United Kingdom VAT & Duties Tribunals Decisions

Worldwide Designs Ltd v Customs and Excise [2005] UKVAT V18999 (22 March 2005)

18999

VAT — ASSESSMENT — best judgment — outputs declared in VAT returns amounting to less than true level of inputs — taxpayer appearing to be trading at a loss — alleged by taxpayer that business was financed by its trade creditors and that Customs had ignored stock shown in accounts — evidence of taxpayer rejected — assessment for undeclared VAT on difference between declared outputs and true inputs upheld as reasonable — appeal dismissed

MANCHESTER TRIBUNAL CENTRE

WORLDWIDE DESIGNS LIMITED Appellant

- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: Michael Johnson (Chairman)

J T Brian Strangward

Sitting in public in Birmingham on 8 November 2004 and 21 January 2005

Alan Rudge, solicitor, for the Appellant

Helen Redmond, counsel, instructed by the Solicitor's office for HM Customs and Excise for the Respondents

© CROWN COPYRIGHT 2005


 


DECISION

1. This is an appeal against an assessment to value added tax ("the assessment") made under section 73 of the Value Added Tax Act 1994. The assessment, for £15,857.00 plus interest of £608.74, is in respect of the Appellant's VAT accounting periods from 1 November 2001 to 31 January 2003, ie an initial period of six months, followed by three quarterly periods.
2. The Appellant was registered for VAT with effect from 1 November 2001 to carry on the business activity of selling upholstered furniture, operating from industrial premises in Tividale, Oldbury, West Midlands. The background to the assessment is that, following a visit to the premises of the Appellant and discussions first with Mr Harjit Singh ("Mr Harjit"), sole director of the Appellant, and then with Mr Harjit and his solicitor Mr Rudge, the Commissioners of Customs and Excise ("Customs") formed the view that the Appellant had been underdeclaring VAT due. The officer of Customs in charge of investigating the Appellant was Mr Michael Payne.
3. This appeal has resulted from the Appellant's dissatisfaction with Mr Payne's responses to correspondence from Mr Rudge querying the basis on which the assessment has been formulated. Mr Payne concluded that, according to the information available to him, the Appellant's business had made an apparent loss of approximately £106,481 in its first 15 months of trading. Mr Payne made the assessment on the footing that, in the absence of any other explanation as to how that apparent loss had been funded, Customs could only assume that the Appellant's sales had been under-stated in its VAT returns. The Appellant joins issue on the reasonableness of the assumption made by Mr Payne, as discussed in the correspondence between the parties.
4. The Appellant says that the alleged "loss" is spurious. The appeal is founded on the Appellant's contention that its trading position, which Customs rejects as implausible, is explicable in terms of the stock held by the Appellant from time to time, consisting of unsold manufactured furniture and materials for manufacturing items of furniture, as to which credit accommodation was allegedly provided by the Appellant's suppliers. The Appellant says that, during its first months of trading, it built up a lot of stock for which it did not at that stage have to pay. Thereafter the Appellant's purchases were small compared with its sales, because of the presence of that stock.
5. The Appellant's case is that its trading profit on the stock purchased was postponed until the stock could be realized, which had yet to happen; by the same token, the favourable payment arrangements enjoyed with its suppliers meant that the Appellant could afford to survive pending such realization. In that state of affairs, the Appellant says, its low returns for VAT are understandable and are not reasonably to be interpreted as indicating an underdeclaration.
6. The figures to support this case are contained in the financial statements ("the accounts") prepared for the Appellant covering its trading period from its incorporation on 2 July 2001 until 31 December 2002. The accounts were produced by the Appellant in the wake of the assessment, following the initial exchange of letters between Mr Payne and Mr Rudge ^[1]. For the period covered by the accounts, the Profit and Loss Account shows a turnover of £351,392, cost of sales amounting to £229,774, a resulting gross profit of £121,618 and a net profit, after distribution costs and administrative expenses, of £768. The Balance Sheet shows trade creditors of £116,319 and a total due to creditors within one year of £142,313. But it also shows current assets amounting to £143,083, of which stock is said to represent £143,000, so that after deduction of creditors, shareholders' funds amount to £770. That figure consists of £2 called-up share capital – the two subscribers' shares in the Appellant, both owned by Mr Harjit – together with the £768 from Profit and Loss Account.
7. The profitability of the Appellant is therefore seen to hinge on the stock: whilst, on the one hand, the stock is alleged to be an asset of the Appellant, on the other hand, most of its value is said to be owing to creditors.
8. The first issue that the tribunal has to decide is whether we accept the accounts as an accurate reflection of the Appellant's trading position. If we do, we then have to decide whether that acceptance invalidates the stance of Customs in relation to the assessment. If we reject the accounts for any reason, we must then still proceed to consider the basis of formulation of the assessment. Finally, we must in any event examine and approve the computation of the assessment, and adjust its amount if required.
9. The hearing of the appeal was spread over two days. On the first day, 8 November 2004, the appeal was opened by Mr Rudge, appearing for the Appellant, and we heard oral evidence from Mr Harjit. We then adjourned for lack of time until 21 January 2005. On that day, we heard oral evidence from the Appellant's accountant, Mr Iain Young, and following the closure of the Appellant's case at lunchtime, we heard oral evidence from Mr Payne that afternoon. Closing submissions then followed – those of Miss Redmond, appearing for Customs, having in part been put into writing.
10. We have also had the benefit of a bundle of documents, assembled by Customs but to which documents have, without objection, been added on behalf of each of the parties respectively as the hearing has proceeded. This bundle includes copies of the witness statements of each of the witnesses who additionally gave oral evidence to the tribunal.
11. We find the following facts.
12. Mr Payne initially became involved with the Appellant on behalf of Customs whilst investigating missing VAT returns for Hallmark Design Ltd, another company directed by Mr Harjit. It appeared to Mr Payne that Hallmark Design Ltd no longer traded and that Mr Harjit's efforts were being devoted to the Appellant. Mr Payne found it necessary to chase missing VAT returns for the Appellant as well.
13. On 7 October 2002, Mr Payne visited the Appellant's premises in Tividale and spoke to Mr Harjit. Both he and Mr Payne gave us an account of what was said between them. Afterwards Mr Payne made a note in which he recorded the conversation. Mr Harjit made no note and told the tribunal that he could not remember what was said on that occasion. We see no reason to discount Mr Payne's evidence of what they talked about, and we accept it.
14. The result of the visit was that it was accepted that a fairly small amount of VAT was due for which the Appellant had not accounted, as the Appellant had not declared tax in respect of certain sales invoices. This tax ^[2] was assessed in 2002 and we are not concerned with it. More importantly, Mr Payne established during the visit that Mr Harjit kept no sales or purchases day books or cash book for the Appellant. Mr Harjit accepted in evidence before us that there were indeed no such books. Rather, figures were put through an add-list machine. Accordingly Mr Harjit was unable to demonstrate that the Appellant's records had the appearance of completeness.
15. The second time Mr Payne and Mr Harjit met was on 3 March 2003. Mr Payne was accompanied by Ms Judith Gohlich of Customs (Mr Payne's line manager, who has not given evidence) and Mr Rudge was present with Mr Harjit. The meeting was at Mr Rudge's offices.
16. Again, Mr Payne made a note of what was said and we see no reason to doubt his evidence, seeing that most of what the note records was accepted by Mr Harjit in tribunal as accurate. In particular, Mr Harjit confirmed, when giving evidence before us in November 2004, that he had not provided Mr Payne with information as to the wages of the Appellant's employees, for which Mr Payne alleged that he asked during that conversation.
17. The non-provision of the information is of little moment, as subsequently such information was provided to Customs (see paragraph 20 below), and there is no issue between the parties with regard to it. It does however indicate that Mr Harjit may not have been cooperating fully with Mr Payne at the time. Mr Harjit told us that he was in fact willing to provide the information, but he said that he hadn't been told to provide it – as he put it to us, he hadn't been given a "deadline" for its production. This suggests to us that Mr Harjit was disinclined to volunteer information.
18. At that meeting Mr Harjit also told Mr Payne that his accountant Mr Young kept the Appellant's books and records, such as they were. It was confirmed that there was no cash book, despite the fact that all transactions were either in cash or by cheque. But we observe from Mr Payne's note of the meeting, and his note of the previous meeting, that he had the opportunity to build up, by agreement, output and input tax figures from add-list prints for the VAT periods 04/02, 07/02, 10/02 and 01/03 ^[3], and that whilst there were some small tax-point errors, they corresponded to a negligible amount of VAT ^[4].
19. Mr Payne possessed Inland Revenue information as to wages figures, and he put schedules to Mr Harjit demonstrating "losses" once these figures were included. The meeting ended with Mr Harjit being made aware that an assessment was proposed.
20. Thereafter Mr Rudge corresponded with Mr Payne about the wages figures. He submitted wages schedules along with a letter to Mr Payne dated 11 April 2003. Also in that letter, and for the first time, so far as we can see, it was asserted on behalf of the Appellant that a large stock build-up had taken place and that materials had not been paid for.
21. In his reply to that letter dated 22 April 2003, Mr Payne wrote that he was prepared to accept the wages figures provided within Mr Rudge's schedules and had recalculated the figures into his schedule for the proposed assessment. However he declined to accept the Appellant's case with regard to the stock purchased on credit, seeing that nothing had been said about that at either meeting. He wrote that he had been told at the meetings that all transactions were paid for at the time.
22. Mr Rudge replied to that letter by one dated 25 April 2003, in which he wrote as follows:

"The writer has no recollection in the notes he took of the meeting [in March 2003] that [Mr Harjit] stated 'All items were paid for at the time of purchase'. All that was stated concerning purchases was that 'purchases were paid either by cash or cheque'. There was no statement that all items were paid for at the time of purchase, obviously (sic) there has been a misunderstanding on this issue."

23. Mr Rudge continued that the Appellant would soon be producing its first set of accounts, for the initial 18 months of trading, which would support what Mr Payne had been told. Mr Rudge requested that before raising any assessment, Customs should await receipt of those accounts.
24. With respect to Mr Rudge, we think that his letter misses the point. If, as has transpired, the obtaining of stock on credit is the sheet-anchor of the Appellant's position, it is surprising that the matter was not specifically raised by the Appellant and discussed at either the meeting in October 2002 or that in March 2003. If the Appellant is right about the stock, it is clear to us that Mr Payne was left with a false impression of the business after those meetings, yet the Appellant substantially accepts, as do we, the correctness of Mr Payne's evidence as to what was said at those meetings. It is hardly surprising that Customs viewed with a degree of scepticism a matter so fundamental to the trading position of the Appellant, when nothing was said about it either at the initial meeting or subsequently at Mr Rudge's offices. The disinclination of Mr Harjit to volunteer information, noted by us above, operated to damage his credibility in the eyes of Customs.
25. So Customs did not wait for the audited accounts as requested, but made the assessment. The correspondence between Mr Payne and Mr Rudge of course continued. Mr Rudge sought a reconsideration of the basis of assessment, but provided no further information as to the matter of the stock. Customs referred the assessment for reconsideration to another Customs officer, Mr Martin Dutton (who did not give evidence). In a letter to Mr Rudge dated 24 July 2003, Mr Dutton wrote inter alia as follows:

"You argued, in your letter dated 22 April 2003, that the differences ^[5] were in part due to build-up of stock and subsequent part-time working. In the absence of any accounting evidence this was rejected.

"In your letter dated 25 April 2003 you questioned the rejection above and some of the statements attributed to [Mr Harjit], which included whether the business was profitable or items purchased on credit. Again in the absence of any accounting evidence your points were rejected.

"Whilst certain points have been raised no accounts or other evidence have been produced to substantiate them".

26. Mr Dutton then stated that he was satisfied that, on the basis of the information available to Mr Payne, the assessment was made to best judgment. He ended by asking for additional information that might justify amending the assessment.
27. The response to that was that the Appellant provided a "trial" Balance Sheet and Profit and Loss Account for the Appellant ^[6]. As we have mentioned, the final Balance Sheet contains a figure of £143,000 for stock. That was also the figure for stock in the "trial" accounts. Mr Dutton wrote to Mr Rudge on 6 October 2003 rejecting the compilation of the figure for stock, seeing that no records had been produced or explanation provided. He closed his reconsideration and upheld the assessment.
28. In our view, the closure of the reconsideration could be regarded as precipitate. Mr Dutton's letter quite rightly raised the fundamental question of the compilation of the stock figure, yet provided no further opportunity for the Appellant's representative to deal with that point. However be that as it may, the overriding question in this connection is, could the stock figure have been justified, had a chance to justify it been provided?
29. Notice of appeal against the assessment was received by the Manchester Tribunal Centre on 22 October 2003. We note that the grounds of appeal relate not only to what is termed in the notice "the disallowance of the situation concerning the stock build-up and the theoretical assumption reached [at] by discounting the issue of stock that there were more sales than declared", but also the calculation of the assessment. Accordingly, as we mention in paragraph 8 above, the issues extend beyond the Appellant's case with regard to stock.
30. Nevertheless at the heart of this appeal is the derivation of the figure of £143,000 given for stock in the Balance Sheet of the accounts. Mr Payne told the tribunal that that was a figure provided by Mr Harjit and that he, Mr Payne, had never seen a list of stock. Mr Young, whose assistance we have found to be invaluable, also told the tribunal that he had never seen a list of stock and that the figure of £143,000 was simply given to him by Mr Harjit. Indeed Mr Young prepared the accounts from the information provided to him by Mr Harjit, and was not himself involved with the trading side of the business.
31. Mr Young told the tribunal that he was of the opinion, as an accountant, that £143,000 was "a lot of stock" for a turnover of some £350,000. He said that Mr Harjit had told him that the creditors of the business had funded the stock. He believed that Customs had perhaps seen a stock valuation, but he had not. We find that Customs had not seen a stock valuation. No such valuation was produced to the tribunal, and it was not pretended to us that such a valuation was ever made.
32. Mr Young personally wrote up a cash book for the Appellant, and extracts from this are contained in the tribunal bundle. This book – we had sight of the original at the hearing – was not derived from any previous cash book or record of transactions; simply from the individual dockets provided by the Appellant. Mr Young did his best to identify and "allocate" these documents. Inevitably some items were listed by him as "unallocated payments". As to these, Mr Young told the tribunal, "No-one could tell me what to set these off against".
33. Without in the slightest intending to criticize Mr Young for the very great amount of work he did in compiling his book, we have a fundamental evidential difficulty with the book. The book is only as good as the individual items listed in it, and only as good as the accuracy of Mr Young in identifying and allocating its contents. He himself admits and accepts that he had no knowledge of the business beyond what he was given to understand by his client. The book is not itself therefore evidence of the conduct of the business, beyond any submission that might be made as to what the individual transactions show when considered with one another, deploying the book as a tool for such purpose.
34. Mr Young's book is therefore of limited use to the tribunal. Seeing that the raw information that it contains stems from Mr Harjit, it is his evidence with regard to the contents of the book that might help us.
35. When he gave evidence, Mr Harjit was taken by Mr Rudge to his witness statement dated 28 June 2004. Mr Harjit was not asked supplemental questions about his statement; he just proved it formally and was then tendered for cross-examination on it.
36. In paragraph 12 of his statement, Mr Harjit says that the alleged loss of approximately £106,481 is disputed. He says that that issue is specifically addressed by Mr Young in his evidence. In paragraph 14 of his statement, Mr Harjit says that the accounts and Mr Young's cash book were prepared by Mr Young and submitted to Customs. Finally, in paragraph 15 of his statement, Mr Harjit says that the issue of the interpretation and calculations of Customs are dealt with by Mr Young in his statement.
37. Mr Young formally proved his witness statement, also dated 28 June 2004, when he gave evidence. In paragraph 13 of that statement, he says that he wrote up the cash book in order to complete the preparation of the accounts. In paragraph 21 of his statement, Mr Young states:

"[The Appellant] has been obtaining credit from suppliers in order to build up its stock level. It had to build up its stock level to achieve sales. As and when sales increased and cash-flow improved the supplying creditors could be paid and the stocks accordingly reduced. As the [Appellant's] cash-flow has improved [the Appellant] does not require to have such a high stock level".

38. Mr Young does not state his source of knowledge for the contents of paragraph 21 of his statement. Although Mr Young's statement is said to have been made from matters within his own knowledge except where otherwise stated – see paragraph 2 of the statement – we find that that is not the case here. We find that the contents of paragraph 21 are not from Mr Young's knowledge but derive in reality from Mr Harjit. Mr Young admitted this in oral evidence and so did Mr Harjit (see paragraph 41 below). In other words, all that Mr Young is doing in paragraph 21 of his statement is to set out what he understands his client's case to be. So as regards the matter of the stock, the way in which it was financed, and the levels at which it was maintained, we find that the tribunal is thrown back on the evidence of Mr Harjit.
39. Mr Harjit's oral evidence about the above matters was very unsatisfactory. When cross-examined by Miss Redmond, he said that he could not remember when Mr Young prepared his cash book. He said that he had no record of sales and maintained nothing on a day-to-day basis. He did not remember what he said at the meeting on 3 March 2003 about purchases. He could not remember whether or not he said at that time that the business was making a profit. He did remember subsequently being asked for details of the provision of credit by suppliers and for details of the stock build-up, including materials, quantities and dates ^[7], and maintained that he made a list of stock. However he immediately qualified this by saying that he had no record at all of the items of furniture manufactured using the materials purchased. As we mention above, there is no list of stock, of any kind, in evidence before the tribunal.
40. Mr Harjit maintained that his suppliers were quite happy to supply him with credit for stock, without chasing him for payment. He said that they would ring him up "occasionally" for payment, and he would pay something – there was nothing fixed. The arrangement was entirely oral – there were no documents. He did not know why there were no records. He had provided Mr Young with all his invoices. His customers would pay by cash or cheque.
41. Mr Harjit said that he could not remember when he told Mr Young about goods received on credit. He accepted that Mr Young was in no way involved with his bookkeeping. Mr Harjit maintained that the difference between the income and the outgoings of the Appellant was financed throughout all four VAT accounting periods in dispute by the credit accommodation provided by its suppliers – in fact, by their generosity. Mr Harjit admitted that paragraph 21 of Mr Young's witness statement was derived entirely from him (Mr Harjit).
42. In the light of what we have heard and read, we must make a finding as to whether Customs acted unreasonably in failing to take into account the alleged provision of stock on credit when considering the making of the assessment. Customs regarded the Appellant's case on this – what we have called its sheet-anchor – as implausible. We agree.
43. We think that the credit arrangements described by Mr Harjit were completely unrealistic commercially. These days no supplier would jeopardise its own trading position by supplying materials to customers without written terms governing payment for the goods – especially when the materials are to be incorporated into new items manufactured by the customer. It was to cater for such situations that the law relating to so-called Romalpa clauses in agreements developed ^[8] . Clauses of this kind, which are very common, provide for the retention of ownership in materials supplied pending payment for them, even where the obvious intention is to use the materials to produce other goods.
44. Alternatively suppliers would require some form of security for large sums of money continually owed, such as a guarantee or floating charge. No trading company in its right mind would allow its claim for payment for goods supplied in such circumstances to be entirely unsecured, lest the customer were to become insolvent and the goods realized by the liquidator for the benefit of the customer's creditors generally.
45. There must accordingly, as we see it, be a real question-mark over the credibility of Mr Harjit's evidence. In view of this, and seeing that no stock list, let alone a stock valuation, has been produced, we find that it is and was unsafe to accept the figure of £143,000 contained in the accounts. We however accept that the Appellant must have had some stock, and we return to this matter in paragraph 53 below.
46. The calculations for the assessment were contained in a schedule enclosed with a letter from Mr Payne to the Appellant dated 7 March 2003. The methodology was as follows:

Calculate the Appellant's wages bill from the information available to Customs;

Make an assumption as to the minimum rental cost of the Appellant's premises;

Compare the declared outputs for VAT with the declared inputs plus the wages bill and the rent (since wages and rent had been omitted from Box 7 of the Appellant's tax returns) for each of the four quarters under consideration respectively;

Since on that basis inputs exceeded outputs for each of the four VAT periods, the difference was said to represent an apparent trading loss on the part of the Appellant;

Assume that the Appellant must have had takings to achieve at least a break-even trading result, calculate 7/47ths of the difference just mentioned, and deem that to be undeclared VAT due.

47. As mentioned in paragraph 20 above, Mr Rudge supplied wages information with his letter to Mr Payne dated 11 April 2003, and Mr Payne was prepared to take that into account in place of the information assumed in the above calculation. Having done that, Mr Payne fixed the assessment at £15,857 plus interest. We note that he was not called upon to adjust the figures for rent incorporated in the calculation.
48. Despite enjoying the professional assistance of both a solicitor and an accountant, the Appellant did not in subsequent correspondence challenge the basis of assessment, save with regard to the stock issue. No doubt this was because it is reasonable to assume that the business could not afford to trade without at least breaking even, indeed it is self-evident that a business that trades for 15 months and makes a loss throughout is not properly in business ^[9]. Moreover, having presented the challenge to the assessment on the basis of the Appellant's outgoings having been financed by its trade creditors, there was nothing more for the Appellant to say should it appear that that must be incorrect.
49. On behalf of Customs, Miss Redmond submitted that it had not been shown that the assessment should be disturbed. She referred us to the case of Customs and Excise Commissioners v Pegasus Birds Ltd [2004] STC 1509 for the manner in which we should approach our decision. She pointed out that the assessment is to be taken to be prima facie correct unless or until the taxpayer shows that it is wrong and also positively what corrections should be made in order to make the assessment right or more nearly right ^[10]. She submitted that the build-up of stock was the only live issue, and she invited us to reject the evidence of the Appellant as to stock as wholly incredible. She submitted that the assessment was made to best judgment and that the appeal should be dismissed ^[11].
50. For the Appellant, Mr Rudge submitted that we should accept the evidence as to stock. He submitted that Customs were wrong to have taken no account of stock, which made all the difference to the Appellant's position. The Appellant, he said, was thereby shown not to be loss-making, as Customs assumed. That being so, Customs' methodology was fundamentally flawed, and the assessment could not stand. Customs had ignored the build-up of stock, which it was totally unreasonable for them to have done.
51. When this case was opened to us, it appeared that there might be merit in the argument that Customs had wrongly ignored the impact of stock in formulating the assessment. However, having reserved and considered our decision, we have formed a clear view as to the poor quality of the evidence put forward by the Appellant as to the truth of its trading position. We are not persuaded that there is anything that Customs should have taken into account about the Appellant's circumstances that they wrongly ignored, nor do we think that in making the assessment anything was taken into account that should not have been.
52. The assessment is of course on a conservative basis, because it assumes that the Appellant did no better than to break even. That, as we see it, is the most favourable assumption towards the Appellant on the facts as we have found them, as it presupposes no profit in respect of which VAT might be accountable and assumes that the Appellant is just "clinging on".
53. We have rejected the figure of £143,000 given in the accounts for stock. The business must have had some stock, but we lack the evidence to decide what the true stock level must have been. Commercial realities however will have dictated that the level of stock would be governed by the sales that the business might have effected so as to repay trade creditors in early course, so as we see it, both the value of the stock and the amount owed to trade creditors will have been less than the accounts show.
54. We ask ourselves the question, if the figures for stock and trade creditors contained in the accounts are unrealistic, as we have concluded that they are, how might Mr Payne have taken the true figures into account, with no inkling what they might be? The answer to that question is that he will have been unable to do so. It was therefore correct for him to have adopted a methodology that took no account of those matters. That methodology was one in which it was unnecessary to consider the Balance Sheet, because Mr Payne's calculations were based simply on presumed Profit and Loss Account. In the circumstances, we think that that was a fair approach.
55. Given the reasonableness of the methodology, the calculation of the assessment is not open to challenge. We therefore see no reason to adjust the figures underlying the assessment.
56. We therefore conclude that the assessment is reasonable in every respect. We decide all issues against the Appellant and we dismiss the appeal.
57. The appeal may be restored to the list if required by either party for argument purely as to costs. It may however help the parties to know that, seeing that the Appellant has lost the appeal on the fundamental matter of the stock, as to which we have rejected the evidence of Mr Harjit, we think it highly probable that the order of the tribunal would simply be that costs should follow the event.

MICHAEL S JOHNSON

CHAIRMAN
Release Date: 22 march 2005

MAN/2003/0721

Note 1    The accounts are dated 24 October 2003. The tribunal bundle also contains “trial balance accounts” for the 12-month period January-December 2002.     [Back]

Note 2    amounting to £1,802.     [Back]

Note 3    ie the four periods of the assessment.     [Back]

Note 4   Apart from missing invoices in period 07/02, resulting in the separate assessment mentioned in paragraph 14 above.    [Back]

Note 5    (ie between the respective positions of Mr Payne and the Appellant, the former maintaining that the business appeared to be loss-making, so that sales must have been under-stated, and the latter maintaining that this was not so).     [Back]

Note 6    (see paragraph 6, footnote 1 above).    [Back]

Note 7    These matters were included in the additional information sought by Mr Dutton in his letter dated 24 July 2003.    [Back]

Note 8    named after Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd [1976] 2 All E R 552 – the English case in which such a clause was first considered.     [Back]

Note 9    (The accounts do not indicate any bank overdraft or non-trading loan facilities).     [Back]

Note 10    See the Pegasus Birds case at [14] (page 1515 of the report).     [Back]

Note 11    (This is a very truncated rehearsal of counsel’s submissions, which were comprehensively prepared. No discourtesy to her is intended.)     [Back]