SHERIFFDOM OF GLASGOW AND STRATHKELVIN AT GLASGOW

JUDGEMENT
of Sheriff N.A.Ross
in the cause
ONE STOP ROOFING SUPPLIES LIMITED
PURSUER
against
TIXWAY UK LIMITED
DEFENDER

Act: Clark Q.C
Alt: Morgan

 

Glasgow 9 February 2012: the Sheriff, having resumed consideration of the cause, finds in fact as follows:-

1               The pursuer trades as a supplier of roofing materials and has its registered office and place of business in Govan, Glasgow. The defender is a non-trading company and has its registered office at 65 Bath Street, Glasgow. The pursuer's directors are Robert Jenkins and Paul Martin. The sole director of the defender is Craig Whyte. Mr Whyte's father, Tom Whyte, also assists in the defender's business affairs. The pursuer operates an established practice of obtaining credit risk insurance for each customer. Each new customer requires to sign a credit application, and the pursuer then applies for credit risk insurance for that customer. The insurer then stipulates a credit limit appropriate to the customer's financial standing. The pursuer will then allow trade credit up to that credit limit. A new customer also requires to sign terms and conditions of contract.

2               Snowcast Limited was a roofing contractor which traded between 2006 and approximately early May 2008. It was founded by its director, Chris Keatings, and its operations manager, James Snowball. In about 2008 Snowcast Limited was awarded a potentially lucrative sub-contract by Connaught, who were contractors to Glasgow Housing Association. The contract was for roofing works to various housing developments, and required a large amount of roofing supplies. Between January and April 2008 it purchased such supplies from the pursuer. Snowcast Limited ceased trading on about 30 April 2008. The business, and the said sub-contract, was immediately transferred to a new company, Snowcast UK Limited, in about late April 2008. The business continued without interruption, and Mr Keatings and Mr Snowball continued to act on behalf of the new company.

3               The pursuer commenced trading with Snowcast Limited on about 15 January 2008. In accordance with the pursuer's customary practice, Snowcast Limited signed the pursuer's terms and conditions of sale (production 5/6/9) and insurance application (5/6/8). A credit limit of up to £8,000 per month was obtained, and the pursuer made supplies on credit up to that limit. This level of credit was inadequate for the amount of supplies required to perform the said roofing sub-contract. In addition, Snowcast Limited delayed its payments to the pursuer.

4               Mr Keatings had discussions with Mr Jenkins in early 2008 about how to resolve the limitation in supply. Mr Jenkins has a long-standing acquaintance with the defender's director, Craig Whyte. Mr Whyte indicated to Mr Keatings that he was prepared to give some financial assistance to Snowcast Limited. Mr Whyte had a meeting with Connaught, to solicit increased orders from Connaught to Snowcast Limited.

5               In April 2008, Mr Keatings introduced Mr Whyte to Mr Jenkins. On about 29 April 2008, a meeting took place in the pursuer's offices in Govan, Glasgow. Present were Mr Jenkins, Mr Keatings, Mr Craig Whyte and Mr Snowball. Mr Martin and Mr Brown were in the premises but not in attendance. During the course of that meeting, the Snowcast Limited supply limit was discussed. As a solution, Mr Whyte agreed that the defender would become the customer of the pursuer in place of Snowcast Limited, and that the pursuer could accordingly rely on the defender's credit rating. Mr Keatings was not party to that discussion. The defender has material assets. At the meeting Mr Whyte signed the pursuer's terms and conditions (5/4/5 of process) and authorised a credit application for the defender, which Mr Keatings had previously filled out (5/4/4). Mr Whyte stipulated that all invoices were to be sent to him at his home, Castle Grant, in Grantown-on-Spey. He instructed Mr Snowball that all orders were also to be copied to him there.

6               On 29 April 2008 the pursuer applied for a credit rating for the defender to their insurer, Euler Hermes, and obtained a rating of £75,000 the same day (production 5/6/10) by fax.

7               In reliance on that position, the pursuer immediately recommenced supply to "Snowcast", as the parties referred to the business. In fact, the supply was now requested by and made to Snowcast UK Limited, in place of Snowcast Limited, but the distinction was of no importance to any party. In effect, trading went on as before, but with the defender as the customer, albeit orders were placed by, and paid for, by Snowcast UK Limited, and were delivered to sites in Glasgow. In accordance with Mr Whyte's request, all invoices were addressed to the defender, and sent to Castle Grant. Accurate copies of the relevant invoices, and site delivery notices, are produced at 5/6/1 to 5/6/1748.

8               Trading continued until at least 1 May 2009. Mr Whyte's staff received and kept the relevant invoices, and Mr Whyte was aware of this throughout. Snowcast UK Limited made payment without seeing the invoices. Craig Whyte had unrestricted access to the bank account of Snowcast UK Limited, and was able to move funds into and out of the account. The defender paid various funds to that company by way of loan payments, and withdrew various payments. This was done at the discretion of Craig Whyte, according to the state of the company's finances. The nature of the defender's interest in Snowcast UK Limited is not clearly proved, and nor is the amount of money which passed between the defender and that company.

9               By at least November 2008 Snowcast UK Limited had significant cash flow deficit caused by the failure by the main contractor, Connaught, to make timeous payment. As a result, they started to make late payment to the pursuer. Mr Jenkins spoke to Craig Whyte and Tom Whyte at a meeting in London, and they both reassured him that the payments would be made. Separately, Paul Martin met Tom Whyte, and received similar assurances. As a result, the pursuer did not call up the credit insurance. Eventually, in about early 2009, Mr Whyte agreed to ensure a regular payment by Snowcast UK Limited of £5,000 per month. One such payment was made, in February 2009, and no further payment was made. At no time did the defender or Mr Whyte deny that any debt was due by the defender to the pursuer.

10           In March 2009, Tom Whyte contacted Mr Jenkins to request that invoices no longer be sent to Castle Grant but instead to the defender's registered office at 65 Bath Street, Glasgow. Mr Jenkins duly complied, and the invoices reflect that change.

11           By early June 2010 payments by Snowcast UK Limited to the pursuer stopped entirely. The pursuer's directors asked for Craig Whyte's help in resolving the situation, and in particular the meeting of the defender's debt. The text of 16 July 2010 (5/6/12) and subsequent email correspondence (5/6/13) accurately reflect events, and represent requests for payment in accordance with the contract. Despite these repeated requests by the pursuer, no payment was subsequently made. The defender has since, wrongfully, denied liability to make payment.

12           The sums invoiced by, and paid to, the pursuer are accurately set out in production 5/3/3. The sums were paid from the account of Snowcast UK Limited. The principal sum of the invoices unpaid and outstanding for payment is £86,127.18. That sum is due and resting owing by the defender to the pursuer.

Finds in fact and law that:-

1               On 29 April 2008 Craig Whyte, on behalf of the defender, and Robert Jenkins, on behalf of the pursuer, entered a verbal agreement whereby the defender would assume liability for the payment of all supplies of roofing and ancillary materials by the pursuer to the defender's order, namely to Snowcast UK Limited.

2               The pursuer having supplied such goods to the value of £89,127.18 to the defender's order in terms of the said contract, and having demanded payment therefor, and payment in each case being contractually due within 30 days of the date of supply, the said sum is due and resting owing and pursuer is contractually entitled to payment of the said sum from the defender.

Therefore: sustains the second and third pleas-in-law for the pursuer, repels the defender's pleas-in-law and grants decree for payment by the defender to the pursuer of the sum of £86,127.36, with interest at the rate of eight per cent a year from the date of citation of the present action until payment, being the sum first craved; fixes a case management conference on a date to be afterwards fixed for discussion of expenses, certification of counsel and any other relevant issue.

 

 

Note:-

1       This is an action for payment for roofing materials supplied by the pursuer to Snowcast (UK) Limited. Snowcast Limited traded as a roofing contractor from 2006 until late April 2008, when its business and assets were transferred to Snowcast (UK) Limited. Although the defender's submissions sought to recognise a distinction between these two entities (discussed later), none of the parties at proof recognised any practical difference. For that reason I will refer to them both interchangeably as "Snowcast", except where otherwise indicated.

2       The pursuer seeks payment of unpaid sums from the defender, the claim being based on an alleged agreement that the defender would formally accept liability for payment of roofing materials supplied to Snowcast. The action called for proof before answer on 12 and 13 December 2011, and 19 January 2012. The pursuer was represented by Mr A. Clark, QC, and the defender by Ms C. Morgan, solicitor. The pleadings are the Initial Writ (adjusted to 6 April 2011) and defences (adjusted to 1 November 2011).

The pursuer's evidence

3       The pursuer led evidence from Robert Jenkins and Paul Martin, its directors, and from James Snowball, a founder and former employee of Snowcast.

4       Robert Jenkins is a director of the pursuer. His co-directors are Paul Martin and William Brown. The pursuer started trading on 4 January 1993 and trades in sheeting and cladding, roofing and tiling and bituminous membranes. It also supplies timber, felting, rainwater goods and other ancillary roofing items.

5       Mr Jenkins spoke to the pursuer's approach to trading with its customers. The pursuer operates an insurance policy, renewed each year through a broker, for insuring trading debts. Such an insurance policy is designed to protect the pursuer against bad debts. Exceptionally, the pursuer would trade with a business for whom no cover was available, but it would involve an assessment of who was involved, and an assessment of the commercial risks involved. For each customer, the pursuer would fill in a credit application form, and forward this to their insurer. The insurance company would decide a financial limit for the credit insurance they were prepared to provide to that customer.

6       The pursuer's standard terms for payment was 30 days, which meant that a debt incurred on the first day of a month would be payable on the last date of the subsequent month. The insurance would cover 30 days beyond that date.

7       Mr Jenkins spoke to meeting Chris Keatings, a director of the Snowcast, in early 2008. Snowcast had obtained a roofing sub-contract from "Connaught", a main contractor to Glasgow Housing Association ("GHA"), and approached the pursuer for supplies of roofing materials. The contract was to retile roofs for GHA. The pursuer applied for a credit limit for Snowcast from their insurer, and obtained an £8,000 limit for supplies on credit, per month. Production 5/6/8 is a copy of the credit application for Snowcast Limited, dated 15 January 2008. They then signed Snowcast up to the pursuer's terms and conditions of sale (production 5/6/9), which the pursuer signed on 17 January 2008 and returned. Trading then commenced.

8       Overall, Mr Jenkins thought that Snowcast was a bit slow in paying, and the credit limit of £8,000 was inadequate to cover the quantity of materials which Snowcast required. In April 2008 Mr Keatings contacted Mr Jenkins to discuss ways of procuring larger amounts of supplies. At one stage he suggested the pursuer take a shareholding in Snowcast, but this was declined.

9       At the end of April 2008 Mr Keatings introduced Craig Whyte to Mr Jenkins. Mr Whyte is a director of Tixway UK Limited, the defender. Mr Jenkins spoke to a meeting at the pursuer's offices in Govan. Mr Whyte was introduced by Mr Keatings as a successful entrepreneur with whom he had dealt in the past, and who would provide backing for Snowcast. They discussed the credit problem, and Mr Whyte understood immediately the problem, and that this was a chance to secure volume of supply. Mr Jenkins said that Mr Whyte offered the defender's credit limit for the pursuer's insurers to check. Mr Whyte agreed that the defender would be the debtor, in place of Snowcast. Mr Jenkins subsequently (the same day) applied for a credit limit of £60,000 to £70,000 which was approved (5/6/10), and Snowcast's was rescinded (5/6/11) on 8 May 2008.

10    Mr Jenkins was happy to increase supply to Snowcast to this limit, on the basis that the defender was now (at least formally) the customer. Mr Jenkins was not prepared to trade to anywhere near that limit on Snowcast's credit. Mr Jenkins spoke to productions 5/4/4 (the credit limit application dated 28 April 2008, plus credit search and company accounts), 5/6/10 (the acceptance by the insurer, Euler Hermes, of a £75,000 credit limit for the defender) and 5/4/5 (the pursuer's terms and conditions, signed by the defender). Mr Whyte signed the terms and conditions, as director of the defender, on 29 April 2008. Mr Jenkins then instructed the pursuer's accounts department to start invoicing Snowcast roofing supplies to the defender, at Castle Grant, their registered office. On 8 May 2008 the insurer reduced the permitted limit, for Snowcast Limited, to nil (5/6/11).

11    Mr Jenkins refuted any suggestion that the defender's acceptance of the terms and conditions related to a separate, personal supply to the defender of materials for Castle Grant. The materials were primarily mass-produced concrete roof tiles, suitable for council houses but not a listed castle. These tiles cost £6,000 to £7,000 for 1000 tiles, so £75,000 would buy a very large amount of concrete. It was not necessary to have a credit limit of that amount for Castle Grant, in his view.

12    Mr Jenkins was not aware of the distinction between Snowcast Limited and Snowcast UK Limited. He never asked for any credit reference in relation to Snowcast UK Limited, and they were never a customer.

13    Thereafter the pursuer increased supplies to Snowcast. Snowcast would phone and/or fax an order to the pursuer's office. Delivery would be made as requested to site in Glasgow, a delivery note signed, and, at Mr Whyte's request, an invoice sent to Castle Grant, addressed to the defender. No duplicates were sent to any other party.

14    Mr Jenkins had prepared a schedule of payment of these invoices (5/3/3) dating from April 2008 to May 2009, when supply ceased. This showed the invoices being duly paid for many months, having been sent to Castle Grant. The pursuer had never invoiced Snowcast. During this period relations were good, and Mr Jenkins met Mr Keatings socially from time to time.

15    Payments stopped in 2009, and invoices were left outstanding, as shown in the schedule 5/3/3. Mr Jenkins contacted Mr Keating, who said that there was a problem with being paid by the main contractor, Connaught. Mr Jenkins contacted Mr Whyte, and Tom Whyte, who is Craig Whyte's father and colleague. They reassured Mr Jenkins that they just needed time to sort out payments from Connaught, and that the pursuer had "nothing to be concerned about". The invoices were therefore left unpaid, in effect supplying significant financial support by the pursuer for the defender.

16    Eventually, Mr Jenkins pressed for payment, and a payment plan of £5,000 per month was agreed with Craig Whyte and Tom Whyte. One payment was made on 13 April 2010, before the arrangement broke down ( - objection was taken to any further questions, and the line was not pursued).

17    Mr Jenkins arranged to meet Craig Whyte at his offices in London. He met both Craig Whyte and Tom Whyte. No further offer of payment was made, but both men assured him that they were good for the debt. Mr Jenkins had checked the defender's returns on the Companies Register, and viewed the defender as "cash positive", so he was given comfort by this assurance. Only later, after making further contact, and receiving further assurances, did Mr Jenkins start to lose patience, due to the size of debt. Craig Whyte at no time denied the defender was liable for the debt.

18    Mr Jenkins spoke to the pursuer's first and second inventories of productions, comprising many hundreds of invoices (estimated at 600 to 800) and delivery notes. These were not examined in detail in evidence, but there was no dispute that the invoices were properly rendered for materials supplied. He spoke to sample invoices, as addressed to the defender at Castle Grant. These were VAT invoices, but he did not know who reclaimed the VAT. He accepted that some delivery notes (not invoices) referred to Snowcast Limited, and some to Snowcast UK Limited, but was not aware of any distinction, and the same individuals were involved, principally Jim Snowball, Snowcast's operations manager. The invoices were, in any event, to be made out to the defender.

19    By invoice 5/2/1660 (dated 31 March 2009) the invoices were addressed to Bath Street, Glasgow, not Castle Grant. Mr Jenkins said that this was because Tom Whyte had requested that they be redirected, without giving any reason. Mr Jenkins complied, but did not query this.

20    He confirmed that the sum outstanding for roofing supplies was the sum brought out in the schedule 5/3/3, namely £86,127. The arithmetical working was shown. He did not claim this from his insurer, and it was now too late as the insurance policy had lapsed. He had not made a claim against the defender as he had, in discussion with Mr Whyte, chosen to support their customer, not to activate a claim.

21    In cross-examination, Mr Jenkins confirmed he had a good relationship with Mr Keatings, but not a close one. They discussed the delays in payment and the Connaught delays. They did not discuss any distinction between the two Snowcast companies. Mr Keatings was not the main man at Snowcast - rather Jim Snowball ran the operations part, and Tom Whyte was involved. The three of them influenced Snowcast's decisions.

22    He confirmed Snowcast Limited had been a good customer for three months between January and April 2008. Their orders had been within the £8,000 credit limit. Mr Keating introduced Mr Whyte when the credit problems commenced in April 2008. Mr Whyte offered a credit account with the defender, as he'd seen the business opportunity in the volume of work available for GHA. Mr Jenkins had not previously heard of Craig Whyte or the defender. He agreed that Mr Keatings had suggested, prior to their meeting with Mr Whyte, that the invoices might be sent to the defender.

23    Mr Whyte signed the pursuer's terms and conditions at their meeting, which was on 29 April 2008. There was no mention then of renovation works at Castle Grant, and Mr Jenkins was not aware that he owned a castle.

24    The defender did not place orders. That was done by Snowcast. It was simply a continuation of the existing supply to Snowcast. Mr Jenkins did not "pick up" on the change of order from Snowcast Limited to Snowcast UK Limited. He thought it was the same company.

25    He was invited to compare payments from the bank statement of Snowcast UK Limited (6/1/1) to payments shown in the schedule (5/3/3), and accepted that many of the payments matched. Mr Jenkins was "content" to accept that in fact Snowcast had paid the invoices. He could not explain how Snowcast came to pay these invoices. He would not concern himself with this, while payments were being made.

26    He reiterated that the invoices had been sent to Castle Grant at Mr Whyte's request.

27    The defender's agent started to question whether deliveries had been made as invoiced for, but under objection withdrew the point. It is not part of the defence that these deliveries were not made, or that the sum sued for is not genuinely accrued for supplies sold.

28    In re-examination, Mr Jenkins accepted that 5/4/4 (credit account application) appeared to have been completed by Mr Keatings the day before the 29 April 2012 meeting, but had not been party to this. They'd discussed this the day before, but no decision had been made. That had only been done in discussion with Craig Whyte. Mr Whyte had signed the terms and conditions (5/4/5) as "director" of the defender on 29 April 2008. The company search showed he'd been appointed on 1 April 2008. Mr Whyte supported the plan as there was a large project, with opportunity for significant volume, and profits.

29    Overall, I found Mr Jenkins' evidence to be credible, reliable and straightforward and supported by the documentary evidence.

30    James Snowball was the second witness for the pursuer. He started out in business as JS Builders, and taught roof works at college. He'd set up Snowcast Limited in about 2006 with Chris Keatings as his business partner, to exploit a business opportunity to provide roofing works to the GHA as subcontractor to Connaught. They did "really well" in 2007, and turnover was £300,000 in the first year. He was operations manager.

31    GHA increased their requirements, but Snowcast could not meet these. Mr Snowball and Mr Keatings had a meeting with Connaught to discuss matters. Mr Keatings thereafter told Mr Snowball that he knew someone who could help, and introduced him to Mr Whyte at a meeting in Bath Street, Glasgow in March 2008.

32    At that meeting, Messrs Snowball, Keatings, Craig Whyte and Tom Whyte were present. Mr Snowball gave an "in depth report" about business and said that they needed finance. Craig Whyte would be happy to meet with Connaught and another roofing contractor, Lovells.

33    Mr Snowball organised a meeting with the same parties at the Connaught offices. They met with the finance manager, contracts manager and operations manager of Connaught. Craig Whyte wanted to know if work was available. The Connaught representatives confirmed they were happy for Snowcast to carry out all of the roofing work. Mr Snowball's recollection was that Craig Whyte and Tom Whyte reassured the Connaught representatives that "finance would not be an issue if all the work was issued to Snowcast". Mr Snowball's assessment was that the work value would increase from £300,000 per year to over £2 million per year. Mr Whyte said he was interested in putting something back into the community.

34    Mr Snowball spoke to the formation of Snowcast UK Limited. Mr Whyte did not want to invest in Snowcast Limited where something could "come and bite him" - he wanted a clean, new company. He also specified that the new company must have a gross tax certificate (where payments can be received gross, rather than under deduction of 20 per cent advance tax) for cash flow reasons. A new company was set up, namely Snowcast UK Limited, with Mr Keatings as director. He did not know what happened to the old company.

35    They set up a meeting with the pursuer to discuss supplies. Mr Snowball and Mr Keating were excited to take the business to a new level. They could not do this without Craig Whyte's involvement, and this would alleviate their financial burdens. They could take on new squads of tillers and buy new materials. A meeting at the pursuer's offices took place in April 2008. Present were Mr Snowball, Mr Keatings, Mr Jenkins, Craig Whyte and Tom Whyte and William Brown (of the pursuer).

36    Mr Jenkins said that the pursuer could not get cover on Snowcast sufficient to finance the purchases, as it was a small company. Mr Snowball said "that's when Craig and Tom said they'd finance this under the cover of Tixway". They discussed supplies of £60,000 per month. Craig Whyte said he'd produce the defender's accounts for the insurers, and that this was to allow Snowcast to get the materials. There was one stipulation - that the invoices be sent to the defender at Grantown-on-Spey, and that if Mr Snowball placed an order, copies would go to the pursuer and also to the defender. This was so the defender could marry the order up at the end of the month (by which I understood him to mean matching the orders with the monthly invoice). Craig Whyte said that the defender would become Snowcast's parent company. In the event, Mr Snowball thought he took a 51 per cent shareholding in Snowcast, and that the papers were signed in May 2008. Mr Snowball was clear that the pursuer's customer was now the defender, rather than Snowcast.

37    There was no discussion of VAT invoices at the meeting. Craig Whyte and Tom Whyte stipulated that any invoices were to go to Grantown-on-Spey, so they could see what was being ordered.

38    Thereafter, payment was made by Snowcast to the pursuer. Tom Whyte would write Snowcast cheques, and Mr Keatings would sign them. Tom Whyte was involved in Snowcast to look after his son's interests as Mr Snowball put it. They used the same arrangement with Keyline Limited, another supplier to Snowcast, and the invoices went to Grantown. Mr Snowball was not privy to how VAT was dealt with. Their company accountant was Charles Bryson. Mr Snowball gave evidence that Mr Bryson had expressed disquiet with the arrangement. Craig Whyte's response was that he would do as he was told.

39    Mr Snowball spoke to trading up to December 2009. There was a delay in the pay arriving for the workers. He spoke to further management and financial problems. Mr Snowball spoke to the two credit applications (5/6/8 and 5/4/4) and the terms and conditions (5/4/5). He confirmed that Mr Jenkins had made in "perfectly clear" that Snowcast by itself could not get credit levels to the value of £75,000.

40    In cross-examination, Mr Snowball confirmed his own role in Snowcast. As operations manager, he would get the list of jobs from Connaught, go to the programme meeting, then pass a list of required materials over to Willie Brown of the pursuers. He would place a bulk order with the pursuer, and then draw down on it as required. Orders would go by email to the pursuer, with a copy to Tom Whyte at the defender. This was to comply with Craig Whyte's instructions about keeping the defender informed.

41    He was referred to various orders. He confirmed that Mr Keating's name appeared only on the template, as having authorised the entirety of the order, but that Mr Snowball placed individual orders. He confirmed that reference to "Snowcast Limited" on some of the orders was a misprint, as it was in fact "Snowcast UK Limited".

42    He confirmed that the meeting at the pursuer's offices had taken place before the end of April. He remembered this as they hadn't "signed up on financial control" of Snowcast. The four men - Craig Whyte, Tom Whyte, Mr Snowball, and Mr Keatings - he referred to as the "four amigos", who would go everywhere to deal with Snowcast matters. Craig Whyte had stipulated that the defender be invoiced, as this was the only way they could keep an eye on matters.

43    Overall, I was able to accept Mr Snowball's evidence as credible and reliable.

44    Paul Martin is a company director of the pursuer. He is also manager of Albion Rovers football club. He has been in business with Mr Jenkins for 20 years, and share an office. They have a consensual approach to business - if one doesn't agree with an action, they don't do it. He spoke to the Snowcast credit application 5/6/8 of process. He confirmed that Snowcast had obtained GHA work, and that their requirements were greater than the original account. At that stage the defender was introduced. Craig Whyte saw the opportunity for Snowcast to take all the GHA work, but that they were not well enough funded to do so. The pursuer would not do business with Snowcast above the £8,000 limit. It was therefore agreed that the defender would become the customer.

45    Craig Whyte signed a credit account opening form, and then they began trading. The pursuer's directors were excited, as it was an opportunity to grow. The pursuer's directors were content with the situation - they had a credit risk account for the defender, they had seen the defender's balance sheet which showed substantial cash assets.

46    Initially, trading was successful. After a time, however, payments slowed. They tried to support the customer, against a background of Craig Whyte and Tom Whyte verbally reassuring the pursuer that "they'd not be left behind". There was a clear line of communication between them - he had met Tom Whyte several times, and Craig Whyte met Mr Jenkins in London. It was for that reason they simply let the insurance lapse, and did not make a claim.

47    Mr Martin spoke to the schedule 5/3/3, which had been prepared from the pursuer's SAGE accounting system. He confirmed the sum currently outstanding. Invoices were sent to Castle Grant, but the materials were not. In any event, they were not suitable for a listed building.

48    When the account was opened in April 2008, the pursuer's directors did not know who Craig Whyte was. Mr Martin had never met him, but had communicated by email and text. It was only eventually that the penny dropped that the defender was not going to pay, so they went the legal route. Never previously had anyone at the defender denied liability to pay, and the hundreds of invoices which went to Castle Grant were never queried. He had met Tom Whyte, who had never denied the debt. He confirmed being in the office on the date that the terms and conditions (5/4/5) were signed. He confirmed Craig Whyte was in the office that day, although he had not actually witnessed the signature.

49    In cross-examination, he confirmed that any insurance claim had to be invoked within 60 days from the date of non-payment. He was not challenged on his other evidence. I was able to accept his evidence.

The defender's evidence

50    Christopher Keatings was the first witness for the defender. Mr Keatings was a director of Snowcast Limited and Snowcast UK Limited, but is presently unemployed after they ceased trading. He spoke to the history of Snowcast Limited. He also spoke to the importance of gross payment status for tax reasons - it allowed payment to be received without the otherwise automatic deduction at source of 20 per cent tax. A tax bill would be paid at the end of the tax year. HMRC require, however, timeous submission of monthly tax returns - three late returns and the status is removed. This status is extremely important in providing cash flow for a business.

51    He confirmed that production 5/6/8 was Snowcast Limited's application for a credit limit, and that the date of 15 January 2008 was when they started trading with the pursuer. This trade ceased at "switchover" to Snowcast UK Limited, almost overnight, in 2008. He confirmed that the defender did not invest in Snowcast.

52    He and Mr Jenkins knew each other well, and Mr Jenkins was aware how Snowcast Limited was doing. Mr Keatings convinced Connaught to "flip" the contract to Snowcast UK Limited, which was set up. Mr Keatings was not a director of the latter, for tax reasons - as director of a company (Snowcast Limited) which had lost its tax status, he could not, for a period of two years, be a director of any other company which enjoyed such status. His wife became director instead.

53    He spoke to the ordering process, and was referred to the large number of invoices. He confirmed he had little involvement in ordering, as this was Mr Snowball's task. Problems arose due to slow payment from Connaught. The real problems started in February 2010. The pursuer supplied materials up until the last minute. Snowcast UK Limited stopped trading in July 2010.

54    He spoke to the Snowcast bank statements (6/1/1). Money was "dripped in" by the defender, not regularly, but as required to pay wages and crucial materials. Snowcast did not perform well, due to trading conditions, created mainly by Connaught not paying. This was a huge problem. They "got by", with the defender's contribution and gross payment status.

55    He had told Mr Jenkins that Snowcast UK Limited had succeeded Snowcast Limited.

56    He had a vague recollection that there was a single meeting in April 2008, with Mr Jenkins, Craig Whyte and himself and possibly Mr Snowball. The purpose was to give a level of comfort to the pursuer, relating to investment in Snowcast. He portrayed Mr Whyte as an investor. Mr Keatings did not suggest that any supplies be invoiced to the defender, as he had no authority to do so. He had said to Craig Whyte that they needed a mechanism to secure supplies. How that was obtained was "entirely up to him". They were the pursuer's biggest customer.

57    He was asked if Craig Whyte told him about an agreement about the pursuer's invoicing supplies to the defender. Mr Keatings could not recall this, but it would surprise him, as he viewed Mr Whyte as risk averse ( - I note here that Mr Keating's evidence on the crucial point, namely what was agreed, was too vague to be of assistance. I comment on this further below). Mr Jenkins had not discussed this with him, although they spoke regularly.

58    He was referred to the invoices and delivery notes. He noted that the invoices were sent to the defender, but he "had no idea why". He knew that Mr Whyte worked mainly in London. The invoices were being paid by Snowcast, and they did not see these invoices. Mr Keating at no stage queried why the invoices were made out to the defender, as they were his lifeline, and could be "made out to Mickey Mouse". He was mindful that this was paying his salary, and acted out of self-preservation. Snowcast would be "finished" without materials. Snowcast paid these invoices as quickly as possible. Some he paid with his personal credit card.

59    He was taken to a comparison between the Snowcast bank statements (6/1/1) and the schedule of payments (5/3/3) and identified a number of coinciding entries He agreed that the company was paying invoices he had never seen. There was an element of trust. Payment was made, for example of round sums of £14,000 or £10,000, when Snowcast got payment from contractors. He spoke to the defender's credit application (5/4/4). He confirmed it was his handwriting, but that he would only have completed this on instruction from Craig Whyte. He would not query such an instruction. He confirmed he would "do anything possible" to keep his salary coming in.

60    He was asked again about payment for supplies. He said that Mr Jenkins had confirmed with him that it was difficult to get a suitable level of credit for a new company like Snowcast. It was resolved by Craig Whyte "finding a resolution. It was obviously between the two of them". Mr Keatings only knew that Snowcast was obtaining materials, and he didn't ask how. He did not make an issue of it, as it was their only lifeline. Overall it was clear, in my view, that Mr Keatings simply did not trouble with the detail of the arrangements between the pursuer and the defender - all that mattered was that Snowcast was getting supplies.

61    Towards the end, the debt from Connaught was at £123,000 when Connaught went into administration. Cracks appeared in his relationship with Mr Snowball, who did not like to take a necessary salary cut. There were arguments, including a real argument in the office over levels of holiday pay for the workers. This led to the end of their business relationship.

62    In cross-examination, Mr Keating confirmed his long friendship with Mr Whyte, since 1998. He thought the Snowcast credit limit was higher than the £5,000 to £8,000 shown in 5/6/8, as this would be built up over time. He was familiar with the practice of bad debt insurance, as Snowcast had it also.

63    He said Craig Whyte appeared on the scene in April 2008. He agreed that there was scope for profits from the GHA contract. Mr Whyte said he could take the business to a new level. A new company was formed, although the main driver for that was the need for gross payment status, or the business model would not work. Mr Whyte met with Connaught as they wanted reassurance if Snowcast were to be awarded the roofing sub-contract for all GHA works. They wanted to know, he thought, that there was investment in Snowcast. He was not privy to any meeting, however.

64    Mr Keating confirmed that, if the invoices were made out to the defender, that the defender was effectively the customer. That was clear common sense. It also made sense that no supplier would supply 60,000 to £80,000 per month of materials without comfort they were to get paid. It was crucial for Snowcast to secure a regular supply. He also accepted that it appeared that 5/4/5, the terms and conditions for the defender, showed that some supply to the defender was in contemplation. I note that, however, Mr Keating was vague on much of this material. He did claim to have any knowledge of the parties' discussion at the meeting on 29 April 2008. On that evidence he was not involved in any agreement between the pursuer and the defender, and was simply glad to secure a supply of materials. He was, understandably, indifferent to the mechanism whereby the pursuer continued to supply, as long as that supply continued.

65    He was asked about materials being supplied to Castle Grant. He thought that extensive refurbishment works were being carried out, as the roof of a wing of the castle was destroyed by fire. Snowcast had supplied a load of felt and battens, and also bathroom suites and some other equipment. He had once made a delivery to site, accompanied by Larry Dunn. It had been arranged between Craig Whyte and Snowcast, and Mr Whyte was not invoiced for it. This supply was by Snowcast, not the pursuer.

66    He confirmed that he received none of the invoices. He did not know about the structure or officers of the defender. Mr Whyte was of the nature that "if you don't need to know, you don't get to hear." It was of no consequence to him.

67    He could not speak to how VAT was reclaimed - this was a matter for the company accountant, Charles Bryson. Mr Keatings did not know about any invoices passing between the defender and Snowcast. Craig Whyte had access to the Snowcast bank account, and could do "as he saw fit".

68    When pressed, he confirmed that Mr Whyte had complete access to the Snowcast account. That would enable Mr Whyte to remove money from the account. Mr Whyte would sums back when the account was in a healthy condition. There had been a flow of money from the defender. He was referred to the statements (6/1/1), and agreed that there was a flow of cash between defender and Snowcast. At least £50,000 was removed by Mr Whyte in a series of transactions on 11 March, 24 March, 14 April, 15 May and 29 July 2009.

69    He was asked about ownership of Snowcast UK Limited. He thought that the defender had a majority shareholding, but was not clear. He confirmed that the defender put money into Snowcast, and that Mr Whyte "called the shots" for Snowcast's supply.

70    In re-examination, he confirmed that Connaught would have taken comfort from Mr Whyte injecting funds into Snowcast. He did not think he had been present when Mr Whyte had signed the terms and conditions (5/4/5), but he could not be sure. He thought that Mr Whyte had put about £150,000 into Snowcast over the whole period, and had recovered that sum, plus about £21,500 (i.e. £171,500 in total). He conceded that the operation of Snowcast towards the end had been "a bit kamikaze", and Mr Keatings ordered supplies to keep the business going as long as possible, but was only staving off the inevitable.

71    Craig Whyte was the second and last witness for the defender. Mr Whyte is the sole director of the defender, which is a holding/managing company and doesn't trade.

72    He was referred to the copy terms and conditions (5/4/5). He said it looked like the defender accepting the pursuer's conditions of sale. It appeared to be his signature, and his writing. He did not recall completing this, but accepted that he had. He explained that he would have done so only because he was refurbishing Castle Grant, which was in substantial disrepair, and needed supplies. He was introduced to the pursuer by Mr Keatings. Notwithstanding the date of 29 April 2008, the Castle Grant project had started in late 2006 and continued to this day.

73    The defender had not invested in Snowcast Limited, but had provided Snowcast UK Limited with some funding. He was referred to the bank statement (6/1/1). His involvement with that business came about when Mr Keatings approached him and sold him the idea of the business. Snowcast was struggling for cash flow, so he lent him some money, which he would then get back. He thought this sum was about £200,000, in a facility which would be paid when required. He contradicted Mr Keatings' evidence that there was any shareholding - the defender was not a shareholder in Snowcast. It had "no involvement at all". The relationship was solely a "loan we'd make a return on".

74    He'd known Mr Keatings for about 20 years. He introduced Mr Whyte to the pursuer. He met only Mr Jenkins. They had a meeting, but Mr Whyte could not recall the date. With reference to the copy conditions (5/4/5) he did not know if he'd signed those at a meeting. He met Mr Jenkins only two or three times in total.

75    He was asked about an arrangement whereby Snowcast supplies would be invoiced by the pursuer to the defender. He rejected this absolutely, as the defender had no involvement with Snowcast, and he wouldn't have agreed to such an arrangement in any event. If he wanted to put money in, he would give cash - he would not hand a blank cheque to a supplier. That had "no commercial logic whatsoever". I will return to discuss the logic, below, The defender would pay for materials ordered by the defender, not by anyone else. He did not remember discussing Snowcast credit limits.

76    He was referred to the credit application in the defender's name (5/4/4). He did not complete that form, and had not asked Mr Keatings to complete it. He assumed it related to an account for Castle Grant. It was possible that amount would be spent, as it was a considerable project.

77    He was referred to the many volumes of invoices and delivery notes. He accepted it was unlikely that these were for Castle Grant, and he noted the delivery addresses to sites in Glasgow. They were addressed to the defender. Mr Whyte, however, would have seen the first batch, and these would be forwarded to Mr Keatings, and he would be told to make sure they went to the right party. Mr Whyte did not live at Castle Grant on a regular basis (only 3 or 4 days a month), and his staff would send them on. That had happened with the first batch. He was "not aware" of seeing more batches of invoices. He'd have had a conversation with Mr Keatings, to get it sorted out. The invoices showed the materials were not for Castle Grant.

78    He accepted the invoices, nonetheless, seemed to have sent to Castle Grant for many months. He was clear that his staff would have sent them on. He only saw the first batch. He did not sign any cheque, and they'd only have been paid if they slipped through the system. The defender did not reclaim VAT on them. On one occasion Mr Keatings had delivered materials, but these were not from the pursuer.

79    He was referred to later invoices being sent to Bath Street, Glasgow. He did not know anything about this. It was the registered office of the defender. He could not explain why they would be sent to Bath Street, and he assumed it was a mistake for Snowcast.

80    He was referred to the Snowcast bank statements (6/1/1). He initially denied having any access to this account (in contradiction to Mr Keatings' evidence). It was down to Mr Keatings to make payments. He said that payments to the defender would either be interest or return of capital. He would have to authorise payments, and demands for payment from Snowcast would be discussed with Mr Keatings. Mr Jenkins would contact him about sums due, but that was because he knew Mr Whyte had lent money to Snowcast. Mr Jenkins was aware of that relationship. He had met Mr Jenkins in London: while he could not remember what they discussed, the pursuer and the defender had a similar interest in being paid by Snowcast. All payments to the pursuer were made by Snowcast, not the pursuer.

81    He did attend a meeting at the pursuer's office in Govan. It was to "see the set-up". Mr Whyte did not remember discussing Snowcast at all on that date (a stance I found odd, as Snowcast was the only link between the parties). He was asked if he had asked about getting a credit arrangement for the defender. He said that "if" he did, it would only be for supplies to the defender. Mr Jenkins may well have discussed a £75,000 limit for the defender, but he did not recall. It was, however, "completely false" to say that the defender would become the customer for Snowcast supplies. That "would be a very strange arrangement". He maintained that the signing of the terms and conditions was nothing to do with such an arrangement.

82    If any arrangement like this was mooted, it would be more appropriate to offer a guarantee. Mr Whyte would not offer a guarantee in any event. He denied ever telling Mr Jenkins that there was nothing to worry about, after payment problems arose. Mr Whyte had exactly the same concerns about Connaught's non-payment. There's "no way I would agree to the defender being the customer". He had met with Connaught once, as part of due diligence.

83    He agreed with Mr Jenkins' comment that the defender was offering a financial lifeline to Snowcast, but this was by way of a loan. He did not invest in Snowcast. He dismissed the alleged invoicing arrangement as "absolute nonsense". The invoices sent to the defender were certainly forwarded to Mr Keatings. There was no arrangement that the invoices be sent to the defender.

84    Mr Whyte agreed that this was a business opportunity for the defender, that there might be lots of work, and that it was necessary to secure a supply of materials. He denied that the defender became the customer - if so, the defender may as well have carried out the work itself.

85    In cross-examination, he was asked if Mr Jenkins had ever pressed the defender for payment of the outstanding sum. He denied this had been done. He was then referred to several text and email messages which passed between them (5/6/12 and 13 of process). The text, from Mr Jenkins, states "Hi Craig...I seen (sic) to have hot (sic) a brick wall regarding the £5000 per month which we agreed you'd pay..." Mr Whyte denied ever agreeing to pay. He was asked to comment on various emails. Production 5/6/13 states: "There is still £86,127.36 outstanding. I have received £7,500 to account since both your good self and Tom agreed to settle the Tixway debt...please Craig I am begging you to help me?" Mr Whyte said he was "always happy to help". I found this an odd response, as Mr Whyte was clear there was no such debt. He did not explain the reference to "the Tixway debt". His evidence was that Mr Jenkins would have known there was no such debt. The next email, dated 1 September 2010, also asks him to "...call me with regards to the outstanding sum from Tixway." In my view that can only be understood as a reference to liability of the defender. Mr Whyte said "it was possible" that he had denied this debt to Mr Jenkins.

86    A further email dated 15 October 2010 states: "I am obviously very keen to discuss...the outstanding debt between Onestop and Tixway...I can't stress enough how much it would mean to me...if you reinstated the proposal to pay back at £5k/month". Mr Whyte's response by email said: "Clearly the old Snowcast debt is a problem given nothing can now be recovered from Connaught but happy to sit down with you and discuss potential solutions..." This, in my view, is a striking contemporary failure by Mr Whyte to deny the debt, or at least to query the claimed "£5k/month" arrangement which, according to his evidence, he had never agreed.

87    At this stage, Mr Whyte was reminded of the statement he had made, at the start of cross-examination, that Mr Jenkins had ever pressed for payment. Mr Whyte said that no debt was due (which didn't answer this point). He was referred to a 23 November 2010 email from Mr Martin referring to the "Tixway UK ltd debt". Mr Whyte said there was no such debt, but again there was no contemporary attempt to dispute it.

88    He was asked about the defender, and whether his wife was a director. He replied "I believe so". In my view it was hard to see why such a basic query should elicit such an indirect, equivocal answer. It was becoming apparent to me, by this point, that Mr Whyte was being careful to be as non-committal as possible in his answers. Whether this was due to the pressure of press scrutiny, as he alluded to in his evidence, was difficult to tell. It had, however, the effect of detracting from his evidence.

89    There were no actual orders by the defender that Mr Whyte could recollect. He confirmed that renovation works had started in Castle Grant in 2007, and explained the signing of the terms and conditions (5/4/5) as a new supplier being introduced, notwithstanding the co-incidental timing. Despite there being no orders for Castle Grant, there was no other reason for signing. It was "complete nonsense" to say it was the only way of obtaining supply for Snowcast.

90    It was discussed that the defender would take a 51 per cent stake in Snowcast, but it was never carried through. He agreed there was no loan agreement with Snowcast. He instructed payments from Snowcast. He had, however, no access to the Snowcast bank account. He thereafter modified this to saying "It is a possibility I had direct access to the Snowcast account".

91    He did not recollect how much money was invested, but he thought more went in than came out. He "made no apology" for asking for repayment.

92    He did not recall Mr Keatings filling out a credit application for the defender. He was not in a position to do so. It would be for goods for the castle, and no other reasons.

93    He had no idea why 600 to 800 invoices were sent to the defender. He said he "responded" to these. Mr Keatings should have mentioned these. Mr Whyte had never asked for a credit limit of £75,000.

94    He could not comment on the reclaim of VAT. The defender had never reclaimed. He could not comment on whether Snowcast could reclaim, given that the invoices were not addressed to Snowcast. It was a matter for them. He did know that one needed an invoice, to oneself, to reclaim VAT. He'd told his staff to sort out the addressing to Castle Grant. He would certainly have told Mr Keatings to sort it out.

95    He disclaimed knowledge of Snowcast's history or suppliers. He said that Mr Keatings had sold a story well, or else the defender would not have made a loan. He attended the Connaught meeting not to ask for all the work to be diverted to Snowcast, but only as part of due diligence. He was familiar with credit risk insurance, but did not know the pursuer's arrangements. He agreed that it did not seem very sensible to give credit to Snowcast of £70,000 per month without credit risk insurance. It may be that the pursuer concocted a scheme to use the defender's credit rating, but it was not with Mr Whyte's authority. He had signed the terms and conditions only for Castle Grant supplies.

96    He agreed that a number of invoices went to the defender's registered office at Bath Street, Glasgow. He had "no recollection" of instructing such a change. There was no need to investigate, as they were being paid by Snowcast.

97    Mr Whyte agreed that he was accusing Mr Jenkins, Mr Keatings and Mr Snowball of lying. He stated it was possible that "one of my staff" had access to the Snowcast bank account. He did not accept that Mr Jenkins was ever chasing the defender for payment.

98    He accepted that sometimes he required access to bank accounts for investments in smaller companies. This allowed monitoring of the flow of funds, and the taking of payment when due.

99    Overall, for the reasons set out below, I have not been able to rely on Mr Whyte's evidence as reliable, and where it contradicts the evidence of the pursuer's witnesses, I have preferred the latter.

Submissions

100 Following Mr Whyte's evidence, both sides made written and verbal submissions. Both parties' procurators discussed the evidence, and I set out my findings below. The agent for the defender founded heavily on the distinction between Snowcast Limited and Snowcast UK Limited, and it is appropriate that I deal with this submission as a preliminary matter.

Snowcast Limited/Snowcast UK Limited

101 On behalf of the defender, it was submitted that it was critical to bear in mind the distinction between these two companies. The former had been set up by Mr Keatings and Mr Snowball, and traded until about May 2008. The latter was a new company of similar name, with which the pursuer started trading in succession to the old company. The agent for the defender referred to the pursuer's pleadings, which referred only to "Snowcast Limited", and to her own line of questioning, in which she maintained she had been careful to ask questions only in relation to "Snowcast Limited". She invited me to draw this distinction between the two, and to conclude that the pursuer's case had not been made out, because all supplies post-April 2008 were made to Snowcast UK Limited, not Snowcast Limited, and accordingly there could be no debt due in respect of the former.

102 The defender's agent is correct that the debt averred in the Initial Writ is that of "Snowcast Limited". That is the limit of my agreement with her submission, however, and I reject this approach as misconceived. The function of pleadings is to give fair notice of the case to be made. Once evidence is led, however, that evidence is available for the court to consider. Only by objecting to evidence which does not correspond with the case on record, can the other party prevent it being available. There was no objection to the evidence led about Snowcast UK Limited, and indeed none of the witnesses regarded the distinction as significant (save for the focused point about a "clean" company). While the questioning for the defender may indeed have paid punctilious attention to the distinction (although it was not obvious at the time that any distinction was being drawn), it is not the questions that matter, but the answers. The witnesses plainly did not take the same careful approach, and it is their evidence which forms the basis of judgement.

103 What became clear from the evidence of every single witness was that nobody, in fact, made such a distinction. The two companies were referred to by each and every witness as "Snowcast". That was because the distinction was not a real one in any witness's mind. The same business, with the same principals, with the same supplier and customers, operated after April 2008 as had prior to April 2008. There was absolutely no evidence that any party knew or cared that a new company had been formed. The only reason for a new company was to make sure there was a clean vehicle to which the defender might give financial support. Accordingly, on no fair view could it be said that the pursuer intended to supply the old company, or that the supplies were being ordered by the old company, or that the defender was being asked to invest in the old company. All were agreed that the business was "Snowcast", and all were intent on promoting that business. No lawyer was involved. Consequently, while the pursuer's averments indeed refer to "Snowcast Limited" operating post-April 2008, the evidence shows that averment to be in error, and the evidence also shows that the same business was in fact operated by "Snowcast UK Limited". I have no difficulty with that evidence, and nor did any of the witnesses. A court must reach its opinion on the evidence, not the pleadings, which have limited relevance once the evidence is led, except as a guide to whether evidence is admissible.

104 I would say that, even had this distinction been founded upon in objecting to evidence, it is likely that I would have allowed the pursuer to amend the reference in the pleadings to become "Snowcast UK Limited", and allowed the defender time to respond. It is difficult to see how the defender's case could have changed, in consequence. It is no more than an error in the pleadings in relation to distinction which (as the evidence shows) had no practical relevance to any of the witnesses, or the underlying contract, or the supply of goods, or the payment obligation of the defender. Even hypothetically, therefore, this formal point has no substantive merit.

105 I now turn to discuss the remainder of the evidence.

Discussion of evidence

106 The parties are in dispute as to whether there was any agreement that the defender would become the customer of the pursuer. The pursuer's evidence was that such an agreement was reached between Mr Jenkins and Mr Whyte, on behalf of the parties, on or about 29 April 2008 at the pursuer's offices. That was to allow the pursuer arranging credit risk insurance against the defender's credit rating, rather than that of Snowcast, and therefore free them up to extend credit to a much higher value. The defender denies any such agreement. In submission, the agent for the defender accepted that this was a sharply polarised situation - either the pursuer's version was correct, or it was a case of deliberate fraud by the pursuer on the insurer in the knowledge that the credit risk was misrepresented. It is hypothetically possible that the parties simply misunderstood each other. Having considered the evidence, however, I accept the evidence of Mr Jenkins about what occurred at that meeting, and reject Mr Whyte's evidence as unreliable. I accept the evidence of Mr Keatings, Mr Martin and Mr Snowball, as it substantially coincides on the central points, and where it conflicts with Mr Whyte's evidence, I accept the former as the accurate account. I would set out the overall structure of the evidence, before turning to the detailed reasons for coming to my view.

The context of the April 2008 meeting

107 Parties agree that Craig Whyte met Mr Jenkins at the pursuer's premises either once or twice in April 2008. The context was that Mr Whyte, as director of the defender, was offering some type of financial assistance to Snowcast. Snowcast's problem was that it was a relatively small trading company, attempting to service a large, and potentially much larger, roofing contract. Snowcast's cash flow was an extremely important issue, as it required very large amounts of roofing materials, while depending on the flow of cash from the main contractor, Connaught. Snowcast required to finance supplies and labour for the customary payment period of 30 days. Large amounts of roofing materials were required to allow roofing works to be undertaken, but the credit limit was not enough to cover the amount of materials require.

108 The importance of cash flow was demonstrated in Mr Keatings' evidence. He spoke not only to the issues with credit for roofing materials, and the slow payment by Connaught, but also to the importance of obtaining gross payment status for tax purposes. Such status resulted from a concession from HMRC that income did not require to have 20 per cent tax deducted at source, but could be received gross, provided that monthly tax returns were submitted on time, and all tax outstanding was paid at the end of the tax year. This was such a requirement that he was not able to be a director of the new Snowcast UK Limited, in order to preserve that status for the new company. Mr Snowball's said that Craig Whyte required that the new company had gross payment status

109 Against that background, it was "crucial", in Mr Keatings' view, that Snowcast had a secure supply of materials from the pursuer.

110 From the pursuer's point of view, they were willing to supply Snowcast, and even enthusiastic to do so, because they anticipated that this would allow them to grow their own business. Despite their enthusiasm, however, they were cautious. Mr Jenkins had already noted that Snowcast were "a bit slow in paying", and the credit limit of £8,000 was wholly inadequate for the materials required. He had discussions with Mr Keatings about how to pay for supplies, including a suggestion that the pursuer take a shareholding in Snowcast. In addition, both Mr Jenkins and Mr Martin spoke to the pursuer's practice of obtaining credit insurance, borne out by the applications lodged in process (5/6/8 and 5/4/4). While Mr Jenkins did accept that occasionally they would operate beyond a credit limit, it was not suggested to him that this was such an occasion, and there was no reason to think it was. The defender, and Mr Whyte, were previously unknown to him.

111 At this stage, therefore, Snowcast needed to guarantee a supply; Snowcast knew they were exposed to slow payment from their own main contractor; the pursuer was only prepared to supply materials if payment was secured; the pursuer knew that Snowcast was not a wholly reliable payer and was in any event unable to offer comfort about payment; and their own insurers would not offer adequate risk protection. The solution, therefore, was security for the pursuer's continued credit to Snowcast.

112 Mr Whyte for the defender says that all that was ever on offer was a loan, to Snowcast. Mr Whyte rejected any suggestion that the defender take a shareholding in Snowcast or otherwise take a stake, and it could only, therefore, have been an arm's length loan. It is difficult, however, to see how this would meet the pursuer's commercial requirement for security of payment. The pursuer could not take more than peripheral comfort from a loan to Snowcast, as there would be no guarantee the cash would be used to pay the pursuer. There would be no guarantee of payment, and upon default the loan would most likely be repaid to the defender, not the pursuer. Further, a loan would do nothing to increase the risk insurance level available. From the outset, therefore, Mr Whyte's position is, at least, somewhat improbable. The next issue is what was agreed between the parties at the meeting of 29 April 2008.

The meeting in April 2008

113 I have set out the witnesses' evidence about the meeting on 29 April 2008 in the pursuer's offices in Govan. Those attending included Mr Jenkins, Mr Whyte, Mr Keatings, Mr Snowball and (according to Mr Snowball) Tom Whyte and Willie Brown. In summary, the reason for meeting with Craig Whyte was that he had stepped in to offer financial assistance to Snowcast, for the purpose of addressing the materials problem. Mr Jenkins was clear that this meeting resulted in an agreement that the defender would become the customer for roofing products supplied to Snowcast. At that meeting, Mr Whyte filled in the terms and conditions form (5/4/5). There was no mention of renovation work at Castle Grant, and Mr Jenkins had not previously heard of Craig Whyte. Mr Martin gave evidence that he saw Mr Whyte in the office that day, but was not party to the meeting.

114 Mr Keatings said he had a "vague recollection" of the meeting, but confirmed that the purpose of the meeting was to give a level of comfort to the pursuer relating to Snowcast. He did not, however, suggest that materials be invoiced to the defender, although the mechanism was for Mr Whyte to decide. He is not able to give direct evidence about what the parties agreed.

115 Mr Snowball confirmed the meeting, that the Snowball supplies question was discussed, and "that's when Craig and Tom said they'd finance this under the cover of Tixway", and stipulated that the invoices be sent to Tixway, along with copy orders, so these could be married up on a monthly basis. Mr Snowball, therefore, agrees with Mr Jenkins' recollection.

116 Mr Whyte's evidence was wholly different. His position was that the meeting was to see the pursuer's establishment in Govan. He did not recall discussing Snowcast at all on that date. He did not deny asking about a credit arrangement, but did not confirm it either. If he had, he said, it would only be for supplies ordered by the defender for their own use. The only aspect he was clear on was that he did not volunteer the defender to be the pursuer's customer, which he described as "a very strange arrangement". He accepted that he had signed the pursuer's terms and conditions, on behalf of the defender, but it had nothing to do with such an arrangement. He said that there was "no commercial logic whatsoever" in "handing a blank cheque" to a supplier. I have set out his detailed comments already. Mr Keatings' evidence added to that of Mr Whyte only to a limited extent - namely, although he did not know what had been agreed, he would be "very surprised" if Mr Whyte had agreed that the defender become the customer, as he was very risk averse. That, plainly, was guess-work.

117 Mr Whyte's evidence as to the meeting was clear only on one point, namely that the defender was never to become the customer. On every other issue his evidence was vague and somewhat ambiguous. It was difficult to know, at times, whether his answers that he "had no recollection" of various points meant that events definitely did not occur, or that they might have occurred but he simply did not remember. His demeanour was guarded throughout, and his answers as short as he could manage. It is possible that he may genuinely have a poor recollection of the meeting, but that is double-edged - it means it is more difficult to accept his evidence when he seeks to be clear that there was "absolutely not" such an agreement.

118 Significantly, Mr Whyte did not remember Snowcast credit limits being discussed at that meeting. However, all the other witnesses' evidence points to the Snowcast credit limit being the whole reason for the meeting. Logically, it is difficult to see that Mr Whyte's position is correct - Snowcast was, after all, the only thing in which those attending had a common commercial interest. That meeting was Mr Jenkins' chance to speak to a major provider of financial assistance, in a project which both Snowcast and the pursuer were keen to develop. It is difficult to see that he would not take it. I cannot, therefore, accept that the Snowcast credit limit was not a topic of conversation - it must, indeed, have been the principal topic. That by itself casts further significant doubt over Mr Whyte's evidence.

Events following the meeting

119 With almost immediate effect, roofing supplies were ordered by Snowcast, and invoiced by the pursuer to the defender. The first invoice sent to the defender is dated 30 April 2008 (5/2/1) and is addressed to the defender at Castle Grant. It is the first of (at best estimate) 600 to 800 invoices in total sent to the defender over the course of approximately one year, the last being dated 1 May 2009 (5/2/1748). They were sent to Castle Grant until approximately late March 2009 (5/2/1573, although see 5/2/1580) when they were sent to 65 Bath Street, Glasgow, the defender's registered office.

120 Mr Whyte's evidence was that he became aware of the first batch to arrive at Castle Grant, and handed these to his staff to make sure that there was no repeat. They continued to arrive, however, for approximately one year, when they were diverted to the defender's registered office. Mr Whyte could offer no explanation. Logically, either Mr Whyte's staff are wholly incompetent, or disregarded his instructions, or Mr Whyte's evidence is unreliable. Mr Keatings' evidence was that no invoices were forwarded to him for payment, and payment was made on trust.

Summary of reasons

121 I have preferred the pursuer's account and reject those of the defender. It follows that the pursuer has proved its case. I would summarise the reasons as follows:

122 Firstly, as discussed above, in my view Mr Whyte's evidence about the financing arrangement, namely a loan to Snowcast, is inherently improbable. It is not a solution which would solve the pursuer's problem with extending credit. It would give the pursuer no security for payment, except in nebulous terms. I do not accept that the pursuer would grant very high levels of credit, at £75,000 per month, without security. By contrast, the relationship of client/customer would give the pursuer security, irrespective of who actually paid the bills. There is no suggestion that the defender would make payment direct, but rather it would assume only formal legal liability as the customer. The pursuer's version is inherently more plausible.

123 Second, that point is reinforced by events before and after the meeting. Prior to the meeting, there was a problem with supply levels. Following the meeting, that problem was resolved, and immediate supply began. Within a couple of weeks, many thousands of pounds of credit had been extended (see invoices 5/2/1 et seq). It is highly likely, therefore, that whatever had been agreed at that meeting provided the pursuer with acceptable security. These supplies continue for at least one year. A loan to Snowcast is unlikely to have had that effect. The defender did not attempt to lead any evidence that any loan had even been made by May 2008, or to give any other explanation for this sudden willingness to supply credit. The pursuer's claim is inherently more plausible. I do not accept that any competently managed business in the position of the pursuer would advance £75,000 of credit to a customer in reliance solely on an assurance of payment. I have every impression that Mr Jenkins and Mr Martin were competent managers.

124 Third, as discussed above, Mr Whyte's evidence about not remembering the discussion of Snowcast's credit limit at the meeting of April 2008, is improbable. Snowcast's credit was the main problem between the pursuer and Snowcast. It was the financial problem which held up supplies, which Snowcast regarded as critical. Snowcast supplies was the only topic which linked the pursuer, the defender and Snowcast. The defender, in the form of Mr Whyte, was there to assist. All parties had a direct financial interest in resolving the issue and allowing a lucrative contract to flourish. It was, in my view, the whole rationale for the meeting. This casts doubt on Mr Whyte's evidence.

125 Fourth, immediately following the meeting, supplies were invoiced to the defender at Craig Whyte's home address, not Snowcast's address or even the defender's registered office. There is, in my view, no plausible explanation for this, other than that Mr Whyte asked for this to be done. If the pursuer were to invoice the defender, the logical explanation would be to send it to the defender, at Bath Street, not to a director's private address. In my view that can only be explained by an express instruction. Mr Whyte's explanation for the invoices being sent to Castle Grant was that it was a mistake, which he had instructed be rectified. Mr Whyte said he "had no idea" why 600 to 800 invoices were sent to the defender. I reject that evidence as inherently implausible, and contradicted by all the other evidence.

126 Fifth, Mr Whyte's evidence that he reacted to these invoices is equally implausible. He said he "responded" to these and made sure that Mr Keatings saw they went to the right party. Mr Keatings' evidence gave no support to this. Nonetheless, the evidence shows that the invoices continued to be sent there for approximately one year. The only possible explanations are that either Mr Whyte did not give such an instruction, or that his staff did not receive it (but nonetheless kept processing invoices without telling him), or that his staff are incompetent. These last two options appear unlikely. Even if he did give such an instruction, that does not explain why the invoice address was suddenly switched from Castle Grant to Bath Street. Mr Whyte could offer no explanation. If he had truly instructed these invoices to go to the "right party", the right party was not the defender's own registered office. Moreover, these invoices continued to be paid throughout, so his staff never sent them back to the pursuer. In my view, only the pursuer's explanation makes sense. I note, further, that while the pursuer sent duplicate delivery notes to Castle Grant, they did not sent duplicate invoices to Snowcast. In my view, if Snowcast was truly the customer, it is much more likely that Snowcast, not the defender, would receive the principal invoice. They did not.

127 Sixth, Mr Whyte's explanation for filling in the terms and conditions (5/4/5) was that supplies might be required for Castle Grant. He did not demur from the proposition that the type of concrete red house tile would be wholly unsuitable for a listed building such as Castle Grant, but explained that other types of roofing material might be appropriate. However, his evidence was that there was no supply of any sort by the pursuer to Castle Grant - in reality, the only such supply was made by Snowcast. In my view, there was no reason for Mr Whyte to anticipate supply to Castle Grant, which was never the subject of the April 2008 meeting. It is much more plausible that the meeting was to address the Snowcast issue, and the terms and conditions were the direct means of becoming the customer and resolving the whole problem.

128 Seventh, Mr Whyte's evidence was that he would only put cash into a business in these circumstances, not hand "a blank cheque" to a supplier. He described the pursuer's claim, that the defender was to step in as the client, as having "no commercial logic". On analysis, however, that is not correct. The defender's relationship with Snowcast was no ordinary relationship. It was not an arms-length transaction between the defender and Snowcast. Firstly, Mr Whyte (eventually, after an initial denial) agreed that he would "possibly" have complete access to Snowcast's bank account. Mr Keatings' evidence was that he had such access, and used it to move funds, and I accept that evidence. From this access Mr Whyte could monitor, and indeed control, the cash position. He could, according to Mr Keating, withdraw money from that account at will. The result is that the defender could get repayment as a matter of priority whenever it felt the need. Secondly, invoices of every relevant transaction, and copy orders as well, went to Castle Grant. Accordingly the defender would be fully aware within a few days of any significant variation in order value, and could take steps to protect its position. There was no question of a blank cheque - to the contrary, it is difficult to see that the defender could not, if it chose, regulate the supplies contract very closely and obtain payment instantly if it were abused. To the extent that this was "a very strange arrangement", that moniker would also apply to the intrusive nature of the defender's involvement in Snowcast's affairs, and which Mr Whyte admits.

129 Eighth, Mr Whyte explained that if any arrangement like this was mooted, it would be more appropriate to offer a guarantee (although he would not offer a guarantee in any event). In my view, that explanation is also tends to mislead. As he would undoubtedly realise, a guarantee would not solve the supply problem. It would only mean that the defender would be liable long after Snowcast defaulted. While there might be long-term liability under a guarantee, that would do nothing for the pursuer's short-term cash flow in the event that Snowcast ceased to pay. In an industry where cash flow is critical (see Mr Keating's discussion of gross payment status, for example) this is, in my view, very unlikely to be satisfactory to the pursuer, at least to the extent of allowing £75,000 of credit per month. The pursuer's survival would depend on suing the defender. It is inherently unlikely that (even hypothetically) this arrangement would ever work. I wondered what Mr Whyte's purpose was in mentioning it. Similarly, his evidence was that, if the pursuer's claim is correct, the defender may as well have carried out the work itself. That was not a plausible comment either. Quite apart from the defender not being a roofing contractor, the defender had complete control over accounts, invoices and repayment. This evidence did not assist me in relying on Mr Whyte's evidence.

130 Ninth, Mr Whyte agreed with the proposition that it did not seem very sensible to give credit to Snowcast of £75,000 per month without credit risk insurance. He postulated that the pursuer concocted a scheme to use the defender's credit rating, but without Mr Whyte's authority. He had signed the terms and conditions only for Castle Grant supplies. In my view, Mr Whyte could not believe that scenario, nor could the pursuer credibly have intended it. The whole point of credit risk insurance is that it is arranged, and paid out, on a debtor-by-debtor basis. No insurer could pay out without knowing who the customer was. Here, if the customer was Snowcast, the limit was completely inadequate. For any fraudulent scheme to work, the defender would have to be "misrepresented" as the customer, requiring the defender to collude with this pretence in the event of a claim. I cannot see that the pursuer could ever seriously believe that (if this were truly a fraudulent scheme) Mr Whyte would suddenly collude in agreeing. Ignoring the inherent risk of criminal liability in fraud, the defender would thereby immediately be exposed to a subrogated claim direct from the insurer. The defender had ample cash assets. The first thing an insurer would do is sue the defender, after having paid out. Mr Jenkins did not strike me as so naïve to believe that the defender would, quite unnecessarily and with no gain to itself, subject itself to credit blacking, litigation and commercial ruin. To the contrary, all the defender would have to do is deny liability. The insurer would then refuse to pay out, and the pursuer would be left completely exposed to a huge debt. There was no reason to anticipate, in April 2008, that (fraudulent) invoicing of the defender, to Castle Grant (as Mr Whyte accepts occurred) would be met by anything other than an angry rebuttal and the end of any financial support. All in all, there would never be any credible chance of claiming on such an insurance policy, and accordingly no incentive for the pursuer setting up this unlikely scenario. In my view, Mr Whyte is not so naïve as to believe this either.

131 Tenth, Mr Whyte's evidence as to claims for non-payment was exposed as, at the very least, inaccurate. In cross-examination, he was asked if Mr Jenkins had ever pressed the defender for payment of the outstanding sum. He denied this had been done. He explained away several email messages which passed between them (5/6/12 of process). The text, from Mr Jenkins, states "Hi Craig...I seen (sic) to have hot (sic) a brick wall regarding the £5000 per month which we agreed you'd pay..." Mr Whyte denied ever agreeing to pay. He was asked to comment on various emails (5/6/13). The first states: "There is still £86,127.36 outstanding. I have received £7,500 to account since both your good self and Tom agreed to settle the Tixway debt...please Craig I am begging you to help me?" I have referred to this evidence in more detail above, including "I am obviously very keen to discuss...the outstanding debt between Onestop and Tixway...I can't stress enough how much it would mean to me...if you reinstated the proposal to pay back at £5k/month". For the reasons set out earlier, I reject Mr Whyte's evidence about this correspondence. It is clearly, in my view, a detailed claim for payment by reference to an earlier agreement, which the defender failed to deny and only latterly began to address by "discussing potential solutions". These emails are wholly consistent with the pursuer's position and wholly inconsistent with that of the defender.

132 Eleventh, leading on from the above, the pursuer's position is that payments of £5,000 per month were negotiated, and these are referred to in the foregoing emails. Mr Whyte denies this. However, the Snowcast bank statements (6/1/1) shows that these were paid on 13 April 2010 (5/3/3). This is clear evidence that contradicts the defender's position.

133 Twelfth, the only other possibility was that the pursuer might have mistaken the defender's position, and the parties simply misunderstood each other at the meeting of April 2008. I reject this as a possibility. Not only did neither side suggest such a scenario, but it was not a stance taken by Mr Whyte. He did not attempt to give an alternative version of events. He did not, for example, say that the meeting of April 2008 was designed to comfort the pursuer by a display of financial backing. His evidence was that the meeting was solely for the purpose of seeing the pursuer's establishment, and that Snowcast was discussed either barely or not at all. Further, the defender, on the evidence, could not have been unaware of the invoices, the continued supply or the claims of the pursuer for payment from the defender. Moreover, the substitution of a third party as a customer is a sufficiently unusual situation for it to be highly unlikely that the pursuer misunderstood. I therefore mention this possibility for completeness and only to dismiss it as highly unlikely.

134 Thirteenth, by contrast to the foregoing, all the documentary evidence fits with the pursuer's case. I accept that the pursuer operated a cautious business model which involved credit risk insurance for its clients, and that it followed normal practice with Snowcast and, in turn, the defender. The invoices are consistent with this, as are the subsequent emails. I have no doubt that the pursuer's version is the correct one.

135 I would mention one other point, namely the VAT question. The invoices were VAT invoices, and one would expect an attempt to reclaim the VAT. Whoever reclaimed VAT may, in my view, throw some light on who the customer truly was. There was, however, no evidence, and this point cannot be taken further. Mr Whyte denied reclaiming VAT, but there was no evidence that Snowcast did, either. It remains an unknown factor.

136 For completeness, a passing reference was made in evidence to Mr Whyte having served a period of disqualification as a company director, and he admitted this. It was not suggested that there was any direct link between that event and the defender or Snowcast. In fairness to Mr Whyte, because it has no direct bearing on the current case, I have not taken any account of Mr Whyte's history and I simply disregard this.

Conclusion

137 For the foregoing reasons, I accept the evidence led by the pursuer as credible and reliable, and supported by the available documentation. I reject the evidence of Mr Whyte as wholly unreliable. It is not possible to ascertain whether he is not telling the truth or is simply unable to recollect the true position, and has convinced himself that this arrangement is something that he would not have entered into. Either way, his evidence is contradicted by virtually every other piece of evidence. In my view, the defender offered its own credit rating to allow cover for the supply of large volumes of materials to Snowcast, subject to (i) a high degree of control by the defender over Snowcast and (ii) an understanding between the defender and Snowcast that Snowcast would make payment for these materials. As a matter of legal liability, however, the defender remains the principal obligant. There is no dispute as to the sum outstanding, nor that it was properly incurred, and I accept the total brought out by the pursuer's figures (5/3/3). I will grant decree as craved.

138 I will fix a hearing for parties to discuss expenses and any other matter arising.

 

Sheriff of Glasgow and Strathkelvin at Glasgow.