process of assembling the Equipment has now been completed. The Equipment has been commissioned and we are ready to start production and sales. During the course of the installation the Equipment has been connected to plant, machinery and equipment of our own.

We are writing to record the agreement between us that we may assemble the Equipment at our premises in Newport at our own expense; that we may use the Equipment to roll steel; and that we may sell the resulting products for our own account. We are also writing to record our agreement that:-

(a) The Equipment is moveable;

(b) The Equipment is your property and remains and will continue to remain your property;

(c) We do not own all or any part of the Equipment and we have no rights over and in respect of the Equipment (apart from the right to use it to roll steel and to produce the resulting products);

…

(f) We shall, when requested by you, arrange for metal tags to be affixed to the Equipment confirming that the Equipment remains your property;

(g) We have no lien or charge over or in respect of the Equipment;

(h) You may at any time, after giving us reasonable notice, enter our premises in Newport with your engineers and workmen for the purpose of dismantling and removing from our premises all or any part of the Equipment at your expense;

(i) We shall ensure that the Equipment shall remain at our premises in Newport and will not remove any part of it from those premises without your prior written consent except for the sole purpose of carrying out any repair or maintenance which cannot be effected while the item of Equipment in question remains at our premises. Upon the completion of any such repair or maintenance we shall as soon as practical arrange for the item of Equipment in question to be returned to our premises;

…

(l) We shall insure the Equipment in your name against all usual risks with first class insurers and in amounts agreed with you; we shall pay all the premiums for such insurance at our own expense; and we shall ensure that the Equipment is not used or permitted to be used in any manner or for any purposes prohibited by such insurance;

and

(m) We will not sell or purport to sell, mortgage, hypothecate or charge your interest as owners in the Equipment or create or knowingly suffer to exist any lien over all or any of the Equipment."

The schedule referred to in the April Agreement is not part of the evidence before me. It appears that, if such a schedule was in fact drawn up at all, it has since been lost. However, it is not in dispute that the "Equipment" referred to in the April Agreement is the HSM.

The sale to Satico

42. On 9 May 2003, Werta agreed to sell its 100% shareholding in Alphasteel, along with its interests in Lictor and Technoplan, to Satico a Swiss company ultimately owned by Mr Rostami-Safa and a share purchase agreement was signed on the same day (the "Satico SPA"). The Preamble to the Satico SPA states:

"Alphasteel Ltd is a company incorporated in England with an issued share capital of GBP 70 Mio; divided into 70 Mio registered shares with a nominal value of GBP 1 each, all held by:

Werta Anstalt, Vaduz, Liechtenstein;

Lictor Anstalt, Liechtenstein, is the owner of the wide strip.

Technoplan Anstalt, Liechtenstein, is the owner of the adjacent land to Alphasteel Ltd in Newport, UK …" (original emphasis)

The Satico SPA was subsequently amended by a Supplemental Letter dated 30 June 2003 which amended the price structure.

43. On the same day, Werta sent Satico a letter entitled "Disclosure Letter relating to the sale of shares of Alphasteel Limited". Under the heading "Warranty Disclosure", Werta disclosed, inter alia, the following:

"(q) For its operations the Company [Alphasteel] uses land which is owned by Technoplan Anstalt, Liechtenstein. A hot strip mill used by the Company is owned by Lictor Anstalt, Liechtenstein. There are no formal arrangements for payment for the use of these assets…"

44. Pursuant to the Satico SPA, the consideration payable by Satico was structured in such a way that an initial payment of EUR 15 million was payable immediately followed by three further instalments of EUR 15 million each over an 18 month period. Pending payment of the final instalment, the relevant stock transfer form (in relation to the shares in Alphasteel) and deeds of assignment (in relation to Werta's ownership interests in Lictor and Technoplan) were to be held in escrow and only released to Satico on receipt of the final payment. The terms of the escrow were recorded in an escrow agreement between Werta, Satico and Mr Dupont-Willemin. This provided that Satico would not acquire full title to Alphasteel, Lictor or Technoplan until the final instalment was paid.
45. In fact, the fourth and final instalment of the consideration payable under the Satico SPA was never paid by Satico, and as a result Satico never became the registered owner of the shares in Alphasteel. Following a dispute with Werta, Satico went into administration in Switzerland, and the Geneva Bankruptcy Office was appointed administrator.

Lictor's accounts

46. During cross-examination, Mr Downes QC took Mr Drennan to the accounts of Lictor that have been disclosed in these proceedings (which Mr Drennan had not seen before). The relevant points in relation to these accounts are set out below and I accept Mr Drennan's evidence in this regard:

i) The 1992 accounts relate to the period before the HSM was acquired. Mr Drennan accepted that one would expect to see a change reflecting the acquisition of the HSM in the 1993 accounts. Mr Drennan accepted that, according to UK and International GAAP accounting rules, there is no explanation for the absence of the HSM in the accounts. However, there is no entry for the HSM on the balance sheet. Further, there is no entry for the HSM in the accounts for the years 1994 to 1997;

ii) There is a suggestion that the 1998 accounts reflect the purchase of the Large Motors, and various parts of the HSM, with a counter-entry for exactly the same amount, which Mr Drennan accepted would reflect a type of netting off. There is no entry for the whole of the HSM, nor is there an entry for the HSM in the accounts for 1999 or 2000;

iii) The 2001 accounts feature an entry in "assets" for approximately CHF 63 million, for "Machines and technical equipment", and an entry under "liabilities" in exactly the same sum for "Loan beneficiaries". Mr Drennan accepted that, looking at the 2000 and 2001 accounts it would be inferred that in 2001 Lictor had taken out a loan for CHF 63 million and used that loan to acquire the HSM. However, there are two sets of accounts for 2001 and 2002, one featuring entries for the HSM, and one without such entries; and

iv) The 2003 and 2004 accounts show an asset and liability in the same amounts as that shown in the 2001 accounts.

I should add that it is not in dispute that the HSM does not appear as an asset in Alphasteel's accounts.

47. Mr Hosseini's evidence was that he was not in a position to comment on Lictor's accounts and that he had not looked at them in 2003 or in 2009 when Alita purchased Werta's interest in Satico. He stated that he was not sure whether the accounts he had seen were audited, and he was used to dealing with audited accounts. He also stated that it was for Lictor to decide how to treat its transactions in its accounts. He went as far as to say that he had no opinion as to whether the accounts may have been false. In this regard, his evidence was extremely evasive and I am unable to accept it.

The Alphasteel Administration

48. On 12 December 2007, Alphasteel's principal financier, Rosbank Switzerland SA filed an application for the appointment of administrators. On 20 December 2007, Christopher Morris and Simon Thomas of Begbies Traynor were appointed joint administrators. On 6 May 2008, Mr Thomas was replaced by Mr Fry and David Hudson (together the "Administrators").
49. Upon their appointment, the Administrators instructed Edward Symmons LLP ("Edward Symmons") to prepare particulars of sale in relation to the business and assets of Alphasteel including the freehold of the Site, the plant and goodwill and to carry out a marketing exercise. On 21 December 2007, Mr Thomas telephoned Edward Symmons LLP. A note of the telephone call includes the following reference: "steel rolling mills could be owned by third party?? [sic]".
50. On 4 January 2008, there was a meeting between the Administrators, their solicitors, Withers LLP represented by Mr Scott, and Peter Leckey, Mr Rostami, a Mr Salamat and a Mr Safavi, and representatives from Taylor Wessing LLP including Mr Paul Webb, acting for Satico. The redacted note of the meeting states:

"AG [Alison Goldthorp of Taylor Wessing] explained that the hot strip mill (which they thought was worth from £20-£30 million) was not owned by Alphasteel but by a Liechtenstein Anstalt. She invited the meeting to read the letter from Tondury, who are managers of the two Anstalts Lictor and Technoplan.

CM [Christopher Morris] asked who the beneficial owner of those two anstalts was. Mr Webb [of Taylor Wessing] replied that both were owned by Satico. Mr Webb then produced a copy of a Land Registry plan. The hot strip mill was said to be owned by Lictor.

CM asked what the reason for this was, to which Mr Webb replied that this was how the business had been acquired. AG said that the ownership had not been moved around; it was how the current management had got it. Originally, Technoplan and Lictor had been owned by Angelopoulos through Werta, and there was a sale of those Anstalts to Satico, in order to include the land.

CM asked under what arrangement the hot strip mill had been used. No-one seemed to know and Mr Khamsy [a director of Satico] said that he had not seen any agreement between Alphasteel and Lictor for its use…"

51. By a letter dated 9 January 2008, Taylor Wessing LLP notified Withers LLP that Mr Rostami "wished to make an offer to purchase the business, alternatively to refinance and restructure the business". The letter also stated:

"5. Asset ownership

As indicated at our meeting, it is the understanding of the former directors that the hot strip mill is owned by Lictor Anstalt, which is managed by Tondury & Partner AG, based in Liechtenstein, details of which were provided to you at the meeting…"

52. On 11 January 2008, Edward Symmons LLP produced a preliminary valuation of Alphasteel's freehold property, plant and machinery. These assets were valued at approximately £40 million if sold for existing use and "in situ" but only £10.25 million if sold piecemeal. Thereafter, on 15 January 2008, there was a meeting between Mr Thomas, Mr Scott of Withers LLP, and various representatives of Werta including Mr Paul Fleming of DLA, Werta's solicitors. The note of the meeting records the following:

"Mr Fleming said that there were issues relating to Lictor and Technoplan.

…

As regards Lictor, JS [Mr Scott] asked what they thought it owned. Mr Fleming said he thought that it was machinery. ST [Mr Thomas] observed that this machinery was fixed into the ground, and that there were no rights of access."

53. Thereafter, on 21 January 2008, Edward Symmons LLP produced a draft document entitled "Alphasteel Limited - In Administration, Brief Details of the Business and Assets" which included details of the HSM in a schedule entitled "Schedule of main items of plant and machinery etc". On the same day, Edward Symmons LLP sent a valuation report to the Administrators in relation to Alphasteel's freehold property, in which it was stated to have an Existing Use Value of £9.5 million, and a Market Value of £4-£5 million. The particulars of sale were circulated under cover of a letter dated 30 January 2008 with the details of the HSM contained in schedule 5. Advertisements were also placed in the Financial Times (1 February 2008) and Metal Bulletin (4 February 2008), which listed a "semi continuous hot strip mill" as part of the "UK Mini-Mill Steel Works" on sale.
54. By an email dated 1 February 2008, Mr Swidenbank emailed Mr Webb of Taylor Wessing and explained:

"There have been various questions re the hot strip mill at Newport, due to the fact that when it was installed in 1998/1999 it's [sic] original ownership was by one of the Angelopoulis [sic] Anstalts, although I have never seen any agreement covering its use in the factory. Presumably, or perhaps possibly, there may have been some agreement lodged in the company records that you have, given the size of the transaction and the vagueness of the conditions that the line would have been installed under. Is there any way you could get anyone in your office to look at this."

55. On 4 February 2008, in response to Mr Swidenbank's email, Mr Webb sent an email to Mr Scott of Withers LLP entitled "Alphasteel Limited - hot strip mill" to which he attached the 2000 File Note, the note of advice from tax counsel dated 13 July 1993, the 2000 Letter of Advice, the 2000 Offer Letter and the April Agreement. The email went on to state:

"In relation to the subject matter of Mr Swidenbank's email, coincidentally in retrieving Taylor Wessing's archived files for the purpose of providing you with a schedule of all files held by us, and subsequently presumably the files themselves, I have come across some correspondence and documentation in February 2000 which sheds some light on the position relating to the hot strip mill . . . . .

You will of course draw your own conclusions from the attached documents, but it appears to me that the hot strip mill equipment was originally envisaged to be the subject of either an operating lease or a finance lease between [Lictor and Alphasteel]. As a result of discussions between Bob Drennan of Rawlinson & Hunter, Dimitri Economou and Martin Dillon of Taylor Johnson Garrett in February 2000, a recommendation evolved that [Alphasteel] should purchase the hot strip mill from [Lictor] on the basis described in the letter of 25 February 2000. So far as I am aware, the recommendation contained in this letter was never effected. Certainly at the time of the sale of the shares in [Alphasteel] from [Werta] to [Satico] in June 2003, my understanding was that the hot strip mill continued to be owned by [Lictor]."

56. Thereafter, on 8 February 2008, the Administrators formally filed their statement of proposals in which they proposed to pursue the objective in paragraph 3(1)(b) of Schedule B1 to the Insolvency Act 1986, namely "achieving a better result for the company's creditors as a whole than would be likely if the company were wound up (without first being in administration)". Under the heading "Details of proposals", the Administrators set out the following:

"The administrators propose to market the business for sale as a going concern with a view to maximising recoveries by selling the whole of the business as an operational steel works."

On 22 February 2008 Mr Thomas noted in an email to Edward Symmons:

"… In essence we are saying that if we have a going concern sale with everything intact we could be going to £30-40m[. I]f we lose the strip mill you are saying we will end up nearer £10m."

57. In late February or early March 2008, the Administrators met with Adams Mitchell, a firm of accountants, to discuss the most tax efficient structure for the disposal of Alphasteel's assets. Thereafter, on 3 March 2008, Adams Mitchell wrote to the Administrators advising that a hive down was the most appropriate option.
58. At some time in March 2008, whilst assisting the Administrators at the Site, Mr Swidenbank found a copy of the April Agreement in a hanging file at Alphasteel's offices. He could not recall if the version he found was signed by Professor Dr Dr Batliner, although he thought he recalled that it was signed by Mr Economou. I accept Mr Swidenbank's evidence in this regard.
59. On 27 March 2008 Edward Symmons LLP provided an update to Begbies Traynor regarding the proposed sale of Alphasteel's assets. Edward Symmons stated that there had been a very good response to the advertisements placed in the Financial Times and Metal Bulletin with over 100 parties requesting to receive the sales pack. It appears from a note dated 4 April 2008 that the vast majority of interested parties wanted the HSM included in any sale. The note also records "Potential Section 15 application has problems." Mr Fry accepted that this was a reference to a procedure under the Insolvency Act 1986 by which in certain circumstances, an application can be made to court and third party rights in an asset may be turned into a monetary entitlement. Mr Fry stated that even at this stage, he considered that the HSM had become part of the Site itself.
60. On 8 April 2008 Mr Scott of Withers LLP attended the offices of Rawlinson & Hunter to inspect their files relating to the HSM. Also on 8 April 2008 Python & Peter, a Swiss law firm, wrote to the Administrators on behalf of two major creditors of Satico enclosing a copy of a letter sent to the Geneva Bankruptcy Office which had responsibility for the supervision for the liquidation of Satico, requesting its "urgent intervention to preserve Satico's interest" in the HSM. Python & Peter estimated the HSM's value at approximately CHF 150 million.
61. Thereafter, on 9 April 2008, Mr Scott met Mr Drennan at Rawlinson & Hunter's offices to investigate Lictor's claim to the HSM. He was shown a number of documents and received an explanation from Mr Drennan of the transaction. The note of the meeting records that Mr Drennan stated that the decision which was driven by tax considerations, had been to lease the HSM on a zero rental rather than to sell it. Thereafter, on 10 April 2008, Mr Drennan sent Mr Scott an email enclosing a full set of documents relating to the February 2000 Advice and a number of emails in relation to drafts of the April Agreement. His email concluded:

"Whilst it is eight years ago, my recollection of the outcome of the transaction was that Lictor retained ownership of the plant and gave the permission contained in the 3 April letter from Alphasteel to Lictor. The plant was not reflected in the accounts of Alphasteel audited by us. We continued to prepare quarterly VAT returns for Lictor until we ceased to act and passed those files over to Haydn Swidenbank at Alphasteel who continued to undertake that exercise post the sale of Alphasteel to Satico. Had Lictor sold the plant and had no other interests in the UK then there would have been no need for it to continue to be VAT registered and we would have de-registered it in 2000. On the ultimate sale of Alphasteel to Satico, Lictor was an integral part of that sale as it retained the ownership of part of the mill.

As I say, all of that confirms to me my recollection that the plant was not sold by Lictor to Alphasteel in March 2000."

The sale of the Site and HSM by the administrators

62. In a letter dated 25 April 2008, Libala (through its agent Stemcor UK Ltd ("Stemcor")) made an offer subject to contract for the purchase of Alphasteel's freehold of the Site, business and assets. It stated:

"We understand that there may still be some doubt about the ownership of the hot strip mill at Alphasteel and so, as agents only, we are pleased to be able to make two proposals on behalf of Libala:

1. To purchase all the assets comprising the freehold property and the plant and machinery, as described in the offer for sale. Clean title to all the assets – including that to the hot strip mill – must be provided. On this basis, Libala Limited offers the sum of £50.1 million (Fifty million one hundred thousand pounds sterling).

2. To purchase all the assets comprising the freehold property and the plant and machinery, as described in the offer for sale. Clean title of all the assets - with the exception of the hot strip mill, for which the buyer will take the risk that there may be a dispute about ownership must be provided. On this basis, Libala Limited offers the sum of £40.1million (Forty million one hundred thousand pounds sterling". (original emphasis)

63. Mr Thomas had a conversation with Edward Symmons on 30 April 2008, a note of which states that:

"Doesn't look like we can challenge ownership of the strip mill on the grounds of a tax dodge.

[Edward Symmons] to now consider/arrange to investigate how much of original [sic] strip mill has been replaced…."

64. By a letter dated 12 May 2008, Stemcor, on behalf of Libala, increased its bid. The two-proposal structure was maintained, with the first offer (for clean title of all assets) being increased to £60 million, and the second offer (clean title for all assets except the HSM) being increased to £50 million.
65. On 16 May 2008, a meeting was held between those representing the proposed vendor (the Administrators, Edward Symmons and Mr Scott of Withers LLP) and those representing the proposed purchaser, being Stemcor and Clyde & Co although Mr Scott's evidence is that, in fact, no one from Clyde & Co was present at the meeting (the "16 May Meeting"). Mr Fry had no independent recollection of the meeting and needed to check his diary to make sure that he attended it.
66. Two handwritten notes of this meeting were produced, the first of which states:

"HSM - IS [Ian Sherwin of Stemcor] stated that Stemcor was as aware as possible in respect of this.

1993 - A HSM bought. Shipped over by? Some years ago. Commissioned and installed by Lictor Anstalt (Angianopolos) [sic].

2000 - Letter - [Alphasteel] and Lictor suggesting Lictor bought in 1993.

If Lictor suggests own mill then how much is debatable as it has been amended over the years.

[Mr Scott] pretty certain that judgment could be delivered.

Q is do [the Administrators] accept £60M and walk away or £70M and hope judge would rule HSM is not more than £10M. Otherwise [the Administrators] will be out of pocket. IS argued that [the Administrators] would have benefit in court due to legislation as opposed to a successful bidder taking on the argument.

OFFER

£70M - Received and run with litigation. If more than £10M is requested from judge the first £5M goes to the Stemcore [sic] and anything more goes to [the Administrators].

Stage 1 - Determines whether you get title.

Proceeding on basis of £60M !!

…

Tax losses

Hive down assets, employees etc into subsidiary. By doing this the subsidiary also has the tax losses otherwise can't give tax losses alone."

67. The second handwritten note of the same meeting states:

"Strip mill

Stemcor aware of background

JS [Mr Scott] outlined background

Either/or

Administrators to be paid at least £60M - offer now £60M and £70M.

V. diff to engineer solution re strip mill court hearing:

Potential damages claims

Judges award unquantifiable

No definitive time lines, Lictor could appeal

Number of potential claimants.

Agreed £60M to exclude strip mill."

68. Mr Scott stated in cross examination that his recollection of the 16 May Meeting was poor and that the relevant parts of his witness statement had been reconstructed from the two notes referred to above. Accordingly, I approach his evidence in this regard with a high degree of caution. In any event, Mr Scott stated that he thought that the possibility of the Administrators making a paragraph 72 application (formerly section 15) to the court under the Insolvency Act 1986 was discussed. In fact, Mr Fry accepted in cross examination that the reference to "judgment could be delivered" in the first hand written note of the meeting was likely to have been a reference to paragraph 72 of Schedule B1/section 15 Insolvency Act 1986.
69. Mr Scott suggested that the reason that the Administrators took the lower offer of £60 million was on the basis that the purchaser, Libala, would bear the risk of Lictor bringing a claim of ownership of the HSM, in preference to the Administrators making an application to the court which would have delayed the transaction going ahead and the administration being brought to a close. Mr Scott added that he thought there was a misapprehension about the complexity of any application under paragraph 72 and that it would not have got off the ground because the HSM was part of the land. Mr Scott added that the timing of any such application was of very great importance to the Administrators, and it was a particular factor that such an application would not have been resolved in short order. He went on to add that he did not think there were any other lawyers present at the 16 May Meeting, he stated that he thought it unlikely that he would have gone into great detail in relation to the legal issues. I accept his evidence in this regard.
70. On 19 May 2008, Ernst & Young Switzerland wrote to the Administrators on behalf of Satico stating that they were of the opinion that the HSM was Lictor's property and that the Administrators were not entitled to sell or otherwise dispose of it. The fourth paragraph of the letter stated:

"Based on the Agreement entered into between Alphasteel and Lictor of April 3, 2000, and subject to further analysis of the legal situation, we are of the opinion that the HSM is Lictor's property."

71. In cross examination, Mr Scott explained that he had assumed from this letter that Ernst & Young were alive to the issue of annexation. He stated that the fourth paragraph of the letter seemed to indicate that there was an awareness of a dispute of title over the entire HSM, and Mr Scott believed that that is only understandable in the context of the annexation issue.
72. In fact, in cross examination, Mr Fry stated that he had sought to engage with Mr Bauer on behalf of Satico and had flown to Geneva to discuss the matter. However, the sale to Libala/Mir was well underway, he was concerned to avoid the delay which might ensue if he were to negotiate with the Geneva Office in Bankruptcy and the risk of a diminished offer as a result. He added that he was also of the opinion at this stage that the HSM had become part of the Site.
73. By a letter dated 20 May 2008, Edward Symmons set out their advice in relation to four offers made for Alphasteel's business. The relevant parts of the letter stated:

"… The next highest offer is from [Libala], a special purpose vehicle set up by a major steel producer.

…

The bid from Party D is at a good level but is dependent on the Administrators being able to deliver good title to the hot strip mill.

We are advised by your solicitors that the question of the ownership of the hot strip mill remains unresolved and it will be necessary to obtain a Court judgement [sic] to determine whether the Administrators can sell the hot strip mill. Whilst it may be possible to obtain a Court hearing before the end of July, this is not certain. Furthermore, there is a possibility of an appeal being lodged after the Court's initial decision which would considerably delay matters further.

Even if the Administrators could obtain a Court order enabling a sale of the hot strip mill, there is a large uncertainty over how much of the overall realisations may have to be paid to Lictor. As an estimate we are informed it could be between £3M - £20M".

74. On 29 May 2008, a meeting was held between the Administrators, Edward Symmons, Clyde & Co, Stemcor and others. A handwritten note of that meeting records the following:

"ST [Mr Thomas] asked for indemnity in HSM - Stemcor were to go away and consider but couldn't see problem should they indemnify against things that are or should be seen proper."

In cross examination, Mr Fry stated that the request for an indemnity was normal and that Administrators are always concerned about exposure to risk. He accepted that he had seen the April Agreement and that there was a risk of the claim being successful and that the position was inconclusive. He added that the Heads of Terms dated 2 June 2008 (the "Heads of Terms") between the Administrators and Libala to which I refer below were transparent and that the risk was passed to the purchaser. He said that he understood that the Site was sold subject to any rights which could be enforced against the purchaser and accordingly, did not think that any harm was being done to Lictor. At the same time, he also accepted that the sale of the Site to Mir would cause a breach of the April Agreement assuming it to be valid, but that there were questions as to the circumstances in which it was produced.

75. Mr Fry also explained that there was a time and cost aspect involved in the decision not to proceed with an application to the court. He stated that in 2008 the Administrators regarded the April Agreement as a valid agreement, but were of the view that the HSM had become part of the land. Mr Fry could not give any evidence as to whether he considered, at the time, the possibility of the April Agreement containing any unwritten terms. However, he confirmed that the Administrators made a commercial decision to accept the lower offer on the basis that the purchaser took the risk in relation to third party rights over the HSM, not because the Administrators considered the HSM to be worth £10m but because they wished to avoid delay and there was litigation risk. During cross-examination, when pressed by Mr Braithwaite to give a value to Lictor's claim, Mr Fry was only willing to say that the Administrators considered that Lictor's claim had a value of between £3 million and £20 million. He did accept however, that £10m might be a value which it would reach.
76. Thereafter, the Heads of Terms were agreed between Libala and the Administrators, subject to contract. The relevant provisions are as follows:

"1. Major terms

1.1 We or a nominee ("Buyer") will acquire the entire business and assets of Alphasteel, including those assets referred to in paragraph 1 of Appendix 1 (the "Assets"), but excluding finished stock and book debts, either directly or by way of the purchase of a wholly owned subsidiary of Alphasteel ("SPV") to which Alphasteel's entire business and assets (other than semi-finished and finished stock and book debts) would be hived-down, the choice of acquisition structure being at our election after reasonable consultation with you. . . . .

1.2 The purchase price will be the aggregate of:

(a) £60,000,000 cash on completion […]; and

(b) 50% of any cash benefit which we (or a company in our group) may derive as a result of being able to utilise any of Alphasteel's available trading losses.

…

1.4 Subject to the release of Security Interests referred to above, we will acquire only such right and title to assets as Alphasteel actually has. We acknowledge the existence of;

(a) a title dispute relating to claim by Lictor Anstaldt [sic] to ownership of Alphasteel's hot strip mill and that the Definitive Agreements between us will provide that we shall be responsible for settling any claims made against us, the SPV or the Assets following Completion in relation thereto;"

77. It was around the end of May when Mr Taylor of Fox Williams LLP was instructed on behalf of Lictor in relation to the HSM. He was aware that the Site was being marketed. On 2 June 2008, the same day as the Heads of Terms were dated, Mr Taylor emailed Mr Scott informing him that he had been instructed, making reference to the April Agreement, noting that his clients awaited a response from the Administrators as to a possible meeting and that:

"negotiations as to a possible sale of Alphasteel's business are progressing (and may even be concluded). We obviously want to ensure that the purchaser is aware of my client's rights…"

Mr Taylor says that the reference to the fact that the negotiations "may even be concluded" was included on the basis of an article in the Financial Times which gave the impression that the mill had been sold.

78. A few hours after that email, Mr Taylor and Mr Scott spoke on the telephone. It is accepted that Mr Scott's handwritten note of the conversation states:

"Joint instructions for Werta and E&Y acting for Satico - its liquidator.

Also for Technoplan.

Not looking to block a sale […] claim ownership of assets.

Proposing a meeting

…

JS to chivvy [Administrators] for dates".

79. Mr Taylor stated that he did not recall this conversation, although he was sure it took place. He accepted that he did not request an undertaking that the sale would not go through without Lictor being given notice, nor did he seek to protect his client's interests by registering any interest against the registered title to the Site. Rather surprisingly, he stated in cross examination that he was not aware of the law relating to the annexation of chattels to the land. Given that he is a qualified solicitor who has been on the Roll for a considerable time, I find this difficult to accept and on the balance of probabilities, consider it unlikely to be the case.
80. Thereafter, on 5 June 2008 a meeting took place between Mr Scott and Clyde & Co in order to discuss the dispute over the HSM. Mr Scott explained that as part of the due diligence process, the meeting involved him sharing all that he had advised his client in relation to the HSM.
81. On the same day, Edward Symmons prepared, for the Administrators, a schedule of the main assets situated at the Site (the "ES June Report"). Contrary to an earlier report dated 28 December 2007, the ES June Report included the label "THIRD PARTY" next to an entry for the "Semi continuous hot strip mill". Furthermore, under a heading "THIRD PARTY ASSETS", the "Semi continuous hot strip mill" was also listed. In cross examination, Mr Swidenbank stated that items would be listed as third party assets where the Administrators were satisfied there was a claim. However, Mr Fry's evidence was that, in June, the Administrators were recognising that there was a risk of the HSM being a third party asset, in that there was a claim to it. He said that the listing of the HSM in the ES June Report did not mean that the third party claim was proven. Furthermore, he drew attention to the fact that the ES June Report was produced with the intention that it be annexed to the Heads of Terms or be provided to lawyers. As a result, he said that by the document the Administrators were putting any counterparty on notice that there was a third party claim over the assets in question. I accept his evidence in this regard.
82. On 9 June 2008, Mr Taylor left a message for Mr Scott, in which he suggested a meeting. The same day, Mr Scott emailed Mr Simon Vere Nicoll of Clyde & Co, stating that he was being pressed for a meeting and asking to be informed "as soon as possible whether, from your point of view, it is desirable or not for me to have this." In cross examination, Mr Scott stated that he was asking for Mr Vere Nicoll's view, and he disagreed with the suggestion put to him by Mr Braithwaite for the Claimant that he considered Clyde & Co had a "veto" as to whether Mr Scott met with Mr Taylor or not. He said that Mr Vere Nicoll's view mattered because the Administrators were keen for Mr Taylor to speak directly with Clyde & Co. He also added that he did not know what Mr Taylor would "come up with" at the meeting and therefore, he was keen that Clyde & Co should be there. However, he was quite sure that, in the event Mr Vere Nicoll had requested that Mr Scott not meet with Mr Taylor, he nevertheless would have done so. Mr Scott added that he did not think it was ever "really on the cards" that the Administrators could have included Lictor in the negotiations so as to obtain the additional £10 million offered by Libala to purchase with clean title. I accept his evidence.
83. On 10 June 2008, at 11.22, Mr Scott received another telephone call from Mr Taylor. A note of this call records that a meeting was arranged for the next day. The note also records the phrase "why allege don't have title?" Mr Taylor states that Mr Scott confirmed during the call that the purchase of the assets of Alphasteel had not been concluded. According to Mr Taylor, Mr Scott also noted the existence of the April Agreement and the evidence supplied by Alphasteel's accountants. In cross examination, Mr Scott stated that it was not clear from the note who made the comment relating to title, although he accepted it was possible that it might have been Mr Taylor asking the question "why are you alleging that Lictor does not have title?" In cross examination, Mr Scott eventually accepted that Mr Taylor's recollection that Mr Scott had said that the Administrators were not necessarily disputing Lictor's title to the HSM may have been correct.
84. In any event, the same day, at 12.15, Mr Scott sent another email to Mr Vere Nicoll in which he stated:

"Not having heard from you in response to my question on Friday, and my subsequent messages, I have not been able to put off a meeting with Paul Taylor at Fox Williams any longer, and have agreed to meet him at 4.30pm tomorrow.

I would still like to discuss this with you, please. Someone from Clyde & Co might wish to attend as well. I am sure I will be asked what answer the Administrators (at least) have to Lictor's claim."

85. Mr Scott explained that the Administrators were pleased with the fact that Libala was going to take the problem of the HSM, at a particular price. In his evidence the next day, Mr Scott clarified his response. He explained that, in fact, the Heads of Terms had already been entered into, the Administrators had agreed to sell at a particular price, and therefore if a deal could be done with Lictor it would be to the advantage of Libala and accordingly, it was a matter for Clyde & Co. He added that one of the reasons he wanted someone from Clyde & Co to attend the meeting was because of the exclusivity period during which Libala was carrying out due diligence.
86. The meeting between Mr Scott and Mr Taylor took place on 11 June 2008 (the "11 June Meeting"). Ms Caroline Stripp of Withers LLP took a note of the meeting. The relevant parts of the note are as follows:

"JS [Mr Scott]: Other issue - docs exchanged by fax initially, hard copies. Defn of equipment - there is no attached schedule. There are collections of docs which relate back to 1998 - reality Alpha Steel [sic] would know what you're talking about.

PT [Mr Taylor]: With that in mind, happy to sit down with Clyde & Co. Hot strip mill - how do we get around this - w'out going to court - valuation - % of …

…

PT: My clients are still keen to speak to [the Administrators] - I think that would be of limited merit.

…

PT: Happy to have Lictor selling steel mill, happy to have others signing as content with terms (Werter [sic] etc) Sattico [sic].

…

PT: If you look at FT - you've completed the deal? Still a fair bit to do on sale process?

JS: Depends on how much more they want to see.

PT: Exclusive DD period?

…"

87. In cross examination, Mr Taylor's evidence was that he does not usually take notes of meetings, but would write a summary email to his client which would serve as such a note. On 12 June 2008, Mr Taylor sent such an email to Mr Zondler and Mr Bauer on behalf of Lictor, in which he stated that he had summarised the "main points that came out of the meeting" as follows:

"…

3. With regard to the purchaser [Mr Scott] again pointed out that no sale agreement had been concluded.

From the way that he was talking, I inferred that negotiations on the business transfer agreement had not even started.

The potential purchaser had been granted a period of due diligence. He confirmed that Clyde & Co had been appointed as lawyers . . .

. . . .

6. Hot Strip Mill

We spent a bit of time going through the history.

[Mr Scott] thought there was no commercial sense to what happened back in 2000 as it seemed to be contrary to the advice received from the auditors.

Apparently he had lots of documentation relation to Hot Strip Mill [sic] and the discussions with Lictor.

The first thing he said, with a wry smile on this [sic] face, was that there was definitely no schedule to the 2000 agreement! He spent a lot of time looking for it and it had not been found.

[Mr Scott], on a without prejudice basis, acknowledged that all the evidence pointed to Lictor retaining ownership of the assets that had been shipped over in 1998. The problem was that the Hot Strip Mill had been substantively repaired and added to since then. For example, he had evidence of £4 million worth of motors.

On his interpretation of the 2000 agreement, he believed that Alphasteel would have a very good argument that any replacements and repairs were for its account.

He believed that it was less of a legal argument but an engineering conundrum of going through the Hot Strip Mill and establishing what would have been in existence in 1998 and what had been added to or repaired since."

88. When pressed in cross examination, Mr Taylor said that he recalled at least some of the things that were discussed during the 11 June Meeting. He stated that, at the time of the 11 June Meeting, he was not aware of the concern that the HSM might be fixed to the land, since he had seen the April Agreement which said that the HSM was moveable, and he did not appreciate the annexation point which as I have already mentioned, I find hard to accept. Mr Taylor explained that he did not ask Mr Scott for a specific undertaking that the land would not be sold without giving Lictor notice, since at the time he was trying to negotiate a deal with the Administrators.
89. Mr Taylor also said that he recalled that at the 11 June Meeting Mr Scott acknowledged that the evidence pointed to Lictor retaining ownership of the HSM and the task being essentially an engineering one, something which Mr Scott denied. He also accepted in cross examination that he knew that due diligence was underway and that it followed the bid process but nevertheless reported to his client that negotiations had not even started. He also stated that Mr Scott had misled him but was unable to state at what stage he may have become aware that he had been misled. Given his inability to indicate the relevant stage, his knowledge that due diligence followed a bid and what he himself had read in the Financial Times, on the balance of probabilities, I consider it more likely than not that Mr Taylor knew that the sale process was well underway.
90. Mr Scott's evidence in relation to the 11 June Meeting was that he did not recall it, and that all he had to go on were the notes which had been made. Accordingly, I approach his evidence in this regard with some caution. However, he added that, at the time, he assumed that Mr Taylor had been fully briefed, and that he was therefore aware of the annexation issue, which, according to Mr Scott, may explain why he may not have specifically mentioned this during the meeting. Mr Scott accepted that he knew at the time of the 11 June Meeting that Lictor had not registered an interest in the Site at the Land Registry, and he also knew that Lictor's equitable right would be defeated upon the registration of Libala's purchase. He maintained however, that it was not for him to advise Mr Taylor that Lictor should register its interest.
91. Mr Scott accepted that, when discussing with Mr Taylor the absence of a schedule to the April Agreement at the 11 June Meeting, the parties would have known what "equipment" was being referred to. He added that the point he was trying to make in relation to the schedule was that it went to the curious circumstances in which the April Agreement came into being. Mr Scott explained that the fact that Lictor was not receiving anything from Alphasteel, for example, by way of rent, made the arrangement seem "peculiar" to him. He said that he was not raising concerns with Mr Taylor, but merely commenting that he could see no commercial sense to the April Agreement. He added that the April Agreement had not been raised at any of the meetings with Mr Rostami or Mr Zondler and Dr Vetsch in January of 2008 and as a result, he had some concerns about its provenance. However, he was concerned not to waive privilege in the advice he had given his client and sought to be particularly careful as to the extent of the evidence he gave.
92. On 13 June 2008, Mr Scott emailed Mr Vere Nicoll as follows:

"I will try to call you this afternoon on the content on [sic] my meeting with Paul Taylor of Fox Williams. In essence, though, I simply listened and pointed out that Lictor might have appreciable difficulty in identifying 'its' equipment. Taylor is very keen to have a conversation with you (in conference, it seems, with me too) as he now understands that your clients are the people he really needs to be dealing with. I said I would inform you of this and ask when you could discuss the matter with him."

93. Mr Scott said that in the phrase "identifying 'its' equipment" the quotation marks signalled the annexation point. He disagreed with the suggestion put to him by Mr Braithwaite for the Claimant that the note shows that the engineering issue of identifying the equipment belonging to Lictor was the "headline point" during the 11 June Meeting. Mr Scott maintained that he found it very hard to believe that Mr Taylor could have left the 11 June Meeting in the belief that the main challenge to Lictor's claim was the need correctly to identify the equipment that belonged to it. Further, throughout robust cross examination, Mr Scott refused to accept Mr Taylor's evidence that at the 11 June meeting Mr Scott had accepted that all the evidence pointed towards Lictor retaining ownership of the components of the HSM.
94. In this regard, in my judgment, given Mr Scott's very careful approach in relation to his client's position and the fact that due diligence was already underway and the Heads of Terms had been entered into, on the balance of probabilities, I find it more likely than not that he did not assert that the evidence pointed to Lictor retaining the ownership of the HSM as Mr Taylor alleges. Such a conclusion is consistent with the notes of the 11 June Meeting produced both by Mr Scott and Ms Stripp which contains no reference to such an acceptance. However, it is inconsistent with Mr Taylor's email to Mr Zondler and Mr Bauer of 12 June 2008 to which I have referred. Nevertheless, in the light of the inaccuracy in the email in relation to the state of negotiations for the sale of Alphasteel's assets and Mr Taylor's misunderstanding in relation to the alleged refusal by Mr Scott to provide a valuation, to which I shall refer, it seems to me that it is more likely than not that the reference to the alleged admission in the email arose as a result of a misunderstanding or was otherwise inaccurate.
95. Thereafter, in a letter dated 19 June 2008, Adpico wrote to the Administrators in the following terms:

"We are writing as a substantial creditor of [Alphasteel] in order to indicate our concern in relation to the asset sale which you are currently undertaking.

As you are aware, a major asset at the Newport site comprises the hot strip mill which is owned by Lictor Anstalt, not [Alphasteel]. In our view, in order to maximise realizations for the benefit of [Alphasteel's] creditors, it is essential that a co-ordinated approach is adopted such that a potential purchaser is clearly able to acquire title to the hot strip mill as well as the other assets located at the Newport site. If the administrators were to sell only such right and interest as [Alphasteel] has to the Newport assets, this would in our view inevitably devalue those assets, and furthermore would create a significant risk that any proceeds of sale would be vulnerable to a claim from Lictor Anstalt that it should be entitled to receive a share of such proceeds. Accordingly, we would not support a sale on this basis, unless it was clear that, despite our best efforts, the administrators had not been able to procure a sale of all relevant assets on a co-ordinated basis, as outlined above.

We would urge you to take all steps open to you in order to ensure that Lictor Anstalt is a party to the sale arrangements in order to maximize realisations on behalf of the Alphasteel creditors. We understand that you will, at the same time, be concerned to protect the interests of the creditors of the Company in relation to the split of proceeds as between the hot strip mill and other assets."

96. Mr Taylor emailed Mr Scott on 20 June 2008 at 15.16, as follows:

"My client is getting frustrated with the lack of progress on Lictor's ownership rights re the strip mill. They have asked for a further response from you by close of Monday including an update on the proposed meeting/call with Clyde & Co.

If not I will need to move the request onto our letterhead." (original emphasis)

The same day, at 16.17, Mr Scott forwarded Mr Taylor's email to Mr Vere Nicoll, adding:

"Please see below. I have of course mentioned this before on a number of occasions.

It would be helpful to know whether you are prepared to talk to Paul Taylor or not. If not, I will simply tell him.

I have previously outlined the concern I have if he and his clients are left hanging."

97. Mr Scott accepted that the concern referred to would have been that Lictor might have done something to prevent the deal with Libala proceeding, and Mr Scott's evidence was that he had hoped Clyde & Co would get Lictor involved in the negotiations. However, he accepted that he knew that the effect of the HDA and the registration of the Site in the name of the purchaser would be to defeat Lictor's alleged interest under the April Agreement.
98. Mr Fry also gave evidence of the Administrators' concern that Lictor would attempt to use the marriage value of the HSM and the Site (and other assets) as a negotiating tool which could have led to protracted delay which would not have been in the best interest of Alphasteel's creditors. Mr Fry emphasised that the decision to accept Libala's offer and not to treat with Lictor was a "commercial decision" and that he was not particularly involved in the legal niceties of the situation. He stated that he believed that the terms of the HDA were such that Lictor's rights, if any, would be preserved and that in any event, administrators frequently enter into contracts which are inconsistent with existing contracts of the company in administration and they do so in order to fulfil their duties in the administration. I accept his evidence in this regard.
99. In particular, Mr Fry's evidence was that timing was an important factor in this decision, and the Administrators were concerned not to jeopardise the deal with Libala. He added that the £60 million that Libala agreed to pay was significantly better than the value of offers the Administrators had expected.
100. In fact, on 24 June 2008, Mr Taylor met with Mr Robert Pilcher of Clyde & Co on a without prejudice basis. Mr Taylor says that it was during this meeting that he was first made aware of the annexation issue and passed it on to his property department. Thereafter, on 27 June 2008, Mr Taylor emailed Mr Scott requesting "the valuation of the [HSM]". Mr Scott responded that same day stating that he was unable to provide the figures because they had been produced for internal purposes. Mr Taylor responded just over an hour later, stating that he would be willing to sign a hold harmless letter in order to obtain sight of a valuation. Mr Taylor's evidence was that Mr Scott had referred to a professional valuation in the 11 June Meeting. He maintained that his impression of the existence of such a valuation persisted, despite Mr Scott's response, and he accepted that, in the email chain, he and Mr Scott may have been "missing each other" in this respect. Mr Taylor's evidence was that he gained this impression following either the 11 June Meeting or a subsequent phone call with Mr Scott, but that, in any event, he did not think it was a big issue.
101. On 30 June 2008 Mr Taylor emailed Mr Pilcher, copying Mr Zondler and Mr Bauer. The relevant parts of the email are set out below:

"Withers

Jeremy Scott declined to supply the valuation he had obtained on the basis that we may sue the valuer. I have gone back and offered to enter into a hold harmless letter. Just wondering if you had any better luck?

…

Figures

I asked my clients (who I have cc'd), for further information on the costs of replacement, removal, transportation etc.

Again on a without prejudice basis, the obtained from a Director, what could be described as a rough calculation, of the values of the Hot Strip Mill, back in 2002:

Original Cost £50,000,000

Value if removed £10,000,000

Value [in] situ £20,000,000

Dismantling costs £4-5,000,000

…

Fixtures

In passing I confirm that we have carried out some legal research on the fixtures/fittings points you raised.

As well as the point you made about the degree of attachment, the law will also take into account the intention of the party at the time the equipment was supplied. Here the 2000 agreement is clear that the intention was for title to remain with Lictor (e.g. Equipment is expressed to be movable and Lictor has rights including to take repossession). This is further supported by subsequent accounting treatment..."

102. Mr Taylor's evidence was that he may have misunderstood the position in relation to the existence of a valuation, but that this was a single point within a longer email, the rest of which accurately reflects what happened at the time. It is common ground that the assertion that account would be taken of the intention of the parties at the date of annexation was wrong in law.
103. Mr Taylor's email was forwarded to Libala and on 3 July 2008 and Mr Scott sent various schedules to Clyde & Co from which he considered it would be possible to identify "what of the equipment may now not belong to Lictor (if any of it does.)" Thereafter, on 9 July 2008 Mr Taylor sent a chasing email to Clyde & Co stating that Lictor wished to make progress with the negotiations and otherwise it would need to put Libala "on notice of any proposed usage on the mill."

The Hive Down and Share Purchase

104. On 11 July 2008 the Administrators caused Mir to be incorporated under the name Alpha (Realisations) Limited with the intention that Mir be the vehicle by which the business and assets of Alphasteel would be sold to Libala by way of a hive down. It is to be inferred therefore, that Libala had chosen this alternative that was open to them and set out at paragraph 1.1 of the Heads of Terms. Alphasteel was the sole shareholder, and Mr Kenneth Tointon was the sole director. In cross examination, Mr Fry explained that Mr Tointon often acts in this capacity on behalf of administrators.
105. On the same day, the Administrators and Mir entered into the HDA. Mr Tointon signed a written resolution approving the HDA and authorising him to execute the HDA on behalf of Mir. The relevant parts of the HDA were as follows:

"2.1 Subject to the provisions of this Agreement, the Vendor shall sell and the Purchaser shall purchase, with effect from the Transfer Date, the Business by way of the purchase by the Purchaser of such right, title and interest as the Vendor may have in the following assets free of any claims by the Charge Holder under the Charge Holder's Security:

…

(d) the Property

(e) the Fixed Assets…"

Fixed Assets were defined to include "the plant and machinery used or intended for use in connection with the Business that is fixed to and forms part of the Property at Completion, which is non-exhaustively itemised in schedule 2 being identified by the letter 'F' alongside it". Schedule 2 included the HSM which was identified as a fixed asset.

106. Further, the relevant parts of clauses 7 and 9 of the HDA are in the following form:

"7. Passing of property and risk

Such right, title and interest as the Vendor may have, and the risk, in all Assets shall pass and the Vendor shall be deemed to have delivered the Assets into the possession of the Purchaser on the Transfer Date.

…

9. Third party claims

9.1 If any of the Assets are or shall be found to be subject to a lien, hire purchase, hire, loan, leasing or rental agreement or other encumbrance, the Purchaser shall take subject to it.

…

9.3 The Purchaser acknowledges that it has had the opportunity to inspect the records of the Vendor to satisfy itself as to the position regarding the matters referred to in clause 9.1

9.4 The Vendor and the Administrators warrant that they have not wilfully withheld any materials in their possession nor wilfully failed to supply any details held by them in relation to the interests of Lictor Anstalt in the hot strip mill situated at the Property.

9.5 The Purchaser agrees that it shall be responsible for settling any claim made against it by Lictor Anstalt in respect of the hot strip mill situated at the Property."

The consideration as stated in clause 3 of the HDA was £58.02 million of which £14 million was apportioned to the Fixed Assets. These figures, amongst others, were amended on 14 July 2008 so that the total consideration was restated as £57.35 million with £42.55 million being apportioned to the Fixed Assets (including the HSM).

107. Also on 11 July 2008, the transfer documents including a Land Registry form TR1 were executed on behalf of Alphasteel and delivered to Mir. Thereafter, on 14 July 2008, Mir changed its name from Alphasteel Realisations to Mir, and Mr Tointon resigned as director. Alphasteel and Libala executed a share purchase agreement ("SPA") pursuant to which Libala purchased the single share in Mir for £1 and Libala lent Mir the funds required to pay the amount due under the amended HDA pursuant to an inter-company loan agreement. Mir paid the consideration in the sum of £57,355,549.96 on the same day.
108. In cross-examination, Mr Fry accepted that from the point at which Alphasteel had passed over all of the assets to Alpha (Realisations) Ltd, the name by which Mir was then known, Alphasteel would not be able to honour the April Agreement, although he added that between 11 and 14 July 2008 whilst Alphasteel was the only shareholder in Alpha (Realisations) Ltd, it could potentially have insisted that Alpha (Realisations) Ltd act in a way consistent with Alphasteel's obligations under the April Agreement.

Events after the HDA and SPA

109. On 15 July 2008, Mr Taylor emailed Clyde & Co asking for an update and stating that if a response was not received within 7 days Lictor would have "no option but to look to a court application in respect of the recovery of the equipment". Mr Taylor sent a further email on 17 July 2008, noting that "the business has been reported as being acquired by your clients" and putting Libala on notice that Lictor reserved all rights in respect of any usage of the HSM. Thereafter, on 30 July 2008 Mr Taylor sent an email to Clyde & Co asking them to take instructions on the price that Libala would be prepared to offer for the HSM.
110. On 12 August 2008 title to the Site was registered in Mir's name at HM Land Registry. Clyde & Co wrote to Fox Williams the same day stating that it understood that Lictor may wish to assert rights over or in connection with the HSM forming part of the land purchased by Mir and that they had threatened court action. Clyde & Co stated that they could not see any basis on which Lictor could have a claim but requested full details of Lictor's alleged rights or interests in the interests of having a focussed discussion. Fox Williams replied on 29 August 2008 attaching valuation information in relation to the HSM and drawing attention to the April Agreement, and, in particular, stating that it clearly set out the intention of the parties, which was that Lictor retained title to the HSM.
111. Fox Williams sent a further email on 4 September 2008 asking for confirmation of whether Libala was prepared to make an offer for the HSM or put forward dates for a meeting to negotiate. However, on 5 September 2008 Clyde & Co replied stating that their position was as set out in their letter dated 12 August 2008 but they were taking instructions about a possible meeting. However, no solution was reached and on 12 December 2008 Lictor wrote a letter of claim to Mir alleging (inter alia) that the Equipment constituted a collection of chattels which remained the property of Lictor.
112. On 18 December 2008 Alphasteel entered creditors' voluntary liquidation at which point the Administrators became joint liquidators. Alphasteel had cash realisations of around £57m, most of which represented the price paid by Mir under the HDA. However, initially none of those realisations could be distributed to the creditors because of the threat of a claim from Lictor.
113. Thereafter, in or around March 2009, Lictor took steps, albeit belatedly, to try to register its interest under the April Agreement at HM Land Registry.
114. Also as I have already mentioned, in 2009 Werta sold its claims against Satico to Alita. Satico then sold its interests in Lictor and Technoplan to Alita. Alita paid £5.2m in respect of Lictor. In addition, Satico was a creditor of Alphasteel in the sum of £45m in relation to which, after the sale to Mir, it received a dividend of 42 pence in the £1. As I have already mentioned, Alita was founded by Mr Hosseini who is Mr Rostami's son in law. In turn, Mr Rostami had controlled Satico to which Werta had sought to sell its interests in Lictor, Technoplan and Alphasteel. From September or October 2009, Mr Hosseini took over negotiations in relation to the HSM on Lictor's behalf.
115. On 12 January 2010 Lictor, Alphasteel and the Administrators (in their capacities as joint administrators and liquidators) entered into a deed pursuant to which Lictor agreed to forfeit any claims it might have against Alphasteel and the Administrators in relation to the ownership of the HSM, the HDA and the SPA.
116. During cross-examination of Mr Hosseini, Mr Downes QC pressed that there was a conflict of interest in relation to Satico, since a quick sale of Alphasteel's business and assets for maximum value was in Satico's interests as a creditor of Alphasteel, but it was not in Satico's interests in relation to Lictor's interest in the HSM. Mr Hosseini did not agree that such a conflict existed.

The Proceedings

117. Following further exchanges, the present proceedings were issued by Lictor against Mir and Libala on 25 June 2010. As I have already mentioned, David Richards J gave judgment in relation to Mir's application of July 2011 to join Alphasteel and the Administrators as Part 20 defendants and in relation to its application of November 2011 for summary judgment against Lictor dismissing the claims for damages for procuring breach of contract and for the tort of conspiracy. Mir appealed in relation to the application to join Alphasteel and the Administrators and that appeal was also dismissed.
118. Thereafter, the matter was set down in a trial window for early January 2013 but was adjourned late in December 2012 at Mir's expense as a result of the late delivery of witness statements.

Expert and other evidence about the HSM and the Site

119. The expert on behalf of Lictor was Mr Finbarr Batt, a Chartered Structural Engineer and Associate with Mott MacDonald Ltd. The expert on behalf of Mir was Dr Steven Luke, a Chartered Civil and Structural Engineer and Director of Ove Arup & Partners Ltd. The expert evidence is largely agreed, although there are differences in some of the details. The experts prepared a Joint Statement setting out the extent of the agreement between them following a meeting. Only Mr Batt was cross examined and therefore, Dr Luke's evidence is unchallenged.
120. Both experts set out and described the layout, configuration, basis of equipment, mill capability and general operation of the HSM in very similar terms. Although of assistance, much of this is not directly relevant to the issues before me and I do not repeat it here. I should add however, that it is not in dispute that the land itself forming the bedrock for the HSM was prepared and that there are concrete foundations, trenches and parapet walls created in order to enable installation and operation of the HSM.
121. It is agreed that the HSM is independent of the building support structure and independent from the main building superstructure. The building and HSM equipment therefore, do not rely on each other for support or stability. The mill is in excess of 300 metres in length and the plant is estimated to weigh in the region of 4000 tonnes.
122. There is also no dispute between the experts that the HSM is connected to the foundations and concrete floor slabs by large diameter steel bolts and that such fixing is appropriate since concrete embedment of the HSM would not be a practical option. Furthermore, the experts agree in principle that these bolts may be undone and the HSM removed from its foundations, although the bolted arrangement after installation would primarily facilitate removal for maintenance, or the replacement of components. The experts further agree that the bolts may also be used to assist accuracy of location, to resist movement in operation and to provide anchorage against uplift.
123. In cross examination, Mr Batt's evidence was that it was possible that some of these bolts may have "seized up" and would need to be sheered if the HSM were to be removed. Nevertheless, when questioned about the difficulty of removing such bolts, Mr Batt stated that, whilst there is a degree of difficulty involved, it would still not be as difficult as removing something that had been deeply embedded straight into the foundations.
124. The HSM is also attached to low pressure and high pressure water supplies, lubricant supplies, electricity and motors. The water and lubricant pipes are steel and heavy duty in nature and it is agreed that the connections between for example, the water and lubricant supplies and the HSM, are held in position by the use of bolts or bolted flanges. In cross examination Mr Batt agreed that although in detachable form, they might seize up.
125. The experts also agree that removal of the HSM would be a complex, very expensive and time consuming operation which might take up to two years to complete and would require some remedial repair works to the Site. The extent of these works, it is agreed, would be considered minor in the context of the demands inherent in relocating the HSM. Repairs resulting from removal of the HSM could include gouged concrete, local spalling (being surface damage to concrete), making good the removal of secondary services, decommissioning of the water filtration systems and backfilling trenches. The experts agree that the extent of repair and making the building safe could be considerable. Mr Batt added in his report that "this sort of minor and localised damage would be easily repairable".
126. It is agreed that the existing overhead cranes at the Site have a capacity of 40 tonnes, and that, therefore, these cranes do not have sufficient capacity to lift and remove the Reverse Roughing Mill part of the HSM, and that it would be necessary to bring a larger capacity crane for such an operation. During cross-examination, Mr Batt explained that it was likely that part of the roof of the shed would need to be removed in order to remove certain parts of the HSM, although he clarified that this would be a "temporary removal and replacement of some of the lightweight items of the structure". However, he accepted that there is nothing in the design itself which would indicate that it was intended to be temporary.
127. The experts agreed that removal of the plant in its entirety would not be usual in view of the scale of operations required for its removal and reconstruction, and would only be undertaken in extreme circumstances or when the market condition dictated. In fact it was also accepted that but for wear and tear and any failure, it would be anticipated that an HSM would remain on site for as long as 40 or 50 years. However, the experts agreed that the HSM was deliberately designed to facilitate ease of installation and to allow for the future removal of discrete items for repair or replacement. Whilst the experts agreed that it would be normal for an HSM facility to remain in operation for long periods, being between 15 and 20 years or even until the end of its design life, they differ in relation to the commonality of removing an entire HSM.
128. According to the report of Mr Batt, it is common practice for Hot Strip Mills to be removed from one site and re-installed elsewhere, sometimes being shipped around the world. This would not be feasible if they were not deliberately designed to be removable even after many years of operation in one location. The position is summarised in the experts' joint statement where they agree that:

"…whilst such equipment is removable this would not be on a frequent basis in view of the scale of the operation, the dead weight of the equipment, the cost of the transport and the need for repair of the existing facility and creation of new infrastructure at the alternative location. Removal would be a complex operation, requiring significant planning, pneumatic equipment for removal of the large diameter bolts, lifting equipment, transportation by specialist equipment and/or shipping of major items of equipment and the time to do so would be demanding. These activities and the provision of new infrastructure at any new location would be substantial."

129. Mr Preece also gave evidence which is not disputed, to the effect that an HSM must be levelled on the vertical and horizontal plane and that the method used worldwide is to insert vertical metal posts in the foundations upon which the machinery is lowered. The vertical posts are then concreted into the foundations and the machinery is bolted to them using hydraulic machinery. He too accepted that the bolts can seize up over time and that if an HSM is removed, damage will occur to the site itself. He also did not disagree with Mr Luke that all things being equal, HSMs are intended to remain in situ for 30-50 years. He also accepted that relocation is extremely costly and relatively rare.

The site visit

130. I should add that I had the opportunity during the trial of this matter to visit the Site and to view the HSM in situ. It is not operational at present. The impression gained was one of enormity and complexity. The HSM itself is upon prepared foundations and in some cases, is sunk below the surface, positioned over aligned pits and upon specially erected parapet walls. The electrical connections, lubrication and water pipes are themselves extremely large and durable as are the means by which they are attached to the HSM itself. All of the fixings and boltings are also of an extremely heavy duty nature. Further, the HSM stands in a building or shed which is some 300 metres in length. The Site is situated in order to enable easy access by water and road for raw materials and finished products and the "Sloblands" upon which waste and cooling takes place are adjacent.

Evidence of a market in used HSMs

131. Mr Preece has more than forty years' experience in hot strip mills and has worked all over the world on maintenance, commissioning and technical support for such mills. He confirmed and it is not in dispute that during the life of a mill, parts would be upgraded and would also be replaced as a result of wear and tear. Furthermore, he was involved in the re-commissioning of the hot strip mill moved from the Site to Indiana in the late 1980s/early 1990s. In Mr Preece's witness statement he referred to five hot strip mills which he knew had been sold and moved and during cross examination he added examples of a further two mills and another, the name of which he was unable to recall. However, he accepted that in general, hot strip mills were intended to operate in situ but other than one mill moved for environmental reasons, he was unable to give evidence of the reasons for relocation.
132. Mr Preece also exhibited copies of listings from industry websites www.steelequip.com, www.caseyusa.com, and www.hotstripmill.com which he explained showed a number of existing hot strip mills currently offered for sale. In fact, in cross examination, he accepted that many of the examples he had given were duplicates and that in fact, many mills remain on the market for as much as ten years. As I have already mentioned he accepted that the use of "regularly" in relation to the offer for sale of HSMs should be deleted from his evidence. It was also accepted that it would be necessary to remove part of the roof of the building if the HSM were removed, that the Large Motors were embedded in the Site and that the HSM was semi-permanently plumbed and attached to the electrical and lubricant supply.
133. Mr Swidenbank's evidence was that although the entire plant could be removed it was not realistic.
134. Mr Hosseini also included in his witness statement a list of 15 hot strip mills which had been relocated "in the last decade or so", including the Original HSM which was moved by Alphasteel to Indiana, USA. Mr Hosseini explained in his witness statement and in cross examination that this list was provided by Danieli, a company which, according to Mr Hosseini, is "in the top 3 largest suppliers of plant and equipment to the metals industry worldwide". Danieli provided this list to a Mr Peter Marcus of World Steel Dynamics who, again according to Mr Hosseini's witness statement, "is widely considered to be the leading authority on market trends in the steel industry", who then provided the list to Mr Hosseini. In cross examination, Mr Hosseini accepted that he had no direct knowledge of the matter and as a result, I am unable to accept his evidence in this regard.
135. I should add that I was also referred to two instances where the removal and relocation of the HSM at the Site was considered, although not in fact implemented. The first was an unsolicited offer to buy the HSM from a client in China in 2001 and the second was an abortive project to move the HSM to Poland that was under consideration in 2002.

Applications after the close of evidence

136. After the close of the evidence on day 7 of the trial, Mr Braithwaite made an application seeking an order that he be permitted to rely upon the witness statement of Gerhard Meier and/or permission under CPR 33.6 to rely on the exhibited documents pursuant to section 9 of the Civil Evidence Act 1995 and/or for relief from sanction under CPR 3.9. It was accompanied by Herr Meier's witness statement dated 17 July 2014 and exhibited documents together with two hearsay notices pursuant to section 2 Civil Evidence Act 1995 and CPR 33.2. One was expressed to relate to the "certified copies of public documents obtained from the Public Commercial Register in Vaduz, Liechtenstein" and the other was in respect of Herr Meier's witness statement.
137. The need for the application arose as a result of the indication by Mr Downes QC on behalf of Mir made in opening, that the Claimants had failed to prove their case as to the validity of the April Agreement and, in particular, as to the authority of Professor Dr Dr Batliner to sign the April Agreement on behalf of Lictor. As a result, documents were disclosed over the weekend and on Monday 14 July 2014, the fourth day of the trial, the issue was ventilated before the court and Mr Braithwaite accepted that it might be necessary for him to make an application in order to seek relief from sanction in order to rely upon a new witness statement at a late stage. In fact, as I have said, the application was made after the close of evidence and before closings, on day 7 of the trial which had been agreed would cause least disruption.
138. The application was supported by the third witness statement of Mr Foggo of Fox Williams, solicitors for the Claimant. He accepts that if the question of the authority of Professor Dr Dr Batliner is in issue in the proceedings, the evidence of Herr Meier ought to have been provided at the exchange of witness statements. In summary, he explains that if, in fact, the question of authority is in issue, it had not been appreciated because of the way in which the Amended Defence had been pleaded and that it did not appear in the agreed List of Issues. He says therefore, that the breach in failing to adduce Herr Meier's witness statement, if it is one, is not serious or significant and causes no real prejudice to the Defendant and does not have a significant effect on the efficient conduct of the litigation at proportionate cost, or to litigation in general.
139. Paragraph 1 of the Amended Defence makes clear that Mir takes issue with the April Agreement and refers to it merely as a "Letter". Paragraphs 14 and 15 of the Amended Defence address paragraphs 13, 14 and 15 of the Particulars of Claim. Paragraph 13 of the Particulars of Claim related to advice given in February 2000 and referred to a decision having been made that Lictor would retain ownership of the "Equipment" which is a reference to the HSM. Paragraph 14 set out the relevant terms of the April Agreement and paragraph 15 dealt with the Equipment and the missing schedule to the April Agreement.
140. Paragraphs 14 and 15 of the Amended Defence are in the following form:

"14. As to paragraph 13 of the Particulars of Claim, the First Defendant repeats paragraph 13 herein. Save as aforesaid no admissions are made as to paragraph 13.

15. As to paragraphs 14 and 15 of the Particulars of Claim:

a. It is admitted that the contents of the letter of 3rd April 2000 ("the 3rd April 2000 Letter") are accurately set out at paragraph 14. It is denied that the 3rd April 2000 Letter constitutes a legally enforceable agreement.

b. It is admitted that the "equipment" referred to in the 3rd April 2000 Letter is the Equipment which is the subject of this dispute. It is denied however that as at 3rd April 2000 the equipment was a chattel which vested in Lictor. It had already become part of the Site which was owned by Alphasteel.

c. It is not admitted that there was any schedule to the 3rd April 2000 Letter. The First Defendant has not seen such a document.

d. It is admitted that the 3rd April 2000 Letter was drafted on the mistaken belief that the Equipment was a chattel which could remain the property of the Claimant.

e. Save as aforesaid paragraphs 14 and 15 are not admitted."

141. They refer back to paragraph 12 in which the April Agreement was said to be void for three reasons. Paragraph 12 is as follows:

"12. The First Defendant denies that as at 3rd April 2000 the Equipment existed as a chattel. In the premises any agreement as to the ownership of the Agreement was void:

a. By reason of a fundamental mistake at common law as to the existence of the subject matter of the purported agreement: the purported agreement proceeded on the basis that the Equipment was a chattel. However, as at the time of the 3rd April 2000 Letter, annexation had already occurred in relation to the Equipment and it was no longer a chattel. Accordingly the state of affairs upon which the purported agreement is based had already ceased to exist by 3rd April 2000.

b. For total failure of consideration: by the time of the 3rd April 2000 Letter, the Claimant had no rights to the Equipment and it had already become a part of Alphasteel's land. Therefore the Claimant gave no consideration for the purported agreement.

c. Alternatively if the facts giving rise to annexation were fully known to the parties and the legal effect of the said annexation was fully known: the 3rd April 2000 Letter was a sham entered into for the purposes of misleading the tax authorities as to the true legal owner of the Equipment."

142. Mr Downes on behalf of Mir says that it is clear that there is a non-admission at paragraph 15(e) of the Amended Defence made in the context of an allegation that the April Agreement was a sham for tax purposes and accordingly, that without proof of Professor Dr Dr Batliner's authority amongst other things, the Claimants have not proved their case. Mr Downes emphasises that he was not in a position to put forward a positive case as to the creation and execution of the April Agreement, nor was he seeking to do so but that it falls to the Claimant to prove their case.
143. The witness statement of Gerhard Meier upon which the Claimants seek permission to rely sets out that Herr Meier and Herr Hermann Hauer have been directors of Lictor since 20 December 2001 with "a single signatory right" and that they replaced Professor Dr Dr Batliner who was the sole director of Lictor from 21 December 1998 until 20 December 2001. Paragraphs 7, 8 and 9 of the witness statement are in the following form:

"7. As an officer of Lictor Anstalt, I confirm that the documents exhibited at GM1 are certified copies which I caused to be obtained on 15 and 16 July 2014 from the Public Commercial Register in Vaduz of:

(1) An extract of Lictor Anstalt's Public Commercial Register of the Principality of Liechtenstein as at 3 June 2008;

(2) The Articles of Lictor Anstalt dated 13 December 1983; and

(3) The Articles of Lictor Anstalt dated 17 April 2000.

8. I confirm that these documents form part of the company records of Lictor Anstalt.

9. Page 39 of GM1 confirms that Professor Dr Dr Batliner was Lictor Anstalt's sole director with a single signatory right from 21 December 1998 until 20 December 2001 and that Mr Hauer and I took over on 20 December 2001."

144. It is not in dispute that it is necessary to obtain the permission of the court to rely upon a witness statement served out of time: CPR 32.10 and that at the latest, a hearsay notice ought also to be served with the witness statements: CPR 33.2(4)(a). Furthermore, it is agreed that CPR 3.9 applies. The rule is as follows:

"(1) On an application for relief from any sanction imposed for a failure to comply with any rule, practice direction or court order, the court will consider all the circumstances of the case, so as to enable it to deal justly with the application, including the need –

(a) for litigation to be conducted efficiently and at proportionate cost; and

(b) to enforce compliance with rules, practice directions and orders.

(2) An application for relief must be supported by evidence."

145. The most recent authority is Denton & Ors v TH White Ltd & Ors; Decadent Vapours Limited v Bevan & Ors; Utilise TDS Limited v Davies & Ors [2014] EWCA Civ 906. The most relevant passages for these purposes are from the judgment of the Master of the Rolls and Vos LJ as follows:

"Guidance

24. We consider that the guidance given at paras 40 and 41 of Mitchell remains substantially sound. However, in view of the way in which it has been interpreted, we propose to restate the approach that should be applied in a little more detail. A judge should address an application for relief from sanctions in three stages. The first stage is to identify and assess the seriousness and significance of the "failure to comply with any rule, practice direction or court order" which engages rule 3.9(1). If the breach is neither serious nor significant, the court is unlikely to need to spend much time on the second and third stages. The second stage is to consider why the default occurred. The third stage is to evaluate "all the circumstances of the case, so as to enable [the court] to deal justly with the application including [factors (a) and (b)]". We shall consider each of these stages in turn identifying how they should be applied in practice. We recognise that hard-pressed first instance judges need a clear exposition of how the provisions of rule 3.9(1) should be given effect. We hope that what follows will avoid the need in future to resort to the earlier authorities.

The first stage

25. The first stage is to identify and assess the seriousness or significance of the "failure to comply with any rule, practice direction or court order", which engages rule 3.9(1).That is what led the court in Mitchell to suggest that, in evaluating the nature of the non-compliance with the relevant rule, practice direction or court order, judges should start by asking whether the breach can properly be regarded as trivial.

 . . . . . . . Such semantic disputes do not promote the conduct of litigation efficiently and at proportionate cost. In these circumstances, we think it would be preferable if in future the focus of the enquiry at the first stage should not be on whether the breach has been trivial. Rather, it should be on whether the breach has been serious or significant. It was submitted on behalf of the Law Society and Bar Council that the test of triviality should be replaced by the test of immateriality and that an immaterial breach should be defined as one which "neither imperils future hearing dates nor otherwise disrupts the conduct of the litigation". Provided that this is understood as including the effect on litigation generally (and not only on the litigation in which the application is made), there are many circumstances in which materiality in this sense will be the most useful measure of whether a breach has been serious or significant. But it leaves out of account those breaches which are incapable of affecting the efficient progress of the litigation, although they are serious. The most obvious example of such a breach is a failure to pay court fees. We therefore prefer simply to say that, in evaluating a breach, judges should assess its seriousness and significance. We recognise that the concepts of seriousness and significance are not hard-edged and that there are degrees of seriousness and significance, but we hope that, assisted by the guidance given in this decision and its application in individual cases over time, courts will deal with these applications in a consistent manner.

27. The assessment of the seriousness or significance of the breach should not, initially at least, involve a consideration of other unrelated failures that may have occurred in the past. At the first stage, the court should concentrate on an assessment of the seriousness and significance of the very breach in respect of which relief from sanctions is sought. We accept that the court may wish to take into account, as one of the relevant circumstances of the case, the defaulter's previous conduct in the litigation (for example, if the breach is the latest in a series of failures to comply with orders concerning, say, the service of witness statements). We consider that this is better done at the third stage (see para 36 below) rather than as part of the assessment of seriousness or significance of the breach.

28. If a judge concludes that a breach is not serious or significant, then relief from sanctions will usually be granted and it will usually be unnecessary to spend much time on the second or third stages. If, however, the court decides that the breach is serious or significant, then the second and third stages assume greater importance.

The second stage

29. The second stage cannot be derived from the express wording of rule 3.9(1), but it is nonetheless important particularly where the breach is serious or significant. The court should consider why the failure or default occurred: this is what the court said in Mitchell at para 41.

. . . . .

The third stage

31. The important misunderstanding that has occurred is that, if (i) there is a non-trivial (now serious or significant) breach and (ii) there is no good reason for the breach, the application for relief from sanctions will automatically fail. That is not so and is not what the court said in Mitchell: see para 37. Rule 3.9(1) requires that, in every case, the court will consider "all the circumstances of the case, so as to enable it to deal justly with the application". We regard this as the third stage.

32. We can see that the use of the phrase "paramount importance" in para 36 of Mitchell has encouraged the idea that the factors other than factors (a) and (b) are of little weight. On the other hand, at para 37 the court merely said that the other circumstances should be given "less weight" than the two considerations specifically mentioned. This may have given rise to some confusion which we now seek to remove. Although the two factors may not be of paramount importance, we reassert that they are of particular importance and should be given particular weight at the third stage when all the circumstances of the case are considered. That is why they were singled out for mention in the rule. It is striking that factor (a) is in substance included in the definition of the overriding objective in rule 1.1(2) of enabling the court to deal with cases justly; and factor (b) is included in the definition of the overriding objective in identical language at rule 1.1(2)(f). If it had been intended that factors (a) and (b) were to be given no particular weight, they would not have been mentioned in rule 3.9(1). In our view, the draftsman of rule 3.9(1) clearly intended to emphasise the particular importance of these two factors.

33. Our view on this point is reinforced by the fact that Sir Rupert recommended at paragraph 6.7 of Chapter 39 of his report that rule 3.9 should read as follows, including a factor (b) referring specifically to the interests of justice in a particular case:-

"(1) On an application for relief from any sanction imposed for a failure to comply with any rule, practice direction or court order, the court will consider all the circumstances including –

(a) the requirements that litigation should be conducted efficiently and at proportionate cost; and

(b) the interests of justice in the particular case."

This recommendation was rejected by the Civil Procedure Rule Committee in favour of the current version. In our opinion, it is legitimate to have regard to this significant fact in determining the proper construction of the rule. It follows that, unlike Jackson LJ, we cannot accept the submission of the Bar Council that factors (a) and (b) in the new rule should "have a seat at the table, not the top seats at the table", if by that is meant that the specified factors are not to be given particular weight.

34. Factor (a) makes it clear that the court must consider the effect of the breach in every case. If the breach has prevented the court or the parties from conducting the litigation (or other litigation) efficiently and at proportionate cost, that will be a factor weighing in favour of refusing relief. Factor (b) emphasises the importance of complying with rules, practice directions and orders. This aspect received insufficient attention in the past. The court must always bear in mind the need for compliance with rules, practice directions and orders, because the old lax culture of noncompliance is no longer tolerated.

35. Thus, the court must, in considering all the circumstances of the case so as to enable it to deal with the application justly, give particular weight to these two important factors. In doing so, it will take account of the seriousness and significance of the breach (which has been assessed at the first stage) and any explanation (which has been considered at the second stage). The more serious or significant the breach the less likely it is that relief will be granted unless there is a good reason for it. Where there is a good reason for a serious or significant breach, relief is likely to be granted. Where the breach is not serious or significant, relief is also likely to be granted.

36. But it is always necessary to have regard to all the circumstances of the case. The factors that are relevant will vary from case to case. As has been pointed out in some of the authorities that have followed Mitchell, the promptness of the application will be a relevant circumstance to be weighed in the balance along with all the circumstances. Likewise, other past or current breaches of the rules, practice directions and court orders by the parties may also be taken into account as a relevant circumstance."

146. As I have already mentioned, Mr Braithwaite says that it was believed that the challenge to the enforceability of the April Agreement was solely on the grounds set out in paragraph 12 of the Amended Defence. Nevertheless, he says that the breach if it is one, is not serious or significant because he merely seeks to put in evidence as to incontrovertible fact which would not preclude Mr Downes from taking any points in relation to the adequacy or otherwise of the evidence tendered. He says that it is not necessary for Herr Meier to be cross examined. He was not an officer of Lictor at the time the April Agreement was executed and accordingly, could not be of assistance. He says that the reason for the breach is the failure to appreciate the non-admission and when taking all the circumstances into account including the matters set out at (a) and (b) of CPR rule 3.9 it is clear that the court should proceed on the basis of the proper factual footing and that it is in the interests of justice that it should do so.
147. In the alternative, it is said that the documents themselves should be admitted by virtue of section 9 Civil Evidence Act 1995 which provides as follows:

"(1) A document which is shown to form part of the records of a business or public authority may be received in evidence in civil proceedings without further proof.

(2) A document shall be taken to form part of the records of a business or public authority if there is produced to the court a certificate to that effect signed by an officer of the business or authority to which the records belong.

For this purpose—

(a) a document purporting to be a certificate signed by an officer of a business or public authority shall be deemed to have been duly given by such an officer and signed by him; and

(b) a certificate shall be treated as signed by a person if it purports to bear a facsimile of his signature.

(3) The absence of an entry in the records of a business or public authority may be proved in civil proceedings by affidavit of an officer of the business or authority to which the records belong.

(4) In this section—

"records" means records in whatever form;

"business" includes any activity regularly carried on over a period of time, whether for profit or not, by any body (whether corporate or not) or by an individual;

"officer" includes any person occupying a responsible position in relation to the relevant activities of the business or public authority or in relation to its records; and

"public authority" includes any public or statutory undertaking, any government department and any person holding office under Her Majesty.

(5) The court may, having regard to the circumstances of the case, direct that all or any of the above provisions of this section do not apply in relation to a particular document or record, or description of documents or records."

148. Mr Braithwaite says that Lictor is a "business" within the definition in section 9(4) CEA 1995 and that the documents are "records" within the definition in the same sub-section. As a result of a combination of section 9 and CPR 33.6(2) they should be admitted. He says that it is the just thing to do, no prejudice is caused as a result, the reason for the failure, being the misunderstanding, is a good one and that neither the default nor the admission of the documents at this stage will have a significant effect upon the efficient conduct of the litigation.
149. Mr Braithwaite also says that the existence of a discretion in the court contained in sub-section 9(5) of the CEA 1995 does not render the documents inadmissible nor would Mir be prevented from making such an application within the present timetable of the trial, were they admitted. He says that the suggestion that Mir might seek to serve a notice to admit is artificial and that Mir would not be precluded from obtaining advice as to Liechtenstein law on the very narrow point in issue, in the time available. If they wish to rely upon such advice an application could be made in closing.
150. Further, Mr Braithwaite submits both under this head and in relation to Herr Meier's witness statement that the procedural history of this matter including the adjournment granted at the end of 2012 or the beginning of 2013 is irrelevant and in any event, the precise details are in dispute. This concerned an adjournment caused by Mir's application shortly before the trial date in January 2013. It is said by Mr Downes that the adjournment at Mir's expense, caused by the admission of further witness statements on Mir's behalf was obtained on the premise that the Claimant was ready for trial at that stage which now proves to be incorrect. He also refers to the fact that security for costs will be inadequate if the new evidence is admitted and as a result, the trial is extended.
151. In relation to the witness statement, Mr Downes says first that the issue of Professor Dr Dr Batliner's authority arises quite clearly on the pleadings and that the failure to serve Mr Meier's witness statement at the appropriate time, some 19 months ago is serious and significant. He says that this is all the more so because no one has given direct evidence on behalf of the Claimant in relation to the formation and execution of the April Agreement. He also says that his clients are dissatisfied by the failure to produce any documentation from Lictor in relation to the April Agreement to which Mr Braithwaite counters that the issue has not been raised in correspondence or by way of an application for specific disclosure.
152. In any event, Mr Downes says that in that context, if Herr Meier's witness statement were admitted at this late stage, Mir should not effectively be shut out but would be entitled to consider whether to apply to cross examine the witness and to seek to call expert evidence in Lichtenstein law, and as a result serious disruption would be caused to the trial timetable.
153. In relation to section 9 Civil Evidence Act 1995, in his written submissions, in summary, Mr Downes contended that Lictor was not a business within the meaning of section 9, the documents were not records belonging to Lictor, that pursuant to section 9(5) the court may dis-apply the procedure and that the process does not render the record admissible as to the proof of its contents. Mr Downes submits therefore, that the breach is substantial and serious, the reason is not a good one and that when taking into account all the circumstances including those set out in (a) and (b) in CPR 3.9, given the disruption which would be caused, permission should not be granted.
154. First, in my judgment, given the shape of the pleadings, it seems to me that the non-admission at paragraph 15(e) put the validity of the April Agreement in issue and that accordingly, it is for the Claimant to prove the necessary elements of a valid agreement. This includes the authority of Professor Dr Dr Batliner. This is despite the form of paragraph 17(c) of the Amended Defence which states that if the April Agreement is not void it only created rights in personam as between the parties. It seems to me that this is directed at paragraph 17 of the Particulars of Claim and does not derogate from the non-admission contained in paragraph 15(e). Accordingly, in my judgment, issues concerning the creation and formation of the April Agreement were and are in issue. This is consistent with the evidence of Mr Drennan and Mr Braithwaite's acceptance that the circumstances surrounding the April Agreement are in issue and that it was for that reason that Mr Drennan was called to give evidence.
155. I will take the application in relation to Herr Meier's witness statement first. The first stage is to consider whether the failure to comply with the rules in this regard is serious and significant. It seems to me that it is. The witness statement and the hearsay notice in respect of it ought to have been served some 19 months ago. Their production at this very late stage inevitably disrupts the conduct of this litigation. I accept Mr Downes' submission that he is entitled on behalf of Mir to consider whether to make an application to cross examine Herr Meier, an officer of Lictor, appointed in 2001 and to seek to obtain and to adduce expert evidence as to Liechtenstein law. I do not consider such matters to be artificial. Although Herr Meier had not been appointed at the date of the April Agreement, were permission given for his cross examination there are numerous issues which might be addressed. As a result, it seems to me that it is impossible to characterise the failure to comply with the rules as immaterial in the sense of causing no disruption to the conduct of the litigation.
156. The reason for the failure has already been canvassed. Although the failure to analyse the pleading adequately may well have been unintentional, it seems to me that a mistake of this kind cannot be characterised as a good reason. The Claimant has brought the position upon itself.
157. Lastly, it is necessary to consider all of the circumstances of the case so as to enable the application to be dealt with justly including the need (a) for litigation to be conducted efficiently and at proportionate cost; and (b) to enforce compliance with rules, practice directions and orders. In this regard, it seems to me that although the failure may have been as a result of inadvertence and it is said that Mir failed to draw attention to the issue until Mr Downes opened the case, in the circumstances in which no witnesses involved directly with Lictor, other than Mr Hosseini were called to give evidence, it is not appropriate that Mir should be shut out of the opportunity to seek to cross examine Herr Meier and if necessary to seek to rely upon expert evidence as to the necessary elements when establishing authority to act on behalf of an Anstalt. Such legitimate steps will inevitably jeopardise the trial timetable and as a result, jeopardise the efficient conduct of litigation in general at a proportionate cost. Accordingly, in my judgment the relevant factors militate against granting relief from sanction in this case and I refuse to do so in relation to Herr Meier's witness statement.
158. What then of the alternative application under section 9 Civil Evidence Act 1995? First, in my judgment, there is nothing to suggest that Lictor does not fall within the wide definition of "business" for the purposes of section 9. Are the documents themselves "records" however? All of the documents have been obtained from the Trade Register of the Principality of Liechtenstein. It is accepted that as Herr Meier is not an officer of the Register Lictor cannot seal the records on the basis that they are the records of a "public authority" under section 9 (even assuming a foreign body to be a "public authority" for the purposes of the rule). Further, it seems to me to be relatively clear that the extract from the register itself is not a record of the business. It is a record about the business, kept by the public authority in Vaduz. Accordingly, it seems to me that section 9 cannot be relied upon in relation to the extract from the register and therefore, it is not necessary to consider the three stage test in that regard.
159. What of the certified copies of the Articles of Association of Lictor which are kept on the register? It seems to me that they fall within the wide definition of "records". Although they may not be compiled on a regular basis, the Articles of Association are a central record of the way in which the business of Lictor is to be and ought to have been conducted. Does it matter that the certified copies were obtained from the Trade Register? In my judgment, the repository does not affect the fact that the Articles of Association themselves belong to Lictor. Furthermore, for this purpose, I am satisfied that paragraph 8 of Herr Meier's witness statement amounts to a certificate signed by him as an officer of Lictor to the effect that the Articles form part of the records of that business.
160. What then of the threefold test? In relation to the documents, the Claimant has failed to give notice for the purposes of CPR 33.6 and in relation to the hearsay notice necessary in order to seek to rely upon the statements contained in the documents, has failed to comply with CPR 33.2. Although the consequences are different, the date by which the Claimant ought to have complied in both cases was the latest date for serving witness statements. Therefore, the length of the delay is 19 months in this regard also. Once again it seems to me that given the length of the delay and the potential for disrupting this litigation and litigation in general, it cannot be characterised as other than serious and substantial.
161. The reason for the failure is the same as in relation to Herr Meier's witness statement.
162. What of all of the circumstances of the case so as to enable the application to be dealt with justly including the need (a) for litigation to be conducted efficiently and at proportionate cost; and (b) to enforce compliance with rules, practice directions and orders? In my judgment, despite the lengthy delay in dealing with the point and the need to observe the rules, it seems to me that taking all matters into consideration including the efficient conduct of litigation and the justice of the matter, it is appropriate to grant relief from sanction and permit reliance upon the Articles of Association in their various forms. Any application which Mr Downes chooses to make in relation to the documents pursuant to section 9(5) can be accommodated within the written and oral closings and it seems to me that the very limited issue which may arise from the Articles of Association and be pursued as to Liechtenstein law can be dealt with in the same way. Accordingly, having given appropriate weight to limbs (a) and (b) in CPR 3.9, in all the circumstances, including the way in which this issue has come to the fore, I grant relief from sanction in relation to the three iterations of the Articles of Association exhibited to Herr Meier's witness statement.

Is the Equipment a chattel (or a collection of chattels)?

163. Lictor's primary position is that the HSM is a chattel or a collection of chattels and that as a consequence, it retains title to it. It is said that this is the case despite the fact that the components of the HSM are very large and heavy, that its installation was a very lengthy and expensive process and that its removal would be a similarly lengthy, expensive and destructive process. Mir on the other hand says that such a claim is completely contrived and that it is obvious that the HSM became part and parcel of the land itself.
164. The question for the court therefore, is whether the Equipment which together constitutes the HSM became affixed to the land, so as to become part of it or remains a chattel. Whether there is sufficient annexation is a question of fact and depends upon all the circumstances and in particular, the degree of annexation and the object of the annexation: Holland v Hodgson [1872] LRCP 328 per Blackburn J at 334 and approved in Elitestone v. Morris [1997] 1 WLR 687 (HL).
165. The issue of annexation was considered in some depth by the House of Lords in Elitestone v Morris. In that case, their Lordships sought to avoid the traditional two-fold distinction between chattels and fixtures which they considered to be confusing and unhelpful in the circumstances of the case which concerned a wooden bungalow the main structure of which rested on concrete pillars which were attached to the ground. Lord Lloyd of Berwick determined that the question in the appeal was whether the bungalow became part and parcel of the land itself and adopted the three fold classification set out in Woodfall, Landlord and Tenant (loose leaf ed) Vol 1 para 13.131 which is the following form:

"An object which is brought onto land may be classified under one of three broad heads. It may be (a) a chattel; (b) a fixture; or (c) part and parcel of the land itself. Objects in categories (b) and (c) are treated as being part of the land."

166. I adopt the same classification and in the same way, I have formulated the question in this case, in terms of whether the HSM remains a chattel or has become part and parcel of the land itself. I also take due notice of Lord Clyde's warning at 696D, that each case turns upon its own facts and that comparable cases may provide useful guidance in relation to the relevant factors but rarely provide conclusive answers.
167. Both Lords Lloyd and Clyde with whom Lords Browne Wilkinson, Nolan and Nicholls agreed, made clear that the answer to the question of whether an object brought onto the land remained a chattel or became part of the land itself depended upon the circumstances of each case but mainly upon degree of annexation to the land and object of annexation. They both made clear that the intention of the parties is only relevant to the extent that it can be ascertained objectively.
168. Lord Lloyd addressed the issue first in the context of an argument based upon estoppel by convention raised in the Court of Appeal but abandoned before the House. He made clear that whether the structure had become part of the land could not be affected by a common assumption between the parties any more than it could be affected by an express agreement. He stated 690D-G:

"The plaintiffs might have renewed the argument before your Lordships. But in the meantime the House had given judgment in Melluish v BMI (No3) Ltd [1996] AC 454. In that case Lord Browne-Wilkinson said at 473:

"The terms expressly or implicitly agreed between the fixer of the chattel and the owner of the land cannot affect the determination of the question whether, in law, the chattel has become a fixture and therefore in law belongs to the owner of the soil... The terms of such agreement will regulate the contractual rights to sever the chattel from the land as between the parties to that contract and, where an equitable right is conferred by the contract, as against certain third parties. But such agreement cannot prevent the chattel, once fixed, becoming in law part of the land and as such owned by the owner of the land so long as it remains fixed."

If an express agreement cannot prevent a chattel form becoming part of the land, so long as it is fixed to the land, it is obvious that a common assumption cannot have that effect. . ."

He went on at 693E-F:

"As to the second reason the Court of Appeal may have been misled by Blackburn J's use of the word "intention" in Holland v Hodgson, LR 7 CP 328. But as the subsequent decision in of the Court of Appeal in Hobson v Gorringe [1897] 1 Ch 182 made clear and as the decision of the House in Melluish v BMI (No3) Ltd [1996] AC 454 put beyond question, the intention of the parties is only relevant to the extent that it can be derived from the degree and object of the annexation. The subjective intention of the parties cannot affect the question, whether the chattel has, in law, become part of the freehold, any more than the subjective intention of the parties can prevent what they have called a licence from taking effect as a tenancy, if that is what in law it is: see Street v Mountford [1985] AC 809. "

169. Lord Clyde sought to make a clear distinction between the principle of accession and the rules of removability. At 696C he made clear that it was the second rule of removability which required particular consideration of the relationship between the interested parties "which may play a part in the matter of removability, such as landlord and tenant, or mortgagor and mortgagee." However, he concluded that such differences play only "a subordinate role" when considering the principle of accession.
170. He went on to consider the issue of intention at 697H – 698F:

". . . accession can operate even where there is only a juxtaposition without any physical bond between the article and the freehold. Thus the sculptures in D'Eyncourt v Gregory (1866) LR 3 EQ 382 which simply rested by their own weight were held to form part of the architectural design of the hall in which they were placed and so fell to be treated as part of the freehold. The reasoning in such a case where there is no physical attachment was identified by Blackburn J in Holland v Hodgson (1872) LR 7 CP 328, 335: "But even in such a case, if the intention is apparent to make the articles part of the land, they do become part of the land." He continued with the following instructive observations:

"Thus blocks of stone placed one on the top of another without any mortar or cement for the purpose of forming a dry stone wall would become part of the land, though the same stones, if deposited in a builder's yard and for convenience sake stacked on the top of each other in the form of a wall, would remain chattels. On the other hand, an article may be very firmly fixed to the land, and yet the circumstances may be such as to show that it was never intended to be part of the land, and then it does not become part of the land. The anchor of a large ship must be very firmly fixed in the ground in order to bear the strain of the cable, yet no one could suppose that it became part of the land, even though it should chance that shipowner was also the owner of the fee of the spot where the anchor was dropped. An anchor similarly fixed in the soil for the purpose of bearing the strain of the chain of a suspension bridge would be part of the land. Perhaps the true rule is, that articles not otherwise attached to the land than by their own weight are not to be considered as part of the land, unless the circumstances are such as to show that they were intended to be part of the land, the onus of showing that they were so intended lying on those who assert that they have ceased to be chattels, and that, on the contrary, an article which is affixed to the land even slightly is to be considered as part of the land, unless the circumstances are such as to show that it was intended all along to continue a chattel, the onus lying on those who contend that it is a chattel."

It is important to observe that intention in this context is to be assessed objectively and not subjectively. Indeed it may be that the use of the word intention is misleading. It is the purpose which the object is serving which has to be regarded, not the purpose of the person who put it there. The question is whether the object is designed for the use or enjoyment of the land or for the more complete or convenient use or enjoyment of the thing itself. As the foregoing passage from the judgment of Blackburn J. makes clear, the intention has to be shown from the circumstances. That point was taken up by A L Smith LJ in Hobson v Gorringe [1897] 1 Ch 182, 193, a decision approved by this House in Reynolds v Ashby & Son [1904] AC 466, where he observes that Blackburn J,

"was contemplating and referring to circumstances which showed the degree of annexation and the object of such annexation which were patent for all to see, and not to the circumstances of a chance agreement that might or might not exist between the owner of a chattel and a hirer thereof."

Regard may not be paid to the actual intention of the person who has caused the annexation to be made. ."

171. Lord Clyde also emphasised that accession involves a degree of permanence rather than a temporary provision. Lord Lloyd approached the issue in a slightly different way at 692H – 693A:

"Many different tests have been suggested, such as whether the object which has been fixed to the property has been so fixed for the better enjoyment of the object as a chattel, or whether it has been fixed with a view to effecting a permanent improvement to the freehold. This and similar tests are useful when one is considering an object such as a tapestry which may or many not be fixed to a house so as to become part of the freehold: see Leigh v Taylor [1902] AC 157. These tests are less useful when one is considering the house itself. In the case of the house the answer is much a matter of common sense as precise analysis. A house which is constructed in such a way so as to be removable, whether as a unit, or in sections, may well remain a chattel, even though it is connected temporarily to mains services such as water and electricity. But a house which is constructed in such a way that it cannot be removed all at, save by destruction, cannot have been intended to remain as a chattel."

172. With regard to both degree and purpose of annexation, I was also referred to a series of nineteenth and early twentieth century cases concerning different types of machinery and plant in which the relationship between the interested parties fell into a number of categories. Mr Downes sought to rely upon the manner of fixing which became a consistent feature which he said was all but identical to the fixings used for the HSM. The line of authorities culminated in Hobson v Gorringe in which AL Smith LJ considered many of the authorities and concluded at 190:

"In Longbottom v Berry (5), which was a case between assignees of a mortgagor and mortgagees, it was also held that machinery annexed to the floor of a building in a "quasi-permanent manner" by means of bolts and screws passed to the mortgagees; and in Holland v Hodgson (6) the Exchequer Chamber affirmed Mather v Fraser (1) and Longbottom v Berry (5) and held that looms attached by means of nails driven through holes in the feet of the looms into the floors, which attachment was necessary to keep the looms steady when at work, and which nails could be drawn easily and without any serious damage to the flooring, formed part of the realty and passed to the mortgagee in fee. If there had been in this case nothing but the existing visible degree of annexation of the gas engine to King's freehold, and the known object for which such annexation had taken place, the authorities conclusively establish that the gas engine had ceased to be a chattel, and had become part of the freehold."

173. As will be clear from the extract from Lord Clyde's speech in Elitestone to which I have already referred, in Hobson v Gorringe, A L Smith LJ went on to consider the significance of the hire purchase agreement under which there was a contractual right to remove the machinery if the payment instalments under the agreement were not made. It was a case not dissimilar to this where the plaintiff owner sought to recover the machinery from a mortgagee of the land, the hirer having been made bankrupt. In that case, the mortgagee took after the hiring agreement but without notice of it. It was held that upon a true view of the hire purchase agreement coupled with the annexation of the engine, it had become affixed subject to a contractual right to unfix it. The argument that as a result of the hire purchase agreement, it was intended that the engine would not become a fixture and therefore, never did so was also dealt with. As Lord Clyde records, the approach based on dicta in Hodgson v Holland was rejected.
174. In summary, Lictor says the HSM has not been annexed to the Site, because the degree of annexation is no more than is necessary to allow the HSM to fulfil its purpose. The component parts merely rest upon bolts cast in the ground, to which they are secured. The experts agree that the purpose of bolting is to assist accuracy of location, to resist movement in operation and to provide anchorage against uplift. However, it is said that the HSM remains wholly independent of the building in which it is located. It has been annexed to the Site so as to better operate as an HSM. Further, as the removal of the original HSM demonstrates, the Site could still be used for the production of other products using other lines that may be installed. The HSM (or any component part of it) can be removed without causing any significant damage to either the building or the Site, a task that would only be carried out if justified by the economics of doing so. However, Mr Braithwaite emphasises that the experts agree that the HSM has been deliberately designed to facilitate its installation and to allow future removal and that the service connections are likewise designed and that HSMs are removed and sold.
175. Mr Braithwaite also accepts that the test is objective. However, he says that the passage in Elitestone v. Morris [1997] 1 WLR 687 at 693E-F amounts to a disregard for subjective declarations of intent but does not prevent the Court from taking into account the positions of the interested parties. He relied upon Leigh v. Taylor [1902] AC 157, a case concerning the status of tapestries fastened to the walls of Luton Hoo and in particular, upon passages in the speeches of Lord Macnaghten at 162, Lord Shand at 163 and Lord Lindley at 164 in which emphasis was placed upon all the circumstances including the relationship between the parties which in that case was tenant for life and remainderman. Lord Shand concluded therefore, that the tenant was " . . a temporary occupant having put up things for temporary purposes."
176. Mr Braithwaite says therefore, that this is a case where one person's chattels have been assembled on another person's land in circumstances in which, prior to assembly, the landowner had no rights of any nature whatsoever in the chattels and no consideration was paid. He says that it is also material that the value of the HSM far outweighed the value of anything else on the Site at the time the HSM was installed.
177. In addition, he says that the court may still have regard to the actual intentions of the parties as part of its general enquiry into the factual background. This is expressly recognised in Australia: see May v. Ceedive [2006] NSWCA 369, and properly understood Mr Braithwaite says that it represents the law in England too and that otherwise, cases such as Vaudeville Electric Cinema Ltd v. Muriset [1923] 2 Ch. 74 cannot be explained. That was a case in which amongst other things, the status of 477 plush tip up cinema seats was under consideration. They had been screwed to the floor of the cinema. Sargant J held that the seats were fixtures and passed to the mortgagee. He distinguished the circumstances in Lyon & Co v London City and Midland Bank [1903] 2 KB 135 in which similar seats originally obtained under an agreement for hire for twelve weeks, were held to have remained chattels. He contrasted the cases and stated that in the case he was dealing with, there was the question of a temporary user. He added that no inference could be drawn from anything done by the parties that there was an intention to prevent annexation.
178. I was also referred to Hellawell v Eastwood (1851) 6 Ex 295, a case in which "mules" used to spin cotton, which were fixed to the floor of the mill by screws, some into the wooden floor and some by being sunk in to the stone floor and secured by molten lead were distrainable for rent. However, I should say at this stage that this case is out of step with the line of authorities considered by AL Smith LJ in Hobson v Gorringe and was explained by the Vice Chancellor in Mather v Fraser (1856) 2 K&J 536 on the basis that it was concerned with distress over tenants' fixtures.
179. In this case, Mr Braithwaite seeks to rely upon the 1997 Letter and the April Agreement as supporting sufficient absence of permanence such that the HSM will have retained its status as a chattel. He also says that the fixings in respect of the HSM are insufficiently permanent and the mill itself was designed to be removable.
180. Mr Downes on behalf of Mir adopts the approach in Elitestone. He says that I must consider the degree of annexation and the purpose of annexation. When considering the degree of annexation he says that it is helpful to consider whether the object "can easily be removed integré, salvé et commodé, or not, without injury to itself or the fabric of the building": Hellawell v Eastwood [1851] 6 Ex 295, 312. He also emphasises that an article is prima facie a fixture if it has some substantial connection with the land or a building on it and that an object which is attached to the land or a building on it, for example, by nails screws or bolts, will prima facie be a fixture and therefore part of the land even if it would not be difficult to remove it: Woodfall at 13.134.4.
181. Mr Downes points out that in this case both parties' experts agree that the Equipment was attached to the land by means of cast-in holding down bolts and connected to the gas, water and electricity supplies. He also relies upon its sheer size and scale, the expectation that it would remain in situ for as long as 50 years, the expense and time necessary for removal and the damage to the land in such a process. Relying upon an extract from the judgment of Blackburn J in Holland v Hodgson cited with approval by Lord Clyde in Elitestone at 698, he says therefore, that it is prima facie a fixture and that the burden is on Lictor to establish that the intention was that it should continue as a chattel or collection of chattels.
182. Mr Downes accepts that when considering the purpose of annexation it is necessary to consider all the circumstances. However, he says that the intention of the parties is only relevant to the extent that it can be derived objectively from the degree and purpose of the annexation and accordingly that any reliance upon the April Agreement is misconceived: Melluish v BMI (No 3) Ltd [1996] AC 454 at 473. He also submits that any reliance upon the 1997 Letter is misplaced given that it is clear from that document that a sale of the HSM to Alphasteel was intended.
183. Lastly, Mr Downes emphasised that a distinction must be drawn between fixtures which may subsequently be removed and items which remain chattels. He referred me to the passage in the speech of Lord Lloyd in Elitestone v Morris at 691C where he referred to the confusion between fixtures and tenants' fixtures and to Lord Clyde at 695D where he said:

"As the law has developed it has become easy to neglect the original principle from which the consequences of attachment of a chattel to realty derive. That is the principle of accession, from which the more particular example has been formulated, inaedificatum solo solo cedit. A clear distinction has to be drawn between the principle of accession and the rules of removability…"

184. In my judgment the HSM in this case forms part of the Site and therefore, part of the land itself. I come to this conclusion having considered all the circumstances of the case. First, in my judgment, the degree of annexation is such that it is difficult to conclude but that the installation is intended to be other than permanent or semi-permanent. The land had been prepared by way of concrete foundations, trenches and pits where necessary and parapet walls. In just the same way as many of the nineteenth century cases, the HSM was attached to the floor by means of heavy duty bolts cast in the concrete. Furthermore, the services in the form of high pressure and low pressure water supply, lubricants and electricity were provided by way of substantial metal pipes and connected in a semi-permanent way.
185. It is accepted that both the bolts and the flange fixings for the service pipes can be undone with the correct equipment or sheered if necessary. However, in the case of the equipment itself, it seems to me that the bolts are very substantial and they are connected to metal pillars in the concrete which itself forms part of the foundations. There is nothing temporary about them.
186. Furthermore, although every case turns upon its own facts, I draw some comfort from the fact that the mode of fixing appears to be very similar to that in the line of cases including Hobson v Gorringe. In that regard, it seems to me that Hellawell v Eastwood was fully explained and distinguished on the basis that it concerned distraint over tenants' fixtures.
187. I also take into account that the mill stands themselves are extremely heavy and of considerable size. The entire mill line is some three hundred meters long and each mill stand, of which there were six, stands some twenty feet high. That is not in itself something which should lead to the conclusion that they have become part of the land. However, the fact that one would need specialist heavy lifting gear and would have to dismantle the roof of the mill building itself in order to remove a single stand is relevant, all the more so in the light of the fact that Mr Batt accepted in cross examination that he could not think of any design features intended to facilitate removal. Although the experts agreed that the HSM is constructed in parts, this is to facilitate repair, replacement and maintenance.
188. Although it is accepted that the HSM can be removed and it would seem that although there would be damage to the Site, the extent is dependant upon the care taken in the removal process, it was also agreed by the experts that an HSM of this kind would be expected to have an operable life of up to fifty years and would only be removed in exceptional circumstances. Such a removal would be a very lengthy and expensive process. Although there were examples of such removal and reinstatement, it seems to me that there is little doubt that given its very nature, an HSM and this HSM upon erection was intended as a permanent or semi permanent structure. Although it appears that there is some kind of second hand market in this type of machinery, it was clear that it was hardly buoyant. In my judgment, the examples available were consistent with sale being the exception rather than the rule. In any event, as Lord Clyde pointed out in Elitestone, there is a clear distinction between the principle of accession and the rules of removability.
189. What of the purpose of annexation? In my judgment, the purpose of the annexation was to create and run a mill and roll steel for profit. In this regard, I also take into account the position, nature and convenience of the Site. It seems to me that the proximity of the River Usk and lands suitable for activities which are essential to the milling process militate in favour of the purpose of the annexation having been to create an integrated whole. Furthermore, although it is necessary to secure the machinery in order properly to use it, in my judgment the purpose of securing the HSM to the Site is properly to enjoy the Site as a functioning steel mill.
190. Lastly, in my judgment, neither the April Agreement nor the 1997 Letter are of any assistance to the Claimants when determining the purpose of annexation. The April Agreement, as Mr Braithwaite appeared to concede cannot take the matter any further forward. In my judgment, the fact that the parties to the April Agreement sought to classify the HSM as a chattel and to preserve a contractual right of re-entry upon the Site in order to remove the HSM is no different from the subjective classification of a lease as a licence in Street v Mountford which was rejected in Elitestone. As Lord Clyde pointed out, it is the purpose which the object is serving which has to be regarded, not the purpose of the person who put it there.
191. The passage from Lord Clyde's speech set out above, makes clear that it is not open to consider the terms of the April Agreement or the 1997 Letter themselves. Accordingly, it is not necessary to consider the decision of the New South Wales Court of Appeal in May v. Ceedive, or such cases as Vaudeville Electric Cinema Ltd v. Muriset.
192. If I am wrong about this, it seems to me that even if the 1997 Letter is part of the relevant surrounding circumstances, it does not assist. In fact, it is concerned with use and envisages a future sale. Furthermore, even if contrary to the passage from Lord Clyde's opinion set out at paragraph 169 above, the relationship between the parties plays more than a subordinate role when determining the purpose of annexation and its permanence, as in Leigh v Taylor, once again, it seems to me that it does not assist the Claimant. Here Lictor and Alphasteel were all part of the same group of companies or entities, operated by the Angelopolous family. Such a background does not militate against the HSM having been intended to form a single entity being the mill, as one with the Site.

Was the April Agreement a valid contract and specifically, was it void: (a) By reason of a fundamental mistake as to the existence of the subject matter of the April Agreement? (b) For a total failure of consideration? (c) As a sham entered into for the purposes of misleading the tax authorities as to the true legal owner of the Equipment?

Was the April Agreement a valid contract?

193. Before turning to the three reasons allegedly rendering the April Agreement void, I should address the question of whether Lictor has proved that the April Agreement was properly executed. Although there is no positive case is pleaded to the effect that the April Agreement was not properly executed by Lictor and Alphasteel respectively, Lictor is put to proof.
194. This issue arises in part, from the fact that no witnesses were called who could give evidence as to the execution of the April Agreement and the circumstances in which it first came to light. Despite there being no positive case put forward on behalf of Mir, Mr Downes emphasised the lack of witnesses and the fact that despite being dated in April 2000, there is no evidence that the parties were aware of the existence of the April Agreement at the time of the sale to Satico in 2003. Despite having been purchased in 1993 at the cost of around £25m, the HSM is not recorded in the accounts of Lictor as its asset until the period ending 31 December 2001 which were signed off in May 2002. Even at that stage, it appears that there were two versions of the balance sheet produced in only one of which the HSM appeared, albeit subject to an offsetting loan liability. He also described Lictor as a shadowy entity and drew attention to the nature and flexibility of the tax advice received from Mr Drennan at Rawlinson & Hunter and the objective of the Angelopolous family to avoid tax in the United Kingdom.
195. Furthermore, he reminded me that Mr Hosseini was unable to give evidence of having been aware of it at the time of the purchase of Lictor by Satico in 2003 and despite being present and or represented at the meetings in January 2008 after Alphasteel went into administration, no one mentioned the existence of the April Agreement. It was not until Mr Webb found a copy in his archive and Mr Swidenbank found a copy in a hanging file at Alphasteel's offices in February 2008, that it came to the fore.
196. Mr Downes also made much of what he called the shadowy nature of Lictor, which was part of a group of companies including Alphasteel and Technoplan, controlled by Werta and owned ultimately by the wealthy Angelopoulos family. He referred to the fact that Rawlinson & Hunter stated in 1993 before instructing Stephen Alcock QC that they were unaware of the beneficial ownership of Alphasteel and that it would appear that the Angelopolous family's main concern was to avoid Lictor become taxable in the UK.
197. He also drew particular attention to the nature and tenor of the advice received by Lictor from Rawlinson & Hunter in 1995 in relation to the Large Motors supplied by General Electric and delivered apparently by mistake to the Site in 1993. In cross examination, Mr Drennan accepted that the first of the options put forward in order to seek to deal with the issue involved a fraud on the HMRC, the second was illegal and that the third option which was adopted, namely, the registration of Lictor for VAT in the UK, was taken despite the fact that Lictor had no intention of making and did not make any further VATable supplies in the UK. Mr Downes also noted that in cross examination, Mr Drennan stated that although it was his practice to take notes of meetings, he did not do so in respect of meetings relating to Alphasteel and Lictor.
198. He also submitted that it was curious that of the three draft letters sent by Mr Dillon to Mr Economou on 24 February 2000, all three appear to have been signed by Mr Economou on 25 February 2000 but only two were signed by Lictor. The letter of comfort appears to have been signed by Dr Vetsch on 29 March 2000 and the April Agreement was allegedly signed by Professor Dr Dr Batliner on 3 April 2000.
199. Mr Downes also referred to the fact that what Mr Drennan considered and rejected, namely that Alphasteel should be allowed to use the HSM for no reward to Lictor whilst acknowledging Lictor's partial interest in the plant, is exactly what appears on Lictor's case, to have come to pass. In cross examination, he was unable to give evidence that there had been a decision to lease the equipment for no rent. Nevertheless, in Mr Scott's note of his meeting with Mr Drennan on 9 April 2008 there is reference to Mr Drennan stating that a decision to lease the equipment at zero rent was made and was driven by tax considerations.
200. In summary, Mr Braithwaite submits that there is nothing unusual about the way in which the April Agreement came into existence, it was not surprising that it had been forgotten until it came to light in Taylor Wessing's archive (formerly Taylor Joynson Garrett) and in the hanging files at Alphasteel and that the evidence before the court is sufficient to satisfy the burden of proof upon Lictor.
201. First, despite the background of tax advice and the flexible approach taken in relation to the HSM and its ownership, in my judgment, there is nothing particularly surprising about the way in which the April Agreement came into being. It was drafted by Mr Dillon as part of a suite of documents. The advice had been that a sale of the HSM to Alphasteel was preferable but there had also been consideration of a lease or a hire purchase agreement. Mr Economou was eager to regularise the position and once the correct address had been confirmed, sent the final version of the April Agreement by fax and by post to Lictor.
202. In relation to the authority of Professor Dr Dr Batliner, Mr Downes points out that Mr Drennan stated in cross examination that he did not know Professor Dr Dr Batliner and had not seen anything to confirm his authority in behalf of Lictor and Mr Taylor had never heard of him. The April Agreement was first produced to Mr Drennan under cover of an email from Mr Webb of Taylor Joynson Garrett in which he mentioned that he had found the suite of documents which he attached to the email, which included the April Agreement, in his firm's archives. Mr Webb's email was as a result of the enquiry made of Mr Webb by Mr Swidenbank who asked whether it was possible that he held such a document together with other company records. The email is in the bundle, but Mr Webb has not been called as a witness. Nevertheless, Mr Braithwaite submits that it is evidence of what Mr Webb, a solicitor, explained to Mr Drennan at the time and there is no reason to infer anything other than that it represents the truth. I agree with Mr Braithwaite in this regard. There is nothing to suggest that the explanation given by Mr Webb in his email in response to the request by Mr Swidenbank is other than accurate. Furthermore, the inference from the email is that the April Agreement signed on behalf of Lictor by Professor Dr Dr Batliner had indeed been stored in Taylor Joynson Garrett's archives together with the other contemporaneous documents. It seems to me that the way in which the April Agreement came to light, Mr Swidenbank having contacted Mr Webb to ask whether a document had been stored with others in the firm's records, is perfectly natural.
203. Mr Braithwaite also points out that Professor Dr Dr Batliner is recorded as chairing meetings of Lictor, his address is recorded as that of Lictor and he was stated to be a professional company administrator. He asks rhetorically, why should a professional fiduciary put his name to a document if he did not have authority to do so?
204. In addition he relies upon the articles of association which were admitted pursuant to section 9 Civil Evidence Act 1995 which show that the company signatory authority was to be determined by the board of directors of Lictor. In relation to the extract from the Handelsregister kept by the Principality of Liechtenstein, which reveals that Professor Dr Dr Batliner's term of office as company signatory extended form 10 February 1995 to 20 December 2001, Mr Braithwaite says that the document is before the court and whilst it is not an authenticated document by reason of the Court's decision under section 9 Civil Evidence Act 1995 and whilst its contents are hearsay, those matters go to weight and not admissibility. In this regard, Mr Braithwaite points out that the extract from the register is consistent with the replacement of the articles of association on 17 April 2000, a document the authenticity of which is not in issue and is also consistent with the evidence of Herr Meier having become Lictor's representative.
205. Nevertheless, Mr Downes says that having decided that it did not fall within section 9 Civil Evidence Act 1995, I should exclude the extract from the Handelsregister it under CPR 32.1(2) or at the very least afford it next to no weight.
206. It seems to me that although there is no admissible evidence of the extract's true provenance, on the balance of probabilities, it is extremely unlikely that it does not represent the relevant part of the register kept by the Principality of Liechtenstein. Furthermore, as to its content there is nothing to suggest that doubt should be cast upon it. In fact, as Mr Braithwaite points out, its content is consistent with the articles of association which have been admitted pursuant to section 9 Civil Evidence Act 1995. In the circumstances, despite the fact that it was tendered extremely late and as a result, the court has not had the benefit of any evidence as to the relevant law of Liechtenstein, in my judgment, it is not appropriate to exclude it.
207. Taking all these matters together, in my judgment on the balance of probabilities, the April Agreement was properly executed and accordingly, Lictor has satisfied the burden upon it. It is not disputed that the draft of the April Agreement was produced by Mr Dillon and sent to Mr Economou who drew them up on Alphasteel notepaper. He sent them on to Dr Vetsch. On 30 March 2000, Mr Economou faxed Dr Vetsch Mr Dillon's original draft with manuscript amendments to the address. Thereafter, he faxed the final version to Dr Vetsch and sent it by post as well. It appears that it was returned bearing Professor Dr Dr Batliner's signature. As Mr Braithwaite points out, Professor Batliner is recorded as chairing meetings of Lictor and his address was Lictor's address. The document which he has signed is admitted to be an authentic document, and Professor Dr Dr Batliner's signature is admitted to be his authentic signature. Further, a combination of the articles of association and the extract from the Handelsregister confirm the Professor's authority to sign on behalf of Lictor. In any event, on a balance of probabilities, it seems to me that the document would be more likely than not to have been signed and returned from the office of a professional fiduciary signed by the appropriate person.
208. In any event, Mr Braithwaite says that the April Agreement was ratified because it was relied upon by Lictor consistently from 2008. He says that the lapse of time from 2000 is of no relevance because no detriment was caused to any third party during that period. Mr Downes says that reliance upon the April Agreement in the context of the administration of Alphasteel does not amount to ratification. He says that a mere assertion by Mr Taylor that the April Agreement was valid does not amount to ratification. Ratification requires actual authority, must take place within a reasonable time and a person who lacked capacity at the time of the act cannot ratify.
209. Had it been necessary, I would have decided that the conduct of Lictor since 2008, was not sufficient to ratify the April Agreement. There is no evidence of actual authority rather than mere assertion by Mr Taylor and given the considerable lapse of time, I would have decided that conduct from 2008 was insufficient for ratification.

(a) Common mistake?

210. First, in relation to mistake, it is said on behalf of Mir that at the stage at which the April Agreement was executed, the HSM had already been erected on the Site and as a result of annexation had become part of the land which in any event, belonged to Alphasteel. It does not appear to be in dispute that despite the wording of the opening of the April Agreement, the Equipment had been erected and commissioned by the time it was dated. Furthermore, it is accepted by Lictor that it proceeded on the basis that the HSM was a chattel.
211. In this regard, Mr Downes on behalf of Mir referred me to a passage from the speech of Lord Atkin in Bell v Lever Bros [1932] AC 161 at 218 where he said:

"Corresponding to mistake as to the existence of the subject-matter is mistake as to title in cases where, unknown to the parties, the buyer is already the owner of that which the seller purports to sell to him. The parties intended to effectuate a transfer of ownership: such a transfer is impossible: the stipulation is naturali ratione inutilis. This is the case of Cooper v. Phibbs (1), where A. agreed to take a lease of a fishery from B., though contrary to the belief of both parties at the time A. was tenant for life of the fishery and B. appears to have had no title at all. To such a case Lord Westbury applied the principle that if parties contract under a mutual mistake and misapprehension as to their relative and respective rights the result is that the agreement is liable to be set aside as having proceeded upon a common mistake. Applied to the context the statement is only subject to the criticism that the agreement would appear to be void rather than voidable…"

212. In short, Mr Downes says therefore, Alphasteel could not rent Equipment from Lictor which it (Alphasteel) already owned. The agreement proceeded on the basis that the HSM was a chattel or a collection of chattels whereas it had already been annexed to the land. The April Agreement was therefore void on the grounds of a fundamental mistake. He reminded me that in cross examination, Mr Drennan was clear that both Lictor and Alphasteel viewed the Equipment "through moveable spectacles" and that at paragraph 7.1 of the Reply, it is pleaded on Lictor's behalf that "the April Agreement proceeded on the basis that the Equipment is a chattel."
213. However, Lictor denies that there was a fundamental mistake on the basis that the Equipment existed and was readily identifiable and clauses (d) to (m) of the April Agreement were capable of performance. Mr Braithwaite also referred to In re Samuel Allen & Sons Ltd [1907] 1 Ch 575, a case in which by a hire-purchase agreement dated July 14, 1904, the owners agreed to let to the hirers certain machinery specified in the schedule which at that time, was already fixed to the company's business premises. The agreement provided amongst other things, that the owners were to be entitled to enter and remove the machinery in certain circumstances.
214. Mr Braithwaite also referred me to Melluish v BMI (No3) Ltd [1996] 1AC 454 a case in which the chattels in question were fixed to the freehold before the date on which the relevant lease schedule was completed. In fact, there was a master equipment lease entered into before the equipment and plant was acquired which purported to refer to equipment, rent, term and location referred to in the relevant schedule. A schedule was inserted subsequently in respect of each transaction. Under the master lease the company was given the right to repossess the equipment in certain circumstances and by clause 3.10 the parties stated that the equipment remained the personal property of the lessor despite being affixed to the land. Lord Browne Wilkinson at 473E pointed out that the terms agreed could not affect whether in law, the chattel had become affixed to the land and went on at 475D –E to consider cases including In re Samuel Allen & Sons Ltd. He concluded that the cases provided some support for the argument that the rights under the master lease were not purely contractual but "also confer . . . an equitable right in the equipment enforceable against any subsequent taker of the land to which it is affixed other than a bona fide purchaser for value without notice."
215. Mr Braithwaite submits therefore, that whether the item in question is considered by the parties to have been a moveable or not is irrelevant and does not affect the validity of the agreement itself.
216. In my judgment, although the opening parts of the April Agreement are framed in terms that the Equipment is a chattel in the ownership of Lictor, the circumstances are different from those under consideration in Bell v Lever Bros and similar to those in Melluish. The entirety of the April Agreement does not proceed upon the basis of a mutual or fundamental mistake. As Lictor points out, some of the sub-paragraphs are concerned with the right of Lictor to come upon the land and detach and remove the Equipment. It seems to me therefore, that even if there were a common mistake as to the status of the Equipment once erected, there are aspects of the April Agreement which were capable of performance even in the light of the common error. In those circumstances, it seems to me that in the same way as in In re Samuel Allen & Sons Ltd and the Melluish case, the April Agreement is not rendered void by reason of the common mistake and creates both contractual rights between the parties and arguably an equitable right in the equipment.

(b) Total failure of consideration?

217. Alternatively, Mir contends that the April Agreement was void for a total failure of consideration. It is said that if by the time of the April Agreement Lictor had no rights in the Equipment because it had already become part of the Site then there was no consideration for the agreement.
218. Lictor says that, in return for allowing Alphasteel to use the Equipment, Alphasteel promised to allow Lictor to enter upon the Site and remove the Equipment at any time on giving reasonable notice and that it would not sell, or purport to sell, the Equipment. Lictor's response is that good consideration was given in 1998 when, at Alphasteel's request, Lictor gave its consent to Alphasteel to assemble the Equipment on the Site and that it is obvious that Lictor did not intend to give the Equipment to Alphasteel; rather Lictor permitted such installation on the basis that either Alphasteel would pay for the Equipment or that an agreement would be entered into between Lictor and Alphasteel which would regulate Alphasteel's use of the Equipment and Lictor's interest therein.
219. It is said that this is not past consideration because the supply of the Equipment in 1997, the installation between 1997 and 1999 and the April Agreement are all part of one transaction. Mr Braithwaite referred to the discussions in July 1999 whether to enter into a joint venture to operate the mill and the option of a finance lease considered at the 23 February 2000 meeting, followed by the advice letter of 25 February 2000. He says these are consistent with the period between 1997 and April 2000 being a single transaction. In the alternative, it is said that the case falls within an exception to the general rule that past consideration is not good consideration.
220. Mr Downes submits that the installation and April Agreement were plainly not part of one single transaction. Furthermore, he points out that the last letter dated 12 August 1997 was written over 2 ½ years before the April Agreement was purportedly signed and expressly states that permission to instal the Equipment was conditional: "This is always provided that a mutual agreement on the final terms and conditions for the sale of the equipment to you can be reached between our two companies." In fact, the terms of the April Agreement are the exact opposite of a sale: the Equipment was to remain Lictor's property.
221. As regards the exception to the rule that past consideration is not good consideration, I was referred to Chitty on Contracts, 31^st ed at 30-29: a past act may amount to good consideration if three conditions are satisfied:

1. The act must be done at the request of the promisor;

2. It must have been understood that payment would be made;

and

3. The payment, if it had been promised in advance, must have been legally recoverable.

222. Mr Downes submits that the burden of proving that this case falls within the exception to the general rule is on Lictor. However, he says that there is no evidence that the installation was done "at the request" of Alphasteel. The letter dated 12 August 1997 simply stated that Alphasteel could start with the installation. Moreover, although the letter dated 12 August 1997 appeared to envisage that a sale would take place, no payment by Alphasteel to Lictor was ever agreed or made. On the contrary, the terms of the April Agreement on its face are inconsistent with any such payment.
223. It seems to me that despite the period of approximately 2 ½ years between the 1997 Letter and the April Agreement, the whole matter can be construed as a single transaction. The lapse of time should be seen in context. It is accepted by all that the installation of equipment like the HSM is and was very time consuming and expensive. It would not have been expected to have been completed in other than a lengthy period in excess of a eighteen months. On that basis, it seems to me that the entire process commencing with the delivery of the Equipment, followed by the 1997 Letter, the installation and discussions as to the manner in which the mill was to be operated, culminating in the April Agreement immediately prior to operations, can be seen as a single transaction.
224. I find it more difficult to conclude that the circumstances fall within the exception to the rule about past consideration. Although the 1997 Letter was written by Alphasteel and therefore, I do not consider it too difficult to infer that the installation of the Equipment was at the request of Alphasteel, it is not clear to me that it was understood that payment would be made. Although a sale was envisaged, it never came about and the remainder of the April Agreement is inconsistent with payment being required. I therefore reject this alternative argument.

(c) Was the April Agreement a sham?

225. Further and alternatively, Mir has pleaded that if (contrary to its primary case) Lictor and Alphasteel were aware prior to 3rd April 2000 that the Equipment had become annexed to the land, the April Agreement was a sham for the purposes of misleading the tax authorities as to the true legal owner of the Equipment.
226. In this regard, Mr Downes submits that it is clear from the evidence that prior to the execution of the April Agreement on 3 April 2000 back in 1993, Stephen Allcock QC had raised the issue of annexation and commented that specialist advice was required. The issue was raised again in Mr Aughterson's advice dated 22 April 2000 and was on the agenda for the meeting on 23 February 2000. Moreover, Mr Drennan confirmed that it would have been discussed at that meeting.
227. I was referred to Diplock LJ's definition of a "sham" in Snook v London and West Riding Investments Ltd [1967] 2 QB 786 (at 802):

"As regards the contention of the plaintiff that the transactions between himself, Auto Finance and the defendants were a "sham," it is, I think, necessary to consider what, if any, legal concept is involved in the use of this popular and pejorative word. I apprehend that, if it has any meaning in law, it means acts done or documents executed by the parties to the "sham" which are intended by them to give to third parties or to the court the appearance of creating between the parties legal rights and obligations different from the actual legal rights and obligations (if any) which the parties intend to create. But one thing, I think, is clear in legal principle, morality and the authorities... that for acts or documents to be a "sham," with whatever legal consequences follow from this, all the parties thereto must have a common intention that the acts or documents are not to create the legal rights and obligations which they give the appearance of creating. No unexpressed intentions of a "shammer" affect the rights of a party whom he deceived..."

228. This passage was referred to by Lord Clarke in Autoclenz Ltd v Blecher [2011] UKSC 41 at paragraph [23] where he said that, although Snook was authority for the proposition that if two parties conspire to misrepresent their true contract to a third party, the court is free to disregard the false arrangement, it is not authority for the proposition that this form of misrepresentation is the only circumstance in which the court may disregard a written term which is not part of the true agreement. Mr Downes submits therefore, that the Court is not bound by the language the parties have used in the April Agreement but is entitled to look at all the circumstances and ask itself: what is the substance and the reality of the situation? And, if different from the form, to give effect to the true agreement.
229. Mr Downes points out that the evidence in this case is that Mr Drennan's advice contained in his letter dated 25 February 2000 was that Alphasteel should purchase the Equipment outright on an interest free loan basis. This advice was given both to Lictor and Alphasteel and is confirmed in Mr Drennan in his witness statement. The April Agreement appears contrary to that advice and Mr Drennan was unable to provide any explanation as to why that should have been.
230. Mr Downes submits that an obvious answer is that there were advantages to both Lictor and Alphasteel in maintaining a stance that the Equipment belonged to Lictor. Mr Drennan accepted in cross examination that there were tax advantages to Lictor if the Equipment was treated as remaining Lictor's property. Mr Downes also drew attention to the following exchange in cross examination:

"Q. No, it is a simple point. It is a hypothetical question, I agree. If you were wrong about that [annexation], the Revenue were being misled, were they not. I am not saying you knew that, and I am not saying you are culpable, but that is the end result, is it not?

A. Yes.

Q. So, all the points that are sort of building here as to why Lictor might want this classified as a moveable, they are stacking up, are they not? We have the whole, it needs to be a moveable to claim any capital allowances; it needs to be a moveable so as to avoid any rental payments being rent for land; it needs to be a moveable so that there is not an argument that Lictor are trading in the UK, as opposed to with the UK. Nodding. Now, we have this other point, that it needs to be a moveable so that you can claim these capital allowances over the better period, the higher capital allowances. So, at this point in time, it was, it suited Lictor down to the ground, did in not, to have this treated as a moveable, right or wrong?

A. Yes.

Q. That was an advantage to Lictor that was perceived to be, presumably, worth several million pounds?

A. I hate to quote figures, because I seem to get them wrong -- 50, 40, 27.

Q. We are talking in the millions, are we not, not the hundreds of thousands?

A. Yes, of course."

231. Accordingly, Mr Downes submits that if the Court finds that Lictor and Alphasteel were aware that the Equipment/HSM had become annexed to the land prior to installation (contrary to Mir's primary case on fundamental mistake), there is sufficient evidence to find that the April Agreement was a sham: it purported to record an agreement that the Equipment/HSM was the property of Lictor and moveable, when in fact both parties knew that it was not, with the intention that Lictor should obtain the resulting tax advantages worth several millions of pounds.
232. On the other hand, Mr Braithwaite submits that this is not a case of sham for the purposes of deception of the Revenue at all. My attention was drawn to the observations of Munby J in A v. A [2009] WTLR 1 at [53-54]:

"53. An allegation of sham is a serious matter. As Neuberger J said in National Westminster Bank plc v Jones [2001] 1 BCLC 98 at para [59]:

"there is a very strong presumption indeed that parties intend to be bound by the provisions of agreements into which they enter, and, even more, intend the agreements they enter into to take effect."

Moreover, and because as Neuberger J pointed out (see paras [40], [46] and [59]) "a degree of dishonesty is involved in a sham", it follows (see para [59]) that:

"there is a strong and natural presumption against holding a provision or a document a sham." . ."

233. Mr Braithwaite submits that the problem, from Mir's perspective, is that both Mir and Lictor would want the April Agreement to be valid. He said that that was what was encapsulated in the extract from the cross examination of Mr Drennan which I have set out. Although the question assumes a state of affairs that did not exist, it is predicated on the assumption that it was in Lictor's and Alphasteel's interests for the HSM to be classed as a moveable. But if that is right, an agreement that declares the HSM to be a moveable is not, therefore, a sham. It is, instead, an agreement that seeks to affirm something that was to the potential benefit of both parties. In the absence of any suggestion as to what advantage Alphasteel and Lictor were seeking to obtain by reason of the supposedly true state of affairs (which must be that Lictor had actually gifted the HSM to Alphasteel), the sham argument fails.
234. I agree with Mr Braithwaite. As the authorities make clear, a sham and in particular, a sham intended to mislead HMRC is a serious matter and there is a strong natural presumption against holding that a document is a sham. Furthermore, all the parties must have a common intention that the acts or documents are not to create the legal rights and obligations which they give the appearance of creating. However, in this case, the common intention was the reverse. It appears from the April Agreement that despite the advice received from Rawlinson & Hunter, both Alphasteel and Lictor intended that it should created the legal rights and obligations it gives the appearance of creating. This is the case whether or not they were aware of the issue of annexation, which it seems to me in all the circumstances, is more likely than not. Accordingly, the defence of sham fails.

If the Equipment became part of the Site itself as a result of its installation, what effect did this have on Lictor's rights under the April Agreement? Did Alphasteel breach the April Agreement?

235. It is pleaded at paragraph 17 of the Particulars of Claim that if the HSM became part of the Site as a result of equitable rights created as a result of the April Agreement Lictor nevertheless remained entitled to enter upon the Site, dismantle and remove the HSM. Further at paragraph 18 of the Particulars of Claim it is pleaded that upon the proper construction of the express terms of the April Agreement or alternatively, as implied terms it was agreed that as long as the April Agreement remained in force:

(a) Alphasteel would not put it out of its power to allow Lictor to enter the Site to remove the Equipment;

(b) Alphasteel would not do anything which extinguished Lictor's right to enter upon the Site to remove the Equipment;

(c) Alphasteel would not sell or purport to sell the Equipment, nor sell the Site if so doing would involve a sale of the Equipment;

(d) Alphasteel would not deal with the Equipment in a way which had the effect of transferring or extinguishing Lictor's interest in the Equipment.

236. Further, on the footing that contrary to its primary contention, the HSM is held to be part of the land, at paragraphs 36 and 37 of the Particulars of Claim it is pleaded that as a result of the transfer of the legal title to the Site to Mir, Mir received such title unencumbered by any contractual or equitable right vested in Lictor as a result of the April Agreement. Accordingly, it is said that the transfer caused a breach of the April Agreement by putting it out of Alphasteel's power to allow Lictor to enter the Site to remove the HSM, extinguishing Lictor's right to enter upon the Site in order to do so, effecting the sale of the HSM by Alphasteel to Mir and postponing thereby effectively extinguishing Lictor's equitable interest in the HSM.
237. It is not disputed that the test for the implication of terms into a contract was set out by Lord Hoffman in Att-Gen of Belize v Belize Telecom Ltd [2009] 1 WLR 1988:

"…in every case in which it is said that some provision ought to be implied into an instrument, the question for the court is whether such provision would spell out in express words what the instrument read against the relevant background would be understood to mean."

He went on to say that the traditional tests of necessity to give business efficacy to the contract and obvious inference from the contract were simply different ways of expressing the same idea.

238. It is Mir's case that the alleged implied terms are not necessary to give business efficacy to the April Agreement nor do they represent the obvious but unexpressed intentions of the parties and Mr Downes submits that in fact, only a breach of implied terms is relied upon.
239. In my judgment, the term set out at (a) above is one which the April Agreement read as a whole and against the relevant background available to the parties at the time including the installation of the HSM at the Site and the relationship between Lictor and Alphasteel, would have been understood by the reasonable reader to mean. Without such an implication, it seems to me that clause (h) is both worthless and meaningless. In my judgment, it spells out in express words what the April Agreement properly construed would be understood to mean. I consider the same to be true of the term set out at (b). As to the first part of (c) and the whole of (d), in my judgment, the same is true. In relation to the second part of (c) in my judgment, the relevant background to the April Agreement militates against such an implication. In any event, were it necessary, in my judgment, one arrives at the same place upon the proper construction of the express terms of the April Agreement and therefore, there is nothing of any substance in Mr Downes' point in relation to reliance upon breach of express or implied terms.
240. The question of the rights created by an agreement of the nature of the April Agreement was dealt with by Lord Browne Wilkinson in Melluish v BMI (No 3) Ltd, a case in which a clause of the master lease provided that as between lessor and lessee certain property should remain personal or moveable notwithstanding that it may have been affixed to the land. The passage in his opinion in which Lord Browne Wilkinson dealt with the effect of the agreement upon the status of the object itself is quoted by Lord Lloyd in Elitestone and I have set out the passage above. However, in the context of the effect of the agreement itself, it is important to consider the passage at 473E-G as a whole and set it out again here:

"Unfortunately, the decision in Hobson v. Gorringe [1897] 1 Ch 182 was not cited to Buckley J. That case (which was approved by this House in Reynolds v. Ashby & Son [1904] AC 466 ) demonstrates that the intention of the parties as to the ownership of the chattel fixed to the land is only material so far as such intention can be presumed from the degree and object of the annexation. The terms expressly or implicitly agreed between the fixer of the chattel and the owner of the land cannot affect the determination of the question whether, in law, the chattel has become a fixture and therefore in law belongs to the owner of the soil: see pp. 192-193. The terms of such agreement will regulate the contractual rights to sever the chattel from the land as between the parties to that contract and, where an equitable right is conferred by the contract, as against certain third parties. But such agreement cannot prevent the chattel, once fixed, becoming in law part of the land and as such owned by the owner of the land so long as it remains fixed. . ."

241. It seems to me that in just the same way as in Melluish the parties to the April Agreement intended to create contractual and equitable rights and obligations in relation to the Equipment/the HSM itself and that it is what they did. The fact that the HSM became part of the land did not prevent the April Agreement from regulating those rights under clauses (h) and the first part of (m) as between Lictor and Alphasteel, to enter upon the land and sever the HSM from the land and to prevent dealings with the HSM by Alphasteel as if it were the owner.
242. At the least therefore, it seems to me to be clear that the transfer of the Site upon which the HSM had been constructed put the performance of clause (h) out of the control of Alphasteel and/or Lictor and amounted to a breach of contract and had the same effect in relation to clause (m). In my judgment, it also had the effect of causing a breach of the implied terms set out at sub-paragraphs 235 (a), (b), (d) and the first part of (c) above. I have come to this conclusion despite the terms of clauses 9.1 and 9.5 of the HDA which in summary, provide that the Purchaser takes subject to any lien, loan leasing or rental agreement and agrees to be responsible for settling any claim against it by Lictor in respect of the HSM. It seems to me that the April Agreement does not fall within the category of lien, loan, leasing or rental agreement and that responsibility for settling a claim does not prevent a breach of contract having taken place. It merely determines the party which will be liable.

Is Mir liable for procuring breach of contract and/or conspiracy?

(i) Procuring breach of contract

243. In this regard, both parties referred me to the trilogy of cases reported under the name of OBG v Allan [2008] 1 AC 1, and in particular the speeches of Lord Nicholls of Birkenhead and Lord Hoffmann. In that case, the House of Lords made clear that the tort of procuring a breach of contract and the tort of causing loss by unlawful means were two separate torts which should be kept distinct from one another. It was made clear that the tort of inducing a breach of contract is a form of accessory liability to be contrasted with the tort of unlawful interference which is described by Lord Nicholl as a "stand alone" tort imposing primary liability on a defendant in respect of his own conduct.
244. Lord Nicholls went on to consider the "mental ingredient" of the tort of procuring or inducing a breach of contract at paragraphs 191-193:

"191. I turn next to the mental ingredient in the Lumley v Gye tort. The mental ingredient is an intention by the defendant to procure or persuade ("induce") the third party to break his contract with the claimant. The defendant is made responsible for the third party's breach because of his intentional causative participation in that breach. Causative participation is not enough. A stranger to a contract may know nothing of the contract. Quite unknowingly and unintentionally he may procure a breach of the contract by offering an inconsistent deal to a contracting party which persuades the latter to default on his contractual obligations. The stranger is not liable in such a case. Nor is he liable if he acts carelessly. He owes no duty of care to the victim of the breach of contract. Negligent interference is not actionable.

192. The additional, necessary factor is the defendant's intent. He is liable if he intended to persuade the contracting party to breach the contract. Intentional interference presupposes knowledge of the contract. With that knowledge the defendant proceeded to induce the other contracting party to act in a way the defendant knew was a breach of that party's obligations under his contract. If the defendant deliberately turned a blind eye and proceeded regardless he may be treated as having intended the consequence he brought about. A desire to injure the claimant is not an essential ingredient of this tort.

193. For completeness I mention, but without elaboration, that a defence of justification may be available to a defendant in inducement tort cases. A defendant may, for instance, interfere with another's contract in order to protect an equal or superior right of his own, as in Edwin Hill & Partners v First National Finance Corpn plc [1989] 1 WLR 225."

245. Mr Braithwaite submits that the required mental element is therefore intentional causative participation, and he referred me to a passage from Lord Hoffmann's judgment in OBG v Allan which is in similar terms:

"8. … In unlawful means the defendant must have intended to cause damage to the claimant . . . . Because damage to economic expectation is sufficient to found a claim, there need not have been any intention to cause a breach of contact or interfere with contractual rights. Under Lumley v Gye, on the other hand, an intention to cause a breach of contract is both necessary and sufficient. Necessary, because this is essential for liability as accessory to the breach. Sufficient, because the fact that the defendant did not intend to cause damage, or even thought that the breach of contract would make the claimant better off, is irrelevant. . . "

Lord Hoffmann went on at paragraph 39:

"To be liable for inducing breach of contract, you must know that you are inducing a breach of contract. It is not enough that you know that you are procuring an act which, as a matter of law or construction of the contract, is a breach. You must actually realize that it will have this effect. Nor does it matter that you ought reasonably to have done so. This proposition is most strikingly illustrated by the decision of this House in British Industrial Plastics Ltd v Ferguson [1940] 1 All ER 479, in which the plaintiff's former employee offered the defendant information about one of the plaintiff's secret processes which he, as an employee, had invented. The defendant knew that the employee had a contractual obligation not to reveal trade secrets but held the eccentric opinion that if the process was patentable, it would be the exclusive property of the employee. He took the information in the honest belief that the employee would not be in breach of contract. In the Court of Appeal [1938] 4 All ER 504, 513, MacKinnon LJ observed tartly that in accepting this evidence the judge had "vindicated his honesty … at the expense of his intelligence" but he and the House of Lords agreed that he could not be held liable for inducing a breach of contract."

246. Mr Braithwaite also referred me to British Motor Trade Association v Salvadori [1949] Ch 56 approved by the Court of Appeal in DC Thomson & Co Ltd v Deakin [1952] Ch 646 and in Rickless v United Artists Corp [1988] QB 40, 59 per Bingham LJ. As David Richards J held at [49] when considering the applications made in this case nothing in OBG v Allan casts doubt on the correctness of Roxburgh J's conclusions in the Salvadori case. He considered the degree of participation necessary for the purposes of the tort of procuring a breach of contract at 565 in the following way:

"… in my judgment, any active step taken by a defendant having knowledge of the covenant by which he facilitates a breach of that covenant is enough. If this be so, a defendant by agreeing to buy, paying for and taking delivery of a motor-car known by him to be on offer in breach of covenant, takes active steps by which he facilitates a breach of covenant . . . . . The plaintiffs will succeed even if I have construed the word 'interference' too broadly, because even if a further element of inducement must be present, that further element can be found. The covenantor who offers a car for sale is not unconditionally ready to break his covenant but only if the price offered is high enough and, accordingly, a defendant who offers such a price induces the seller to take the final step towards breaking his covenant by making his willingness to sell unconditional."

247. Mr Braithwaite submits that it is obvious that Mir through the Administrators of Alphasteel knew that Alphasteel would breach the April Agreement by entering into the HDA and ultimately by the execution of the Transfer. He says that this was why the Administrators provided by clause 9.5 of the HDA for Mir to be responsible for settling any claim made by Lictor in respect of the HSM. In this regard he referred me to the judgment of Rimer LJ on the appeal from David Richards J. Rimer LJ stated at [38] and [41] inter alia as follows:

"[38] . . . Unlike in most such cases, when Alphasteel, the administrators and Mir Steel entered into the hive down agreement they all knew that Lictor had raised and asserted a claim to the ownership of the hot strip mill. In particular, they all knew of the terms of the letter of 3 April 2000. They all knew, therefore, of the factual basis upon which Lictor could or might claim to assert its title. . . . But Mir Steel knew all about such flaw and was nevertheless prepared to buy the asset, warts and all; and, by clause 9.5, it agreed to assume responsibility "for settling any claim made against it by [Lictor] in respect of the hot strip mill'.

[41] … If the sale to Mr Steel did involve any wrongdoing, whether of conversion, inducing a breach of contract or conspiracy, the parties to the hive down agreement, including Mir Steel, were all engaged in it together and Mir Steel could or should have realised that. . . "

248. He also submits that had the Administrators not thought that the April Agreement would be breached they would not have accepted the lower offer made by Libala and Mir or concluded that the April Agreement could not be attacked as a "tax dodge". Furthermore, he says that such knowledge is consistent with Mr Scott having had a meeting with Mr Taylor centred on the addition and replacement of component parts. Furthermore, he points out that there is no record of the suggestion that the April Agreement might be invalid as a result of annexation having been mentioned or discussed by the Administrators themselves. He points out that Mr Scott's alleged reservations about the validity of the April Agreement were not mentioned in his witness statement and were unsupported by contemporaneous documentation and Mr Fry was unable to articulate the nature of any concerns. It was also accepted that Mr Fry did not give close consideration to the point and as an administrator was prepared to break contracts if necessary. It is Lictor's case that Mir, Libala and the Administrators reached a cynical commercial decision to bring about the transfer of the Site and the HSM in breach of Alphasteel's obligations under the April Agreement and infringing Lictor's rights under that agreement, and thereby causing Lictor harm. It is not disputed that the knowledge of the Administrators is attributable to Mir.
249. Alternatively, Mr Braithwaite submits that Mir is liable on the basis that the Administrators were knowingly indifferent to whether a breach of the April Agreement would occur. In a passage from Emerald Construction Co Ltd v Lowthian [1966] 1 WLR 691, 701 approved in OBG v Allan at [41], Lord Denning MR observed:

"It is unlawful for a third person to procure a breach of contract knowingly, or recklessly indifferent whether it is a breach or not."

Mr Braithwaite also referred me to a passage in the judgment of Browne Wilkinson J in Swiss Bank Corp v Lloyd's Bank Corp [1979] Ch 549 at 580 at which the learned judge held that it was not enough to show that there was honest doubt as to the legal position in order to escape liability for procuring breach of contract. He concluded that in such circumstances the defendant must at least show that he was advised and honestly believed that he was legally entitled to take the particular course. In this case, although it is clear from Mr Scott's diffidence in giving evidence, if nothing else, that advice was taken, no evidence was led as to the nature of the advice.

250. On the other hand, Mr Downes submits that Mir's involvement in the HDA, the Transfer and SPA, is to be properly characterised as "mere facilitation" which is not sufficient to amount to "procuring" a breach of contract. He relies on the decision of Lord Templeman in CBS Songs Ltd v Amstrad Consumer Electronics plc [1988] 1 AC 1013, in which he refers to Buckley LJ's observation in Belegging-en Exploitatiemaatschappij Lavender BV v Witten Industrial Diamonds Ltd that "facilitating the doing of an act is obviously different from procuring the doing of the act".
251. He also submits that the Court must be satisfied that Mir had a high degree of culpability in entering into the transaction with the Administrators. He says that the mental element for the tort should be characterised as reckless disregard of, rather than a genuine doubt in relation to Lictor's rights under the April Agreement. He sought to draw an analogy between the tort of procuring a breach of contract and the cause of action in equity of dishonest assistance in breach of trust. He says that they are both accessory in nature and both causes of action serve to prevent interference with the claimant's accrued legal rights and relationships with others; subjective state of mind of the defendant is relevant in both causes of action; and the issue of risk taking arises in both causes of action, and there is a need to distinguish between conduct that is commercially acceptable and which does not attract liability, and conduct which is commercially unacceptable and does attract liability.
252. Mr Downes QC referred me to the Privy Council decision in Royal Brunei Airlines v Tan [1995] 2 AC 378, and in particular the speech of Lord Nicholls at 389H:

"All investment involves risk. Imprudence is not dishonesty, although imprudence may be carried recklessly to lengths which call into question the honesty of the person making the decision. This is especially so if the transaction serves another purpose in which that person has an interest of his own.

This type of risk is to be sharply distinguished from the case where a trustee, with or without the benefit of advice, is aware that a particular investment or application of trust property is outside his powers, but nevertheless he decides to proceed in the belief or hope that this will be beneficial to the beneficiaries or, at least, not prejudicial to them. He takes a risk that a clearly unauthorised transaction will not cause loss. A risk of this nature is for the account of those who take it. If the risk materialises and causes loss, those who knowingly took the risk will be accountable accordingly. …

This situation, in turn, is to be distinguished from the case where there is genuine doubt about whether a transaction is authorised or not. […] The difficulty here is that frequently the situation is neither clearly white nor clearly black. The dividing edge between what is within the trustees' powers and what is not is often not clear-cut. Instead there is a gradually darkening spectrum which can be described with labels such as clearly authorised, probably authorised, possible authorised, wholly unclear, probably unauthorised and finally, clearly unauthorised.

The difficulty here is that the differences are of degree rather than of kind."

Lord Nicholls noted that, whilst the liability of the trustee is strict, for an accessory, there must be a finding of dishonesty: "what does honesty require him to do?" and went on:

"The only answer to these questions lies in keeping in mind that honesty is an objective standard. The individual is expected to attain the standard which would be observed by an honest person placed in those circumstances. […] Knox J captured the flavour of this, in a case with a commercial setting, when he referred to a person who is "guilty of commercially unacceptable conduct in the particular context involved" see Cowan de Groot Properties Ltd v Eagle Trust Plc [1992] 4 All ER 700, 761. Acting in reckless disregard of others' rights or possible rights can be a tell-tale sign of dishonesty. An honest person would have regard to the circumstances known to him, including the nature and importance of the propose transaction, the nature and importance of his role, the ordinary course of business, the degree of doubt, the practicability of the trustee or the third party proceeding otherwise and the seriousness of the adverse consequences to the beneficiaries. The circumstances will dictate which one or more of the possible courses should be taken by an honest person. He might, for instance, flatly decline to become involved. He might ask further questions. He might seek further advice, or insist on further advice being obtained. He might advise the trustee of the risks but then proceed with his role in the transaction. He might do many things. Ultimately, in most cases, and honest person should have little difficulty in knowing whether a proposed transaction, or his participation in it, would offend the normally accepted standards of honest conduct.

Likewise, when called upon to decide whether a person was acting honestly, a court will look at all the circumstances known to the third party at the time. The court will also have regard to personal attributes of the third party, such as his experience and intelligence, and the reason why he acted as he did. . ."

253. Mr Braithwaite says that for the purposes of the tort of procuring breach of contract, this passage is only helpful at a high level of generality, since it inevitably becomes a discussion involving the notion of 'dishonesty', which is not relevant here. I have to say that I agree. To do otherwise would be to adopt a dangerous course.
254. Giving proper weight to the evidence as a whole, it seems to me that the Administrators and therefore, Mir knew that by entering into the HDA and as a result, thereafter executing the TR1 they would be breaching the April Agreement. It seems to me that had they thought otherwise, in April 2008, Mr Thomas would not have noted that the ownership of the HSM could not be challenged on the basis of a tax dodge and progressed investigations from considering the background to investigating replacement parts. It is also consistent with Mr Scott's desire to encourage Mr Taylor to negotiate directly with the purchaser and the discussion as to parts of the HSM at his meeting on 11 June 2008. Such a conclusion is also supported by the evidence as to a section 15/paragraph 72 application. The references to section 15 in the notes of the relevant meetings are consistent with an acknowledgement of the likely existence of the rights of Lictor. In my judgment, the same is true of the insertion of "THIRD PARTY" in respect of the HSM in the schedule of assets produced by the Administrators for the purposes of the HDA. Furthermore, it seems to me that the Administrators' acceptance of the lower offer made on 16 May 2008 is consistent with having no real grounds to doubt the validity of the April Agreement and a desire to proceed without further delay. The offer was lower by £10m which was the figure quoted for the value of the HSM if removed in Mr Taylor's email of 30 June 2008 and was a value within the range accepted by Mr Fry.
255. In addition, as Mr Braithwaite points out there is no documentary evidence of any suggestion made to Libala or Lictor that the April Agreement might be invalid as a result of the annexation of the HSM. If such a conclusion had been reached or discussed amongst the Administrators, it seems to me that it is more likely than not that it would have been recorded. Nor is there any documentary record of any reservations as to the validity of the April Agreement whether by Mr Scott or Mr Fry to which they referred in cross examination. Neither Mr Scott nor Mr Fry mentioned their reservations in their witness statements and Mr Scott did not disagree that Mr Fry had not necessarily given particularly close consideration to the legal niceties of the point.
256. In fact, not unsurprisingly, it was Mr Fry's evidence that it was usual to have to break contracts in order to fulfil one's duties as an administrator. However, whilst stating that he believed that by only selling such right title and interest as Alphasteel had, Lictor would be able to enforce its contractual rights against Mir he went on to accept that Alphasteel would not be able to fulfil its obligations under the April Agreement once the HDA and the Transfer took effect and that using the formula that the Administrators only sold what right, title and interest Alphasteel had, did not prevent a breach of the April Agreement being effected. It seems to me that all the matters to which I have already referred together with Mr Fry's acceptance that the formula did not prevent a breach taken with the very inclusion of a provision such as clause 9.5 of the HDA in the circumstances which prevailed at the time, is consistent with Mir through the Administrators being aware that there would be such a breach of the April Agreement.
257. Overall, therefore, in my judgment, the evidence points to the conclusion that the Administrators and as a result, Mir, knew that the transaction on 11 July 2008 and the subsequent Transfer would breach the April Agreement. In my judgment that is intentional causative participation. Libala and Mir intended to purchase Alphasteel's assets including the HSM. That end was achieved by getting Alphasteel to execute the HDA and the Transfer, in other words by getting Alphasteel to do the very thing it had to Mir's knowledge promised not to do under the terms of the April Agreement. Mir intended those steps or means to its end of purchasing the assets. All the parties were aware of the content of the April Agreement. Accordingly, in my judgment, it intended to procure the breach of the April Agreement. It is unnecessary, therefore, to decide whether the Administrators were knowingly or recklessly indifferent whether there was a breach of contract or not. Had it been necessary, for the same reasons I have already referred to, I would have held that Mir was knowingly or recklessly indifferent to the breach of contract.
258. It follows that I cannot accept Mr Downes' submission that Mir's involvement should be characterised as mere facilitation as opposed to procuration. I have found that Mir through the Administrators had actual knowledge of the fact that by executing the HDA and the Transfer the April Agreement would be breached.
259. Furthermore, were it necessary, I would have decided that Mir and the Administrators were unable to rely upon an honest doubt as to the legal situation surrounding the annexation of the HSM to the Site. It seems to me that Browne Wilkinson J as he then was, was correct to decide in Swiss Bank Corp v Lloyd's Bank Corp that it is insufficient for a defendant to show that there was an honest doubt as to the legal position in order to escape liability for procuring breach of contract but that he must show that he was advised and honestly believed that he was legally entitled to take a particular course. Mr Fry accepted that he took a commercial decision and did not dwell on the legal niceties of the situation. Although he repeated in cross examination that at various stages he took the view that the HSM had become part of the Site itself, there is no documentary evidence of such a view at the time. In my judgment such assertions are inconsistent with Mr Fry's acceptance that he did not dwell on legal niceties and in the absence of contemporaneous documentation supporting such a view, on the balance of probabilities, I consider is less likely than not to have been the case at the time. In any event, as Mr Braithwaite points out there is no evidence before the court of the advice sought and given at any stage.
260. Intention to cause loss is not a necessary element of the tort and therefore, it is of no relevance for the purposes of this head of claim that Mr Fry says that he believed that any harm to Lictor would result, which I accept. Accordingly, in my judgment, all the elements necessary for the tort of procuring a breach of contract are made out.

(ii) Unlawful means conspiracy?

261. It is not in dispute that the ingredients for the tort of unlawful means conspiracy are that: (a) two or more persons combine to (b) take an action which itself is unlawful (c) with the intention of causing damage to a third party who (d) does incur the intended damage as a result: Digicel (St Lucia) Ltd &Ors v Cable & Wireless Plc & Ors [2010] EWHC 774 (Ch). It is not necessary that the injured party show that causing him damage was the main or predominant purpose. However, it must be proved that that purpose was part of the combiners' intentions. It is clear that in conspiracy, the defendant must intend to cause the loss.
262. It is also not disputed that the necessary element of intention to injure the claimant is satisfied where the defendant intends to injure the claimant either as an end in itself or as a means to an end, such as to enrich himself or protect or promote his own economic interests. Furthermore, in Meretz Investments v ACP [2008] Ch 244, the Court of Appeal also held that it was a condition of liability that the defendant knows that the claimant's loss will be caused by the use of unlawful means.
263. It is pleaded in the alternative that Mir conspired with Alphasteel and Libala to cause injury to Lictor, namely the loss of its rights under the April Agreement, by the use of unlawful means being the breach of the April Agreement by Alphasteel. In fact, Mr Braithwaite did not press this part of his case with any force in closing.
264. In my judgment, given Mr Fry's evidence that he did not believe that he was causing any harm to Lictor because only such rights, title and interest as Alphasteel possessed was being sold which I accept, there can be no liability under this head because there was no intention to cause loss. I have come to this conclusion despite the fact that Mr Scott appreciated that loss would be caused because Lictor's rights were not registered.

Does the defence of justification in relation to the Administration (set out in paragraph 40A of the Re-Amended Defence) and/or the effect of the Land Registration Act 2002 (referred to at paragraph 40B of the Re-Amended Defence) avoid Mir's liability?

(i) Justification as a result of the position of the Administrators?

265. It is pleaded in defence that Mir was established by the Administrators for the purpose of executing a hive down and that the HDA, the SPA and the Transfer were effected in accordance with the Administrators' powers under paras 15 and 16 of Schedule B1 to the Insolvency Act 1986. Furthermore, it is said that Mir had no independent knowledge or intention of its own prior to the completion of the SPA on 14 July 2008; the administrators were acting in good faith and within the scope of their authority and in what they considered to be the best interests of Alphasteel's creditors; and that even if Mir was aware through the Adminstrators that the Transfer would constitute a breach of contract, it was nevertheless justified and:

" It is in the public interest and necessary to give effect to the intention of the legislature and in particular the statutory objectives stated at paragraph 3(1) of Schedule B1 of the Insolvency Act 1986, that third parties should be able to purchase assets from an administrator which are subject to purely contractual (as opposed to proprietary) restrictions without the fear of potential liability for inducing breach of contract, otherwise this may affect the ability of administrators to achieve the  best price for such assets. If the defence of justification is not open in such circumstances, it would render the hive down process as (at least implicitly) authorised by statute effectively useless."

266. It is common ground that when Alphasteel was placed into administration on 20 December 2007, the Administrators came under a statutory duty to perform their functions for the objectives set out in Schedule B1 Insolvency Act 1986; that the Administrators determined that they would fulfil the purpose in paragraph 3(1)(b) namely "achieving a better result for the company's creditors as a whole than would be likely if the company were wound up (without first being in administration)"; that in order to achieve such statutory objects, the Administrators were endowed with the powers stipulated in para 59(1) of Schedule B1 and Schedule 1 of the Insolvency Act; and that Mir was created to allow Libala to purchase the assets of Alphasteel which the Administrators had put up for sale. However, it is clear from clause 1.1 of the Heads of Terms that the choice of the hive down procedure was that of Libala.
267. Justification as a defence to a claim in tort for inducing breach of contract is referred to by Lord Nicholls in OBG v Allan in the passage which I have already cited. He stated that a defendant may interfere with the contractual right of another in order to protect an equal or superior right of his own as in Edwin Hill & Partners v First National Finance Corpn plc [1989] 1 WLR 225. In that case, Stuart Smith LJ noted at 233F:

"Justification for interference with the plaintiff's contractual right based upon an equal or superior right in the defendant must clearly be a legal right. Such right may derive from property, real or personal, or from contractual rights."

268. In that case, the defendant bank held a first legal charge on freehold property as security for the indebtedness of the developer, which was unable either to repay the loan or to raise finance for the development for which the plaintiffs had been appointed as architects. The bank agreed to provide the finance on condition that the architects were replaced. The architects were dismissed and claimed damages against the bank for procuring a breach of contract. The Court of Appeal upheld the decision at first instance dismissing the claim on the basis that the interference was justified as being in defence and protection of an equal or superior right under the legal charge. The bank could have exercised its statutory power of sale in which case the architects' contract would necessarily have come to an end, or it could have appointed a receiver who would have been free to engage new architects without inducement to breach a contract. Stuart Smith LJ observed at 232-233 that it would be undesirable if the law required the mortgagee in such a position to exercise his strict legal rights in order to be justified and could not come to a sensible and reasonable accommodation.
269. Mr Downes also drew attention to the decision in Joint Administrators of Rangers Football Club plc, noters [2012] CSOH 55, [2013] 2 BCLC 436 (which was decided after Mir's summary judgment application) at paragraph [53] where Lord Hodge said:

"An administrator would not be acting in breach of his duty to the company if he refused to perform a contract having acted reasonably to satisfy himself that the continued performance of the contract (i) would impede his achievement of the objectives of the administration, and (ii) was not in the interests of the company's creditors as a body. If he could establish reasonable grounds for being so satisfied, I consider also that he would be likely to have the legal justification which would exclude a personal liability to the counterparty of a company's contract for inducing the company to break that contract; see Fletcher, Higham and Trower, Corporate Administrations and Rescue Procedures' (2nd edn, 2004) para 5.29; OBG Ltd v Allan [2007] 4 All ER 545 at [39]–[44] and [168]–[173], [2008] 1 AC 1 per Lord Hoffmann and Lord Nicholls; and Professor Joe Thomson, Delictual Liability (4th edn, 2009) para 2.3. I am aware of the caution on the issue which David Richards J expressed in an application for summary judgment in Lictor Anstalt v Mir Steel UK Ltd [2011] EWHC 3310 (Ch), [2012] 1 All ER (Comm) 592 at [57]–[62]. But I do not see how an administrator could perform his statutory duties in many insolvencies if he were not able to plead justification. As the delict is an accessory liability it appears to me that a third party who contracts with the company in administration, for example in acquiring the company's assets after the administrator's repudiation of a contract, will not incur liability for inducing breach of contract if he merely responds to an invitation to treat from the administrator who is properly exercising his statutory duties."

270. Mr Downes points out that an inevitable consequence of almost any hive down is that the insolvent company breaches its contracts with third parties insofar as assets are the subject of existing contracts. He says that this is legitimate and the third parties have a right to prove for any damages in the insolvency. He submits however, that neither the Administrators personally nor the hive-down subsidiary can or should be liable for the tort of inducing breach of contract. If they were, it would render the hive-down procedure (as implicitly authorised by statute) practically useless. Furthermore, he says that even if Mir through the Administrators was aware that the transfer would constitute a breach of contract, Mir's actions were nevertheless justified because it is in the public interest and necessary to give effect to the intention of the legislature, and in particular the statutory objectives stated at paragraph 3(1) of Schedule B1 of the Insolvency Act 1986, that third parties should be able to purchase assets from an administrator which are subject to purely contractual (as opposed to proprietary) restrictions without the fear of potential liability for inducing breach of contract.
271. Mir further submits that a genuine but mistaken belief as to an equal or superior legal duty is sufficient.
272. Mr Downes goes on to say that in this case it is common ground that the Administrators acted in good faith and pursuant to their statutory powers, that those statutory powers are for the benefit of all creditors as a class: and specifically not to allow one creditor to obtain a preferential position as against the rest. He says that the Administrators had good legal and factual grounds to doubt Lictor's claim (because of the annexation of the HSM and the absence of a Schedule to the April Agreement) and to accept Lictor's claim would have allowed them to "queue jump" their position ahead of other unsecured creditors, who the administrators were bound to treat on a pari passu basis. He adds that Lictor made a conscious decision (or should be taken to have done so) to be satisfied with unsecured rights against Alphasteel, by dealing with the Equipment and allowing it to become annexed to the land, and not registering any interest against that land. The way in which Lictor arranged its affairs (with the benefit of full legal advice) should be such that it was content to take the risk of Alphasteel's insolvency on an unsecured basis. Accordingly, it is said that the position of Mir and the Administrators cannot be distinguished for these purposes, they shared the same guiding will and spirit and were both acting for the same purpose, ie to secure a better result for Alphasteel's creditors (which incidentally included Lictor).
273. In response, in summary, Mr Braithwaite submits that Lictor's right was proprietary and superior to that of Mir and so there was no possibility that the breach could be justified; in any event, upon the facts, the Administrators would not have been justified in breaching the April Agreement; and even if the Administrators had some justification, it does not inure to the benefit of Mir.
274. As to the proprietary right, Mr Braithwaite prays in aid in re Samuel Allen & Sons Ltd a case to which I have already referred in which a right to go onto land and remove machinery which had become annexed to the land was held to be an equitable proprietary right which took priority over a subsequent equitable mortgage. The analysis was approved in the Court of Appeal in In re Morrison Jones & Taylor [1914] 1 Ch 50 and as I have already mentioned, both cases were cited with approval by Lord Browne Wilkinson in Melluish v BMI (No3) Ltd.
275. He also submits that the distinction is supported by the exceptional right granted to administrators under paragraph 72 of Schedule B1 to deal with property subject to hire purchase agreements or other retention of title arrangements, with the permission of the court and upon paying full market value. Accordingly, he says that Lictor's right was superior to all other competing rights and was proprietary in nature.
276. Furthermore, with regard to the dicta of Lord Hodge in the Scottish case concerning Rangers Football Club to which I have referred, Mr Braithwaite points out that Lord Hodge suggests that the administrator is "likely" to have a defence of justification where he refuses to perform a contract on the part of the company having acted reasonably to satisfy himself that the continued performance of the contract (i) would impede his achievement of the objectives of the administration and (ii) was not in the interests of the company's creditors as a body. Other than adding (iii) that the breach should be carried out in a manner consistent with the administrator's duties (including his duty to act honourably – Ex parte James (1873-74) LR 9 Ch App 609) Mr Braithwaite accepts the proposition as a workable rule of thumb.
277. However, he says that in this case Lictor's rights to the HSM would not have impeded the objectives of administration, it was not reasonably necessary to ignore them and as a result it was not in the public interest to defeat a right over company property. He says that it was not an objective of the administration that the Administrators should appropriate proprietary rights to which Alphasteel was not itself entitled and for example, it was open to the Administrators to invite Lictor to exercise its right to remove the HSM. The sale could even have been structured (with Lictor's participation) so as to allow Lictor to exercise that right after the sale, assuming commercial terms could not be agreed with the purchaser. Furthermore, the Administrators could have applied to the court for directions as the administrators did in the Rangers case.
278. Furthermore, even if the defence were available to the Administrators, Mr Braithwaite submits that there is no reason why Mir should benefit from it. Mir had no rights at all until after it had procured the breach. Further, Mr Braithwaite submits that the obiter view of Lord Hodge in the Rangers case that a third party who contracts with the company in administration after a repudiation of the contract will not incur liability by merely responding to an invitation to treat from the administrator who is properly exercising his statutory duties is entirely correct, because a third party who contracts after the breach has already taken place does not procure the breach itself.
279. He also points out that the liability of the third party purchaser in such circumstances is not accessory to the liability of the administrator but to that of the company. He says therefore that there is no logical reason why a defence which is available to the administrator should necessarily be available to the purchaser. Furthermore, he emphasises that public policy considerations which apply to an administrator do not also apply to a third party who acquires an asset from a company in administration knowing that another person asserts rights to it and intending to defeat those rights. In this case, Mir achieved a discount by agreeing that it would assume the risk of claims by Lictor. Mir having obtained such a discount, why is it contrary to the public interest for it to have to face the very claim that it undertook to face?
280. It seems to me that even if the defence of justification is open to the Administrators in this case, it is not open to Mir. In my judgment there is no reason of public policy or otherwise why a defence available to an administrator should also be available to a purchaser from the administrator in circumstances where the purchaser knows that a third party asserts rights to the asset, intending to defeat those rights and purchasing at a discount to take account of the risk. This is a long way from the circumstances considered by Lord Hodge in the Rangers case. Further, I agree with Mr Braithwaite that Mir had no rights until after it had procured the breach.
281. If I am wrong about that, in any event, I do not consider that the Administrators themselves could rely upon the defence here. First, in my judgment, the circumstances of this case are similar to those in re Samuel Allen Ltd which was approved in Melluish v BMI (No 3) Ltd. Accordingly, in addition to its contractual rights, Lictor had an equitable proprietary right in relation to the Site, superior to the competing rights. Furthermore, I agree with Mr Braithwaite that it was not necessary in order to further the objectives of the administration, nor was it in the public interest to defeat Lictor's rights. There were other avenues which the administrators could have properly taken, including seeking the directions of the court.
282. Furthermore, I do not consider that such a conclusion renders the hive down process useless. In most cases, the purchaser will not satisfy the requirements for the tort of procuring breach of contract including the requisite knowledge which Mir possessed in this case. In my judgment, Mr Downes seeks to cast the net of public policy far too wide.

(ii) Justification arising from the regime of land registration?

283. In this regard it is said that to make a purchaser of a registered title to land subject to personal liability in relation to adverse contractual rights affecting land which do not appear on the register is offensive to the entire scheme of land registration. It is said therefore, that the only exception to the primacy of the registration system lies in the concept of the constructive trust which itself has been judicially doubted. In this regard, Mr Downes referred me to Megarry & Wade "The Law of Real Property" 8^th Edn at para 6-046 where the position is stated thus:

"The irrelevance of the doctrine of notice. The doctrine of notice has no place in registered conveyancing, whether under the Land Registration Act 1925 or under the Land Registration Act 2002, which makes specific provision for the application of the principles of notice in three cases, and therefore necessarily excludes it in all others."

There is then cited the statement of Lord Wilberforce in William & Glyn's Bank v Boland [1981] AC 487 at p.504: "The only kind of notice recognised is by entry on the register".

284. Mr Downes submits that a personal liability imposed on the purchaser is as offensive as an encumbrance upon the title because in just the same way the risk of such a liability would cause the potential purchaser to engage in extensive enquiries and investigations as to the possibility of a proprietary encumbrance existing outside the framework of registration. He referred me to a number of cases including Binions v Evans [1972] Ch 359 in which it was held that a purchaser with notice of the promise made to a widow that she could stay in a cottage for the remainder of her life, took the land subject to a constructive trust. However Megaw LJ thought that the tort of wrongful interference with contractual rights was relevant:

"As the plaintiffs took with express notice of, and indeed expressly subject to, the agreement between the trustees and the defendant, the plaintiffs would, on ordinary principles, be guilty of the tort of interference with existing contractual rights if they were to evict the defendant. For that would be knowingly to interfere with her continuing contractual rights with a third party, the trustees. In the ordinary way, the court would intervene to prevent the plaintiffs from interfering with those rights. I should have thought that ordinary principles of equity would have operated in the same way. However, it may be that there are special technical considerations in the law relating to land which would require to be reviewed before one could confidently assert that the ordinary principles as to the protection of known contractual rights would apply."

285. Mr Downes also took me to an extract from Chaudhary v Yavuz [2012] 2 All ER at para 61 at which Lloyd LJ he considered Lyus v Prowsa in the following way:

"It may be said that, on this basis, Lyus v Prowsa Developments is a very unusual case, and is not likely to be followed in more than a few others. That is a fair comment, but not a fair criticism. I know of no English case in which the precedent of Lyus v Prowsa Developments has been used successfully to make binding on a purchaser an interest which could be but was not protected on the register as against him, other than Lloyd v Dugdale at first instance (overturned on appeal) and the present case, also at first instance.

Since the basis of Lyus v Prowsa Developments is showing that the conscience of the purchaser is affected, it might be argued that the apparatus of registration has no relevance to the question arising. In Lyus v Prowsa Developments itself it had none, because nothing which the plaintiffs could have done could have protected their rights against the defendants. In a directly comparable case that might again be the case. But in a case such as the present, where the rights asserted are capable of protection on the register and where they are not referred to in the contract in specific but only in general terms, then it seems to me that the registration system is relevant. That is for at least two reasons. One is that, absent a specific reference in the contract, the purchaser may be thought to be entitled to rely on third parties protecting themselves in the manner provided for under the legislation. The other is that the contract provision will more readily be interpreted as intended to protect the vendor against a possible claim by the purchaser than as imposing a new personal obligation on the purchaser towards the third party."

286. He also took me to the recent case of Groveholt v Hughes [2012] EWHC (Ch) in which David Richards J said with regard to an attempt to bind a purchaser with notice:

"On the face of it, any such claim is barred by s 20 of the Land Registration Act 1925 as a result of Mr Hughes' failure to register his rights to a re-transfer. This is the case notwithstanding that, as Groveholt accepts, it had knowledge or notice of Mr Hughes' rights contained in the Hughes/Chelverton agreement. Mr Hughes seeks to overcome this obstacle principally on the basis that, by reference to the terms of the Chelverton/Groveholt agreement, Groveholt is obliged as a constructive trustee to give effect to his rights.

It is well established that in certain circumstances a constructive trust may be imposed on a transferee of registered land to give effect to third party rights notwithstanding their non-registration. Because this clearly cuts across the underlying premise of the land registration system that purchasers should acquire good title free of any interests which do not appear on the register, subject to statutorily defined overriding interests, the circumstances in which a constructive trust will arise have been narrowly confined."

287. Mr Downes submits therefore, that section 29(1) Land Registration Act 2002 and the phrase "an interest affecting the estate" should be read so as to include a personal claim against a purchaser based on an economic tort as in the present case. It is in the following form:

"If a registrable disposition of a registered estate is made for valuable consideration, completion of the disposition by registration has the effect of postponing to the interest under the disposition any interest affecting the estate immediately before the disposition whose priority is not protected at the time of registration."

288. Mr Braithwaite says that the assertion that section 29(1) affects purely contractual rights as well as proprietary rights is astonishing. He points out that the phrase "any interest affecting the estate" is defined in section 132(3)(b) as follows:

"references to an interest affecting an estate or charge are to an adverse right affecting the title to the estate or charge"

289. He also asks rhetorically, how could a personal contractual right be postponed to a freehold title? He says it makes no sense and that section 29 is concerned with the relative priority of property interests which it seeks to organise. It is for this reason, he says, that "mere equities" and inchoate rights under a proprietary estoppel are treated as interests in land by virtue of section 116 Land Registration Act 2002. Mr Braithwaite says that such a conclusion would also be contrary to the analysis in the leading cases. He referred me to Esso Petroleum Co Ltd v. Kingswood Motors (Addlestone) Ltd [1974] QB 142. In that case, Esso sought an injunction requiring property to be retransferred back to Kingswood on the basis that it had been transferred by Kingswood to a third party pursuant to a conspiracy to defeat Esso's rights under a solus tie agreement between Esso and Kingswood. Bridge J granted the mandatory injunction and noted:

"… I can see no reason whatever why the powers of the court to act against tortfeasors who bring about breaches of contract by other persons should be limited in the way suggested simply because the breach of contract which the conspirators have succeeded in inducing is one which involves a transfer of title to land."

290. Mr Braithwaite also said that this was consistent with the outcome in Midland Bank v Green (No 3) [1982] 1 Ch 529. In that case, although the son's option to purchase was defeated by the sale of the land to his mother, as a result of the fact that it had not been registered under the Land Charges Act 1925, he was still able to pursue a claim in conspiracy against his parents for breach of his personal contractual rights. Furthermore, it was not suggested that the fact that he had a cause of action in negligence against his solicitors for failing to register the option, afforded his parents a defence against the claim against them.
291. Mr Braithwaite points out that a person who acquires land with actual notice of an unregistered property right does not, without more, commit a tort. He submits however, that a person who acquires land with knowledge of a contractual right the breach of which he intentionally procures does commit a tort. Furthermore, he adds that to suggest that contractual rights survive registration would lead to additional enquiries is also misconceived because tortious liability only arises because of actual knowledge of the contractual rights being broken: so a person who does not know he is acquiring land in breach of a third party contract does not commit a tort.
292. He also says that there is no analogy here with the constructive trust analysis in cases such as Lyus v. Prowsa. Attempts to assert such trusts obviously fail where the matters giving rise to the trust pre-date the transfer because a constructive trust is a registrable right: if it is not registered, it does not bind a purchaser. The assertion of such a registrable right can therefore only succeed where, exceptionally, it is the transfer itself that gives rise to the constructive trust. Tort claims are not registrable interests in land and the analogy is of no assistance.
293. I agree with Mr Braithwaite. First, it is clear from the statutory definition contained in section 132(3)(b) that the phrase "any interest affecting the estate" contained in section 29 Land Registration Act 2002 is concerned with rights affecting the title itself and does not extend to personal claims against a purchaser based upon an economic tort. This is consistent with the fact that the Act is concerned with property interests only and is also consistent with the ratio in Esso Petroleum Co Ltd V Kingswood Motors and Midland Bank v Green (No 3).
294. Furthermore, it seems to me that in any event, such a conclusion does not lead to a situation contrary to the public policy behind the system of land registration. It would not lead to the need for additional enquiries in every case because the tort is based upon actual knowledge of the contractual rights having been broken.
295. I should add that I do not consider that there is an analogy with the line of cases concerning constructive trusts.

Was the alleged breach of the April Agreement the cause of Lictor's alleged loss?

296. Lastly, Mir contends that the alleged breaches of contract by Alphasteel are not the true and proximate cause of Lictor's alleged loss. It is a necessary element of the tort of inducing breach of contract that damage is suffered by Lictor as a result of the alleged breach of contract. Similarly, damage is a necessary element of a claim for conspiracy. In fact, Mir contends that the proximate cause of any loss suffered by Lictor was Lictor's own failure to protect its alleged interest in the HSM before annexation occurred or before the sale to Mir. Mir says that Lictor could have protected its alleged interest by entering a notice on the register and if it had done so at any time before title was registered in Mir's name, Mir would have taken subject to Lictor's alleged rights under the April Agreement.
297. Alternatively, it is said that Lictor could have applied for an injunction or other relief to prevent the HDA and/or the SPA from taking place but it took no such steps despite being represented by Fox Williams from 3^rd June 2008 onwards. As a result, Mir says that any alleged loss suffered by Lictor was not caused by a breach of the April Agreement by Alphasteel but instead by the installation of the Equipment/HSM at the Site and/or the registration of the Site in Mir's name at which point Mir took title to the Site and the Equipment unencumbered by any alleged contractual or equitable rights vested in Lictor, a state of affairs which Lictor could have but failed to prevent.
298. Mr Braithwaite says that Mir's case in causation is not legally, logically or chronologically coherent. He says that even if the failure to register a notice were another cause of loss, it would not rob the breach of contract of its causative effect: Heskell v. Continental Express Ltd. [1950] 1 All E.R. 1033, 1047 per Devlin J:

"Where the wrong is a tort, it is clearly settled that the wrongdoer cannot excuse himself by pointing to another cause. It is enough that the tort should be a cause and it is unnecessary to evaluate competing causes and ascertain which of them is dominant . . ."

299. He also points out that no attempt has been made to rely upon contributory negligence. Lastly, he says that the problem with Mir's case on causation is that it supposes that the cause of Lictor's loss was not Alphasteel's breach of contract procured by Mir, but Lictor's failure to anticipate Alphasteel's breach of contract. It seeks to make the more remote event the effective cause.
300. I agree with Mr Braithwaite. Although Lictor could have protected itself by registering a notice or even seeking an injunction, in my judgment, its failure to do so does not rob the breach of the April Agreement of its causative effect. At best there may be competing causes but as Devlin J pointed out the wrongdoer cannot excuse himself by pointing to another cause.

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