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
		07/02/2017

Mr Justice Nugee:

Introduction

1. This is the trial of an action in which the Claimant, Clydesdale Bank plc ("the Bank"), brings claims in relation to facilities that it provided to a number of companies run by Mr Novtej Dhillon, the 2^nd Defendant ("Mr Dhillon"), and through which he ran a disparate group of hotels, mostly in the South East but including one in Birmingham. Each of the companies is insolvent and the Bank is facing a large shortfall on the facilities that it granted. In this action it seeks to recover some of its losses from Mr Dhillon personally.
2. There were originally four defendants. The 1^st Defendant, Stoke Place Hotel Ltd ("SPHL"), was one of the companies involved and owned a hotel called Stoke Place, but it is in administration and the action has been stayed against it pursuant to the provisions of the Insolvency Act 1986. The 3^rd Defendant, Mrs Sarina Dhillon ("Mrs Dhillon"), was throughout the material time (that is from 2005 to 2012) married to Mr Dhillon, but is no longer married to him: she was granted a decree nisi in February 2013. The claims against her have been settled and she has played no part in the action. The 4^th Defendant, Mr Andrew Seavers, is a former employee of the Bank who was responsible for managing the relationship with Mr Dhillon's companies. He was a long-standing and well-respected employee but was responsible, as he has admitted, for granting substantial unauthorised facilities to the companies; when this came to light he was first suspended and then resigned; summary judgment has been given against him at an earlier stage in these proceedings, and he has now appeared as a witness for the Bank. The only claims that have been pursued in this trial are therefore those against Mr Dhillon.
3. The claims made by the Bank against Mr Dhillon can be divided into three:

(1) The Guarantee claims

The Bank sues him on two personal guarantees, one limited to the sum of £250,000 (plus interest and costs) and the other, a joint and several guarantee with Mrs Dhillon, to the sum of £850,000 (plus interest and costs). His defence to those claims is, very simply put, that the Bank agreed to release the guarantees and they are no longer enforceable.

(2) The Stoke Place claim

This claim relates to a transaction concerning SPHL. At the end of 2009 the Bank was persuaded to release its security over SPHL's assets, namely a debenture and a mortgage over the hotel. Mr Dhillon's solicitor, a Mr Bains, represented to the Bank that the release was required in order to enable Mr and Mrs Dhillon to sell 80% of their shareholding in the company to a purchaser, for a sum of £6.1m payable immediately and further sums of at least £900,000 in deferred consideration. The Bank agreed to the release on payment of the £6.1m and an assignment of the deferred consideration. In fact, although Mr Bains produced to the Bank's solicitors such documentation as a share sale agreement and a management agreement, no such sale took place. Instead, the transaction that did take place was a straightforward re-financing under which the company re-mortgaged the hotel to another lender, HSBC Bank plc ("HSBC"), for the sum of £9.2m. The Bank's claim against Mr Dhillon in relation to this transaction is primarily in deceit, alleging that Mr Dhillon was responsible for fraudulent misrepresentations made by Mr Bains. There is an alternative claim in conspiracy to injure by unlawful means. Mr Dhillon's defence is that although he was aware that there was a possibility of a share sale, that was always a fall back option to his preferred option of re-financing; and that any representations to the Bank that the transaction that in fact took place was the share sale rather than the re-financing were made by Mr Bains without his authority or instructions.

(3) The unauthorised facilities claim

The Bank makes claims in respect of the unauthorised facilities which Mr Seavers made available to the Dhillon companies. These started in 2008 with a relatively modest 'Treasury loan' in the sum of £650,000 odd, but by the time the unauthorised facilities came to light in 2012 they had grown to over £17m. The Bank's primary claim against Mr Dhillon in relation to the unauthorised facilities is that he was well aware that the facilities were unauthorised and that he was party to a conspiracy to injure the Bank by unlawful means. The Bank has alternative claims based on knowing receipt of the funds or unjust enrichment. Mr Dhillon's defence is that he did not know that the various facilities which Mr Seavers made available were unauthorised.

This is only a brief summary of the claims and defences which I will refer to in more detail below.

The Dhillon companies, and their hotels

4. Mr Dhillon ran his hotel business through a number of companies. In the period with which I am concerned there were five hotels; there was no corporate group as such, and each hotel was owned by a separate company of which he and Mrs Dhillon were the directors and, directly or indirectly, the sole (or in one case majority) shareholders.
5. The lead company was Dhillon Hotels Ltd ("DHL"). The history of this company dates back a good many years before 2005. It was formerly called Dhillon Property Developments Ltd, changing its name to Dhillon Hotels Ltd in 1997, and it was initially owned and run by Mr Dhillon and his sister Ms Anant Dhillon.
6. Its connection with the Bank dates back to at least 1990 as a register of charges shows that in June 1990 it granted a charge over a property in High Wycombe, Buckinghamshire to Yorkshire Bank plc (which, as appears below, later became subsumed into the Bank), followed by a debenture in October 1990, and a series of further charges between 1990 and 2004 on other properties, mostly in High Wycombe but including in 1997 a charge on a hotel called the King's Arms Hotel in Stokenchurch, Buckinghamshire. That hotel does not feature in the current claim as in 2005 Mr Dhillon and his sister decided to split the business and Ms Anant Dhillon took the King's Arms with her; but DHL did retain some of the other properties (later referred to as DHL's "non-core assets"). Its significant asset in the relevant period however was a hotel called Ye (or The) Olde Bell in Hurley, next to the River Thames in Berkshire. The main part of the building dates back to the 12^th century and was originally used to accommodate visitors to Hurley Priory, which enables it to claim to be the oldest hotel in England. DHL bought it in 2006 with the assistance of facilities from the Bank. In 2012 it was valued for the Bank by GVA who described it as a very well presented property with 48 bedrooms, which traded as a "country inn" and appealed predominantly to the affluent leisure market. GVA valued it at £5-6m.
7. DHL is the only one of the Dhillon companies which was not 100% owned by Mr and Mrs Dhillon. When Ms Anant Dhillon left the business in 2005, Mrs Dhillon (who had married Mr Dhillon in 2002) was appointed a director and a secretary (together with Mr Laurence Clark, who was Mr Dhillon's financial controller) of DHL. Ms Anant Dhillon however retained an interest in the company in the shape of 60,000 out of 240,000 issued shares. These were initially ordinary shares but later re-structured as deferred shares, leaving Mr Dhillon, who held the other 180,000 shares, as the sole holder of ordinary shares; in 2009 he gave 25% of them to his wife. Although retaining this interest in the company, Ms Anant Dhillon does not appear to have taken any further part in the running of the business or have had any involvement in the events with which this action is concerned.
8. The other four hotels were acquired between 2000 and 2007, in each case using a separate company. In date order they were as follows:

(1) SPHL

This company held Stoke Place in Stoke Green, near Stoke Poges, Buckinghamshire, which was acquired in 2000. The hotel was not, as the others were, valued for the Bank by GVA in 2012 as the Bank no longer had any security over it; but it was valued for the Bank by Savills in 2007. Savills described it as a 31 bedroom niche hotel to be operated in the high specification boutique market, comprising a converted Queen Anne mansion (although dating it, inconsistently, to 1690) set in parkland, and fitted out and finished to a very high standard; they valued it at £8.25m on completion of some proposed development works.

(2) Liongate Hotel Ltd ("Liongate")

This company held the Liongate Hotel in Hampton Court, which was acquired in 2001. When GVA valued it in 2012, they described it as having 32 bedrooms over two buildings, the main one dating to 1721; both buildings were said to be in a poor state of internal and external repair, and the standard of the bedrooms to vary throughout the hotel but in general being low and positioned in the 2/3 star market. They valued it at £1.5m to £2m.

(3) Crown Hotel (Amersham) Ltd ("Crown")

This company held the Crown Hotel in Amersham, Buckinghamshire, which was acquired in 2004. When GVA valued it in 2012, they described it as a series of historic buildings with some dating back to the late 16^th century and retaining many original features, with 38 bedrooms in all; the buildings were attractive and had been the subject of a high quality refurbishment; and, as with Ye Olde Bell, it traded as a country inn and appealed predominantly to the affluent leisure market. They valued it at £3-4m.

(4) Paragon Hotel (Birmingham) Ltd ("Paragon")

This company held the Paragon Hotel in Birmingham, which was acquired in 2007. The Paragon Hotel was rather different from the other four hotels, both because it was in Birmingham, and because it was much larger, and less upmarket (at any rate than Ye Olde Bell, Stoke Place and the Crown). It was not directly owned by the Dhillons but was owned by a holding company, Paragon Birmingham Ltd, which was in turn owned by Mr and Mrs Dhillon. When GVA valued it in 2012, they described it as built in 1903 to house migrant workers and an impressive example of Gothic architecture built in red brick with turreted corners; it had 212 usable rooms (not counting the 5^th floor which was unrefurbished and "basically derelict", although used for staff up until the administration), which presented reasonably well: they had been refurbished to a 2/3 star standard but were quite small with narrow windows and felt slightly oppressive. GVA valued it at £3-4m.

9. In each case the directors were, or in due course became, Mr and Mrs Dhillon; and from 2009, when Mr Dhillon gave his wife a 25% shareholding in each company, the shares were held by Mr and Mrs Dhillon in the proportions 75% to 25%. Mr Dhillon was however almost entirely responsible for the running of the business, taking all financial and strategic decisions, Mrs Dhillon being involved in such matters as the refurbishment, design, branding and marketing of the hotels.
10. With the exception of SPHL, all the companies banked with the Bank and continued to do so until they went into administration in September 2012. The Bank placed DHL, Liongate and Crown into administration on 20 September 2012; Mr and Mrs Dhillon resolved to place the two Paragon companies into administration on 21 September 2012, and the Bank appointed administrators on the same day. The administrators of all five companies were Mr Anthony Nygate and Ms Sarah Rayment, both members of BDO LLP. The total amount outstanding to the Bank at the date of administration was over £48m, being over £30m in respect of the authorised facilities and some £17.7m in respect of Mr Seavers' unauthorised lending. The administrators sold all the hotels and other assets, and the companies were put into liquidation in March 2015, Mr Nygate and Mrs Rayment being appointed the joint liquidators of each of the companies. The Bank has received various recoveries as a result of the disposal of the assets by the administrators, amounting to some £16m, and may receive a small further distribution, but there is a very substantial shortfall owing to the Bank, of about £32m. That comprises roughly half the authorised lending and the entirety of the unauthorised lending.
11. SPHL banked with the Bank until the end of 2009 when, as already mentioned, it re-financed with HSBC and switched its banking to HSBC. On 9 November 2015 two members of PricewaterhouseCoopers ("PwC") were appointed as joint administrators of SPHL; in December 2015 they disposed of the business and assets of Stoke Place for a sum not exceeding £4.25m, which left a substantial shortfall owing to HSBC.

The Bank

12. The Dhillon companies that banked with the Bank were referred to by the Bank as the "Dhillon connection". The connection dated back to at least 1990 when, as already mentioned, DHL (then called Dhillon Property Developments Ltd) granted a mortgage to Yorkshire Bank plc over a property in High Wycombe.
13. Yorkshire Bank plc and Clydesdale Bank plc each became part of the National Australia Bank Group in 1990. They remained separate legal entities until some time in 2004 when the assets and liabilities of Yorkshire Bank plc were transferred to Clydesdale Bank plc pursuant to a private Act called the National Australia Group Europe Act 2001. The name of Yorkshire Bank was however retained as a trading name for Clydesdale Bank plc, and due to the historical nature of the banking relationship the Dhillon companies' accounts remained on the Yorkshire Bank account system rather than the Clydesdale Bank account system, and the relevant documents generally use the name Yorkshire Bank.
14. The primary point of contact between the Bank and a customer connection was the relationship manager. Mr Seavers was the relationship manager (also referred to as a "Business Partner") for the Dhillon connection from about 1992 or 1993. In 2003 or 2004 he moved to the Bank's West End Financial Solutions Centre ("FSC"), in Piccadilly Circus, London. Junior to Mr Seavers in the FSC were a number of associates. I heard from two of them, Mr Tony Leo, who worked for him between January 2010 and January 2012, and Mr Gary Johnson, who worked for him between August 2011 and October 2012. Their role was to support the Business Partner by carrying out day to day tasks, such as drafting memoranda and submissions for credit, and handling banking transactions and queries from customers, so as to free up the Business Partner to concentrate on more substantive matters. Senior to Mr Seavers in the FSC was a Senior Partner to whom he reported, who at the material time was Mr James Spence; Mr Spence in turn reported to the Managing Partner of the FSC. From 2004 to February 2011 this was Mr Simon Gallie, who also gave evidence before me.
15. The Bank, as one would expect, had detailed arrangements specifying what authority was required for making a decision to lend to a customer. This was referred to as Delegated Credit Authority. Mr Seavers had a personal credit sanctioning limit of £3m of aggregate borrowings across any one connection. At all material times the facilities granted to the Dhillon companies were very much in excess of this, so Mr Seavers had no authority himself to grant credit to them.
16. The next level up in the credit structure of the Bank was what was referred to as Level 2 Credit; and above that was the Bank's Credit Committee UK ("the Credit Committee"), sometimes referred to as Central Credit). In the case of the Dhillon connection, the size of the lending was such that at all material times the granting of credit was subject to the oversight of the Credit Committee.
17. The procedure was for the Business Partner (in this case Mr Seavers) to draft a credit memorandum recommending a lending proposition, with supporting documentation, known as a business credit submission. That was then considered by the Level 2 Credit team, which consisted of a number of Credit Executives. I heard from one of them, Mr Alexander Gold, who at the relevant time was initially a Credit Executive, and then in 2011 promoted to Regional Head of Credit for London and the South, with responsibility for the Level 2 Credit team in the region. One of the Level 2 team would consider the business credit submission and raise any initial queries with the Business Partner; the Level 2 team would then add their analysis to his, the two being combined in a document called "Executive Summary/Report and Recommendation".
18. That joint document was then submitted to the Credit Committee. The membership of the Committee varied but would always consist of three senior Bank employees. The full procedure would involve the Committee meeting, or holding a telephone conference, and the credit proposition being presented to them by the Business Partner and a member of the Level 2 team. In some cases however, where the request was not sufficiently material to justify the full procedure (for example a short extension to an existing facility), a decision could be made by circulating the request, and the Committee's approval, by e-mail. Decisions of the Credit Committee had to be unanimous. I heard from one member of the Credit Committee, Mr Alan Duncan, a very long-standing and senior employee of the Bank, who had by 2005 become Head of Central Credit iFS, which meant he was head of Level 2 Credit in the Bank. As such he was at all material times a member of the Credit Committee and on occasions acted as its chairman.
19. Mr Gold, Mr Gallie and Mr Duncan were each asked about Mr Seavers' unauthorised lending and how it could have been allowed to happen. Mr Gold agreed that he was surprised at the extent of it, and said he was not aware of any other unauthorised lending at that scale; but he did not understand the detail of what Mr Seavers had done or how he had been able to get away with it for so long. Mr Gallie also agreed that he was absolutely shocked when he learnt the extent of Mr Seavers' actions, and that he was not aware of such a thing happening before or since at the Bank. He thought that Mr Seavers had done it by using his detailed knowledge which he'd built up over 35 years of the Bank's systems, and had disguised the unauthorised facilities by setting them up in a way that would be difficult to trace. Mr Duncan said that with the benefit of hindsight the Bank clearly did not have a watertight system, but because he did not know the detail could not comment on whether there was a glaring error or if it was very, very cleverly done. He accepted there was an organisational deficiency but he was not aware of any warnings which people turned a blind eye to, and thought that you could not blame individuals if they could not reasonably be expected to find it.
20. I infer from this evidence as a whole that Mr Seavers' unauthorised lending of over £17m, not a single penny of which has been recovered from the customer (a comparatively small part has been recovered from Mr Seavers himself), was on a completely unprecedented scale; and that it exposed a significant weakness in the Bank's checks and balances. The impression I gained was that the Bank's elaborate system of credit approval was designed to guard against the normal risks of lending by ensuring that applications for credit of a certain size were assessed by Level 2 Credit Executives and the Credit Committee. They were heavily dependent however in assessing those risks on what the relationship manager told them, and the systems do not appear to have been designed to guard against the quite different risk of the relationship manager himself abusing his position. It is not however necessary to reach any final conclusions about this; there is no dispute that Mr Seavers' lending was unauthorised, and precisely how he was able to do this without being detected is not directly relevant to the claims against Mr Dhillon. Mr Cutting, who appeared for Mr Dhillon, rightly accepted that contributory negligence (which had been pleaded at a stage when the Bank was pursuing a claim in negligence) was no defence to the claims relied on by the Bank at trial; he also, again in my view rightly, accepted that whatever the Bank's failings, they could not have broken the chain of causation.

The witnesses

21. The Bank called a number of witnesses. I have already referred to some of these: Messrs Leo, Johnson, Gold, Gallie and Duncan. I will refer to such of the others as are necessary below. With one exception, it is not necessary to say anything specific about the quality of their evidence: I am satisfied that they were all seeking to assist the Court to the best of their recollection.

Mr Seavers

22. The one witness for the Bank that I should say something specific about is Mr Seavers. He is something of an enigma. He joined the Bank in August 1977, so by June 2008 when he made his first unauthorised loan to the Dhillon companies, he had worked for the Bank for over 30 years, and had been a relationship manager, a senior and responsible position, since at least 1992 or 1993 when he first met Mr Dhillon, if not before. The Bank's witnesses who knew, or knew of, him referred to him in largely similar terms. Mr Leo, who worked for him as an associate for two years, said that he was very professional, a good supervisor and mentor, a very experienced banker who taught him a lot and whom at the time he considered to be an excellent role model; his approach to everything was well thought out and well conducted; he did not make rash decisions. Mr Johnson, who worked for him for over a year, said he was very well respected, a dominant personality but not a bully, a professional, traditional banker, and organised in his approach. Mr Gallie, who was Managing Partner of the FSC for over 6 years, said he was calm and considered, very well respected, a steady performer who consistently had good appraisals. His perception was that he taught his staff to do things properly; there was always a calm atmosphere around him and his associates. The feedback from the Credit team was generally good: he was seen at the time as a role model from a risk and control perspective. Mr Gold did not know him particularly well, but knew that his local reputation was that of an experienced and trusted Business Partner (although his credit submissions were not the most detailed and Level 2 had to provide more support than he would have expected). Mr Duncan, who had known of him since the 1990s, viewed him as one of the 'old guard', a steady career banker who could usually be called on to display sensible credit judgment.
23. The contrast between this perception of him as a safe pair of hands, and the reality that he single-handedly lost the Bank the astounding sum of over £17m by deliberately and repeatedly lending without the slightest authority to do so, in breach of his contract of employment, in breach of his fiduciary duties and in breach of the most basic principles of banking, and compounded matters by thereafter concealing what he had done, could not be greater. It is unsurprising in these circumstances that Mr Cutting submitted that he was a man on whose evidence no credibility could be placed whatever. He relied in particular on the following:

(1) Mr Seavers had made a witness statement in opposition to an application for summary judgment against him. In his witness statement for trial, he said that he no longer maintained a number of contentions in that statement, but, when asked to identify which of the statements in his earlier statement he no longer maintained, he could not do so. That, it was suggested, meant that his statement for trial was untrue. Mr Seavers explained the particular passage in his witness statement as having been insisted on by the Bank's lawyers, which Mr Cutting naturally submitted raised the question of what else had been.

(2) Mr Cutting put to him that his actions had been dishonest. Mr Seavers accepted, as he had in his witness statement, that he had acted in breach of his duties to the Bank, but was reluctant to accept the charge of dishonesty. He said that he was helping a business that had employees, which was returning an income for the Bank. He was anticipating the proceeds of sales of assets that would have cleared this in full, but pending that, it was necessary to keep the business going and pay the wages.

(3) Mr Cutting put to him that he had taken steps to conceal the unauthorised lending from the Bank. He accepted this, and that he had for example failed to disclose the unauthorised lending in credit submissions. He also accepted that he rolled up the (unauthorised) Treasury loans into a new (unauthorised) facility called the Property Development Facility ("the PDF") as a means of continuing to conceal his actions. If he had not done this, they might have come to light.

(4) Finally, Mr Cutting put to him that he was gambling at the casino table, as it were, with the Bank's money in the hope that by buying more chips he would eventually win – that is that the sale of assets would enable everything to come right without his dishonest actions being discovered – or in other words that he was gambling with the Bank's money to save his own skin. Mr Seavers accepted that this was one way of putting it.

24. I do not place any particular weight on the first of these points. Although a witness statement should be in a witness's own words, it is a fact that they are often drafted for witnesses and it would be foolish to pretend otherwise. I can well understand why the Bank's lawyers wished Mr Seavers to make some such statement: one of the things he had said in his witness statement opposing summary judgment was that he had not been involved in any concealment, which was at odds with his witness statement for trial where he admitted at times concealing the existence and nature of the lending. I do not regard this particular point as assisting one way or another in assessing Mr Seavers' general credibility.
25. I have no hesitation however in accepting that Mr Seavers' actions were dishonest. The money which he lent to the Dhillon companies was not his but the Bank's. The loan of money always involves a risk that it will not be repaid, and he had no right to take that risk with the Bank's money. He knew perfectly well that he had no authority to lend it, and hence no right to take that risk. That by itself seems to me well within the ordinary understanding of what it is to act dishonestly, quite apart from his repeated concealment of his actions in not referring to the unauthorised facilities in credit submissions, and taking active steps to continue that concealment by rolling the unauthorised loans over, and then into the PDF. The fact that he hoped and expected that the Dhillon companies would by one means or another be able to repay the unauthorised lending, and thought that in doing so he was helping to preserve a viable business and the jobs of its employees, are in this context neither here nor there.
26. It is very difficult to understand how an experienced and well-respected banker could ever have got himself into this position. The closest Mr Seavers came to giving an explanation was that he was not in his normal, right-thinking mind because he was under stress; and that in the early stages, he thought the aberration (as he called it) would simply be corrected and they could all carry on with proper sanctioned facilities. That suggests that matters then got out of hand and he could not see a way out. That chimes with something he said when matters came to light and he was interviewed by Mr Gallie on 4 July 2012, where, after admitting the unauthorised lending and describing it as irrational, he described himself as "in a spiral that you can't see your way out of".
27. In the light of what I have said about his conduct, which inevitably involved not just keeping quiet about what he had done but telling lies about it in credit submissions, I have naturally approached his evidence with the utmost caution. But I have also had the advantage of seeing him being cross-examined at some length in the witness box. Rather against my expectations, I found him a measured and careful witness, who gave every appearance of trying to assist the Court with the best of his recollection. His explanations of the contemporary documents were usually sensible and believable – I give some examples below. He undoubtedly found it difficult to explain how he had come to throw away his career, and a great deal of the Bank's money, in the way he had, but when it came to what had happened – his evidence as to what he and others had said and done – I found his accounts straightforward, coherent and credible.
28. In his interview with Mr Gallie, he said two other things, neither of which has been shown to be untrue. First, that this was a one-off: when Mr Gallie asked him if there were any other facts that should come out, he replied that there was nothing else, either on Dhillons or anything else. There is no evidence contradicting that. I accept therefore that this appears to have been an isolated episode – albeit an extended, very serious and career-destroying one – in an otherwise respectable career. Second, he said that he had not profited personally from it – he had not taken a penny. Again there is no evidence contradicting that – the Bank has devoted considerable resources to tracing what happened to the money lent to the Dhillon companies but there is no suggestion that any of it found its way to Mr Seavers, and no other evidence of his having benefited financially. In his witness statement he disclosed that he had in fact had some minor personal benefits from his connection with Mr Dhillon: Mr Dhillon used to invite him to Stamford Bridge as his guest to watch Chelsea, and occasionally invited him to make use of his corporate hospitality package there when he was unable to attend; and in 2007 when Mr and Mrs Seavers celebrated their silver wedding anniversary at Stoke Place, they were not charged for the room or the food. But these are minor matters that cannot realistically be taken as any sort of reward for disloyalty – the silver wedding indeed was some time before the unauthorised lending started.
29. Nor is there any suggestion that Mr Seavers has agreed to give evidence for the Bank in return for being let off his liability. On the contrary, having obtained summary judgment against Mr Seavers on 30 January 2015 for over £17m, the Bank has proceeded to enforce the judgment, and has received various sums from the execution of a writ of control, from the sale of Mr Seavers' property and from Mr Seavers' pension, the entirety of which has been forfeited. The total recovered is in excess of £1.25m.
30. Taking account of everything, including in particular the impression which I formed of him giving oral evidence, and despite the obvious suspicion which his dishonest actions inevitably cast over his credibility, I have come to the firm conclusion that his evidence is in general evidence that I can and should accept, although I will naturally test it in any particular instance against the contemporaneous documents and inherent probability.

Mr Dhillon

31. Mr Dhillon did not call any witnesses except himself. I had the advantage of seeing him too being cross-examined at length, in his case over more than 3 days. He did not make a good witness. I am satisfied that many of his purported explanations were untrue, and that he lied repeatedly both to the Bank at the time and to the Court in this action. I have come to the conclusion that his evidence was wholly unreliable and that I am unable to place any weight on it at all, save where supported by contemporary documents or other evidence, or where it is inherently probable.
32. I do not consider it necessary to set out in exhaustive detail all the matters which have led me to this view of Mr Dhillon's evidence; I give some examples below when considering the individual claims, and I will refer to two other specific matters here.
33. Before doing do I should record that Mr Dhillon, on advice, invoked the privilege against self-incrimination and declined to answer certain questions. There was no dispute between the parties as to the law in relation to this, and the following was common ground:

(1) A person called as a witness in civil proceedings in general has a right to refuse to answer any question if to do so would tend to expose him to proceedings for a criminal offence. This is a common law privilege, although statutorily recognised by s. 14 of the Civil Evidence Act 1968.

(2) There is an exception in the Fraud Act 2006, s. 13(1) of which provides that a person is not to be excused from answering any question put to him in proceedings relating to property on the ground that doing so might incriminate him of an offence under that Act or a related offence. The corollary is that under s. 13(2) his answers are not admissible in proceedings for any such offence.

(3) These proceedings are "proceedings relating to property" as defined in s. 13(3) (which includes proceedings for the recovery of money), so that s. 13(1) is potentially applicable.

(4) Some of the areas of questioning of Mr Dhillon undoubtedly raised the question whether he had committed offences which were either offences under the Fraud Act 2006, such as the offence of fraud by false representation (s. 2), or related offences (which by s. 13(4)(a) includes conspiracy to defraud). In relation to such areas of questioning the effect of s. 13(1) was that Mr Dhillon could not rely on the privilege against self-incrimination.

(5) However other areas of questioning raised the question whether he had committed offences which were neither offences under the Fraud Act 2006 nor related offences. I was not told specifically what such offences might be, but possible examples mentioned in argument were offences under the Companies Act 2006. (I also raised the possibility of false accounting, but this is in fact an offence under the Theft Act 1968, and s. 31 of that Act contains a provision similar to s. 13 of the Fraud Act 2006).

(6) In relation to such areas of questioning, Mr Dhillon was entitled to rely on the privilege against self-incrimination.

34. In these circumstances Mr Dhillon invoked the privilege and, on the advice of Mr Cutting, declined to answer a series of questions put to him by Mr Wilson, who appeared for the Bank. Mr Wilson accepted that no adverse inference should be drawn against Mr Dhillon from the fact that he invoked the privilege. I did not hear any argument on the point but that seems to me to be right: a non-answer is not evidence of anything, and to draw an adverse inference might tend to undermine the privilege. On the other hand, the result of his invoking the privilege is that I have no evidence from him on these questions. That means that I have nothing to set against the inferences to be drawn from such other evidence as there is. In short, I proceed on the basis that Mr Dhillon is entitled to refuse to give any explanation in answer to the various questions asked, and that that is not to be held against him; but that if he chooses to do this, the result of his declining to answer is inevitably that I have no explanation from him in relation to such matters.
35. I said that there were two specific matters which I would refer to here. The first concerns repeated statements made to the Bank that Mr Dhillon was in the process of selling valuable land in India. Mr Dhillon was born in the UK but his father was born in India, and he told PwC, who prepared a report to go to HMRC for him in January 2010 in relation to his tax affairs, that he had a family property in India which he visited frequently. He said in oral evidence however that this was held between the family (his father's brothers and so on) and was not a big land holding, and in answer to the question "Did you have any land in India", he simply said "No".
36. The relevance of this is that on 23 May 2008 Mr Ranbir Singh (or Rana) Bains, a solicitor who acted for Mr Dhillon and the Dhillon companies and practised under the style Bains & Co (at that date, according at any rate to his letterhead, with one other partner), wrote to Mr Seavers. The context was that in February 2008 Mr Seavers had been told that Mr Dhillon was looking to move house, and Mr Bains' letter was part of an attempt to persuade the Bank to make a loan to Mr Dhillon in connection with the purchase of the new house. In it he confirmed, following a telephone conversation of the previous day, that Mr Dhillon was arranging to sell some land in India, that he expected to receive the equivalent of £7.5m on completion, that contracts had been exchanged, that Mr Dhillon had already received a 15% deposit, that Mr Dhillon confirmed that he was the sole proprietor of the land and all the monies would therefore belong to him, and that Mr Dhillon would arrange for his lawyers to let Mr Bains have an undertaking that on completion they would send all the monies to him.
37. On the basis of Mr Dhillon's denial in oral evidence that he had had any land in India, every single one of those statements in Mr Bains' letter was flatly untrue: Mr Dhillon was not arranging to sell land in India, had not exchanged contracts and did not expect to receive the equivalent of £7.5m. If Mr Dhillon is right that he had no land in India, there are logically only three possibilities. Either Mr Bains believed what he was telling Mr Seavers, in which case Mr Dhillon must have told Mr Bains a series of lies; or Mr Bains knew perfectly well that what he was telling Mr Seavers was untrue, in which case he was either doing that in agreement with Mr Dhillon, or without Mr Dhillon knowing anything about it. Only the last of these of course would exonerate Mr Dhillon from being implicated.
38. On the face of it, it seems unlikely that a solicitor would be willing to lie for a client even if asked to, and even more unlikely that he would lie for a client of his own accord without being asked to; but, as I explain below, Mr Bains undoubtedly told a whole series of lies to the Bank in connection with the Stoke Place transaction, and he has subsequently been struck off for further dishonesty in relation to unrelated matters, so I cannot assume that he acted as one would normally expect a solicitor to, and I am certainly willing to assume that he was telling deliberate lies on this occasion too. But this still does not explain why he would do so on behalf of Mr Dhillon if Mr Dhillon had not asked him to. Mr Dhillon was unable to suggest any reason other than that Mr Bains probably did whatever needed to be said to help the transaction.
39. That in itself seems fairly unlikely, but it is made much more unlikely by a series of e-mails from Mr Bains to Mr Seavers over the next few weeks. On 2 June 2008, Mr Bains told Mr Seavers that he had enquired of Mr Dhillon and the land in India had been sold to DLF, one of India's largest housebuilders. On 5 June 2008 he sent Mr Seavers an e-mail attaching a draft of an undertaking to be provided by his firm, titled "Re: Novtej Singh Dhillon – Sale of land in India". On the same day he sent an e-mail in which he said that Mr Dhillon had confirmed that he would put approximately £500,000 towards the new purchase from the deposit monies he had received for the land in India, which he had lent to someone else and which it would take him 4-6 weeks to get back. On 12 June 2008 he sent another e-mail repeating that Mr Dhillon's money from India that he received as part of the deposit for the sale of land should arrive within 4-6 weeks, and also referring to an undertaking to send the funds from the sale of the land in India within 9 months. Each of these e-mails was copied to Mr Dhillon. If Mr Bains was really making up the whole story without Mr Dhillon knowing anything about it, it seems extraordinary that he should do that, and thereby risk Mr Dhillon telling Mr Seavers that it was all untrue and so exposing Mr Bains as fundamentally dishonest, unless he knew that Mr Dhillon would not object if he found out.
40. In fact I think that by far the most likely explanation for Mr Bains copying the e-mails to Mr Dhillon is that Mr Dhillon already knew what Mr Bains was saying to the Bank and was fully in agreement that he should do so. On the basis that Mr Dhillon never had any such land, it follows that Mr Dhillon was quite content for Mr Bains as his solicitor to tell a series of lies to the Bank in order to induce them to make a loan to him.
41. There is further evidence in this connection which I found particularly telling as to Mr Dhillon's attitude to the truth. He was asked what he would have done had he found out that Mr Bains was telling lies to the Bank on his behalf. His answers are revealing:

"Q. Listen to my question. Imagine you knew at this time in 2008 that Mr Bains is telling Mr Seavers that you had land in India which you're selling and you are about to get money out of that. What would you do? Would you tell Mr Bains to correct that?

A. I don't know, I can't -- I wouldn't know. I can't remember actually what I would say.

Q. Just hypothetically, would you wish to correct Mr Bains' false statement?

A. I might not say anything.

Q. Why?

A. I might not -- I might not. I'm not sure. Because I know there's no land, so what's the point? There's nothing --

Q. I'm sorry, if you know your solicitors are lying to Mr Seavers about land in India, why would you not take steps to correct that?

A. The reason is I don't really see that as any valid point to me, right yes. I'm not expecting any money from India so it's a nonstarter as far as I'm concerned.

…

Q. Well, you're getting an email here, this would be an email that pops into your inbox with the subject "NS Dhillon", right, you. And the first line mentions land in the Punjab in India. Wouldn't you say "Hang on a minute, what's that all about"?

A. Look, as far as I'm concerned, right, there's no land in India. I didn't have any land –

Q. Exactly, that's my point, Mr Dhillon. Wouldn't that have immediately alerted you to the fact that something very wrong is being said by Mr Bains here?

A. You know what, I can't recall this fully, right, the conversation, right yes. Maybe I might have said to Rana, you know: what the hell -- what's this all about? And he would probably have said: don't worry about it. He might have reassured me it's nothing to worry about. He could have said: look, nothing is going to happen, it's just to keep -- so you could get your transactions sorted out. He might have just told me that story.

…

Q. My question is if you see this you wouldn't -- you're saying that if you'd seen this you would still have been reassured simply by Mr Bains saying "Don't worry about it". Is that your evidence?

A. To be honest, Rana is an experienced guy, he's advising me -- I was just taking it at face value from him in saying: look, don't worry about it --

Q. So you would have taken that as a perfectly acceptable explanation?

A. Look, I didn't probably -- the detail of the email I wouldn't have read. If there was discussions going on between them, fine, there was discussions, fine. I wouldn't have paid any more attention than that, right yes. Because the real reason is, look, Rana had -- it looks like has spun a story here, that's it. He's a bit of an entrepreneur, maybe he tells porky pies, maybe he's something like this, but he's done it in a way where I go: fine.

Q. He obviously doesn't have any concern about keeping you in the loop because he's copying you in on this email. Why is he copying you in on this email if he was telling a lie which you would immediately see as being a complete lie on your case?

A. Look, at the time I might have mentioned it to him and said to him: what's going on here? And he probably said: don't worry about it, there's nothing."

In other words, Mr Dhillon accepts that he might have spoken to Mr Bains, in which case Mr Bains would probably have reassured him that it was nothing to worry about, that it was just to get his transaction sorted out, and Mr Dhillon would have been content with that. That is in itself an admission that he would have been quite happy to allow his solicitor to lie to the Bank to obtain facilities from them, and speaks volumes as to his regard for the truth.

42. In fact it does not stop there. About a year later, on 29 May 2009, Mr Bains sent an e-mail to Mr Dhillon. After referring to another matter Mr Bains referred to the completion of "the sale to DLF"; he said the dispute had been settled, and that it might take "a further one or two weeks (India timing)" to finalise the form of order; Mr Dhillon could expect to receive his monies towards the end of July or early August; and that although he would receive some interest, this would be swallowed up by legal costs, adding "Just hope the current riots don't cause any complications – I spoke to two people there this morning and they say calm has been restored generally and there is no need for any concern."
43. This e-mail plainly concerns a sale to DLF taking place in India under which Mr Dhillon was the vendor (or at least had an interest in the purchase monies) and completion of which was due to take place late due to a dispute which had recently been settled. The significant point is that the e-mail was not copied to anyone else. It is not possible to think of any rational explanation why Mr Bains should have written such an e-mail to Mr Dhillon if they both knew that there was no land in India being sold at all. Mr Dhillon was asked about it but simply repeated that he did not have any land in India and had no idea what Mr Bains was going on about. I found this explanation wholly unconvincing. It looks very much as if Mr Dhillon did have land which he sold in India after all, in which case he repeatedly lied to the Court. But whatever the position, I am satisfied that Mr Dhillon has not told the Court the whole truth.
44. The second specific matter to which reference should be made here concerns financial information in relation to the Dhillon companies which was provided to Mr Seavers. Mr Clark, who I have already mentioned as secretary, along with Mrs Dhillon, of DHL (and in fact of the other companies) had the title of Group Financial Controller from 1999 to 2008, and then from 2008 Group Financial Director, although he was never a director of any of the companies. His role was to collate and report financial information for provision to Mr Dhillon, and to others, including to the Bank; and he often sent financial information to Mr Seavers. There are a number of e-mails from him to Mr Dhillon concerning such information, the natural inference from which is that Mr Clark, at Mr Dhillon's direction or with his knowledge and approval, was deliberately sending Mr Seavers false figures.
45. These e-mails were put to Mr Dhillon in cross-examination, but he declined to answer any questions on them in reliance on the privilege against self-incrimination, so I do not have any explanation from him. They are as follows:

(1) The earliest is dated 30 January 2008. Mr Clark sent an e-mail to Mr Dhillon, the subject being "Aged Debts listings", which attached a listing of aged debts. He said:

"Attached amended listing to be sent to Andrew. I obviously won't be sending Andrew the earlier sheets which are based upon the actual figures.

Note that the amended figures are slightly below those sent to him on 25/1, which would be reasonable given the receipts this week. I have mainly amended the agency balances in the 60 and 90 day periods and kept the 120 day relatively low."

The natural inferences from this e-mail are that "Andrew" was a reference to Mr Seavers (Mr Dhillon accepted in another context that a reference in an e-mail to "Andrew" was to Mr Seavers, and there is no evidence of any other plausible contender); that Mr Clark was proposing to send him a list of aged debts which were different from the actual aged debts and which he had deliberately falsified to show what he wanted to show; and that Mr Clark knew that this was something that he could freely disclose to Mr Dhillon, and which had either been done at his request, or at least would meet with his approval.

(2) On 20 October 2011 Mr Clark sent an e-mail to Mr Dhillon, the subject being "Cashflow". He attached two versions of the anticipated cashflow for each week from the current week (ended 21 October 2011) to the week ended 30 December 2011, one marked "Actual" and the other marked "Andrew". The latter has different figures from the former for cash inflow each week, and for some other figures (for creditors and taxation/VAT/PAYE), the net effect being to change the amount of weekly overdraft requirements. The natural inference is that Mr Clark, to Mr Dhillon's knowledge, was proposing to send to Mr Seavers figures for anticipated cashflow that were different from the actual anticipated cashflow.

(3) On 3 August 2012 Mr Clark sent Mr Dhillon an e-mail whose subject was "Andrew figures June". This e-mail attached spreadsheets, and Mr Clark said:

"I will talk through on Monday morning but in essence I have done the same as last month ie reduced Turnover for CR, Li, P and put costs across the board in Tax and Capex."

Mr Dhillon replied:

"Laurence create me spread sheet with actuals and Andrew don't send until I approve."

The natural inferences are that Mr Clark had falsified the figures that he was going to send to Mr Seavers; that he expected to explain quite what he had done to Mr Dhillon; that Mr Dhillon understood that the figures to be sent to Mr Seavers were not the actual figures; and that Mr Dhillon wished to approve the false figures before they were sent to Mr Seavers.

(4) On 6 August 2012 Mr Clark sent Mr Dhillon an e-mail with the subject "Weekly Cashflow update". He said:

"Updated Income as attached – Original figures reduced by 20%"

Mr Dhillon replied:

"It can't go up this much we will have to be careful"

It appears from this that Mr Clark had amended the income shown in the weekly cashflow figures. By itself this could have an entirely innocent explanation, as the cashflow figures were no doubt anticipated future cashflow and there are legitimate reasons why a business might revise its forecasts. But the natural inference from Mr Dhillon's response is that he thought the amended figures unrealistic, and that they might cause Mr Seavers to become suspicious and uncover the fact that the figures were not genuine.

(5) On 9 August 2012 Mr Clark sent Mr Dhillon an e-mail with the subject "Cashflow 9-8-12". He said:

"I attach Cashflow up to end of August which I think is fairly realistic… This version is for your info and I will amend it for the bank's version…

Although I have separated out the Capital/Building costs these only amount to £74k and I assume that you will want to inflate this figure for the bank's version."

The natural inferences are that Mr Clark was intending to produce a cashflow for Mr Seavers which differed from his genuine estimate of cashflow; that he expected Mr Dhillon to wish him to do this; and in particular that the Bank's version of the cashflow would contain inflated figures for capital expenditure.

46. These e-mails speak for themselves. I am entirely satisfied on the basis of them that Mr Clark was routinely and repeatedly producing deliberately false figures to Mr Seavers; that Mr Dhillon was fully aware of this; that at the very least he was content to allow Mr Clark to do this; and that at any rate in some cases (and I suspect in many more than can be clearly shown) he was actively involved in approving or directing the false figures to be used.
47. There is other evidence which all points in the same direction; in particular I was taken to evidence which on its face appears to show that the statutory accounts of the companies, which were signed off by Mr Dhillon, were routinely and grossly falsified so as, among other things, to give the appearance, contrary to the facts, that the companies had complied with the financial covenants contained in the Bank's facilities. It is not necessary to go into the detail. I am satisfied on the basis of the evidence I have already set out, and the other evidence before me, that Mr Dhillon has lied again and again and indeed is a man who regards truth as a merely optional extra when doing business. I see no reason to think that he has any more regard for it when giving evidence, and there was nothing in his performance in the witness box which persuaded me otherwise. As already said, I have concluded that I cannot place any weight on his evidence at all.
48. With that introduction, I can turn to the particular claims brought by the Bank.

The Guarantee claims

49. The Bank relies on two Guarantees, which I will refer to as "the 2005 Guarantee" and "the 2006 Guarantee". It is admitted in Mr Dhillon's Defence that he did duly enter into each Guarantee.
50. The 2005 Guarantee came about as follows. On 3 March 2005 Mr Seavers completed a business credit submission seeking authority for increased facilities for the Dhillon companies. The increase sought was from an existing exposure of some £13.6m to a new figure of some £15.3m. Among the proposed security for the lending was a proposal that Mr Dhillon give new security in the form of a £250,000 Guarantee. A memo from Mr Seavers dated 7 March 2005 indicates that Mr Seavers had discussed this with Mr Dhillon, and that Mr Dhillon fully understood the likelihood and effect of the Bank enforcing the Guarantee; and on 8 March 2005 Mr Dhillon signed a form confirming that he did not wish to obtain independent legal advice. The Guarantee form was sent to Mr Seavers at the FSC, and on 11 March 2005 Mr Dhillon signed it there, witnessed by Mr Seavers and one of his associates, Mr Scott Sutherland. On the same day Mr Seavers issued DHL with a new facility letter, together with an offer letter describing the particular facility as a floating rate loan facility in the amount of £410,000 for a term of 14.8 years; the facility letter specified that one of the conditions precedent was a £250,000 Guarantee by Mr Dhillon.
51. The Guarantee is in the Bank's standard form. It names Mr Dhillon as guarantor, and he enters into the Guarantee in return for the Bank (described as "Clydesdale Bank PLC trading as Yorkshire Bank") making facilities available to DHL. The Guarantee contains a limit in Box C in the following terms:

"In no circumstances will the liability to us under this Guarantee exceed £250000 (two hundred and fifty thousand pounds sterling) plus interest and the other sums referred to in paragraphs 3.1."

Clause 2.1 provides:

"You unconditionally and irrevocably guarantee to us that the Customer Obligations will be paid or satisfied in accordance with the terms applicable to them".

The Customer Obligations are defined in clause 1.1 as:

"any sum of money or any liability which the Customer may now or at any time in the future owe to us…"

The Customer is the person or persons identified in Box B, namely DHL; and clause 3.1 provides a limit on liability as follows:

"3.1 In no circumstances will your liability to us under this Guarantee exceed the total of:

3.1.1 the figure appearing in Box C; and

3.1.2 Interest on the Customer Obligations up to the figure appearing in Box C from the earlier of the time you receive a demand from us under this Guarantee or establish the principal amount of your liability in accordance with paragraph 3.2 until you have paid us in full what you owe under this Guarantee; and

3.1.3 Costs and Interest on Costs".

Interest is defined in clause 1.1 as:

"interest at the applicable rate or rates we agree with the Customer from time to time in respect of any sum of money or liability … computed and compounded as agreed between us and the Customer, or, if there is no agreement, in accordance with our current practice from time to time."

Mr Dhillon also signed a certificate on the same date acknowledging receipt of a copy of the Guarantee.

52. The 2006 Guarantee came about as follows. On 10 January 2006 Mr Seavers wrote to the directors of DHL requiring as a condition of banking facilities that a guarantee in the sum of £850,000 be provided, to be supported by a second legal charge over a freehold property known as 4 Earls Terrace in Kensington, London. 4 Earls Terrace had been acquired by Mr and Mrs Dhillon in August 2004 and was their family home. Since the Bank required a charge over the property it also required the guarantee to be executed by both Mr and Mrs Dhillon. On 12 January 2006 Mr Seavers completed an internal form asking a department called Business Lending Services ("BLS") to issue security documentation; this was supported by an analysis of securities which identified an £850,000 guarantee, supported by a second legal charge over 4 Earls Terrace, as a new security. Mr and Mrs Dhillon signed forms appointing Mr Bains to act for them, and on 17 January 2006 BLS sent Mr Bains instructions in relation to the obtaining of a second legal mortgage, and on 18 January 2006 instructions in relation to obtaining the guarantee. Mr Bains acknowledged both instructions on 19 January 2006. On 18 January 2006 BLS also sent directly to Mr and Mrs Dhillon letters confirming that the guarantee was limited to £850,000.
53. Mr and Mrs Dhillon signed the Guarantee, witnessed by Mr Bains. They also each signed three other documents, namely a copy of the letter of 18 January 2006 acknowledging the £850,000 limit, a certificate that before signing the Guarantee he or she had had advice, and a separate document confirming again that he or she had had advice, the latter two documents also being signed by Mr Bains to confirm that he had explained them. The Guarantee and each of the other documents is dated 1 February 2006; there is no evidence beyond this as to when they were actually signed.
54. The 2006 Guarantee is in the same form as the 2005 Guarantee save that the guarantors named in Box A are both Mr and Mrs Dhillon, and the Guarantee Limit is £850,000, again with interest and costs and interest on costs. The Customer is again DHL. Clause 1.6.3 provides that where two or more persons are identified in Box A:

"your liability to us is both joint and several which means that we can enforce against any or all of you for any sum. However this is subject to the overall Guarantee Limit."

Clause 6.2 provides:

"This Guarantee is independent of and additional to any other security, guarantee or similar obligation of which we may have the benefit at any time in relation to the Customer Obligations."

That makes it clear (as is admitted in Mr Dhillon's Defence) that the 2006 Guarantee was not a replacement of the 2005 Guarantee but an additional security.

55. On 2 February 2006 Mr Seavers completed a credit submission in relation to DHL. The relevant parts of the submission are as follows.

(1) The submission sought approval for the annual renewal of facilities for the group together with some new facilities, in particular a new term loan to enable DHL to buy Ye Olde Bell at Hurley, and new facilities for Liongate, SPHL and Crown for refurbishments at each of their hotels.

(2) The overall total of facilities for the group as a whole would be just over £24m. Taking account of existing securities held by the Bank that produced an initial loan to value ratio ("LTV") of 74%. Mr Seavers noted that:

"The non core assets which consist of several residential properties and land in High Wycombe have agreed to be disposed of in the next 3 years. Clearly the disposals are key to regaining a level of comfort as far as security values are concerned.

The table below illustrates our level of exposure during the next 5 years firstly without asset disposals, then with a revaluation of Stoke Place as Savills suggest at £7.25m then with non core assets being realised over three years and finally a combination of Stoke Place being revalued and the asset sales…

The final column shows the period within which we achieve 70% LTV cover."

The table showed that LTV would be achieved in an estimated 46 months with no asset disposals, 38 months taking account of the revaluation of Stoke Place, 30 months taking account of asset sales alone, and 23 months taking account of both the Stoke Place revaluation and asset sales.

(3) Under "4. Key Credit Risks & Mitigants" Mr Seavers suggested a covenant as follows:

"Initial LTV 74% to be managed down to 70% within 3 years from asset sales as per table above."

(4) Under "6. Summary" he said, among other things:

"Initial LTV higher than we prefer but asset disposal programme and enhanced values would see this corrected within an acceptable timeframe."

(5) The final section of the report, headed "8. Business Credit (Europe) Comments / Recommendation" was completed by two Level 2 Credit Executives, Mr Hamish Boag and Mr Colin Rutherford. Under "Management" it included the following:

"The management structure has recently changed with co director (sister) having left the business with one of the hotels. Subsequent to this we have seen a major cost overrun on Stoke Place (estimated at >£629k). This was not advised until we had very limited options with funding approved only after referral to SBS and on the basis of; Segment B maintained at all times, updated valuation, PG to be supported by second charge over house, with PV to be updated."

The reference to PG is evidently to a personal guarantee.

(6) Under "Market Risk" the comments included:

"We believe that PRM input on the hotels, the non-core assets and the disposal strategy are required, but essentially believe that the mutual 3 year period proposed is too long and would seek a plan which sees the bulk of the assets sold within a 12 month period."

(7) Under "Security Position" the comments included:

"Opening LTV is 74% and may rise dependant on the value created by use of UCRE…

Non core property assets (BV £3,066,000) to be disposed of to reduce borrowing. This is a very open ended arrangement with no real strategy as detailed above.

We have previously been offered a supported guarantee of £850k (nil BV attaching) and would wish this and the supporting Guarantee to remain a firm requirement until all non core assets sold."

The reference to BV is to Bank Value. It is apparent from the submission that it was calculated at precisely 70% of the market value of the non core assets, which was given as £4,380,000.

(8) The recommendation by the Level 2 Executives was to support a heavily conditioned approval as outlined in the submission plus:

"Asset disposal programme timing to be reviewed with a view to completion within 12 months…

Increased Guarantee for £850k plus supporting security to remain in place until the asset disposal programme is successfully completed and the Bank is satisfied that the group is trading in line with projections…

Full satisfaction with all of the above is a prerequisite to our continuing support and unless we can be fully satisfied with all of these we believe we will be unable to progress."

56. That submission was made to the Credit Committee and was considered by the Committee at a meeting on 3 February 2006. The Committee's decision was to grant conditional approval on amended terms. The terms listed included as conditions precedent:

"Asset disposal programme timing to be reviewed with a firm timetable proposed for each asset sale (this should not exceed 2 years). This will be Covenanted and failure to adhere to the plan as set out will result in a Breach of Covenant.

Increased Guarantee for £850k plus supporting security to remain in place until the asset disposal programme is successfully completed and the Bank is satisfied that the Group is trading in line with projections."

Under "Covenants" the approval provided that one of the covenants should be:

"All non-core assets to be sold in accordance with agreed plan and, in any case, within 2 years from the date of this Credit Decision."

57. That decision was communicated to Mr Seavers. It was in due course confirmed in a written memo but even before then he sent an email to Mr Dhillon on the evening of 3 February 2006 in which he said:

"I am still awaiting the written confirmation from the Committee but can confirm that we have today obtained approval for the following…"

He then set out the various facilities which had been approved and said that the funds would be available on satisfaction of various conditions which would be outlined in the offer letter but containing among other things:

"The non core asset disposal programme to be agreed by the Bank and have some specific parameters around when the assets will be sold and understanding that the proceeds will be used in full in permanent debt reduction.

Retention of the increased guarantee and legal second charge until such time as the level of exposure is reduced to 70% loan to value from non core asset disposals and trading in line with projections. In this respect we still await the valuation on 4 Earls Terrace."

Mr Seavers also mentioned that because the total exposure had moved beyond 70% LTV there would be an increased pricing to reflect the increased risk but continued:

"The margin will be reduced to 1.25% to match the existing debt once asset sales have reduced our exposure to a level of 70% loan to value and bank satisfaction with valuations."

58. On 20 February 2006 Mr Bains sent a certificate of title to BLS. This confirmed that the Bank's legal mortgage had been signed by Mr and Mrs Dhillon on 9 February 2006, but no copy of the signed version has been put in evidence. The certificate of title was in the form required by Rule 6(3) of the Solicitors' Practice Rules 1990, and hence incorporated by reference a certificate that Bains & Co would within the period of priority complete the mortgage and register it at HM Land Registry, but it came to light much later that Bains & Co never registered the mortgage. The Bank, however, appears to have assumed that the mortgage had been duly registered and that it had a valid security over 4 Earls Terrace, which is not perhaps surprising in the light of the terms of Bains & Co's certificate. On 23 February 2006 Mr Bains sent BLS the original of the 2006 Guarantee signed by Mr and Mrs Dhillon. On 24 February 2006 BLS confirmed to Mr Seavers that all security for the new facility was in order and that he could make the funds available to the customer.
59. On 1 March 2006 Mr Seavers sent a memo to Central Credit in which, among other things, he said:

"The non-core asset disposal programme has been revisited and Mr Dhillon has agreed to the following which will be incorporated in the facility letter as a covenant.

Sale of Davinia Court by 30/09/06

Sales of 61/63 Priory Ave by 31/12/06

Sale of 28 Priory Rd by 28/02/07

Sale of 15 Priory Rd by 28/02/08

All proceeds to be used in permanent debt reduction.

No reference has been made to any target dates or events that will lead to the release of the 850k guarantee and supporting security."

60. On 9 March 2006 Mr Dhillon signed a letter addressed to Mr Seavers confirming a programme of disposals as follows:

"Re: Disposal of non-core assets held in the name of Dhillon Hotels Limited.

The timetable of disposals below is that which is referred to in Schedule 2, section 3(f) of the Facility Agreement dated 8 March 2006.

It is agreed that the following assets will be disposed of and the sale proceeds used in permanent reduction of certain borrowing facilities with the Bank. All sale prices to have prior Bank agreement.

Property Latest date for receipt of sale proceeds

23/25 Priory Ave, High Wycombe 30 September 2006

61 Priory Ave, High Wycombe 31 December 2006

63 Priory Ave, High Wycombe 31 December 2006

28 Priory Road, High Wycombe 28 February 2007

15 Priory Road, High Wycombe 28 February 2008"

The facility agreement referred to in this letter has not been found.

61. Four of the five properties listed in Mr Dhillon's letter were sold in the course of 2006. The first was 23/25 Priory Avenue which consisted of eight flats known as Davinia Court. That was sold in June 2006 and £1.3m was remitted to the Bank to release the property from the Bank's legal charge. Three further properties, namely 28 Priory Rd, and 61 and 63 Priory Avenue, were sold in September 2006 and £1.2m was remitted to the Bank to release them. However despite the fact that Mr Seavers' e-mail to Mr Dhillon of 3 February 2006 had referred to the proceeds being used "in full in permanent debt reduction", a matter repeated in his memo of 1 March 2006 to Central Credit where he referred to "All proceeds to be used in permanent debt reduction", it appears that the sums of £1.3m and £1.2m were not in fact the full proceeds of sale of the properties or anything like them. What actually happened, as appears from the tax report that PwC prepared for Mr Dhillon, is that Mr Dhillon procured DHL to sell the properties to himself, acquiring them with the benefit of advances from Heritable Bank Ltd. In the case of Davinia Court the sale price was £1,755,000, the advance from Heritable was £1,491,750 and the net amount available to Mr Dhillon after discharge of stamp duty and costs was £1,464,733.77, of which £1.3m was paid to the Bank; Mr Dhillon paid nothing else in cash to DHL, the balance between the £1.3m and the £1.755m purchase price (£455,000) being left outstanding as a debt due from Mr Dhillon to DHL and debited to his director's loan account. The same was done with the other three properties (28 Priory Road, and 61 and 63 Priory Avenue) where the sale price was £1,750,000 (£650,000 for 28 Priory Rd and £550,000 each for 61 and 63 Priory Avenue), the advance from Heritable £1,469,167.50, the net amount available to Mr Dhillon after deduction of stamp duty and costs £1,390,512.34, the amount paid to the Bank £1.2m, and the balance left outstanding as owing by Mr Dhillon to DHL £550,000. The difference between the net amounts advanced by Heritable and those paid to the Bank in this way became available for Mr Dhillon's own purposes, and most of it was paid into his and his wife's personal bank account.
62. This unorthodox method of selling the properties (PwC said they were unable to verify the arms' length nature of the transactions) meant that the Bank did not receive the full sale proceeds according to the agreed prices, or even the full amount of the net advances to Mr Dhillon. There is nothing to indicate that the Bank was aware of any of this. In an e-mail of 13 September 2006 Mr Boag wrote:

"Credit committee approval incorporated a gradual disposal programme in respect of non-core assets currently held within Dhillon Hotels Ltd. This has been progressing with £1.3m reduction in facilities during June. We have now been advised of further non-core asset sales totalling £1.2m. The sale price achieved is £70k higher than our securities analysis and the full proceeds are to be applied in permanent debt reduction."

That suggests that Mr Boag at any rate understood the £1.2m to represent the full proceeds of the sale of the properties sold in September, whereas the true position is that it represented considerably less than the full purchase price of £1.75m, and less even then the net cash available to Mr Dhillon from Heritable.

63. In an e-mail of 27 July 2007 from Mr Boag to Mr Seavers he noted that:

"The disposal plan is progressing satisfactorily with one remaining property (15 Prior Rd) expected to sell by 28/2/08. Full sale proceeds to be applied in reduction of CB borrowings as previously agreed."

15 Priory Rd was not in fact sold by 28 February 2008, or indeed at all until after DHL went into administration, as Mr Dhillon accepted in cross-examination.

64. In a submission dated 14 December 2007 to the Credit Committee seeking further facilities to enable the purchase and refurbishment of the Paragon Hotel in Birmingham to be completed, Mr Seavers wrote:

"CC-UK also agreed a disposal programme for non-core property assets in 2006. This is currently ahead of schedule with debt reduction of £3.2m achieved to date and one remaining piece of land in High Wycombe due to be disposed of in the next 4 months."

That is no doubt a reference to 15 Priory Rd, as is confirmed by the fact that in the list of assets in the submission a market value is given to non-core property assets of £2m, which is the market value attributed to 15 Priory Rd in the 2006 submission. The figure of £3.2m for the debt reduction already achieved takes account of £700,000 received by the Bank from the sale of some other properties (these were sold in December 2006 by DHL to Mr Dhillon for £960,000; in this case Heritable advanced the whole £960,000 but only £700,000 was remitted to the Bank, the balance of £260,000 being left outstanding as a debt owed by Mr Dhillon to DHL in what had become the usual way).

65. The submission came before the Credit Committee on 18 December 2007 and was approved; one of the terms on which the Committee gave approval was as follows:

"Personal Guarantee. On completion of the Paragon Hotel redevelopment and receipt of satisfactory updated comment from the valuer in this regard along with confirmation of satisfactory Group trading position inclusive of covenant compliance we can confirm that the £850k Guarantee may be released. Request to release the Guarantee should be presented to Head of CCiFS for approval prior to confirming to the member."

That does not specifically refer to continuing with the agreed non-core asset disposal plan, but as appears above the disposal plan had been incorporated into the 8 March 2006 facility letter as a covenant; this is also referred to in Mr Seavers' business credit submission where he includes as one of the covenants in a covenant and compliance schedule:

"All non core assets to be disposed in accordance with agreed plan and in any event by 28/02/08 and used in debt reduction."

It seems likely therefore that the reference in the Committee's approval to confirmation of satisfactory covenant compliance was intended to include completion of the non-core asset disposal plan.

66. In a memo from Mr Seavers to Central Credit (Alex Gold) of 11 or 12 February 2008 Mr Seavers said as follows:

"Whilst we are writing we have been requested to release the £850k guarantee supported by the second charge on his current property slightly earlier than was envisaged in the approval memo dated 19 December 2007. Basically, he had already asked for this release late last year but I had initially rejected this pending gaining approval for the Paragon deal. In the circumstances it appears slightly unnecessary to take a new charge on the new property if we have agreed in principle to release this later down the line. I can confirm that the group continues to trade well and is covenant compliant."

67. On 13 February he followed that with an e-mail to Mr Duncan in which he said:

"I recall the guarantee and charge were originally taken in 2006 when we did the Ye Olde Bell deal and we went outside BV cover pending Dhillon selling off non core assets and reducing the debt back to with 70% LTV which he duly did over the last 2 years. I know the release is a little earlier than you had suggested but in the circumstances as explained in the attached note I recommend we release it now rather than wait for the Paragon refurb to be completed."

Mr Duncan replied that it would require the support / agreement of all Committee members and on the next day a formal request was made by Ms Jennifer Meechan to Mr Duncan which summarised the position as being as follows:

"At the time of the presentation we held a PG from N & S Dhillon for £850k supported by a Second Charge over their residential property. This was taken into our security ring in 2006 when we assisted with the purchase of Ye Olde Bell Hotel. BV at that time was outwith the covenanted 70% LTV and at that point we were reliant on the Members selling off core assets and reducing our LTV back within the agreed 70%. This has now been achieved.

It was agreed at Committee that we would retain this until such times as the new hotel development was completed.

The Member is currently in the process of moving house and has requested release of the Second charge over the residential property. CCiFS are supportive of this request due to the following:-

Nil BV is attached to the second charge

…

We will continue to hold the PG pending completion of the Paragon refurbishment.

On this basis please confirm your support."

68. Mr Duncan replied "Approved"; Miss Meechan forwarded that to Mr Seavers saying:

"Please find below approval from Alan Duncan (as Chair of Committee) for release of second charge over residential property together with drawdown of £1.5m."

Mr Seavers then e-mailed Mr Bains, also on 14 February 2008 and copied to Mr Dhillon, saying:

"We have today agreed that the legal second charge currently held by the Bank on 4 Earls Terrace, London may be released. This may either be removed now or when Tej sells the property as we will not require a replacement charge on any new property."

(Tej is how Mr Dhillon, whose name is Novtej, was regularly referred to.) It appears from an e-mail dated 23 June 2008 from Mr Gold to Mr Seavers, with a draft submission to the Credit Committee seeking a three month bridging loan of £675,000 to allow Mr and Mrs Dhillon to pay a deposit for the purchase of a new property at 19 Melbury Rd, Kensington to be used at their new home, that the Bank thought that Mr Bains had not got round to releasing the second charge. In that e-mail Mr Gold wrote as follows, referring to Mr and Mrs Dhillon's existing home at 4 Earls Terrace:

"This property was previous secured via second charge to support the business borrowing, however CCUK agreed the release of the second charge on 14 February 2008 (no longer deemed necessary).

Although this was advised to Mr Dhillon, his solicitor did not get round to providing the Bank with a DS1 release document, so our charge still stands and will remain in place with this transaction….

Given the short term nature of the request, and with the benefit of the overall security position, CCiFS support this request on the basis that a written undertaking is received form the solicitor to remit repayment proceeds by 30th September 2008 and second charge over the existing property is confirmed as in place."

In fact it appears (see Paragraph 58 above) that Mr Bains had never registered the charge in the first place, which explains why he did not provide a DS1 release document.

69. Mr Duncan replied to the submission on the evening of 24 June 2008 expressing nervousness about providing the deposit funding without a clear understanding of the funding for the balance to complete the purchase but was prepared to support the bridging loan.
70. On these facts, which I have drawn from the documentary record, it seems to me that the position is reasonably clear. There is no reference in any of the documentation to the release of the original 2005 Guarantee. There was reference to release of the 2006 Guarantee, but although the Credit Committee had in December 2007 approved that in principle it required an application for release to be made. It was not something that would happen automatically. In fact although Mr Seavers did apply for the 2006 Guarantee and second charge to be released in February 2008, the only approval that was given by the Bank was to release of the charge and that was given by Mr Duncan by way of approval to a request from Ms Meechan which expressly said that the personal guarantee should remain in place. Agreement to the release of the charge, but not the Guarantee was passed on by Mr Seavers to Mr Bains. There is nothing therefore in the documentary record to suggest that the Bank ever agreed to release the 2006 Guarantee, or gave Mr Dhillon to understand that they had done so.
71. However, Mr Dhillon's case is that the Guarantees have ceased to have any effect. His pleaded case relies on two matters: (1) an assurance which is said to have been given to him by Mr Seavers prior to his executing the 2006 Guarantee and charge that the only reason the Bank required the personal security was because the loan to value ratio on the facilities given to the Dhillon companies had risen to over 70%, and that if DHL disposed of non-core assets such that the loan to value ratio dropped to or below 70%, the Bank would release the charge and release Mr and Mrs Dhillon from both the 2005 and 2006 Guarantees – this is relied on as a collateral contract (it being said that the effect of the disposals of non-core assets was that the loan to value ratio had in fact dropped below 70%), or as giving rise to an estoppel preventing the Bank from relying on the Guarantees (Mr Dhillon having relied on them in procuring the disposal of non-core assets); and (2) a discussion that Mr Seavers is said to have had with Mr Dhillon in February 2008 prior to his e-mail of 14 February being sent in which Mr Seavers is said to have agreed on behalf of the Bank that the Guarantees were now discharged.
72. I am not satisfied on the balance of probabilities that either of these matters has been established by Mr Dhillon. So far as the first is concerned:

(1) I have already said that I am unable to place any weight on Mr Dhillon's assertions in evidence save where supported by contemporary documents or inherently probable.

(2) On this particular point his credibility is further undermined by an e-mail exchange in December 2008. The group's overdraft limit had been exceeded. Mr Seavers spoke to Mr Dhillon about it and then e-mailed Mrs Dhillon, copying Mr Dhillon in, on 23 December 2008 asking her:

"Would you please confirm that you both understand that this excess is covered by not only the cross company guarantees and property security but also by the personal security in the form of supported guarantee by yourselves."

She replied (again copying Mr Dhillon in):

"Both Tej and I agree to the email below and confirm that we accept the conditions."

On the face of it this is an acknowledgment by Mrs Dhillon on behalf of Mr Dhillon that he accepted that the 2006 Guarantee still subsisted. Mr Dhillon's attempts to explain it away in cross-examination were frankly unconvincing.

(3) There is absolutely nothing in the contemporary material to suggest that there was any question, in 2006 or 2008 or indeed at any other time, of the release of the 2005 Guarantee. It is not referred to in any of the documentation, and since it had not been taken in the first place due to a concern about the loan to value ratio, there is no reason to think that either the Bank or Mr Dhillon would connect it with the exercise of selling off the non-core assets. I am wholly unpersuaded that there was any reference to it in this connection, and I think it likely that Mr Dhillon has simply added in a reference to it in the hope that he could escape liability for both Guarantees.

(4) By contrast I accept that the 2006 Guarantee was linked to the excessive loan to value ratio and the non-core asset disposal programme. The best contemporary evidence of what Mr Seavers was telling Mr Dhillon in February 2006 is his e-mail to Mr Dhillon on the evening of 3 February 2006 confirming the decision of the Credit Committee (Paragraph 57 above), which does indicate that the increased guarantee and charge would be retained until the level of exposure was reduced to 70% loan to value from non-core asset disposals. This is not however framed as a positive assurance or promise that when that happened the Guarantee would be released, partly because it also requires trading in line with projections, but also because it does not use the language of assurance or promise or commitment. All it is purporting to do is confirm what the Committee has approved.

(5) I accept that Mr Seavers spoke to Mr Dhillon on the telephone around this time: his e-mail itself refers to "As I mentioned today" and again to speaking to him "on Monday" (6 February). But I do not accept that he would have made any promise to Mr Dhillon that the Guarantee would be released. Mr Seavers gave two reasons in oral evidence why he did not say that in the e-mail, and would not have said it verbally: first, he had learnt very early on in his lending career never to say, verbally or in writing, that a guarantee would be released; and second, that it was not a matter for him in any event, but would have to go to the Committee. All that he would have said therefore would be that they would consider it or review the position once non-core assets had been disposed of and the company was trading in accordance with projections, or that he would recommend that it be released, but that's as far as he would ever go.

(6) This evidence is inherently credible. It is also supported by the fact that not long afterwards, on 1 March 2006, Mr Seavers told Central Credit that no reference had been made to any target dates or events that would lead to the release of "the 850k guarantee and supporting security" (Paragraph 59 above). In the light of subsequent events, one must be hesitant before assuming that Mr Seavers was always truthful in what he said to Central Credit, but on this point there was no reason for him to mispresent the position, and it would only cause difficulties for him later if he had.

(7) I therefore accept Mr Seavers' evidence on this point. That is sufficient to dispose of the case that Mr Seavers gave verbal assurances to Mr Dhillon in February 2006 which committed the Bank to release the Guarantee once the loan to value ratio had reduced to 70% and which could form the basis of either a collateral contract or an estoppel. That makes it unnecessary to consider other suggested difficulties with this case, such as whether the reference to the loan to value ratio was certain enough or was too vague to be enforceable, or would require a fresh valuation or not; or whether it was a pre-condition to the release of the Guarantee that the whole disposal programme was carried out (which it was not, as 15 Priory Avenue, by far the most valuable of the properties concerned, was never sold), or that the entirety of the proceeds of sale was remitted to the Bank (which it was not, as I have explained above (Paragraphs 61-2)).

(8) It also makes it unnecessary to consider another point. Mr Dhillon's pleaded case is that Mr Seavers' assurances were given before he executed the 2006 Guarantee and charge and in order to persuade him to execute them and that he executed them in reliance on such assurances. In fact the 2006 Guarantee was first asked for not in connection with the increase in facilities sought in Mr Seavers' business credit submission of 2 February 2006 (which was what took the loan to value ratio over 70% and was the impetus for the suggestion of the non-core asset disposals) but as early as 10 January 2006 (Paragraph 52 above) in connection with facilities apparently required to deal with a cost over-run (Paragraph 55(5) above); the Dhillons had nominated Mr Bains to act for them by 17 January 2006, and it was signed at some stage and dated 1 February 2006. Mr Seavers did not apply to the Committee for the approval of the new facilities until 2 February 2006 and did not get it until 3 February 2006, and it is difficult to think that he would have said anything about the outcome of the application before then; and in his submission, he had referred to the Guarantee as one that had been previously offered (Paragraph 55(7) above). This all to my mind casts real doubt on the suggestion that Mr Dhillon did not execute the Guarantee until after a conversation with Mr Seavers linking its retention to the non-core asset disposals. But these points were not explored in evidence and I need not take them any further.

73. So far as the second matter is concerned (that is whether Mr Seavers told Mr Dhillon in February 2008 that the Guarantees had been released):

(1) Again I am unable to place any weight on Mr Dhillon's assertions. His case was not helped by the fact that in his witness statement he did not even assert that there had been such a conversation, but merely that he understood, from Mr Seavers' confirmation that the charge had been released (in his e-mail of 14 February 2008), that the Guarantees had been released as well. In oral evidence however he did assert that Mr Seavers had told him in around January or February 2008 that the Bank no longer required the Guarantees, and this had, to be fair, formed part of his pleaded case.

(2) Again Mr Seavers' evidence was that he recalled no such conversation. And again the contemporaneous documentation gives no support for Mr Seavers having told Mr Dhillon that the Guarantee would be, or had been, released, but is to the contrary. On 18 December 2007 the Credit Committee had agreed to the Guarantee being released subject to a number of conditions including completion of the Paragon Hotel redevelopment, and specifically stipulated that request to release the Guarantee should be presented to the head of CCiFS for approval before confirming to Mr Dhillon (Paragraph 65 above). In early February 2008 Mr Seavers received a request for release of the Guarantee and charge which he put to Mr Gold (Paragraph 66 above), but the answer on 14 February 2008 from Mr Duncan was that the second charge could be released but that the Guarantee would continue to be held pending completion of the Paragon refurbishment (Paragraph 67 above). Mr Seavers' reaction to that was to e-mail Mr Bains and Mr Dhillon that same evening with the news that the second charge could be released, but saying nothing about the Guarantee.

(3) That is exactly what one would expect given the terms of Mr Duncan's approval. Accepting Mr Dhillon's case means accepting that although Mr Seavers went through the correct procedure of formally asking for release of the Guarantee and charge, and received an answer that the charge could be released but not the Guarantee, and accurately reflected that in his e-mail to Mr Bains, at about the same time he told Mr Dhillon orally that the Guarantee had been released as well. That seems to me to be highly improbable, and I am wholly unpersuaded that it took place.

(4) Mr Dhillon also said that he noticed that both Guarantees continued to be listed as among the security documents required in various facility letters which were subsequently produced. He said he queried this with Mr Seavers and was told not to worry about it as the Guarantees had been released. I do not accept this, which was denied by Mr Seavers. It seems to me far more probable that the Guarantees continued to be referred to because Mr Seavers understood that they were still in place.

(5) I find therefore that Mr Seavers did not tell Mr Dhillon in February 2008 that the Guarantees or either of them had been released.

74. In these circumstances there is no other defence to the Bank's claims on the Guarantees. The Guarantees guarantee the amounts owing by DHL to the Bank, limited to £250,000 and £850,000 respectively, and it is admitted both that at all material times the debts and liabilities of DHL to the Bank have exceeded £1.1m, and that demand was made under each of the Guarantees on 19 September 2012. I will therefore give judgment against Mr Dhillon for the principal sums of £250,000 and £850,000 respectively.
75. I should add that although the £850,000 Guarantee was entered into by both Mr and Mrs Dhillon, there is no suggestion that the Bank has recovered anything from Mrs Dhillon under this Guarantee, and Mr Wilson indeed specifically confirmed that the Bank had not done so. Mr Cutting made the point that he did not know the terms on which the Bank had settled with Mrs Dhillon (which were confidential) and that it was possible that the Bank might have some prospect of receiving something from her, for example if they had taken security over her property. My understanding of the law however is that if A has a joint and several claim against B and C for say £100,000, A is prima facie entitled to judgment against B for the whole £100,000. A admittedly cannot recover a total of more than £100,000, so if by the time of entering judgment A has actually received say £10,000 from C, A can only have judgment for £90,000 as the payment by C discharges the debt to that extent (and similarly if, after obtaining judgment against B, A receives £10,000 from C, that discharges the judgment debt to that extent, and A can only execute the judgment against B for the balance of £90,000). But if A has not actually received anything from C at the time of entering judgment, the debt has not been discharged, and it does not matter that A also has a claim against C, and may also have security for that claim: B is still liable for the £100,000. Subject therefore to confirmation from the Bank that it has not yet received anything from Mrs Dhillon in respect of this claim when judgment is handed down, it seems to me that the Bank is entitled to judgment for the full £850,000 against Mr Dhillon.
76. Under the terms of the Guarantees the Bank is entitled to interest from the date of demand until payment at the rate agreed with the customer, compounded as agreed or in accordance with its current practice. The rate agreed with DHL for its facilities was increased to 3.75% above the Bank's base rate by letter dated 28 February 2012, and the Bank has put in evidence calculations at that rate, compounded monthly in accordance with its usual practice. This evidence is agreed and produces the following figures from 19 September 2012 up to 22 June 2016:

(1) On the £250,000 Guarantee £ 43,257.41

(2) On the £850,000 Guarantee £147,075.18

These sums will have to be updated to the date when judgment is formally handed down, but subject to that I will give judgment for interest calculated in this way.

The Stoke Place claim

77. The chronology for this claim starts in the summer of 2009. By June 2009 the Dhillon companies were suffering significant cashflow problems: on 23 June 2009 Mr Seavers submitted a business credit submission seeking an increased overdraft facility for them and referred to the Group as having "encountered severe cash difficulties since the start of the calendar year". In fact the difficulties seem to have started earlier than that, as HMRC issued a petition to wind up Crown in September 2008, and another to wind up DHL in December 2008; a third, to wind up Stoke Place, was issued in July 2009. All were based on non-payment of various tax liabilities, and in an e-mail from Mr Clark to Mr Dhillon dated 7 March 2010 he referred to the cash flow for the year to February 2010 as showing a net movement of £2.5m outflow, funded by among other things, holding back on payments to HMRC. HMRC were also at the same time investigating the tax affairs of Mr Dhillon and his family (which was why he consulted PwC).
78. In these circumstances Mr Dhillon sought to raise money, and enlisted the help of a finance broker, Khadr Commercial Finance ("Khadr"). There were a number of potential lenders including Strategic Capital Solutions LLC, a New York based lender, who sent a letter of interest on 31 July 2009 for a loan of up to £9.6m on Stoke Place at 22% per year; Mr Bains told Khadr that Mr Dhillon was willing to accept 1.75% per month on the basis that it would be a short term loan only. Another potential lender was Alliance & Leicester plc who provided heads of terms for a term loan of £8.5m on 18 November 2009. But in the event Mr Dhillon refinanced with a third lender, HSBC, in the sum of £9.2m.
79. An e-mail of 3 August 2009 from Ms Salma Kauser, a corporate analyst at HSBC, shows that Mr Dhillon had met HSBC the previous Friday (31 July 2009) and had discussed the possibility of HSBC making a term loan against security over Paragon and Stoke Place Hotels. The e-mail from Ms Kauser, which was sent to Mr Clark and copied to Mr Dhillon, asked for various information in order for HSBC to proceed with drafting a credit proposal. One of the things that she said in the e-mail was that it had been mentioned at the meeting the previous Friday that they would need to obtain written confirmation from the Bank as to the level of repayment they required to release Paragon and Stoke Place from their security. There is nothing in the e-mail that suggests that what was in contemplation at that time was anything other than a straightforward re-mortgage of the hotels in favour of HSBC in place of the facilities currently provided by the Bank.
80. By 13 August 2009 a firm of valuers, CBRE, had prepared a draft valuation of Stoke Place at £14.15m. Although the draft valuation is expressed to be "On behalf of Dhillon Group and Clydesdale Bank plc", there is no evidence that the Bank saw a copy of it or knew anything about it, and Mr Dhillon accepted in oral evidence that CBRE were valuers selected by HSBC; a copy of the draft valuation was in due course provided to HSBC, as appears below.
81. By 22 September 2009 HSBC had provided Mr Dhillon and Mr Clark with draft terms both for Stoke Place alone, and for Stoke Place and Paragon combined. The summary of key terms for Stoke Place alone show that what was in contemplation was a term loan for a term of 5 years of up to 65% of value as shown by a fresh professional valuation of the hotel, secured by a first legal charge over the hotel and a debenture from SPHL, and that the expressed purpose of the loan was "to refinance existing lender (which we understand to be Clydesdale Bank - how much debt is presently outstanding against the Hotel?)". Later the same day, 22 September 2009, a Mr Rowland Thomas, a director of Close Property Finance Ltd, which had lent money on the Paragon car park, e-mailed Mr Bains asking him "Realistically, when do you think the refinance might go through?" Mr Bains replied that his estimate would be that it would take "between 6 and 10 weeks from today" and added:

"Having said this, HSBC are chasing Tej's business and have been for a couple of years. They would like to replace Yorkshire as Tej's bankers generally. The relationship manager at HSBC has assured Tej he will pull out all the stops to get the loans completed asap."

82. HSBC instructed external lawyers, Stephenson Harwood, and Mr Dhillon instructed Bains & Co. The evidence in this action does not include a complete file of the documents passing between them, but certain documents have been disclosed and put in evidence, and so far as appears from those, the transaction, so far at any rate as HSBC and its lawyers were concerned, appears to have proceeded smoothly, if a little slowly, without any major hitches.
83. On 4 December Mr Bains sent an e-mail to Mr Thomas, who had again been inquiring whether Mr Dhillon had heard any more from HSBC regarding a re-finance (specifically in relation to Paragon). Mr Bains said he had spoken to Mr Dhillon and:

"the current situation is that whilst HSBC remain committed to the transaction, the bank wish to see satisfactory completion of a smaller (c £10m) loan that was agreed at the same time in respect of the Stoke Place Hotel first. The legal formalities on that began about two weeks ago (James is acting for the borrower and Stephenson Harwood are acting for the bank). We are expecting that to complete next week. The bank will then concentrate on the bigger, Paragon loan."

The reference to James is to Mr James Simmonds of Bains & Co whom Mr Bains had asked to assist with the re-finance.

84. By 7 December 2009, matters were sufficiently far advanced that a checklist of conditions precedent had been prepared showing HSBC's requirements for completion. This indicates that HSBC had received CBRE's draft valuation and were awaiting a final valuation in the sum of at least £14,154,000 (65% of which would be £9.2m); it also listed as outstanding, and awaited from Bains & Co, the provision of a copy of a resolution of the board of directors of SPHL approving the relevant documents. Minutes of such a board meeting were duly prepared. They showed the board meeting as taking place on 10 December at Mr Bains' offices in Watford, attended by Mr and Mrs Dhillon, at which they resolved that SPHL should enter into a loan agreement with HSBC in the sum of £9.2m, and a debenture (including a first legal charge over Stoke Place Hotel) securing the loan, Mr Dhillon reporting that the purpose of the loan agreement was:

"to refinance the existing indebtedness of the Company to Clydesdale Bank secured on the property, repaying loans to the Chairperson [ie Mr Dhillon] and other companies owned by the Chairperson and to release the balance of the loan to the Chairperson."

The minutes are signed by Mr and Mrs Dhillon, again with a date of 10 December 2009. In cross-examination, Mr Dhillon denied that he and his wife had gone to Mr Bains' offices, but accepted that he signed the document. He could not be sure when he did so: he and his wife would have signed it, sent it to Mr Bains, and left it to him to put the details in, and it could have been a week before or a week later. I do not think the exact date matters: what this indicates is that at around this time Mr Dhillon was leaving it to Mr Bains to progress the HSBC loan, and there had been no suggestion (or at any rate none that has left its trace in the record) of any delay or difficulty in this respect.

85. Some drafts (or parts of drafts) of the loan documentation between HSBC and SPHL were disclosed in this action, but not the agreements as executed, and there was no clear evidence when these were signed. The latest draft in evidence was dated 8 December, and I am satisfied, as appears below, that the agreements were in place by at the latest 24 December 2009; I think it probable that they were agreed and signed some two weeks or so before that, on or around 10 December when the board resolution was dated. On 11 December 2009 Khadr sent Mr Dhillon its invoice in respect of finance arranged from HSBC in the sum of £9.2m, the invoice being for £105,800 (that is exactly 1% of the loan amount of £9.2m (£92,000) + VAT at 15%), which indicates that he at any rate understood that the loan had by then been agreed, even if not finally entered into.
86. Before HSBC would advance any money it would of course need to be sure that it was obtaining the security it expected, and that required the Bank to release both its own existing charge over Stoke Place and the debenture given to it by SPHL. That, as explained below, took a little time to arrange. By e-mail timed at 1.40 on 23 December however Mr Seavers confirmed to Mr Bains that on receipt of £6.1m (the sum the Bank was expecting, as explained below) the Bank would execute a form DS1 cancelling the registered charge against the hotel and a Deed of Release releasing the debenture. In the course of the day it was agreed that the Bank would sign the release documents and provide them to Mr Bains who would hold them pending completion; and on this basis Mr Bains by e-mail timed at 9.54 on 24 December sent Mr Simon Collins of Stephenson Harwood a drawdown notice. At 10.57 Mr Bains e-mailed Mr Collins again, copying in Mr Dhillon, saying that:

"I have just spoken to my clients and they agree that the whole of the facility amount should be drawn today. Please accept this letter as my clients authority for the drawdown figure to be amended accordingly."

There is no reason to doubt Mr Bains' statement that he had spoken to Mr Dhillon and obtained his instructions that the whole amount should be drawn down. At 12.30 Mr Collins e-mailed Mr Bains confirming that HSBC had sent funds in the amount of £9,175,078.55 (being £9.2m less HSBC's solicitors' costs and disbursements) and that completion of the HSBC loan had occurred that day, and that he had dated the loan agreement and finance documents accordingly. Mr Dhillon accepted in cross-examination that he would have known from this e-mail, which was also copied to him, that the HSBC transaction had completed at 12.30 on 24 December.

87. So far as HSBC are concerned, therefore, there is nothing to suggest that there was anything unusual about the transaction, which took the form of a simple re-mortgage by SPHL under which the Bank's security was discharged and replaced with security given to HSBC.
88. This was not however the transaction that was presented to the Bank. In an audacious, detailed and sustained fraud, the Bank were throughout given to believe that an entirely different transaction was being carried out, namely that Mr and Mrs Dhillon were selling a majority of their shareholding in SPHL to two individuals by the name of Gurdip Singh Hothi and Gian Singh Hothi ("the Hothis"), the fully developed form of this supposed transaction involving a Share Purchase Agreement between Mr and Mrs Dhillon and the Hothis ("the SPA"), a Shareholders' Agreement, again between Mr and Mrs Dhillon and the Hothis ("the SHA") and a Management and Service Agreement between SPHL, DHL and Mr and Mrs Dhillon ("the MSA"). Mr Bains consistently and repeatedly led Mr Seavers (and the Bank's external solicitors, Addleshaw Goddard ("Addleshaws")), to understand that this was the nature of the transaction being carried out.
89. I am entirely satisfied that this supposed transaction was a complete fabrication from beginning to end. Mr Bains as I have mentioned was subsequently struck off as a solicitor for dishonesty in relation to another matter, and the Solicitors Regulation Authority intervened in his practice. The Bank obtained his files from the interveners. There is not a single document which has been disclosed in these proceedings, and I take it from that that no document was found by the Bank in Mr Bains' files, which evidences any communication with the Hothis or with any solicitors acting for them. Mr Dhillon gave evidence that the Hothis, although not known to him personally, were real individuals who were clients of Mr Bains; and there are included in the bundles before me copy documents purporting to have been signed by the two Hothis. But I heard no evidence which would enable me to conclude that these signatures are genuine or that the Hothis ever had any involvement in this matter at all. But even if they did, I am quite satisfied that the whole thing was a pretence throughout. Indeed it is common ground between the Bank and Mr Dhillon in these proceedings that the communications between Mr Bains on the one hand, and the Bank or Addleshaws on the other, referring to the sale transaction were simply untrue. In fact it is not going too far to say that almost every e-mail or letter from Mr Bains either to Mr Seavers or to Addleshaws contains one or more lies, expressly or impliedly.
90. This is therefore very far removed from the familiar case of a genuine transaction which is said to have been induced by a misrepresentation made in the course of negotiations. This is a case where the whole transaction as presented to the Bank was a carefully, elaborately, deliberately and dishonestly contrived fiction from start to finish. It is no surprise to learn that Mr Bains has been struck off, albeit for other dishonesty; it is nevertheless astonishing that anyone practising as a solicitor could lend themselves to such a comprehensive fraud.
91. But no claim in these proceedings is brought against Mr Bains. The claim is brought against Mr Dhillon and the question is whether he was party to the fraud or whether, as his case is, this was something done by Mr Bains off his own bat. I will say straightaway that I am satisfied that the only possible conclusion is that Mr Dhillon was a full, complete and knowing participant in this fraud, indeed very probably the architect, alone or with Mr Bains, of it.
92. His case, as set out in his Defence, is that when in the summer of 2009 he was looking to raise further finance, he spoke to Mr Seavers, who said that the Bank was not interested in providing re-finance, and he told him that he would either look for finance from another source or for a purchaser for Stoke Place; that he made clear to Mr Seavers that his preferred course was to re-finance and that he was pursuing this with other lenders; that he knew Mr Bains and Mr Seavers were "exploring the possibility of a share purchase" but he made clear that a sale was only a fallback if re-finance was not secured; that he was under the impression that Mr Seavers and Mr Bains were dealing with the Hothis but he himself had no contact with them, and repeatedly told Mr Seavers that he was not interested in a share sale unless re-finance could not be secured; that if Mr Bains made any representations to the effect that Mr and Mrs Dhillon had decided to sell 80% of their shareholding, it was inaccurate and not something he instructed him to do; that he did not pay any attention to the e-mails between Mr Bains and the Bank; that although he signed documents, he believes they were related to the HSBC transaction; that Mr Bains was not instructed by him to complete a share sale transaction; and that he did not know that Mr Bains had represented to the Bank that such a sale had been completed.
93. This defence is impossible to reconcile with either the inherent probabilities or the contemporary documents. I leave aside the unlikelihood of Mr Bains creating this elaborate fiction behind Mr Dhillon's back and without telling Mr Dhillon anything about it; but if it had really been the case that Mr Dhillon was primarily interested in a re-financing and only interested in a share sale as a fallback, and had made that repeatedly clear to Mr Seavers, then it is impossible to understand why Mr Seavers did not pursue the question with him how his plans to re-finance were proceeding, or query whether it was necessary for the share sale agreement to be pursued, or refer to it in any of his communications seeking approval from others in the Bank.
94. In fact, as appears below, the transaction was never presented to Mr Seavers as a fallback or longstop in case the re-financing did not go through, but as a transaction which Mr Dhillon had already decided on; and even after 24 December 2009, when the HSBC loan had completed and the money had been drawn down, the fiction was kept up. I am satisfied that this was to the knowledge of, and with the participation of, Mr Dhillon.
95. It is difficult to see what motive Mr Bains would have had for devising and implementing the fraud by himself, or who would stand to benefit from it. I am satisfied however that Mr Dhillon did have a motive for the fraud. As already referred to, the companies were short of cash and had a number of pressing liabilities to HMRC and others, and the purpose of the re-finance was to raise some cash for these liabilities (as well as providing some cash for the Dhillons themselves). But if Mr Dhillon had told the Bank that he was re-financing with HSBC, there was at least a risk if not a likelihood that the Bank would have wanted the entirety of the proceeds of any re-financing to be used in reduction of the outstanding facilities, just as it had wanted (although not in fact received) the entirety of the net proceeds of sale of the non-core asset sales. I suspect that Mr Dhillon was well aware that this was the case: he accepted in cross-examination that he was aware that there was a difference of some £3m between what was raised from HSBC (about £9m) and what had to be paid to the Bank (about £6m). This was very probably the inspiration for the fraud: the idea, somewhat as had been done with the non-core asset sales, was to raise cash by re-mortgaging Stoke Place but without paying the entirety of the proceeds over to the Bank. That involved the pretence that there had only been a partial sale of the Dhillons' interest in the hotel, raising enough to keep the Bank happy, without revealing that a much larger amount was in fact being raised from HSBC.
96. The story starts on 2 October 2009 when Mr Seavers sent an e-mail to Mr Gold. This indicates that what Mr Seavers had been told was as follows:

"Tej has also decided to sell a majority stake in Stoke Place as this would not fit in the "Old English Coaching Inn" brand which he is trying to develop with the rest of the estate. A further reduction in debt will therefore be seen…I am meeting with Tej next week and will advise you further once details are known and all that I know at the moment are that the buyers for Stoke Place are keen to move quickly to benefit in the run up to Christmas."

That makes it clear that Mr Seavers had been told not only that Mr Dhillon had already decided to sell a majority stake in Stoke Place, but that there were identified buyers for Stoke Place then in existence who were keen to move quickly. These statements were untrue. Mr Seavers does not here say where he got the information from, but even without more it would be likely that this was Mr Dhillon himself, as Mr Seavers was in regular contact with Mr Dhillon, either by telephone or face to face, whereas almost all of his communication with Mr Bains was by e-mail. Mr Dhillon denied in oral evidence that he had said that the buyers were keen to move quickly, but could not explain where else Mr Seavers could have got the information from. Moreover on 6 October Mr Gold sent an update to the Credit Committee in which he said:

"The member has advised the BP that he is considering selling a majority stake in the Stoke Place Hotel in order to concentrate ownership on the core "Old English Coaching Inn" operations. It is anticipated however that Mr Dhillon would continue to run the hotel for the new owners…

In the event that this discussion was to proceed towards a sale, we will require full detail of the transaction from the member in order to understand the basis of the Stoke Place Hotel going forwards and establish an overall appropriate reduced debt level and loan structure going forwards."

This too suggests that Mr Gold understood that this was something Mr Dhillon himself had told Mr Seavers, "the member" being a reference to Mr Dhillon, and "the BP" to Mr Seavers; in the same report when Mr Gold referred to Mr Bains he called him "the member's solicitor". Mr Dhillon accepted that he discussed with Mr Seavers "the possibility of a share sale", but says that at the same time he discussed that the re-finance was his preferred outcome. I do not accept this; I find as a fact that the information in Mr Seavers' e-mail was derived from what Mr Dhillon told him, and it does not refer to the sale as a possibility, to be explored as a fallback to a preferred re-finance, but as something that Mr Dhillon had decided to do.

97. Mr Duncan, the Head of Credit, replied to Mr Gold that a full review would in due course be appropriate but that:

"By way of expectation management though, given the previous experience with this Member, the Bank will expect the full net proceeds of any asset sales to be applied on reduction of facilities."

That was no doubt passed on by Mr Seavers to Mr Dhillon when he met him the next week.

98. On 23 November 2009 Mr Bains sent a letter to Mr Seavers by e-mail. It was headed "Re Stoke Place Hotel Ltd" and said:

"As Tej may have informed you, he is in the process of selling part of his shareholding in the above company. The due diligence has just commenced. The Purchaser has indicated that it may be in a position to complete by the end of this week (which is probably not realistic) or during the course of next week.

The sale price is proceeding on the valuation of the Company's only asset, Stoke Place Hotel at £8.5 million. Tej is selling 60% of his shareholding (and the Purchaser will have the option to buy the remainder at a later date). Tej will be given a management contract which will provide his Company with some continuing income from the property (approximately £200,000 per year at present levels of trade)."

He asked for the original title deeds and a redemption figure. This letter tends to confirm that it was Mr Dhillon, not Mr Bains, who had spoken to Mr Seavers back in October as Mr Bains does not suggest he had previously referred to the sale. It contains a whole series of lies: Mr Dhillon was not in the process of selling any part of his shareholding, no due diligence had commenced, the purchasers had not said anything about completing in the next week, and so far as the evidence reveals there had been no valuation at £8.5m – CBRE's draft valuation had been £14.15m, and there is no trace of any other valuation having been carried out. Mr Dhillon was asked about this in cross-examination and said that he left the negotiation of a possible share sale to Mr Bains; he was not keen on it and not paying that much attention to it.

99. This was also untrue. The next day Mr Bains sent to Mr Dhillon by e-mail a copy of a draft of the letter, which was in materially identical form. Mr Dhillon forwarded it to Mr Clark. On 25 November Mr Dhillon e-mailed Mr Bains and said, among other things:

"Andrew has not been in touch, do you think he has received the email."

A follow up e-mail on the next day, 26 November 2009, was sent by Mr Clark to Mr Bains, copying in Mr Dhillon. The subject was "Tej issues" and Mr Clark asked Mr Bains to come back to Mr Dhillon over a number of matters including "Can you let us know what is going on with Andrew – update?"

100. That to my mind makes it entirely clear not only that Mr Dhillon was aware what Mr Bains was telling Mr Seavers, but was anxious to know what his reaction to it was. It does not square at all with the idea that Mr Dhillon had simply mentioned a possible sale to Mr Seavers as a fallback to his preferred option of a re-finance, and that anything different said by Mr Bains was a frolic of his own.
101. On 2 December 2009 Mr Seavers contacted Addleshaws, and told them that Stoke Place Hotel was now being sold and the Bank had been asked for the title deeds. On 3 December Mr Simmonds of Bains & Co sent an e-mail to Mr Seavers in which he said:

"I act for Stoke Place Hotel Ltd in respect of the proposed re-mortgage of the above property over which Clydesdale Bank hold the first legal charge."

He asked again for a redemption statement. Mr Seavers replied the next day (4 December) at 9.54 and said:

"As Tej knows the Stoke Place Hotel is cross collateralised and as a minimum we would require sale proceeds of £5,100,000 in order to release our security….

I have just spoken with Tej and I believe he will be in touch later today."

Mr Seavers then (at 10.21) sent a memo to Mr Gold in which he referred firstly to a proposed sale of the Paragon Hotel and then added:

"Of more urgency i[s] the agreement to agree the sale price and release Stoke Place from our security. Tej has sold a 60% interest in Stoke Place at an agreed figure of £5.1m although there is an element of deferred consideration (£350k) which will be paid out in 12 months subject to performance…

Tej has requested the release of £1m to go towards a personal property move he would like to undertake in the early part of next year…

I recommend we agree the sale price but if we are agreeable to the £1m release then this is to come from the Paragon proceeds rather than Stoke Place. The purchasers are looking to complete next week in order to benefit from a very busy Christmas season that starts this weekend and with the frustrations of the hold up at the Paragon Tej is keen not to lose the Stoke Place deal and is asking for our agreement as soon as possible."

102. The details in this memo such as the figure of £5.1m (that is exactly 60% of the supposed valuation of £8.5m), the deferred consideration of £350,000, the request by Mr Dhillon for a release of £1m, the fact that the purchasers were looking to complete next week and Mr Dhillon's keenness not to lose the deal, cannot be found in any written communication from Mr Bains. The obvious inference is, and I find as a fact, that these details were given to Mr Seavers when he spoke to Mr Dhillon on the morning of 4 December. They are inconsistent with Mr Dhillon's case that what he told Mr Seavers was that he was exploring the possibility of a sale as a fallback to his preferred re-financing. It is noticeable that on the same day Mr Bains told Mr Thomas that they were expecting the loan from HSBC to complete "next week" (Paragraph 83 above), which makes the idea of the share sale being pursued as a fallback even more absurd.
103. On 8 December Mr Gold, who had reviewed Mr Seavers' memo of 4 December, sent an e-mail to Mr Andrew Lynch in which he expressed a number of doubts about the proposal, the summary being that the amount of income that would be lost would be disproportionate when compared with the debt reduction; on that basis he could not see a way to support the proposal as presented without the certainty of the Paragon sale completing. He sent a copy of that e-mail to Mr Seavers on 9 December, and Mr Seavers replied to Mr Gold and Mr Lynch by e-mail on 10 December in which he explained there was a delay in relation to the sale of the Paragon, and in relation to Stoke Place said as follows:

"The sale of Stoke Place may not now be able to proceed. There is not an option for us to retain the security of the asset as this would form part of the package that the purchasers lenders are looking for. I fully take on board your comments regarding the disproportionate level of security and income that we will be losing if we only reduce the debt by £4.75m. I believe the case could be put if we had by now had the expected debt reduction from the sale of the Paragon but it is a case of cart before the horse in this instance. Tej is under pressure to complete the sale or lose it but I have explained our position and if both could have been completed simultaneously then I would have still sought a recommendation. However whilst the Paragon sale is still very much on and all parties are agreeable to the course of action outlined above I cannot see how we can get comfortable with Stoke Place being released at this stage.

I would welcome a discussion to see if there is another way round this at your earliest convenience so I may go back to Tej and advise him formally of our decision."

Again the obvious inference is, and I find as a fact, that Mr Seavers had spoken to Mr Dhillon and explained the Bank's difficulties with the proposal in relation to Stoke Place, and that Mr Dhillon was the source of the statement that he was under pressure to complete the sale or lose it.

104. Later that day Mr Simmonds sent Mr Seavers an e-mail saying:

"The lender's solicitors have requested that we are to hold the executed DS1 and Deed of Release with the documents being held to your order pending completion.

Is this something which you can agree to?"

Mr Seavers was asked about this in cross-examination and it was suggested to him that this document, with its reference to "the lender", was one of a number of documents which put him on notice that there was a re-finance rather than a sale. He did not accept that and said that he understood that what was being referred to was the lenders who were lending to the purchasers. If one just looks at Mr Simmonds' e-mail in isolation that may seem a little surprising; but when one reads it with the e-mail that he had written that morning in which he referred to the impossibility of the Bank retaining the security of the asset as it would form "part of the package that the purchasers lenders are looking for", it becomes entirely believable that Mr Seavers understood the reference to the lenders as being the lenders to the purchasers who were proposing to buy a majority stake in the company and who required security over the hotel, rather than to a potential re-finance by SPHL with a lender. (A similar point could be made about the reference in Mr Simmonds' e-mail of 3 December to "the proposed re-mortgage"; whatever might have been understood from that if it stood alone, Mr Seavers spoke the next day to Mr Dhillon who asked for the release of the Bank's security in the context of a sale of 60%, not of a straight re-mortgage).

105. On 11 December Mr Bains sent Mr Seavers an email saying that Mr Dhillon had asked him to clarify the situation regarding the management contract with the investors. He said that Mr and Mrs Dhillon had sold a greater shareholding to raise a sufficient sum to secure the discharge of the Bank's charge, and had negotiated a larger fixed fee (£475,000) for DHL providing management. That contract was for 5 years and allowed for an increase in the fees in line with the RPI. He continued "Tej states that the loss of income for the group will therefore not be as great as might first have appeared". It was put to Mr Dhillon in cross-examination that this was his reaction to the Bank's initial negative response to the share sale proposal; Mr Dhillon said he had very limited involvement in any share sale and that it was something that Mr Bains was negotiating. He was asked whether Mr Bains was indeed reporting what Mr Dhillon had said to him; Mr Dhillon denied it. I do not accept this evidence. The fact that the Bank had declined to agree to the release of security over Stoke Place posed a serious obstacle to Mr Dhillon's plans, as without that he could not proceed with the loan from HSBC. I find as a fact that Mr Dhillon agreed to the Bank being told that he had sold a higher amount and also negotiated a higher income in the hope that that would satisfy the Bank and allow the transaction to proceed.
106. On 14 December Mr Bains sent an email to Mr Seavers, copying in Mr Dhillon, saying that Mr Dhillon had asked him to forward a copy of the MSA and enclosing a copy. This was a 12 page agreement between SPHL, DHL and Mr and Mrs Dhillon, which provided for DHL to make the services of Mr and Mrs Dhillon available to SPHL as a Managing Director and Marketing Director respectively, and also to provide a full and ongoing management service commensurate to a luxury boutique hotel, in return for a fee of £475,000 per year, of which £175,000 was attributable to the provision of Mr and Mrs Dhillon as Managing Director and Marketing Director. Mr Dhillon denied that he had asked Mr Bains to forward the MSA, and said that he did not always open his e-mails. I find this difficult to accept: Mr Bains would have had to have been bold indeed to send Mr Dhillon a copy of a 12 page agreement ostensibly committing him and his wife to act as directors for the next 5 years if he knew nothing about it. I find as a fact that Mr Dhillon knew that Mr Bains was sending Mr Seavers the MSA. The suggestion that this had been negotiated and agreed was, needless to say, a complete fiction.
107. On 14 December Mr Gold emailed Mr Seavers effectively saying that they would not be able to support the proposal for the sale of Stoke Place without the sale of the Paragon, because they did not want to end up with the sale of the poorer performing site (Paragon) not completing whilst losing a strong performer (Stoke). On 16 December Mr Seavers replied to Mr Gold. In relation to the Stoke Place sale he started with a few lines on why Mr Dhillon was looking to sell it, referring to Mr Dhillon's longer term vision being to build the "modern English coaching inn" brand and that Stoke Place did not fit the criteria for the brand. He continued:

"His initial desire was to retain a reasonable minority stake in the business whilst at the same time entering into a management contract to run the hotel on behalf of the purchasers. Following our discussions he has accepted that his minority stake will have to be a lot less in exchange for receiving an increased cash up front price and larger now fixed fee contract for managing the hotel.

The deal will now see the Bank receive £5.95mn on completion and the management fixed fee of £475k for the next 5 years….

Our initial concern regarding the uncertain future income stream has to a large degree been mitigated by the fixed fee rather than a performance dependent contract…

Finally, the urgency that is driving the sale of Stoke Place is tax related as far as the purchasers are concerned and the deal will be lost if it cannot be completed before the year end but in reality due to Christmas, that means in the next few days."

His recommendation was to agree the release of Stoke Place in exchange for £5.95m debt reduction. Again this reads as if Mr Seavers had been talking to Mr Dhillon himself.

108. On 17 December Mr Gold replied that a presentation would need to be made to the Credit Committee. Mr Seavers therefore prepared a submission, which is dated 17 December and refers to the deal as seeing the Bank receive £5.95m on completion and a management fee of £475k for the next 5 years payable to DHL. That was supported by Mr Gold and Mr Lynch as the Level 2 executives. They commented that market value of the hotel as at September 2007 was £8.25m (and the bank value £5.775m); the level of debt being sought by the proposed new owner was unclear, and thus the impact of debt repayment obligations was currently uncertain. They were supportive of the proposed sale subject to a number of conditions including a copy of the share sale agreement being provided to, and satisfactory to, the Bank, the Bank being provided with confirmation of the terms of funding being provided to the purchaser, and an assignation (or assignment) of the management charges payable under the terms of the MSA from DHL to the Bank.
109. The Credit Committee meeting was fixed for Tuesday 22 December so on Monday 21 December Mr Seavers e-mailed Mr Bains asking for a copy of the share sale agreement, and telling him that the Bank wanted to know the terms of funding being provided to the purchasers, and would require an assignation of the management charges. Mr Bains therefore wrote a letter to Mr Seavers which was e-mailed to him that afternoon in which he said:

"We are unable to provide a copy of the Share Sale Agreement without obtaining the Purchasers prior written authority due to the nature of the Confidentiality Agreement that was entered into."

(I suspect the true reason was that Mr Bains had not anticipated that the Bank would need to see a copy and he had not yet drafted it). He then summarised its main terms these being that the consideration was £7.35m for 80% of the issued share capital, with a retention of £1.2m to be paid one year after the date of completion; and (at point 12):

"There will be a new mortgage in favour of HSBC Bank PLC. The terms of this will be as follows:-

Loan amount - £4.5 million.

Interest rate – 2% over base.

Interest only – Term – 10 years from the date of completion.

Personal Guarantee from one of the new shareholders for the full amount.

There is an early repayment charge of 5% of the loan amount for the first year of the loan and 2.5% in the second year."

It was suggested to Mr Seavers that point 12 of these summarised terms put him on notice that there was to be a loan from HSBC to be secured by a mortgage. Mr Seavers said that his understanding in the light of paragraphs 1-11 and the previous communications was that this was a loan to the purchasers to enable them to purchase the shares, not a loan to SPHL, and therefore that he was not on notice that what was contemplated was a straightforward re-financing. I accept this evidence which seems to me to be inherently credible.

110. The next day, Tuesday 22 December 2009, saw a very large amount of activity between on the one hand the Bank, and on the other both Mr Bains and Addleshaws. At 10.13 Mr Bains sent Mr Seavers the draft SPA. This was drafted as an agreement between Mr and Mrs Dhillon as Seller and the Hothis as Purchaser, and as summarised in Mr Bains' letter of the previous day provided for the acquisition by the Hothis of 80 of the 100 issued shares in SPHL at a price of £7.35m of which £6.15m was to be paid on closing and a retention of £1.2m to be paid within 1 year. The payment of the retention was however subject to provisions contained in the SHA, a document which had not been provided to the Bank. Mr Seavers forwarded that to Mr Gold and Mr Lynch saying "We should receive £6.1m net after fees".
111. In the course of the morning the Credit Committee met and approved the proposed sale of a majority holding in SPHL subject to a number of conditions, including the review of the SPA and SHA by the Bank's solicitor, the obligation under the SPA in respect of the £1.2m deferred element of the share purchase being formally assigned to the Bank, and the assignation of the management charges payable under the terms of the MSA from DHL to the Bank. Mr Gold e-mailed Mr Seavers to the effect that they had noticed that there was a separate SHA referred to in the SPA, and pointed out that both documents would need to be reviewed by Addleshaws.
112. Mr Seavers spoke to Ms Sarah Broadhead at Addleshaws and then sent her the SPA, and asked her to review it together with an assignment document that was being drawn up. Ms Broadhead in fact asked another associate solicitor at Addleshaws, Ms Kate Matthewson (now Mrs Cook), who gave evidence before me, to do this and Ms Matthewson in turn got Mr James Tatro, another associate, to help her. Mr Tatro asked Mr Seavers for a copy of the SHA. Ms Matthewson sent a draft deed of assignment to Mr Bains. Mr Tatro sent a draft report on the SPA to Mr Seavers with a number of recommended amendments; among other things he pointed out that the agreement contained a clause prohibiting assignment. Mr Seavers therefore sent an e-mail to Mr Bains timed at 17.08 with the subject "Share Purchase Agreement" passing on the amendments which Mr Tatro had recommended. This e-mail was copied to Mr Dhillon. He was asked about it in cross-examination and said he had not seen the e-mail at the time, he was at home and did not have a computer. Mr Bains also sent Mr Seavers a version of the SHA, a 27 page document expressed to be made between (1) the Hothis (2) Mr and Mrs Dhillon (3) SPHL and (4) "Stoke Place Hotel". (This does not make sense as there is nothing to suggest that the hotel was a legal entity; again I suspect that he had drafted it in a hurry, not having drafted it earlier). By that evening Mr Tatro had reviewed the SHA and produced an amended report, and Ms Matthewson had sent Mr Bains a list of eleven outstanding points to be dealt with and the full suite of documents to be executed (8 in all).
113. Also that evening at 21.11 Mr Seavers e-mailed Mr Dhillon with the subject "Letter to be faxed to the bank" as follows:

"Tej

Please print out the brief note below, then if both you and Sarina would sign it and fax it to me on 020 7344 1236 ready for completion.

I'll speak to you before we apply any surplus proceeds…"

The e-mail then contained the text of a letter from Mr and Mrs Dhillon to Mr Seavers as follows:

"On receipt of the £6.1m proceeds from the sale of our 80% shareholding in Stoke Place Hotel Ltd please in the first instance repay the indebtedness of Stoke Place Hotel Limited then apply any surplus proceeds towards the indebtedness of Dhillon Hotels Limited, Liongate Limited or Crown Hotel (Amersham) Limited."

Mr Dhillon undoubtedly did receive this e-mail as he forwarded it at 8.23 the next morning to Mr Bains. He said he might have done it on his Blackberry, but did not pay any attention to the e-mails. If Mr Seavers had asked him to sign something he would do so. I do not accept this evidence, which does not explain why he forwarded it to Mr Bains rather than do as Mr Seavers had asked him to which was to print it off, sign it and fax it back. I find that the explanation is that he and his wife had already arranged to attend Mr Bains' offices in Watford that day to sign documentation and it was therefore easiest to deal with this with Mr Bains at his offices. But in order to decide this, Mr Dhillon must have read the e-mail sufficiently to see what it was about, and if he had done so he would have seen the reference to sale proceeds, and to the sale of their 80% shareholding.

114. Wednesday 23 December 2009 also saw a flurry of activity. Mr and Mrs Dhillon drove to Watford. Mr Dhillon accepted that Mrs Dhillon was not happy about having to attend: her parents were arriving that day for the Christmas holidays and she wanted to get things ready at home for them. It was snowing and it took a long time to get there. It was suggested to Mr Dhillon that he must have recognised that there was some important and significant reason to make the trip. He said that he was finalising any documentation that Mr Bains wanted him to sign in relation to the re-finance. In fact I am satisfied that the documents which he and his wife signed were the suite of documents required to complete the ostensible sale of shares. Mr Dhillon had some difficulty in cross-examination in explaining whether he thought they were all connected with the re-finance, or with the possible share sale, not least in view of the fact that several of them were signed by him on behalf of DHL (including minutes of a board meeting) and there was no obvious reason why DHL should have had anything to do with a straightforward re-finance by SPHL; and because among other documents were one-page Notices of Assignment (of the SPA and MSA) which referred prominently to "Share purchase agreement" and "Management and services agreement" respectively, in each case on the page that Mr Dhillon signed. His eventual position was that he didn't really focus on what he was signing; he thought the documents mainly related to the re-financing but that some of them might relate to the share sale.
115. There is one other matter of relevance. Mrs Dhillon had prepared an extraordinary document which said that she had been forced over the last year to sign documents, and that her husband had got very angry and bullied her into this; she said that she had asked him to sign the document but he would obviously only sign if she agreed to sign his papers, adding:

"To be honest living with him if I do not sign his documents would mean even more hell that I am living today."

Mr Dhillon accepted that he signed this document and would have signed anything to keep the peace.

116. I do not accept Mr Dhillon's evidence that he did not focus on, or know, what the documents were that he was signing. His evidence that he thought that they mainly related to the re-financing did not ring true; the documents relating to the re-financing had probably already been signed some time before. The hold-up in completion, as I am satisfied that he appreciated, was not with the HSBC loan, which was ready to be drawn down, but with the Bank which would only agree to release its security once it had the documents its solicitors required. Those documents of course all related to the fictitious share sale. I find as a fact that Mr Dhillon was indeed very keen to get the documents signed, which is why he required his wife to come with him to Watford despite her reluctance to do so, and why he was prepared to sign his wife's document, but the reason he was so keen was that he understood that the ostensible share sale documents had to be completed to the satisfaction of the Bank so that they would agree to release their security and the loan from HSBC could be drawn down.
117. In the course of the morning of 23 December 2009 Mr Seavers reported to Mr Gold on where matters stood, saying that completion was expected that day. Among other things he attached the letter from Mr Bains of 21 December 2009 summarising the terms of the share sale agreement, and drawing attention to point 12 which he described as follows:

"At point 12 you will note the terms of the purchasers funding which I outlined on our Committee call. I believe that we have agreed that these (generous) terms do not put too much of a strain on the cashflows of Stoke Place such that it will be able to service both the debt and the all important management fee."

That confirms that he had understood the reference to a new mortgage in favour of HSBC Bank in point 12 of Mr Bains' letter as being a reference to funding for the purchasers.

118. By the end of the day the transaction had not completed. One of the documents which had been signed by Mr and Mrs Dhillon was a confirmatory letter addressed to the Bank confirming that any sums received by way of deferred consideration under the SPA should be applied in reduction of sums owed to the Bank by themselves or any of the companies. But after this letter had been signed, the Bank asked for a slightly revised version under which Mr and Mrs Dhillon also agreed not to amend or waive any term of the SHA without the Bank's consent. This needed to be signed, and at 10.45 on 24 December 2009 Mr Bains e-mailed the revised version to Mr and Mrs Dhillon "for signature and return to me today". Very shortly afterwards, at 10.52, Mr Dhillon replied "We signed and biked back". This too was a one-page document, which referred to the sale of 80% of the shares, the SPA and the Hothis, and, as was accepted by Mr Dhillon, clearly had nothing to do with re-financing. He said however that he did not read it. This seems unlikely, and I do not accept that he had no idea what it was. He and his wife had gone to Watford the previous day specifically to sign the necessary documents, which had led to a major disagreement between them, and it would be surprising if he really had no curiosity as to what this revised document was.
119. Also on the morning of Thursday 24 December 2009 Mr Seavers dealt with a minor point on the form of release of the Bank's debenture. He reported:

"Just checked with the solicitors who requested these. Apparently HSBC the purchasers bankers, are looking for a formal deed from us confirming release of the whole debenture rather than just an MG02."

That again tends to confirm that Mr Seavers, although aware that HSBC were lending money in connection with the transaction, believed them to be the bankers to the purchasers of the shares rather than re-financing SPHL. Similarly, Mr Seavers was asked about an e-mail from Mr Bains timed at 12.18 that morning in which he said that "I am not yet in receipt of the monies from HSBC's lawyers although I understand that they have been asked to send them to me." It was suggested to Mr Seavers that this was another indication that HSBC were lending on the transaction, but, as before, HSBC's involvement was, so far as Mr Seavers was concerned, readily explicable on the basis that he understood them to be lending money to the purchasers.

120. Mr Bains' e-mail of 12.18 was copied to Mr Dhillon, as was an e-mail at 12.29 re-sending it, this time with the attachment. Its subject in each case was "Shareholders' agreement wording". Mr Dhillon, who said that they were about to complete the deal (that is with HSBC), said that he had no idea why Mr Bains was still dealing with a shareholders' agreement, and was unable to explain what he thought Mr Bains was doing. In his e-mail of 12.18 Mr Bains had told Ms Matthewson that he was running out of time as he had to leave at 12.30 that day. At 12.45 Ms Matthewson sent an e-mail to Mr Bains summarising what was required for completion to occur that day but she did not get a response, and when she tried to telephone him she was unable to contact him. So although the money was drawn down from HSBC at 12.30 that day, the transaction with the Bank did not in fact complete then.
121. The matter was picked up again on Tuesday 29 December. Mr Bains had initially said that he was not going to be in the office between Christmas and 4 January but he came in on 29 December in order to try and complete the transaction. Among other matters, Ms Matthewson wanted a further revision to the confirmatory letter, and sent Mr Bains a revised version asking for it to be executed. In the event however Ms Matthewson was waiting for instructions from Mr Seavers, and Mr Seavers was involved in a minor car accident and was not able to give those instructions, so the matter went off again.
122. On Wednesday 30 December Ms Matthewson and Mr Bains spoke in the morning; one of the outstanding matters was the further revision to the confirmatory letter. At 10.54 Mr Bains e-mailed Ms Matthewson to say that his clients would fax that document to her direct; that appeared to be the only outstanding matter before the transaction could be completed. At 10.56 Mr Bains forwarded a copy of his e-mail of 10.54 to Mr Dhillon. At 11.13 Mr Seavers emailed Ms Matthewson to say "Tej Dhillon says he faxed you direct with the confirmatory letter but is faxing it again now so you should hopefully have that very shortly." At 11.16 Mr Bains e-mailed Ms Matthewson with a copy of the confirmatory letter which he had received by fax from his clients adding "They state they have sent you a copy by fax direct." It is apparent from this that Mr Seavers spoke to Mr Dhillon before 11.13 and Mr Dhillon told him he had already faxed the confirmatory letter to Ms Matthewson, and would do so again, and that he also for good measure faxed it to Mr Bains. That shows that Mr Dhillon realised that it was a matter of some importance, and it seems likely that Mr Seavers had told him that it was the final piece of the jigsaw needed before the transaction could be completed. Mr Dhillon could not explain why anything still needed to be done when he knew that the re-financing with HSBC had completed 6 days before. I find that he knew perfectly well that although HSBC had sent the money through, the Bank still needed to be satisfied, and that the Bank would only be satisfied with finalised documentation relating to the fictitious share sale.
123. At 11.30 Ms Matthewson and Mr Bains spoke on the telephone and she authorised him to complete the transaction. He confirmed in an e-mail of 11.37 that he had completed and confirmed that to his clients, and was dating the completion documents that day. He transferred £6.1m from the Bains & Co client account to Mr and Mrs Dhillon's joint account with the Yorkshire Bank, and a further £2.5m to Mr and Mrs Dhillon's account with the Halifax. Mr Bains' e-mail of 11.37 was copied to both Mr and Mrs Dhillon. Mr Dhillon was asked what it was that had been completed, but he said that he wouldn't pay attention to the e-mail and did not now understand why Mr Bains was conducting something else. I do not accept this evidence. I see no reason to doubt, and every reason to accept, that Mr Bains did tell Mr Dhillon that the transaction with the Bank had finally gone through. I find that Mr Dhillon knew that the Bank had to complete its side of the transaction, and would have wanted to know when that happened, and that Mr Dhillon understood that so far as the Bank was concerned the transaction was the share sale.
124. There was one post completion matter to deal with. So far as the Bank was concerned, the £6.1m represented a consideration payable to Mr and Mrs Dhillon personally for their shares. That was why it was transferred into a joint account in their name. It was however intended to be used to discharge an indebtedness of SPHL and various liabilities of other Dhillon companies for which SPHL was liable under a cross collateralisation. That meant that the Bank understood that Mr and Mrs Dhillon would be advancing the £6.1m to the various companies in order to enable them to discharge their debts to the Bank, and hence that the companies would owe the Dhillons money on their directors' loan accounts. The Bank was alive to this point and wished the directors' loans to be subordinated to the liabilities of the companies to the Bank. On 4 January 2010 Mr Seavers picked up this point with Ms Matthewson saying:

"I believe we need to catch up on the matter of the formal postponement of the directors loans and I am meeting with Tej Dhillon tomorrow so will come back to you shortly with exact details on amounts and which companies etc."

On Monday 11 January he followed that up, asking Ms Matthewson to prepare loan subordination deeds in the amount of £185,307 which Mr Dhillon put into Liongate and £3,380,534 which went into DHL. The natural inference is that Mr Seavers discussed these details with Mr Dhillon on 5 January, and in doing so it seems likely that he would have explained about the directors' loans and how they arose. On 29 January Ms Matthewson sent the engrossment versions of the two subordination deeds to Mr Bains asking him to arrange for them to be executed. Ms Matthewson chased him on 4 February and again on 10 February, without success, and Mr Seavers then emailed Mr Dhillon on 10 February at 12.51 the subject being "Dhillon subordination deeds", saying "Tej Have you signed these yet?" Mr Dhillon replied by email at 13.45 "Yes", and the signed deeds were later sent through, followed by minutes of board meetings of each of Liongate and DHL which were dated 17 February 2010 and signed by Mr Dhillon as chairman of each meeting. Mr Dhillon was asked about these documents but said that he didn't pay attention to them and would have signed them if asked. I find that it is probable that Mr Dhillon appreciated that they were only needed because Mr Seavers understood that the transaction that had taken place was a share sale.

125. There is one other small but telling detail. It will be recalled that the Bank, as part of the transaction, took an assignment both of the deferred consideration payable under the SPA, and of the management fee of £475,000 payable under the MSA. One would have expected Mr Seavers as the relationship manager to be astute to see that these sums were received. In fact he took no steps to see that the deferred consideration was paid to the Bank. He was asked in cross examination about this and accepted that that was an oversight on his part. It was also suggested to him that he had not taken any steps to confirm that the management fee was being paid. He replied that he had been told, and had checked, that the management fee was being received by DHL. He referred by way of example to an e-mail of 13 July 2010 in which Mr Clark sent to him, copied to Mr Dhillon, what he described as the "May figures". These were monthly management accounts for each hotel and included a monthly profit and loss account broken down for March, April and May 2010 for Ye Olde Bell, the only hotel still operated by DHL. They also included a profit and loss account for the same months for what was described as 'Consolidated Dhillon Hotels'. A comparison of the figures on the two sheets shows that the Revenue was in each case the same save for one line item, namely "Other". The figures for Ye Olde Bell for Other were £1,564 (March), £1,453 (April), and £3,112 (May). The corresponding figures for the consolidated account were £41,147, £41,036, and £42,695. Mr Seavers said that he understood that the difference was accounted for by the management charge payable by SPHL to DHL for managing Stoke Place. The difference in each case is in fact £39,583, which (ignoring pence) is exactly 1/12 of £475,000. On this basis I accept Mr Seavers' evidence that the figures sent to him did indicate that the management fee was being received.
126. Since the management fee only arose under the fictitious MSA and was not in fact received, this indicates that someone had told Mr Clark to include an extra £475,000 per year in the accounts sent to Mr Seavers. The only realistic candidate for that is either Mr Bains or Mr Dhillon. It seems highly unlikely that Mr Bains would have done that, as his role was to act in respect of legal transactions and there is nothing to suggest that he involved himself at all in the question of ongoing reports from Mr Clark to the Bank. Mr Dhillon was asked about this and could give no explanation: he suggested that Mr Seavers might have asked Mr Clark to do that. That I regard as having no foundation in reality at all: even if for some inexplicable reason Mr Seavers had suggested it, Mr Clark would have been bound to raise it with Mr Dhillon (as indeed he would have done if Mr Bains had suggested it). It is far more probable, and I find as a fact, that the instruction came from Mr Dhillon in the first place. This by itself is sufficient to demonstrate that his repeated assertions that Mr Seavers knew that the transaction was a re-finance and not a share sale, that Mr Dhillon himself only ever entertained the possibility of a share sale as a fallback, and that he knew nothing of the lies told by Mr Bains to the Bank, which he was doing for his own reason, must all be rejected; by this stage the re-finance had long since gone through, and the only possible reason for including this amount in the accounts was to keep up the pretence that the transaction that had been carried out was a share sale with associated management fee.
127. One of the witnesses for the Bank was Mr Merzak Kaddour. He had first met Mr Dhillon in late 2005, when he was working at the Bank of Ireland and was asked to look at the possibility of that bank re-financing the Dhillon companies' existing facilities. That meeting took place at Stoke Place. In early 2012 Mr Kaddour, who was by then an employee of the Bank, suggested to Mr Seavers that he should have a meeting with Mr Dhillon so that he could assist as a "fresh pair of eyes". A meeting was duly arranged and took place on 5 March, and Mr Kaddour was shown the Crown and Ye Olde Bell. Mr Kaddour's evidence was that he asked about Stoke Place, which he remembered from his time at the Bank of Ireland, and that Mr Dhillon told him that it had been sold and he was continuing to run it under a management and services agreement. He was cross-examined about this but was quite categoric that Mr Dhillon had said it had been sold; he was really surprised because he remembered the hotel and how much time Mr Dhillon and his wife had spent on it, and that it had been the "jewel in the crown", and the "pride and joy" of DHL.
128. By July 2012 the Bank had become aware of serious irregularities in relation to some of the lending to the Dhillon companies. Mr Kaddour was asked to arrange a meeting with Mr Dhillon. Mr Dhillon was on holiday in Bali, but a meeting was arranged for 3 August 2010 at the offices of his then solicitors, Clyde & Co, which he would attend by video conference (in fact Mr Dhillon said that although he did attend from Bali he could only hear and not see the other participants). On 2 August 2012, Mr Kaddour drafted and sent to Clyde & Co an agenda for the meeting which included, under the heading "Recap of relationship history to date", a reference to "Stoke Place (sale & deferred consideration, management contract)." A note of the meeting indicates that when Mr Paul Rayner (a senior employee of the Bank) asked for an update on the sale of Stoke Place, Mr Dhillon said that he had not sold Stoke Place. The note records that Mr Kaddour reminded Mr Dhillon that Mr Dhillon had told him that he had sold 80% of the hotel and had a management agreement in place, to which Mr Dhillon had said he could not remember saying this. He further confirmed that the Group had not sold Stoke Place but had re-financed it: contracts for sale had been exchanged but then HSBC had come up with sufficient finance for the sale not to occur. Mr Dhillon also confirmed that there had been a party interested in purchasing Stoke Place but that the sale had fallen away and that he had told Mr Seavers this at the time.
129. I accept Mr Kaddour's evidence of what Mr Dhillon told him on 5 March 2012, supported as it is not only by his adamant recollection but by the terms of his agenda, and the note of the meeting on 3 August 2012. That means that Mr Dhillon was still lying to the Bank in March 2012 in an effort to perpetuate the pretence of a sale; and that although he had abandoned that by August, he not only denied saying what he had said, but told two further lies in the meeting of 3 August 2012, namely that contracts had been exchanged with a purchaser but HSBC had subsequently come up with sufficient finance; and that he had told Mr Seavers at the time that the sale had fallen away. Both were simply untrue.
130. I find therefore that Mr Dhillon participated in a sustained fraud on the Bank consisting of numerous deceitful misrepresentations made by Mr Bains. Save for one point (which I will come back to), there was no significant disagreement on the law or dispute that in those circumstances Mr Dhillon would be liable for the tort of deceit. The representations pleaded were (i) that the transaction at all times in contemplation was a share sale transaction; (ii) that Mr and Mrs Dhillon had in fact sold 80% of their shareholding and that the transaction had completed on 30 December 2009; and (iii) that the terms of the sale were as shown in the SHA, SPA and MSA and various other documents under which the Bank was to receive an initial payment of £6.1m and deferred consideration and management fees. Mr Cutting specifically accepted that these representations were made by Mr Bains, were untrue, and were known to Mr Bains to have been untrue. It also seems to me not seriously capable of dispute that Mr Bains intended the Bank to rely on the representations by releasing its charge over Stoke Place and the debenture; and I find that the Bank did so rely on them – the only possible basis for a contention to the contrary is that Mr Seavers was aware that the transaction in question was a re-finance, but as already indicated I do not accept that. His evidence was that he thought throughout that the transaction was a sale of shares, which is supported by his reaction when he was first told, in November 2012, that Mr Dhillon had refinanced Stoke Place with HSBC. He said that was the first he'd heard about that, that it was news to him and that all he ever envisaged was a sale.
131. Mr Cutting also accepted as a general proposition of law that a person may be liable in deceit as a joint tortfeasor if he is a knowing and active party to a scheme to defraud even if has not himself said anything and the actual representation has been made by someone else: see Dadourian Group International Inc v Simms [2009] EWCA Civ 169 per Arden LJ at [84]:

"It is sufficient for a person to be liable as a joint tortfeasor if another commits a wrongful act pursuant to a common design between the two of them that such act be committed. It is not necessary for that person also to have committed a wrongful act."

(This was said specifically in relation to the tort of deceit). In the light of my findings, this exactly describes the position of Mr Dhillon: he did enter into a common design with Mr Bains that the Bank should be told that he had entered into the fictitious share sale transaction, and all the many lies told by Mr Bains, including the specific representations pleaded by the Bank, were committed by Mr Bains pursuant to that common design.

132. The one point that leaves is whether the deceit caused the Bank any loss. By Order dated 11 February 2016 Master Matthews ordered (at paragraph 10.9) that the quantum of the Stoke Place claim should be split from the existing trial of the proceedings to be considered at a further hearing to be listed following the conclusion of that trial. That means that I am not concerned with the quantum of any loss. But that by itself that would not I think absolve me from considering whether the Bank had established that the deceit had caused it to suffer any loss at all, as deceit is one of those torts for which damage is the gist of the action. This means that unless the claimant establishes that the defendant's wrongful act has caused him some damage, there is no liability at all: see the discussion by Millett LJ of the comparable case where a trial has been directed on liability but not quantum in a negligence claim in Allied Maples Group Ltd v Simmonds & Simmonds [1995] 1 WLR 1602 at 1622D-F.
133. I was concerned at the hearing that this might be a point of some difficulty. The Bank's pleaded case is that, but for the various representations, it would not have agreed to release its security over Stoke Place and that it has therefore suffered loss equating to the value of its lost security, which it estimated at between £8.25m and £16.4m, less the £6.1m that it received; the figures of £8.25m and £16.4m are taken from the Savills valuation in 2007 and the highest figure shown in SPHL's accounts respectively. But it is at least possible that if the Bank had not released its security when it did, it would have retained it until September 2012 when the other Dhillon companies were put into administration, that administrators would also have been appointed over SPHL and that they would then have sold the hotel and business. I have no evidence that such a sale would have realised more than £6.1m, and the fact that the administrators in fact appointed by HSBC over SPHL only realised £4.25m for its business and assets suggests that it might well not have done.
134. That potentially raised a number of issues, including the date at which loss should be assessed, Mr Wilson's position being that if loss could be shown to be suffered at the date of the transaction that was sufficient to establish liability, citing the decision of Briggs J in 4 Eng Ltd v Harper [2007] EWHC 1568 (Ch) at [46]-[50]. That seems to me to raise quite a difficult point, namely whether a claimant who has been deceived into paying £100 for an asset worth only £50, but who by the time of trial has recouped that loss, has a cause of action at all; or, to apply that to the present case, whether the Bank could establish liability by showing that its security was worth more than £6.1m when it was released, even if the evidence showed that it would not in fact then have realised it and by the time it came to do so it would have received less than £6.1m (in which case one might say that Mr Dhillon has done the Bank a kindness by deceiving it into accepting £6.1m when it did). As it is however I do not need to consider this point as counsel reached agreement that I should not in this judgment decide anything other than whether Mr Dhillon was in principle responsible for the deceit, all questions of loss, including not only quantification of loss, but whether the Bank can establish that the deceit caused it any loss at all, being put off to a further stage.
135. I will therefore simply say that in my judgment Mr Dhillon is indeed responsible as joint tortfeasor for the deceit consisting of the false representations made by Mr Bains which are pleaded and which I have found established, but without prejudging any questions of loss, including the date of assessment of loss and whether the deceit caused the Bank any loss at all.
136. Counsel also agreed that if I reached this conclusion it was unnecessary to consider separately an unlawful conspiracy claim which was also pleaded against Mr Dhillon. I agree that this does not raise any separate issue and I will say no more about it than that I am satisfied for the same reasons that Mr Dhillon and Mr Bains did conspire to use unlawful means (the deceit) against the Bank.

The unauthorised facilities claim

137. Although this is by far the largest of the Bank's claims, and spans by far the longest period, I can deal with it comparatively shortly. The underlying facts, namely that over a period from 2008 to 2012 Mr Seavers was responsible for facilities being granted to the Dhillon companies for which he neither had, nor sought, any authority are not significantly in dispute, and the only real questions of fact that I have to decide are whether, as Mr Seavers asserts, he made it clear to Mr Dhillon that the facilities were unauthorised, and, if so, when this was; and there are then some questions as to what the legal consequences are.
138. The story starts in June 2008. Mr Bains told Mr Seavers that Mr Dhillon was looking to exchange contracts to buy a new house at 19 Melbury Road, Kensington and asked for funding (see Paragraph 68 above). The upshot of that was that on 23 June 2008 Mr Seavers asked the Credit Committee for, and on 25 June 2008 received, approval for a new £675,000 facility by way of a 3 month bridging loan to fund a 5% deposit on the house (the purchase price being £13.5m), to be repaid from part of the deposit on the ostensible sale of the land in India; the loan was to be made to DHL, who would then pass on the money to Mr Dhillon in reduction of the amounts owing to him on his director's account. It was a condition of the loan that Mr Dhillon's solicitor (Mr Bains) provide an undertaking to repay it by 30 September 2008, and on this basis the loan was advanced on 25 June 2008, the actual amount being £659,775. However when the time came for repayment, Mr Bains told Mr Seavers that the money had not in fact been needed immediately and had been placed on deposit in a 7 day notice account. In the end, the loan was "rolled over", that is the amount of the original loan was debited to DHL's account on it maturing on 30 September 2008, but at the same time a new loan of £659,775 was credited to the account. This new loan was what was referred to as a "Treasury loan", which was a type of short-term LIBOR-linked loan, and was itself for a term of one month, to 31 October 2008. Mr Seavers did not seek, and did not have, any authority to roll over the loan in this way. On 31 October, the loan was rolled over again, this time until 10 November 2008; and this was then done repeatedly thereafter. None of this was authorised, and indeed Mr Seavers told the Credit Committee in a number of reports from November 2008 onwards that the facility had not been used.
139. A second example of unauthorised lending was a loan of £750,000 drawn down on 22 September 2008. Mr Seavers had obtained approval from the Credit Committee in July 2007 for a £750,000 overdraft facility in favour of DHL. That was drawn down on 30 July 2007. In June 2008 Mr Seavers prepared, and got Mr Dhillon to countersign, a facility letter for a further £750,000 loan, ostensibly pursuant to the same credit approval but without referring back to the Credit Committee; and £750,000 was drawn down under this facility on 22 September 2008. This was rolled over on 31 October 2008, and again on 28 November 2008, and repeatedly thereafter. Mr Seavers had no authority to advance this loan.
140. In January 2009 Mr Dhillon approached Mr Seavers for a new £2.85m facility for refurbishment of Ye Olde Bell. Mr Seavers applied for approval by way of a business credit submission dated 13 January 2009 (in which among other things he said that the £675,000 facility was not needed, without disclosing that he had advanced £659,775 against it which was still outstanding, or indeed disclosing the £750,000 unauthorised loan); the Credit Committee gave approval for a £2.5m facility subject to a number of conditions precedent. Despite not receiving confirmation that the Credit Committee was satisfied that the conditions had been met, Mr Seavers proceeded to make a series of new advances, by way of Treasury loans, in March and April 2009, the total amounts drawn down being in excess of £2m. In May 2009 the Credit Committee confirmed that they had withdrawn their conditional approval for the £2.5m facility; Mr Seavers did not disclose that he had already made over £2m of Treasury loans.
141. As loans matured Mr Seavers rolled them over, or on occasion consolidated them by rolling two or more loans into one new larger one. For example the loan of £659,775 and a loan of £155,000 first made in April 2009 were consolidated in July 2009 into a new loan of £814,775; the loan of £750,000 and 7 other loans made in the course of 2009 were consolidated in November 2009 into a new loan of £4,597,775, and so on. A large part of this latter loan was repaid out of the £6.1m that the Bank received in respect of Stoke Place. After repayment of what SPHL itself owed, and a small authorised loan to Liongate, almost all the rest of the money, amounting to a sum of over £3.2m, was used in this way, reducing the outstanding balance on the £4.59m loan to £1,337,441.84 which was itself rolled over into a new loan.
142. From January to June 2010 Mr Seavers continued to make a series of fresh unauthorised Treasury loans. In June 2010 he rolled all of these into the PDF (the Property Development Facility), an unauthorised facility that he had set up by way of a LIBOR-linked overdraft account in May 2009, but did not use until June 2010. By then the various outstanding Treasury loans had grown again to just under £4m; Mr Seavers repaid all of them by debiting the PDF.
143. Thereafter Mr Seavers' modus operandi was rather simpler than it had been. When more cash was needed by Mr Dhillon, he advanced funds under the PDF. As the borrowing grew, he issued new facility letters in increased amounts; and periodically increased the overdraft limit on the PDF account in order to avoid the outstanding balance exceeding the limit. It is not necessary to set out all the details, but a few examples will suffice to show the inexorably increasing amounts: on 31 March 2011 he increased the limit to £8m, on 24 August 2011 to £11.65m, on 2 March 2012 to £15.29m, and finally on 28 June 2012 to £18.29m. At that date the final drawdown of £500,000 took the amount outstanding to £17,625,729.35.
144. On 14 June 2012 however the Bank had introduced a new procedure for checking borrowing limits inputted on all accounts of £5m or more, with the result that the last increase in the limit triggered investigations which uncovered the lending. That led to Mr Seavers' suspension on 4 July 2012, and in due course his resignation on 26 November 2012.
145. None of these matters was disputed. The critical question is whether the Bank can show that Mr Dhillon knew that the lending was unauthorised. I will say straightaway that I am satisfied that Mr Dhillon did come to know that the lending was unauthorised, although it is not possible to be precise as to the date when he first knew.
146. The Bank primarily relied on Mr Seavers' evidence. Mr Seavers was first interviewed by the Bank on 4 July 2012, and it was his consistent position from then to when he gave evidence before me that he had repeatedly told Mr Dhillon, not at the outset but during the course of the lending, that it was not authorised. I have already said that despite the obvious question marks over his credibility I am disposed to accept Mr Seavers' evidence and on this point I am fully persuaded that it rings true. The explanation Mr Seavers gave for the unauthorised lending, although he himself recognised that it was not a rational thing to do, was that Mr Dhillon had already committed himself to various capital expenditure on refurbishing and improving the hotels, that he needed the money, and that he had promised Mr Seavers that it would be covered by the sale of the land in India and the sale of the Paragon Hotel, which had been put on the market for over £20m. Mr Seavers appears to have thought that as the money would be spent on improving the hotels and the India and Paragon sales would clear all the unauthorised lending, the Bank would not lose out in the end; but as time passed and neither the Indian land nor the Paragon sale produced any money, he must have become increasingly worried, and it was only natural that he should tell Mr Dhillon what he had done and what a risk he had run for him. The way Mr Seavers put it in his witness statement was that by May or June 2010 Mr Dhillon had been promising him for some time that funds would be introduced to reduce the debt but they had not been forthcoming, and that he spoke to Mr Dhillon, the essence being:

"Look, is this money going to come in, and if so when? You know this is beyond what has been officially sanctioned, beyond my authority. I'm going out on a limb for you – this time the promise has to come good."

In oral evidence the way he put it was that he suspected that Mr Dhillon knew but decided to tell him because he (Mr Seavers) was taking all the pressure and Mr Dhillon wasn't; he needed to get across to Mr Dhillon the message that it simply couldn't continue. I accept this evidence, which is inherently probable. Mr Dhillon himself gave evidence of the meeting when the last of the facility letters was signed at which Mr Seavers appeared nervous.

147. Mr Dhillon denied, both in his witness statement and in oral evidence, that Mr Seavers had ever told him that the facilities were unauthorised, but for reasons that I have already explained, I can place little if any weight on his assertions, and I do not accept this evidence.
148. These conclusions are sufficient to establish to my satisfaction that Mr Seavers did tell Mr Dhillon that the facilities were unauthorised. Mr Wilson relied on numerous other points in support of this conclusion. It is not necessary to go through them all in detail. Apart from general evidence of Mr Dhillon's dishonesty, what they come down to can really be marshalled under two heads.
149. One is that the unauthorised facilities were handled in a quite different way from the authorised facilities. Mr Dhillon accepted in terms that he knew that the Bank must have had procedures for authorising the grant of facilities, and that Mr Seavers had to get credit approval, as indeed is illustrated by Mr Seavers' e-mail of 3 February 2006 when he said that he was awaiting written confirmation from the Committee but could confirm that "we have today obtained approval" for certain facilities (Paragraph 57 above). However in the case of the unauthorised facilities there was nothing to suggest that matters were being put to the Credit Committee for approval, or that approval was awaited. In effect, as Mr Dhillon accepted, the PDF was just used to meet cashflow requirements, and indeed it can be shown that Mr Clark regularly kept Mr Dhillon informed of what was needed for this purpose, which would almost immediately be met by a drawdown on the PDF, and where necessary a further facility letter. The inference which Mr Wilson invited me to draw, and which I do draw, is that Mr Dhillon himself discussed the cashflow needs with Mr Seavers. The facility letters themselves were all in similar form; no new arrangement fees were charged, no new security was sought, and no new valuations were required. The point that Mr Wilson made was that it must have been obvious to Mr Dhillon that fresh advances, and new facility letters, were consistently produced by Mr Seavers, but without any of the attendant formalities that one would expect for substantial fresh loans being required.
150. The second matter is that although the facility letters all referred to the facility being used for the development of Ye Olde Bell, there was no attempt by the Bank to monitor what the money was in fact spent on. A detailed forensic analysis showed that the money was in fact used for a variety of payments such as debt servicing costs, payments to Stoke Place and a very significant amount of personal expenditure by Mr Dhillon and his family, and in effect was just treated as an apparently bottomless source of funds for whatever purpose Mr Dhillon wanted. At the meeting on 3 August 2012 which Mr Dhillon attended from Bali (Paragraph 128 above) Mr Dhillon said that the PDF was for refurbishment and ancillary costs across the hotels; this was confirmed in a letter dated 23 August 2012 from his then solicitors who said that their clients confirmed that all of the facilities had been used to finance the development of properties by the companies; and this was itself later backed up by figures for each hotel which were drawn from the figures for additions to freehold property shown in the companies' statutory accounts. But the GVA valuations obtained by the Bank cast very significant doubt that the sums shown had been spent, and Mr Dhillon in fact accepted that the statement that all the sums had been spent on refurbishment was untrue to his knowledge; the fact however that he felt it necessary to say that was relied on as an indication that he appreciated that the use of the PDF to fund cashflow in an unrestricted fashion was not something that would have been regarded as acceptable by the Bank.
151. I accept the broad tenor of these submissions which do to my mind support the conclusion that I have already expressed based on Mr Seavers' evidence.
152. More difficult is to identify when Mr Seavers first told Mr Dhillon that the facilities were unauthorised. Mr Seavers accepted that he did not tell him at the outset (that is in the summer of 2008). When Mr Seavers was initially interviewed by Mr Gallie on 4 July 2012 he told Mr Gallie that about 3 years before he had got a facility approved by the Credit Committee in a telephone conversation but that they had later withdrawn it; Mr Dhillon had however committed to a spend for capex and improvements and needed the money and Mr Seavers thought the Bank would be repaid from the sale of a couple of hotels and it was easier to pay the money. When asked if the customer thought the drawing was approved, he replied "Pretty much". This is fairly clearly a reference to the £2.5m facility which the Credit Committee gave conditional approval for in the early part of 2009, but which was never finally approved and was withdrawn in May 2009 (Paragraph 140 above). Mr Seavers was then asked by Mr Gallie about subsequent increases, as follows:

"SG Did Dhillon ask for the increase?

AS Yes – but I told him it couldn't continue

SG What do you mean?

AS The land sales need to happen – it has happened but he can't get the money out of India. Paragon was on sale for £22-24m.

SG Was Dhillon aware you'd stepped over the line?

AS Yes – 2 years or so.

SG So he knew and kept coming back for more.

AS Yes – once he'd started development, he was attracting corporate and weekend trade which pays more so he needed to finish the work."

The statement that Mr Dhillon knew that Mr Seavers had stepped over the line for 2 years or so would take the date of knowledge back to mid-2010.

153. Mr Seavers was interviewed again, and in more detail, in November 2012, this time by a Mr Steven Walsh. On this occasion he said this:

"SW Was Dhillon aware that the credit approvals hadn't been gained?

AS Yes. I can't tell you when but 4 or 5 occasions when that specifically came into conversation 18 months – quite early into the process.

SW So we're talking about December 2010-ish that Dhillon became aware?

AS: Yes."

Mr Seavers' reference to "18 months" here is not explained, and was not explored in evidence. Mr Walsh may have taken it as referring to the last 18 months of the facility, that is 18 months back from June 2012, which would indeed take one back to December 2010. It looks more likely that Mr Seavers was instead referring to some 18 months into the process, which, depending on when Mr Seavers saw the process as having started, could put the date as early as the beginning of 2010, although it must be acknowledged of course that he agreed with Mr Walsh's date of December 2010.

154. In his witness statement Mr Seavers said that Mr Dhillon was fully aware that the funds were being advanced without authorisation for the "vast majority" of the period of unauthorised lending. He could not remember the precise occasion when it was first mentioned, but he specifically instanced (i) the fact that in January 2010 some £3.2m of the £6.1m received by the Bank from the Stoke Place transaction was used to repay some of the then outstanding unauthorised facilities and that Mr Dhillon was aware of this; and (ii) a specific meeting at the Bank's Piccadilly office when he made the comments to the effect that he was "going out on a limb" for Mr Dhillon. He put the latter meeting at around May or June 2010 when the PDF was first used. He was naturally cross-examined on these statements but was not shaken on them.
155. This state of the evidence leaves matters rather uncertain. The pleaded case is that Mr Dhillon knew from at least around 2010, which is itself rather imprecise, but in submissions Mr Wilson invited me to adopt the beginning of 2010. Although there is some evidence which would support a date as early as this, and I may be being rather more generous to Mr Dhillon than he deserves, I propose to adopt a date in the middle of 2010, consistent with Mr Seavers' first reaction when interviewed by Mr Gallie and with his recollection of the specific "going out on a limb" conversation as having taken place around the time the PDF was first used (which would make sense). It is not consistent with his acceptance of Mr Walsh's date of December 2010, but it may well be consistent with his own reference to 18 months if, as I suspect, that was meant to be a reference to 18 months into the process. I find on the balance of probabilities that by then, if not before, Mr Dhillon knew that the lending under the PDF was unauthorised. The first drawdown under the PDF was 23 June 2010, and the existing Treasury loans were rolled into the PDF on 30 June 2010 and I will take the latter date.
156. On these facts the Bank's primary claim is in conspiracy to injure by unlawful means. There was little dispute between the parties on the applicable principles. An unlawful means conspiracy requires in essence (i) a combination between two or more people; (ii) to carry out unlawful acts; (iii) with the intention of injuring the claimant; and (iv) which do injure the claimant. Mr Cutting, whose submissions on these points were noticeably realistic, accepted that the key question was whether I was satisfied, as I am, that Mr Dhillon knew of Mr Seavers' lack of authority, and otherwise confined himself to the following points.
157. So far as (i) (combination) is concerned, Mr Cutting said that the Court must consider what objective Mr Dhillon and Mr Seavers shared and whether the attainment of that objective to their knowledge involved unlawful means. I find that Mr Dhillon and Mr Seavers shared the objective that the Bank's monies would be made available to the Dhillon companies, and that both knew that the means to be used to enable that to happen was that Mr Seavers should advance the monies despite not being authorised to do so, and both appreciated that that would inevitably involve Mr Seavers acting in breach of his contractual duties to the Bank. Mr Cutting said that the Court also had to be satisfied that Mr Dhillon joined in the execution of the plan: I am satisfied that he played a key role in regularly asking Mr Seavers for increased facilities to meet the cashflow requirements of his companies, and that this was a sufficient joining in the plan for the purposes of the tort.
158. So far as (ii) (unlawful acts) is concerned, it is accepted that Mr Seavers' actions were in breach of his contractual and equitable duties to the Bank and no more need be said.
159. So far as (iii) (intention to injure) is concerned, Mr Cutting equated that with an intention by Mr Dhillon to benefit himself. That is not I think necessary, and all that is required is an intention that the Bank be damaged. For these purposes it is sufficient that Mr Dhillon appreciated, as I find that he did appreciate, that the effect of Mr Seavers' unauthorised lending was that monies were being advanced which would not have been advanced (or at the very least might not have been advanced) if Mr Seavers had not acted in breach of his duties. That was self-evidently something that would be to the prejudice of the Bank which was deprived of the opportunity of considering whether to make the advances or not. In fact it is likely that Mr Dhillon appreciated that the Bank would never have authorised the facilities if they had been properly applied for, but it is not necessary to go that far: on Mr Seavers' evidence, which I have accepted, Mr Dhillon knew that Mr Seavers was taking risks with the Bank's money which he had no right to take. The intention that that should happen is a sufficient intention to injure the Bank.
160. So far as (iv) (damage) is concerned, Mr Cutting accepted that the Bank had sustained losses in excess of £17m as a result of the actions of Mr Seavers.
161. I therefore find that the Bank has established its case in conspiracy against Mr Dhillon and that he is liable for damages. So far as quantum is concerned, by the end of the argument there was little dispute that account has to be taken of two matters. The first is that Mr Dhillon did not know of the unauthorised lending at the outset, as Mr Seavers himself said. That meant that he was only liable for damage sustained by the Bank after he entered into the conspiracy, which for these purposes can be taken as the date on which he knew of Mr Seavers' lack of authority. I have found that date to be 30 June 2010, by which time the balance outstanding was £4,157,441.84, representing a £200,000 drawdown under the PDF on 23 June 2010, and £3,957,441.84 of Treasury loans which were rolled into the PDF. It seems to me – and Mr Wilson did not strenuously dispute this – that the damage caused by the conspiracy must be confined to further amounts advanced after that date.
162. The second point concerns interest charged to the PDF. Although the Bank initially claimed this interest as damages, that does not seem to me to be justified, and Mr Wilson did not press the point. The purpose of damages in a claim in tort is to put the claimant into the position it would have been in had the wrongful act not taken place. If the conspiracy had not taken place, the Bank would not have made the unauthorised advances, and if it had not made the unauthorised advances it would not have been entitled to the interest charged on them. To put the point another way, each fresh advance represents actual money paid out by the Bank and thereby lost; but the interest ostensibly charged on the unauthorised facilities has not actually been paid out by the Bank. The correct analysis therefore in my judgment is that the Bank's loss is the sum of actual fresh advances made as a result of the conspiracy, and does not include the interest charged under the PDF. Instead the Bank can claim discretionary interest under s. 35A of the Senior Courts Act 1981 (on which see below).
163. The calculation of damages is therefore relatively straightforward. It is the sum of fresh advances made after 30 June 2010, but not including the interest charged to the account. It should also exclude two modest charges of £25 which Mr Wilson told me were for fees. These too do not represent monies actually paid out by the Bank and cannot be claimed as damages. The total fresh money actually advanced between 30 June 2010 and 28 June 2012 by my calculation comes to £12,860,000.
164. That leaves two loose ends. One is that there were three sums credited to the PDF in this period of £27,523.10, £18,000 and £41,005.10 respectively, making a total of £86,528.20. I did not receive submissions as to how these sums affect the amount of damages, but in principle it seems to me that monies actually repaid to the Bank after 30 June 2010 reduce its loss and the damages should be reduced accordingly. That would reduce the damages to £12,773,471.80. That is the sum which seems to me ought to be awarded as damages for conspiracy, but I will hear counsel on whether my calculations are correct and whether they wish to add anything on the deduction of the £86,528.20.
165. The other loose end is the question of interest. It follows from the way that I have calculated damages that the Bank suffered loss in the amount of each advance from the date of advance, and in principle ought to be awarded interest under s. 35A of the Senior Courts Act 1981 on each sum advanced from the date of advance. I will however hear counsel on this, both as to the principle and as to the rate of interest that is appropriate, and also as to how to account for the credits in the calculation of interest.
166. The Bank had alternative claims against Mr Dhillon for knowing receipt and unjust enrichment. Both claims depend on proof of the amount of money in fact received by Mr Dhillon personally. I am satisfied that he did personally receive and benefit from some of the monies advanced but the amounts are very much less than the quantum of the conspiracy claim and neither counsel invited me to spend any time considering these claims if satisfied, as I am, that the conspiracy claim is well founded. I propose to say no more about them.

Summary

167. For the reasons I have given:

(1) On the Guarantee claims I will give judgment against Mr Dhillon for £250,000 and £850,000 respectively, in each case with interest calculated as referred to above (that is from 19 September 2012 to the date of judgment, at a rate of 3.75% above the Bank's base rate, compounded monthly).

(2) On the Stoke Place claim I will grant a suitable declaration reflecting my finding that Mr Dhillon is responsible as joint tortfeasor for the deceit consisting of the false representations made by Mr Bains to the Bank which are pleaded and which I have found established, but without prejudging any questions of loss, including the date of assessment of loss and whether the deceit caused the Bank any loss at all.

(3) On the unauthorised facilities claim, I will give judgment against Mr Dhillon for damages for conspiracy, my provisional view being that the correct sum is £12,773,471.80, together with interest under s. 35A of the Senior Courts Act 1981, and I will hear counsel on the points I have referred to above.