Neutral Citation Number: [2013] EWHC 3745 (Ch)
Case No: HC10CO2118
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

Royal Courts of Justice
Rolls Building, 7 Rolls Buildings
Fetter Lane, London EC4A 1NL

Date: 28/11/2013

Before :

MR JUSTICE MANN
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Between :

	RIVERTRADE LIMITED	Claimant	
	- and -		
	(1)	EMG FINANCE LIMITED
(2)	SHAILESH GOVINDIA
(3)	EMG HOLDINGS LIMITED
(4)	FORBURG LIMITED 

Defendants	
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- - - - - - - - - - - - - - - - - - - - -

Nicholas Bard (instructed by Spring Law) for the Claimant
Gabriel Buttimore (instructed by Whitworth Green) for the Defendant

Hearing dates: 1st, 2nd, 3rd , 7th, 8th, 9th, 10th & 24th May 2013
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-	Judgment

index	paragraph number	
Introduction	1	
The EMG Group	5	
The Claimant's Witnesses	10	
Mr Hofer	11	
Mr Kinder	15	
Mr Neil Henry	16	
Mr Bahman Jahanshahi	17	
Mr David Robins	18	
Mr Harvey McGrath	22	
Ms Patricia Zoebelin	23	
The Defendant's Witnesses	24	
Mr Govindia	24	
The position and authority of Mr Govindia in the affairs of the EMG Group	26	
The 2008 transactions	32	
The May 2008 transaction	33	
The December 2008 loan	49	
The April 2009 dealings	62	
June 2009	87	
The June 2009 documents	111	
The Facility Letter (or loan agreement)	112	
Letter from Rivertrade to the Directors of Holdings and Forburg (the "Cover Letter")	119	
The Forburg Letter	121	
Letter from Holdings about the Ranhill proceedings	122	
The documents generally	124	
Moneys paid	125	
Subsequent events	126	
Corporate authority - the position and status of Mr Robins and Mr Hofer	136	
The Ranhill proceedings	144	
The claims arising out of those facts	148	
Were there binding agreements in April?	150	
The material agreed terms in April	161	
The parties to the April agreements	167	
Was there a further binding agreement in June, and what was its scope?	172	
The formation of the June agreement	173	
Mr Hofer's authority	178	
The effect of the June documentation according to its tenor and its problems for the claimants	182	
The prior assignments and ownership of the Ranhill proceedings	189	
Estoppel and allied doctrines	203	
The force and effect of the debentures	212	
The 2001 debenture - Finance to Forburg	213	
The 2006 debentures	225	
The 2006 Holdings debenture	233	
The 2006 Finance debenture	239	
Conclusions on the debentures	244	
Costs of the Ranhill proceedings in Malaysia	263	
MrGovindia's personal liability	267	
Conclusion	268	

Mr Justice Mann : 
Introduction
1.	This is an action which had two principal elements.  The first is the recovery of a loan made by the claimant (“Rivertrade”) to EMG Holdings Limited (“Holdings”), and the second is the enforcement of security said to have been given for that loan.  Summary judgment on the loan itself has been obtained against Holdings and that element therefore falls out of the picture.  The trial in this case therefore concerned questions relating to the second aspect, the existence and enforcement of that security.
2.	The subject of that security was the benefit of a contract (in the form of moneys receivable under it) with a Malaysian entity called Ranhill Berhad (“Ranhill”).  The contract in question was made between the first defendant (“Finance”) and Ranhill, but the documentation in this case provided for security to be given, and assignments to be provided, by Holdings.  That gives rise to a range of questions which are said to be questions of construction of the documents and/or rectification, which Rivertrade says have the end effect of giving Rivertrade the benefit of the security notwithstanding that ostensibly the agreement to provide it was not made by the company which owned the asset (Finance).  Questions also arise as to the effectiveness of what has happened.  The defendants challenge Rivertrade’s case that there was a binding agreement to provide security, and also assert what are said to be prior rights to the moneys vested principally in the fourth defendant (“Forburg”) by virtue of assignments and debentures.  The claimant challenges the validity of some of those assignments and debentures, and in any event says that, in the circumstances (principally circumstances arising out of the general control and authority of the second defendant, Mr Govindia) sufficient consents or agreements are in place to prevent Forburg or Finance asserting any rights in priority to Rivertrade.  If those claims to the security fail, then Rivertrade advances personal claims against Mr Govindia based on warranties and fraud.
3.	The amount of the loan was £300,000.  The proceeds of the Ranhill contract have now been obtained and amount to some $600,000.  They have been secured pending the decision in this action.  This is not, therefore, a substantial action, and it is highly regrettable that by the time it started, and on the basis of enquiries made by me, the claimant’s costs were also the amount of the debt and the defendants’ base costs were over twice the amount of the debt.  Unfortunately it does not seem to have settled.  I shall therefore have to decide the points in issue.
4.	In the narratives that follow any recitation of fact should be taken as a finding of fact by me unless the contrary appears.  Mr Bard appeared for the claimant; Mr Buttimore appeared for the defendants other than the third claimant (which was not represented).
The EMG group
5.	The EMG group is a group of companies which offers, or at the time of the events relevant to this action offered, corporate financial services.  Amongst other things, it assisted other entities in raising finance and in advising in relation thereto.  Finance is a Jersey company and a wholly owned subsidiary of Holdings (another Jersey company), which in turn is a wholly owned subsidiary of Forburg (a BVI company).  At the date of some of the transactions in this case Finance and Holdings had different names.  I shall, where possible, ignore the previous names in the interests of ease of exposition, substituting shortened forms of their names in citations from documents where appropriate.
6.	Another EMG company features in the narrative, namely EMG Suisse SA (”Suisse”).  As its name suggests, it is a Swiss company.  The corporate charts do not show it to be a subsidiary of Forburg.  The shares were actually bearer shares, and were held by PRH Group Suisse SA, which is a company owned and controlled by Mr Hofer, one of the individuals who was a director of various companies in the EMG group.   A letter of 7th July 2006 from Ernst & Young to Mr Hofer at Suisse, recorded (under the heading “General structure”) that Suisse was “beneficially owned by [Holdings]”.  Mr Hofer signed this letter by way of his agreement to it.  A minute of the board of directors of Suisse held on 28th July 2008 was attended by Mr Hofer as chairman with Mr Govindia as a “Special invitee … Advisor representing the sole shareholder holding 100% of the shares”.   In his cross-examination Mr Hofer acknowledged that he held the shares for someone else, that person being represented by Mr Govindia.  However, as a result of his being unpaid various sums he decided he could appropriate the shares to himself. I deal with this a little more below in the context of considering Mr Hofer’s credibility.  For present purposes I make a finding that Suisse was, for practical purposes, part of the EMG group.  This helps to explain why one of its assets was used to support borrowings by Forburg.
7.	The shares in Forburg were owned by an offshore trust, administered by off-shore administrators.  I find that those administrators played little independent part in the affairs of the company.  Mr Govindia says that the trust was set up by himself and his godfather (mainly the latter) in the late 1990s with moneys coming from business ventures.  Originally the beneficiaries were charities, but in 2006 the range of beneficiaries was changed so as to include Mr Govindia’s children.  Until he fell into dispute with Mr Govindia, Mr Hofer was (Mr Govinida said) the Protector of that trust.  Mr Govindia is said not to be a beneficiary.
8.	The identities of the appointed directors of the various companies from time to time are important in the narrative of this case.  The following details are significant.
(a)  The directors of Forburg were Mr David Robins and Mr Paul Hofer.  
(b)  The directors of Finance were Mr Robins, Mr Hofer and Mr Govindia.
(c)  The directors of Holdings were Mr Robins, Mr Hofer and Mr Govindia.
By the end of 2009 Mr Robins and Mr Hofer had ceased to be directors of all three companies, but the dates on which this occurred are the subject of dispute.  Mr Govindia claims to have brought about their departures in May 2009 (Forburg) and July 2009 (Holdings and Finance).  The circumstances in which that is said to have happened say something about the degree of control exercised by Mr Govindia over the affairs of the group, as will appear.  Mr Robins and Mr Govindia accept that they were removed from all three companies by the end of November of that year at the latest.  The significance of this to this case is that their capacity to act as directors in June 2009 is important.  
9.	Mr Govindia described himself at the time as CEO of EMG.  It was not clear whether he claimed that position in relation to each company, or whether it was just some sort of useful overall title.  Despite the fact that he was a director of both Holdings and Finance he did not like signing documents for those companies, and the evidence showed that he asked Mr Hofer and others to sign when formal signatures were necessary.  He told Mr Hofer that it looked better if the chairman (Mr Hofer) signed.  Mr Govindia disputed saying that, but I accept that he did.  I find that he did it in order to be able to maintain an apparent distance from decision-making and to enhance the impression that there were other truly active directors.  

The claimant’s witnesses

10.	I heard evidence from the following witnesses for the claimants.

Mr Hofer
11.	Mr Hofer was a director of all the companies which are relevant to this action at one time or another, and signed all or virtually all of the important transactional documents in the transactions which have featured in this story.  He had a history in banking before retiring from that field and operating his own office in Basel.  One of his post-retirement activities was being a director of the companies in question in this case, though he did not devote a lot of time to that activity.  He told me, and I accept, that it took only a day or two per month.  He was not a particularly active director and it is plain that he participated in large part for form’s sake.  While he was not a complete cipher, his main function, it seems, was to provide a signature on documents which Mr Govindia required to have signed.  He virtually said as much himself.  He sought to give the impression that he would seek to find out what lay behind any given document, and would at least scan it.  Having heard him give evidence, and having heard how the companies on the defendants’ side of this case conducted their businesses, I do not think that he did do anything more than scan documents in the vast majority of cases.  I do not accept that he really brought any separate business judgment to bear in the transactions; nor was he called upon to do so by Mr Govindia.  He basically signed where and when he was asked.  I do not consider that he would sign anything which contained a statement which he was aware of and which he knew to be untrue; but I do think that he was capable of signing a document just because he was asked and without actually considering all of its contents or their accuracy.

12.	I am afraid that I also found he was a man whose business practices are, sometimes, a little questionable.  Two examples of that emerged in this case.  The first concerned  Suisse.  I refer to my findings (above) about the status of this company in relation to the EMG group.  He admitted to a transaction pursuant to which he held the shares for the benefit of Mr Govindia (or one of the Govindia entities – probably Forburg – it does not matter precisely which) and that that was the position in 2009.  This is reflected in various corporate structure charts which show the company off to one side, as though it was part of the general Govindia structure or connection but not part of the EMG group.  It had some significant subsidiaries.  However, by the end of 2009 he had essentially taken control of the company and was no longer acknowledging, or giving effect to, the rights of Mr Govindia or his entities.  He claimed that two things entitled him to do that.  The first is that Mr Govindia never put in place the necessary steps to have the shares transferred and to bring the company within the group.  The second is that by the end of 2009 he was owed what he regarded as a lot of money from Mr Govindia in the form of unpaid fees – several tens of thousands of Euros.  He said in the witness box that he was quite prepared to transfer the shares if Mr Govindia paid him.  There was no formal, or informal, lien, or any similar arrangement which might have justified Mr Hofer’s attitude.  Mr Hofer simply treated himself as entitled to appropriate the shares because of the way in which he had been treated.  He does not seem to have appreciated that there was any incongruity or impropriety about this.

13.	The second instance is his attitude to signing documents.  I have already referred to the fact that he was prepared to sign documents put in front of him without giving them any or much consideration.  However, his conduct went farther than that, on occasions.  In this case he admitted that he signed the execution pages for various debentures in blank, as it were.  He executed the pages without their being attached to any document, whether actual or prospective.  These documents play a part in the story, as appears below.  For the moment it is sufficient to observe that a man operating in a straightforward fashion would not, in my view, do such a thing.  Someone who claims to be a responsible director would not sign pages which can be put on the back of another document by another individual (which seems to have been the situation that Mr Hofer was content to accept).  This is of a piece with another part of Mr Hofer’s evidence in which he volunteered that on a different occasion he signed several blank pages for Mr Govindia without knowing the use to which those pages were to be put.  Again, this is not the act of a conscientious and sensible businessman.

14.	All these matters cause me to have more misgivings about the evidence of Mr Hofer than I would have expected.  Furthermore, the manner in which he gave his evidence reinforced those misgivings.  He was at times over-cautious (he was not prepared to acknowledge clearly apparent copies of his signatures without seeing originals, as though he constantly feared forgery when forgery of the kind he was ostensibly worried about was not something that anyone was accused of in this case), and on other occasions he was positively evasive (for example in dealing with some of the aspects of how he and his secretary dealt with the debenture execution pages that I have just referred to).

Mr Kinder (the claimant)
15.	Mr Kinder had a background in the EDF Man group but now operates independently of them.  He has his own financial interests and he acts, or has acted, in such roles as the chairman of a substantial Indonesian sugar refinery.  His evidence did not give rise to any concerns about his probity or honesty, and I regarded him as an honest and straightforward witness.  His reliance on reconstruction was, on the whole, fairly careful and limited.  He did not exaggerate or indulge in some of the wishful thinking that litigants with vested interests are prone to indulge in.  He was, however, not a detail man.  He admitted that his case involved him not reading or considering correspondence properly, and I accept that he was probably given to that.  He was likely to have looked to the deal rather than the detailed correspondence.  I find he was a witness on whose evidence I could, by and large, rely.

Mr Neil Henry
16.	Mr Henry is the financial controller of the claimant and he gave evidence as to various relevant documents that he did and did not see, and of his dealings with Mr Govindia.  He had some involvement in trying to understand the affairs of the EMG group when Mr Govindia was being detained in India at the end of 2009 and he prepared some of the draft documents which are relevant to this case.  I consider him to have been a completely straightforward witness on whose evidence I could rely.

Mr Bahman Jahanshahi
17.	At the time of the events relevant to this claim he was employed within the EMG group (latterly by Finance) to run its corporate finance advisory business.  He was the CEO of Finance and a director of EMG Corporate Finance Limited, a UK company authorised and regulated by the FSA.  He gave evidence of his limited involvement in the transactions which are germane to this action and of Mr Govindia’s position within the EMG group.  He was a measured and careful witness who explained matters well.

Mr David Robins
18.	Mr Robins was, like Mr Hofer, a director of Finance and Holdings.  It also seems that he was a director of Forburg, though in the witness box he professed himself to have been uncertain as to whether he was a director until he was asked to, or decided to, resign from that post in 2009.  Notwithstanding his uncertainty, his name appears on various documents (such as minutes) in such a way as to indicate that he was indeed a director.

19.	Mr Robins gave evidence of his position and functions within the EMG group, Mr Govindia’s position in the group, the circumstances of his ceasing to be a director of group companies and his involvement (most of which he could not really recollect) with the Rivertrade transactions.

20.	His witness statement sought to explain that, as a director of Holdings and Finance, his was “an oversight position, to review and consider transactions that SG [Mr Govindia] proposed to the board, and act as a signatory for such documents as SG required us to sign”.  He acknowledged that Mr Govindia had complete day-to-day control of the companies.  He explained that if he was presented with documents he would seek an explanation and read the documents, and if he was satisfied with both he would then sign them.  Having heard his evidence, and having considered other evidence of how this group was run, I think that is the maximum of what he would do on any given occasion.  I do not consider that he thought he was, or indeed actually was, a complete cipher, who would automatically do Mr Govindia’s bidding.  However, his oversight in the affairs of the EMG group was probably not very great.  That explains why he has little recollection of the actual transactions in this case.  I am satisfied that, if presented with a document by Mr Govindia, he would almost inevitably sign it.  I say “almost” inevitably because he did give evidence of one transaction which Mr Hofer and he were not prepared to sign.  Otherwise, however, I think that his engagement with the affairs of the company was relatively slight.

21.	This is significant in relation to the circumstances in which two of the important debentures in this case came to be signed.  As I have explained when considering my findings in relation to Mr Hofer’s credibility, there was some evidence that unattached “debenture execution pages” were signed without reference to any particular form of debenture.  Mr Robins told me, and I accept, that it would not be his normal practice to sign documents in blank, or to sign pages which purported to be something which they were not.  However, he accepted that it was “possible” that he signed the debenture execution pages by themselves.  He did not utterly disclaim the idea as a possibility.  That is telling – it means that he would not refuse to do such a thing as a matter of principle, leaving open the door to his doing an unprincipled act of this kind (I would not wish to suggest that he is generally capable of acting in an unprincipled way).  It also means that I cannot be completely confident that he approached all his directorial activities with an open questioning mind.  I think he is likely to have approached his functions as a director of the EMG companies in a manner which was little more than purely formal.

Mr Harvey McGrath
22.	Mr McGrath contributed £100,000 of the loan which is the subject of this action.  He was called to give brief evidence of his involvement (which was slight) and of his knowledge of one or two relevant matters.  His evidence was not materially challenged and he was a reliable witness.

Ms Patricia Zöbelin
23.	Ms Zöbelin was Mr Hofer’s secretary in 2009.  She gave evidence via a Civil Evidence Act notice of marking and posting debenture execution pages in what she said was July 2009.  Since she was giving her evidence under that Act, she was not cross-examined.

The defendants’ witnesses
Mr Govindia
24.	Mr Govindia has been involved in the affairs of Forburg and the EMG group from the start.  He put some of his own money in, and it is quite apparent that he was heavily involved in all aspects of his business.  He was centrally involved in all the transactions of this case and gave evidence of his participation.  I regret to say that I found him an extremely unsatisfactory witness.  He was at times evasive in his answers and betrayed a frequent willingness to take a slanted view of documentation in order to support his view of the facts.  He insisted on viewing several documents as a “release” by Forburg of various rights when they were no such thing, and obviously so, as would have been apparent to any businessman with the obvious experience of Mr Govindia.  His failure to acknowledge the extent of apparent agreement in correspondence about the first stage of the loans that are the subject of this action did him no credit, and I do not believe that he held the views about that correspondence which he professed to hold.  He had obviously decided that propounding the particular views of which he spoke would or might assist the case of the defendants, and gave those views accordingly.  One of the issues in this case is how an execution page came to be put on the end of a debenture given by Finance to Forburg.  This incident is dealt with in detail below.  For present purposes it is sufficient to note that Mr Govindia produced (late in the day) a letter purporting to be dated in January 2007 which sought to explain what happened.  It puts forward a rather extraordinary story.  The incident cried out for an explanation, and anyone in Mr Govindia’s position who was involved in litigation such as this would have taken all the steps that he could to find out that explanation.  He did not do so.  He managed to identify one of the individuals involved, but his evidence (if it were accepted) demonstrated a remarkable lack of curiosity and a remarkable failure to appreciate the appropriateness of getting to grips with the point.  In fact his evidence on the point was not credible.  For these and other reasons concerning the quality of his evidence, I treat all his evidence with extreme caution and, unless any piece of his evidence carries with it its own inherent degree of plausibility, I am, by and large, unable to accept it without some form of corroboration.

25.	No other witness was called by the defendants.  They served two witness statements of Mr Manoj Shah, a recently appointed director of Forburg, but decided not to call him and his statements were therefore not taken into account.
The position and authority of Mr Govindia in the affairs of the EMG group
26.	Before setting out the facts relevant to this case it will be useful to deal with this particular matter at this stage.  One of the issues in this case is the position of Mr Govindia and the extent to which he had authority in relation to the affairs of the EMG group, and in relation to Forburg, Holdings and Finance in particular.  Mr Govindia acknowledged that he had authority to negotiate for the companies in the group, but not to reach agreements or to bind the companies.  Where formal documents had to be signed he placed them before the other directors, informed them about them and invited them to consider signing them.  Until that was done there was no binding agreement.  Where appropriate he looked to the shareholders of Forburg (the trustees), who offered him their independent advice.  He disclaimed the idea that he had effective control of the group (and indeed the trust).  He acknowledged a greater degree of authority at the end of 2009, when he considered that the boards of the EMG holdings were misbehaving, but not before then.  

27.	In my view the true picture is very different.  I have formed the clear view that if there were material strings to be pulled, Mr Govindia pulled them, and no-one else did.  He was the effective decision-maker in the group and other directors more or less did his bidding.  That is not to say they were mere ciphers.  I think that they did a bit of their own checking (though not much).  Basically Mr Govindia  took the decisions.  The job of the other directors was to do little more than sign.  Occasionally Mr Govindia made a telling remark when his guard was down.  By way of example, he gave evidence about the circumstances in which he said he asked Mr Hofer and Mr Robins to resign as directors of Forburg in May 2009 (a matter which is disputed and about which I make some findings below).  He said that he flagged up to Mr Kinder that he might do it, and he used the words (as noted by me):

“I had mentioned that I might have to do this.”

The pronoun is important.  The dismissal of directors of Forburg ought to have been done by the shareholders (the trustees).  But he presented the decision as being effectively his, which I am sure it was.  

28.	There are similar indications in the documents.  Thus, by way of example, in an angry letter to Mr Hofer on 6th April 2009, he wrote:
“I am fully authorised to represent Forburg Limited which is the major shareholder of the EMG group of companies.”  
29.	Again, in an email to Mr Hofer sent on 12th October 2009 Mr Govindia  wrote the following:
“I think you may also be forgetting that I am still the CEO and a Board member and also the representative of the major shareholder (Forburg) who is in fact predominantly responsible for the appointment of Board members.”

The reference to the person with responsibility of board members is a reference to him, not the shareholders, as his answers in cross-examination about this revealed.  It reflects the fact that he found Mr Robins and Mr Hofer in the first place, and he found their replacements after they had been dismissed.  This is Mr Govindia  throwing his corporate weight around.

30.	That is the overall conclusion that I draw from all the evidence that I heard.  It is plain that the decisions as to whether to enter into the transactions about which this action turns, and the terms of those transactions, were all effectively his, without any or much consultation.  He is the person with whom Mr Kinder dealt at all relevant times.  There is also the evidence of Mr Robins and Mr Hofer, which dealt with their relationship with the affairs of the group.  I do not find that they did nothing and contributed nothing at all.  At least towards the end of the events in this case, when the EMG group was in financial difficulty, Mr Hofer participated in some deliberations as to possible ways out.  Mr Robins attended formal board meetings (which I find were largely formal) and periodic “progress meetings” (meetings of the director which could not be called board meetings because they took place in this country and the entities involved had to be seen to be foreign).  But Mr Govindia was the real power.  I consider that his attempts to portray himself as a servant of the trust, and as someone who looked to the trust’s administrators for guidance when things were difficult, were unsuccessful.  Administrators sitting in remote jurisdictions could not do much more than approve courses of conduct which Govindia  had decided on.  They basically let Mr Govindia get on with running the group.

31.	This is important background material in relation to findings that I have to make about his capacity to bind the companies, which I make below in the context in which those issues arise.

The 2008 transactions
32.	Although the events with which this action is primarily concerned took place in April and June 2009, the events of 2008 (and, to an extent, preceding years) are relevant for two principal reasons.  First, they show the relationship between the parties and the individuals involved.  Second, in relation to certain transactional documents, they provide an important piece of background in relation to the validity and effects of assignments of choses in action.

The May 2008 transaction
33.	As part of its activities, the EMG group sought to enter into documents with clients which it called “mandates”, which governed the terms on which it was acting, the activities to be conducted and the amount of payment to be made for those services.  Some of those mandates were in terms which had the effect that the group would have to put in a lot of activity up front whilst waiting for a considerable time for payment, because the client was not obliged to make any payments until some future event which might be some significant time in the future.  One of those mandates was what was called the Intelcan/Brasov mandate, under which the group was providing services to a Romanian entity in connection with the construction of an airport.  The mandate was between Suisse and Intelcan Technosystems Inc (of Canada).   It was also a mandate which the group was holding out as presenting real prospects of producing cash, unlike some of the other transactions.  Accordingly, it features in the transactions which took place between Rivertrade and the group.

34.	Rivertrade had been an investor (which is how it looked at it) in the group for a little time before 2008.  In 2007 Mr Kinder had provided £500,000 in the expectation that he would receive some shares in the group – probably in Holdings.   Those shares were never provided – this was said to have been because an intended migration of Holdings from Jersey to Guernsey was contemplated, and (at least on the EMG group side) it was thought better to wait until it was.  That migration was never completed.  

35.	By 3rd April 2008, Mr Govindia was seeking further moneys.  He approached Mr Kinder again and proposed a deal similar to the previous year’s under which  Mr Kinder (Rivertrade) would provide cash in exchange for shares.  Mr Kinder was not impressed and complained about the “dismal” history of his investment in the business.  No predictions had turned out to be accurate and the information flow was said to be appalling.  So while he indicated that that he would prepared to provide some funds, he would not do it on the basis of a subscription for shares.  Instead he proposed a convertible loan.  This was to meet what Mr Govindia described as “a pressing cashflow deficiency which I need to fix asap”.  In an email of 3rd April Mr Kinder expressed misgivings, though did not give an outright rejection.  Mr Govindia sought to allay his concerns and referred to “EMG which is of course fully under our own control”.  On 12th May 2008 Mr Kinder wrote saying he had been intending to offer £500,000 on the basis of a “simple convertible loan”, (i.e. convertible to shares), and an email from Mr Govindia on 13th May 2008 summarised an agreement about that.  An email of 13th May, and a more formal letter signed by Mr Hofer on 14th May, set out the terms.  They were for a loan of £500,000 to Forburg to be paid in two tranches in May, the loan being for 6 months.  It was convertible and for interest at 8%.  In his email proposing the deal of 12th May Mr Kinder had specified as a condition:

	“Security: loan to be secured by payments from any/all of the mandated deals”.

A signed letter from Mr Hofer on Forburg notepaper said:

“We will procure to secure repayment of the Amount from income received by EMG from one of its mandated deals.  Please find attached letter from EMG to us providing this undertaking to us for the same.”

36.	In the terms proposed by Mr Govindia in an email of 13th May he had proposed that:

“Forburg will provide undertaking that it will secure payment from mandated deals in EMG.”

Mr Kinder had responded on 14th May that:

“We require more than an undertaking from Forburg regarding payment from the mandated deals.  We basically need an assignment from one or more of the counter-parties when the deals are concluded – I don’t mind which.”

Mr Govindia replied on the same day saying:

“However, regarding payment from the cashflow of a mandate, any assignments means [sic] that the client needs to be approached and we need to avoid that completely since that will definitely send the wrong signal to them as to why we are doing this and we’ll not have the upper hand in the relationship which could also thereafter become more complicated.

The simpler solution to this is that we will structure it so that Forburg will have a letter of undertaking from EMG for the cashflow of one of its mandated deals and on the back of that Forburg will be giving you the undertaking.  I think this would be the most practical.”

Mr Kinder responded that that would be alright but needed to be properly documented.

37.	There was then a series of documents, signed by Mr Hofer (apparently in anticipation of their being the successful final drafts) which were overtaken by various final versions.  

38.	What emerged was a final form of loan agreement in the form of a letter from Forburg dated 14th May 2008 and signed by Mr Hofer and Mr Kinder.  This version was produced only at the trial, and only by the defendants.  The claimant did not produce a copy so I assume Mr Kinder did not retain one.  I am satisfied it is a genuine document, not least because it incorporates various points that Mr Kinder had wanted incorporated into a prior draft (signed by Mr Hofer alone).  It read (so far as material):

“ Dear Mr Kinder,
Convertible loan
We write to confirm our agreement regarding your providing a convertible loan to Forburg under the following terms as follows:
•	Amount -- £500,000
•	Payments to Forburg of the Amount will be in two  tranches -- 15th May and 21st May
•	Term -- 6 months (30th of November)
•	Interest -- 8% pa payable at the end of the Term
•	Conversion Option – Rivertrade holds the option to convert the Amount plus any accrued interest into ordinary shares of [Holdings] ("EMG") at a pre-money valuation of $100m, such shares to be issued by Forburg from its holding in EMG.
We confirm that we have been assigned all transactions fees due to [Finance] (via Holdings) and hereby undertake to provide you security of repayment of the Amount plus interest through the fee income assigned to us specifically from the Intelcan/Brasov transaction (copy of the mandated letter attached) and in the event that this transaction is delayed then we shall provide you with similar security from the fees assigned to us from another such mandated transaction as may be mutually agreed between us.  Such security shall only remain in place while the Amount is outstanding but such security shall cease to remain once the Amount has been converted into shares of EMG.  Please find attached a letter from EMG to us with confirmation of the assignment to us of its fees from mandated transactions.
[This paragraph superseded an earlier version which read: We will procure to secure repayment of the Amount from income received by EMG from one of its mandated deals.  Please find a letter from EMG to us providing this undertaking to us for the same.]
….
We would be grateful if you could confirm your agreement to the above by signing below and returning it to our Swiss Office.”

39.	Although this document is dated 14th May, it was plainly executed after that date.  There was an earlier version bearing that earlier date, signed by Mr Hofer (but not apparently by Mr Kinder) but that version was modified as a result of requests made by Mr Kinder in an email dated 22nd May.  It seems that the later version was sent out to Mr Kinder by email on 23rd May.  Mr Kinder had paid the first tranche of the loan (£250,000) before the documentation was thus finalised, but held back the second tranche until the documentation was agreed.  He duly paid it after this document, and accompanying documents, were received by him.  This dating feature (back-dating documents in at least this sense) occurred later in the story.  It does not demonstrate an entirely conventional approach to dating documents.

40.	The accompanying documents were a series of assignments and a copy of the Intelcan/Brasov mandate agreement.  In order to satisfy Mr Kinder’s requirement for what the parties called security, a structure was set up under which income streams were apparently assigned up the line to Forburg.  Those documents were:

(a)  An assignment by Suisse dated 20th May 2008 under which it assigned to Holdings:
“all transaction revenues pertaining to it’s assigned mandates to cover the repayment of Loans plus interest received by [Holdings] from Forburg Ltd for working capital purposes of [Holdings] and its subsidiaries.
We hereby confirm that the assignment of mandates is governed by English Law.”
It was accepted by Mr Govindia that this document was executed some time after the date that it bore (a matter of days and weeks) in order to “tidy up” the situation - presumably because it was realised that the most relevant mandate (the Intelcan/Brasov mandate) was with Suisse and not Finance or Holdings.  It was done to make sure the benefits of the agreements got to the right place (Forburg) by assignment; but the backdating is one of a number of factors in this case which requires me to look with particular care at the apparent dating of documents.  
(b)  An assignment by Finance to Holdings dated 20th May 2008 in the same terms.
(c)  An “Assignment of Transaction Revenue to Cover Loan Repayment Plus Interest” dated 20th  May 2008 on Holdings notepaper and addressed to Forburg which read:
“We write to confirm that we have received an assignment of all kinds action revenues from [Finance] pertaining to all its assigned mandates to cover the repayment of Loans plus interest received by Forburg Limited for working capital purposes required by [Holdings] and its Subsidiaries.
[Holdings] hereby assigns in its entirety the above said assignments received from [Finance] to Forburg Limited to cover the repayment of the Loans plus interest received from you.”
(d)  A letter of 22nd May 2008 on Holdings notepaper to Forburg with the same title as the preceding one and with the same first 2 paragraphs together with the following:
“We also confirm that we have instructions from Forburg Ltd that as part of the above assignment to it we are to pay on your behalf an amount of £520,000 from the fee income received from the Intelcan/Brasov mandate into a bank account belonging to Rivertrade Limited.”
(e)  An assignment on Finance notepaper addressed to Holdings dated 22nd May 2008 and reading:
“We write to confirm that we hereby assign to [Holdings] all transaction revenues pertaining to its [assigned] mandates including the Intelcan/Brasov mandate to cover the repayment of Loans plus interest received by [Holdings] from Forburg Ltd for working capital purposes of [Holdings] and its subsidiaries.”

41.	All those documents were signed by Mr Hofer.  The later dated documents were presumably intended to replace the earlier ones.  

42.	The significance of all this at this stage is as follows:
(a) 	It shows a pattern of assignments from Finance to Holdings and from Holdings to Forburg.  Not only was this known to Rivertrade, it was insisted upon by Rivertrade as a term of the loan.
(b) 	The loan was being provided in order to meet critical cashflow shortages in the EMG group.
(c) 	All the negotiation was done by Mr Govindia, as had been the case historically.  It was Mr Govindia who agreed terms with Mr Kinder and who dealt with Mr Kinder’s concerns about repayment mechanisms.  Mr Hofer had already signed a form of agreement before the later documents were finalised, and in an email of 20th May Mr Kinder had queried his capacity as a signatory:
	
“Can you demonstrate that Paul is a signatory and is authorised to sign for all these parties.  I believe we should have at least two signatories on each.”

Mr Govindia responded to this by annotating Mr Kinder’s comment thus:

	“Paul is a director of all the EMG group of companies as well as of Forburg.  He is also the chairman of the board of directors for EMG.  EMG’s articles allows one director to sign, but if you wish, as director, I can also sign on EMG’s behalf.”
43.	He did this in an email of 20th May 2008, in which he also said:

“We’ll get the amendments done and sent to you shortly – the only problem is that Paul Hofer is now travelling extensively in Asia and therefore getting these turned around may take a little time.

Can I suggest that we execute what you have been sent so far and we’ll replace these with the amended versions as soon as Paul returns (week beginning 9th June)?”

44.	This point was taken up in an email of the next day (21st May at 16.22) in which Mr Govindia said:

	“Further to my email below, please find attached the amended versions of the agreement plus the supporting letters.

	As Paul Hofer (who is our main signatory for the offshore entities) is travelling at present, I am sending these unsigned to you first for your execution and I’ll get Paul to sign them at the first opportunity if I can get these to him.  I hope that works for you, if not then I’ll have to try and catch him to sign and fax them back and execute the originals when he returns (week beginning 9th June).”

45.	What this exchange demonstrates is that Mr Hofer seems to have been purely a signatory for a deal which Mr Govindia had negotiated, and he was expected to sign.  

46.	Mr Kinder had sent half the loan through to Forburg while the documents were being finalised, in anticipation that the final form would be acceptable.  He gave instructions for the balance of the moneys to be paid on 23rd May 2008.

47.	The original loan term expired on 30th November 2008.  A note of a “Progress Meeting” of the EMG group of 8th December 2008 recorded that Rivertrade had agreed an extension of the loan for 6 months.

48.	The significance of this transaction is, or is said to be, as follows:
(a)	 It is said to demonstrate that Mr Kinder had knowledge of the fact that the benefit of various contracts had been assigned up to Forburg, through the various subsidiaries (and, so far as the Intelcan/Brasov mandated is concerned, from Suisse, which was not a subsidiary, or at least not openly so).  This has a significance in relation to the transactions at the heart of this matter.
(b)	I find that it demonstrates a propensity to date documents with an inappropriate date.  The loan agreement document was plainly backdated.  This may have been to make it clearer that it covered the moneys which had already been lent by then, but it was nevertheless, to that extent, a contrivance.  The same is true of the Suisse assignment.
(c)  	I find that it demonstrates the extent to which Mr Govindia was pulling the strings in the affairs of the group, including Forburg.  He was negotiating the deal and had extensive authority to act on its behalf.

The December 2008 loan
49.	It is plain that by mid-December 2008 the EMG group remained in serious financial difficulties.  Funds were apparently sought from Credit Suisse but in an email of 15th December 2008 Mr Damodararu of EMG wrote to Mr Hofer, Mr Govindia and Mr Robins, with a subject heading “Survival” as follows:

	“Dear Paul
	I understand [that] Credit Suisse hasn’t come back with anything positive.  So I think we need to immediately decide the way forward for us; in terms of staff, creditors and others and also from a statutory point of view.  Much appreciate your input.”

To which Mr Hofer responded (to Mr Damodararu, Mr Govindia and Mr Robins):

	“Yes, a very serious matter – I could be in London next Monday, my cost, to decide jointly on all matters in a calm manner?
	Regards, Paul
	Shailesh [Mr Govindia]:
•	Is there really nobody whom you know who can provide another £250,000 – for the next three months?  E.g. Mr Kinder – he stands to lose it all – how can you personally cope with this?
•	What is the status with the landlord?
•	What is the status with Vinod in India – these very wealthy individuals who are so much in support, the Dharma concept?  Is there more equity we need to offer?”

So it is plain that money was urgently needed.

50.	It is plain that Mr Govindia then approached Mr Kinder for more support and he provided another £200,000.  Agreement on terms was reached by 23rd December 2008 and bank details for the transfer of money were provided under cover of a letter from Mr Govindia to Mr Kinder of that date.  He also sent him copies of various formal documents which were unexecuted and which bore the date of the next day as their respective dates.  On the next day (24th) Mr Hofer emailed Mr Govindia with the subject “Kinder documents” and apparently with one attachment called “EMG £200.000 loan 24.12.08.pdf”, the body of the text reading: “Shailesh, received, printed, signed, scanned and originals sent today, regards, Paul.”

51.	There was then a series of documents all  bearing Mr Hofer’s signature.    The documents are:

(a)  	A letter from Holdings to Rivertrade headed “Loan Agreement”.    There are various versions of this, some of them showing an interest rate of 5% and one of them showing an interest rate of 8%.  Two of them bear Mr Hofer’s signature and the text differs in other ways.  For these purposes I shall take as the governing document one which is actually counter-signed by Rivertrade. This seems to be the only version with a late-agreed provision for conversion of the loan to shares.   It describes the loan as being £200,000 for two months with:
•	“	Security being pledged - $1m Series B Convertible Bond of LML India.
Further, in consideration of your providing the above loan we hereby undertake to:
•	Pledge to you 1m Convertible Bonds of LML, India denominated in USD.  The bonds are currently held by EMG Suisse SA (a group company of EMG) with Credit Suisse, Basel, Switzerland [account number provided]
•	Ensure, should there be any default by us, that any shortfall (after adjusting the disposal proceeds of the above LML bonds) there may be to the repayment of the above loan including interest thereon, is secured by Forburg Ltd from the receivables of the Intelcan/Brasof transaction.
Further, we hereby also grant you an option, valid for two years, from the date of this agreement to subscribe to shares in EMG Holdings at a pre-money valuation of $50m.
This agreement will be governed by English Law.”

(b)  A “pledge for loan to EMG Holdings” on EMG Suisse SA notepaper.  This document acknowledges the existence of a loan agreement requiring the pledge of the LML Convertible Bonds.  It confirms that EMG Suisse SA is “the beneficial owner (through our subsidiary Warren Investments Limited)” of the Bonds and that they are not encumbered.  It goes on to “pledge the above bonds in your favour as a collateral security for the loan.”  It ends by recording:
“Your right to any proceeds in the event of a default by the borrower (whether through conversion and disposal or redemption) from the pledged bonds will be limited to the extent of the loan dues including interest.”

(c)  A letter from Forburg Ltd to Rivertrade, countersigned by Rivertrade.  It confirms the loan agreement, acknowledges the pledge of the bonds and acknowledges that the loan agreement stipulates securing “this letter” from Forburg.  It goes on:

“In compliance with the said loan agreement, in the event of a default by EMG Holdings, we hereby undertake to secure you for any shortfall (after adjusting for disposal or redemption proceeds of the LML Bonds) there may be to the repayment of the above loan including interest thereon, from the receivables of the Intelcan/Brasov transaction
Your right to receive any proceeds from us, in the event of default by EMG Holdings will be limited to the extent of the shortfall in the loan dues including interest thereon after adjusting the proceeds (whether through conversion and disposal or redemption) from the LML bonds.
This agreement will be governed under English Law.”

In this chronological context there are also three documents relating to some debentures.  It is the case of the defendants that Holdings gave Forburg a debenture in 2001 and that Holdings and Finance gave Forburg debentures in 2006.  The validity and effect of these documents is in issue in these proceedings, as is the state of knowledge of Rivertrade (or Mr Kinder) of them.  I shall have to deal with these points below, but it will be convenient to put certain apparently related documents in their ostensible chronological context now.  I say “ostensible” because the dates which they bear are also not accepted by Rivertrade.

52.	The first set of documents are two documents headed with Forburg’s name, in similar form, one being addressed to Finance and the other to Holdings.  Both bear the date 24th December 2008.  Each of them refers to the 2006 debentures given to Forburg and is a notice of crystallisation of the floating charge contained therein.  They are signed by Mr Hofer and Mr Govindia.  Mr Govindia’s evidence is that he remembered them - they were to make sure that Forburg had priority, and Mr Hofer and Mr Robins advised them to do this.   Bearing in mind their relationships and functions, it is impossible to see how or in what circumstances Mr Robins and Mr Hofer advised him to do this.  It was not the sort of thing they did.  Someone else must have had the idea.  However, what the trigger was is not obvious.  Mr Govindia said that it was done to make sure that Forburg stood in priority.  But in relation to whom and what?   The charge was only a floating charge, with it was a fixed charge on book debts.  If this were an attempt to get priority over Rivertrade, then it would be pointless in relation to the most valuable assets, and in any event would be something of a breach of faith in relation to someone who had just bailed the group out.  These are most odd documents, and not necessarily to be taken at face value.

53.	The second document is also a letter of 24th December 2008, in the form of a letter from Holdings to Rivertrade, bearing Mr Hofer’s signature (or apparent signature).  It is written to Mr Kinder and is headed “Documents for the loan agreement” and it purports to attach the loan agreement, the Credit Suisse letter, the Forburg letter and copies of the two 2006 debentures, all listed in bullet points.  It says (like the preceding documents):

“We shall be grateful if you could confirm your agreement to the above by signing the appropriate documents and returning them to our Swiss office.”

54.	The authenticity of this document as a document sent from Holdings to Rivertrade is disputed by Rivertrade.  Mr Kinder is clear that this document was never received.  Mr Hofer does not accept its validity.  He says he would want to see the original to see if the signature was his (the original is not available) and said that to the best of his memory he had never seen any pages of the debentures until he saw the fruits of the discovery process in this action.  He also queries the date, because he thinks that it is unlikely he would be in London on 24th December.  This last point is easily dealt with.  The transactional documents for this loan are all dated 24th December and bear his signature.  It is apparent from his one of his own emails that he signed at least one of them and scanned it, and must have done so on Christmas Eve (in Switzerland).   

55.	Other doubts are not so easily dispelled.  It was not referred to in the original defence or in the summary judgment application against Holdings.   Its genesis and purpose are far from clear.  Mr Govindia  says that he asked Mr Hofer to send the letter because Mr Kinder had asked to see the debentures because releases from the debenture were being effected in relation to the LML bond and the Intelcan mandate.  I find this evidence hard to accept.  First, none of the documents contain anything which in terms is a release from the debenture. At best any release would be implicit, but if Mr Kinder had insisted on one and asked to see the debenture one would have expected it to have been explicit.  Second, I do not think that Mr Kinder had an eye to that kind of detail. If he had then he would have insisted on explicit releases, which takes one back to the first point.  Third, Finance was not joining in this transaction, so did not need to provide a release or provide its debenture. Fourth, there is no documentary record of how it came to be created.  One can see emails passing between Mr Govindia  or his colleagues and Mr Hofer, in order to create the other documents, but there is no indication of how, when or why this one was created, or how it got to Mr Hofer for signature.  There is an email of 24th December 2008 which (probably) sent engrossments of the other documents for signature by Mr Hofer, and there is an extra document described as an attachment, but its description (”EMGH - John Kinder Loan - 24-10-08 v2 doc”) is not a promising one, and an unsigned draft (which ought to be extractable from this email) has not been produced.  While I am prepared to find that Mr Hofer signed it, I am not prepared to find that it was sent and received.  It is, of course, a potential covering letter for the formal documents for this transaction, and there is no other letter which is a candidate for that, but there are in fact no other covering letters for other originals of other documents in this case, so that does not lend much strength to Mr Govindia’s case on the point.

56.	This means that, so far as relevant, this letter is, on my findings, not a means by which Mr Kinder acquired copies of the debentures prior to the 2009 transactions, and not evidence that he knew about them either.  I make further findings about this below.

57.	The overall transaction is another example of the extent of Mr Govindia’s authority.  While Mr Hofer was engaged in considering (and indeed propelling consideration of) approaching Mr Kinder as a matter of some corporate desperation, Mr Govindia was the person who did all the negotiating and agreeing.  I am satisfied that Mr Hofer signed what he was asked, on the footing (in essence) that this was required by Mr Govindia to complete a transaction that Mr Govindia had himself agreed and had decided should go forward.

58.	The £200,000 was duly provided, and became repayable on 1st March.  Mr Jahanshahi said in his evidence that he was told by Mr Govindia that only £100,000 had been advanced, and did not discover that it was in fact £200,000 until some time in 2009.  He considered that Mr Govindia concealed the true amount of the loan so as to conceal the availability of funds which staff (who were not being paid properly at the time) might have available to fund their salaries.  Mr Govindia disputed this and said that Mr Jahanshahi was told that £100,000 was being made available to his part of the business, not that only £100,000 was borrowed.  I accept Mr Jahanshahi’s version of events.  Apart from his greater credibility as a witness, it is supported by an email dated 3rd March 2009 from Mr Hofer to Mr Govindia in which he asked for details of the use that was made of the December loan and ended:

“I wonder what Bahman thought, when you had to admit it was £200,000 - rather than £100,000?”.  

59.	That demonstrates that no only did Mr Govindia mislead Mr Jahanshahi; he also said as much to Mr Hofer.  This is an important pointer to Mr Govindia’s business ethics.  He was, in essence, not merely misleading another officer in the group.  He was also, in effect, misleading employees who were not being paid for their efforts.  The fact that he was also prepared to do this also goes to his position in the management of the affairs of the group.  He would be more likely to do this if he felt he had, and indeed did have, some stake in the affairs of the group greater than that which he claimed to have, which in turn goes to the extent to which he had and exercised authority in the group.

The Ranhill transaction
60.	This transaction forms an important part of the background of what happened next.  

61.	By an agreement dated 4th January 2008 Finance agreed to provide services to Ranhill under which Finance would assist in negotiating and structuring investment in Ranhill.  Finance was entitled to be paid a retainer of $100,000 per month, expenses and a success fee.  By the end of the year a sum of over $640,000 was said to be due to Finance and it was pressing for payment.  Payment had not been made by the time of the next set of dealings between Mr Govindia and Mr Kinder, in March/April 2009.

The April 2009 dealings
62.	I describe these as “dealings” for the time being because whether it resulted in any, and if so what, contract is one of the issues in this case.

63.	The financial position of the EMG group did not improve and in February 2009 it was still in financial difficulties.    Moneys were needed, but were unavailable, to pay rent, salaries and other critical creditors.   Staff pay was several months in arrears, according to an email of 5th March from Mr Jahanshahi to the directors.  The two month December loan had not been repaid, and on 10th March 2009 Rivertrade served a notice of default in relation to that loan.  Mr Hofer confirmed in writing that he had received it on 19th March, and asked to discuss it with Mr Kinder on 23rd March.  It is not clear whether he ever did speak directly, but his evidence was to the effect that in any event prior to March 2009 he had never communicated with Mr Kinder direct.  Mr Govindia disputed that and said that there had been prior contacts.  I prefer Mr Hofer’s evidence on the point.  On 25th March Rivertrade followed up the default notice with a demand that the LML bond (held as security) be liquidated, adding:

“Can you also ensure that any shortfall … there may be for the repayment of this loan including interest thereon, is secured by Forburg Ltd from the receivables of the Intelcan/Brasov transaction.”

64.	In the light of these difficulties Mr Govindia approached Mr Kinder for more funds. He does not seem to have shrunk from describing the seriousness of the problems facing the group, and mentioned the possibility of calling in insolvency practitioners.   At some point the Ranhill receiveables were referred to as an income stream for the group and therefore, as Mr Kinder put it in his witness statement, as “security” for Rivertrade’s loans.

65.	Mr Kinder took some convincing.  Mr Hofer urged “absolute transparency” towards Mr Kinder, and Mr Govindia did not take kindly to this suggestion, since he considered he was already providing that.  In an email back to Mr Hofer dated 3rd March 2009 he said:

“John has full transparency …I am really getting fed up with the constant insinuation that I’m somehow deceiving John - I really need you to stop that approach with me henceforth!  John happens to be a personal relationship and friend of mine - I would therefore like to deal  with him in the way I feel it best appropriate.”

This demonstrates the extent to which Mr Govindia considered that he was, and ought to be, free to deal in transactions with Mr Kinder, as he thought fit.  The other directors do seem to have let him get on with it, which goes to the question of his authority.

66.	In an email of 5th March to the directors, Mr Jahanshahi referred to a forthcoming meeting with Mr Kinder and said that there was a need to show him “the full pipeline of our mandates” and to “give him comfort that in our books, EMG will give repayment of this tranche top priority followed by repayments of the loans he made last year”.    In his response, Mr Hofer explicitly agreed the emphasis on the repayment, and said to Mr Govindia that he believed that the material in Mr Jahanshahi’s email was “very much what you suggested yesterday”.  I consider it likely that this was a theme underpinning the subsequent dealings with Mr Kinder.  

67.	Negotiations with Mr Kinder continued over the next month.  On 10th March, and pursuant to a request made by Mr Kinder, Mr Govindia sent him “key summary docs for the Ranhill recovery”, and attached a “Ranhill case summary”, a copy of the Ranhill mandate and a copy of the invoices rendered to Ranhill and which were said to be due.  However, Mr Kinder was not satisfied about the certainty in the “income stream”.  He considered the Ranhill claim had merit but he did not have time to check it.  So on 19th March he declined to make the further loan.  However, negotiations with him continued and he was persuaded to change his mind.  The negotiations were apparently oral, between him and Mr Govindia, and a deal in principle was agreed which would provide £200,000 to pay some salaries and other expenses, and to provide some breathing space to allow deals to be struck with a list of further potential investors.  

68.	On 8th April Mr Kinder sent an “outline idea” in an email which included the loan for £200,000, applied in certain ways and:

“2) in exchange
a.  Indian bond has to be controlled by Rivertrade
b.  Malaysian Claim assigned to Rivertrade
c. First refusal on office space at cost …

3)  Payback - Brasov/Mecano/any other corporate finance deal/Malaysian legal claim
a.  35% to staff until  repaid plus agreed bonus
b.  35% to Rivertrade until repaid (inc interest set up cost etc)
c. Balance EMG”

The reference to “Mecano” was to another transaction which it was hoped would bear fruit for EMG at some point in the future.

69.	Mr Kinder spoke to a “Progress meeting of the EMG Group” (as the record describes it) and confirmed his willingness to lend £200,000 subject to conditions.  

70.	On 11th April Mr Govindia made some proposals to Mr Kinder in an email of that date.  He wrote:

"John,
The following is my suggested outline for the deal: 

1.  Initial Commitment: 
a.  £200,000 made available as follows: 
(i) £125,000 this week 
(ii)  £25,000 per week for 3 weeks 
(iii)  (in terms of salary payments we would pay 1 months salary immediately and another month's at the end of April).  

2.  Contingent Commitment: 

a.  £100,000 in mid-May 

(i)  Contingent on continuing and positive progress on the Investment Banking Mandates being worked on and in particular their being no negative news on Brasov mandate. 

3.  Interest payable for this loan 

a.  15% pa on the above loan amounts 
b.  No set-up costs applied 

4.  Security for the above loans 
a.  LML Bonds to be controlled by Rivertrade 
b.  Ranhill claim to be assigned to Rivertrade 
c.  Any surplus amount recovered from any of the security to be passed on to EMG   
d.  All securities to be released back to EMG upon the secured loans being paid back/recovered. 

5.  Office Space Option

a.  EMG would give RT/you the 1st right of refusal for sub-letting any surplus space that EMG has to its requirements, such space to be made available at EMG's cost but the terms and conditions still to be agreed (such as payment terms, deposit, etc). 

6.  Additional Incentive

[Under this head there are proposals for increasing what are described as  "HMG's [Mr Harvey McGrath – a business associate of Mr Kinder] and JK's (and/or Rivertrade's) collective total holding in EMG".  The details do not matter, but at sub-para (c) there appears the following:]

c.  RT would have a put option back to FOL/EMG valid for 5 years for the 7% at a group valuation of $5m. 

7.  Loan repayments

a.  From the fees generated from one of the larger transactions (Brasov/Mecano) the fees shall be distributed as follows: 
staff - outstanding salaries for staff repaid (plus any discretionary bonus payments as may be agreed by the board).  

Of the balance remaining after staff are repaid: 
- 35% to Rivertrade until repaid (inc interest, etc) 
- Balance to EMG 

B.  From the fees generated from any other transaction (including any recovery from Ranhill, etc, other than the  Brasov/Mecano mandates) the repayment would be:

- 35% to staff until all outstanding salaries are repaid
- 35% to Rivertrade until repaid (Inc interest, etc)
- Balance to EMG

8.  Loan rep pre-conditions

a.  Key Staff sign up until June
b.  RT to have right to appoint a director, total visibility on accounts etc  

I trust this is acceptable.

Could you please arrange the transfer 1st thing Tuesday morning since I need to sort of [sic] the landlord and one month's pay for the staff as matter of urgent [sic]."

71.	There was then a negotiation of these terms which took the form of replies to emails in which Mr Kinder marked up Mr Govindia’s proposals with some comments and Mr Govindia further marking up the document with his further comments.  Mr Kinder sent his comments under an email of 14th April which said:

“Comments below.  Assuming you agree pls text me and I will arrange first payment.  Neil if you think I have left anything out please advise.”  

72.	The reference to Neil must have been a reference Neil Henry, who assisted Mr Kinder.  Mr Govindia added his comments the same day and sent the whole lot back to Mr Kinder.  

73.	Taking the combined document, the most material alterations were as follows:

- Against paragraph 1 Mr Kinder said:  “Can’t do more than Stlg 100 this week as need to iron out terms with Harvey”; and he counterproposed £25,000 for four weeks and not three.  Mr Govindia responded that he needed to pay staff by the end of April and that he would forward an email from Mr Jahanshahi about this.

- Against paragraph 2a Mr Kinder had added: “end May - but has to be solid progress, not #nothing positive nothing negative#”

- Mr Kinder added a 3b:  “I will be charging costs for this as everything we have done to date hasn’t been charged.  I will accept 5k though as it is probably close to actual costs.”

- In relation to paragraph 6 Mr Kinder proposed an increased shareholding over that which had been offered, but Mr Govindia resisted that.  

- Against paragraph 7 Mr Kinder had said:  “I don’t agree with this - we have to get some payments back if there are any distributions.  We can say 65% staff and 35% Rivertrade.   Can you please tell me what the staff liability is likely to be at that point?”; to which Mr Govindia said he was broadly agreeable but urged the need to pay staff.  

- Against paragraph 8 Mr Kinder added:  “c  The proper assignment of Ranhill and the bond to be controlled by RT and/or/JK this can be done after the first payment but before any others.  By the way this also means that you have to advise me of any terms you have agreed with Salans on this as there is clearly confusion as to how to pursue the Ranhill case.”  Mr Govindia  did not comment on that.   There was a minor proposed amendment about the shareholding of Mr McGrath.  

74.	On 16th April Mr Kinder sent an email from his Blackberry.  It was not written over the top of the preceding email chain, and it is not clear what precise dealings there had been between the parties, but it is clear enough that it must have been referring to their previous written dealings as set out above.  The email read:

“Shailesh, this is our final offer.  It is still subject to Harvey agreement but I will risk payment this week of 100k on this basis.  Our existing shares remain as is.

All points as per previous email except new equity.  10 pct non-dilutive Reduces to 5 pct if you are successful in next 2 months to raise sufficient funds to pay off all loans and interest.  You have a call option over 2 years to buy 5 pct of shares back at 20 mln stlg.  If you call these shares we have right to put all our remaining shares at same price.  If you don't call the shares we also have a put option at any time from 18 months from now to put all our shares including existing ones at 5mln stlg valuation provided NAV is materially higher than that.

If we put in additional funds this Equity deal will be increased by the same proportion i.e. 15 pct in total.

Could you please clarify when the employees have signed on till is it end June.”

On the same day (just over 3 hours later, at 9.59 am) Mr Govindia responded:

“John

OK - will you be able to transfer the money today?

I have already sent you Bahman’s note giving their commitment, it is in essence till June.

Once again, apologies for having disturbed you on your break with this and thank you for your continued support - I really do appreciate and respect both you and Harvey for all that you have done.”

Mr Kinder responded:

“Yes will do now.  Let’s hope we can all make some money back.”

75.	About 2 hours later Mr Kinder emailed to the effect that he had instructed his bank and EMG would “have value today”.  It is accepted that he (or Rivertrade) paid the first £100,000, and that thereafter the remainder of the loan was paid.

76.	Mr Bard’s case is that at this point an agreement (called, for the sake of convenience, “April I”) came into existence on the terms of the email exchange.  Mr Buttimore submitted that there was no resulting agreement, mainly on the basis that there were obviously some terms which were left open for negotiation and the parties actually carried on negotiating.  I shall make findings about this below when I consider the overall effect of the dealings between the parties from time to time in 2009.

77.	The negotiation or discussion of the matter did indeed continue in emails.  In the evening of 19th April Mr Kinder emailed Mr Govindia saying:

“I would like to confirm what we agreed last week subject to Harvey’s approval (which I will be seeking tomorrow, having sent him this email).

One thing that needs clarification, which I have asked you already, is exactly what the staff costs are and what has been agreed with the corporate finance people … We also need to have an updated list of all contingent liabilities, including landlord, Lawyers, staff etc which requires weekly updating.”

Below that he set out a slightly different version of  the original emailed proposals sent by Mr Govindia  at the start of the process.  Mr Kinder had re-cast slightly the principal terms, omitting Mr Govindia’s attempts to modify Mr Kinder’s original modification.  He added specific dates on which he would lend the £25,000 instalments, and added a figure of £5,000 for “admin costs” to the interest paragraph.  Paragraph 4 (”Security for the above loans”) became:

“a.  LML Bond to be controlled by Rivertrade/JK/HMG
b.  Ranhill claim to be assigned to Rivertrade/JK/HMG.
c.  All securities to be released back to EMG upon the secured loans being paid back/recovered plus all interest and related costs and Any surplus amount recovered from any of the security to be passed onto EMG”  

78.	Paragraph 7 was altered slightly so far as the “larger transactions” were concerned (I need not set out the modification) but was the same so far as it dealt with fees from other transactions.

79.	This was not so much a negotiation; it was seeking clarification.  Mr Kinder emailed Mr McGrath on the same day forwarding his email to Mr Govindia of 19th April and reporting that he had paid £100,000 “to keep one wheel on the wagon”, and expressing the view that £200,000 would get the group though to June.   He said to Mr McGrath:

“Totally up to you on this one.”

The next day Mr McGrath emailed back thanking Mr Kinder for his work and saying:

“I’m happy to come in on this basis.

Let me know when you need the funding and what documentation is appropriate.”

Thus Mr McGrath clearly indicated his consent.

80.	On 22nd April Mr Kinder emailed Mr Govindia asking:

“Shailesh,

Can you please send me a confirmation of the terms we have agreed.  I can then send this to Harvey and have Neil draw up the documents for Harvey and for you.  Without this I cannot instruct the branch to pay the next tranche…  We have discussed the issue of the Indian bond here and decided that we still want to control the Mauritian entity even if that may trigger a demand for payment.  So can you please set that in motion too.”

81.	Mr Govindia responded just over 15 minutes later.  He did so by sending an email over the text of Mr Kinder’s email of 19th April.  His email said:

“This is to confirm my agreement to this.

As already discussed and agreed (as a gentlemen’s agreement) the only area I may require some softening on from you and Harvey is the additional shares being allocated and the claw back therein but we can review this once I have the terms of any fresh capital/loan structure established and in particular, if we are able to repay the secured loans back quickly, then we should review the shares being allocated/clawed back more favourably from me.

Please also thank Harvey for me on this.”

82.	Mr Bard submitted that at this point there was a further or alternative agreement to “April I”, and he called it “April II”.  

83.	Mr Govindia could not remember whether he had been told prior to this email that Mr McGrath had agreed to the loan, but I think it likely that he had (hence his reference to “Harvey” in the email), and in any event he clearly understood (correctly) that Mr McGrath agreed.  

84.	Mr Govindia also asserted in the witness box that this email could not amount to a binding agreement because of the reference to a “gentlemen’s agreement”, which, he said, governed the whole arrangement.  He said that that is what he had written.  I find that that is manifestly not so.  On its clear terms this email is Mr Govindia’s acceptance of the arrangements set out in the 19th April email, and the gentlemen’s agreement covered another aspect where he hoped to reach a binding agreement.  I am afraid it does Mr Govindia’s credit no favours that he should seek to maintain that the point went wider than that.   It is a manifestation of a tendency on his part to put a retrospective gloss on documents and events in order to bolster the defendants’ case. 

85.	I deal below with the parties’ case on whether this exchange creates a binding agreement or not. 

86.	Thereafter 4 payments of £25,000 were made to Holdings on the dates identified in the 19th April email, and a further £100,000 was paid on 26th June 2009.  The Defence admits the payments but denies that they were made pursuant an April agreement.

June 2009
87.	Thereafter there were attempts to draw up and agree documentation pursuant to the April arrangements.  Mr Henry was responsible for that on the EMG side.  It is unnecessary to plot the course of the negotiations.  Limited reference suffices.

88.	On 20th May Mr Henry sent an email to Mr Govindia about several things, including security which Forburg had: 
“I would like to establish where we are with a[sic] …

Forburg Security
You mentioned during our meeting that loan obligations to Forburg have already been secured by pledge over EMG assets as this has been registered in Jersey, can you provide the documentation relating to this and assuming jersey operates in a similar way to UK how charge this is registered [sic] ..."

Mr Henry told me, and I accept, that he never had a response to this.  Mr Govindia said that he had told Mr Henry there was a debenture in place over EMG assets.

89.	That email was copied to Mr Kinder, who responded the next day: 

“Shailesh,

Just to confirm our conversation re outstanding points from Neil’s last email to you.

…

2.  Forburg security - your request is with the administrators and we should get that early next week.

…

We should have two documents with you early next week, a loan agreement for the additional £200,000 and the overall agreement we reached on the at the [sic] end of April covering loans/security/shares etc.”

90.	Paragraph 2 of that letter goes to the question of the awareness of the various parties, and in particular of Mr Kinder, of the Forburg debentures and of the basis on which the parties were negotiating.  It is not consistent with Mr Govindia’s case that Mr Kinder already had the 2006 debentures.   If Mr Govindia’s oral evidence is accepted, and if he knew of the pre-existing chain of assignments, Mr Govindia was negotiating with Mr Kinder in the knowledge that there was a pre-existing security interest which would, strictly speaking, stand in the way of Mr Kinder getting the security he expected, and yet did nothing to fix the problem or to alert Mr Kinder to it.  If he was not being dishonest, he, like Mr Kinder, must have been proceedings on the assumption that no problem was posed by the existence of any prior debenture.

91.	No security document had been forthcoming by 26th May, when Mr Govindia emailed Mr Kinder:

“Please find attached the summary of EMG's external liabilities.

Please note that the largest creditor by far is Forburg Ltd (owed over £6M by EMG Holdings, secured) but that amount has not been shown in this summary since it substantially distorts the external liabilities picture – especially for the purpose for which you want to do list.
…

I'll send the Forburg secured loan document once I get it from Jersey/Guernsey."
92.	2 days later Mr Kinder replied to Mr Govindia (having studied the summary of EMG liabilities): 

"We are close to finalising the documents for the last loan.  As you know the original £500,000 loan is due for repayment on the 31st May.  What I would propose is the following set of documents
1) Loan agreement for the second £200k covering the agreement of 22nd April.
2)  A letter clarifying the repayment schedule for the three loans.
3)  A debenture which comes in to place an additional security for the three loans which comes into place on June 1.
4)  Assignment letter for Ranhill payment.
5)  Assignment letter for proceeds from LML bond – which you still need to agree with the credit Suisse.”

93.	On 29th May Mr Kinder chased the Forburg charge: 

"We really need that Forburg charge.
I will have to send a formal email on Monday regarding the May 2008 for which I will need an acknowledgement."

This letter is inconsistent with the suggestion that Mr Kinder already knew all about, and had a copy of, a Forburg debenture which is relied on by the defendants in these proceedings.  While he knew about a Holdings/Forburg debenture by now I find he had not got it at this point.

94.	A number of drafts then passed between the Rivertrade side and the EMG side.  Mr Kinder sent some on 1st June (which may explain how some significant documents came to bear that date).  The authority that Mr Govindia apparently had to deal with these matters can be seen from his email to Mr Kinder of 9th June:

“John,

I’ve had a chance to go through the draft documents you sent last week.

There are few points which I'd like to discuss with you – please let me know when would be a good time for us to discuss these."

It should be noted that this email demonstrates that Mr Govindia, and no-one else, was dealing with details.  Some form of executable drafts were in existence a week later, at least so far as Mr Kinder was concerned, because on 16th June he emailed Mr Govindia:

“Shailesh, i believe these documents reflect the changes we discussed the other day.  Can you please print off and get them signed by Paul.  Can you get a confirmation by the way that Paul is an authorised signatory?  Silly point I know, it's mentioned in the Malaysian letter, but that letter is also meant to be signed by Paul.  I guess the confirmation should come from the company secretary?”

95.	Two hours later Mr Kinder emailed again, forwarding an email from Ms Gerry Downey of Rivertrade who had spotted a couple of small points which needed amendment, and Mr Kinder emailed: 

“Shailesh - a couple of amendments, rather than resending perhaps you can amend before signing.”

In fact these two amendments were incorporated into later forms of the documents.

96.	On 19th June Mr Govindia apparently responded to the query about directorships by forwarding an email from Guernsey corporate managers confirming who they were.  The email of Mr Govindia reads: 

“I’m resending you the email confirmation from Fortis which I sent you last year confirming the directors of Forburg, EMG Holdings and EMG Finance.  
I trust this is sufficient for our purposes."  

97.	What he “re-sent” was an email exchange of 21st May 2008 in which he forwarded to Mr Kinder an email from the administrators of the same date:

"John,

Please see below email from Fortis (our administrators in Guernsey) confirming the directors of each of the relevant companies.

I can also forward the letter version to you once we receive that."

The letter from the administrators reads:

"I confirm that the current directors are as follows:

Forburg Ltd – David Robins and Paul Hofer
EMG Finance Ltd – David Robins, Paul Hofer and Shailesh Govindia.
E.Merging Markets Group Holdings Limited - David Robins, Paul Hofer and Shailesh Govindia.

I will draft a letter confirming this and post to you in London."
98.	Thus was Mr Govindia clearly confirming, on 19th June, that Mr Robins and Mr Hofer were still directors of Forburg.

99.	By the end of June, or perhaps the beginning of July, a set of documents got signed and exchanged.  The manner in which this was achieved is slightly (and surprisingly) obscure, but each side has ended up with a version which has been signed by the other. The claimant has got some originals, bearing signatures of Mr Kinder, Mr McGrath and Mr Hofer (where appropriate).  Mr Hofer has merely initialled some documents.  So far as the most important document is concerned (the Facility Letter) the defendants had, by the time that Mr Govindia got back from India later in the year, a copy in their possession with copy signatures of all three signatories, but they have not disclosed a version with original signatures.  
100.	By this time the parties had negotiated some new features of the transaction.  It had been agreed that the May 2008 loan to Forburg should be novated so that it became due from Holdings, not Forburg.   This was duly dealt with in a separate document.   

101.	 On 22nd June Mr Govindia emailed Mr Kinder as follows:

“John,

I've sent 2 sets of original documents to your Islington address.
Could you please sign and send back one set to be for our files.
Board had some comments on the Dharma documents which are currently being made and I'll send you a copy of that in the next couple of days.

As discussed and agreed in the board meeting on Friday, could we please also organise the release of the contingent £100k before the end of this week?

Summary of changes to the documents – as discussed in addition to the changes you asked me to make, the following is a summary of the other key changes made to the documents:

[There then follows a list of indicated changes to the various documents.]”

102.	The documents referred to in the first line of this email are plainly, on any proper view of that email, the final form of the transactional documents which it was considered had to be signed.

103.	Mr Govindia emailed again on 24th June, over the email of 22nd June.  He wrote:

“John,

Hope your trip is going well.

All the signed documents are now with Neil and I also went though [sic] the minor changes with him this morning.  

[Reference to dealings on various projects]

Since we now have June commitment to meet in the next few days, could I please request that you organise the transfer of the £100k so that it hits us before the end of this week?

Call me if there is anything else you need to discuss or clarify.”

104.	In his evidence Mr Govindia sought to say that the signed documents referred to were copies of a different document - a non-disclosure agreement which was required for a project known as Dharma.  I do not accept that evidence.  His email was sent over an email that clearly referred to the loan documentation, and the paragraph of the email seeking release of funds is much more likely to be intended to be related to the statement that documents have been signed.

105.	On 29th June Mr Kinder emailed to say:

“Shailesh I have looked at the documents and have a couple of issues which I will come back on tomorrow …”

That email was timed at 14:58.  One minute earlier at 14:57 Mr Kinder had emailed Mr McGrath as follows:

“Harvey,
I am just back from a pretty hectic week in Asia …

2 things, EMG and Revere.

Firstly EMG - I have been in the process of trying to update you on this for a while but haven’t finished off the email.

1)  We have signed documents now for the last transaction.  The last loan is a Rivertrade loan, however as you receive 5% of the equity as a result of this you are a signatory to the agreement.  Could you let me know where you wish this to go for signature.”

2)  The agreement allowed for an additional £100,000 to be payable by the end of June should certain conditions be met, but in any event at our discretion.  I have paid this but as I did not get your approval before hand, should you wish not to participate that would be completely understandable.  The £100,000 is on the same terms as the rest including pro-rated additional equity (i.e. an additional 5% for the £100,000).

Progress

1)  We have a signed agreement that we can take any amount from the Ranhill legal claim in Malaysia now.
2)  We have instructed Shailesh to convert the LML bond to equity…

Conclusion – this £100,000 is the end of the road as far as I'm concerned, but should get an extra 6 weeks of lifeline.  Is this sufficient?  I don't know and couldn't guarantee it, but it may be.  It should take us beyond the new term sheet for Brasov and some sort of clarity on Ranhill, plus the liquidation of the LML bond. ...”

This document demonstrates that Mr Kinder had signed the transaction documents by now  (or at least the loan agreement).  It also shows that the £100,000 had been paid. 

106.	On 1st July Mr McGrath responded saying that he was happy to participate in the “last £100k” and gave an address to send the documents to.  On 2nd July Mr Kinder said:

“Will send over document for signing”

The document must have been the loan agreement, because that was the only document which required Mr McGrath’s signature. 

107.	This exchange of emails indicates acceptance of the then form of the documentation.  In his evidence Mr Govindia said he thought that this exchange was a “contrivance”.  I find it was no such thing, and I do not consider that that view of it could reasonably be held.  Mr Govindia’s willingness so to describe it does not reflect well on his credibility.  It tends to demonstrate that he is willing to propound whatever view of any given circumstances will fit the overall position he wishes to take at that moment in time.  

108.	However, having said that, Mr Govindia might be thought to have more of a point when he points out that on the face of the next email Mr Kinder seems to be indicating some qualifications to the drafting (though Mr Govindia put it as saying that Mr Kinder did not accept the changes proposed).  What happened was that on 2nd July, 4 hours after he emailed Mr McGrath, Mr Kinder emailed Mr Govindia with “Comments on the documents”, and attaching a “deed of priority (2)”.   In his email he took the alterations which Mr Govindia had described in his email of 22nd June and typed his comments.  Under several he added “Fine”.  However, under others he added something more qualified.  Those were:

(i)  One of the things that had been agreed between the parties was that the May 2008 loan to Forburg should be assumed by Holdings.  Mr Govindia had added wording to the clause which reflected this (no more than drafting matters) to which Mr Kinder commented:

“This is correct, however, you told me before that you couldn’t do this and give us a debenture which would be what is required.  What I suggest is a deed of priority therefore that Forburg and EMG would have to sign, I have copied a draft one that we think would cover things.  Apologies for the state of the draft - we can clean it up but I didn’t have time this afternoon.”  

(ii)  Under a comment about the “Forburg Letter “ (see below) Mr Kinder commented:

“Fine if we get deed of priority”.  

(iii)  In respect of this Forburg letter Mr Govindia had pointed out that he had removed a clause which provided for a debenture over the assets of “EMG”, to which Mr Kinder responded:

“As above.  This letter should be signed by Paul [Hofer], not just initialled.” (thereby demonstrating that he had by this time had an initialled copy).

(iv)  In relation to a comment about another document, he again commented “As above” and required the document to be signed and not just initialled and noted as “received” by Mr Hofer.

109.	The “deed of priority (2)” was a draft deed with Holdings, Forburg and Rivertrade as parties.  It was not well drafted but its intention was to regulate priorities between a Forburg debenture and Rivertrade and give Rivertrade priority.  Since it was never executed in this or any other form I do not have to decide any questions of construction that might have arisen, but the significance of this document is that it demonstrates that Mr Kinder was aware of a Forburg debenture and the apparent need (or at least desirability) of having express arrangements which prevented its being asserted against Rivertrade.  The Rivertrade interest which was given priority was not specified.  

110.	I deal with the effect of this below when analysing whether or not there was a binding agreement at this stage.

The June 2009 documents
111.	The evidence recited thus far shows that documents were signed by 2nd July despite the fact that some aspects of the arrangement were still under discussion on that date, albeit to a very limited extent.  Some signed versions of documents did not actually emerge until the trial, but by the end of the trial it became apparent that each side was holding a version of various documents which were ostensibly intended to be final, and the principal one of which (the loan agreement) bore signatures by all relevant parties.  The documents in their apparent final form were as follows.  In each case I seek to explain what forms of these documents existed in the hands of either party so far as relevant.

The Facility Letter (or loan agreement)
112.	This document took the form of a letter addressed by Rivertrade to Holdings and included the following terms:
113.	 Paragraph 1 contained definitions.  The “Borrower” was defined as Holdings and “Drawdown Notice” meant a notice in the form set out in the Schedule.  It was headed “Loan Facility in the sum of £200,000 (the “Facility”)” and went on:
“We are pleased to place at your disposal the above Facility subject to the following terms and conditions.”

It went on, so far as relevant:

“2.  Amount and availability
2.1 The total amount to be advanced (the “Loan”) under this Facility shall be restricted to £200,000…and shall be made available as listed below.
2.2 The drawdown under the Facility shall be at the discretion of the lender but shall not exceed in aggregate the amount of the Facility.  Such drawings must be made by means of a Drawdown Notice, such notice to be received by Rivertrade Limited no later than two Business Days before the date of drawdown.
2.3 Entirely at the discretion of Rivertrade Limited and contingent on the continuing and positive progress on Investment Banking Mandates and taking into consideration alternative sources of funding, this facility may be increased by a further £100,000 from June 2009.
3.Period & repayment.
3.1 The Loan is to provide short-term liquidity and shall be repaid to Rivertrade Limited immediately on demand.
…
5. Security
5.1 As security for the performance by the Borrower of its obligations pursuant to this Loan Agreement and in consideration of the monies advanced the Borrower hereby assigns deposits and pledges and charges to and in favour of Rivertrade Limited the [LML Bond].
5.2 As security for the performance by the Borrower of its obligations and pursuant to this Loan Agreement, and in consideration of the monies advanced the Borrower hereby assigns to Rivertrade Limited the receivable due from Ranhill Berhad (Malaysia) of $644,744 held in the name of EMG Finance Limited in accordance with the terms of the Assignment Agreement between the parties of the same date.
5.3 As security for the performance by the Borrower of its obligations pursuant to this Loan Agreement and in consideration of the monies advanced the Borrower hereby assigns to Rivertrade Limited up to 35% of the fees generated from the Brasov/Mecano mandated deals until such time as the Loan plus interest have been paid.
5.4 The security held by Rivertrade Limited shall be unconditionally released upon full repayment of all the principal and interest monies due to Rivertrade Limited under this Loan Agreement and any other loan agreement that Rivertrade Limited and John Kinder/Rivertrade Limited has entered into with the Borrower.  For purpose of identification the loans outstanding at time of execution of this agreement are:
(a) 	£500,000 loan from John Kinder to Forburg Limited dated 14th May 2008 the liability of which and the obligation therein has been taken over by [Holdings]
(b)	£200,000 loan from Rivertrade to [Holdings] dated 24th December 2008.”

114.	Clause 6.3 provided for the issue of shares in Holdings to Mr Kinder and Mr McGrath, with an option for Forburg Limited to buy back the shares within two years.  Clause 9 was an English Law clause.  Clause 10 read:
		“10.  Acceptance

Please indicate your acceptance of this Facility on the terms and conditions set out herein by signing and returning, to Rivertrade Limited, the enclosed copy of this Facility Letter, no later than 19 June 2009, after which this offer will lapse if unaccepted.  The returned copy of this Facility Letter, duly signed, must be accompanied by:
10.1 Copies of the Board Minutes of a meeting of your Board of Directors approving, inter alia, the acceptance of the Facility.”

115.	The Facility Letter was dated 18th June 2009, though on any footing it was signed some days after that and was not even agreed in this form at that time.

116.	The letter contained a space for signature by Rivertrade (signing by Mr Kinder as director), for signature by Mr McGrath,  and at the bottom of the signature page was the following:
“We confirm our agreement to the terms and conditions contained herein.”

and below was a space for signature on behalf of Holdings.  To the right of that was a line where the date could be inserted.

117.	The version of this document produced at the trial by the claimant had three Drawdown Notices attached, each signed by Mr Hofer and bearing a manuscript date at the foot written by him, of 18th June.  However, at the top each Drawdown Notice there is  a different typed date.  There is one for 16th April 2009 for £100,000, one for 28th April 2009 for £25,000 and one for 13th May 2009 for another £25,000.  Each of those notices confirms that the drawing effected by the Notice is within the powers of the Borrower and has been appropriately authorised, that no event of default had occurred and that the undertakings contained in clause 6 of the Facility Letter had been complied with.  
118.	By the end of the trial the parties had each disclosed versions of this agreement bearing different forms of signature.  The claimant produced a version bearing signatures of Mr Kinder, Mr McGrath and Mr Hofer.  Mr McGrath produced a version bearing photocopies of the same three signatures, but it is apparent, even from a photocopy, that the signatures on this version are all slightly different, either in form or in their position on the page (which can be judged from dots on the signature line).  In fact Mr McGrath seems to have retained the original of this document.  During the disclosure process the defendants disclosed a version bearing three signatures, which seems to be the same as the version produced by Rivertrade at the trial (the signatures appear to be identically positioned).  However, at the trial the defendants produced a further copy bearing only Mr Hofer’s signature.  This looks very much like the signature of Mr Hofer on the copy produced by the claimants, and may be a copy of the same document before a further copy was sent to Rivertrade for signature.

Letter from Rivertrade to the Directors of Holdings and Forburg (the “Cover Letter”)
119.	This letter is dated 18th June 2009.  It reads:
		“Dear Sirs
I would like to confirm our understanding of the current position between [Holdings] and John Kinder/Rivertrade with regard to our loans and the issue of equity to John Kinder/Harvey McGrath.
		1)	Loans
Loan 1 (14th May 2008) £500,000 plus interest to date.  This loan is in default as from 31st May.  This loan is secured by the proceeds on the Brasov/Intelcan Airport deal…[Holdings] has agreed to take over this liability from Forburg Limited and its obligations therein which we are in agreement with.   A letter concerning an additional extension of this loan is attached.

Loan 2 (24th December 2008) £200,000 plus interest to date.  This confirms that EMG is currently in default of this loan, which is secured by the LML Bond.  This Bond, if sold, would first pay off Loan 2 plus interest.  Any remaining amount would be used as further repayment schedule (see below).

Loan 3 (22nd April 2009) secured by the LML Bond and the Ranhill legal claim.  This loan is repayable on demand or payable from the receipt of the Ranhill claim or according to the repayment schedule (see below).  The full agreement is attached to this letter.

		Repayment Schedule
	A) 	From the fees generated from the Brasov/Intelcan Airport deal and/or Meccano rolling stock deal with Sri Lanka
- after repayment of Loan 1 65% will be paid to Forburg Limited or its nominee, and 35% to Rivertrade to cover any outstanding amount owed on Loan 1 and 3.
		B)	From the fees generated from any other transaction
		35% will be repaid to Rivertrade until all loans repaid
		65% will be paid to Forburg Limited or its nominee.
	2)	Shares
	[Reference to the issue of shares]”

120.	The letter contained a signature block for Rivertrade but no signed copy was produced.  However, both Rivertrade and Mr McGrath produced copies signed by Mr Hofer thus:

		“Received, Hofer 18.6.09”.

It appears that the defendant’s copy was a different document (that is to say Mr Hofer’s endorsement is differently positioned on the page).

The “Forburg letter”
121.	This is a letter on Rivertrade headed notepaper addressed to the directors of Forburg and dated 1st June 2009.  It reads: 
	“Dear Sirs

	Ref. Loan for £500,000 for Forburg dated 14th May 2008.

1)	This loan was originally due for repayment on 30th November 2008.
2)	On 28th November 2008 the loan repayment deadline was postponed to 31st May 2009.
3)	As of 31st May 2009 no repayment has been received so Forburg is in default of its obligations.
4)	Rivertrade confirms a further extension of the loan until October 2009 on the following terms:
a)	The liability for the repayment of this loan and your obligations therein is taken over by EMG Holdings Limited.
b)	Repayment of the loan is secured against the fees received from the mandates for the Brasov/Intelcan airport deal and the Meccano/Sri Lanka railway deal.
c)	In the event of either of these transactions being concluded Rivertrade will receive 100% of the proceeds until such a time as the full loan amount plus interest is repaid.
d)	As per the letter dated 1st June 2009, should there be any revenue from any other EMG transaction including the Ranhill legal claim and the LML Bond, such income will be divided 35% to Rivertrade, and 65% to Forburg or its nominee.
e)	Forburg will secure a letter from EMG confirming these terms.
f)	All other terms shall remain unchanged.
Please confirm your agreement.”

There is then a signature block for Rivertrade’s signature, but no signed copy has been produced.  However, Mr Hofer has initialled this document in the bottom right-hand corner indicating a form of approval.  A version produced by the defendants at the trial contains an additional page which also contains a signature of Mr Hofer, with the date 18th June 2009, signing as a director of Forburg.  The claimants do not seem to have such a copy.  It will be remembered that in his email of 2nd July Mr Kinder asked that this letter be signed by Mr Hofer.  It is likely that this signature was produced as a result of that request.
Letter from Holdings about the Ranhill proceedings (”the Assigment Letter”)
122.	This is a letter, again dated 18th June 2009 (at the head).  It is addressed to Rivertrade and reads:
		“Dear Sirs
Re: EMG Holdings v Ranhill Berhad
This letter confirms that we are currently issuing legal proceedings against Ranhill Berhad for the total sum of $644,744.  These proceedings are taking place in Malaysia and it is anticipated that judgment will be awarded in our favour.

In consideration of the security provided by us pursuant to a loan facility agreement between us dated 19th day of April 2009 (“the Agreement”) and in particular clause 5.2 we hereby agree to pay to you any and all monies recovered in the aforementioned proceedings in repayment of any of the loans set out in the Agreement, limited only to the amount owed therein.

It is further agreed that this security held by you shall be unconditionally released upon full repayment of all monies due to you as set out in clause 5.4 of the Agreement.

For the avoidance of doubt we also confirm that Paul Hofer has the duly authorised power and authority from our company to sign this Agreement on our behalf.
	
Yours faithfully
		[signature of Mr Hofer].”

123.	The reference to the agreement of 19th April is almost certainly a mistake.  While there was an exchange of emails on that date relating to the agreements reached in April, the references to clause 5.2 and clause 5.4 do not tie up.  They do, however, match to the Facility Letter of 18th June.  That must be what was intended.

The documents generally
124.	I will have to return to consider the effect of the documents, which are not all consistent and which do not always reflect reality (for example, it was not Holdings who had commenced proceedings in Malaysia; it was Finance).  For the moment it is only necessary to add the observation that the form of the agreements as I have just set them out is such that they include the drafting points referred to by Mr Govindia in his email of 22nd June.
Moneys paid
125.	Across the period from April to the end of June, the £300,000 anticipated by the documents was paid as follows:

16th April - £100,000
28th April - £25,000
13th May - £25,000
20th May - £25,000
27th May - £25,000
26th June - £100,000
Subsequent events
126.	I can deal relatively shortly with subsequent events, because they are by and large only relevant insofar as they shed light on what had happened by the time of the apparent finalisation of the June 2009 documentation.  

127.	On 25th July Mr Hofer emailed Mr Govindia with a complaint about lack of communications in relation to the funds available for running the business.  He said that there was more available than Mr Govindia had led him to believe.  The result was a furious email back from Mr Govindia.  What he said about the availability of funds is not particularly relevant, but what is significant is its tone and what it says about Mr Govindia’s position in the affairs of the group.  It starts by saying:

“Don’t you ever use this tone or attitude with me ever again - I’m fed up with your whole attitude and tone towards me and you have no right to insult me in this way …”

128.	He then goes on to state what he had already told Mr Hofer as to what money must be applied where.  The detail does not matter.  The general thrust, and the tone, does.  It is quite plain that Mr Govindia considers that he is entitled to call the shots and to run the business as he thinks appropriate.  It also appears that he had given a personal guarantee of the overdraft of one of the companies.  The email ends by requiring an apology and change of attitude or “I think our relationship going forward is not going to be tenable”.  Having heard and read the evidence I am quite satisfied that this email reflects where the real power and control in the management of the group lay, viz with Mr Govindia.

129.	At the end of July Mr Govindia went to India.  Not long after arriving he was arrested (on or about 31st July), apparently at the behest of a Mr Vaghani, over some business dealings.  He was held for several weeks.  He blames Mr Hofer and others here for supporting his detention in India, and for failing to do enough to assist him and his family with money and other support while he was in difficulties there.  It is not necessary for me to go into the detail of that, or to make findings about it, save to say that some of his allegations were somewhat wild.

130.	While he was in India Mr Hofer and others ran the businesses here.  Mr Henry told me that it was only at that point that he saw the full figures for the group and saw what a parlous state its finances were in.

131.	On 29th September Rivertrade, Suisse and EMG entered in to a further loan agreement, this time for £190,000.  Rivertrade lent that sum to Suisse, and EMG was a party to the agreement, presumably because at clause 4 the agreement provided for security to exist against “certain of the Borrower’s and/or [Holdings’] corporate mandates and other receivables being listed below”.  Those items included the “Ranhill legal claim”.

132.	Things did not go well and the Rivertrade loans were not repaid.  When Mr Govindia got back in the autumn he sought to restore his control.  In an email of 12th October 2009 he wrote to Mr Hofer:

“I think you may be forgetting that I am still the CEO and a Board member and also the representative of the major shareholder (Forburg) who is in fact predominately responsible for the appointment of Board members.”

133.	The fall-out between Mr Hofer and Mr Robins became complete when they were ostensibly removed from the boards of the companies of which they were directors at a board meeting on 24th November 2009.  That removal was plainly orchestrated by Mr Govindia.  

134.	In due course these proceedings were started and summary judgment on the loan itself in the sum of £300,000 was obtained against Holdings on 25th November 2011.  

135.	At some point in 2011 Mr Govindia was removed from his group directorships, according to him.  He claims that this was an actual removal because he thought he had messed up the situation in relation to the Holdings debenture (whatever that may mean).   I consider it likely that this resignation was cosmetic.  Two new directors were appointed, one a friend of his and the other a paternal uncle.  A further friend was also appointed as a director.  I do not find it likely that this was a genuine decision by disappointed trustees to replace a poor manager.  If that had been the case I do not think that friends and relations of Mr Govindia would have been appointed.  They are likely to be his nominees.

Corporate authority - the position and status of Mr Robins and Mr Hofer
136.	Points arose as to the status of Mr Robins and Mr Hofer in relation to the various defendant companies.  

137.	The more important is (or may be) Mr Hofer’s status as director of Forburg.  At the beginning of the train of events leading up to the loans in this case both Mr Robins and Mr Hofer were directors of Forburg.  It is plain that Mr Govindia had said that that was still the case in June 2009 when he forwarded to Mr Kinder confirmation of the directorships (see above).  However, it transpired during the course of this litigation that Mr Hofer ostensibly resigned as director of Forburg by a letter dated 21st May 2009, as did Mr Robins, or at least they signed resignation letters.  The circumstances of this are somewhat obscure.  Mr Robins thinks he resigned at about that time, but did not seem too sure about when (or indeed whether) he ever became a director in the first place.  Mr Hofer did not seem to challenge the fact that he resigned.  He recalled a discussion in which Mr Govindia asked him if he would mind resigning as director of Forburg, and since he had no reason not to resign he did so.  Forburg was Mr Govindia’s family trust, and he would do what Mr Govindia wanted in this respect.  He did not challenge the date of this letter.

138.	This is curious for two reasons.  First, if they resigned in May 2009 then it is not apparent that any directors were appointed to replace them.  Forburg would have been directorless at this point, because there is no evidence that anyone else was appointed in their place.  Furthermore, the resignations fly in the face of the email traffic next month in which Mr Govindia confirmed the directorships of Mr Robins and Mr Hofer in response to a specific query from Mr Kinder.   He can hardly have forgotten that they had resigned and the company was directorless.  Nor would it be likely that Mr Govindia would allow Mr Hofer to attach his signature to the Forburg letter and other documents as director - it must be remembered that the copy with that signature attached was found by the Defendants, and that that signature was probably attached as a result of a request by Mr Kinder that Mr Hofer’s signature on it be obtained.  

139.	I think it much more likely that, for his own purposes, Mr Govindia decided he wanted to have Forburg resignations up his sleeve in case he wanted them, but he did not intend to action those resignations when they were signed.  In his first witness statement Mr Govindia said that the May letters had not been “processed” by November.  That supports my finding. The purported resignations were not treated as effective by him or the shareholders (if indeed the shareholders knew about it).  That explains why Mr Hofer participated as director in the June transaction, and why he was described as a director by Mr Govindia.  Therefore Mr Hofer was actually still a director of Forburg when the June documentation was signed.  That deals with one apparent attack on the completeness of the transaction based on an assertion that the documentation was not signed by an officer of Forburg.

140.	For the sake of completeness I also deal  briefly with the cesser of Mr Robins’ and Mr Hofer’s directorships of Finance and Holdings.  Mr Govindia’s evidence was that he was concerned about the activities of Mr Hofer and the accountant (Mr Damodararu).  When he was in India he insisted on a telephone conference in the course of which Mr Hofer and Mr Robins resigned as directors  and said they would deliver their formal resignations by no later than 5th August.  He put the conference at 30th July, the day before he was arrested.  

141.	Mr Hofer and Mr Robins deny this version of events.  They accept that they prepared written resignations from their directorships at the beginning of August, because they were concerned about their position in the light of what was happening in the company and to Mr Govindia.  They wanted to be able to resign at short notice if necessary, so they sent letters of resignation to Mr Damodararu but they were not to be actioned until he was given instructions to that effect.  

142.	I accept the evidence of Mr Hofer and Mr Robins about this and reject Mr Govindia’s account.  I find their evidence more plausible, and it is consistent with email traffic at the time, not least an email from Mr Damodararu dated 18th August in which he says:

“Please note that your resignations received by me last week are currently being kept on hold and are not being processed until and instructed [sic] by yourselves otherwise.  Please confirm if this is not the case.”

143.	Mr Hofer replied on the next day confirming it.  It is, of course, possible that they had earlier agreed to resign and then backtracked when Mr Govindia was arrested, but I think that very unlikely.  It is more likely that their own version of events (albeit odd) is correct.  Mr Govindia made up his version of events when he came back from India and discovered the unacted-upon resignations in the office. The two directors remained directors until formally removed in November after Mr Govindia’s release from detention in  India. 

The Ranhill proceedings
144.	As appears elsewhere in this judgment, proceedings were commenced in Malaysia to enforce Finance’s claims under the Ranhill mandate when Ranhill did not pay the sums due.  They were not commenced until about March 2009 when Mr Kinder himself identified a Malaysian law firm who would act for the claimant.  His evidence is that thereafter and until April 2010 he gave the instructions to that firm, informed Mr Govindia of what was happening and, significantly, paid the bills.  He said that Mr Govindia was more than happy for Mr Kinder to take these steps in order to get the money in.  Mr Govindia’s witness statements took issue with the proposition that Mr Kinder was instructing the lawyers.  There was no real cross-examination on this part of the dispute, but looking at the email traffic it is plain that Mr Kinder was, in effect, doing the instructing until mid-April 2010.  I accept Mr Kinder’s evidence on the point.  Mr Kinder (or Rivertrade) plainly had authority to act for the claimant in those proceedings.   It was not disputed that Mr Kinder paid the bills, and an email from Mr Govindia of 28th July 2009 says (in response to a fee note from the Malaysian lawyer):

“I assume that you’ll be handling this for us.”

145.	At least one invoice next year was re-addressed from Finance to Rivertrade.  I find that Mr Govindia agreed that Mr Kinder would pay, and at no stage did any of the defendants raise the point that Mr Kinder was paying for the recovery of something he was not entitled to.  Mr Kinder considered the Malaysian action, and his procuring and running of it, to be necessary to procure the settlement of the April/June 2009 moneys.  

146.	Judgment was obtained against Ranhill in the sum of $600,000 on 16th March 2010. On 12th April 2010 Mr Govindia revoked Mr Kinder’s authority to instruct Shearn Delamore, the Malaysian lawyers.  He wished to make sure that the proceeds found their way to the EMG group, whereas Mr Kinder was keen to have them pass to him pursuant to what he saw as his rights under the arrangements that had been made. 

147.	Moneys were ultimately paid by Ranhill, and they are now frozen in Malaysia (after proceedings there between Rivertrade and the EMG group companies) while Rivertrade’s claim to be entitled to them is determined in this action.  

The claims arising out of those facts
148.	A whole slew of issues is said to arise out of those facts.  Rivertrade claims that there are binding agreements under which it lent money to Holdings and under which it is entitled to an assignment of the Ranhill proceeds, or part of them, to repay its loan.  If it has not actually acquired such an interest by reason of the defences raised by the corporate defendants then Rivertrade asserts personal claims against Mr Govindia.   The defendants raise the following points by way of defence:
(i)  There was not, at any stage, a completed agreement along the lines of those said to constitute April I, April II or June.  The evidence showed that precise terms remained under negotiation and were never concluded.  Rivertrade responds by maintaining the agreements were all complete and effective.  
(ii)  Finance was not a party to any of the agreements alleged, so there cannot have been an assignment of the Ranhill proceeds.  This involves assertions that Finance was not an express party (or not an express party to anything relevant) and those acting on the EMG side did not have authority to bind it in the manner alleged anyway.  Rivertrade responds by saying that Finance was bound into the transaction, or alternatively rectification should be granted in order to bring it in.
(iii)  If the agreements would otherwise have achieved an assignment of the Ranhill proceeds, Forburg takes priority under one or both of the two debentures given by Finance to Forburg to secure debts said to be owed by Finance.  One debenture dates back to 2001; the other was given in 2006.   Rivertrade’s riposte is to aver there is no evidence that any moneys were still secured by the 2001 debenture, and the 2006 debenture was not validly executed, or at least not until after the transactions in question.  It also says that insofar as the debentures are valid Forburg is barred from asserting its claims under them by virtue of acquiescence, estoppel and consent.  This last point again raises the question of capacity.

149.	I shall deal with disputes in that order.  They will each turn out to have branches and sub-branches.

Were there binding agreements in April?
150.	The division of the April dealings into two potential agreements was a late analysis by the claimant.  However, I shall consider that analysis.

151.	The nature of the exercise should be understood.  The exercise is not necessarily the classic one of matching offer against counter offer against acceptance in order to see if there is any agreement.  There is no doubt that in April that there was some agreement, because Mr Kinder provided money.  It was not suggested that it was a gift, so it must have been a loan (as is acknowledged by the summary judgment in this case).  The question is therefore not whether there was any agreement, but what were the terms on which he lent the money.  If there was no other agreement the moneys must have been repayable on demand.  It is the claimant’s case that there was indeed an agreement governing the moneys paid in April (and before June), and it appears in the email exchanges.  It is the defendants’ case that there was no such agreement because no final agreement was reached, and it was apparent the parties were intending to continue to negotiate.

152.	Whether or not there was an agreement is a question of primary and secondary fact.  The facts have to be viewed objectively to ascertain whether it can be concluded that the parties reached an agreement and intended what they had apparently agreed to be binding.  In many cases a failure to agree on all the terms may well indicate that they had not reached a binding agreement on any of the terms.  However, that is not necessarily true in every case, and if the facts justify it a court can find that where some terms are apparently agreed but others are apparently not, then the parties at least intended the agreed terms to govern.  That is a real possibility in a case like the present where the borrower was very anxious to have the money apparently on offer, and to have it as soon as possible without necessarily waiting to have every last point nailed down.  I also bear in mind what Elias J said in Dresdner Kleinwort v Attrill [2013] EWCA Civ 394 at para 60:

“The court will be slow to hold that otherwise contractually enforceable obligations cannot be enforced because they are too uncertain.”

153.	I find that it is clear that an agreement going beyond a mere loan repayable on demand was reached on 16th April (April I).  Mr Kinder was making it plain that he had made an offer, and it was final.  The offer was to be found in his additions to Mr Govindia’s outline of terms.  He was, in essence, rejecting Mr Govindia’s qualifications so far as he introduced any, and Mr Govindia accepted that position.   Mr Govindia, who needed the funds, accepted (”Ok - will you be able to transfer the money today?”).  That is the clear language of offer and acceptance.  The offer was “All points as per previous email except new equity” and that last point was developed.  

154.	Mr Buttimore pointed to various points that he said meant there was no deal, and in particular the preceding references to “outline idea” (8th April) and “outline for the deal” (11th April), and he carried out a further analysis of the proposal which demonstrated that there was no concluded deal.  He pointed to the following:
	(a)  Mr Kinder had said he could not lend more than £100,000 because he needed to do a deal with Mr McGrath.  
(b) The document did not state which entity was undertaking which obligation.
(c)  Mr Kinder himself referred to the “risk” posed by not getting Mr McGrath’s agreement.  
(d)  It is unclear what is meant by “control” of the LML bond (it turned into an assignment in the formal documentation in June).
(e) The terms of, and indeed the parties to,  the “Office Space Agreement” were not clear, as is actually stated in paragraph 5 of the Govindia proposals of 11th April.
(f)  The details of the shareholding incentive in paragraph 6 still had to be worked out and contained uncertainties.
(g)  He pointed to the “pre-conditions” in paragraph 8 of the email exchange which had not been fulfilled.

Mr Buttimore summarised this by saying that the parties were continuing to negotiate albeit that a framework had been agreed. 

155.	I do not accept Mr Buttimore’s submissions.  Mr Kinder’s email of 16th April is clear.  He wanted acceptance of his offer, in the sense of his response to Mr Govindia’s outline, before he would provide funds.  Mr Govindia agreed to that.  There was obviously an attempt to reach a binding agreement at that stage.  Unless their attempt to do so was completely undermined by fundamental uncertainties the court should seek to uphold what they thought was a bargain if conceptually and legally possible.  Courts seek to preserve, not undermine, bargains, and it is clear that the parties thought that they had a bargain.  

156.	Some of the lack of clarity that Mr Buttimore relied on does indeed exist.  The best example is the suggested deal over office space.  However, that does not mean that other terms should be rejected as not having been finalised when it is clear that Mr Kinder was requiring, and Mr Govindia was accepting, that money would only be provided if the “offer” was accepted.  The uncertainties are not so fundamental as to undermine every term which might otherwise appear to have been agreed.  Most of the proposals were sufficiently clear and certain to be capable of being the subject of a binding agreement, though some take a bit of construing.  It is completely commercially unrealistic to suppose that the parties were agreeing to go forward on something which was not contractually binding at that stage.  They were doing the best they could, in contractual terms.  

157.	The pre-condition point fares no better.  It is suggested as a pre-condition, and Mr Kinder added his own, but they were terms operating in his favour and he could waive them; and he did.  Similarly the McGrath participation point is not a good one.  This was not a point which operated for the benefit of Mr Govindia.  He did not mind whether Mr McGrath agreed or not.  In expressing his qualification Mr Kinder was saying he would provide at least the first payment without Mr McGrath’s agreement, and in any event Mr McGrath soon added his agreement, making any condition fulfilled.

158.	It is true that the parties continued to negotiate, and that further negotiations were envisaged. However, it is clear enough that that did not prevent agreement (in a binding form) of those matters which had been agreed.  They were obviously hoping to flesh out the bargain which had been reached; but that does not detract from the bargain.  In his email of 16th April 2009 Mr Kinder required agreement so far as they had got, and Mr Govindia agreed to that in his response. 

159.	All in all, therefore, I consider that when Rivertrade advanced the first £100,000, it was on the terms of the exchanged emails so far as those emails contained Mr Govindia’s proposals and Mr Kinder’s comments.  So far as Mr Govindia sought to add further qualifications they were not part of the contract, because Mr Kinder rejected them and Mr Govindia accepted that. 

160.	I shall deal with what was actually agreed, so far as relevant, and who the parties were, in due course, but it will be convenient first to consider whether there was a second agreement in April (April II).  Insofar as the email of 19th April varied what had been agreed previously then it probably did amount to a further agreement.  It was, however, the same so far as the principal and material clauses were concerned.  The email probably reflects an attempt to refine the deal a little more.  More formal documentation was anticipated, but that does not prevent an agreement arising at this stage.  It was essentially a development of April I.  

The material agreed terms in April
161.	Having decided there were agreements in April it is next necessary to consider what the relevant agreements were.  It is unnecessary to consider each of the terms.  I can concentrate on the lending and security provisions.  

162.	Rivertrade agreed to lend £200,000 in 5 tranches - one of £100,000 on 16th April, and 4 more on 28th April and 13th, 20th and 27th May.  The dates were not specified in April I, but they were in April II.  There was then a “contingent commitment” for a loan of £100,000 in early June, which was not a binding commitment but was an indication that it would be lend if there was sufficient progress in getting in money on the mandates.  

163.	The first key point requiring decision is what was agreed about security, and in particular how much of the Ranhill proceeds was to stand as security.  Paragraph 4 suggests that the whole proceeds were to stand as security, but Mr Buttimore submits that paragraph 7(b) limited the amount of the security to 35% of the proceeds, with the remaining 65% being payable to EMG.  Mr Bard submitted that the agreement had the effect that Rivertrade would hold the proceeds of the Ranhill mandate on trust, and that it was intended that it would have 35%, 35% would then go to staff costs and the rest would go to EMG to put back into its business.  As at today, there were no more staff costs in EMG (because the business is not being carried on), and there was no business into which the balance could now be applied.  Those limbs of the purpose of the trust had therefore failed and that left Rivertrade holding the proceeds on trust for itself.  

164.	I do not consider that that was the effect of the agreement. The agreement was entered into at a time when staff were not being paid properly, and procuring that they be paid their arrears was an objective of both Mr Kinder and Mr Govindia - they both wanted the group to retain its staff so that it could bring its work to fruition.  In that context it might have made sense for the surplus once staff were paid to go to the secured creditor, but that is not what was agreed.  Rivertrade was given a fixed percentage (limited, of course, until it was repaid, as the agreement expressly provided - the assignment was a security not an out and out assignment).  There is no express provision for the balance after the first 35% accrued to Rivertrade.  The only thing said about the balance is that “Balance to EMG”.  That is capable of catching balances whether they occurred under the salary provision, or after Rivertrade had had its 35%.  In my view it had that effect.  Once there were no outstanding staff salaries, the rest of the 35% would fall within that balance and be paid to EMG.  It would not go to Rivertrade.  If that is right it means that if there are no staff left to be paid then (assuming that there are no outstanding balances due to departed staff) that balance still passes to EMG.  Rivertrade would not pick it up.

165.	Nor does it make any difference that EMG is not conducting business (if it is true).  The balance is its money, whether it is conducting business or not.

166.	It therefore follows that under the April agreements Rivertrade is entitled to no more than 35% of the Ranhill proceeds.

The parties to the April agreements
167.	The April documents do not always make it clear who the counterparty is on each side.  On Mr Kinder’s side Rivertrade is sometimes identified, and sometimes Rivertrade, Mr Kinder and Mr McGrath are identified in the alternative.  However, in these proceedings there was no real issue as to who the real counterparty should be taken as being on that side - it is to be taken to be Rivertrade.

168.	There is more dispute as to the other side.  On the EMG side the counterparty is described as “EMG”.  That is not attributable to any casual corporate description adopted by Mr Kinder.  Where that is used it comes from Mr Govindia, who was not bothering to distinguish between the various companies in the group.  I consider that he did that because he did not need to distinguish them.  He was acting for all of them and doing what was necessary to save the group for all of them, including Forburg.  In my view he had authority to do so.  As I have found above, Mr Govindia was pulling the strings and taking the decisions.  He was allowed and authorised to do so by the other directors.  The only exception to the description “EMG” in the emails which form the contract is in clause 6c where the expression FOL/EMG is used.  Although Mr Govindia was not asked about it, “FOL” must be Forburg.  I do not think that this connotes a deliberate reference to Forburg because Forburg was interested in that clause and that clause alone.  I think it merely connotes that Mr Govindia happened to have Forburg specifically in mind at that moment.

169.	The borrower under this loan was ultimately treated as being Holdings.  There was no paper trail of the money advanced (or none was drawn to my attention) but Mr Govindia’s witness statement says that the moneys (or at least some of them) were paid to Holdings, which is what one would perhaps expect given the historical fact that that is where money had been paid by Mr Kinder in the past.  Thus Holdings was, or became the borrower.  However, in my view the use of the expression “EMG” meant that Mr Govindia was acting on behalf all other group companies whose participation might be necessary.  Thus, since Finance was entitled to the Ranhill proceeds, and the Ranhill proceeds were to be assigned, he should be taken to be acting for Finance in that respect.   His general powers and position in the group certainly allowed him to do so.  In any event, the email traffic shows that Mr Govindia was telling Mr Robins and Mr Hofer some of what was happening from time to time and they at the very least acquiesced in what he was doing.   In an email dated 9th April 2009 Mr Jahanshahi explained to Mr Hofer and Mr Robins (and Mr Govindia) that what was proposed was:

“An emergency funding of £200k (based on Ranhill receivables) is provided by John Kinder as a matter of urgency.”

Although it does not in terms refer to security it does indicate that something like that was proposed.  Neither of the other two directors demurred, and on 14th April Mr Hofer responded approvingly.  In his evidence he said he was satisfied that Mr Kinder  would and should have the Ranhill proceeds to repay his loan.  In other words, the other directors let Mr Govindia get on with it in the proposals he was putting forward.  He had their authority.

170.	Thus when Mr Govindia put forward the proposal that the “Ranhill claim be assigned to Rivertrade” he carried a sufficient authorisation from the company which had it in its power to perform that assignment, namely Finance.  He must be taken to have been so acting.  Nothing else makes sense.  It was so obvious to Mr Govindia that it did not occur to him to spell it out.  He was prepared to do whatever acts were needed, on behalf of whichever company was necessary, to do the deal that he did.  Thus was Finance a party to the April arrangements and thus it came under an obligation to assign the Ranhill receivables.

171.	By the same token Mr Govindia was also acting on behalf of Forburg.  Forburg had an interest in the transaction because it had an interest in saving the group which it owned.  As identified above, Mr Govindia could act for Forburg when he deemed it necessary to do so, and he took it upon himself to do so in this transaction.  He was apparently doing what was necessary for the group, and the group included Forburg.  Again, he was appropriately authorised.    Paragraph 6c actually refers to Forburg.  In propounding this transaction Mr Govindia was proposing to bind Forburg so far as necessary, and certainly to indicate its consent to the transaction.  This has a consequence for Forburg’s debentures, which is dealt with below.

Was there a further binding agreement in June, and what was its scope?
172.	As the above narrative shows, a number of documents were signed or initialled in June.  On their face they seem to amount to a number of agreements.  However, the defendants say that there was no binding agreement because:
(a)  The correspondence shows that matters remained in a state of negotiation which was never resolved.
(b)  No document other than the Facility letter was executed by Rivertrade.
(c)  Mr Hofer did not have authority to execute the Assignment letter.
(d)  Mr Hofer did not have authority to sign any document on behalf of Forburg because he had resigned as a director of Forburg (see above).  

The formation of the June agreement

173.	The first point (continuing negotiations) turns on the email sent by Mr Kinder to Mr Govindia on 2nd July.  I have acknowledged that at first blush it seems that this letter might be seeking to introduce qualifications to the overall drafting, and such qualifications might be capable of keeping matters in a state of negotiation.  However, closer scrutiny demonstrates that that is not the case.  If one looks at the email what Mr Kinder is doing is commenting on changes that have already been made to the draft documents, all of which were with Mr Kinder.  He approves them all.  The only thing he does is add the qualification that he wants a deed of priority.  By now Mr Kinder has paid the last £100,000 anticipated by the April agreements.  In essence everything is agreed, and Mr Kinder is suggesting some additional tweaks.  He is not saying that there is no deal until they are done.  

174.	I therefore do not consider that this email means that the documents were not intended to be binding.  By now Mr Kinder had signed the documents and sent them to Mr McGrath for signature (thought that was not known to Mr Govindia at the time).   At some point Mr Kinder must have sent back a copy of the signed version (probably not an original signed version) because Mr Govindia found one in the office when he got back from India.  It is not apparent from the documents when it was sent, but Mr Kinder’s evidence, which I accept, is that he would have sent a copy back, and he normally sent documents under cover of merely a compliments slip.  I accept that evidence too.  The copy signed version must have got  back, and while the failure to send back a top copy signed version does not demonstrate a focus on what was strictly required, I consider it likely that he would have wanted to complete matters by returning some form of signed copy.  Otherwise there would be no point in signing it, and getting Mr McGrath to sign it.  

175.	It is not apparent that he signed anything else, or sent anything else back, and this is Mr Buttimore’s second objection to the June agreement.  However, the email of 2nd July, and his sending back the signed facility letter, can and should be objectively viewed as an acceptance of the entire package.  He cannot be taken to have been agreeing only the facility letter, when that was clearly part of a package (and which cross-referred to other parts of the package).  

176.	I therefore find that subject to the other possible objections to the agreement or agreements, there was sufficient to give rise to a further agreement between Rivertrade and EMG group companies in June.  The other documents were agreed, and formed part of the package.  While Mr Kinder had wanted Mr Hofer’s signature on the Forburg letter, when he signed off on the facility letter and sent a copy back (having already paid the last tranche of the loan) he had seen an initialled copy (which had been good enough for Forburg until then), and that letter will have become part of the agreed package.
177.	The deed of postponement was never agreed.  However, it was not part of the original bargain, as such, so that is irrelevant to the conclusion I have just expressed.  Mr Kinder was seeking to add it to the package, but that fact did not have the effect that there was no agreed package. 

Mr Hofer’s authority
178.	Mr Hofer’s authority arises in relation to all three relevant companies - Holdings, (because he signed the assignment letter on behalf of that company), Forburg (because he signed the Forburg letter and because and the claimants rely on Forburg’s overall participation in the agreement) and perhaps Finance (insofar as it the claimant tries to tie Finance into the deal through the participation of Mr Hofer).  

179.	In support of his submissions that Mr Hofer had no authority  Mr Buttimore pointed to the following:

(i)  The Articles of Association of Holdings and Finance which (in the normal way) provided for the companies to be managed by a board and not just one director, and said that therefore a single director has no power to act.  

(ii)  Holdings did not own the Ranhill receivables, so Mr Hofer can have had no authority to sign a letter from Holdings assigning them.  

(iii)  There was no holding out of Mr Hofer as having any requisite authority.

(iv)  None of the documents can have been executed on the dates they bore, and it has not been proved that any were entered into before 30th July when (according to Mr Govindia) Mr Hofer (and Mr Robins) resigned as directors of Holdings and Finance.  Mr Hofer had resigned as director of Forburg on 21st May.

(v)  In January 2009 Mr Hofer had written to Mr Govindia expressing his desire to ensure that all legal documents were approved by the board of Finance.

180.	All these points fail:

(i)  Mr Buttimore is right about what the Articles say, but this does not make his point.  The question is whether the directors had authorised Mr Hofer to sign what he signed, or whether the company had held him out as having that authority.  Mr Hofer was not cross-examined much about this, which may reflect the fact that there is nothing in the point.   Mr Govindia was calling the shots.  He was one of the three directors of Finance and Holdings.  He wanted the documents signed.  In his witness statement Mr Hofer says that he must have signed the documents because Mr Govindia asked him to.  I am sure that that is right.  That is two out of the three directors.  Mr Robins was obviously content to let Mr Govindia get on with it as usual.  So on that basis alone there was authority, or even holding out.  In fact there was a board meeting, or a progress meeting,  of one or both of Holdings and Finance (the Agenda, which is all we have, does not say which), at which Mr Kinder’s support (which the company needed) was to be discussed, along with “Loan docs” and “Ranhill”.  There are no minutes, but if there was any form of meeting I am sure that it will have approved the documents either prospectively or, more likely, retrospectively.  Mr Hofer was fully authorised to sign what he signed.

(ii)  There is nothing in the second point either.  The question is whether Mr Hofer was authorised to sign the documents, and enter into the transactions, not whether Holdings had what it was purporting to assign.   There is nothing necessarily inconsistent in a director having authority to enter into a transaction on the one hand and the company having no power to convey the subject matter on the other.  

(iii) I have dealt with this.  Holding out was probably irrelevant, but if it is necessary then on the facts he plainly was held out by Mr Govindia (who had authority to do such things), not least when Mr Govindia told Mr Kinder that he had sent him (Mr Kinder) signed versions of the documents (which turned out to be signed by Mr Hofer).

(iv)  I have already found that Mr Hofer and Mr Robins did not effectively resign as directors of Forburg in May; nor did they resign from Holdings and Finance on 30th July.  So the date of signing is immaterial.  However, on the evidence the documents were plainly signed or initialled by Mr Hofer before 30th July in any event.  

(v)  This document (which I shall not take up space setting out) is merely background to a submission that one director does not, without more, have authority to bind the company.  It has no relevance to the point under discussion.  In fact the document appears to be pointed towards a point other than directors’ authority.  It seems to be pointing out the desirability of making relevant matters the subject of whole board oversight, in the interests of the company (though that was rather a hollow gesture in a group which was so much under the influence of Mr Govindia).  

181.	Accordingly, there is no question-mark over the authority of Mr Hofer to sign or initial what he signed or initialled by way of the June documentation.  In any event it is quite plain that the documentation had the approval of Mr Govindia.

The effect of the June documentation according to its tenor and its problems for the claimants
182.	The June documentation is not a particularly well-drafted set of interlinking agreements, but its main ingredients are clear.  It must  be remembered that the June documentation was the end of the process of formally documenting the April agreements, though it supplemented them in dealing with such things as the repayment date under the May 2008 loan and was also amended so as to strengthen the position of Mr Kinder in the light of worsening, or non-improving, position of the EMG group.  

183.	 The June documentation provides, so far as material:

(i)  Mr Kinder would lend £200,000, with another £100,000 at his discretion - see the Facility Letter.  By the date of the documents the £200,000 had already been lent, and by the time Mr Kinder signed it the remaining £100,000 had also been lent.
(ii)  As part of the security Holdings assigned the Ranhill receivables “held in the name of EMG Finance Ltd in accordance with the terms of the Assignment Agreement between the parties of the same date”.  (Facility Letter para 5.2).
(iii)  The security would be released on payment of the sums due under that agreement and any other Rivertrade/Holdings agreement.  The two 2008 loans were expressly identified as being two such agreements. 
(iv)  The Assignment Letter recited that “we” (prima facie Holdings) are starting legal proceedings against Ranhill, and in consideration of the agreement “dated 19th day of April 2009” agreed to pay any and all moneys recovered in those proceedings in repayment of the loans set out in the agreement.  This stated date must be a mistake for 19th June.  The cross-referenced paragraphs make that plain - they work as cross-references to the Facility Letter.
(v)      The May 2008 Forburg loan was extended to October 2009 and novated to Holdings. 35% of the Ranhill proceeds was to be paid to Rivertrade (Forburg letter para 4(d)).  

184.	Thus unlike the April agreements, these agreements provided for 100%, not merely 35%, of the Ranhill proceeds to be made available as security for the 2009 loan of £300,000.   Mr Buttimore argued that it remained the intention that only 35% should be available, and relied on an email of 28th May in which Mr Kinder is said to confirm all the principles of the April agreement, the terms of the Forburg letter referring to the Ranhill proceeds, and the terms of the Rivertrade covering letter which is said to refer to only 35% of Ranhill being made available to Rivertrade.

185.	The email does not help.  It does not refer to the point, and in any event as part of prior negotiations it is not admissible in construing the final form of agreements.  The Forburg letter, on its true construction deals only with security for the May 2008 loan , not with security for the April/June 2009 loan.  

186.	That leaves the terms of the covering letter.  It is true that it refers to only 35% being made available to Rivertrade (see the section headed “Repayment Schedule”), and that that schedule seems to relate to the whole of indebtedness, including the April/June loan.  However, it does not, in my view, override the clear terms of the Facility Letter and of the Assignment Letter.  Those plainly provide that the security is the whole of the Ranhill proceeds.  There is no scope for arguing otherwise.  The covering letter purports to  be dealing with something else - repayment.  The paragraph immediately preceding the heading “Repayment schedule” reflects accurately the terms of the security for the 2009 loan (the whole of the Ranhill proceeds) and describes the Repayment Schedule as some sort of alternative.   This letter does not introduce anything into the clear terms of the other documents other than a little oddity.  It is certainly not capable of over-riding their clear terms.  It is apparent that the scope of the security had been renegotiated since April, and Rivertrade was now to have the benefit of 100% of the Ranhill proceeds as a matter of security.

187.	This situation poses the following problems for Rivertrade in its case that the Ranhill proceeds stand as security for the 2009 loan:

(i)  Finance was the counterparty to the Ranhill transaction, and so would prima facie be the appropriate assignor.  However, the assignment was by Holdings, and Finance was not a party to the transaction on the face of any of the documents.

(ii)  In 2008 Finance had assigned its receivables to Holdings, and Holdings had assigned them on to Forburg.  Prima facie, therefore, Finance and Holdings had nothing to assign.

(iii)  Both Finance and Holdings had given debentures to Forburg, under which it is said that Forburg has priority over the Ranhill proceeds.  

188.	Mr Bard sought to meet these points with a mixture of claims, based on identifying true parties, implied terms, rectification, estoppel and acquiescence.  Estoppel and acquiescence apply to all three matters.  The other ripostes apply only to (i) and (ii) and it will be convenient to take those first.

The prior assignments and ownership of the Ranhill proceeds
189.	I shall put on one side for the moment the problems posed by the May 2008 assignments to Forburg and deal first with the apparent fact that Finance was the contracting party entitled to the Ranhill proceeds but Holdings entered into the letter of assignment and entered into the Facility Letter which provided for security for the loan.  That poses an immediate and obvious problem for Rivertrade’s claim as assignee of the Ranhill proceeds - it was apparently an assignment by the wrong person (someone who did not have title to the assigned asset).

190.	Mr Bard’s attempt to get round this was first to invite me to treat the loan, and presumably the assignment letter, as having been entered into by Holdings not only on its own behalf but also on behalf of Finance.  He relied on the fact that Holdings was the parent company and controller of Finance, the clear reference to the security for the loan, the fact that the directors of the two companies were the same (which they were) and that all parties intended there should be an assignment of the Ranhill proceeds.  All these are said to justify a proper and commercial construction of the agreements in which Holdings was contracting on behalf of its subsidiary, ensuring that the Ranhill proceeds were effectively assigned.  

191.	In my view this argument fails.  The terms of the signed documents are clear, and the drafting is deliberate.  It is simply not possible, as a matter construction, to construe them as agreements which Holdings was making on behalf of its subsidiary.  The parties knew, or ought to have known, that the Ranhill agreement was in the name of Finance, and indeed clause 5.2 of the Facility Letter refers to it as “held in the name of EMG Finance Ltd”.  But the fact of that knowledge and that reference does not mean that Holdings should be taken to be contracting on Finance’s behalf as well. Other language would have been appropriate for that purpose, and the language of these documents is clear.  It may be (and almost certainly was) the case that Holdings (and Forburg and/or Mr Govindia) could have procured that Finance expressly joined in this documentation, but they did not do so and it is not possible to construe the participation of Holdings as being that of agent for Finance.  

192.	Mr Bard’s next point is to say that Holdings was in fact beneficially entitled to the Ranhill proceeds, and was entitled to assign the beneficial interest, which is what it should be taken as doing.  He relies on the expression “held in the name of EMG Finance Ltd” as demonstrating the beneficial interest.  In my view this reads too much into those words.  There is no other indication at all that Finance holds the proceeds (or the benefit of the contract with Ranhill) on trust for Holdings, and in a group structure such as this there is no reason why it should.  The words are incapable of giving rise to a trust, and insufficient evidence that there already was one.

193.	Next, Mr Bard takes a point which is allied to his construction point.   He says that the assignment should be rectified to make Finance a party to the assignment of the Ranhill proceeds.  He says that that must have been the “continuing common intention” of the parties, citing the officious bystander test in support.

194.	The requirements for rectification can be taken from Chartbrook v Persimmon Homes Ltd [2009] 3 WLR 267 at para 48:

“The party seeking rectification must show that:

(1)  The parties had a continuing common intention, whether or not amounting to an agreement, in respect of a particular matter in the instrument to be rectified;
(2)  there was an outward expression of accord;
(3)  the intention continued at the time of the execution of the instrument sought to be rectified;
(4) by mistake, the instrument did not reflect that common intention.”

195.	The relevant intention in the present case would have to be that Finance should be a party to the assignment.  Unfortunately for Rivertrade the first problem is there is no evidence of such a common intention.  It did not really occur to the parties.  The most that can be said is that if they had thought about it, and had had the problems with the documentation pointed out to them, they would have realised that the documentation did not work without Finance actually assigning (though if they had had all the details they might actually have realised that Forburg would have to assign instead or as well).  They would have realised that there was a mistake, but would not necessarily have had a shared agreement as to how to deal with it.  Mr Bard’s submissions involved an officious bystander (who actually has no part to play in rectification, as opposed to construction) asking whether Finance should not be a party, and being responded to to the effect that there was a continuing common intention to that effect.  That sort of notional exchange does not encapsulate the actual common intention that the parties need to have.

196.	There is also the difficulty that rectification is available to and against the parties to a transaction.  Parties can have the transaction rectified to reflect their intention as parties.   Mr Bard did not draw to my attention any rectification case in which rectification was used to introduce someone who, absent rectification, would not be a party at all.  That is not surprising - a non-party is, by definition, not a participant to the transaction which is sought to be rectified.  This is not a case of a real party being wrongly described.  This is a case of bringing in a new party.  That is not a proper application of the doctrine of rectification.  

197.	That is sufficient to deal with the rectification claim.  There are other problems (such as the absence of a relevant mistake) but I do not need to go into them.

198.	Thus far Mr Bard’s arguments sought to bind Finance into the assignment of the Ranhill proceeds.  It should be observed that in the face of the assignments in 2008, success on any of those points would not have fixed the problem, because those assignments passed the benefit of the proceeds up to Forburg, at least in equity, and Rivertrade clearly had notice of those assignments.   Mr Bard’s next submission (taking the submissions in a logical fashion, not necessarily in the order in which they were advanced) proceeded from the starting point of the receivables being vested in Forburg.

199.	That submission was to the following  effect.  Mr Bard said that those assignments were carried out to give Rivertrade “security” for the May 2008 loan.  In the June 2009 transaction the May 2008 loan was novated to Holdings.  Accordingly Forburg was a party to the June 2009 arrangements.  It was an implied term of those arrangements that the benefit of the “security” should accompany the obligation to repay the loan, and as Holdings was taking on the obligation, its previous assignment of receivables should “revert back” to Holdings (to use Mr Bard’s expression).  Logically this must require the implication of a term that Holdings would reacquire what it assigned in 2008.  

200.	Mr Govindia disputed the allegation that the assignments were to provide “security” for the May 2008 loan.  He produced (very late) resolutions pre-dating the loan which were said to indicate that the assignments were going to happen anyway.  Mr Bard says that these resolutions were ex post facto creations.  I do not need to decide this point because Mr Bard’s point fails anyway.  The assignments did not provide “security” in the technical sense.  They provided comfort to Mr Kinder that there was a source of funds for the repayment of Forburg’s obligations, falling short of actual security.  The moneys from the various transactions were not appropriated to the discharge of the Rivertrade loan, and were therefore not linked in that way.  They were merely linked commercially in the eyes of Mr Kinder (at least).  It was not obviously necessary for them to accompany the burden of the loan in its trip down to Holdings, though Mr Kinder might have gained comfort if they had, and it is not obvious that the parties would have agreed that they should had the point been raised by an officious bystander.  They might perfectly well have remained where they were, even though logic would have suggested that the logic that put them in Forburg  in the first place would have tended to indicate that they ought to move back to Holdings if Holdings was assuming the burden of the loan.  While this would have been a good idea, it was not necessary, so that particular test of implication of terms is not fulfilled.  Nor are any of the other tests.  What happened was that the parties (and in particular Mr Kinder) did not think through the various aspects of the June 2009 bargain and produce a logical scheme of security and holding of property.  Implication is intended to assist in reflecting the true bargain between the parties; it is not intended to improve it.

201.	In all that has gone before in this section I have borne in mind the fact that the June documentation was intended to formalise and develop the April agreements.  Those agreements, as I have found, were effective to give rise to an agreement, binding on Finance, to create an agreement to create security over 35% of the proceeds of the Ranhill receivables in favour of Rivertrade to secure the 2009 April/June loan.  That is a significant background against which to consider the questions which I have just determined against Rivertrade.  However, it does not improve the case on who were parties to the June agreements, where the beneficial ownership of the Ranhill receivables lay, whether Finance was actually a party to the June arrangements or whether they should be rectified.  What happened was a preceding agreement, and an exercise to produce formal documents which did not manage to achieve a complete reproduction of the earlier agreement.  That states the problem; it does not provide an answer.  The background might get closest to assisting the rectification claim, but on analysis it does not overcome the problem of Finance not being a party in June, and it does not supply the missing common intention.  In April the parties had not articulated a clear intention that Finance should be a party.  It was, on that occasion, a party to more informal arrangements because an analysis of what was going on requires that conclusion.  The June parties apparently intended the parties to be those who actually were parties.  The mistake (and as will appear when I come to consider estoppel I consider that there was one, of sorts) lay not in a failure to embody an articulated common intention; it lay in agreeing an erroneous form of documentation.

202.	Accordingly, thus far in the argument the June 2009 documents did not create the effective security over the Ranhill proceeds that Rivertrade claims.  It becomes necessary to turn to estoppel, acquiescence and the like.

Estoppel and allied doctrines
203.	This riposte is not only an alternative answer to the difficulties which have so far been addressed (Finance not a party, Ranhill proceeds vested in Forburg in 2008).  It is also said to be an answer to Forburg’s claims that it is entitled to prior security over the Ranhill receivables by virtue of debentures given to it by Finance in 2001 and 2006, and (so far as relevant) by Holdings in 2006.  There were separate attacks on these debentures mounted by Rivertrade, and I deal with those attacks below, but for present purposes I shall assume that those debentures are good and valid on their face and all secure moneys which would give them priority over such interest as Rivertrade would otherwise have in the Ranhill receivables.

204.	Rivertrade’s submission on this was, in outline, that if it has failed thus far in the reasoning, and if the debentures bit on the Ranhill receivables, then Forburg and Finance were estopped from asserting their respective interests against Rivertrade, or were estopped from denying that Holdings was the owner of the Ranhill receivables (and thereby empowered to assign them).  Mr Bard relied on estoppel by convention, estoppel by representation and proprietary estoppel.  

(i)  So far as estoppel by convention was concerned, he submitted that it was the common intention (as he put it - “assumption” would be the more conventional word in this context) that there should be an assignment free from encumbrances, and that Forburg could not now be heard to say anything different.

(ii)  So far as the other representations were concerned, Mr Bard relied on representations by conduct to the effect that the assignment by Rivertrade was to be free from encumbrances, and that any party who wished to assert any prior right or encumbrance was obliged to speak up or be precluded from asserting that interest.  It was intended that Rivertrade should act on that representation and it did so - it would not have lent absent that representation.  There was detriment in parting with the loan moneys.  

205.	Mr Buttimore, with commendable realism, did not take issue with the principles, and went further in making some submissions which were capable of making it unnecessary to engage in a significant exposition of the legal principles applicable to estoppel in these circumstances.  In his written final submissions (carefully framed) he wrote:

“121.  If the court finds:

a) that by the terms of the 18 June 2009 agreement an assignment of the Ranhill proceeds was effected;
b)  that PH [Mr Hofer] was acting as agent for Forburg in signing/initialling the Forburg letter and Assignment letter;
c) SG [Mr Govindia] was acting as agent  for Forburg throughout;
d) such that Forburg is then taken to have been aware of and permitted C to act in the belief that Forburg would not assert its prior rights … then it follows that Forburg acquiesced in the grant of security over the Ranhill proceeds such that it will have lost priority at least to the extent of 35%.”

206.	He accepted that the last proposition could be stated in a number of ways, as set out in Mr Bard’s skeleton.

207.	Mr Buttimore’s target was the debentures.  His submissions were dealing with the situation in which the terms of the June documents were effective according to their tenor (his paragraph (a)) but frustrated by the charges in the debentures.  Mr Bard’s case goes wider - estoppel is said to be an answer to Forburg’s claim as assignee as well as chargee.  In my view the same principles apply to both and it is right to treat them together.

208.	Mr Buttimore’s formulation probably has its roots more in proprietary estoppel, or acquiescence, than estoppel by convention, but in my view that last doctrine is likely to be the most applicable.  The most convenient formulation of this doctrine can be found in the speech of Lord Steyn in Republic of India v India Steamship Co Ltd  [1998] AC 878 at 913-4, cited with approval (and obvious gratitude) by Carnwath LJ in Ing Bank v Ros Roca [2012] 1 WLR 472:

“It is settled that an estoppel by convention may arise where parties to a transaction act on an assumed state of fact or law, the assumption being either shared by them both or being made by one and acquiesced in by the other.  The effect of an estoppel by convention is to preclude a party from denying the assumed facts or law if it would be unjust to allow him to go back on the assumption  ...  It is not enough that each of the two parties acts on an assumption not communicated to the other.  But it was rightly accepted by counsel for both parties that a concluded agreement is not a requirement for an estoppel by convention."

209.	In my view Mr Buttimore’s predicated facts all existed, though in a more wide-ranging form than in his formulation, and they give rise to an estoppel by convention.  The doctrine applies in the following manner.

(i)  The June transaction was designed to embody the principles of the April transaction.  That earlier transaction clearly embodied, and agreed, the concept of effective security over the Ranhill proceeds (albeit limited to 35%).
(ii)  The earlier transaction was one in which all the relevant companies in the group joined by agreement, or at the very least by acquiescence and implicit signification of approval - see above.  The idea that they would be seeking finance, proffering security and yet holding back that security because of a debenture (or because of historic assignments up the group) is contrary to common sense and commercial propriety.  I do not think that Mr Govindia (who was the principal person involved) or Mr Hofer (who had some lesser involvement) harboured those reservations.  They assumed that the security would be effective, probably not thinking at that stage about mechanics.  Mr Govindia represented Forburg for these purposes - see above.
(iii)  There was therefore at that stage a common assumption, plainly communicated between the parties (because it was of the essence of the transaction) that there was, and would be, effective security over the Ranhill proceeds.
(iv)  Nothing changed in that assumption between then and the June transaction, save that the amount standing as security increased to 100%.  It is true that by then the Finance debenture was referred to between the parties, but in a sense that reinforces the assumption.  The parties assumed it would not be an obstacle.  When proposals were made for a deed of postponement in July they were made because of the assumption, not because the assumption did not exist.
(v)  The assumption was shared by all the directors of the relevant EMG companies, who had the objective of saving the group through the loan that Mr Kinder was offering.  It was in the interests of all of Forburg, Holdings and Finance that it be given, and the directors had an eye to all three businesses when conducting the deal.  The assumption should be attributed to them wearing all hats, and to Mr Govindia wearing his hat as representative of the entire group.
(vi)  Mr Hofer was indeed acting as agent in initialling the Forburg letter.  The existence of that letter demonstrates that Forburg was party to the overall arrangement.  He was still a director when he initialled it.
(vii)  The reference to Finance in the Facility Letter demonstrates that the individuals who were directors of that company (and principally, for these purposes, Mr Hofer and Mr Govindia) had that company in mind and should be taken as entertaining an assumption about the validity of the security in that capacity as well as in their capacity as the directors of the other companies.
(viii)  I doubt if Mr Govindia was being deliberately silent about what he knew to be blots on the title of Rivertrade to security over the Ranhill proceeds.  He shared the assumption of Rivertrade as to what the June documents had achieved in this respect.  But if he was being deliberately silent, he acquiesced in, and indeed probably encouraged, the assumption of Rivertrade in this respect.
(ix)  Rivertrade acted on that assumption by continuing to lend money, and by financing the Ranhill proceedings both before and after the June transaction.  It is inconceivable that Mr Kinder would have done that if had not believed Rivertrade had got security over that asset.  There would be no reason for Rivertrade to have funded the litigation (and indeed given instructions in relation to it) absent such an interest.   All the EMG companies (including Forburg) must have known and appreciated that.

210.	In those circumstances it would be plainly unjust to allow any of EMG companies to resile from the assumption which underpinned the June transaction.  As well as being a breach of faith, it would completely undermine a fundamental aspect of the transaction.

211.	The effect of that finding is that Finance is debarred from asserting its title (if any) against Holdings, and therefore from asserting that Holding was not an appropriate assignor; and that Forburg is estopped from asserting that it has a title which is better than Holdings’ or that it has a right to the Ranhill proceeds higher than Rivertrade’s.  To allow those companies to behave otherwise would falsify the assumption on which all parties, including those companies, were operating in the period between April and the end of June 2009 in a manner which would be quite inequitable.  It would be unjust to allow them to go back on the assumption on which they, Holdings and Rivertrade were operating.

The force and effect of the debentures
212.	So far as the debentures are concerned, Rivertrade does not dispute the existence of the 2001 Finance debenture but says there is no evidence that any moneys are still owing under it, and it maintains that the 2006 debenture relied on by Forburg did not in fact exist in 2009.  A debenture given by Holdings to Forburg was also relied on, but may be of less significance.  The conclusion that I have just reached to the effect that the debentures cannot be asserted against Rivertrade even if they take effect according to their tenor makes it unnecessary for me to decide this point, but since there was some extensive argument and a significant amount of evidence on it I shall consider it briefly.  

The 2001 debenture - Finance to Forburg
213.	This debenture is dated 22nd August 2001 and is made between Finance (then known as E.Merging Markets Group Ltd) and Forburg.  Under it Finance covenants as Guarantor to pay the sums due under something called “the Deferred Consideration Agreement” made between the two of them.  It contains, inter alia, a fixed charge on book debts and other debts and a floating charge on the undertaking.  Clause 3.2 permits the conversion of the floating charge to a fixed charge of such assets as are specified in a notice served for that purpose.  There is a bar on permitting other charges.  It is made subject to English law and was ostensibly executed for Finance by Mr Hofer and Mr Govindia.  
214.	The Deferred Consideration Agreement is one of the same date made  between the same parties in connection with a Sale of Assets Agreement between various entities, under which £275,000 was payable.  It recites a sale agreement involving external companies, Finance and Forburg and recites:

“(B)  The parties have agreed to vary the terms by which the Consideration due under the Sale of Assets Agreement is paid by the Guarantor to the Creditor.”

215.	Clause 2.1 provides that Finance would pay that consideration to Forburg on 31st December 2002 together with interest at 2% above LIBOR.  It is signed by Mr Hofer and Mr Govindia.  
216.	There are minutes of a board meeting of Finance on 22nd August which authorise both transactions.
217.	Mr Govindia does not deal with this debenture at all in his witness statements.  Indeed, this debenture was not pleaded in the Amended Defence as being something which would take priority over any rights that Rivertrade had (contrast the 2006 debenture, which was pleaded).    It was apparently produced only some 4 weeks before the trial.  In his cross-examination Mr Govindia said that this debenture was created as part of the financing structure when the group acquired assets in 2001.  He claimed that the document  had been given to his solicitors some time during the litigation, but could not explain why it had not been disclosed (or pleaded) before it was produced 4 weeks before the trial.  He also said that the sums secured under it had not been repaid.
218.	There is a dearth of evidence about the accounting under this debenture.  No explanation was proffered as to what arrangements there were, or were not, in relation to the sum due, and why it was not repaid on the contractual date (if indeed it was not).  No explanation was given as to what happened to the interest.  If that was not being paid then it will have amounted to a tidy sum which will have swollen the debt very significantly.   Consolidated accounts for Holdings were produced for the year ended 30th June 2008.  They show a group debt to Forburg of £358,105, reduced from a sum of £4,223,740 in the previous year, reflecting a repayment of debt of over £3.8m.  Mr Bard submitted that it was likely that the sum due under that debenture was paid at, or before, that time.  It is likely that the earlier debt would be repaid first, and although there was no evidence of other debts it should be inferred that this was an early debt.  
219.	Mr Govindia disputed the accuracy of these accounts.  He said they were never agreed.  There were difficulties with the accountant.  He maintained that the sum secured by the debenture had never been repaid.
220.	Mr Govindia’s evidence about this sits ill with the fact that he provided these accounts to Mr Kinder in about October 2008.  They must have been provided in connection with the requests for finance.  Mr Kinder raised some questions about them, and answers were prepared  but it is not clear they were sent out; they may have been stalled when Mr Govindia said he wanted to consider the answers (in an email of 30th November 2008).  However, what is apparent is that Mr Govindia did not say that the accounts were not agreed by him.  If he had not been satisfied with them they ought not to have been provided.  I find that he was content to have them provided to Mr Kinder in order to convince him that he should lend to the group.  I do not accept his evidence that he did not agree with the accounts as a whole.  His putting them forward is evidence that they were accurate.
221.	Mr Govindia also suggested that the reduction of the debt might well be associated with the issue of some redeemable preference shares, and ordinary shares, in 2008, which is reflected in the accounts but which he did not necessarily accept happened.  That was speculation on his part, and even if he were right and the share issues took place then he was actually describing a repayment mechanism.  It does not go to the question of whether there was a repayment at all.
222.	Mr Buttimore submitted that whether or not there were sums due under this debenture was an accounting matter.  What needed to be decided was whether this debenture took priority over any interest that Rivertrade had.  Therefore it was not right to seek to make findings about the amount due.  
223.	I do not accept that submission.  This debenture was put forward, belatedly, as another reason why Forburg took priority over any Rivertrade interest.  It was presumably propounded on the footing that sums were due under it.  Otherwise there is no point in putting it forward.  The burden of demonstrating that sums were due fell on the defendants.  They have produced no evidence whatsoever that sums are still due, save such inferences as might be drawn from the fact that there once was apparently a loan (not challenged by Rivertrade).  If there were sums still due then there ought to be some accountancy explanation of what has happened over the years (including what happened about interest), and why it is that a sum apparently due for repayment in 2002 was still outstanding in 2013.  It is, of course, possible that it was still outstanding, especially in a group structure, but something more than the mere assertion of Mr Govindia (who would not have been aware at all times of details of the accounting structure) is required for that purpose.  I consider that this debenture was found at the last minute and put forward as part of an attempt to put every possible obstacle in the way of Rivertrade’s claim without any belief that there were sums secured under it.  If it were a genuine part of the group’s debt structure then there would be some further accountancy explanation of what has happened since 2002.  None has been proffered.  If it secured a genuine outstanding debt it would have been referred to in 2008.  It was not.  It is, in my view, very significant that the debenture did not come to light until 4 weeks before this trial.  I consider that that is because its force was long since regarded as spent and it never occurred to anyone that it had any relevance.  That is obviously significant.  I reject Mr Buttimore’s submission that I should not make a determination about the sums secured under it.  I would (or might) agree if there were a dispute about precise amounts in circumstances in which it was clear enough that something was owing, then I might order some sort of inquiry, but where it has not been satisfactorily demonstrated that anything is owing it is not good enough just to produce a debenture as some sort of speculative bar to entitlement.

224.	I am prepared to find that the 2001 debenture was a validly granted document.  Indeed Mr Bard did not contend otherwise.  I am also prepared to find that it was not formally discharged by an act of discharge, but I also find that by 2009 nothing was secured under it.  In the circumstances in did not, in any practical sense, take priority over such interests as Rivertrade acquired that might otherwise have been affected by the debenture.

The 2006 debentures
225.	The two debentures given, or purportedly given, to Forburg by Finance and Holdings in 2006 are in identical form.  They are all moneys charges, and contain fixed and floating charges.  The fixed charges catch “book debts and receivables”.  There is a negative pledge prohibiting the grant of other security over the charged assets and a provision allowing the conversion of the floating charge into a fixed charge on serving a notice.  These are all familiar terms and I do not need to set them out in this judgment.  Each of them purports to be executed by Mr Govindia and Mr Hofer for Finance and for Holdings, and by Mr Hofer and Mr Robins for Forburg.  The execution page of each has a heading “Debenture Execution Page”, and the pages have the right company names (typed) against each signature.  The pages of the debenture are consecutively numbered, but the execution page does not bear a number.  Each is dated in type (not manuscript) 24th January 2006.  

226.	The validity of the Holdings debenture arises out of information and evidence given by Mr Hofer.  He gave evidence that he had in his possession the originals of 4 “Debenture Execution Pages”, and the documents were produced at the trial.  They are all in the same format - there is title at the top of the page - “Debenture Execution Page” - in block capitals and underlined.  On the left there are entries describing “Execution by the Chargor” (in each case specified as Holdings), stating execution as a deed by the company, and a similar block describing “Execution by the Lender” (in each case specified as Forburg).  To the right there are signature lines for a Director and Secretary/Director.  

227.	All of the pages bear original signatures.  In each case Mr Govindia and Mr Hofer have signed for the chargor company (Holdings) and Mr Hofer and Mr Robins have signed for the lender company (Forburg).  None of them have page numbers at the bottom.

228.	None of these documents is attached to any debenture.  They all have holes punched in them as if for a lever arch file or a ring binder, but none has any evidence of stapling or any other form of fixing.  Three of the four have pencil manuscript in the top right hand corner which reads “per registered mail  10/7/09 Shailesh”  The handwriting is that of Mr Hofer’s secretary, Miss Zöbelin.   
229.	This is odd enough, but two of them have odder links.  The defendants have a copy of the Holdings 2006 debenture with a copy (not an original) of a signature page attached to it.  The copy is apparently a copy of one of the three pages with the manuscript addition.  So a copy signature page has been attached and the original is, at least now, elsewhere.

230.	The second is an even greater oddity.  The copy of the  Finance 2006 debenture that the defendants have again has a copy of the execution page, not one bearing original signatures.  Forensic evidence  reveals that the copy signatures on this page are precise copies of the signatures on one of the four Holdings execution pages (the one without the manuscript addition).  Thus someone has taken that Holdings page, copied the signatures on the right and added words of execution appropriate to Finance on the left, and produced an apparent copy of an execution page pertaining to a Finance debenture.  The defendants do not challenge this forensic evidence, and do not challenge that that this is what has in fact happened.

231.	All this has (not surprisingly) led Rivertrade to allege that the 2006 Holdings and Finance debentures were not duly executed, or (in the light of evidence from Mr Hofer) at least not until after 2nd July 2009.  

232.	That is the starting point for the attack on the validity of each debenture, but there is further evidence which is relied by each side in relation to each of them.  I shall first set that evidence in relation to each in turn before reaching conclusions about them.  Although in theory the case for the validity of each debenture could be considered separately from the other, the background to both is sufficiently odd and sufficiently shared to make it right that they be viewed together because the credibility of the cases for and against due execution of each is capable of being affected by the other.

The 2006 Holdings debenture
233.	Mr Hofer’s evidence was that none of the four original signature pages held by him were signed until July 2009.  He remembered an occasion when Mr Govindia was about to go to India, and prior to departure he wished to carry out some “housekeeping”.  His witness statement suggested that the documents were executed in that context but did not suggest how or why.  He was clear in his statement that he did not execute the Holdings debenture in 2006.  In his supplemental evidence in chief he said that to the best of his knowledge the execution pages were given to him in London by Mr Govindia or Mr Upendra Kalan of EMG shortly before he (Mr Hofer) was leaving the London office with a request that he sign them and return them.  As he did not want to miss his plane he took them back to Switzerland, intending to sign and return them.  

234.	Ms Zöbelin provided written evidence by way of a hearsay notice.  She explained that she was regularly asked to send documents internationally to different locations by registered mail.  Her usual procedure was usually to send them out the same day, but if she had a heavy workload they might be posted the next working day.  She referred to a copy post office receipt dated 17th July 2009, recording the sending of a document to Mr Govindia, but she could not remember what it was.   She was only working two days a week at the time and suggests that the difference in time between that date and what she described as an earlier date could be because of the odd days she was working.  She does not actually say she was comparing the date on the manuscript addition to three of the originals (such that that date would be the earlier date she referred to), and does not even identify the handwriting as hers.  Mr Hofer’s witness statement (actually his second - his first does not deal with this point at all) says that he has no doubt that the manuscript would have recorded that Ms Zöbelin would have sent them on that day, so he would have signed them shortly beforehand.  It does not explain how Ms Zöbelin can have sent them whilst retaining them.  His oral evidence suggested that she sent copies by mistake, rather than sending originals back.  He had wanted to keep back copies.  
235.	Putting all this together, the claimant says that Mr Hofer took the pages back to Switzerland, added his signature and told Ms Zöbelin to send them back to England.  She made a mistake and retained the originals and sent back copies.  She endorsed three of the originals with manuscript additions which denoted the sending of copies.  This demonstrates a purported execution of the pages in July 2009 (not 2006) and a purported execution of paged divorced from any document.

236.	The defendants do not accept this version of events, and would point out the implausibility of the explanation of how Mr Hofer came to have them in the first place.  It would have been the work of moments for him to have added his signature to the documents and would hardly have caused him to miss his plane.  They also point to certain prior dated documents which refer to the debenture as having been executed long before July 2009. 

(i)   A record of a resolution of the board of Holdings (and Finance) dated 24th January 2006 and apparently signed by Mr Hofer and Mr Govindia authorised the execution of debentures in tabled form (in the case of Finance to reinforce the 2001 debenture), and authorised Mr Hofer and Mr Govindia to execute the agreements and deliver them to Forburg for safe keeping.  
(ii)  Minutes of an undated Forburg directors’ meeting with a coversheet dated 24th January 2006 (the minute itself does not record the date of the meeting).  The minute records the tabling of debentures for approval by the Board (both debenture agreements recorded as being already executed and delivered to Forburg for its security and safe keeping), the debentures being over all the assets of Holdings and Finance.  It was resolved that Forburg should execute the agreements.
(iii)  A memo dated 11th January 2007 from Mr Leisinger (an adviser of Forburg) and Mr Kalan (the financial controller at EMG), headed “Re: Forburg Ltd”  asks Mr Kalan to find enclosed the following listed documents, which are then listed.  They include the 2001 Finance debenture (”original”) and Finance and Holdings debentures dated 24th January 2006 (”copy”).
(iv)   Minutes of Finance which authorise the assignment of receivables to Forburg to cover repayment of loans made to Forburg.  The minute records a requirement on the part of Forburg to strengthen “its existing security/Debenture over the EMG Group of companies”.
(v)  Notices from Forburg crystallising floating charges under the 2006 debentures (see above).  
(vi)  The  letter from Holdings to Rivertrade dated 24th December 2008 purporting to enclose 5 documents, including debentures from Holdings and Finance to Forburg dated 24th January 2006, and inviting Mr Kinder to sign “the appropriate documents” and return them to the Swiss office.  I have already made some observations about  this letter above.    The letter itself bears Mr Hofer’s signature, though he did not acknowledge that it was actually his signature.  Mr Kinder denied seeing this letter, and denied having seen the 2006 debenture at any time before the June 2009 loan.

237.	Rivertrade did not accept that these documents demonstrated the prior existence of a properly executed Forburg debenture.  Mr Bard suggested that the minute did not evidence execution, and was probably a pre-prepared minute.  The Leisinger letter may have sent unexecuted copies and there was no evidence that Mr Kinder ever received the 24th December 2006 letter. There was no reason why the debentures would have been sent, and Mr Kinder denied having received them.  It was noteworthy that the next year Mr Kinder asked for the Holdings debenture (which had been referred to between the parties by then) but did not receive it and Mr Govindia was unable to supply any details for the purposes of the proposed draft deed of postponement.

238.	I shall defer further comment until I have dealt with the Finance debenture.

The 2006 Finance debenture
239.	The oddity of the execution page has already been pointed out.   It is purportedly explained in a remarkable letter bearing the date 22nd January 2007.  It is on Finance notepaper, signed by Mr Govindia and Mr Hofer, and it reads:
“Re:	Debenture Agreements Dated 24th January 2006 between:

	i)	Forburg Limited and EMG Finance Limited (“EMG Finance”);
	ii)	Forburg Limited and E.merging Market Group Holdings Limited 		(“EMG Holdings”);

	and the relevant Board Resolutions thereof also of the same Date.

Dear Sirs,

Pursuant to the Board resolutions of E.merging Markets Group Holdings Limited and EMG Finance Limited passed on the 24th January 2006, EMG Finance Limited executed two copies of the Debenture agreement with Forburg Limited (“Forburg”) dated 24th January 2006 (“the EMG Finance Debenture Agreement”).

It is acknowledged that E.merging Markets Group Holdings Limited also separately executed two copies of a similar Debenture agreement (with identical terms and conditions) with Forburg Limited also dated 24th January 2006 (“the EMG Holdings Debenture Agreement”).

However, it has been brought to our attention that within the execution pages of the EMG Finance Debenture Agreement, the execution designation of the Chargor has by mistake been shown as “E.merging Markets Group Holdings Limited” as opposed to “EMG Finance Limited”  That is, it currently reads:

	“Execution by the Chargor:
	EXECUTED (but not delivered until the date hereof) as a Deed by
	E.merging Markets Group Holdings Ltd
	acting by”

We hereby acknowledge and confirm that this is clearly a typographical error and that the Chargor designation on the execution pages for the EMG Finance Debenture Agreements should have carried the execution designation of EMG Finance Limited and not of E.merging Markets Group Holdings Limited.  That is, it should have read:

	“Execution by the Chargor:
	EXECUTED (but not delivered until the date hereof) as a Deed by
	EMG Finance Ltd
	acting by”

Accordingly, we, the two directors who executed the above mentioned EMG Finance Debenture Agreement on behalf of EMG Finance Limited hereby fully authorise Forburg Ltd to be able to rectify or alter the two execution pages for the EMG Finance Debenture Agreements in any way that you may deem necessary or as may be required in order to enable the true intention of the agreement by its execution to remain fully in force and fully valid, legal and authorised.  We hereby fully authorise you to rectify, alter and, if required, copy the execution signatures onto a new page to show that the Chargor Designation within the EMG Finance Debenture Agreement’s execution was in fact that of EMG Finance Limited.

We confirm that the EMG Finance Debenture Agreements were executed in addition to, and are separate from, the EMG Holdings Debenture Agreements.  We are, of course, also happy to re-execute the execution pages of the said EMG Finance Debenture Agreement in which case please provide us with further copies of the same and we shall re-execute and return to you accordingly.

For the avoidance of doubt, we summarise and reconfirm the situation:
On the 24th of January 2006, EMG Finance as well as EMG Holdings both entered into separate Debenture agreements (with identical terms and conditions) with Forburg Limited.  However, due to a typographical error, the Chargor designation within the EMG Finance Debenture Agreement’s execution pages carries the wrong designation and this letter hereby provides you the authorisation to make any alterations that you may deem necessary to the EMG Finance Debenture Agreement in order to ensure that you have an effective, on-going and fully enforceable Debenture over EMG Finance as you also do for EMG Holdings.

We also hereby confirm and undertake that the above mentioned error and any rectification, alteration or correction thereof (as authorised herein) shall not, in any way, prejudice your rights under the original intention entered into under the EMG Finance Debenture Agreement executed on the 24th January 2006.  We confirm that the current outstanding balance owed by EMG Finance to Forburg stands at circa GBP £1.5 million (one and a half million Pounds Sterling) which is secured under the EMG Finance Debenture Agreement dated 24th January 2006 (even though this amount may appear to be consolidated into the amount owed to you by EMG Holdings).

For and on behalf of EMG Finance Limited

[Signed Mr Govindia and Mr Hofer]”

240.	In these proceedings the execution point emerged in the following way.  In the summary judgment application against Holdings there was reference to the Holdings debenture but it was pointed out that this did not bite directly on the Ranhill proceeds because those proceeds were owed to Finance.  The Finance debenture was then pleaded in an amended Defence of the first two defendants on 29th June 2012, though Mr Govindia said in his evidence that his solicitors had always had it (for the purposes of the litigation).  On 5th March 2013, having got the original execution pages from Mr Hofer, Rivertrade’s solicitors wrote to the defendants’ solicitors pointing out the similarity in signatures and suggesting that the debenture had been “forged”.  Forgery was denied in a response on 4th April 2013, without any reference to the January 2007 letter or the substance of its contents.  Those contents only emerged for the first time in an amended Rejoinder served on 15th April 2013, and the January letter then emerged.   At trial Mr Govindia suggested that Mr Kalan may have been the person who carried out the activity of copying signatures from another document and “pasting” them on to a document with the correct signature block for a Finance debenture.  

241.	Mr Kalan was not called to give evidence about this, despite the fact that he was the source of the letter for Mr Govindia for this litigation.  He is in the UK, and there was no suggestion that he was not available to give evidence but Mr Govindia said that Mr Kalan did not want to give evidence because Mr Hofer had compromised him in a blackmailing letter.  The person who procured Mr Govindia’s arrest in India had originally been introduced to Mr Govindia by Mr Kalan and he felt bad about that.  Mr Govindia did not want to force Mr Kalan into a position in which he did not want to be (i.e. giving evidence).  I found this explanation to be totally unconvincing, where it was comprehensible at all.  I consider it much more likely that Mr Govindia did not want to call Mr Kalan to give evidence because he did not like the evidence that Mr Kalan would be likely to give.  The circumstances of the letter, and of the execution of the 2006 Finance debenture, were obviously issues which lay close to the heart of this litigation (since the 2006 debenture was relied on) and which raised matters which had to be explained convincingly, and I consider it likely that if Mr Kalan was able to give evidence which supported the circumstances set out in the letter then Mr Govindia would have appreciated he needed to call him.  His failure to do so is more likely to be attributable to the fact that Mr Kalan would not support Mr Govindia’s present case on the point.

242.	Mr Hofer was cross-examined on this letter.  He did not dispute his signature and did not dispute the date, in the sense that he said he would not sign a document which he knew to be backdated (a proposition which I do not accept - I think that he would sign a back-dated document if it appeared to him to be necessary for the purposes of the transaction as he saw them).  Mr Govindia had no recollection of the letter.

243.	At the trial Mr Buttimore relied on the documents identified in the previous section of this judgment as being pre-June 2009 documents which supported the prior existence and execution of the 2006 Finance debenture as well as the 2006 Holdings debenture.  He suggested that Mr Hofer had removed original signature pages to frustrate Mr Govindia’s reliance on the debentures.   The motive is said to be to improve the position of Suisse, which has guaranteed the obligations of Finance and Holdings and which therefore stands to benefit if other sources are found to procure repayment of those obligations.

Conclusions on the debentures
244.	The facts surrounding the debentures are somewhat remarkable.  The defendants have been unable to produce a properly executed version of the debentures, blaming Mr Hofer (who they said had custody of the originals in Switzerland).  I shall start by considering the Holdings debenture and the execution pages, because the conduct in relation to that is relevant to a consideration of the likelihood of the Finance debenture being properly executed.  

245.	There is no doubt that what would otherwise be presented as the execution pages for the Holdings/Forburg debenture are not at present attached to any debenture document.  There is also no doubt that three pages bear the pencil manuscript to which I have referred.  That is a clear starting point for the inquiry as to what happened in relation to execution of the debenture.  There are two possibilities as to what happened in relation to these pages.  The pages were either originally attached to debentures and were subsequently detached, or they were never attached in the first place.  I find that they were indeed never attached to a physical print of the debenture.  I find this for the following reasons:

(i)  There are too many of them.  There are four originals, all for charges for Holdings to Forburg.  But that is three too many, or two too many if one allows for counterparts.  So at least two must have been unattached to anything relevant on any footing.  So at least some  execution pages were signed in an unattached way, which increases the plausibility and likelihood of this having happened in the case of the Holdings debenture.

(ii)  If they were detached one has to inquire why that was, or might have been, the case.  The only explanation proffered is that Mr Hofer did it to sabotage the defendants’ reliance on the Holdings debentures.  That is, in my view, fundamentally unlikely.  It would require thought processes that are far too tortuous for Mr Hofer.  No other explanation was proffered or is readily imaginable.

(iii)  The debenture pages do not look as though they were consecutively run pages.   There is no continuous page numbering, so on any footing they are likely to have been produced from a different print run.  That does not mean that they could not have been attached, but it does point in the direction of their being prepared as separate documents.  

(iv)  If Mr Hofer detached them from something, why would his secretary write what she is said to have written upon three of them?  I find that the handwriting is hers, and that it does indeed connote a sending of three copy execution pages (one of which is the page attached to the copy 2006 Holdings debenture relied on by the defendants)  not attached to anything.  I find that that sending happened in mid-July 2009.  That means that at that point the original Holdings debenture execution page was not attached to the debenture.  

(v)  Since, as I have found, it is not possible to identify a plausible reason why the page would have become unattached, I find that they (and in particular the page relied on subsequently as the 2006 Holdings debenture page) never were attached.

(vi)  Although Mr Hofer’s version of what happened in July has certain credibility problems, I find that on balance it is correct.  He was asked to sign documents as part of a “housekeeping” exercise, and he did so and his secretary in error sent back copies and not originals.  

246.	Those findings mean that the 2006 Holdings debenture was not validly executed.  I acknowledge the prior references  to the existence of debentures, but they are explicable as reflecting a belief as to what happened rather than what actually happened.   The company minutes might in other circumstances be a reliable record of the state of affairs at the time, but in this case I do not find them to be reliable.  They are, in any event, contradictory.  The Holdings/Finance minutes of 24th January 2006 refer to debentures which have not yet been executed, whereas the Forburg minutes refer to debentures which have already have been executed and deposited for safe keeping.  That is unlikely to have happened like that on the same day.  It is much more likely that the minutes were produced to provide some sort of paper formality about the process, without necessarily reflecting reality.  Minutes were often prepared in advance of meetings (as is often the case) and I find that these minutes were probably thus prepared and signed at some convenient moment without anyone realising that the formalities of execution had not taken place.  The Leisinger letter probably attached unexecuted copies, because an original executed copy was not available (the 2001 debenture was, by contrast, available, and that was recorded as being sent as an original).  Other references to the debenture were to copies, or to a belief that it had been properly executed.  The purported December 2008 letter was, I find, never sent, and its genesis is highly uncertain.  The story on the EMG side was in any event not consistent - the 2008 Holdings accounts referred to above (even draft accounts) referred to Forburg as an unsecured creditor.  If there was a firm and clear belief in the group that a debenture had been executed then that statement would not have been made.  Mr Govindia referred to this as an error, but if it is it is a very surprising one.

247.	My first finding is therefore that the deed was not executed in 2006 because the relevant pages did not come into existence until July 2009.  However, underlying this is a separate reason for holding that the 2006 Holdings debenture was not validly executed.  The execution pages reflect the fact that it was intended to execute the document as a deed.  Even if the execution page now relied on was created before 2009, and even in 2006, with the intention that it would at some point be relied on as an execution page, but in circumstances in which it was separate from every other page of the debenture, then in my view that is not execution of the debenture as a deed.  The concept of executing a document as a deed involves appending an appropriate signature (or seal) to the document itself, and not to some page which was subsequently to be attached to a document containing all the terms.  That latter process is completely inimical to the concept of execution of a document.   It is execution of a page, not of a whole document.  No authority was cited to me which would justify that as a course of action.  There was no attempt to construct some sort of agency argument, by which someone was authorised to put the document together, and that is doubtless because there can be no such argument.  Apart from anything else, such an authority (if were otherwise conceptually possible) would require authorisation by another deed.  

248.	Accordingly, the Holdings 2006 debenture was never validly executed, and there was probably not even any attempt to produce a signed execution page until July 2009. 

249.	Next is the Finance debenture.   None of the four separate original execution pages relates to Finance.  The problem with the Finance debenture is that the execution page relied on is a copy page which is, at best (as far as the defendants are concerned) a contrivance intended to overcome what was perceived as a problem arising out of the fact that the execution page referred to the wrong company.   A page constructed in the way in which it was apparently done (adding a copy signature derived from a different document to a “correct” signature block) cannot conceivably be a proper execution of the document.  
250.	Mr Buttimore submitted otherwise.  He submitted that this process was a valid execution process because it was done with the consent of Finance and Forburg, as is said to appear from the January 2007 letter.  If one assumes for present purposes that the letter is genuine then Mr Buttimore’s reasoning is still wrong.  The process of executing a deed has certain basic elements to it - there has to be a signature (or seal) applied properly to a document.  The process of marrying a copy signature with a new signature block and attaching that to a debenture does not begin to qualify.  It is simply not a proper execution.
251.	Mr Buttimore sought to say that the technique of appending a copy signature page in the manner which has plainly happened could be due execution.  He was, however, unable to adduce any authority which truly supported that submission.  He pointed to certain dicta in Caton v Caton (1867) LR 2 HL 127 as allegedly demonstrating that such an attempt to execute would be valid, and to Butts Park Ventures (Coventry) Ltd v Bryan Homes Central Ltd [2003] EWHC 2487 at paragraphs 9 and 10 where he said that the court left open the question of whether a photocopy signature would suffice for the purposes of s2(3) of the Law of Property (Miscellaneous Provisions) Act 1989.  
252.	So far as Caton is concerned, it does not assist at all.  The question there was whether a particular document, assuming it to be an agreement at all, was signed for the purposes of the Statute of Frauds.  There was no signature as such, merely a reference to the name of the person sought to be bound by the document.  Mr Buttimore relied on what Lord Chelmsford LC said (at page 139):
“The cases upon this point cited in the course of the argument establish that the mere circumstance of the name of a party being written by himself in the body of a memorandum of agreement will not of itself constitute a signature.  It must be inserted in the writing in such a manner as to have the effect of ‘authenticating the instrument’ or ‘so as to govern the whole agreement’ …”
253.	This does not help Mr Buttimore at all.  This citation at least presupposes the writing of a name, and that did not happen in relation to the contrived execution page of the debenture.  There was the photocopying of some signatures, and moreover they were signatures were of individuals acting as officers of a different company.  There was nothing approaching the writing of a name with a view to authenticating a document.
254.	Nor does Butts Park assist him.  A study of the two paragraphs he relies on reveals that the court did not expressly leave open the question of whether a photocopy signature would do.  It found that there was an original signature on the relevant document, so it did not address the point at all.  The court did not even say the point was being left open.  Furthermore, the point in that case was different.  It was a point about what sort of signature would do for the purposes of the 1989 Act.  There was no question-mark over actual execution.  The question in the present case is whether there was proper execution of a deed, which is entirely different. 
255.	Bluck v Gompertz (1852) 7 Exch 862 was also relied on by Mr Buttimore.  There a defendant signed a guarantee, and subsequently personally endorsed a correction on the document in his own handwriting but without signing the document again.  It was held that the endorsement could be taken to be authenticated by the original signature.  That, again, is a different point.  There was once an original signature (proper execution), and what was written was some substantive matter, not an attempt at fresh execution.  

256.	However, those points still leave one possible point in Forburg’s favour, albeit not mentioned by Mr Buttimore.   The January 2007 letter (if genuine) proceeds on the footing that there was a genuine attempt to apply signatures, and the problem was the wrong corporate name in the signature block.  In my view if that had happened then there would probably have been a good execution in the first place.  If the signatories really intended to act on behalf of Finance, and there was a mistake in the description of the party at the end of the document where they signed, then it would be a valid execution and the document would be rectifiable.  The obvious way of fixing the problem would have been a deed of rectification, which would be likely to have been taken to reflect reality as far as any third party was concerned.   If it did not then a rectification claim would have been likely to have succeeded.  The error would be in the nature of a clerical error.  (For these purposes I apply the principles of English law.   The debentures both express themselves as being subject to English or Jersey law, at the discretion of the Lender, but no evidence was adduced as to Jersey law so I assume that the principles of Jersey law are the same as English law.)

257.	Accordingly the question (not identified by Mr Buttimore as such, but nonetheless it seems to me to be the correct one) is whether there is acceptable evidence of an original compliant execution but with the wrong company name in the first place.  In these circumstances the burden of proof must be on the defendants, who have to prove due execution.

258.	The only evidence of what happened on execution is in the letter of January 2007.  No deponent has given that evidence, and Mr Kalan, who might have  been called to explain the situation, has not been called to give evidence, in circumstances such that no justifiable explanation for that failure has been given.  

259.	In the circumstances of this case that letter does not, in my view, enable the defendants (and particularly Forburg, which propounds the debenture) to prove a form of due execution.  The fact of an execution with the wrong company name on the execution page is itself plausible - such things could well happen by accident.  However, beyond that there are serious difficulties:

(i)  My findings about the Holdings debenture demonstrate a casual attitude to the execution of documents in which there is not necessarily any attempt at all to execute a document (as opposed to executing an execution page).  If that sort of thing goes on one cannot have any degree of confidence in assertions that the original debenture ever had signatures appended to it. 

(ii)  The letter itself is highly implausible as an attempt to overcome a newly perceived difficulty.  While the problem might be plausible, the elaborate explanations of, and authorities for, the manners of overcoming it are highly unconvincing.  One would have thought that laymen who identified the problem, and who wished to fix it by attaching an alternative signature page, would simply have attached a new signature page with original signatures (as at least one alternative).  That may or may not have been more effective, but it is a more natural suggestion than those occurring in the letter.  It is not comprehensible why the executing directors would seek to overcome the problem by getting someone else to tamper with the documents, and even less comprehensible why they would suggest copying signatures over to a fresh execution page.  Short of forging new original signatures, that could only be done by producing a copy of signatures, which is an extremely strange suggestion.   The letter itself does invite the addressee to ask for fresh execution pages if the addressee thought it appropriate, but since one of the addressees was Mr Hofer (a director of Forburg) that is a strange suggestion.  Why not just do it?  The letter is so odd that it is impossible to take it at face value without at least some form of reliable corroboration, and I find that there is none.  Despite Mr Hofer’s non-disclaiming of this letter in his evidence, I do not accept it as a genuine letter which attempts to deal with a genuine problem.  I find it to be a contrivance for some later purpose.  The circumstances in which it, and the 2006 Finance debenture itself, came to be disclosed in these proceedings does not encourage the view that it is genuine either.  

(iii)  For what it is worth, I note that there is no other record of what is said to have happened, such as a board minute.  This was a group which from time to time does prepare formal minutes, but there is no such minute about correcting an originally faulty execution.  This is not a very strong factor, but its absence lends support to the strong air of contrivance about the whole thing. 

260.	Accordingly, so far as it might be necessary to do so, I find that the defendants have not fulfilled the burden of proof of establishing that the 2006 Finance debenture was ever executed.  I am not satisfied that it was. 

261.	In his final submissions Mr Buttimore suggested that even if the debenture was not validly executed Finance was estopped as against Forburg from challenging the execution because the group acted on the footing that it was valid.  This was a one sentence submission, advanced with no real supporting facts.   The question of reliance was not dealt with in the evidence at all, and there is no evidential foundation for the estoppel claim. 

262.	I therefore find that even if there had not been estoppel or acquiescence, none of the debentures relied on from time to time in this case would take priority over Rivertrade in relation to the Ranhill proceeds. 

Costs of the Ranhill proceedings in Malaysia
263.	When giving instructions to the Malaysian lawyers for the proceedings against Ranhill Rivertrade incurred costs said to be £7,765.35.  The Particulars of Claim identifies this expenditure and claims it in the prayer, but no legal basis for the expenditure is set out.  The point was not much developed in final submissions, and was dealt with extremely shortly.  The pleading adds a further claim for £69,000 odd which is pleaded as being both the costs of preserving the proceeds in Malaysia as against Forburg and others and as being the costs of enforcing the judgment against Ranhill.  Mr Bard said the sums were recoverable in restitution.  Mr Buttimore did not really deal with the claim as against Finance at all (not surprisingly bearing in mind the real issues in the case) and the absence of any emphasis on this point.  He made some short observations on this aspect in relation to the money claim as against Mr Govindia (which was only to the extent of the £7,765), and observed that if there was any evidence about the payments then he had missed it (a stance with which I have some sympathy). 
 
264.	The absence of argument on this point is unsatisfactory.  In the absence of argument and clarity as to the scope of this claim it is not possible to give a clear money judgment.  However, I accept that in 2009 Mr Kinder or Rivertrade did fund the litigation against Ranhill (there is some email traffic which confirms Mr Kinder’s evidence that he did).   There was no express agreement as to the basis on which this was done.  However, in my view there must have been an implied term of the agreement with Mr Govindia that Rivertrade would do this to the effect that it would be reimbursed for its expenditure in trying to get in the Ranhill proceeds.  It cannot seriously be contended that Rivertrade was making a present of the sums paid.  If the claim were successful the benefit of the expenditure would ultimately accrue to the benefit of the EMG group by getting in an asset.  The fact that that asset is used to discharge a debt does not matter.  It still operates for the benefit of the group.  All that supports the existence of an implied term.  I am sure that both Mr Kinder and Rivertrade would have testily suppressed the officious bystander appropriately.   I also find that it was an implied term that Rivertrade should be at liberty to reimburse itself from the Ranhill proceeds.  That, again, is something falling within the officious bystander test, though I suspect that those proceeds will not be sufficient to satisfy both the debt and the costs. 

265.	It follows that Rivertrade has a right to recover sums spent as against Finance (that is logically the company which would be taken to undertake the obligation to pay).  I so determine.  I am unable, on the evidence shown to me, to find at the moment that the £7,765 was the correct sum.  I shall direct an inquiry as to the amount spent by Rivertrade in this manner.  That is a more appropriate way of dealing with the matter than simply finding that the detailed facts have not been proved.  I trust that the parties will be able to agree the sums so that conducting the inquiry will not actually be necessary. 

266.	Insofar as any of the costs claimed are adverse costs, as against Finance and other EMG companies, of preserving the Ranhill proceeds in Malaysia, those costs are not recoverable in this action or secured against the Ranhill proceeds by virtue of the arrangements dealt with in this action.  If they are to be recovered at all it must be pursuant to costs orders (if any) in the relevant Malaysian proceedings. 

Mr Govindia’s personal liability

267.	Personal claims are made in the event that the direct claims against the Ranhill proceeds fail.  They are made on the basis of collateral warranty, misrepresentation and procuring breach of contract.  Since I have found the direct claims to have succeeded these claims do not arise.  I shall not lengthen this judgment by considering them further. 
Conclusion
268.	I therefore find that Rivertrade succeeds in its claim to the whole of the Ranhill proceeds and that that claim takes priority over the claims that Finance, Holdings and Forburg might have to those moneys.  I also find that Finance is liable to reimburse the sums paid by Rivertrade in pursuit of the Ranhill proceeds, as against Ranhill, in Malaysia and that Rivertrade is at liberty to take those sums from the Ranhill proceeds.