Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION [2009] CSOH 134
	OPINION OF LORD DRUMMOND YOUNG in the cause THE ROYAL BANK OF SCOTLAND PLC Pursuer; against (FIRST) NEIL ROBERT DAVIDSON and (SECOND) DONNA ELIZABETH DAVIDSON Defenders: ­­­­­­­­­­­­­­­­­________________

Act: Mackenzie, Solicitor; Pinsent Masons

Alt: Hood; Lindsays WS

30 September 2009

[1] The defenders are respectively a director and the company secretary of a company known as Red Shark Technologies Ltd. The company was founded by the first defender in 1998, and initially traded from premises in Seahouses, Northumberland, and subsequently from premises in Berwick upon Tweed. The company was involved in the importation and distribution of compatible ink jet cartridges. In the autumn of 2004 the company's banking services were provided by Barclays Bank. At about that time the pursuers approached the company with a view to providing it with banking services. Certain negotiations ensued, and the result was that the company became customers of the pursuers.

[2] Following the transfer of the company's banking business to the pursuers, on 8 February 2005 a meeting took place between representatives of the pursuers and both defenders. At that meeting the defenders signed a personal guarantee of the company's obligations to the pursuers; the validity of that document is, however, put in issue by the defenders, who claim that they signed it as a result of negligent misrepresentations by the pursuers. I will return to this matter below at paragraph [12]. According to the terms of the document that was signed by the defenders, they guaranteed to discharge on demand all of the company's liabilities to the pursuers, together with charges, commission, interest and expenses payable by the company. The guarantee was subject to a limit of £200,000, and it was further provided that the defenders' obligations would be joint and several. The document containing the guarantee was declared to be governed by English law.

[3] The pursuers advanced funds to the company. On 23 January 2006 they made a written demand for payment from the company of the sum of £333,099.19. Payment was not received, and administrators were appointed to the company on 31 January 2006. The administration came to an end of 30 August 2006. The pursuers aver that, following the administration, an amount in excess of £200,000 remained payable by the company to them. A demand for payment of £200,000 was sent by the pursuers' agents to each of the defenders on 1 November 2007. The pursuers aver that that sum has not been paid. They have raised the present action for payment of the sum of £200,000 from the defenders, together with a sum of £12,447.95, which is said to represent interest accrued until 10 September 2008.

[4] The defenders dispute that they are liable to make payment of the foregoing sums. On the substance of the pursuers' claim, the principal line of defence is that the defenders are entitled to avoid the guarantee on the ground of negligent misrepresentation. As a preliminary matter, however, the defenders have tabled a plea of forum non conveniens, on the basis of which they aver that the action should be sisted in order that their liability may be determined by the English courts. The pursuers have tabled a plea to the relevancy of the defences. The action was appointed to debate on the parties' preliminary pleas, and the pursuers have also enrolled a motion for summary decree on the ground that no defence to the action is disclosed in the defences. The debate and the motion for summary decree were heard together. I intend first to deal with the defenders' plea of forum non conveniens and thereafter to consider the merits of the summons and defences.

Forum non conveniens

[5] It is a matter of agreement that both defenders are domiciled in Scotland, and the pursuers have relied on domicile as the ground of which the Scottish courts have jurisdiction. Domicile is, of course, the primary ground of jurisdiction that is available under Schedule 4 to the Civil Jurisdiction and Judgments Act 1982. In support of their plea of forum non conveniens, the defenders aver that the English courts also have jurisdiction on the ground that the place of payment under the guarantee is in England. They aver that under the applicable law of the guarantee, English law, any obligation to make payment is an obligation to be performed at the place where the monies are to be received. (I note that the Scottish rule is the same). The letter of demand of 23 January 2006 required payment to be made by the company to the pursuers' branch in Newcastle upon Tyne. Moreover, the company's dealings had initially been with the pursuers' branch in Newcastle upon Tyne until, at a later stage, they were transferred to the pursuers' Huddersfield branch. The defenders further aver that the initial negotiations and the transfer of the company's banking business, including the execution of documents such as the guarantee, were dealt with by the pursuers' Newcastle branch. In the circumstances payment was due at the pursuers' Newcastle branch, and the English courts have jurisdiction in terms of rules 3(a) and 3(e) of Schedule 4 to the 1982 Act. In addition, the defenders rely on the fact that the guarantee is to be governed by and construed in accordance with English law, that negotiations were dealt with by employees of the pursuers' Newcastle branch, and that the company traded from premises in Seahouses, Northumberland, and Berwick upon Tweed, both in England. In all of those circumstances it is said that the subject matter of the action should more appropriately be dealt with by the English courts, and that pending the outcome of such proceedings the present action should be sisted.

[6] The doctrine of forum non conveniens has long been part of Scots law. Classic formulations of principle are found in 19th-century cases such as Clements v Macaulay, 1866, 4 M 583, and Sim v Robinow, 1892, 19 R. 665. In the latter case Lord Kinnear stated (at 668):

"[T]he plea can never be sustained unless the Court is satisfied that there is some other tribunal, having competent jurisdiction, in which the case may be tried more suitably for the interests of all the parties and for the ends of justice".

The test is not one of mere balance of convenience. In the discussion that precedes that passage, Lord Kinnear states:

"Now, I am not aware that the Court has ever refused to exercise its jurisdiction upon the ground of a mere balance of convenience and inconvenience, and the reason is that such a ground of judgment would make it necessary for the Court to proceed upon facts and circumstances the full force of which it cannot appreciate without an inquiry into the whole merits of the case".

Those cases were referred to and followed, with some further commentary, in Société du Gaz de Paris v Société Anonyme de Navigation "Les Armateurs français", 1926 SC (HL) 13. In that case Lord Sumner (at page 22) formulated the test as being finding "that forum which is the more suitable for the ends of justice, and is preferable because pursuit of the litigation in that forum is more likely to secure those ends".

[7] The principle of forum non conveniens was received into English law in MacShannon v Rockware Glass Ltd, [1978] AC 795, and the most recent pronouncements on the topic within the United Kingdom have taken place in English cases. Perhaps the most helpful recent analysis of the principle is that of Lord Goff of Chieveley in Spiliada Maritime Corporation v Cansulex Ltd, [1987] AC 460, at 476-478:

"(a) The basic principle is that a stay will only be granted on the ground of forum non conveniens where the court is satisfied that there is some other available forum, having competent jurisdiction, which is the appropriate forum for the trial of the action, i.e. in which the case may be tried more suitably for the interests of all the parties and the ends of justice.

(b) As Lord Kinnear's formulation of the principle indicates, in general the burden of proof rests on the defendant to persuade the court to exercise its discretion to grant a stay...

(c) The question being whether there is some other forum which is the appropriate forum for the trial of the action, it is pertinent to ask whether the fact that the plaintiff has, ex hypothesi, founded jurisdiction as of right in accordance with the law of this country, of itself gives the plaintiff an advantage in the sense that the English court will not likely disturb jurisdiction so established ... In my opinion, the burden resting on the defendant is not just to show that England is not the natural or appropriate forum for the trial, but to establish that there is another available forum which is clearly or distinctly more appropriate than the English forum [my emphasis]. In this way, proper regard is paid to the fact that jurisdiction has been founded in England as of right ... ; and there is the further advantage that, on a subject where comity is of importance, it appears that there will be a broad consensus among the major common law jurisdictions ...

(d) Since the question is whether there exists some other forum which is clearly more appropriate for the trial of the action, the court will look first to see what factors there are which point in the direction of another forum ...

(e) If the court concludes at that stage that there is no other available forum which is clearly more appropriate for the trial of the action, it will ordinarily refuse a stay ...

(f) If however the court concludes at that stage that there is some other available forum which prima facie is clearly more appropriate for the trial of the action, it will ordinarily grant a stay unless there are circumstances by reason of which justice requires that a stay should nevertheless not be granted. In this inquiry, the court will consider all the circumstances of the case, including circumstances which go beyond those taken into account when considering connecting factors with other jurisdictions...".

The fundamental test is accordingly that the doctrine of forum non conveniens will apply only where another forum is clearly more appropriate than the forum where jurisdiction has been established as of right.

[8] In the present case it was not in dispute that the English courts would have jurisdiction over the defenders by virtue of rules 3(a) and 3(e) of Schedule 4 to the 1982 Act; the guarantee was entered into through an English branch of the pursuer's, and the place of payment would accordingly be in England. Nevertheless, the defenders are domiciled in Scotland, and the Court of Session thus has jurisdiction under the primary ground in Schedule 4. It is accordingly necessary to consider whether the English courts are clearly a more appropriate forum than the Court of Session. The factors that favour an English forum are, first, that the principal debtor in respect of which the guarantee was granted carries on business in England; secondly, that the branches of the pursuers responsible for both the principal debtor and the guarantees were situated in England; and thirdly, that the guarantee is subject to English law. The first of these does not appear to me to be of great significance. The principal debtor is not a party to the present action. To the extent that information about its affairs is required, it should be available from the defenders, who are domiciled in Scotland, or the company's accountants, who appear to be based in Berwick upon Tweed, just over the border. Thus a Scottish forum should not face the defenders at any significant disadvantages are far as the company is concerned. In relation to the second factor, the pursuers have chosen to litigate in Scotland, and are obviously prepared to make witnesses and documents available from their branches in the North of England. The defenders can, of course, compel the attendance of witnesses and the production of documents.

[9] The factor that appears to me to have the greatest substance is the third, the fact that the guarantee is subject to English law. Nevertheless, while complex guarantee arrangements are encountered on occasion, the present guarantee is relatively simple and straightforward in its terms. The pursuers merely seek to enforce the guarantee, which is a straightforward remedy, taking the form of an action for payment. The defenders seek to avoid the guarantee on the ground of negligent misrepresentation. This is an area where Scots law differs from English law to some degree; in particular, the Misrepresentation Act 1967 has no application in Scotland. The basic concepts used in dealing with misrepresentation, however, do not differ significantly between Scots and English law; this is clear from the fact that English cases are regularly referred to in discussions of Scots law. In these circumstances, even to the extent that English law differs from Scots law, a Scottish judge should not have great difficulty in understanding expert evidence on the matter. Moreover, the precise case of misrepresentation that is made by the defenders does not present any difficulties of understanding for a Scottish lawyer. The defenders' case is that they were induced to transfer the company's banking business and to enter into the personal guarantee by the pursuers' representation that facilities available under the government's Small Firms Loan Guarantee Scheme would be extended by £150,000. That representation, it is averred, "constitutes a negligent misrepresentation in terms of English law". On that basis it is said that the guarantee is liable to be avoided. Scots law permits a contract to be reduced on the basis of misrepresentation, whether innocent or negligent, provided that the misrepresentation induced the contract: see McBryde, The Law of Contract in Scotland,15-51 - 15-59, 15-66 - 15-71, and Gloag, Contract, pages 469 and 471-473. In these circumstances I do not think that the choice of English law as the proper law of the contract is a decisive consideration; if it were, the doctrine of forum non conveniens would apply to almost any case where the parties' contract was subject to a legal system other than Scots law.

[10] I accordingly conclude that it is impossible to hold that England is a forum that is clearly more appropriate than Scotland. Jurisdiction has, of course, been established in Scotland as of right, on the basis of domicile. Domicile is the primary basis for jurisdiction under Schedule 4 to the 1982 Act. In these circumstances the test for the application of the doctrine of forum non conveniens has not been met, and on that basis I will repel the defenders' first plea in law.

The pursuers' motion for summary decree

[11] The pursuers' motion for summary decree is made under Rule of Court 21.2; the test set out in that rule is that there is no defence to the action, or a part of it, disclosed in the defences. In considering that test, the court may have regard not only to the terms of the pleadings themselves but also to any documentary evidence or affidavits that are available: Henderson v 3052775 Nova Scotia Ltd, 2006 SC (HL) 85, at paragraph [17]; Spink & Ltd v McColl, 1992 SLT 470, at 472. At the same time matters of law, if they are sufficiently clear, can be dealt with in the course of motion for summary decree: Mackay's Stores Ltd v City Wall (Holdings) Ltd, 1989 SLT 835, at 836; Henderson, supra, at paragraph [17]. The purpose of the rule is stated by Lord Rodger of Earlsferry in Henderson, in the paragraph last cited, as follows:

"[Rule] 21.2 is not confined to questions of relevancy. Otherwise, the rule would not provide a means of tackling the situation where a defender puts forward a defence which is legally relevant but demonstrably unfounded in fact. While, under the rule, the court is concerned with whether any defence is disclosed in the defences, it is not confined to considering the defender's averments and any documents which he may have incorporated into his pleadings by reference. The judge may order either party to produce a relevant document or article or to lodge an affidavit in support of any assertion of fact made in the pleadings or at the bar. So the rule envisages that the court may look beyond the pleadings and consider what, in substance, each of the parties and, more particularly, the defender is saying. It is this power which allows the court to deal with a party who tries to use his written pleadings not to present a real defence but to throw up a smokescreen of supposed fact behind which he can delay the progress of an action, or part of an action, which he is bound to lose".

In the same opinion the conditions for summary decree are set out (at paragraph [19]):

"The judge can grant summary decree if he is satisfied, first, that there is no issue raised by the defender which can be properly resolved only at proof and, secondly, that, on the facts which have been clarified in this way, the defender has no defence to all, or any part, of the action. In other words, before he grants summary decree, the judge has to be satisfied that, even if the defender succeeds in proving the substance of his defence as it has been clarified, his case must fail".

[12] In the present case the defenders did not dispute that the pursuers had granted loan facilities to Red Shark Technologies Ltd; the relevant facility letter, dated 4 February 2005, was lodged in process. Clause 9.1 of the facility letter provided that the facility would be secured by a debenture from the company and a further guarantee for £200,000 and relative interest by the defenders. The pursuers aver that on 8 February 2005 the defenders executed a guarantee in their favour for £200,000 plus interest and expenses. A copy of that document was produced, and it is on that document that the action is founded. It was not disputed by the defenders that they executed the document; their defence is rather that the guarantee is voidable on account of negligent misrepresentation by the pursuers. On 23 January 2006 the company's then indebtedness, £333,099.19, was called up by the pursuers; that figure was not challenged by the defenders. On 1 November 2007 the guarantee was called up by means of a formal demand served on each defender for payment of £200,000 plus accrued interest and expenses. It is not in dispute that those documents were served on the defenders.

[13] The defence to the action is that, when in the autumn of 2004 the pursuers were attempting to persuade the first defender to transfer the company's banking business from Barclays Bank to the pursuers, they made a number of misrepresentations. Those were as follows. First, it is said that the pursuers represented that the company's overdraft and credit card facilities could be increased. Secondly, it is said that the company's existing small firms loan guarantee ("SFLG") from the Department of Trade and Industry (as it then was) in respect of its borrowings from Barclays would be extended by a further £150,000 if its banking business was transferred to the pursuers. In that way the pursuers would advance a total of £250,000 under the SFLG scheme, of which £100,000 would be used to repay the existing loan from Barclays and the remaining £150,000 would be available for the company's use. Monies advanced under the SFLG scheme are guaranteed by the government. Thirdly, it is said that the pursuers represented that the factoring facilities provided by them to the company would be equivalent to or better than those provided by Barclays. The defenders aver that Barclays indicated that they could not match the pursuers' proposals, and in particular the proposed increase in the SFLG facilities. In the light of this information, it is said that the first defender discussed the matter further with the pursuers, and was told that, through their membership of an advisory group, they "had the inside track with the Department of Trade and Industry" and that a change of policy to allow the proposed increase in the SFLG facilities would occur. The defenders further aver that the company provided a business plan to the pursuers, at the latter's request, and that plan was drawn up on the basis that the SFLG was to be extended by a further £150,000. A decision was accordingly taken to transfer the company's banking business from Barclays to the pursuers. That decision was implemented in due course. The defenders then aver that, "in anticipation of the extension" of the SFLG facilities, a substantial marketing campaign was undertaken. Nevertheless, progress with the SFLG facilities seemed to be slow, and eventually the pursuers told the first defender that they had been mistaken and that the SFLG scheme would not affect the extended, with the result of the pursuers could not provide the company with the facilities which had been agreed. The defenders aver that, had the first defender been aware that the SFLG facilities could not be extended, the banking business would not have been transferred and the defenders would not have entered into any personal guarantees. A complaint is also made about the factoring facilities that were made available by the pursuers, but this point was not relied on by the defenders.

[14] It is clear that the critical representation that is said to have been made by the pursuers was the second of those described in the last paragraph, that the facilities guaranteed under the SFLG scheme would be increased to £250,000. On this matter, the final representation that appears to have been made by the pursuers was that "a change of policy" to permit the higher level of borrowing "would occur". That representation relates to a change in government policy that was to take place in future. The precise date when the change was to supposed take place is not specified in the pleadings. The pleadings are supplemented by certain documents lodged as productions by the parties. Among these was a press release issued by the Department of Trade and Industry on 4 October 2004, issued after a report by Teresa Graham on the future of the SFLG scheme. In this it was stated that the government had committed to the implementation of the report's key recommendations, including expanding the lending limits to £250,000 per business for all eligible businesses and raising the turnover limit to £5.6 million for all eligible businesses. A further notice, also lodged as a production, was a press release from the same department, now renamed the Department for Business Enterprise & Regulatory Reform, which related to the SFLG Annual Report published on 1 August 2008. This stated that changes to the SFLG took effect from 1 December 2005 to reflect the recommendations of the Graham Review. On the basis of these documents it appears that a change of policy on lending limits under the SFLG scheme was announced in the autumn of 2004 and was in fact implemented slightly over a year later, in December 2005. That of itself suggests that the representation averred by the defenders was true; a change of policy was announced on 4 October 2004, and it is likely that it was proposed some time before that.

[15] The precise nature of the representations made by the pursuers appears from certain further productions. The defenders' productions included a copy of a minute, prepared by the company's accountants, of a meeting held between the first defender, the accountants and the pursuers' representatives on 13 October 2004. In the minute it is noted that "The SFLG would be taken over at £100,000", and that the pursuers could meet a facility of £250,000 including letters of credit. It is further noted that Claire Johnson, a Senior Manager Commercial Banking with the pursuers, brought up the issue of the SFLG. It is said that she "indicated that the criteria on this had changed recently and they may be able to give up to £250,000 but this would require a business plan fitting the criteria that the company would not have turnover of over £5,000,000". In a further minute prepared by the accountants, on this occasion of a telephone discussion that took place on 22 October 2004, it was noted that the pursuers wanted to indicate the ideas that they were starting to formalize, and had in mind an offer of an SFLG of £250,000 plus an overdraft or letter of credit facility of £170,000, giving a total of £420,000 cash availability. It is clear that none of these documents indicated any representation that an SFLG loan of £250,000 would definitely be available, as against the possibility that it might be available.

[16] The pursuers' proposals were further developed in an e-mail dated 3 November 2004 from Claire Johnson to the first defender. In this it was stated:

"What we have considered is the following;

1) £90K small firms loan - take over this line from Barclays

2) £40K business cards

3) £150K new small firms loan-subject to being able to get DTI to buy into the position -- see later

4) £170K overdraft/letter of credit line".

The third of these suggestions is in my opinion of great significance, in that it makes clear that additional SFLG funding, beyond that made available by Barclays, was dependent upon the consent of the DTI. Further important correspondence passed in January 2005. On 10 January an Associate Director of the pursuers, David Moon, sent the first defender an e-mail in which he stated:

"However, and as discussed, we have come up against some 'red tape' in terms of the increase to the Small Firms Loan facility in that current rules are such that because Red Shark is a non-manufacturing business, to qualify, turnover must not be more than £3m. That said, we have established that following a recent paper, a number of recommendations have been made, one of which is to remove this limit and to have a turnover threshold of £5.6m for all types of business. We understand that these recommendations have been approved and are due to be announced by the Chancellor in April; the only aspect we haven't been able to verify as yet is the timing for introduction of the amendments".

On 11 January 2005 the first defender replied as follows:

"Most of this is just fine. With the inclusion of the SFLG it would be a simple decision. John [the company's accountant] as you know had factored in the SFLG into his cash flow projections. Based upon where we know that we currently are we feel prima facie that the 170,000 to include LC's and overdraft will at maximum times of exposure leave us around 30,000 short. Obviously if the SFLG had been there this would not be an issue and hopefully in a couple of months the rules will change and we can put this in place. In the interim however I would not want to do something that has the potential to cause a problem.

My suggestion therefore is if you can increase the 170,000 to 200,000 - with the agreement that we will reduce it back once the SFLG is in place then ... we could proceed with this very quickly".

It is clear from the first of these e-mails that provision of the full SFLG loan that had been discussed was dependent upon changes in the relevant regulations. It seems obvious that the changes in question are those indicated in the DTI press release of 4 October 2004. On that basis, what is said in the e-mail of 10 January is entirely accurate. It is apparent from the second of the e-mails that the first defender was willing to accept what was put forward in the first e-mail, and that matters could be restored if, as was hoped, the regulations were changed in future. It is clear, however, that any change in the regulations was something to take place in future. Moreover, it was not clear from these exchanges when any such change would take place, except for the hope expressed that the Chancellor of the Exchequer would make an announcement in April 2005. The final e-mail, that of 11 January 2005 from the first defender, indicates a hope that matters might change "in a couple of months", but that was no more than a hope; it was not the subject of any representation by the pursuers. Moreover, the e-mail of 11 January indicates that the first defender was willing to go ahead despite the fact that the increase in the SFLG limit had not taken place.

[17] The defence is founded on negligent misrepresentation, and the critical question is whether I am satisfied that, even if the defenders succeed in proving the substance of their defence, as disclosed both in the pleadings and in the productions, that defence must fail: see paragraph [11] above. An initial matter must be dealt with: the defenders aver that, in terms of clause 12 of the guarantee, the guarantee is to be governed by and construed in accordance with English law. That appears clearly from the terms of the guarantee itself. The defenders go on to aver that English law is consequently "the applicable law"; that they were induced to enter into the guarantee by the pursuers' representation that the SFLG facilities would be extended by a further £150,000; and that that representation "constitutes a negligent misrepresentation in terms of English law". On that basis it is said that the guarantee is liable to be avoided. If it appears that the parties' relationship is governed by a system of law other than Scots law, but no averments are made as to the content of that system, the presumption is that the rules of that system of the same as Scots law: Bonnor v Balfour Kilpatrick Ltd, 1974 SC 223, per Lord Kincraig at 225; the point was not argued on appeal. Thus, if foreign law is to be relied on, it must be the subject of relevant averments in the pleadings: Anton, Private International Law, 2nd edition, at 774. In my opinion the defenders have not in the present case made any relevant averments of English law. They do not aver any specific principle of rule of English law. Beyond the statement that the representation constitutes a negligent misrepresentation, nothing is said about the content of English law, or how it may differ from Scots law on this matter. In these circumstances the foregoing presumption must apply, and the court is obliged to assume that English law is the same as Scots law. I should note that counsel for the defenders submitted that it was wrong at this stage to presume that English law was the same as Scots law; the true nature of the rule was that, "as foreign law is in most cases a question of fact to be proved by evidence, in the absence of such evidence the court has no option but to apply [the law of the forum]": Global Multimedia International Ltd v Ara Media Services, [2007] 1 All ER (Comm) 1160, at paragraph [38], per Sir Andrew Morritt C; counsel also relied on Dicey, Morris & Collins, The Conflict of Laws, 14th edition, 2006, volume 1, paragraph 9-025. That may well be an accurate representation of the position in England. In Scotland, however, the system of written pleadings requires that foreign law be averred, and in my opinion the traditional statements of principle still apply. That is so even in the simplified system of pleading used in commercial actions; it is still imperative that the substance of any rule of foreign law that is relied on should be stated in the pleadings.

[18] In Scots law, when misrepresentation is founded on it is essential that the details should be properly averred. The relevant principles are set out by LJC Gill in Hamilton v Allied Domecq Plc, 2006 SC 221, at paragraph [2]; although the formulation relates to evidence regarding a claim for damages exactly the same principles are in my opinion applicable to averments of misrepresentation that is relied on in order to avoid or reduce a contract:

"When a claim for damages is based upon the making of a misrepresentation, it is incumbent on the pursuer, in my view, to provide clear evidence as to the terms of the misrepresentations, the time and place at which it was made and the context in which it was made".

In the present case, little detail is given in the pleadings as to precisely when and where any representation was made; the most that can be taken is that the representation was made at some point in the autumn of 2004 in the course of the meetings that took place between the pursuers' representatives and the first defender. The terms of the representation that are averred are, in essence, that a change of policy to permit a higher level of borrowing under the SFLG scheme would occur: see paragraph [14] above. For the purposes of the motion for summary decree, however, I am entitled to have regard to the productions that have been lodged by the parties. These to a substantial extent supplement the pleadings, and can be said to give content to the defence. On the basis of these documents, I am of opinion that the defence must necessarily fail for three distinct reasons.

[19] First, on the basis of the documents that have been produced, I am of opinion that the representation relied on by the defenders was true. In this connection I attach importance to the DTI press release of 4 October 2004 and the notice from the same department relating to the SFLG scheme dated 1 August 2008. The first of these documents indicates that in the autumn of 2004 the DTI was indeed intending to increase the lending limit for the SFLG scheme to £250,000 for all eligible businesses, not merely manufacturing businesses. The second indicates that the increase was implemented, with effect from 1 December 2005. That appears to have been later than the parties contemplated, but it is notable that at no point, either in the pleadings or in the productions, is there any suggestion that the pursuers represented that the increase in the permitted amount of lending would take place on any particular date. It follows that there was no misrepresentation, and that of itself is fatal to the defence.

[20] Secondly, on a proper construction of the representations made by the pursuers, I am of opinion that they amount at best to statements as to an intention to increase the level of available finance under the SFLG scheme at some point in future. A statement of that nature cannot constitute a misrepresentation. It was at all times understood by the defenders and Red Shark Technologies Ltd that the increased limit was not immediately available; it could only be made available when the necessary change in the SFLG scheme was brought into effect. That appears very clearly from the e-mails sent by the pursuers on 3 November 2004 and 10 January 2005, both of which are discussed at paragraph [16] above. The law on expressions of intention is stated in Gloag on Contract at pages 463-464 as follows:

"An expression of intention cannot be a misrepresentation unless the party has not in fact formed the intention he professes. A man who states his intention does not bind himself not to change his mind, and anyone who contracts in reliance on statement of intention takes his chance that the intention will be carried out. But it is a question of construction whether a statement that the party intends to do a certain thing is a mere expression of revocable intention, a promise to do the thing in question, or an offer to do it which may be made binding by acceptance. But in no event is an expression of actual intention a misrepresentation; it is either a contractual obligation, or it has no legal effect. But a man may misrepresent his intentions, and if he does so with the object of misleading another party, his act will amount to fraud".

In the present case I am of opinion that the statements made by the pursuers' employees were nothing more than statements of intention as to intended future conduct. Moreover, I am satisfied that they were made in good faith; they were clearly based on the change in government policy which was set out in the DTI press release of 4 October 2004. Statements of that nature fall within the rule described in the passage just cited, and accordingly cannot amount to misrepresentations. It was not suggested for the defenders that the pursuers had entered into any contractual obligation; the defenders' case is clearly based on misrepresentation.

[21] Thirdly, the first defender's e-mail of 11 January 2005 makes it clear that he was aware that the limits on the SFLG scheme had not yet been increased and that it was uncertain when precisely they would be increased. In spite of that he was prepared to proceed with the loan arrangements proposed by the pursuers. In these circumstances it cannot in my view be said that the defenders were induced by any statements by the pursuers to enter into the loan arrangements and guarantee; at least the first defender was aware of the true position and nevertheless decided to go ahead in spite of that.

[22] The test for summary decree is essentially twofold: there must be no issue raised by the defender that can only be resolved at proof, and the court must be satisfied that the defender has no defence to the action or part thereof. In my opinion that it is satisfied in the present case. On the basis of both the defenders' pleadings and the documentation that is available, I am satisfied that there are no issues that cannot properly be decided without evidence. In this connection, it is of critical importance that the defender's case is based solely on alleged negligent misrepresentations by the pursuers. It is accordingly incumbent upon the defenders to specify what the misrepresentations were. This is not done clearly in the pleadings, and I have therefore gone to the documents to supplement the pleadings. Neither in the pleadings nor in the documents, however, can I find anything that amounts to a misrepresentation, nor anything more than a statement of intention, nor any misrepresentation that can be said to have induced the parties' contract. In the circumstances I will grant summary decree in favour of the pursuers.

[23] The only remaining issue is the amount sued for. This comprises the sum of £200,000 specified in the guarantee and £12,447.95 in respect of interest to 10 September 2008. Before any liability can arise under the guarantee, the indebtedness of the company must be established. Clause 10 of the guarantee states that a certificate signed by an official or manager of the pursuers as the amount of the company's obligations shall be conclusive evidence save in the case of manifest error or on any question of law. A certificate of the company's indebtedness to the pursuers has been lodged in process; this is signed by a corporate manager of the pursuers and states that, as at 16 January 2009, the company was due principal of £256,049.57 and interest of £52,351.61. That is obviously more than the amount covered by the guarantee. Nevertheless, counsel for the defenders pointed out that the certificate can be challenged on the ground of manifest error or on a question of law. She stated that, if I were minded to grant summary decree, she would like time to consider whether these defences might apply. For this reason I will allow a period of 14 days from the date of issue of this opinion to permit the defenders to consider whether they wish to challenge the pursuers' certificate. If they wish to do so, they should intimate that to the court, in which events the case will be put out by order. If the defenders do not intimate that they wish to challenge the certificate within the foregoing period of 14 days, I will grant decree for the sum sued for.