Neutral Citation Number: [2008] EWHC 2171 (Comm)
Case No: 2006 FOLIO 26
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 30/09/2008

Before :

THE HONOURABLE MR JUSTICE FLAUX
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Between :

	AUTOMOTIVE LATCH SYSTEMS LIMITED	Claimant	
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	HONEYWELL INTERNATIONAL INC	Defendant	

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Michael Douglas QC, Alison Potter and Marcos Dracos (instructed by O’Mahoney St John) for the Claimant
Ewan McQuater QC, David Head and James MacDonald (instructed by Wilmer Cutler Pickering Hale and Dorr LLP) for the Defendant

Hearing dates: 7 April to 18th July 2008
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Judgment
Mr Justice Flaux: 
Introduction
1.	This case concerns an ill-fated collaboration between the parties for the development and manufacture of a new kind of car door latch invented by Jean Pierre Chevalier, the managing director and principal shareholder of the Claimant company (to which I will refer as ALS). ALS is essentially the corporate vehicle Mr Chevalier was then employing for the development of the latch. Mr Joe Toledano was his co-director. He was the financial backer, his background being in the catering industry, but he took little part in the running of the business.
2.	I will refer to the latch which Mr Chevalier invented, as it has been referred to throughout the trial, as “the ULS”, which stands for Universal Latch System. For present purposes, the ULS can be summarised as follows. As the term ULS suggests, the latch is intended to fit into any car door. It is operated by a single motor which is able to perform ‘superlocking’, power closure and power opening, as well as the more usual functions of door latches. In that respect it differs from other latches which perform a wide range of functions such as power closure, but which use more than one motor. It is also much more compact than other premium latches which perform those functions. 
3.	The Defendant (to which I will refer as Honeywell) is (as described in its own hand out prepared in July 2001 for presentation to potential customers for the ULS) a global advanced technology and manufacturing company employing over 120,000 people worldwide with a $25 billion plus annual turnover in 2000. It had experience in the aerospace industry, in sensing and control systems and the automotive industry. For the latter, it produced turbochargers and cooling systems amongst other products, although prior to the collaboration it had no specific experience or expertise in car door latches.
4.	By way of brief overview of the case, the Joint Collaboration Agreement (to which I will refer as “the JCA”) was entered into on 17 May 2001 and terminated by ALS on 11 September 2003 under Article 10.1 for alleged breaches of the agreement by Honeywell. ALS contends that in 28 months of collaboration, the ULS had not advanced beyond the concept development phase and that only 10% of the work necessary for design validation had been completed. This is said to be breach by Honeywell of its obligation under Article 4.5 of the JCA to take all and any reasonable actions without unreasonable delay to manufacture the latch at a competitive cost. ALS makes specific complaints about absence of resources, unauthorised and pointless design changes, excessive time spent on drawing transfer, lack of direction and proper management, development of a rival e-latch to the detriment of the ULS and a number of other matters. 
5.	ALS claims damages by way of lost profits on the basis that if Honeywell had performed its obligations properly, the ULS would have been developed sufficiently to procure nomination from Volkswagen for the new Passat and Jaguar for the new XK during 2003. From that platform, ALS’s forensic accounting expert Mr Mathew-Jones has produced a “loss of a chance” model based on the evidence of ALS’s industry expert Mr Ian Henry, predicting the relative probabilities of ALS capturing substantial shares of the latch market from various motor manufacturers in different parts of the world.  Based on that model as revised by the time of trial, Mr Mathew-Jones assesses loss of profits ranging between £332 million and £457 million. 
6.	Honeywell denies that it was in breach of the JCA at all. Its case is that it had no obligation to develop the design prior to the stage of the building of prototypes from soft tools and that any delay before that stage was  attributable in one way or another to Mr Chevalier. More than adequate resources were put in place to develop the ULS, including the employment in due course of a latch expert, Mr Nigel Spurr. Even if there had been delay prior to the first soft tooled build in March 2003 (contrary to Honeywell’s primary case) Honeywell made real and substantial progress with the development of the latch for manufacture between then and September 2003. ALS had seriously underestimated both the difficulties which Mr Chevalier’s design posed and the progress which Honeywell made between March and September 2003. 
7.	Even if Honeywell was in breach, Honeywell contends that ALS’s claim faces insuperable problems both as to causation of loss (because amongst other reasons the Court has to assess the matter on the basis that Honeywell would have been entitled to terminate the contract itself under Article 10.3 of the JCA) and as to whether ALS has suffered any loss at all. The model put forward by Mr Henry and Mr Mathew-Jones is unrealistic and wildly optimistic, given that it was unlikely that Honeywell and ALS would have won the nomination for the Passat or the XK and that the latch market is intensely competitive. The view of that market put forward by Honeywell’s industry expert Mr Brayshaw is to be preferred to that of Mr Henry and, based on Mr Brayshaw’s evidence, Honeywell’s forensic accounting expert, Mr Maher, has put forward a much more realistic quantum model. This shows that even on the basis that the ULS could have achieved a significant share of the market, either it would not have been profitable at all or at best ALS has suffered a modest loss, a few millions of pounds rather than hundreds of millions.
Chronology of events
8.	This section of the judgment contains a chronology of some of the principal events before, during and after the JCA which should assist in putting the various issues which arise in context. It identifies but does not deal with detailed factual issues, which I will address as appropriate in the relevant section of the judgment.
9.	The first contact between Mr Chevalier and Honeywell was in about September 1999 when Mr Chevalier was looking at Honeywell as a possible supplier of sensors for the ULS. A number of meetings took place between September 1999 and the date of the JCA. Initially Honeywell’s proposed involvement was limited to the sensors and possibly other elements of the electronic sub-assembly. It was at a meeting at Newhouse on 13 January 2000 that Dr Frank Turnbull of Honeywell first voiced the offer that Honeywell might make the whole latch. 
10.	 A non-disclosure agreement relating to Mr Chevalier’s intellectual property in the latch was signed by Honeywell on 18 May 2000 and on 25 May 2000, Mr Chevalier sent Honeywell two Zip disks consisting of 71 files of drawings. It appears from a note of a meeting on 20 June 2000 that Honeywell was unable to open the files. This was because Mr Chevalier’s drawings were created in one software package, Auto CAD, whereas Honeywell used Pro Engineer or Pro E, a different software package. The two were incompatible and there is apparently no software available to convert from one to the other, although Honeywell took no steps to investigate that until after the JCA was signed. Equally they did not ask for hard copies of the drawings. 
11.	A further meeting took place at Newhouse on 24 July 2000. Honeywell’s case is that at this meeting Mr Alan Wright of Honeywell informed Mr Chevalier that the ULS was more mechanically complex than anything previously produced at Newhouse. This was denied by Mr Chevalier in his evidence. 
12.	Further meetings then took place in September and November 2000 at the latter of which Mr Chevalier handed a CD of drawings to Mr Shelley a mechanical design engineer at Honeywell. There was then a period between February and May 2001 during which drafts of what became the JCA were negotiated before a meeting on 17 May 2001 at which the JCA was finalised.
13.	On 6 July 2001 Mr Tom Cummings, the then project manager circulated an e-mail internally within Honeywell referring to the difficulty which Mr Shelley had had in transferring the data concerning the drawings from Auto CAD to Pro E and saying that what was proposed is that Mr Shelley should re-draw the drawings on Pro E “from the bottom up” in frequent consultation with Mr Chevalier. This drawing transfer was estimated to take nine months to one man year of work to carry out. 
14.	In the six months or so after the JCA was entered, Honeywell held a number of meetings with OEMs to promote the ULS.  Thus, on 9 July 2001, Honeywell had its first meeting about the ULS with Volkswagen. In August 2001, invitations were sent to a number of vehicle OEMs (including Nissan UK, BMW, Mercedes, Renault, PSA and Volkswagen) to view the latch at the Frankfurt motor show in September 2001. Before that show, meetings were also held with Jaguar and BMW.  At the show various OEMs attended Honeywell’s stand including Volkswagen, DaimlerChrysler and Mercedes. 
15.	Starting on 11 October 2001, Honeywell had a series of meetings with MG Rover about the possible use of the ULS in their new RDX60 model, the projected replacement for the Rover 45. These culminated in a visit by MGR engineers to Newhouse on 11 and 12 February 2002 and, on 19 February 2002, Honeywell received a letter of nomination to supply the ULS to MG Rover for the RDX60. In the event, although a number of meetings took place between Honeywell and other OEMs in the period from late 2001 onwards, this was the only nomination from an OEM received during the course of the collaboration. The reasons for this are the subject of a major dispute between the parties.
16.	The transfer of ALS drawings to the Honeywell system was completed in May 2002. However, before that was achieved, from March 2002 onwards until at least December 2002, a number of changes in the design of the ULS were made, some to improve manufacturability, others in response to actual or perceived requirements of OEMs. These changes were essentially made or directed by Mr Chevalier. It is in issue between the parties whether the fact that Mr Chevalier had to take the lead in this respect is a matter attributable to breach of the JCA by Honeywell. It is also in issue to what extent the design changes caused delay to the project and whether that delay in turn is attributable to breach of the JCA by Honeywell.
17.	In any event, Honeywell did not start sending out instructions and drawings to toolmakers and component suppliers for the soft tooled prototypes which were to be built as part of the design validation process until late November 2002. Parts for that build (apart from pins and washers) were largely available by some time in February 2003. 
18.	It had originally been contemplated by Honeywell that there would be a full tolerance analysis of the design for the purposes of manufacturability before it went out to toolmakers and component suppliers for the soft tooled build. In fact pressure of time to meet the demands of MG Rover and of an undertaking to produce a quiet prototype for Volkswagen meant that such an analysis was not carried out beforehand. This was a matter of which ALS was heavily critical at the trial (although not contemporaneously). 
19.	A limited tolerance analysis on the stacks which contained the rivet pins and washers of the latch was carried out by Mr Shelley in early February 2003.  Following that analysis, he revised the drawings for the pins and washers, although these revisions were not completed until early March 2003, a delay for which ALS blames Honeywell. At the same time, in late January 2003, MG Rover suspended the RDX 60 project and asked Honeywell instead to supply the ULS for the existing Rover 25 and 45 models, although no formal letter of nomination was in fact signed before ALS terminated the JCA.
20.	Two soft tooled builds took place in mid to late March 2003. These threw up problems and the prototypes which were built did not function correctly and were not suitable for demonstration to MG Rover, Volkswagen or any other OEM. The cause of these problems is in issue between the parties, ALS blaming it on the failure of Honeywell to progress the project properly and on unauthorised changes to the design by Honeywell. In contrast, Honeywell contends that the problems were all attributable to Mr Chevalier’s design and specifically to the fact that whilst it was a good design for hand built prototypes which could be manually tweaked to operate correctly, it was very difficult to translate into a reliable repeatable design for manufacturing purposes.
21.	The problems with the failed soft tooled build were obviously stressful for all concerned and Mr Chevalier was absent from the project as a consequence of stress related illness from the end of March 2003 until early June 2003 on his doctor’s orders. During that time, under the direction of Mr Nigel Spurr, a latch expert employed by Honeywell with effect from late January 2003, the problems with the design of the ULS were identified and solutions began to be found. These were presented to Mr Chevalier on his return to the project on 11 and 12 June 2003 (on the basis that under the JCA, all design changes had to be approved by ALS): some found favour, others did not. 
22.	ALS seeks to downplay the significance of the design changes proposed by Honeywell, contending that they were routine changes to be expected in any latch project, which were identified within a matter of weeks following the failed soft tooled build. Thereafter, according to ALS, little if any progress was made by Honeywell in advancing the project. ALS contends that it was frustration at the absence of progress that led Mr Chevalier eventually to serve notice of termination on 11 September 2003, which notice was fully justified on the basis that there were continuing or extant breaches of the JCA by Honeywell. 
23.	 In contrast, Honeywell contends that during the period between the failed soft tooled build and the termination of the JCA, it made real progress in the development towards manufacturability of the ULS. This included development work on the so-called Rev D design, a smaller version of the latch originally designed to meet the demands of MG Rover for fitting the ULS into its existing models. From July 2003, it was agreed between the parties that the smaller latch should be the mainstream product. Accordingly, Honeywell contends that whatever the position may have been at the time of the failed build, at the time of the notice of termination there was no extant breach of the JCA which would have justified termination. Honeywell’s case is that the real reason for the termination was that there had been a breakdown of the relationship between Mr Chevalier and the Honeywell project management, a matter which was not attributable to any breach of the JCA by Honeywell. Accordingly, the purported termination by ALS was wrongful.
24.	After the notice of termination, Honeywell continued with the design development work on which it had been engaged and continued to co-operate with Mr Chevalier albeit in rather difficult circumstances. ALS and Honeywell sought to negotiate and agree a basis on which the collaboration could go forward, each party seeking a different arrangement from what had applied previously. Mr Chevalier wanted to go forward with an arrangement which did not involve the relevant project management with whom he was dissatisfied. 
25.	On the other hand Honeywell wanted a new agreement which reduced the influence of Mr Chevalier and which reached an agreement on share of profits (an outstanding matter never in fact contractually agreed between the parties) on the basis that ALS was paid a royalty. Mr Chevalier was not prepared to agree this and, in the event, terminated the JCA finally on 16 December 2003.
26.	I will deal with events after the final termination so far as they are relevant to the issues in a separate section of the judgment, rather than taking up space now. All it is necessary to record is that in the intervening period of nearly five years since ALS terminated the JCA, ALS (and its successor corporate vehicle of Mr Chevalier’s, VSS) has not succeeded in procuring the use of the ULS by any European OEM (MG Rover having gone into administration in the spring of 2005 and Nanjing Automotive, which purchased the business having singularly failed to produce any cars yet).
The List of Issues
27.	In accordance with modern Commercial Court practice, the parties prepared and agreed a List of Issues. This has proved of considerable assistance in preparing the judgment and although I have not dealt with the issues in the same order in the judgment, I have sought to cover those issues which remained live at the end of the trial. Nonetheless, I should note that both parties’ cases have changed somewhat even since the List of Issues was agreed earlier this year, before the trial began. 
28.	In particular, whereas ALS’s pleaded case (as recorded in Issue 12(1)) is that the latch was “essentially complete” at the time of the JCA, in that it was ready for design validation, Mr Chevalier accepted in his evidence that at the time of the JCA the design of the ULS was still at an early stage of development, the concept stage. This was agreed between the mechanical latch experts (although there was a slight disagreement as to precisely where it was in the concept stage). Although Mr Chevalier vacillated in his evidence as to how much work was required to be done on the design at the time that the JCA was entered to make it ready for the soft tooled prototype build, he did agree quite clearly that, as at that time, the ULS needed considerable design work to resolve a lot of issues before soft tools could be commissioned.  This was also the view of the mechanical latch experts. This is all of course wholly inconsistent with the latch being “essentially complete”, which was not a case pursued at trial. 
29.	 Similarly, Honeywell’s pleaded case (as recorded in Issue 11) is that the design of the mechanical sub-assembly was fundamentally flawed and incapable of generating a manufacturable product. However, that case was not supported by the evidence of either Mr Spurr or of Honeywell’s mechanical latch expert, Mr Stephen Drysdale who agreed that although the design posed challenges, the ULS would have been manufacturable. Again, that case (at least in its most extreme form) was not pursued at trial.
The factual witnesses
30.	Before turning to deal with the history of the relationship between the parties and the issues in the case in more detail, I propose to say something about some of the factual witnesses who gave evidence at the trial. 
Mr Chevalier
31.	Mr Chevalier was the principal witness for ALS and gave evidence over six days.  He had prepared himself to give that evidence to an extent that was unparalleled in my experience. This included a 370 page witness statement which went way beyond the actual evidence he could give. It is literally littered with inadmissible material. In particular, Mr Chevalier seems to have read all the internal documents from Honeywell, many of which are set out in his statement with his opinions about them then expressed, usually in a manner designed to support his “world view” of the relationship between ALS and Honeywell. The indefatigability of his determination to defend his invention and to get across to the Court and to Honeywell his version of the collaboration and why it went wrong was impressive. No incident in the history of the relationship was too minor but that it would be analysed by Mr Chevalier, usually in a manner which was critical of Honeywell.
32.	Having observed Mr Chevalier giving his evidence, he is undoubtedly a highly intelligent man with considerable charm. However, on many occasions he seemed to me to be completely lacking in objectivity. This manifested itself most obviously in his complete inability to accept anything in anyone else’s evidence or in contemporaneous documentation which was in any way inconvenient to his version of the collaboration or the evidence he was determined to give. Three examples will suffice from the documents, some of which I will need to consider more closely later in relation to the issue whether Mr Chevalier misled Honeywell and indeed OEMs before and at the outset of the collaboration as to the stage of development which the ULS had reached.
33.	First, in relation to the notes prepared by Mr Cummings of the various meetings between Mr Chevalier and Honeywell personnel prior to the JCA, whenever these contained any statement attributed to ALS or himself which was inconvenient to his version of events, he said, both in his witness statement and his oral evidence, that this had not been said by him and that Mr Cummings must have included such matters, which ostensibly “talked up” the ULS and the stage of development which it had reached as part of an internal pitch to senior management of Honeywell to support the project. On occasion, the determination of Mr Chevalier that he had not said things attributed to him by Mr Cummings’ notes extended to purporting to have total recall of what had been said at meetings which took place 8 or 9 years ago. I found this incredible. I have no doubt that Mr Cummings’ notes of meetings are accurate and that the statements attributed to Mr Chevalier were made by him.
34.	Second, there is the ALS business plan prepared by Mr Chevalier. Extracts of this were provided to Honeywell in June 2000 before the JCA and the full version, now described as the “ALS-Honeywell Business Plan” was sent to a number of members of Honeywell management in June 2001.  In each case, what was provided included passages which made representations about the ULS being in an advanced stage of development which were simply not true. Mr Chevalier’s explanation was that these were in some way a future projection of what the position would be a few years later if and when he needed to raise finance. He insisted that the extracts and the full Plan were only provided to Honeywell for the market information contained in them and that he said to Honeywell on numerous occasions that they should not rely on the statements about the stage the ULS was at which were not intended to be taken seriously. I deal with this matter more fully later in this judgment but for the present it suffices to say that none of that explanation is reflected in the contemporaneous correspondence or meeting notes. It is frankly incredible. I should add for good measure that it was never put to any of the relevant Honeywell witnesses that Mr Chevalier had told them that they could not rely upon the information in the business plan.
35.	Third, there are the presentations to the various OEMs at the outset of the collaboration which made statements about the advanced stage of development of the ULS very similar to those contained in the Business Plan. Mr Chevalier had a hand in the preparation of these documents, which were a collaborative effort, as one might expect, and he was clearly the source of the statements about the stage of development which the ULS had reached. Confronted with the statements made, which were clearly inaccurate and misleading, he maintained that his only involvement had been in providing pictures and that he had not read the text, since had he done so he would not have permitted the presentations to go out containing such inaccuracies. Again, I found this explanation incredible. It is inconceivable, given that the ULS was his invention and the presentation was marketing the product to major OEMs, that he did not read the text and approve it, even if he was not responsible for writing it. Furthermore, one of the pictures, for which he was even on his own case responsible, contained highly misleading text.  In any event, whether he wrote the text of the presentations or not, that text was clearly based upon the statements in the Business Plan, which he did write.
36.	Such matters as these examples reflect badly on Mr Chevalier’s credibility. Inevitably, I have asked myself whether he was deliberately lying in his evidence. Ultimately, I have concluded that, whilst there were occasions when Mr Chevalier knew that what he was saying was not true (for example his unedifying evidence that the letters to car manufacturers in June 2001 had in fact been written by Mr Kettle), the overall explanation is less sinister. He has obviously lived and breathed the ULS for more than ten years and, like many people in such situations, has come to believe his own version of events. He has convinced himself that there is nothing wrong with the ULS or its design and that all the problems with the collaboration were the fault of Honeywell. 
37.	The reality is that whilst Honeywell was at fault to some extent as I shall come on to consider, Mr Chevalier’s version of events is skewed and Honeywell is simply not the demon Mr Chevalier makes it out to be. That is not to say that he has not convinced himself of his “world view”. I was left with the overwhelming impression that there was a strong element of the “Walter Mitty” about Mr Chevalier, in the sense that when it comes to the ULS and what he sees as the invincibility of his design, there is something of the fantasist about him.
38.	This may be the explanation for the misleading statements in the Business Plan and the presentations to OEMs. It is not so much a question of deliberately misleading the OEMs or Honeywell. Rather, Mr Chevalier had a wholly unrealistic view of the ULS and had convinced himself that the ULS was at a more advanced stage of development than it actually was or at least, he seems to have seriously underestimated how much design work was required to bring the ULS to successful soft-tooled prototypes. The extent to which Mr Chevalier would brook no criticism of the ULS may be the explanation for the extraordinary and unwarranted attack launched by Mr Chevalier in his evidence on the two Honeywell employees who did have latch expertise, Mr Spurr and Mr Kilker, a matter to which I will return later in the judgment. 
39.	Mr McQuater submitted that Mr Chevalier’s evidence was so flawed that I should not accept any of it, unless it was corroborated by other witness or documentary evidence, on the basis that Mr Chevalier had cynically set out to put forward whatever evidence would support his case, even if he knew it was untrue. It will be apparent that I am not prepared to go that far, having said which, I have viewed a great deal of what Mr Chevalier said in his evidence (particularly when not supported by or inconsistent with contemporaneous documents) with great care and considerable scepticism.
Mr Kettle
40.	Mr Kettle had been employed by Honeywell as a sales manager and he became the person with primary responsibility for promoting the ULS. Since leaving Honeywell in 2004, he has been engaged by VSS as a consultant and has thus been involved in the recent marketing of the latch. I formed the very strong impression when he was giving his evidence that Mr Kettle was a fair minded and essentially truthful witness who in a number of respects did not “come up to proof” on many of the things he had said in support of Mr Chevalier in his witness statement. This is less a criticism of his veracity than a demonstration of the extent to which witness statements can be partisan and misrepresent what a witness’s evidence really is. Mr Kettle in his oral evidence was in broad terms fair and was prepared to back off on some points.
41.	I was not convinced by the suggestion put to him in cross-examination that because he now works for VSS as a consultant he is parti pris and not to be trusted and, to be fair to Mr McQuater, he did not really pursue this in closing submissions. However some caution is required in relation to accepting Mr Kettle’s evidence uncritically, essentially for two reasons. First, he is obviously a salesman by profession with an optimistic view of the prospects of successfully promoting the ULS, a “glass half full” man, as he accepted or as Mr McQuater put it “ever the salesman”. Accordingly, he inevitably put a positive spin on events both in his oral evidence and, perhaps more importantly, in his contemporaneous assessments of meetings with OEMs.
42.	Secondly and perhaps deriving from his optimistic desire for the collaboration to succeed, he tended to take Mr Chevalier’s side within Honeywell and was perceived as Mr Chevalier’s man. There was justification in that perception since for example he did send a full unexpurgated copy of an internal Honeywell e-mail about personal insults to Mr Chevalier, which really suggests that the view that he was Mr Chevalier’s man was justified. He also retained a disk with a great deal of Honeywell documentation and confidential information on it and handed it over to Mr Chevalier.  Despite his genuine regret about this, it must tell against him. Furthermore, although in his oral evidence he was essentially truthful, the fact that he was prepared to sign a witness statement which bore so little relation to the evidence he could really give also tells against him. Having said all of that, I do not consider that it is a question of not accepting his evidence, so much as recognising that it has a tendency (perhaps unconsciously) to be slanted in Mr Chevalier’s favour.
Mr Bur
43.	Mr Bur was another former Honeywell employee who gave evidence for ALS. He had been head of marketing and sales for the ULS project in Freeport. In his witness statement he was highly critical of Honeywell’s performance of the JCA, particularly on the issue of lack of resources, a matter with which he had been concerned. It is no exaggeration to describe that as something of a diatribe against Honeywell. However what emerged in cross-examination was a much more reasonable and measured analysis, which recognised that at many stages the project was well-resourced and that the real problem was one of attracting latch experts to join Honeywell from other established latch manufacturers. Mr Bur accepted that Honeywell had had real problems in attracting such experts, apart from Mr Spurr.  I formed the view that he was an essentially honest witness who gave way on extreme positions in his witness statement when challenged in cross-examination.
Other ALS witnesses
44.	It is not necessary to say much by way of comment about the other witnesses who gave evidence for ALS. Mr Barry Alder and Mr Larry Devlin were both former employees of MG Rover with whom ALS and Honeywell had dealings during the collaboration. In Mr Alder’s case he now acts as a consultant to Mr Chevalier’s successor company VSS. They both appeared fair and straightforward witnesses trying to do their best to assist the Court albeit with the inevitable limitation of being asked to recollect events which occurred between five and seven years ago. One area where I was not particularly impressed with Mr Alder’s evidence concerned the MG Rover specification or rather the absence of it, where I felt he was somewhat defensive, but that may have been out of an understandable loyalty towards his former employer. 
45.	Mr Steven Manning was a late entrant on behalf of ALS, called in the middle of the Honeywell witnesses. He is the Product Line Manager with Inteva Products LLC, formerly the Global Interiors and Closures Division of Delphi Corporation, a major automotive component manufacturer which went into Chapter 11 of the US Bankruptcy Code last year. Delphi (now Inteva) is one of the principal latch manufacturers in the world, after the two main players, Kiekert and Arvin Meritor.  Delphi/Inteva entered a non-exclusive licensing agreement dated 24 September 2007 with VSS to manufacture the ULS. 
46.	Mr Manning gave evidence about his dealings with VSS, the latch market, particularly in the United States and about costs and prices which was of some assistance in relation to the quantum issues in the case. He was a frank and straightforward witness but to the extent that ALS relied upon his evidence in support of its case as to the costs of manufacture and the likely sale price the limitations of his evidence must be recognised. Specifically, there is no evidence as to the price which any OEM would be prepared to pay for the ULS as manufactured under licence by Inteva and, of course, Inteva has yet to manufacture the ULS at all.
Honeywell witnesses
47.	A substantial number of present and former employees involved with the collaboration gave evidence on behalf of Honeywell. It is not necessary to consider their reliability as witnesses individually to any appreciable extent except for the caveats referred to below. As a general observation, they all came across as diligent, careful engineers who had tried to perform their obligations under the JCA to the best of their abilities and who were now trying to assist the Court, albeit that the events in question occurred between five and eight years ago, so that inevitably recollections were somewhat hazy. 
48.	The caveats concern three matters, two of which are related. First, just as Mr Kettle and Mr Bur tended in their respective witness statements, to support ALS’s case and Mr Chevalier’s evidence, in a somewhat indiscriminatory manner not borne out by their oral evidence, so a number of the Honeywell witnesses in their statements towed a “party line” of being misled by Mr Chevalier’s alleged misstatements. In truth, with the exception of Mr Shelley, Mr Mitchell, Mr Cummings and, to an extent, Mr Hayes, they could not give any direct evidence of the course of the project being affected by any misstatement by Mr Chevalier as to the state of the design.
49.	Second, I agree with Mr Douglas that there was a tendency towards what he described as “collective amnesia” concerning the impact of the parallel work on the Valeo project at Newhouse and the extent to which it diverted resources away from the ULS project. However, I would not regard that as anything sinister, just a manifestation of a natural human tendency to downplay the impact of something, in circumstances where you have been under criticism, as Honeywell undoubtedly was from Mr Chevalier. As I will develop in more detail when I deal with the whole Resources issue, I do think that at various times during the life of this project, personnel (and in particular Mr Shelley) were pulled off the ULS project, in effect to fire fight on Valeo. However, whilst Honeywell and its witnesses may have downplayed the impact of this, ALS has undoubtedly overstated its impact. I do not consider that it can be regarded as a general malaise throughout the project.
50.	Third, on a related point, I found the evidence of Mr Hayes about complaints he had made contemporaneously concerning restrictions on resources caused by the involvement of Honeywell engineers, particularly Mr Shelley, in other projects, specifically the Valeo project, unconvincing. He seemed unable to face up to the reality of what he was clearly saying at the time, in a manner which made that part of his evidence seem somewhat evasive. Again there may be nothing sinister in that. He was removed from the project in July 2003 and replaced with Mr Kilker (whom he clearly did not particularly like and who had a very different management style) rather unceremoniously, at a time when the project and Mr Hayes himself were under a lot of pressure. It may be that Mr Hayes has sought to forget what cannot have been a very happy period in his professional life. 
51.	As a general observation about the Honeywell witnesses, inevitably many of them could not recall the detail of events save to the extent they were assisted by contemporaneous documentation. This is scarcely surprising, since the best part of five years has passed since the most recent events under the JCA. In the circumstances, in assessing the course of the project, I have often been more assisted by what appears from the documents than by what is inevitably a somewhat fractured recollection.
Dealings between the parties prior to entering the JCA
Detailed chronology of dealings
52.	Prior to considering the nature and extent of the contractual obligations imposed on each party by the JCA, it is necessary to consider in more detail the dealings between the parties over a period of some 18 months prior to the contract. This is relevant to both parties’ cases. ALS maintained, albeit in a somewhat muted fashion at the end of the trial, an alternative case of misrepresentation by Honeywell. Honeywell contends that it was misled by Mr Chevalier during the various meetings as to the status of the design of the latch. Honeywell contends that what emerges throughout the history of this matter, from before the first contact between the parties until the present day, is a pattern of Mr Chevalier making misleading statements about the status of the ULS and “talking it up”. I have already indicated in my overall assessment of Mr Chevalier as a witness that, as a general proposition, that seems to me to be correct. 
53.	Prior to his first contact with Honeywell, Mr Chevalier had approached several latch manufacturers with a view to negotiating a royalty agreement in relation to the ULS. In the event, no-one offered terms which were acceptable to him. In his discussions, he exaggerated the status of the ULS. By way of example, in a letter to Mannesmann on 7 September 1998 Mr Chevalier described the ULS as “developed to an advanced stage”. When asked about this in cross-examination, Mr Chevalier tried to say that this letter was not about the ULS but some other invention of his, but when I pointed out that a subsequent letter had described this as the “one motor all function” latch, he accepted this must be the ULS.  
54.	Similarly, in a letter to Mr Bland of Meritor of 19 February 1999, Mr Chevalier again stated that the ULS was developed to an advanced stage and also that it was the outcome of 6 years of research and nearly half a million pounds of investment. In his oral evidence he had maintained that he did not create the concept of the ULS until 1997 and was unable to explain the discrepancy or to what the half a million pounds related.  Confronted with the fact that the letter contained untrue exaggerations about the ULS, Mr Chevalier sought to blame the contents of the letter on Professor Harper, who then worked with him. This was the first example of what became something of an unedifying theme in his evidence of blaming others for the contents of documents sent out under his name.
55.	On 19 October 1999, the first of several meetings before the JCA took place between amongst others, Mr Chevalier and Mr Kettle and Mr Cummings of Honeywell. Mr Cummings prepared typed notes of all such meetings. These were prepared immediately after the relevant meeting from manuscript notes and were circulated to attendees within Honeywell for comment where appropriate. I have already referred to the fact that, whenever the notes contained some statement ascribed to ALS which is inconvenient to its current case or a misstatement by Mr Chevalier, he sought in his evidence to say that this was not said by him and that Mr Cummings was in some way “talking up” the proposal for internal Honeywell discussion purposes. 
56.	Mr Chevalier also claimed that his version of what had been said at meetings would be supported by Mr Kettle. This was certainly true to an extent of Mr Kettle’s written witness statement, but as I have already said, that bore little relation to the actual evidence he could give. In his oral evidence, Mr Kettle candidly accepted that without reading Mr Cummings’ notes of the meetings, he could not recollect what had been said at the meetings and that the set up of particular meetings meant that he would not always have heard what had been said anyway. Having seen Mr Cummings in the witness box, I am quite satisfied that his notes accurately reflect what was said at the meetings. He was a careful and professional man and would have had no reason to make up what he recorded in the minutes. Where the note included internal discussions within Honeywell either before or after the meeting with ALS, the note made that clear (as in the Summary on the third page of the note of the 19 October 1999 meeting).  
57.	The note of the meeting of 19 October 1999 records information (which can only have come from Mr Chevalier) that the mechanical design was substantially ahead of the electronic design in that the parts were already fully tooled and investment made in a production line. In his oral evidence, Mr Chevalier accepted that he might have mentioned Lander Automotive but he would never have said the mechanical sub-assembly was fully tooled. Lander Automotive was a company in Birmingham with whom Mr Chevalier had had some negotiations at an earlier stage to manufacture the latch on a production line, but from the documents it is clear those negotiations broke down as the parties were unable to agree terms. 
58.	However, at various stages in his dealings with Honeywell (right through until the time of termination), Mr Chevalier was prone to exaggerate the position with Lander Automotive and to suggest that there was an agreement in place with them. His excuse was that he thought they would have entered an agreement whenever he wanted one but that is unconvincing and not supported by any document. At several stages of his evidence he went so far as to say that he did have an agreement with Lander. Ultimately none of the misstatements about Lander matter because ALS contracted with Honeywell, not with Lander, but it is another example of unsatisfactory and unreliable evidence from Mr Chevalier
59.	In relation to the meeting of 19 October 1999, Mr Douglas sought to suggest that Mr Cummings might have become confused in what he heard in writing down that the parts were fully tooled, but Mr Cummings himself said in evidence that he had taken what Mr Chevalier said at face value and written it down. He did candidly admit that this would not have registered much with him, because at that stage he was focused on the control electronics, which was what Mr Chevalier had come to see Honeywell about. That Mr Cummings was not confused and had not misunderstood what Mr Chevalier told him, is evident from the fact that in his Summary he refers to the mechanical development being well advanced and to manufacturing resources being in place already.
60.	At the next meeting on 8 November 1999, Mr Chevalier is recorded as saying “Each element of the design has been systematically considered and an optimum solution determined”. As Mr McQuater accepted this is perhaps not the most egregious of the misstatements made by Mr Chevalier, although it would undoubtedly have contributed to the impression that the design of the mechanical portion of the latch was well advanced.  As I have said in discussing the general impression Mr Chevalier created as a witness, it may well be that he genuinely believed that the design (which of course he had been perfecting over a number of years) was such that little or no additional design work was required to put it in production. 
61.	The next meeting was at Newhouse on 13 January 2000, when Mr Chevalier was shown around some of the factory. It was during the course of this meeting that Dr Turnbull came up with the idea that Honeywell might manufacture the entire latch. He described this in his evidence as an “aha” moment when he realised that Honeywell might well be able to make the entire latch because it had a history of manufacturing dynamic products, springs, levers and parts formed through stamping. 
62.	Mr Cummings’ note records at the end that ALS would be prepared to consider Honeywell as manufacturing partner for the total latch assembly. In his evidence Mr Chevalier was at pains to deny any suggestion that he had been keen to have Honeywell as manufacturing partner. He claimed that Dr Turnbull had engaged in a “hard sell” about Honeywell being a global advanced technology company with sufficient involvement and understanding of the automotive industry to undertake the development and assembly of the ULS.  This formed a main plank in ALS’ pleaded case of misrepresentation. The full panoply of what Dr Turnbull is alleged to have said at this meeting is set out at Issue 33(1) of the Agreed List of Issues. Although Mr Chevalier maintained in his evidence that this had all been said by Dr Turnbull, it seems to me highly unlikely that it was or that even if anything was said about Honeywell’s capabilities, it was as detailed and specific as Mr Chevalier contends. 
63.	Mr Chevalier’s assertions about what had been said concerning Honeywell’s capabilities were ostensibly supported by Mr Kettle’s witness statement. ALS continues to rely upon and indeed quotes the relevant passage in its written Closing Submissions. This is rather surprising, since it was clear from his oral evidence that he could not recall any such discussion. He said that he had not heard Dr Turnbull make any offer that Honeywell might manufacture the entire latch and had not taken part in any prior discussion. He accepted that there were a lot of good reasons why ALS would want to work with Honeywell. When it was put that there was no need for a “hard sell” he said that Honeywell still had to sell itself, but I had the impression nothing like as much as Mr Chevalier was making out. 
64.	In his evidence, Dr Turnbull accepted that at the meeting, no-one from Honeywell had said “no, we can’t do this”, but he did not recall making any statement about Honeywell being a global advanced technology company etc. That Honeywell had 120,000 employees was in the public domain. He also did not recall representing at the meeting that Honeywell had the necessary understanding of the industry to undertake the development, but he pointed out that Honeywell did have experience of providing sensors to the automotive industry but they had no experience at Sensing and Control with dynamic assemblies. It was not put to him that, if he had said anything along the lines that Mr Chevalier alleges, it was not true or did not represent his genuine belief.
65.	As already noted above in the chronology of events, following the signature of a non-disclosure agreement concerning Mr Chevalier’s intellectual property in the ULS, on 25 May 2000, Mr Chevalier sent Honeywell two Zip disks of drawing files. His covering letter stated that the purpose of sending the drawings was to enable Honeywell to provide ALS with quotations for the cost of production or supply of sensors, part or sub-assembly or full assembly of the latch, to make the necessary assessment as to the optimum sensors or other solution and to provide ALS with alternative solutions to some component parts of the latch including housings. 
66.	Following this, a further meeting took place at Mr Chevalier’s London flat on 20 June 2000 attended by him and Mr Toledano and Mr Kettle and Mr Cummings. By this time of course, the possibility of Honeywell manufacturing the entire latch had been mooted at the previous meeting in January. It is quite clear from Mr Cummings’ note of the meeting (and in particular the six references to Honeywell as a “manufacturing partner”) that there were serious discussions about Honeywell manufacturing the entire latch and that Mr Chevalier expressed enthusiasm for this proposal. Mr Chevalier’s protestations to the contrary in his evidence, that there had been no such discussions before the subsequent meeting of 24 July 2000 and that the note was an internal Honeywell document, were distinctly argumentative. I was not impressed with this evidence.  
67.	Mr Cummings’ note also records that Honeywell could not open the drawings in dxf format in either CAD SX11 or ProE. In his evidence, Mr Cummings said (although he was not sure) that he thought Mr Shelley could view the drawings on screen. Mr Shelley’s evidence was that, when he received the disks he could not open them in either CAD SX 11 or ProE (which is what the note of the meeting records) and so he could not even view them. He could not recollect downloading a viewer from the Internet and said that Auto CAD was not purchased by Honeywell until June or July 2001, after the JCA was entered. 
68.	I consider Mr Shelley’s evidence is to be preferred on this to Mr Cummings’ evidence and I find as a fact that Honeywell was not able to open or view the drawing files sent by ALS on 25 May 2000 (or for that matter those on another CD handed over at a further meeting on 29 November 2000) until it purchased Auto CAD after the JCA was signed.  It is also clear from Mr Cummings’ note of the meeting on 20 June 2000, that ALS was told that Honeywell had so far been unable to open the drawings. In his evidence Mr Chevalier claimed that he had not become aware until recently (in the context of this litigation) of this claim that Honeywell could not open the drawings, but that cannot be correct. I suspect that he may not have focused on the issue and indeed it was not his problem at that stage. It seems that Honeywell never asked for hard copies of the drawings before the JCA was entered.
69.	On either side of the passage in the note of the meeting of 20 June 2000 concerning Honeywell being unable to open the drawings, Mr Cummings records this:
“[Since the meeting in January] Jean Chevalier has held further meetings with car manufacturers and finalised the details of the door latch assembly… the drawings comprise the ‘final design’ of the door latch. ALS is in the process of building and testing sample latches using production standards materials… If testing is successfully completed by end of July [2000], ALS expects to be in a position to commence production assembly machine development. This is expected to take nine months with production capability two to three months thereafter…”
70.	In cross-examination of Mr Cummings, Mr Douglas taxed him as to why the words “final design” were in inverted commas, suggesting to him that this meant “so-called final design”, with an appreciation on his part that there might be some further design work to do. Mr Cummings was having none of this and was adamant that the words were in inverted commas because they were the actual words used by Mr Chevalier. I accept that evidence and, in any event, Mr Chevalier essentially accepted that he had described it as the final design at the meeting. He tried to put a gloss on this that he meant at the end of the concept stage, but this is simply not borne out by the remainder of the passage I have quoted. Mr Kettle’s evidence both in his witness statement and at trial was that he recollected Mr Chevalier saying at this meeting that the design of the mechanical part of the latch was ready.
71.	Mr Chevalier also accepted in his evidence that he had referred to testing being in progress, but said that this was a reference to informal testing he was conducting in his flat. He denied that the impression created was of formal testing and of an advanced stage of development and again suggested that what Mr Cummings had noted bore no resemblance to the truth or reality and that he must have been muddled. I do not accept that Mr Cummings was muddled and consider that he noted down accurately what had been said.  
72.	What he records Mr Chevalier as saying about the state of the design did amount to a statement that the formal testing was underway and that the design of the mechanical portion of the latch was in an advanced state of development, essentially completing design validation before moving to the product development phase. Of course, faced with the reality now of where the design of the latch actually was in terms of development, Mr Chevalier no doubt has to accept that what was said bore no relation to that reality, but that he said it I have no doubt. Furthermore, this became something of a theme of Mr Chevalier’s.
73.	The note of the meeting also records (in the passage I have quoted) that Mr Chevalier had held further meetings with car manufacturers since the previous meeting with Honeywell in January 2000 and later records that he said he had had preliminary meetings with five such manufacturers, PSA, Renault, VW Audi, BMW and Mercedes.  Mr Chevalier initially accepted in cross-examination that he had said that he had made further visits to car manufacturers, though he later denied this, saying that what he had said earlier had been a “pulse” (which I took to mean a momentary aberration) said without proper thought. I consider that he did say that he had had further such meetings, another instance of him “talking up” the latch. 
74.	Although Mr Cummings accepted that he was noting down what was said and not focusing on the content, he did circulate the note to others within Honeywell, more senior than himself including Mr Harman, Mr Horst Wild, vice president Customer Development for Automotive on Board Honeywell Europe and Mr John Smith-Malzfeldt, commercial marketing manager for Sensing & Control, Europe. That was followed up by a presentation to Mr Wild and others to enable a decision to be made as to whether to support the proposal or not. Mr Cummings prepared a power point presentation, which was headed “How would you like a $1 billion business opportunity?”
75.	Mr Douglas sought to rely upon this document as showing that Honeywell’s motivation was purely financial and that it had not relied upon any of Mr Chevalier’s statements about the state of the design in making its decision to assume responsibility for the entire latch.  In fact, this document seems to me to support the opposite conclusion, that reliance was placed on Mr Chevalier’s statements. It contains a number of matters clearly derived from what he had said at the meeting on 20 June 2000. Thus, under Background it says “June 2000-ALS present “final” mechanical design. Request Honeywell commitment”. In relation to potential customers it says “ALS has shown prototypes to (at least) six car manufacturers-PSA, Renault, VW Audi, BMW, Mercedes and Ford” and under next actions it says “Production is 18 to 30 months away. Investment would be in 2001 and possibly 2002”. All this is entirely consistent with the statements which Mr Chevalier had made at the meeting.
76.	The note of the 20 June 2000 meeting also refers to ALS having prepared a comprehensive business plan which it would be happy to share with Honeywell if Honeywell decided to become its manufacturing partner. Mr Cummings evidently wanted to see the business plan for the purposes of his presentation to management, as Mr Chevalier accepted at one point in his evidence, although he later resiled from this and said that all that Mr Cummings wanted was market information.  
77.	Mr Chevalier was reluctant to hand over the whole business plan at this stage. He claimed that this was because it was an internal ALS document and was not to be relied upon and that he had told Mr Cummings and Mr Kettle this, an allegation he repeated several times. This was one of the points in his evidence where I did feel Mr Chevalier was lying and knew it. This allegation was made up as one of the explanations for the extraordinary inaccuracies in the business plan, the other being that the whole document was only referable to the future, in the event that he required finance, an equally fanciful explanation.  It is striking that it was never put to Mr Cummings in cross-examination that Mr Chevalier had said that the business plan should not be relied upon, although that was something he had expressly denied in his second witness statement. 
78.	The closest Mr Kettle came ostensibly to supporting Mr Chevalier’s position on this was in his witness statement, where he said he had assured Mr Chevalier more than once that Honeywell would not rely upon the business plan. It became apparent in cross-examination that that was not really his evidence and even if it had been, I would not have accepted it. It is wholly inconsistent with what he said in his e-mail to Mr Cummings of 22 September 2000 about ALS sharing the business plan with Honeywell  because it would go a long way towards building trust and helping convince Honeywell that it was a project worth pursuing.
79.	In his oral evidence, Mr Kettle said he had thought the business plan would be a great help to Mr Cummings in preparing internal reports but that Honeywell would not be relying solely on ALS’ business plan in making its own commercial decision, although as the salesman he would not have been party to the internal workings of those in Honeywell making that decision. He avoided answering the question whether he had in fact given Mr Chevalier the assurance Honeywell would not rely on the business plan. When pressed by Mr McQuater he said, rather unconvincingly, that he could not remember exactly whether he had definitely said that Honeywell would not use the business plan and that he could not remember saying that to Mr Chevalier in black and white. I consider that this is one of those instances where in his oral evidence Mr Kettle, an essentially truthful witness, could not support what had been written on the page of the witness statement ostensibly in his name. I find that Mr Chevalier did not tell anyone at Honeywell that they could not rely on the ALS business plan and that Mr Kettle did not give Mr Chevalier any assurance that they would not rely on it.
80.	As to why Mr Chevalier was reluctant in the period before the JCA was signed to hand over the business plan, this may be one aspect of his jealous guarding of his own intellectual property and confidential information, a trait which emerged time and again over the course of the relationship between the parties. Whatever the explanation, all that he provided in the aftermath of the 20 June 2000 meeting was an extract from the plan which he sent as an attachment to an e-mail to Mr Cummings headed “Latch Information” on 4 July 2000. 
81.	That extract went beyond merely market information and included under the “Key Information” section statements that “the latch is the result of a considerable investment in research and development spread over 5 years” and that “ALS has recently completed the development and testing of the new product to a level suitable for mass production”. In a section headed “The Business” is another statement that “The inventions embodied in the patents have been translated into prototypes developed to a level suitable for mass production”. All these statements are in line with what he had said at the 20 June 2000 meeting, giving the impression that the ULS was at the end of the design validation phase and about to enter the product development phase. 
82.	Mr Chevalier accepted that these statements would be misleading if taken out of context, but said that they were not actually misleading, because they were referable to future presentation to financial institutions. As I have already indicated, that explanation is incredible and I reject it. It is not necessary to decide whether Mr Chevalier consciously and deliberately sent Honeywell a document which was misleading. It may be that the real explanation, as I have said, is less sinister and that the contents of the document demonstrate the fantasist in Mr Chevalier, the stage of development he would like to think the latch had reached. Whatever the real explanation for the document though, the truth is that the statements were misleading.
83.	In fact the document arrived too late for Mr Cummings to incorporate it in his internal presentation, which was made to management the following day. Although (perhaps unsurprisingly after eight years) he could not remember looking at specific parts of the document, he said in evidence that he had certainly read it at some point in time close to receiving it. He also incorporated some of the information in the business plan he prepared in April 2001.
84.	A further meeting with Mr Chevalier and Mr Toledano took place at Newhouse on 24 July 2000 attended by not only Mr Cummings, Mr Kettle and Dr Turnbull but two more senior Honeywell personnel, Mr Glenn Harman, European Sales Manager and Mr Alan Wright, Vice President, Global Products and Systems Europe. At this meeting Mr Cummings records that:
“Jean Chevalier advised that he had been fully responsible for design analysis and design for manufacture studies on the Mercedes S-class door latch system and had carried out similar studies for this product. Analysis results and full FMEAs can be made available for review.  ”
85.	Mr Chevalier sought to explain away the references to analysis results and FMEAs (Failure Mode and Effect Analysis, a tool used by engineers in the development of design) in his evidence as relating to the S class latch, but then (no doubt recognising that in context, it has to have been a reference to an FMEA on the ULS) said he did have a concept FMEA. No FMEA identifiable as having been in existence at that time has been disclosed by ALS. The reference to analysis results and FMEAs would have been a further indication that the ULS was at an advanced stage of development. 
86.	Mr Chevalier claimed that at some stage he had offered Mr Cummings his FMEA but that Mr Cummings had declined because Honeywell was going to use its own system. This was another matter that was not put to Mr Cummings in cross-examination. In fact it seems to me wholly inconsistent with Mr Cummings’ internal e-mail of 6 July 2001 which refers to doing a gap analysis for which Honeywell should ask Mr Chevalier for the analysis, FMEA and quality audit checking which he had already carried out. This suggests both that Mr Cummings believed what Honeywell was told at the meeting on 24 July 2000 about FMEAs and other analyses having been carried out and that he wanted the FMEA and other documents,  although in the event there is no evidence that he asked Mr Chevalier for these documents.
87.	At the meeting Mr Chevalier also talked further about the business plan saying that ALS had taken the precaution of having it verified by an independent company PriceWaterhouseCoopers and that the market figures were audited by Ernst & Young. It is clear that this was a substantial exaggeration and that (despite his denial in his evidence) Mr Chevalier was talking up the business plan for Mr Wright’s benefit. As Mr Chevalier had to accept, PWC (to whom he paid £10,000) had proceeded on the assumption that the information provided to them by ALS was accurate and had only modelled financial projections, not challenged the reasonableness of the assumptions made in the plan. He accepted that Ernst & Young had only been involved informally and at most had looked at the figures in the business plan, scarcely an audit. 
88.	There are two other aspects of the meeting on 24 July 2000 relevant to the issues in the case. First, Mr Cummings’ note records Mr Wright saying that Honeywell has a strong track record with vehicle OEMs but that “This product is, however, more mechanically complex to manufacture than anything made currently at Newhouse”. In both his witness statement and his oral evidence, Mr Chevalier devoted considerable energy to denying that this had ever been said by Mr Wright, presumably because it was a statement which ran flatly counter to much of ALS’ misrepresentation case. However, I am in no doubt that Mr Wright did say this, not just because there is no reason to suppose Mr Cummings’ note was inaccurate. Mr Cummings himself said in evidence that this was an instance where he had a good recollection of this being said and that it indicated a note of caution, that Mr Wright had some concerns. Mr Kettle accepted without demur in cross-examination that Mr Wright had said this and Dr Turnbull said he recalled something along those lines being said. 
89.	The second matter concerns the allegation pleaded by ALS and maintained in Mr Chevalier’s witness statement that, at this meeting, agreement was reached that, in the event that Honeywell did agree to manufacture the latch, Honeywell’s profit share from any collaboration would be a 15% mark up on its costs. This was denied by all the Honeywell witnesses who attended and was not reflected in the note of the meeting. Mr Kettle maintained in evidence that there had been a “quick fire exchange” between Mr Wright and Mr Chevalier in which Mr Wright said we need to get our money back, Mr Chevalier said would you be happy with 15% and Mr Wright said yes they would. Mr Kettle accepted that there was no legally binding agreement, but was insistent that a short discussion had taken place. 
90.	In his oral evidence Mr Chevalier was constrained to accept that there had been no binding agreement at the meeting. He accepted that the note of a subsequent meeting on 29 November 2000 shows him recognising that nothing had yet been agreed about profit share. His explanation was that things had now moved on from the 24 July meeting and that the subsequent meeting demonstrated that Honeywell was going to put forward monies to develop the project including investment in tooling and a production line. He then accepted that for practical purposes we could “put aside” what he had said was agreed at the meeting on 24 July 2000. This evidence was all rather incoherent, but what is clear in my judgment is that nothing was agreed about profit share at the meeting on 24 July. I have considerable doubts whether it was even discussed, since it would have been of sufficient significance that Mr Cummings would have noted it. I agree with Mr McQuater’s submission that, in the light of the evidence, ALS’ case on an agreement as to profit share wholly collapsed.
91.	Following the meeting on 24 July 2000, draft Heads of Agreement were produced which were discussed at a meeting on 27 September 2000. A further meeting between the parties was held on 29 November 2000, at which Mr Chevalier handed over a CD of the latest component and sub-assembly drawings. No further statement was apparently made by Mr Chevalier about the status of the design at either of these meetings, but equally nothing was said to disabuse Honeywell of the impression previously created.  That meeting on 29 November 2000 was in fact the last formal meeting between the parties before the meeting on 17 May 2001 at which the JCA was signed. In the intervening period, negotiations took place at a rather desultory pace about the terms of what became the JCA.
92.	 Prior to the contract being signed, Mr Cummings prepared a Business Plan or “Strategic Initiative Plan” which he circulated to Mr Wright, Mr Wild, Mr Smith-Malzfeldt, Dr Turnbull and Mr Kettle on 27 April 2001. That document makes it clear that Honeywell was seriously considering the sub-contracting of the manufacture of the mechanical sub-assembly to an experienced latch manufacturer, an option which remained a possibility when the JCA was entered and which was expressly preserved by Article 9 of the JCA. 
93.	Mr Cummings’ evidence was that some of the information in the Honeywell Business Plan he prepared derived from the extract from the ALS Business Plan which he had received the previous July. That this is the case is obvious from a comparison between the two documents. Although the document prepared by Mr Cummings does not mention expressly that the design of the ULS was essentially at the design validation stage, it seems to me that the timescale contemplated by the document is predicated on that assumption. Thus, the Resource Requirements refer to the development and pre-production time scale being estimated at 18 months and the Project Time Line contemplates design transfer until the end of Q3/2001, with contract negotiation with selected OEMs starting in that period and running into the fourth quarter and then immediately after that, development of production tools and automation. In other words, this Plan did not contemplate Honeywell having to do any design work prior to process and product development. 
94.	Furthermore, this assumption behind the Plan was confirmed by the evidence of Mr Cummings in his first witness statement where at paragraph 92, he said:
“Clearly, at the time I drafted this plan, Honeywell understood the design itself to have been verified and ready to progress at least to prototype production stage.  ”
Although Mr Douglas asked a series of detailed questions at some length about the Honeywell Business Plan which Mr Cummings had prepared, that particular piece of evidence was not challenged by Mr Douglas in cross-examination.
95.	The Honeywell Business Plan was subsequently sent by Mr Kettle on 15 May 2001 to Mr Bill Mitchell, Director of Automotive Customer Development at Honeywell in Freeport and Mr Jack Sosnowski, Global Marketing Manager, also at Freeport. In evidence, Mr Mitchell remembered reading the Business Plan at around this time, but could not recollect whether he did so before or after signing the JCA. He had had discussions with Mr Cummings and Mr Wright, from which his understanding was that the design was at a stage where it could be quickly transferred for manufacturing, but his recollection was that such discussions were after the JCA was signed.
96.	A meeting took place on 17 May 2001 between Mr Chevalier and Mr Toledano for ALS and Mr Kettle, Mr Cummings, Mr Wild and Mr Smith-Malzfeldt for Honeywell, at which Mr Chevalier, Mr Toledano and Mr Wild signed the JCA. An action plan was agreed under which ALS was to provide full copies of its business plan and product specifications (which Mr Chevalier had prepared) were to be sent to targeted OEMs with invitations to attend a meeting to see a demonstration of the ULS. This was to be marketed as a Honeywell product with Mr Chevalier introduced as a consultant to Honeywell. Mr Chevalier said that he believed that they should expect development contracts from OEMs within three months. 
97.	Looking at the position as it stood as at the date of the signing of the JCA, it seems to me clear that Mr Chevalier had exaggerated the status of the design and made statements to Honeywell about it which conveyed that it was at an advanced stage of development, effectively at the design verification stage. Furthermore, as I set out at a slightly later point in this judgment, this pattern of exaggeration and misstatement by Mr Chevalier continued after the JCA was signed, particularly in the materials sent out to OEMs.  In truth (as the experts now agree and Mr Chevalier was constrained to accept in evidence) the design was still at the concept development stage, requiring considerable work before it was even ready for a soft tooled prototype build. 
Reliance on misstatements by Mr Chevalier
98.	The question which then arises is whether Honeywell was in any sense misled by those misstatements at the time when it entered the JCA. I agree with Mr McQuater that it is quite obvious, both from the contemporaneous documents and the evidence of the relevant Honeywell witnesses, that Honeywell believed what it was told by Mr Chevalier about the state of the design. I have already referred to the contents of the power point presentation prepared by Mr Cummings after the 20 June 2000 meeting, the assumptions made in the Honeywell Business Plan and the unchallenged evidence of Mr Cummings, all of which support that belief. There is also the evidence of Mr Mitchell about what he understood concerning the status of the design from his discussions with Mr Wright and Mr Cummings. Although those discussions may have post-dated the signing of the JCA, they reflected what Honeywell understood at the time the JCA was entered.  
99.	That Mr Mitchell had that belief at the time the JCA was entered or immediately thereafter is borne out by the terms of his Inter-office Correspondence headed “ALS assumptions and resource allocation” dated 20 June 2001 sent to Mr Sosnowski. Under “Assumptions” the second bullet point was “Design is manufacturable as it is today”. The timeline set out then assumed that in June 2001 “the design is locked and in place for a production and manufacturing Plan”, in July 2001 a team is assigned “to develop manufacturing approach, process, equipment and design validation” and in December 2001 “finalise design, manufacturing process, Equipment and design validation”. That aggressive timeline is clearly predicated on the design being at an advanced stage and not requiring a substantial amount of further work before design validation, or, putting it another way, as a forward plan it would be completely nonsensical if Honeywell had appreciated that a considerable amount of further design work was required before design validation. 
100.	To those matters can be added the evidence of Mr Kettle that Honeywell did not expect the design of the mechanical assembly to require a lot of change at the time of the JCA and of Mr Shelley that Honeywell was presented with a latch that was pretty well advanced and it was promoted that way as well. That Mr Shelley for one had believed initially that the design was “complete” is borne out interestingly by the terms of an e-mail which he sent to Mr Dan Kilker, the then project manager, on 11 September 2003 (the very day Mr Chevalier sent his termination letter, although Mr Shelley’s e-mail was sent before): “The method JP is using to develop this latch is absolutely ludicrous considering the timescales we are expected to meet with this so-called completed design”. Although Mr Shelley did realise at a fairly early stage of the actual performance of the JCA that the design was not as far advanced as Mr Chevalier was representing (a matter to which I return below), that e-mail gives the lie to the suggestion that the belief by Honeywell at the time of the JCA that the design was far advanced is some after the event invention for the purposes of this litigation, which seemed to be what Mr Douglas was suggesting. 
101.	Mr Douglas relied upon a number of matters as demonstrating that in entering the JCA Honeywell had not relied on anything Mr Chevalier said about the status of the design of the latch.  He points out that Honeywell made no real attempt to find a way of opening the drawings before it entered the JCA, nor did anyone ask Mr Chevalier for hard copy drawings or for his FMEAs or test results. In effect Honeywell did no due diligence before entering the JCA, whereas pressing further on those matters would have revealed the real state of the design. 
102.	This was a point made by Mr Kilker during a brief involvement he had with the project in August 2001 when he was asked to review the JCA and the ALS Business Plan and sent an internal e-mail to Mr Sosnowski colourfully headed “Mad Girl Friend Door Slam” in which he says:
“(Not to be a negative sorter but…) Tell me you had a door system guy review the contract/spec BEFORE it was signed. When reviewing Exhibit 1 Product Specification, I saw no mention that any Door System testing has been completed. 
…..
My concern is that this slick little game changing device has a great many shafts bearings and gears. Based on what little I know about this ALS unit, it would not surprise me if a redesign on materials, shaft structure and supports along with housing structure and geometry will be required (if door level testing has not been done).”
103.	Mr Douglas understandably placed particular reliance on this e-mail. Apart from being a prophetic perception of the design problems in fact encountered later in the development from one person within Honeywell who did have some latch experience, he points out that this demonstrates what could and should have been ascertained about the real state of the design with some due diligence. That may well be right but the issue here is not whether any reliance was reasonable (as it might be in a case of misrepresentation) but whether in fact there was any reliance at all. The absence of due diligence does not prove that there was no reliance. 
104.	Mr Douglas counters that by submitting that the fact that no due diligence was done on the design demonstrates that Honeywell was not really interested in the design or the stage it was at, but only interested in the financial opportunity it presented. Because of the potential financial reward, Honeywell was prepared to take the latch as it found it and to take the risk that it proved unmanufacturable, an example of the “high risk, high reward” strategy which Honeywell Sensing and Control adopted.  As I see it, there are two fallacies in that argument. 
105.	First, the risk that the ULS might prove unmanufacturable has no necessary connection with the stage of development which the design had reached at the date of the JCA.  The latch might have reached the end of the design development phase and still prove unmanufacturable in the process and product development phase because the design was fundamentally flawed. Second, the financial opportunity which Honeywell undoubtedly saw before the JCA was entered was predicated upon the design being at an advanced stage, “final” as described by Mr Chevalier at the meeting on 20 June 2000, reflected in the $1 billion business opportunity power point presentation prepared by Mr Cummings on 28 June 2000.
106.	Next Mr Douglas submitted that the fact that the design was still in the concept development stage was obvious from the machined concept prototypes Mr Chevalier showed Honeywell at the various meetings and from the drawings which he provided to Honeywell before the JCA. So far as the prototypes are concerned, I do not consider that they were any indication of the stage which the design had reached. All they would tell anyone inferentially was that no prototypes had been built off soft tools yet, not whether the design was at a stage where a soft tooled prototype could now be built. It is also interesting to note that the evidence of Dr Turnbull, a senior engineer at Newhouse was that his assessment from seeing Mr Chevalier’s prototypes was that the design was “mid-design” in Honeywell terms, ready for soft tooling.
107.	So far as the submission that it was obvious from the drawings that the design was still at the concept stage is concerned, this was founded upon the opinion to that effect of ALS’s latch expert, Mr Timothy Bland. That opinion was not shared by Honeywell’s expert Mr Stephen Drysdale. I shall have to resolve that issue later in the context of determining how quickly after the JCA was entered Honeywell did appreciate or should have appreciated that the design was still at the concept development stage. 
108.	However for the moment, it is only necessary to record that, even if it was obvious from the drawings that the design was still at the concept development stage, the evidence of Mr Shelley, the Honeywell mechanical design engineer with the task of looking at the drawings before the JCA was entered, was that he could not open the disks and CD provided by Mr Chevalier and did not actually see or review the drawings relating to the mechanical sub-assembly until some time in June or July 2001, after the contract was entered. As I have already indicated, I see no reason not to accept that evidence. 
109.	The other matter relied on by Mr Douglas as demonstrating that Honeywell had not in fact relied on any misstatement by Mr Chevalier about the state of the design at the time it entered the JCA, was the complete absence of any contemporaneous complaint in either 2002 or 2003, when Honeywell realised that the design was nowhere near as advanced as Mr Chevalier had represented. Mr Mitchell was challenged by Mr Douglas to point to a single document where he had complained to Mr Chevalier that the design was not as advanced as it should have been. Mr Mitchell was clearly flummoxed and was unable to do so.  Mr Chevalier’s own evidence was that the first time he had heard it suggested that he had misled Honeywell about the state of development of the ULS was when he saw Honeywell’s Defence in 2006.
110.	This is obviously a difficult point for Honeywell and I have considered very carefully whether it should lead me to reject Honeywell’s case that it was misled by Mr Chevalier both before and after entering the JCA. I have concluded that I should not, essentially for three reasons. 
111.	First, I accept Mr McQuater’s submission that there was never a “Eureka” moment (at least before the failed soft tooled build) when Honeywell was suddenly fully aware at just what an early stage of development the design of the ULS was, at the time the JCA was entered. As will appear later in my judgment, I consider that it was very much  a matter of gradual realisation, with some individual engineers appreciating that the design of the mechanical sub-assembly was not as far advanced as Mr Chevalier had stated.  This is particularly so in the case of Mr Shelley, perhaps because, in a very real sense, he was the only mechanical design engineer at Honeywell who looked at the whole of the design of the mechanical sub-assembly, as opposed to particular parts of it with which other engineers were concerned, until Mr Spurr arrived in January 2003. 
112.	Second, there is some force in Mr McQuater’s submission that as engineers, the Honeywell personnel would have been more concerned with working towards a solution of design problems rather than engaging in a blame culture. This might well have been the case when the collaboration was still in effect but does not really explain why, when Mr Chevalier terminated the JCA in September 2003 and sent a detailed letter setting out his allegations against Honeywell, Honeywell did not respond that some of these matters were attributable to his having misstated the state of development of the latch in the first place. The explanation may be that at that time, Honeywell was more concerned with finding a way to continue the collaboration than pointing the finger at Mr Chevalier. 
113.	Third and perhaps most importantly, there are a considerable number of internal Honeywell documents (some of which I have already referred to and others which I will need to refer to later in considering the progress of the project) from which it is apparent that at the time of entering the JCA and for some time thereafter, many at Honeywell were still under the misapprehension that little if any design work was required prior to the soft tooled build. 
114.	Accordingly, I reject the suggestion by ALS that the case about Honeywell being misled by Mr Chevalier’s misstatements about the status of the design of the latch is an ex post facto fabrication by Honeywell to justify its performance of the JCA. I consider that Mr McQuater is right that Mr Chevalier misled Honeywell comprehensively, in the sense that those involved with the project at the time the JCA was entered believed that little or no work would be required on the design before soft tooled prototypes could be produced. 
115.	Despite Mr Chevalier’s protestations in his oral evidence that Honeywell engineers were fully aware from day one of how much work was required, I do not accept that evidence at least so far as the position at the time the JCA was entered is concerned.  Furthermore, the extent to which Honeywell was misled was compounded by the subsequent misstatements made by him, such as the terms of Mr Chevalier’s Business Plan sent to Honeywell on 4 June 2001. I shall consider later the extent to which Honeywell continued to be misled. 
The legal effect of the misstatements
116.	A much more difficult question concerns the legal effect of these misstatements. Honeywell has never pleaded a case of misrepresentation by ALS inducing it to enter the contract, so that there is no question of any entitlement to rescind the contract for such misstatements. In any event, as Mr Douglas rightly points out, any plea of rescission would be met by the answer that by about September 2002 at the latest, Honeywell was well aware that the design had not been as Mr Chevalier had stated at the time of entering the JCA and yet, Honeywell continued with the contract, thereby affirming it.
117.	When I asked Mr McQuater whether he was relying upon the misstatements as part of the “background” or “surrounding circumstances” against which the JCA should be construed, he was understandably cautious, being conscious that pre-contractual negotiations are not relevant or admissible in construing a contract. Reliance upon the misstatements merely as part of the “background” would almost certainly breach that principle.  Rather, the way Mr McQuater puts Honeywell’s case is that the statements made by Mr Chevalier demonstrate a common understanding or assumption as to the status of the latch and thus form part of the admissible background to which the Court can have regard in construing the contract. 
118.	However, there are problems with that analysis. As Mr Douglas points out, to the extent that Honeywell is contending that Mr Chevalier deliberately misled Honeywell, he can hardly have had the same understanding as Honeywell and on analysis, this may be just another way of putting an unpleaded case of misrepresentation.  Of course, as I have already said, it may be that Mr Chevalier did not deliberately mislead Honeywell, because he had underestimated how much design work would be required before a soft tooled build could take place. Nonetheless, he undoubtedly exaggerated the stage of development which the latch had reached. On balance I do not consider it would be safe to conclude that at the time the JCA was entered, there was some common understanding or assumption.
119.	The second way in which Honeywell puts its case as to the legal effect of the misleading statements by Mr Chevalier, is to say that those misstatements, which continued after the JCA had been concluded, inform the issue as to the reasonableness of Honeywell’s actions and whether there was unreasonable delay by it in the performance of the contract. To the extent that the reasonableness of Honeywell’s actions can be judged by its understanding as to the status of the design of the latch, this way of putting the case is more promising. I will return to this issue when I consider the construction of Article 4.5 of the JCA further below.
Misrepresentation 
120.	Before turning to some of the issues of construction of the JCA, I will deal with ALS’s pleaded case of misrepresentation. The misrepresentations which Honeywell is alleged to have made before the JCA was entered are set out in Issue 33 of the Agreed List of Issues. This issue did not loom large at the trial perhaps for obvious reasons. So far as the representations said in Issue 33(1) to have been made by Dr Turnbull at the meeting on 13 January 2000 are concerned, I have already set out his evidence on those in the detailed chronology above.
121.	The alleged misrepresentation by Mr Kettle and Mr Cummings at the meeting on 20 June 2000 that Honeywell intended to fund the production line machinery if it entered an agreement with ALS is not recorded in Mr Cummings’ note as having been a promise made by Honeywell but as the expectation of ALS which is something different altogether. It was not suggested to Mr Cummings in cross-examination that he had made such a representation, let alone that if he had it was untrue.  
122.	The representations said in Issue 33(3) to have been made by Mr Wright at the meeting on 24 July 2000, to the extent they were made at all were clearly qualified by his note of caution that the latch was mechanically more complex than anything previously made at Newhouse and thus no question of any misrepresentation arises. 
123.	I should add that to the extent that any of the representations alleged in relation to the meetings on 13 June 2000, 20 June 2000 and 24 July 2000 are part of a “hard sell” of itself by Honeywell I do not consider any such hard sell either occurred or was necessary. Much of what was allegedly said would have been information available in the public domain anyway and I agree with Mr McQuater that ALS was well able to make its own assessment of Honeywell without relying on any such representations. 
124.	Just as many at Honeywell were enthusiastic about the business opportunity the ULS project offered, the contemporaneous material amply demonstrates (despite Mr Chevalier’s concerted attempt in his evidence to suggest that all the enthusiasm came from Honeywell) that ALS was very enthusiastic about the prospect of collaboration with Honeywell. It was, as I put to Mr Kettle and he accepted, a case of “willing buyer and willing seller”.  Indeed, if anyone was engaged in a “hard sell” it was ALS. Not only was Mr Chevalier a tireless enthusiast and advocate for the latch, but both he and Mr Toledano exhibited what Mr Kettle described in an internal e-mail dated 22 September 2000 to Mr Cummings and Mr Harman as “running on high octane optimism”. As he continued graphically: 
“Perhaps we need to disavow them of this blind optimism, “back up the hearse and let them smell the flowers” as it were.”
125.	So far as the other representations alleged in Issue 33 (4) to (6) are concerned these are largely matters of opinion or intention for the future. To be actionable they would have to be shown not to have been honestly held. ALS never put to any of the Honeywell witnesses who attended the meetings or were responsible for the negotiations, that any statements of opinion or intention were not honestly held and accordingly any claim for misrepresentation must fail.  
126.	The truth is that the misrepresentation case never stood any real prospect of success and once ALS had failed to put to the Honeywell witnesses that what had been said was false or that any opinions or intentions were not honestly held, this case should have been abandoned. The fact that it was not is an example (and there are others to which I will come in due course) of what Mr McQuater correctly described as ALS’ inability to let go of a single point in this case.
Interpretation of the Joint Collaboration Agreement
127.	I do not propose to set out the terms of the JCA here save to the extent necessary to make sense of the issues in relation to its construction. There are several issues of construction, but a number of them (such as the effect of Articles 10.1, 10.3 and 12.2) relate to termination of the ULS and are better addressed when I come to deal with the questions of the validity of the termination and of what if any loss has been suffered by ALS. 
The obligations of Honeywell under Article 4.5 and Exhibit 4 of the JCA
128.	The principal issue of construction of the JCA with which I need to deal at this point is the issue concerning the extent of the obligations imposed upon Honeywell by the JCA and, specifically, whether Honeywell was under an obligation to develop the design of the ULS from the state it was actually in at the date of the JCA (which the latch experts agree was some point in the concept development phase although they disagree as to precisely where) to make it ready and fit for the soft-tooled prototype build. Given that the JCA was entered into in May 2001 and the first prototype build did not take place until March 2003, it can be seen straightaway that this issue is of considerable importance in determining whether, as ALS contend, Honeywell is responsible for all of that delay.
129.	Mr Douglas for ALS contends that the terms of Article 4.5 under which Honeywell warrants that it will take “any and all reasonable actions without unreasonable delay to manufacture the latch” impose a clear and all-encompassing obligation.  Under this, Honeywell has agreed to take all reasonable steps without unreasonable delay to take the latch from whatever state it is in at the time of the JCA up to manufacture. He says that it is of no significance that the Scope of Work does not include a specific commitment by Honeywell to further develop and design the ULS to make it suitable for the building of soft tooled prototypes, either because the list of commitments is not exhaustive or because that commitment to develop and design the ULS from wherever it is at the time of the JCA is encompassed within item 12 of the Scope of Work, the commitment by Honeywell to “develop the manufacturing means and method for the product”.
130.	He submits that the contrary conclusion that there was no obligation on Honeywell to develop and design the ULS to make it suitable for the building of soft tooled prototypes would mean that there was a gap in the contract. That would be an unreasonable construction, given that the whole purpose of the contract is the further development of the latch. This is made clear by the fourth recital (“Honeywell ….wishes to further develop for manufacture the Product”), the definition of “Product” (“the [ULS] designed and developed by ALS comprising a combination of a mechanical and an electronic sub-assembly and as further developed under this Agreement”) and Article 2 –Purpose (“The purpose of this Agreement is to define the terms and conditions under which the Parties agree to co-operate in the development, production and sale of the Product”).

131.	Mr McQuater for Honeywell submits that the obligations assumed by each party are as set out in the Scope of Work. This is made clear by Article 3.1 which provides:
“The subject of the co-operation is the further development, manufacture and sale of products satisfying all requirements pertinent to the Product as presently contemplated and future development of successive revisions as further described in the Scope of Work, Exhibit 4.”
132.	He submits that when one considers the Scope of Work, in stark contrast to the position with the electronic sub-assembly (where, under item 4, Honeywell agrees to “further develop the sensors, motor and control electronics assembly to optimize manufacturability and process quality in line with automotive and internal standards and procedures....”) there is no equivalent obligation to develop the design of the mechanical part of the ULS. He submits that it is extraordinary that, if Honeywell were assuming an obligation to develop the design to make it ready for the soft tooled build, that obligation is not clearly stated in the Scope of Work, nor can Article 4.5 be used to create such an obligation by a side wind. This is because the obligation in Article 4.5 is to be read as one to take all reasonable actions in accordance with the Scope of Work.
133.	This is a powerful argument, but not one I have felt able to accept. The fallacy in it really emerged when I asked Mr McQuater whether he accepted that item 12 (“Honeywell will develop the manufacturing means and method for the product(s), including component and assembly tooling and fixtures, and selection and control of third party suppliers”) must include the obligation to design to optimise manufacturability of the mechanical portion of the latch in the product and process development stage.  He did accept this and once that concession is made, it can be seen that the distinction which Honeywell seeks to draw between design work before the soft tooled build (for which it says it is not responsible) and the build itself and design work after that build to optimise manufacturability (for both of which it does accept responsibility) is an artificial one. As Mr Douglas points out, the JCA does not draw this distinction. 
134.	However, as Mr Douglas also says, in one sense all the changes to the design which Honeywell identified and developed after the failed build in March 2003 are developments concerned with manufacturability. It would be odd if, had they been identified before the build (as ALS contend some of them should have been) they would not have been Honeywell’s responsibility to develop, which would seem to be the logical effect of Honeywell’s argument.
135.	Although item 12 may not be as felicitously worded as it might be, I consider that the obligation assumed by Honeywell to develop the manufacturing means and method did include the obligation to develop the design of the mechanical sub-assembly from wherever it was at the date of the JCA, to make it manufacturable. However, even if that analysis were wrong, I do not consider that the Scope of Work can be regarded as an exhaustive definition of everything that Honeywell may have to do to make the ULS manufacturable.  Article 4.5 imposes a clear obligation to take any and all reasonable actions to manufacture the product and that obligation is not specifically qualified by reference to the Scope of Work. In effect, Honeywell seeks to put an impermissible gloss on the Article by adding the words “as set out in the Scope of Work” after the words “any and all reasonable actions”. However those words are not there and without them the provision will not bear the construction for which Honeywell contends.  
136.	 Honeywell also sought to downplay the significance of the provision by submitting that the obligation was concerned with manufacturing a latch at a competitive cost. That is of course correct but I do not see how it assists Honeywell. The obligation has two parts: to develop the latch for manufacture (a qualified obligation in the sense that it is not absolute but, in effect to take reasonable steps in a reasonable time) and to do so at a competitive cost. The existence of the latter part of the obligation does not reduce the extent of the former. 
The standard of performance under Article 4.5
137.	The next issue which arises in connection with Article 4.5 concerns the standard of performance which it imposes on Honeywell. Both parties recognise that as with other “reasonable endeavours” obligations, the Court is applying objective criteria, but they differ as to whether there is also a subjective element to the analysis, by reference to the precise experience of Honeywell. Honeywell’s case is that the standard required of it is the degree of care and skill ordinarily to be expected of an automotive component supplier with no specialisation or experience in car door latches, by reference to the legal principles applicable in the field of professional negligence. ALS disputes this and points to the fact that Honeywell is a multinational engineering conglomerate and that having agreed to take the whole latch forward for manufacture, it should not be able to hide behind its absence of latch expertise.
138.	It seems to me that, in principle, Honeywell is right on this point, although it cannot be taken too far. Thus, its performance is not to be judged as if it sprang forth on the first day of the JCA as a fully fledged experienced latch manufacturer.  Indeed as I have held, the case made by ALS that Honeywell misrepresented during the pre-contract meetings that it had latch expertise is a hopeless one. As I have concluded, Mr Wright of Honeywell told ALS at the meeting on 24 July 2000 that the latch was more mechanically complex to manufacture than anything else made at Newhouse, thereby disavowing any specialist expertise to manufacture the ULS. Furthermore, the JCA recognised the absence of such specialist experience at the outset in providing in the Scope of Work for ALS to provide training and technical support to Honeywell personnel. 
139.	Had ALS wanted to impose on Honeywell the standards of performance and timing which are to be expected of an experienced latch manufacturer under what might be described as a typical development contract, they should have sought to insert an express term to that effect, which Honeywell would probably not have accepted. I do not consider that ALS can seek to import such an obligation by way of an implied term.
140.	However, Honeywell was a major engineering company with very substantial resources and engineering experience at its disposal. At various stages of the trial I felt that Honeywell was seeking to shroud the mechanical sub-assembly of the ULS in mystery, as an arcane subject that only those versed in the secret world of latches such as Mr Spurr could understand. Frankly I was not impressed by that approach. It seemed to me that a competent and experienced mechanical engineer would be able to understand the design of the latch within a relatively short period of time. However, it is a considerable leap from that to saying that the Honeywell engineers should have appreciated at an earlier stage the problems only thrown up subsequently by the soft tooled build.
Matters relevant to the assessment of reasonable time
141.	The other question which arises in relation to the standard of performance required by Article 4.5 concerns the matters to which the Court can have regard in assessing whether the party upon whom the obligation is imposed has acted reasonably without unreasonable delay. Mr McQuater drew my attention to the decision of the Court of Appeal in Peregrine Systems Limited v Steria Limited [2005] EWCA Civ 239 on the correct approach to this issue. At paragraph 15 of his judgment Maurice Kay LJ says this:
“The consideration of whether there has been a breach of an obligation to perform within a reasonable time is not limited to what the parties contemplated or ought to have foreseen at the time of the contract. In my judgment, the correct interpretation of authorities such as Hick v. Raymond & Reid [1893] AC 22 is that adopted by His Honour Judge Richard Seymour QC in Astea (UK) Ltd v. Time Group LTD [2003] EWHC 725, [2003] All ER (D) 212, where he said that the question whether a reasonable time has been exceeded is 
"a broad consideration, with the benefit of hindsight, and viewed from the time at which one party contends that a reasonable time for performance has been exceeded, of what would, in all the circumstances which are by then known to have happened, have been a reasonable time for performance. That broad consideration is likely to include taking into account any estimate given by the performing party of how long it would take him to perform; whether that estimate has been exceeded and, if so, in what circumstances; whether the party for whose benefit the relevant obligation was to be performed needed to participate in the performance, actively, in the sense of collaborating in what was needed to be done, or passively, in the sense of being in a position to receive performance, or not at all; whether it was necessary for third parties to collaborate with the performing party in order to enable it to perform; and what exactly was the cause, or were the causes of the delay to performance. The list is not intended to be exhaustive. "
I do not seek to improve upon that formulation. It shows that, even if the contract had required Peregrine to complete the installation within a reasonable time, the fact that the parties had contemplated at an earlier stage that completion would be effected by a certain date would not necessarily mean that a failure to complete by that time would involve a breach of the obligation to complete within a reasonable time.”
142.	Applying that principle, it is clear that the Court can and should look at all the material available, including looking at the question with hindsight. On that basis, although none of the cases specifically touches on this, I do not see why in principle, the reasonableness of the party’s conduct should not also be assessed, where appropriate, by reference to matters which ante-date the entering of the contract. Thus here it seems to me legitimate to assess the reasonableness of Honeywell’s actions and the time taken by Honeywell in performing its obligations by reference to what it was told by Mr Chevalier about the status of the design both before the JCA and after. Of course, in making a final assessment of whether Honeywell acted reasonably it will be necessary to consider the extent to which it continued to rely upon statements made by Mr Chevalier and how reasonable it was to do so. 
143.	Equally, another factor which clearly needs to be considered in assessing reasonableness of actions and delay within the meaning of Article 4.5 is the extent to which a particular course of action has been dictated or encouraged or agreed or acquiesced in by the other party. This must particularly be so in the context of a collaboration agreement such as the present. Thus, the extent to which the dual priorities of targeting vehicle manufacturers (“OEMs”) and proceeding to a soft tooled build before anything else were encouraged and agreed by Mr Chevalier and the extent to which changes in the design were dictated by Mr Chevalier (who at least at the outset of the collaboration was the only latch industry “expert”) will inevitably have an impact on the issue of reasonableness under Article 4.5. 
Overview of ALS’s case on breach
144.	ALS has adopted very much a scatter gun approach in seeking to blame Honeywell for what Mr Chevalier perceived as a lack of progress on the project. At times, it seemed that ALS was trawling through the evidence in the case, seeking to blame Honeywell for as much as it could, however minor the problem or delay. That was certainly a trait exhibited time and again in Mr Chevalier’s evidence, both in his witness statement and in his oral evidence. There was also a tendency towards the argument that because, after twenty eight months of collaboration, the ULS had not yet reached the point of design validation, that somehow, in itself, demonstrated that Honeywell must be in breach, in effect a contention in a contractual context of res ipsa loquitur.  I agree with Honeywell that this is not a satisfactory approach and that a much more rigorous and detailed analysis is required.
145.	In seeking to put some order into all this, it seems to me that ALS’s complaints about the performance of the JCA by Honeywell essentially fall into two broad categories: (i) failure to take all reasonable actions without unreasonable delay to develop the design with a view first to achieving a successful soft tooled build and second to achieving manufacturability and ultimately production and (ii) insufficiency of resources from the outset of and throughout the collaboration. There are other allegations but in a sense they are all sub-sets of these core allegations.
146.	The allegation of failure to take all reasonable actions without unreasonable delay obviously focuses on particular aspects of Honeywell’s performance, such as the time taken to effect drawing transfer, the reasons for the failure of the soft tooled build, the alleged lack of progress thereafter and the lack of proper management, all of which I shall have to examine in detail. However, there is what might be described as an overarching allegation behind many of those complaints. This is that ALS contends that Honeywell’s performance of its obligations is to be judged by reference to the timescale and activities of a typical latch development project. 
147.	ALS points out that there is a measure of agreement between the experts, Mr Bland and Mr Drysdale about the time which each stage of a project would be likely to take and the overall time which should be taken from concept development to production and that it seems that Mr Spurr agrees with that timescale. Against that time frame, it is contended by ALS that Honeywell’s performance was woefully inadequate.
148.	It is necessary to set out first in summary the timescale and activities of a typical latch development project. In doing so, I have followed the analysis in the expert report of Mr Drysdale for Honeywell, who for reasons I will come to, I found much more reliable than ALS’s expert, Mr Bland. 
149.	The initial stage of a typical project is the identification of a new concept in terms of latches which would usually but not always be driven by the requirements of a particular OEM. The concept is then developed usually to the stage where there can be a high degree of confidence that the proposed product will meet all the requirements of the specification. The level of development in this concept development stage will vary, but typically it would include brainstorming sessions between design engineers to develop design ideas, concept drawings, “virtual” testing of the design against required specifications, for strength, stress etc, including basic tolerance analysis and assembly studies, the building of manual prototypes from machined parts, concept development and demonstration prototypes to show the relevant OEM who is the actual or potential customer.
150.	Towards the end of the concept development stage, the customer may become more involved and may begin its supplier selection process. According to Mr Drysdale, the concept development stage would typically take 6 to 12 months. After that stage comes the product development process, which major OEMs such as Ford, General Motors and Chrysler define as divided up into a series of overlapping phases, planning, product design and development, process design and development, product and process validation and finally production. 
151.	The planning stage will include so-called Voice of the Customer and other customer input, market research and product reliability studies. At this stage the latch manufacturer would usually produce amongst other things a preliminary bill of materials and a preliminary process flow chart. The questions being asked at this stage include does the product meet the customer’s requirements, is it reliable and how will it be manufactured? The stage typically lasts about 3 months. 
152.	The product design and development phase is intended to encompass a comprehensive engineering review to ensure that the product meets the objectives of the Voice of the Customer. It would typically include design reviews, Design Failure Mode effects and Analysis (DFMEA), the building of prototypes and design verification.  The DFMEA is a tool for risk assessment at the design stage. It quantifies the potential failure according to the severity, probability of occurrence and ease of detection of a failure.
153.	Mr Drysdale would expect design for manufacture to be considered prior to ordering of prototype tooling. At this stage the component parts for prototypes are produced from “soft” tools which are not as durable or long lasting as hard tools used in actual production but should be representative of the materials and process intended to be used in production. The so-called soft tooled build of prototypes is used by the latch manufacturer to verify that the design meets the specification and by its manufacturing engineers to verify the capability of assembling the product within the specifications. Design Verification tests on the prototypes are carried out and any improvements to meet the specification thrown up by those tests are effected by modifications made to the soft tooling. Then the final design testing, Design Validation occurs. As Mr Drysdale says, design verification and validation includes a full test programme according to the customer’s specification. 
154.	The product design and development stage will typically last 12 to 18 months. It will probably overlap with the next stage, process design and development, intended to ensure that the design is suitable for the intended method of manufacture, because even during the product design and development stage, engineers are considering issues of manufacturability.  Process design and development will typically include a product and process system review, a process flow chart, a Process Failure and Mode Effects Analysis (PFMEA) and a pre-launch control plan.
155.	The next stage is product and process validation. This involves validating parts produced from the final “hard” production tooling and manufacturing process. It will typically involve amongst other things production parts approval (PPAP), production validation testing, production tooling and a production trial run.  Production validation testing is the final testing of component parts made with production tools, assembled under production conditions. There is no room for any changes to design at this stage, so that if there are outstanding problems at this stage, the customer may have to approve a deviation from the intended design. However, as Mr Drysdale points out, with a safety critical product such as a door latch, this may not be a foregone conclusion and if there have to be changes made, this may delay the vehicle launch.
156.	Absent such problems, this stage would typically take 12 to 15 months. After this, there will be pre-production trials to improve the efficiency of the production line. The latch manufacturer would also anticipate providing the customer with production latches in considerable quantities, perhaps as many as 500, for the customer’s own pre-production trials. Making everything production ready would typically take another 2 to 3 months.
157.	It was ALS’s case (certainly by the end of the trial) that in large measure, the explanation for the failure to reach the stage of manufacturability by the time the JCA was terminated, when compared with the typical latch project, was not only the lack of resources (which I address in summary below) but the failure of Honeywell to follow a proper design process, with for example (but not exclusively) DFMEAs and PFMEAs, from an early stage of the project. I shall need to consider these allegations in more detail, but by way of overview, I should say that I viewed them with considerable scepticism, essentially for two reasons. 
158.	First, I consider that there are obvious dangers in drawing too close a comparison with a “typical” latch project, to the extent there is such a thing. All timescales for such projects are in one sense aspirational and the time actually taken may be longer (or I suppose shorter) depending on the particular circumstances. I get limited assistance from the fact that to get from concept to design validation might have taken Kiekert or Meritor 15 or 18 months, not just because Honeywell was not a specialist latch manufacturer, although that is of some relevance in assessing its performance as I have indicated in my analysis of the legal principles. 
159.	The timescale of a typical latch project is also of limited assistance because, on any view, this was not a typical project. It did not involve collaboration between a latch manufacturer and a particular OEM as such projects often do. Rather it involved collaboration between the inventor who wanted to market the latch to as many OEMs as possible and Honeywell which was not a latch manufacturer. The JCA did not prescribe that particular stages should be undertaken in developing the ULS, let alone the length of time any stage should take. Furthermore, as a matter of fact, the particular course the project took was to a considerable extent determined by actions and priorities agreed between the parties or which Mr Chevalier wanted to take.
160.	The second reason why I viewed this overall case, that Honeywell was in breach for falling short of what was to be expected on a typical latch development project, with some scepticism is that it was founded to a very considerable extent on the evidence of Mr Bland, ALS’s mechanical latch expert.   There were a number of aspects of Mr Bland’s evidence which were not satisfactory.
161.	First, a substantial proportion of his expert evidence strayed beyond the Scope of Expert Evidence as ordered by Gloster J on 6 July 2007. At that hearing there was a dispute as to what the evidence of the mechanical latch experts should cover. ALS was contending that such expert evidence should include the following areas:
“Honeywell’s obligations and performance after the JCA was signed
...
Honeywell’s performance … addressing in particular the following issues:
The steps Honeywell should have taken after the JCA was signed;
Project management;
Staffing, resources timing and plans…”
Honeywell resisted that and the learned judge ruled against ALS and excluded those areas from the Scope of Expert Evidence. There was no appeal from her Order. 
162.	However, when expert evidence was exchanged, ALS purported to serve a Report from a Mr Butler dealing at length with Honeywell’s performance of the contract and substantial proportions of the Reports of Mr Bland and of Mr Sykes, ALS’s electronics expert, dealt with this issue as well, notwithstanding that it had been excluded by the Order of Gloster J.  It seems that despite that Order, ALS was intent on calling evidence of this kind. Honeywell made an application to exclude all this evidence which came before me at a resumed case management conference on 24 January 2008.  At the outset of that hearing, ALS withdrew the Report of Mr Butler. So far as the passages in the Reports of Mr Bland and Mr Sykes are concerned, I took the pragmatic view that rather than taking a blue pencil to those passages at that stage, I would allow them to remain, but at the trial, to the extent that the Reports dealt with material which was outside the scope of the expert evidence as ordered by the Court, would not expect Mr McQuater to cross-examine on those matters.   
163.	As Honeywell point out, Mr Bland’s Report did not refer to the Scope of Expert Evidence at all and did not address a number of the matters in that document which were for the mechanical latch experts. Rather his Report contains a liberal sprinkling of views and comments on Honeywell’s contractual obligations, its performance under the JCA and the reasons for delay, straying into comments on the facts which went far beyond what is permissible from an expert, even if the issue he was addressing had been within the scope of expert evidence, which it was not. Much the same can be said of his evidence from the witness box. 
164.	This led into the second problem with his evidence. These comments and views were expressed on the basis of a very limited reading of the documents in the case, of which there are several thousand in the Core Bundles alone and he did not identify what documents he had read. He had clearly not read all the witness statements. This was a very uncertain foundation for expressing the views he did, but did not deter him. 
165.	One example at random will demonstrate this point. Mr Bland expressed the opinion that, at the end of the JCA, Honeywell had done about 10% of the necessary development work envisaged in the product and process development stage, a matter of which he was highly critical. However, that opinion was reached without any detailed analysis of the design work actually done on any of the revisions and having only looked at a few drawings. Also he did not seem to have considered (or, if he had, had disregarded) the detailed description in Mr Spurr’s witness statement of the progress made with the design and the problems encountered and resolved in the six months from the soft tooled build until the termination of the JCA (on which he was scarcely cross-examined at all). Frankly, Mr Bland’s opinion on this matter was worth very little. In contrast, Mr Drysdale, who had conducted a detailed review of the drawings and of the design in all its revisions (as contemplated by the Scope of Expert Evidence) was able to provide a measured and careful description of all the design problems and changes and to conclude that substantial progress had been made in that six month period.
166.	The third problem with Mr Bland’s evidence was his own perception of his role as an expert, apparently not something he had been before. Whilst as a person he had an engaging personality, as an expert he was not satisfactory. In his oral evidence, he was argumentative, tendentious and prone to act as an advocate in ALS’s cause. It was not that he lacked integrity, rather that he lacked the independence the Court expects of an expert, possibly because of his lack of experience of giving expert evidence.  Also, despite Mr Douglas’s dismay when I suggested it, I formed a very firm view that he was a great enthusiast of design process, on the absence of which he blamed the failure of the project. Experts who are enthusiasts for a particular cause tend to lack objectivity and this was certainly true of Mr Bland. 
167.	Wherever Mr Bland and Mr Drysdale differed on an issue, I preferred Mr Drysdale’s evidence. He had correctly limited his Reports to what was within the Scope of Expert Evidence for mechanical latch experts. As I have said, he provided a detailed and helpful description of the design in its various revisions, of the problems encountered and the solutions reached. He gave his evidence in a careful and fair minded way and in all respects was a most impressive expert witness. 
168.	Part of the difficulty with the case as it developed through Mr Bland’s evidence about the lack of or inadequacy of design process on the part of Honeywell, is not just that it fell outside the scope of expert evidence (which it clearly did, despite a valiant attempt by Mr Douglas in his reply submissions in closing to “shoehorn” it into one of the areas for the automotive industry experts, which of course was not Mr Bland’s area of expertise). In addition, it was not a pleaded case and does not appear as one of the complaints of breach in Issue 16 of the Agreed List of Issues. As Honeywell points out the reference to a failure “...to comply with industry standards in its performance of the contract” is not an allegation about quality processes or procedures. 
169.	The point first emerged in Mr Bland’s Report served a few months before trial. As Honeywell also points out, some of the relevant Honeywell witnesses, particularly Mr Shannon and Mr Spurr, did deal with the purpose and nature of such tools as DFMEAs and Design Change Logs (DCLs), but not in the context that the timing and content of such documents was a breach of contract. One suspects that if this had been an allegation from the outset, Honeywell might well have adduced further evidence as to why it was, for example that the DFMEA which Mr Shannon was pressing for in June 2002 was not started until January 2003.
170.	In any event, the suggestion that somehow what ALS alleges was the lack of progress with the project at the time of termination was attributable to the fact that the DFMEA and DCL were not created until they were, always seemed to me fanciful in the extreme. Whilst, if a DFMEA had been in existence at an earlier stage, Honeywell might have picked up some of the problems with the design later set out in the DCL, before the drawings were sent out for the soft tooled prototype build, those problems were identified and addressed in due course, albeit after the first soft tooled prototype build failed. At most this is a point that goes to having wasted the cost of the first build, a cost borne by Honeywell in any event and not passed on to ALS and I simply do not see it as having contributed any significant delay to the project.  
171.	Equally the criticisms levelled at Honeywell for the content of the process documents, principally developed through Mr Bland’s oral evidence, are an example of the triumph of form over substance. Clearly in a relatively small team, everyone knew what his responsibilities were. Of course it might have been better if the documents had identified responsibilities, but the idea that this caused any confusion or contributed to the alleged lack of progress is again fanciful. Remarkably, the criticisms of the contents of the DFMEAs and the DCL were not put to Mr Spurr in cross-examination, although he was the person with primary responsibility for them from March 2003 and he had dealt with them in detail in his witness statement.
172.	So far as insufficiency of resources is concerned, the complaints which ALS makes seem to fall into three broad areas. First, it is contended that, from the very outset of the collaboration right through to the end, there was a clash between this project and the Valeo project which was also being carried out at Newhouse.  Personnel were diverted and distracted so that there was a lack of progress and focus on the ULS project. Second, it is said that the senior management of Honeywell never really bought into the ULS project and therefore never dedicated the appropriate resources to it. Third, and as an aspect of that second complaint, Honeywell did not employ appropriate latch experts, other than Mr Spurr, who came to the project too late. They should have employed at least the four experts for whom Mr Bur was asking in February 2002 and, in view of the inevitable delay in finding and hiring appropriate people, they should have started looking at the outset of the co-operation. 
173.	I propose to deal fully with the allegations about lack of resources and my conclusions on them when addressing the details of the case at each stage of the project, which I will do broadly on a chronological basis. However, it seems to me that the judgment may be more coherent if I indicate in summary my conclusions on each of these three areas. 
174.	First, there undoubtedly were problems of clashes with the Valeo project. However, just as Honeywell witnesses had a tendency to downplay this, so ALS’s case that there was a clash and consequent under-resourcing throughout is an excessive view, not borne out by the contemporaneous documents. Furthermore, it is important to remember that having to deal with conflicting projects is a fact of professional life, for many people, not just engineers. The fact that someone is said to be, say, 60% committed to the ULS project does not necessarily mean the project is under-resourced, because the amount of work required of him on the project may not be more than that percentage, let alone that his employer is in breach of contract.
175.	The view I have formed in relation to the Valeo project is that it may have caused resource clashes at the outset of the project but I doubt if those extended beyond Mr Shelley who may have taken longer on the drawing transfer in the period up until late 2001 because of commitments to Valeo. Valeo does not seem to have intruded much during most of 2002, but did present problems of clashing responsibilities for Mr Shelley in February and March 2003. This did cause some delay, but I am pretty sceptical about the suggestion that the delay was substantial. 
176.	In any event, by June and July 2003, Mr Krupp and Mr Kilker had identified the clashing commitments and were taking steps to ensure that the right resources were in place both for the present and the future, with staff dedicated to the ULS project. I consider that this would have been achieved, so far as the future is concerned, if Mr Chevalier had allowed the project to continue and had not terminated the JCA.
177.	The allegation of management not buying into the project is misconceived and simply not borne out by the evidence. Inevitably in any company, senior management are not willing to commit the totality of the financial resources which may be required by the end of the project (if it is successful) from the outset. They will want to be satisfied at the end of each phase of the project that it is successful, before being prepared to commit to the next phase. In the context of a qualified obligation to take all reasonable actions without unreasonable delay, how that approach can be said to be a breach of contract escapes me.
178.	In any event, the evidence shows that the management of Honeywell did buy into the project. They agreed to fund the cost of soft tooling, they agreed to fund the cost of test equipment and testing and they approved the hiring of latch experts, although in the event only Mr Spurr could be induced to join the project. At the end of the collaboration, Honeywell had expended US$3.7 million on this project, hardly indicative of a lack of commitment.
179.	The absence of latch experts before the arrival of Mr Spurr may have hampered the project in the sense that, had a latch expert been hired earlier, some of the problems which Mr Spurr identified, for example as regards the manufacturability of the design, could well have been identified earlier. However, two things must be borne in mind about this. First, under the JCA there was no obligation as such to hire latch experts, only under Article 4.1 to establish a Project Team and Programme Manager for the latch assembly in total. Second, ALS is not on strong ground in complaining about this, since twice at an early stage, in September 2001 and again in February 2002, Mr Chevalier positively discouraged Honeywell from hiring experts from the latch industry, a point to which I will return. 
180.	In any event, Honeywell did try to hire the four latch experts whom Mr Bur recommended, but it proved a slow and dispiriting process, in the sense that a number of appropriate experts who were approached and even interviewed declined to join Honeywell. One other agreed to join but was made a better offer by his current employer. All of this demonstrates that expert engineers working for established latch manufacturers were reluctant to move and that even if they expressed an interest, their current employers would seek to dissuade them. Those factors would equally seem to preclude the employment of such experts as consultants, one of Mr Bur’s alternative ideas. It is difficult to see how any of this can be blamed on Honeywell, let alone shown to be a breach of contract. Mr Douglas’s suggestion at one point that the problem could have been solved by offering the prospective employees more money had an air of unreality and goes beyond any contractual obligation Honeywell could conceivably be under.  
First twelve months of the collaboration from May 2001 to May 2002
The ALS Business Plan
181.	As I have already noted above, at the contract signing meeting on 17 May 2001, two of the agreed actions were that ALS would provide Honeywell with its full Business Plan and that the ULS specification prepared by Mr Chevalier would be sent to targeted OEMs with an invitation to attend a meeting. So far as the latter action is concerned, it is clear that from the very outset of the collaboration (as recorded in an e-mail from Mr Kettle to Mr Cummings of 24 May 2001) Mr Chevalier was anxious to send out invitations to the OEMs. The early targeting of OEMs was clearly part of the strategy he advocated, with which Honeywell concurred.
182.	So far as the former action is concerned, Mr Chevalier sent copies of his Business Plan, now re-labelled as the Honeywell/ALS Business Plan, under copies of letters dated 4 June 2001 to Mr Alan Wright, Mr Horst Wild and Mr Kettle. In those covering letters, there is no suggestion either that Honeywell should not rely upon the Business Plan or that it was somehow merely a projection for the future in the event that ALS needed finance. It is clear that Mr Chevalier sent the Plan to Honeywell, who had been pressing for it for some months, on an unqualified basis, intending that it would be relied upon in planning the future course of action. 
183.	On page 11 of the Plan, headed “The Business” was a passage in bold reading “The concepts embodied in the patents have been translated into prototypes developed to a level suitable for presentation to customers and final pre-production testing and equipment”. It is not suggested that anyone at Honeywell engaged in a comparison between that passage and the original passage in the extract provided to Honeywell in July 2000 which said that the prototypes were developed to a level suitable for mass production. However, even if that comparison had been made, it would only have suggested that all pre-production testing had not been completed.  The text as it now stood still suggested that the design was at an advanced stage just before the stage of process and product development.
184.	The section of the Business Plan dealing in detail with where the design was in terms of a typical latch development project (on pages 26 and 28 of the Plan) merits quotation in full:
“Schedule of Product Development
The principal aspects of product development include:
1. 	 organising an extensive comparative study of the available competitive products (completed);
2. 	obtaining the necessary feed back from the customers (completed);
3.	 adapting the product designs to customer specifications (completed);
4. 	fine-tuning the prototypes to comply with specific customer requirements (to be performed);
5.	producing a number of testing prototypes to perform the necessary statutory and product lifecycle tests (partly completed);
6.	setting up the process of assembly (to be performed) and finally
7.	the launching of the process of production in series (to be performed),
The business has successfully completed phases 1 to 3 and partly phase 4. Phases 5 to 6 are still to be performed.
Stages of Product Development (28 to 38 months)
The stages of product development are outlined, in what follows, with reference to Kiekert's Annual Report 1998, refer to document N° 16.
Concept development stages (16 - 22 months)
Definition Phase
During this phase, the gathering of information relevant to the projects is effected. This phase is completed in 2 months.
Concept Phase
During this phase, the First Concept Prototype is produced to validate the concept. This phase is completed in 8 to 12 months.
The first concept prototype is by no means a product ready for the market.
Draft Phase
During this phase, the First Concept Prototype is transformed into a virtual prototype by means of computer assisted drawing "CAD" and virtual animation. This method of further development facilitates design modifications and saves time and cost. When this method is not used, a number of prototypes or improvements on their components had to be produced before reaching the required development level. This phase is completed in 6 to 8 months.
Product Development (12 - 16 months)
Prototype and Testing Phase
The virtual prototype is developed into a real prototype incorporating all of the tolerances and features as specified by the customer. This prototype is intended to validate and prepare the product for the market. The process of validation is effected through intensive testing and culminating in the "Pre-production Prototype". This phase is completed in 12 to 16 months.
Important note
The business has completed the above phases of the product development. This means that 28 to 38 months of research and development have already been completed. This has particular importance, since it means that the business of the joint collaboration has no more than 12 to 18 months to wait before becoming self-financing.
Implementation Phase
The Customer approves the final prototype "Pre-production Prototype" as well as the production tools and facilities. A small production run is effected. Only at this stage can the product be considered as being ready for the market.
Production in Series
The testing of the production facilities is completed. A trial run production will be effected followed by full production”
185.	Much was sought to be made by Mr Douglas in his submissions of the apparent inconsistency between what is said under the Schedule of Product Development section and what is said under the highlighted Important Note. However, on analysis any inconsistency is more apparent than real, particularly since it is pretty clear that there is a mistake in the numbering under the Schedule of Product Development. The two sentences at the end should surely read: “The business has successfully completed phases 1 to 3 and partly phase 5. Phases 4, 6 and 7 are still to be performed” (my underlining) in order to be consistent with the text which precedes those sentences. On that basis, there is no inconsistency with the Important Note. Even if there were some inconsistency, the overall message which Mr Chevalier is giving out is clear: the design is at the end of the process of design validation, with only product development for manufacture to come. 
186.	What is said by Mr Chevalier here is entirely consistent with what he had said at the meeting on 20 June 2000 about 9 to 12 months to production. The reference to 12 to 18 months until the collaboration would be self financing allows for a slight time lag after production has started until latch sales make the collaboration self-financing. That this is what Mr Chevalier was representing is made clear by the “Assumptions on Financial Projections” on page 38, the third of which reads:
“The latch is developed to an advanced level but may still require further testing and fine-tuning. This may be effected while the tools of production and the assembly line are being produced. To complete the manufacture and trial of the tools of production and the assembly line it is assumed that 9 to 12 months may be required.”
187.	On the basis that, as is now accepted, at the time of the JCA, the ULS was still very much in the concept development phase, it is clear these statements were a serious distortion of the true position. Mr Chevalier’s evidence about the Business Plan was deeply unsatisfactory. Faced with the inevitability of the conclusion that what he had said in it was simply not true, he became evasive and somewhat incoherent. He said that he had told Honeywell many times that the Business Plan was not serious and that they should not rely on it. When it was pointed out that he had not said that in the covering letters sending the Plan, he said he had not needed to as he had explained many times and Honeywell knew absolutely about the situation. None of that was ever put to any of the relevant Honeywell witnesses and I reject Mr Chevalier’s evidence on this point.
188.	As for reliance by Honeywell on the Business Plan produced by Mr Chevalier, Mr Cummings’ evidence in his witness statement (which was not challenged) was that it confirmed many of the things Mr Chevalier had been telling Honeywell during the course of negotiations.  Understandably after this length of time, Mr Cummings had only a general recollection in his oral evidence of having read the document. Whilst there is no evidence that it (rather than Honeywell’s own assessment and business plan) was specifically relied upon in the initial planning of the project, as I have already held, the business plan Mr Cummings had produced in April 2001 had derived in part from the extract provided earlier of the ALS Business Plan. Furthermore, it is clear from the planning documents and meetings that Honeywell had that it thought that once the design had been transferred (i.e. the drawing transfer had taken place) the ULS would essentially be ready for design validation through the soft-tooled prototype build. 
189.	Thus, on 8 June 2001 Mr Cummings e-mailed Mr Wild about resources for the project. He was contemplating only Mr Shelley on mechanical design, scarcely consistent with an appreciation that a considerable amount of design work on the mechanical sub-assembly would be required before design verification could occur. A similar picture emerges from Mr Mitchell’s “ALS Assumptions and resource allocation” document dated 20 June 2001 to which I have already referred.
Letters of invitation to OEMs 
190.	A further indication that, at the outset of the project, Honeywell believed and accepted what Mr Chevalier was saying about the design being at an advanced stage ready for design validation is the fact that Honeywell allowed the letters of invitation to OEMs and the Presentation document provided to Volkswagen (all of which contained similar statements about the state of the design to those Mr Chevalier had made at the meetings in 2000 and those in his Business Plan) without demur. It would hardly have done so if it had appreciated that, contrary to what Mr Chevalier was consistently stating, significant design work would be required before any soft tooled prototype build or design validation.
191.	Mr Chevalier drafted a series of letters to be sent to OEMs soon after the JCA was signed consistent with the course of action agreed at the meeting on 17 May 2001 of targeting OEMs and arranging demonstration meetings, which Mr Chevalier was very keen to do. Letters dated 19 June 2001 to Daimler Chrysler and Volkswagen (the latter following up an earlier letter of 11 June in which Mr Chevalier sent the technical specification for the ULS to Mr Kai Schrenke of Volkswagen) stated: “The development of the system is completed to a very advanced stage and can be producible within 9 to 12 months from placing a development contract”, which echoed what he was saying at the meeting on 20 June 2000 and on page 38 of his Business Plan. The letters to BMW dated 11 June and 12 June 2001 went further and stated: “The development has been completed to an advanced stage-pre-production prototype with Honeywell and it is now a Honeywell product.” That statement of course corresponded with what he had said in the “Important Note” in his Business Plan quoted above.
192.	Mr Chevalier’s evidence about these letters was to say the least unimpressive. He accepted that he had drafted the letters to Daimler Chrysler and Volkswagen, but although it is quite clear he had also drafted the letters to BMW, the contents of which he accepted were nonsense, he sought to blame Mr Kettle. He said that those letters were drafted by Mr Kettle and that he, Mr Chevalier, had objected at the time, but Mr Kettle had said, ‘let’s go ahead, by the time we reach serious development, Honeywell will have reached that stage’. Put bluntly, that was a shameful lie on Mr Chevalier’s part and in his evidence Mr Kettle was having none of it, saying that all the letters had been drafted by Mr Chevalier, which was obviously the case. 
193.	Mr Kettle also said that the statements in the letter accorded with his understanding of the stage the ULS was at and that if Mr Cummings had had any problems with this, he would presumably have spoken out. Mr Cummings had expressed concerns to Mr Kettle as to whether 9 to 12 months was doable, but evidently had not expressed those concerns to Mr Chevalier. The fact that Mr Cummings did not “speak out” suggests that he continued to believe what Mr Chevalier was saying about the state of development of the latch. Both Mr Chevalier and Mr Kettle recognised in their evidence that it would be potentially disastrous to mislead OEMs. 
194.	According to Mr Kettle, Volkswagen’s response to the approach was that it had started to work with Magna to produce a new latch incorporating power opening and closing, but would work with Honeywell instead, if the ULS proved to be as good as the technical specification suggested. A meeting was arranged for 9 July 2001. In readiness for that meeting, Mr Kettle prepared a Presentation document. Although at this distance in time Mr Kettle could not remember whether he got the information about the latch and the stage the design was at from the ALS Business Plan or from discussions with Mr Chevalier, it is clear that by one route or another, that information must have come from Mr Chevalier.  Mr Kettle sent a draft of the presentation to Mr Chevalier on 29 June 2001 and Mr Chevalier sent back what he described as “the final version” under cover of an e-mail of 6 July 2001 in which he said “It has the same text as the previous one but additional pictures”. 
195.	Two pages from this document call for comment.  First, the page on which appears a photograph of the latch with the following text:
“Universal Latch System
1997	Filing of Patents
1998	Production of Concept Prototype
2001	Completion of Testing & Pre-production Prototype of the Universal Latch & Electronic Control System”
Mr Chevalier’s evidence about this was also extremely unsatisfactory. No doubt recognising that the last item was misleading, Mr Chevalier promptly disavowed it in his evidence claiming that although it was inaccurate, he had not seen it, otherwise he would have commented. In fact of course that text was essentially the same as he had stated in the letters to BMW.  Even if he did not write the text on the picture, the information clearly came from him and was not simply made up by Mr Kettle. The idea that Mr Chevalier had not checked the text before sending it back to Mr Kettle is fanciful in the extreme.   
196.	Slightly later in the line of questioning about this page, perhaps having reflected to himself that I would conclude he was responsible for the text, he tried to claim that the statement about 2001 was one of future intent, that such testing and pre-production prototype were intended to be completed within the year. However, when faced down on this point in cross-examination, he accepted that he did not expect to have completed the pre-production prototype within 2001, so to that extent the text was misleading, which it clearly was.  
197.	 The other page which I should mention is one headed “Production….” which contained the following text:
“Customer Approval & Production in Series
This is expected to be completed within 9 to 12 months from confirmation of development contract
Production parameters
All production parameters are in place
		Materials and Tolerances
		Supply chain (subcontractors)
		Assembly process
One fully automated assembly line with 10 million units a year capacity is ready to order
		Tools of Production
		Soft tooling is in place
		Hard tooling is awaiting the result of fine-tuning”
198.	Mr Chevalier admitted that this was misleading but claimed that he had no input and did not approve the text. If he had read it, he would have commented. I cannot accept that evidence. It is inconceivable that he did not read and approve the text of the presentation document. Even if Mr Kettle and not he actually wrote it, the information must have come from Mr Chevalier. It is all of a piece with what he had been saying in the meetings in 2000 and had set out in his Business Plan. 
199.	The presentation prepared for Volkswagen was also used as the basis for the presentation or handout given subsequently to other OEMs, including Jaguar, BMW and MG Rover. In each case Mr Chevalier received these handouts and, in the case of MG Rover, sent it to them direct himself. All the handouts contained the same inaccurate and misleading information about the state of development of the latch. Clearly appreciating this in the witness box, Mr Chevalier sought to distance himself from the handouts. The furthest he was prepared to go by way of admission of involvement in their content was to say that he may have known some of the content but not its entirety, since the document was developed by Honeywell.
200.	I formed the very clear view that this was another area of his evidence where Mr Chevalier was being deliberately evasive. I find that it is inconceivable that he did not consider the contents of the handouts very carefully. After all, this was the first formal presentation of his invention as a Honeywell product to OEMs and must have been an extremely important moment for him. Not only was he well aware of the content of the handouts, but in so far as information was given about the latch (including as to the state of its development) it was derived entirely from him. 
201.	 Mr Kettle clearly relied on and believed the information he was given by Mr Chevalier, otherwise I am sure that he would not have allowed the presentations to go out to OEMs with potentially misleading information in them. There remains the mystery of why Mr Chevalier was prepared to make these statements in the letters and presentations to OEMs in circumstances where (as he was constrained to accept in his evidence) the information given as to the state of development of the latch was overoptimistic and misleading. As I have said, my assessment of Mr Chevalier is that whilst on occasions he did lie deliberately, in this particular instance, he did not deliberately send misleading information to OEMs.  Rather, this is an instance of his having an overoptimistic and wholly unreal perception of his invention and what was required to bring it to production. He had already lost all objectivity in relation to the latch.
202.	This lack of objectivity pervaded much of his evidence about what was required to bring the ULS to production. At various points in his evidence, he accepted the view of both the latch experts that, at the time of the JCA, the ULS still required a considerable amount of design work to achieve a successful soft tooled build and design validation. He promptly blamed Honeywell for failing to carry out that work, asserting that the Honeywell engineers had known from the outset what work was required. However, at other times in his evidence, he reverted to the wholly inconsistent position of saying that very little additional work was required before design validation, just a few minor changes and tolerances which would take a few days. This latter position more accurately reflects what he was saying at the time in late 2001 and in 2002, as will be seen.
203.	Although ALS did not call any evidence from OEMs who received these documents containing the misleadingly optimistic statements deriving from Mr Chevalier (other than MG Rover who for reasons I will come into were in a special category), it seems to me to be a fair inference to draw that such OEMs probably considered on the basis of these documents that the design development of the ULS was much further advanced than it in fact was. As the true position emerged, in the sense that the ULS had not been developed to the point where soft tooled prototypes were available in a relatively short time frame, it is possible that some OEMs became sceptical as to whether what was undoubtedly a clever design could be converted into a manufacturable product. Of course this is conjecture, but it is the case that, other than from MG Rover, there was no contractual commitment from any other OEM during the period of the JCA. 
ALS contention that state of design obvious from beginning of drawing transfer
204.	Before dealing with the initial meetings with OEMs, starting with the meeting with Volkswagen on 9 July 2001, I should mention one matter upon which Mr Douglas placed great emphasis in seeking to persuade me that, even if Honeywell did not become aware of the true state of the design before the JCA was entered, it did become aware of the true position in early July 2001. This is the commencement of the drawing transfer by Mr Shelley. I will come on to deal in more detail with ALS’s allegations that there was unreasonable delay in effecting that transfer, but for the present it is sufficient to record that, by late June or early July 2001, Honeywell had purchased an AutoCAD package which enabled Mr Shelley to view Mr Chevalier’s 2D drawings. Mr Shelley was then able to assess how long it would take to transfer the drawings onto Honeywell’s system by re-drawing them in Pro E.  This was the period of nine months to a year for one man referred to in Mr Cummings’ e-mail of 6 July 2001. 
205.	Mr Shelley accepted that when he viewed the ALS drawings, the state of those drawings was apparent to him, in the sense that he appreciated that the drawings were suitable for the process of machining but not for the process of production using tools, just as he had appreciated Mr Chevalier’s prototypes were machined when he saw them. It was on that basis that Mr Shelley assessed that the drawing transfer would take some time, since he recognised that the process of transfer would involve making modifications to improve manufacturability and improve the piece part count.  However, with respect to Mr Douglas, that is not the same thing as having appreciated from opening the drawings in July 2001 that a considerable amount of design work would be required before a soft tooled build could take place or that Mr Chevalier had seriously overstated the stage the design was at. It was not put fairly and squarely to Mr Shelley that he had appreciated that.
206.	What he had appreciated and had passed on to Mr Cummings was that the process of drawing transfer would take much longer than originally appreciated, because, as Mr Cummings recorded in his e-mail of 6 July 2001, what was required was to re-draw the product from the bottom up, with frequent discussions with Mr Chevalier to understand the design and to get to the point which, as he put it, Mr Chevalier’s drawings were already at. It was the realisation that the drawing transfer might well take nine months to a year that led to Mr Cummings’ comment that Honeywell should be cautious in the way it presented timescales to car manufacturers. 
207.	That Mr Cummings did not appreciate from his discussions with Mr Shelley that Mr Chevalier’s design was not as far advanced as Mr Chevalier was representing and was still only at the concept development stage, is readily apparent from what he says in the e-mail about doing a gap analysis between what has been done and what needs to be done. He says: “We should also immediately start dialogue with JP Chevalier regarding the analysis, FMEA, quality audit checking which he has already carried out in order to establish a gap analysis between what has been done and what needs to be done before we will be satisfied”. From this it is clear he thought that Mr Chevalier had carried out those various steps of the design validation. 
208.	When it was put to him in cross-examination that this indicated that he foresaw that Honeywell standards might well require more than Mr Chevalier had done, he said that would only be if there was a gap but the mere fact of doing a gap analysis did not necessarily mean that there was a gap. Of course there is an issue as to whether Mr Chevalier had done any analyses or had an FMEA and about when if ever Honeywell asked for them, but that has no bearing on Mr Cummings’ state of mind in July 2001.
209.	When he was asked what he meant by requiring formal Honeywell drawings “before starting any serious development”, his response was it was a reference to developing the manufacturing process and establishing whether the information Honeywell had made the product manufacturable. It was not suggested to him by Mr Douglas that this was wrong and that in fact he had appreciated already that a considerable amount of further design work was required before the soft tooled build could be carried out and the design validated. That the concern Mr Cummings had at this stage related to the perceived delay in transferring the design to Honeywell is also clear from his August 2001 Project Progress Report. 
Initial meetings with OEMs
210.	The Presentation prepared by Mr Kettle was duly presented to Volkswagen in the form of power point at a meeting at Wolfsburg on 9 July 2001, attended by Mr Cummings, Mr Kettle, Mr Wild and Mr Smith-Malzfeldt. Present from Volkswagen were Mr Schrenke, Mr Peterson and Mr Meyer. Mr Kettle exhibited his usual salesman’s optimism about the meeting in his evidence, saying it was a very positive meeting and disagreeing that the reception was less than entirely enthusiastic. He referred to the fact that Volkswagen had offered Honeywell two car doors to fit the latch about which Horst Wild was amazed. Mr Kettle did accept though that there were several layers of decision making within Volkswagen above Mr Schrenke. 
211.	Having seen the Meeting Report which Mr Wild prepared, I consider that a more realistic assessment of the meeting is that given by Mr Cummings in his witness statement:
“Although VW “recognised that [the] latch is a completely new concept worthy of further investigations”… its enthusiasm was not without reservation.  VW raised concerns over the newness of Honeywell to the latch industry.  It also raised concerns regarding the ability of the ULS to withstand various external forces (water, ice, dust ingress etc).  These concerns were put to the Honeywell team, and at the same time, VW emphasised the need for low noise levels”
212.	Following the meeting, Mr Schrenke sent Mr Kettle the Volkswagen specification which Mr Kettle had translated. In view of Volkswagen’s concerns about noise, Mr Chevalier conducted some informal tests by way of analysis of the ULS noise level compared to that of other latches.  Mr Kettle sent these to Mr Schrenke on 25 July 2001, saying that they showed that the ULS was much quieter than comparable latches. This assessment was over-optimistic to say the least. In fact, noise remained an issue for Volkswagen with the ULS throughout the collaboration and beyond.
213.	On 1 August 2001, Mr Chevalier, Mr Kettle, Mr Cummings and Mr Smith-Malzfeldt had the first meeting with Jaguar in Coventry. Present were Mr Steve Cox, principal engineer Closure Latching Systems and a design engineer and project engineer. The meeting went well and Mr Cox was enthusiastic about the ULS. Jaguar even offered to provide a car for use for test and demonstration purposes. However, as Mr Kettle accepted, there were several layers of decision making above Mr Cox and as Mr Cummings’ note of the meeting records, Mr Cox said that Jaguar was not big enough to proceed with the project on its own. In other words, because it was a safety critical device, at that time it would have to be approved by Ford (then owner of Jaguar) in Dearborn.  Noise (specifically on power opening and closing) was an important issue for Jaguar, as Mr Cummings’ note records. 
214.	The same written presentation was evidently given to Jaguar as had been presented to Volkswagen, as Mr Cox undertook at the meeting to pass copies of the presentation to Ford in Dearborn. Shortly after the meeting, Jaguar forwarded the presentation to Ford USA, Ford Germany, Volvo and Land Rover, which were all part of the same group, PAG.  A meeting was provisionally arranged with Ford USA for 18 October 2001 but was cancelled because of restrictions on travel following 9/11. In the event no meeting took place with Ford in Dearborn until 18 June 2002.
215.	The first meeting with BMW took place on 6 September 2001. It was due to be attended by Mr Chevalier but he was taken ill at the last minute. As a general observation, Mr Chevalier attended very few of the meetings which took place during the collaboration with OEMs outside the United Kingdom, apparently because of an aversion to air travel.  This is of course no fault of Mr Chevalier’s but inevitably it meant that he was dependent upon reports of such meetings from others, specifically Mr Kettle, who was the person at Honeywell with whom he had closest contact. As I have already commented, Mr Kettle exhibited the enthusiasm and optimism of the natural salesman, and sometimes the views he expressed about the prospects of success were over-optimistic. 
216.	Where meeting notes are available (particularly whilst Mr Cummings, whose note taking seems to have been extremely good, was involved in the project until June 2002) I have generally preferred those to Mr Kettle’s somewhat subjective assessments, both at the time and in his evidence now, when on any view his recollection of particular meetings must be limited in the extreme, as he was really disposed to accept in his evidence.
217.	At the meeting on 6 September 2001, the same presentation was made to BMW as had been made to Volkswagen, with the inclusion of the noise graphs. A number of points emerge from Mr Cummings’ note of the meeting. BMW did not require control electronics or power opening or closing. Although as he said, they showed a genuine interest in the latch, it received a much more enthusiastic response from the BMW engineers present than from the purchasing manager. BMW, like Volkswagen and Jaguar, was prepared to go to the next stage of prototype evaluation and budgetary costing. 
218.	However, BMW was planning to launch a new corporate latch in 2002 (which was manufactured by Kiekert), which meant that that latch was in pre-production and, as Mr Cummings said in his note, also meant that BMW was not actively pursuing a new latch. Despite Mr Kettle’s ever hopeful approach when asked about this meeting, even he accepted that the fact that BMW had a new corporate latch meant that any adoption of the ULS was a couple of years away at a minimum. As Mr Cummings said in his witness statement a follow up meeting with BMW was planned for February or March 2002, but without a fully operational prototype, it was not possible to take matters further.
219.	Also in September 2001, representatives of Honeywell and Mr Chevalier attended the Frankfurt motor show. The Honeywell stand was visited by a number of OEMs, including DaimlerChrysler (Mercedes) to whom a demonstration was made. A preliminary meeting was scheduled for mid-October 2001, but that too was postponed as a consequence of travel restrictions following 9/11.  A representative of Ford Germany attended and told them that Ford had been selecting a new modular latch system for its European market including the Ford Fiesta, the Ford Focus and Volvo models, which would have a start of production in 2003, indicating that the ULS had missed those opportunities. The Ford representative indicated that it might be possible to test the ULS on its premier segment and the Ford Galaxy. Some interest was shown in power closing. Volkswagen also visited the stand and there were discussions about them supplying car doors to Honeywell for fitting the ULS.
220.	On 11 October 2001, Mr Kettle had a meeting with MG Rover, which went well. They asked for two samples of the latch in the week commencing 5 November 2001 to fit into a car for trials. If the trials went well, they would want more samples to be fitted to prototype vehicles. As Mr Kettle explained in his evidence, MG Rover were in difficulty. They were no longer owned by BMW and so were no longer guaranteed BMW’s pricing from its latch supplier, which was presumably Arvin Meritor. They were looking to launch a new model, code named RDX 60, but did not want power closing yet. They might do so in 18 months or two years. 
221.	Honeywell also had contact with other OEMs. A meeting was attended in about June 2001 by Mr Cummings and Mr Kettle at Nissan UK’s premises in Derby, but no further interest was shown thereafter. Contacts were made with PSA (Peugeot Citroen), Renault and Opel (General Motors) but at least at this stage, no meetings eventuated. A first meeting with General Motors in the US was arranged for mid-October 2001, but that too was postponed due to the travel restrictions. 
The Work Breakdown Structure
222.	At around the same time as those first meetings with OEMs, as appears from his e-mail of 25 July 2001, Mr Wright set out his plan on how the project should be run and stated that “We should Design, Manufacture, Distribute and Transact to Six Sigma levels of excellence”. He suggested that the document called “Work Breakdown Structure” which Mr Cummings was in the course of preparing should be used as the baseline for the first “pulsing” meeting/teleconference.  As Mr Cummings explained in his evidence, this was a primary planning document used by the project management office within Newhouse to plan a project. The draft of the document which Mr Cummings prepared (in fact in conjunction with Mr Shelley), together with an Excel spreadsheet project report was sent by e-mail to Mr Wild, Mr Sosnowski, Dr Turnbull and Mr Smith-Malzfeldt on 9 August 2001. The Work Breakdown Structure was ultimately presented to them at the “pulsing” meeting on 14 August 2001.
223.	This document loomed large in ALS’s case at the trial that Honeywell had appreciated either from the outset of the collaboration or at the latest by the time this document was produced, that considerable design work would be required before the ULS would be ready for soft tooled prototype tooling and design validation. ALS has seized upon the fact that the document sets out five phases: Customer Needs Identification, Concept Development, Design and Test, Product Release and Production Acceptance and, in particular, the first two, as demonstrating that appreciation. It seems to me that on examination, it does nothing of the kind.
224.	The various activities under Customer Needs Identification are essentially no more than putting into planning jargon the matters that had been agreed as the priority at the contract signature meeting on 17 May 2001, targeting OEMs, sending them the specification, having meetings with them and exhibiting at the Frankfurt motor show. So far as Concept Development is concerned, ALS can point out that the first item is the establishment of a Six Sigma Plan including DFMEAs, process flows and PFMEAs, all of which are contemplated by Design For Six Sigma. However, this is no more than what Mr Wright contemplated would happen in his 25 July 2001 e-mail. 
225.	There is an issue as to why there was no DFMEA put in place by Honeywell until January 2003, an issue which as I have already said in the Overview Section above has been largely generated by ALS’s latch expert Mr Bland in a manner which goes beyond the Scope of Expert Evidence as ordered by the Court. However, be that as it may, the fact that the Work Breakdown Structure contemplated the creation of a DFMEA by Honeywell in my judgment is no indication that Honeywell had appreciated that a considerable amount of design work would be required on the mechanical sub-assembly before the soft tooled prototype build.
226.	Indeed the next three items in this phase seem to me to demonstrate the precise opposite. The first of these is “Transfer Design” but there is nothing there about significant design work being required, just the transfer to Honeywell for present purposes of the design of the mechanical sub-assembly. Equally “Transfer Procurement Data” seems to be concerned with transferring information from ALS about component and tooling suppliers and “Transfer prototype assembly” was as it says concerned with arranging a meeting with the sub-contractor which ALS was using for building prototypes, Sertrix.
227.	As this document was explained by Mr Cummings in his evidence, it is essentially a due diligence document required by management so that at whatever phase the Honeywell team started in a particular project they still had to satisfy the Product Approval Committee that the work had been done and necessary documentation and information was in place at the end of the phase review, before approval would be given for the next phase. As Mr Cummings put it, both the Customer Needs Identification and Concept Development phases are a little bit light compared to a typical Honeywell project starting from scratch. He said that if you were starting from scratch, you would see a lot more activities in these two phases.
228.	Furthermore, nothing in the minutes of the Executive Review meeting on 14 August 2001 at which the Work Breakdown Structure was approved (subject to the addition of a timeline) even begins to suggest that Honeywell appreciated that substantial design work would be required in the concept development phase before the soft tooled prototype build.  In terms of resources, a mechanical design engineer was being sought from Freeport to assist Mr Shelley. It is true that “design and drafting activities” are referred to, but it is clear from other documents that what is being referred to is someone to assist Mr Shelley in the drawing transfer, which is indeed the role which Mr Scott Vorwald assumed from September 2001. The only external resource contemplated by way of someone from the latch industry was an applications engineer to liaise with customers over their specific requirements.
229.	In terms of the timescale contemplated until the ULS might be in production, the minutes contain a passage which is of some significance in terms of ALS’s contention that Honeywell appreciated that significant design work was required before the soft tooled build:
“Freeport would typically expect a gestation period of three years between concept and production for the' first product with production capability available 12 months in advance of first production delivery to the customer. Based on preliminary work already done by ALS and on the response so far from vehicle OEMs, Newhouse expects a production requirement early in 2003.”
That passage seems to tie in with a page of the Excel spreadsheet sent by Mr Cummings with his 9 August e-mail. This is headed “Project Metrics” and shows a truncated timeline with production introduced by February 2003. Interestingly, the first two phases (the second of which is shown as “concept dev[elopment]” have “n/a” against them, suggesting again that it was not thought that they required that much extra work.
230.	What that passage in the minutes of the Executive Review demonstrates is that Honeywell contemplated that the design was at a stage where a period of 18 months was required until production commenced, as against a period of three years if one were starting with a design from scratch. As Mr Mitchell (who participated in this review) said, when Mr Douglas put this passage to him, the compressed timescale of 18 months was because the design was (in other words was believed to be) already conceptually tested and at a point where, with minor modifications, it could be put into production. It seems to me that evidence has considerable force. 
231.	In his oral closing submissions, Mr Douglas urged me to look very closely at the evidence of Mr Cummings and Mr Mitchell in particular, on the basis that this would demonstrate that they both appreciated from a very early stage of the collaboration that there was still considerable design work to be carried out before a soft tooled build could take place and that they had not relied on any statements to the contrary by Mr Chevalier. I have indeed considered their evidence very carefully against the background of the contemporaneous documentation. Far from this supporting the contention made by Mr Douglas, I am satisfied that it supports Honeywell’s case that they, like others within Honeywell, were not aware of how much additional design work was required, really until the second half of 2002 and that they did rely upon what they were told about the status of the design by Mr Chevalier.
Building prototypes for the Frankfurt Motor Show
232.	The Executive Review also refers to the fact that on 15 and 16 August 2001, Mr Shelley and Mr Hugh Gibson (the manufacturing engineer assigned to the project) were due to meet Mr Chevalier to begin the process of transferring prototype build to Honeywell.  As Mr Cummings explained it in his evidence, ALS was due to be building prototypes for the Frankfurt motor show in September 2001.  It appears that it was because Mr Chevalier was working on drawings for those prototypes that the drawings which Mr Shelley started transferring in September 2001 were dated July and August 2001. 
233.	Mr Shelley’s evidence was that when he travelled to London on 15 August 2001 he thought that there was going to be in effect a design review, but in the event they were taken to ALS’s sub-contractor Sertrix Tools where they only saw how parts were machined for prototypes. Mr Gibson’s evidence was to similar effect, although he may have been confused about precise dates. His evidence was that after that trip, he began to have concerns that the design was not as finalised as Mr Chevalier had said, although it was clear from his evidence that there was not some blinding realisation and that what he was focusing on as a manufacturing engineer was getting baseline data about the ULS with which to go out to get quotes from component suppliers. 
234.	Mr Cummings said that the original intention had been for Mr Shelley, Mr Gibson and Mr Hughes to go to Mr Chevalier’s flat on 15 and 16 August 2001 to go through the first phase of the procedure for transferring the prototype build to Honeywell (something the Work Breakdown Structure contemplated). If that was successful, Mr Chevalier was to go to Newhouse the following week to assist with the build of the 12 prototypes required for the Frankfurt show. In the event that did not happen and the build was sub-contracted to Sertrix Tools. 
235.	There was what can only be described as some fairly incoherent evidence from Mr Chevalier to the effect that Honeywell was at fault for failing to build the prototypes for the Frankfurt motor show, which seemed wholly unjustified given that, at this stage, he was clearly the latch expert and it is difficult to see how Honeywell could have constructed prototypes without his input and assistance.
236.	A demonstration door which Mr Chevalier was due to supply in time for the show with a fully functioning prototype of the ULS fitted did not arrive. Although it was put to Mr Cummings that it had been possible to demonstrate the ULS at Frankfurt with control electronics, he said that his recollection was that they only had mechanical functional capability at the Frankfurt show. 
Mr Chevalier’s attitude to experts and testing
237.	In view of some of the criticisms now levelled against Honeywell by ALS concerning resources and design process, there was a significant exchange between Mr Chevalier and Mr Kettle on 22 September 2001. Following a teleconference on 29 August 2001 attended by Mr Mitchell, Mr Cummings, Mr Sosnowski, Mr Smith-Malzfeldt, Mr Kilker and Mr Kettle, Mr Kilker had been given the task of preparing a series of questions concerning testing and design changes after testing in order to ascertain how much design testing had been done by Mr Chevalier. Mr Kilker had a meeting with Mr Kettle on 20 September and then set out his questions about testing in an e-mail to Mr Kettle dated 21 September 2001, which Mr Kettle then passed on to Mr Chevalier inviting him to contact Mr Kilker direct if he had any questions.
238.	That provoked a very dismissive response from Mr Chevalier the following day, 22 September 2001 in which he said, among other things, the following:
“The questions and concerns raised by Dan are irrelevant to our project in many respects
...
Testing
The question of testing of the mechanical assembly of the latch has been addressed in the best possible manner from the moment of putting pen to paper. 
Excluding the electronics, every element or mechanism in the latch was designed to the mathematical optimum possible within the constraints of size and weight. 
The Individual mechanical elements of the latch, when tested or analysed carefully, will prove far superior to any latch ever put on the market or in patent.
 The individual mechanisms in the latch have been in development and testing since 1995.
 The issue of testing is routine and particular to each specific car or car maker. 
Whatever tests that we may undertake now will be just a waste of time and money and will not mean anything to any potential customer. 
The question often asked by customers during presentations is mainly rhetorical. 
....
The customers know that this process has to be performed hand in hand with them to be considered of any value.
The issue of testing become relevant after the signing of a development contract.

Conclusion

We have as a first priority to produce the soft tools of production and to advance in our engagement with the potential customers. 
Having produced the soft tools we will then tie able to supply any potential customer with the required number of test latches. Only then would we be able to proceed with the issue of meaningful and valuable testing and only as far as the one particular customer concerned.

Design changes consequent to testing

[In this section Mr Chevalier identified potential changes to springs and materials dependent on such matters as the individual OEM’s requirements and specification and price. He then continued]
Conclusion
Our priority is to engage and interact with each customer in as many aspects of the development of the latch as possible. We need to do so constantly and on a regular basis to gain their confidence. Such regular consultation would have the effect of producing a sense of ownership of the product on the part of the customer concerned This will also produce a unique version of the universal latch that each customer can claim their own.

Finally
It is very critical not to lose time in pursuing our hard earned leads. We have a clear programme of what needs to be done. This includes:

Setting up of a dedicated team
Fitting the car doors suggested by the customers
Producing the soft tools
Meeting with the assembly line producers - and getting fresh quotations
Engaging the customers as much as possible in all sorts of questions and 
Fine-tuning the development of the electronic system
Preparing for the already set product presentations
Calling back on our already established leads with further presentations
Writing back with replies to the questions raised by the customers, etc.
The initial engagement with customers and the outcome of the trade exhibition indicate clearly the value of what we have. This also evidently indicates that we are not doing anything wrong except.
Finally, it is very clear that we do not need "experts". We need people like Mike Shelly, James Hughes and Hugh Gibson - people to do the needed and outstanding work. We certainly do not need confusion when we know what needs to be done.”
239.	This e-mail demonstrates a number of matters. It indicates again that Mr Chevalier’s clear priority was the targeting of OEMs and the building of soft tooled prototypes which he hoped would lead to one or more development contracts. It also confirms Mr Chevalier’s earlier statements to the effect that changes in the design and testing were not required prior to that soft tooled build. It also states in the clearest possible terms Mr Chevalier’s view that it was not necessary for Honeywell to hire latch experts externally.
240.	This was another document in relation to which Mr Chevalier’s evidence was unsatisfactory. Obviously appreciating that the strong view about there being no need for experts was not helpful to ALS’s case in this litigation that Honeywell was at fault for failing to employ latch experts sooner than it did, he sought to explain this all away as a sarcastic comment about Mr Kilker, although he then denied that the effect of what he was saying was “Butt out so-called latch expert, I’m the only latch expert”. He then sought to say that the e-mail was designed to support Mr Kettle as he was concerned the Americans in Freeport were trying to take over the project, notwithstanding that, as he sought to deny unconvincingly, one of the reasons why he had been keen on a collaboration agreement with Honeywell was the U.S. dimension.
241.	The truth about this document as I see it, is that it does indeed demonstrate that Mr Chevalier was very jealous of the latch and his own expertise in relation to it and much happier dealing with engineers who were not latch experts and whom he could therefore seek to influence. He did not like the involvement (or as he saw it interference) of engineers who did have expertise in the latch industry, such as Mr Kilker and subsequently Mr Spurr. Perhaps this was because of a concern that such experts might start asking searching questions about the ULS and its design, questioning what he regarded as its invincibility. Equally, his concern to safeguard his intellectual property may have had something to do with it. He certainly considered later that Mr Spurr in particular was trying to “design round” his patents. 
242.	Whatever his motivation, this e-mail and a subsequent one on 26 February 2002, which I will come to, demonstrate very clearly that despite an unconvincing attempt to deny it now, at the time Mr Chevalier did not think it was either necessary or desirable for Honeywell to hire or use latch experts.  Of course it does not follow that merely because it was Mr Chevalier’s preference that Honeywell should not hire latch experts, Honeywell itself did not recognise the desirability of doing so, at least in relation to dealings with customers over specifications. 
243.	In August 2001, Honeywell was looking for an applications engineer to liaise with customers during the generation of customer specifications, which would preferably be a latch industry expert. It was in that context that Mr Chevalier provided Honeywell with a list of potential candidates from Kiekert and Arvin Meritor. It seems that a recruitment agency was engaged which actually made an offer to a potential candidate but Honeywell put the whole question on hold pending what were described in Mr Cummings’ Action Log as at 25 October 2001 as “organisation changes”. None of the Honeywell witnesses was able to assist as to what those were.
244.	Equally, the fact that Mr Chevalier held that view would not in itself excuse Honeywell from hiring experts from the outset of the project, if it recognised the necessity of doing so. The problem for ALS’s case is that, apart from the possible requirement for an applications engineer, it does not seem to me that Honeywell management involved with the project such as Mr Mitchell saw an immediate need for latch experts. When Mr Douglas put to Mr Mitchell the business plan prepared by Mr Sosnowski in November 2001 and passages referring to adequate project staffing at the start of a project being essential and to it being critical that technical resources be in place as soon as possible, Mr Mitchell gave a qualified answer. He said that it was only once the design was transferred to Honeywell and the design validation stage was reached, that Honeywell would know what additional external resources might be required.
245.	That approach seems to me perfectly reasonable, given that Honeywell had not appreciated that considerable design development work would be required before successful design validation could take place. The position would no doubt be different if at this stage in the autumn of 2001, Mr Chevalier had been impressing on Honeywell that it was essential to employ latch experts straightaway without delay, but the e-mail of 22 September 2001 was suggesting the exact opposite. In the context of a joint collaboration agreement I do not consider that it is justified to criticise Honeywell for not having taken steps to employ latch experts earlier than they did, in circumstances where Mr Chevalier was the latch expert and he was saying other experts were not necessary.
Follow up meetings with OEMs
246.	On 13 November 2001. Mr Cummings, Mr Kettle and Mr Smith-Malzfeldt attended a follow up meeting with MG Rover, at which Mr Larry Devlin the purchasing manager and two project engineers were present. Honeywell quoted for three versions of the latch, super lock, electrical child safety and power opening. The quote was above MG Rover’s present price obtained through the corporate BMW deal but which was unlikely to be available without the BMW influence. Honeywell agreed to prepare a value analysis to show that the total installed cost would give advantages that would offset the increase in price of the latch. Mr Devlin indicated that open book costing would be a mandatory requirement of any business with MG Rover. Mr Devlin also confirmed that MG Rover was prepared to proceed further to a formal request for quotation. At some stage after the meeting, MG Rover supplied Honeywell with a Rover 75 door to which Honeywell was going to fit the latch. 
247.	Mr Cummings’ note of the meeting with MG Rover recorded that Honeywell was in a strong position because of the ULS’s capabilities and because it was a product which was “already substantially developed and will not require a huge development or tooling investment by Rover. From a Honeywell perspective, the project timescale and volume requirements and the customer location makes Rover a good potential lead customer”. This is further demonstration that, at this stage in November 2001, Mr Cummings still believed that the design of the latch was at an advanced stage, as had been consistently represented by Mr Chevalier. 
248.	On 14 November 2001, a follow up meeting took place with Mr Steve Cox of Jaguar. Honeywell provided some preliminary pricings for various levels of functionality of the ULS, which Mr Cox said were ok at first glance and not far away from Jaguar’s targets in view of the extra functionality the latch could offer. He said he would circulate the pricings within PAG and thought that Volvo would be particularly interested.  He said Volvo was trying to identify a latch for their next generation cars and was in discussion with a latch manufacturer, probably Meritor. From what the Ford Germany representative had said at the Frankfurt show, it seems likely that arrangements between Volvo and that latch manufacturer were further advanced than Mr Cox was aware. Mr Cox agreed to facilitate a meeting with PAG in Europe once Honeywell had a fully functional latch. 
249.	As Mr Cummings’ note records, Mr Cox was still a strong proponent of the ULS. It is clear that he remained so throughout the collaboration, but a much more difficult question (which I will have to address hereafter in the context of quantum) is whether those people above him in the Jaguar organisation who would have been making the management decision whether to adopt the ULS, would ever have been prepared to do so. For the present I simply note that Mr Cox’s optimism about Volvo was not borne out at least at that stage. No meeting with Volvo took place until Mr Kettle met them on 9 September 2002.
250.	So far as Volkswagen is concerned, on 2 November 2001, Honeywell had received two doors, a front and a rear, for a Passat into which to fit the ULS. On 20 November 2001, a follow up meeting took place at Wolfsburg with Kai Schrenke and Herr Loock who was the engineer responsible for testing latches, attended by Mr Cummings, Mr Kettle and Mr Smith-Malzfeldt. Honeywell indicated that it was expected that the two Passat doors would be available for return, fitted with the ULS by early January 2002. Volkswagen asked Honeywell to quote for 2 million latches a year for the new Passat model. Mr Schrenke confirmed that the likely split would be 5% simple mechanical latch, 80% with central lock and super lock and 15% with full functionality (i.e. power opening and closing). There was an issue with the compatibility of the ULS with the Volkswagen control system, which Honeywell recognised would have to be resolved. 
251.	Herr Loock expressed concern that the ULS could be susceptible to malfunction through dust ingress and corrosion. This concern apparently derived from the close spacing of the levers in the ULS, although the widespread use of metal parts was perceived as an advantage. In view of the subsequent design problems with the ULS identified at the time of the failed soft tooled build in March 2003, this assessment by Mr Loock was rather prophetic.
252.	Honeywell quoted preliminary pricing for five variants of the latch, including that with central lock and super lock, quoted at 13.84 Euros, which Mr Schrenke commented was the price they were paying for their existing latch, from which they were looking for some reduction. In his evidence Mr Kettle accepted that what emerged from this meeting was that the two main issues for Volkswagen were noise and price, although he went on to say that both were always a concern with OEMs. 
Fitting of prototype latches to the Volkswagen doors and the Rover door
253.	In that context, one of the allegations made against Honeywell (Issue 16(1)(g)) is that it failed to return the Volkswagen Passat doors received in November 2001 to Volkswagen with an adequately developed latch system in a reasonable time. In fact, tshe doors were not returned with the ULS fitted until the next meeting with Volkswagen in September 2002.  Although in one sense this allegation did not assume enormous significance at trial, being subsumed within the general ALS allegations about lack of progress, it seems to me to be an issue of some significance, particularly given the extent to which ALS’s case on its quantum of loss and damage is dependent upon the likelihood of obtaining a contract with Volkswagen for use of the latch on the new Passat model had it not been for Honeywell’s breach of its obligations under Article 4.5 of the JCA.
254.	What happened about fitting latches into the two Passat doors and the Rover door seems to involve a conflict of evidence not really satisfactorily resolved by cross-examination. It is clear from contemporaneous e-mails that Honeywell was intending to fit functioning latches into both the Passat doors and the Rover door in the week of 14 January 2002, with a view to delivering them to both Volkswagen and Rover by 23 January. In fact it appears this was delayed and Mr Chevalier was due to attend Newhouse for the building of the latches into the doors in the week of 28 January. 
255.	Mr Chevalier’s and Mr Kettle’s respective evidence in their witness statements was that in January 2002, Mr Kettle telephoned Mr Chevalier to say that there was a problem with Rover who wanted their door back with or without a latch fitted. Mr Kettle asked Mr Chevalier to travel to Scotland to assist in solving the problem. Mr Chevalier went to Newhouse on 27 January 2002 with Mr David Want of VVLP Ltd, who was responsible for the control electronics. Mr Kettle also attended.
256.	Responsibility for fitting the latches to the doors had been given by Honeywell to Mr Alex Crawford, an electronics technician, who was regarded by Mr Chevalier as unqualified. When they arrived, Mr Cummings said that Honeywell could not fit the latches to the doors. Mr Chevalier’s evidence was that he took over and within half an hour had the latch fitted in the Rover door and fully functional. Mr Chevalier was not really cross-examined about this incident and nor was Mr Kettle. 
257.	Mr Cummings’s evidence about this is completely different. In his witness statement, he says that Mr Chevalier would not let anyone else fit the sample latches into the doors and arranged to come to Newhouse in January 2002 with his own working prototypes. Mr Chevalier spent most of a week trying to fit the latches into the doors and, more importantly, to get them to function fully. He described how one evening they were in the factory until 10pm and Mr Chevalier and Mr Kettle had to extend their hotel reservations. Mr Chevalier went away not having succeeded, taking his prototypes with him. Mr Cummings equally was not cross-examined about his evidence concerning the fitting of the latches to the doors. 
258.	In the circumstances, it is difficult to make any definite findings about this issue of the prototype doors save as follows. First, whether Mr Chevalier had to take over building the doors from Mr Crawford or was engaged in the task throughout, it is more likely that he wanted to do the job himself and that he was the only person really qualified to do so. He was the latch expert and he knew full well that Honeywell had not at this stage employed a latch expert of its own. Second, I do not consider that the exercise can have been as much of a failure as Mr Cummings seems to be suggesting. It is common ground (as set out in the Agreed Chronology) that on 4 February 2002 a few days after Mr Chevalier’s visit, the MG Rover door was returned to MG Rover fitted with a prototype latch which was demonstrated to MG Rover. However, the latch was only demonstrated mechanically and Honeywell was not able to demonstrate the latch electronically because of problems with the control electronics as developed by VVLP. Nonetheless, that mechanical demonstration was evidently satisfactory so far as MG Rover was concerned, since after a visit to the Newhouse factory the following week, Honeywell received the letter of nomination for the RDX60 from MG Rover on 19 February 2002.
259.	On the other hand, I do consider that the build of the prototype latches into doors in the week of 28 January 2002 was nothing like as straightforward as Mr Chevalier tried to make out and that it did throw up issues which required further design and development work. I suspect that this may be the explanation for Mr Cummings’s realisation (reflected in his Project Progress Report for January 2002, which must have been prepared after 29 January) that further development work and design work was required. This is the first indication, albeit in an internal document, of Honeywell appreciating that further design development would be required before soft tooling could take place. 
260.	So far as the Volkswagen doors were concerned, it appears that at least by the second half of February 2002, the latches had been fitted into the Volkswagen doors. On 22 February 2002 Mr Kettle wrote to Mr Nigel Cliffe of Bentley (owned by Volkswagen) to inform him that Honeywell would be returning the Passat doors to Volkswagen at a meeting with Kai Schrenke on 6 March 2002.  Mr Kettle said in that e-mail that the latches had been fitted to the doors and that they would be capable of “demonstrating all possible functions such as power opening, power closing, passive entry, central locking etc.”  In the light of the problems encountered with the control electronics during the demonstration to Rover on 4 February (which Mr Kettle accepted existed) this statement was optimistic to say the least. Mr Kettle said he would have got this information from someone and although he could not remember from whom, he accepted it might have been from Mr Chevalier.  
261.	The background to all this was that Honeywell was apparently going to be placed on the Volkswagen system for receiving Requests for Quotation. Mr Kettle regarded this as significant in terms of progress towards securing a nomination from Volkswagen.  It appears that a formal part of that procedure would be a factory visit to Newhouse by Volkswagen personnel.  Although Mr Kettle appears to have subsequently had a meeting with Mr Cliffe of Bentley on 7 March 2002 about arranging that visit to Newhouse, it never took place. 
262.	The problems with the control electronics developed by VVLP continued. Although they worked on the latch during a meeting with Mr Chevalier and representatives of VVLP on 4 March 2002 (at which time Mr Kettle was expecting the MG Rover latch to be ready for 6 March and the Volkswagen latch for 11 March), this did not remain the case. The meeting with Mr Schrenke had been postponed until 21 March. On 11 March the Rover latch with full functionality was sent to Mr Chevalier. It was working perfectly but suddenly it just stopped, due to an electronics problem. Mr Randell of VVLP had sent a replacement latch to Mr Chevalier but was not available to start on the Volkswagen latches until Friday 15 March 2002. Mr Kettle had to contact Mr Schrenke to delay delivery of the doors which he described as “frustrating but unavoidable” in an e-mail. 
263.	On about 21 March 2002, Mr Chevalier terminated ALS’s contract with VVLP and engaged MLE instead. Issues regarding the Volkswagen doors continued into the summer, Mr Chevalier visiting Newhouse in July to discuss the issues and again in August when the ULS was fitted to the two Volkswagen doors and then demonstrated to Volkswagen in September 2002.
264.	That all comes later in the chronology, but the reason for referring to it is that, as the position stood in March 2002, the allegation that Honeywell was in breach of Article 4.5 in failing to return the Volkswagen doors with the latches fitted is not well founded, since the problems encountered were caused not by any fault on the part of Honeywell, but by the control electronics developed by ALS’s own contractor, VVLP.  ALS did not call any witness from Volkswagen, so that it is very difficult to judge how, if at all, their attitude to the ULS would have differed if the doors had been delivered back with fully functioning prototypes in March 2002. It may well be that the reason the visit to the Newhouse factory did not take place was that the doors had not been delivered back. 
265.	Equally, the evidence of Mr Brayshaw, Honeywell’s automotive industry expert, that his own company Wagon was receiving many requests for quotation from Volkswagen, none of which eventuated in a contract, does lead me to be somewhat sceptical as to how serious Volkswagen’s interest in the latch ever was, a matter to which I shall return. At all events, if any fall-off of interest was caused by the fact that the doors were not delivered back to them in March 2002, it does not seem to me that blame for that can fairly be laid at Honeywell’s door.
The issue of resources and lack of progress in the first year of the project
266.	After his visit to Newhouse in the week of 14 January 2002, Mr Chevalier started to complain about lack of progress and resources. I propose to consider what those complaints were first, then to consider the two issues, whether those complaints were justified at the time and what steps Honeywell took to address those complaints, whether they were justified or not.
267.	What seems to have provoked Mr Chevalier to complain to Mr Mitchell was that he had gone to Newhouse in the week of 14 January 2002 and said that he had found no signs of activity, other than Mr Shelley transferring drawings. That he then complained to Mr Mitchell and Mr Cummings is apparent from the fact that they and Mr Bur had a telephone discussion about this on 15 January, referred to in an e-mail from Mr Bur of 24 January 2002.  This refers to Mr Chevalier having a perception that Honeywell was not making proper investment in ALS and to his concern that Mr Smith-Malzfeldt (who spoke German) was leaving the team.  In his evidence, Mr Chevalier maintained that he had told Mr Mitchell at this time in January that Honeywell needed to employ experts from the latch industry but Mr Mitchell said that would take time. It was therefore as an interim solution in the meantime that he, Mr Chevalier, agreed to train engineers coming onto the team at that time, such as Mr Ricks and Mr Bur.
268.	I reached the very firm conclusion that this was another piece of evidence from Mr Chevalier that was not true. It was not suggested to Mr Mitchell that there had been a discussion about hiring experts in January and Mr Bur in his evidence could not recollect Mr Chevalier mentioning that experts were needed when they had their meeting. It seems to me that Mr Chevalier’s assertion that he had told Mr Bur and Mr Ricks when they came to his flat that industry experts were needed was also untrue.
269.	 The best indication of Mr Chevalier’s attitude to the resources needed is to be found in the e-mail he sent Mr Mitchell on 26 February 2002 (following a telephone conversation the previous day) immediately after the MG Rover letter of nomination. His first priority of “vital importance” was the appointment of a project manager endowed with “excellent communication skills” and he said that Honeywell must have someone who would fit these criteria. Then the next priority was the appointment of a fully committed engineering team to deal with the immediate need of satisfying Rover. This should consist of two mechanical engineers, Mr Shelley and Mr Paul Trickett (another mechanical engineer at Newhouse Mr Chevalier had been impressed with), a test engineer and technical assistant, a production engineer who was an assembly line specialist and two electronics engineers, one a software specialist and the other a hardware specialist, both of whom must be experienced in electromechanical drive mechanisms for automotive applications. Mr Ajay Kumar Vaidhyanathan (who had joined Honeywell on 14 January 2002) could be one of them.
270.	Under the heading “How to bring the product forward” Mr Chevalier repeated what he had said before, that the first priority was to adapt the design for the purposes of production, the first stage of which was soft tools. He said “This means that some minor forms and tolerances will be changed in the current design”, and that those modifications could be achieved by having Mr Shelley and Mr Trickett spend a few days with him. He continued that “improvements on some aspects of the design are totally unnecessary and will not be worthwhile or justifiable until such time [as] satisfying customer specifications and testing are underway”, echoing what he had said about testing not being necessary in his reaction to Mr Kilker in September 2001.
271.	 This was all further confirmation of the statements he had made many times previously to the effect that little or no development work was required before soft tooling. Once again Mr Chevalier seriously underestimated the work in fact required. His e-mail concluded, under the heading “Employing staff from the industry”:
“Employing potential staff from the industry is totally unnecessary as the present product is totally dissimilar to anything on the market today except in name. Having to change a system of values deeply held by one from the industry will prove much more difficult than to train someone with clean mechanical or electromechanical drive engineering skill”
272.	 That e-mail and particularly the last passage is inconsistent with ALS’s case in this litigation that Honeywell was in breach of contract for not hiring latch experts from the outset of the project. It is another clear statement (like the one on 22 September 2001) that Mr Chevalier did not think it necessary for Honeywell to employ latch experts. The terms of the e-mail essentially demonstrate Mr Chevalier’s motivation for that view, that he preferred to be in charge, training up other engineers who were not latch industry experts, whereas as I said earlier, such experts might pose a threat to his supremacy as the latch expert.
273.	Mr Chevalier sought to explain this e-mail away in a manner which was, if anything, even less satisfactory than his explanation of the 22 September e-mail. He claimed that he had told Mr Mitchell and Mr Wright in a telephone conversation on 21 February 2002 that it was necessary to hire experts and that in the same conversation he had complained about the fact that it was Honeywell’s responsibility to develop the design. This was a conversation about resources he referred to having had with Mr Wright in his witness statement, but Mr McQuater rightly pointed out that in the witness statement he had not said that during that conversation he had mentioned the need to hire experts or complained that Honeywell was not doing design development work.
274.	When it was pointed out that the alleged conversation was wholly inconsistent with his saying in an e-mail to Mr Mitchell only a few days later that it was “totally unnecessary” to hire latch industry experts, he claimed that the words were simply used to reassure Honeywell in circumstances where he knew that it was having difficulty recruiting such experts. However, that is not what the e-mail says. In my judgment there is an irreconcilable inconsistency between his statement in the e-mail and the conversation alleged to have taken place a few days earlier. The suggestion that he had said that it was necessary to hire latch experts and that he had complained about Honeywell not doing design development was pure invention on his part. I note also that Mr Douglas did not suggest to Mr Mitchell in cross-examination that such a conversation with him had taken place.
275.	The truth was that he was the latch expert and jealously guarded that role. Slightly later in his evidence, he came fairly close to accepting this when he agreed that he had an obligation under the JCA to provide technical support, that Honeywell was looking to him for guidance and instruction on the work to be done on the latch design and that he did not see it as the job of people like Mr Shelley to come up with changes in design, but rather that he would provide instructions on changes. That was very telling evidence both as to why matters took the course they did during the remainder of 2002, namely  Mr Shelley consulting Mr Chevalier about changes to the design, and as to the force of any criticism now levelled against Honeywell for failing to carry out design development itself, matters to which I will return. For the present, I need only record my finding that Mr Chevalier never told Honeywell that it had to hire latch experts. So far as his requirements for a team were concerned, they were as set out in his e-mail of 26 February 2002. 
276.	In terms of whether the complaints he was making were justified, Mr Chevalier himself would never admit that they were not, but the matter needs to be looked at objectively. Whatever his perception was from his visit in January 2002, the fact is that Honeywell was deploying more resources already. The Core Team was set out in a document dated January 2002 prepared by Mr Cummings, probably at the same time as his January 2002 Project Progress Report. That showed in addition to Mr Cummings himself, Mr Shelley,  Mr Scott Vorwald (who was providing mechanical design support to Mr Shelley) and Mr Gibson, the manufacturing systems engineer, that Mr Vaidhyanathan, a senior electronics design engineer and Mr Paddy Shannon a Six Sigma specialist had joined the Core Team. The document showed Mr Shelley and Mr Cummings as committed to the team 60% of the time and Mr Gibson 40% of the time.
277.	Naturally, ALS seized on those figures as demonstrating that there was insufficient commitment, particularly over matters such as drawing transfer. Mr Shelley felt in his evidence that Mr Cummings had underestimated his commitment and at this time in January 2002, he was pretty much fully committed. That may well have some force in it, in that the impression I have (to which I will return in more detail when dealing with drawing transfer) is that Mr Shelley became more involved in the drawing transfer towards the end of 2001. 
278.	Certainly, whether the correct figure for Mr Shelley’s commitment was 60% or slightly more, I reject entirely the suggestion made by Mr Kettle in his evidence that, in the period from September 2001 to December 2002, Mr Shelley had only spent 20% of his time on the project, let alone that Mr Shelley had told him this. This was one area where Mr Kettle’s desire to further the ALS cause got the better of him. I note also that it was not suggested by Mr Douglas in his cross-examination of Mr Shelley either that his real involvement was only 20% or that he had said that to Mr Kettle.
279.	Mr Gibson also disagreed with Mr Cummings’s assessment of his involvement as only 40%, which he could not explain. He said he had checked his own records and that on average he was 80% committed to the ULS project throughout, more heavily at the start. I have to say I found the evidence about an average 80% involvement slightly defensive and not wholly convincing. However, it is important to have in mind the point which Mr Cummings himself made in his evidence, that the percentage figure shown may have been enough in view of what was actually required of the individual. 
280.	So far as concerns what Mr Gibson was doing in the first six months of the project, his evidence was that after the visit he made to Mr Chevalier in London, it took until the end of September 2001 to get Mr Chevalier to come to Newhouse to go through the components and to sit and build a prototype with Mr Chevalier. This was a baseline exercise. Mr Gibson then drew up a Prototype Assembly Method Map. He prepared assembly instructions which he went through with Mr Chevalier. Honeywell then obtained quotations from particular suppliers based on the information provided by Mr Chevalier, which Mr Gibson said was agreed by Mr Chevalier. He said that he discussed the quotations obtained with Mr Chevalier, but was a little confused about this. My distinct impression is that Mr Gibson had only a very general recollection of what he had done when, which is scarcely surprising after nearly seven years. 
281.	However his description of what he was doing tends to bear out his evidence that he was more heavily involved in the project at the outset. Equally it may well be that Mr Cummings’ assessment that as at January 2002, Mr Gibson’s commitment was only 40% is correct, but that at that time, no greater commitment was required of him.  Furthermore any criticism levelled by ALS at Honeywell for not having Mr Gibson more committed to the project is inconsistent with Mr Kettle’s evidence that Honeywell would not be expected to invest a lot of money in manufacturing engineering until it had a contract with an OEM, so that before then there would have been minimum call on his time.  
282.	Accordingly, in terms of what was actually required to be done in the first seven or eight months of the project, I consider that there is not much force in the criticism of Honeywell for not having sufficient resources in place. The process of drawing transfer by Mr Shelley and Mr Vorwald may have taken somewhat longer than it should have done (a matter to which I will return), in part because Mr Shelley had not been fully committed, but otherwise there does not seem to me to be any basis for criticising the activities of Mr Gibson or Mr Cummings in that period.
283.	 Honeywell had dedicated resources, including those of the project manager, Mr Cummings, to the targeting of and meetings with OEMs as Mr Chevalier was keen should happen. Although there are pleaded allegations made by ALS (Issue 16(1) (i) and (k)) that Honeywell failed to market the latch properly and failed to follow up interest, it seems to me that those allegations are wholly without merit, either as regards this first stage of the collaboration or, indeed, any later stage.
284.	Furthermore, the fact that, as his e-mail of 26 February 2002 demonstrates, Mr Chevalier did not think much of Mr Cummings does not mean that it was somehow a breach of contract to have him as the project manager. In fact, Mr Chevalier got his own way about this, because, in due course in May 2002 Mr Cummings was replaced with Mr Richard Hayes, whom it was thought would be better attuned to Mr Chevalier. In any event, I formed a favourable view of Mr Cummings as a thoughtful, careful and professional engineer, who did the best he could in running the project and the criticism of him seemed misplaced. 
285.	I have also reached the very firm view that there is no merit whatsoever in any suggestion that Honeywell was at fault, let alone in breach of contract, in failing to take steps to hire latch experts prior to the recommendations made by Mr Bur and Mr Ricks from March 2002 onwards, not least because the only latch expert on the project, Mr Chevalier, was telling them that it was totally unnecessary to do so. 
286.	Of course, once the MG Rover nomination was obtained, the team as it had been might well not be sufficient to meet the relevant deadlines, but this was recognised in Mr Bur and Mr Ricks’ recommendations to which I now turn. Mr Bur and Mr Lamar Ricks joined the team from Freeport in January 2002. Mr Bur came in as marketing manager effectively replacing Mr Smith-Malzfeldt. He had 16 years experience in the automotive industry. Mr Ricks who was to be the Automotive on Board Engineering Manager, had 10 years experience with Honeywell Automotive on Board. Mr Bur and Mr Ricks visited Mr Chevalier in the week of 18 February 2002, to discuss the issue of resources for the project going forward.  As I have already found, Mr Chevalier did not suggest during that meeting that Honeywell should hire latch experts. Rather that was an idea put forward by Mr Bur and Mr Ricks in the following circumstances.
287.	Mr Bur said that he and Mr Ricks visited Newhouse for two days immediately after their visit to Mr Chevalier. They formed the view straightaway that the team was not sufficient. They prepared an initial resource proposal which was sent in an e-mail of 26 February 2002, to, amongst others, Mr Cummings and Mr Shelley for their views before it was discussed by Mr Mitchell with Dr Turnbull and Mr Wright. They proposed, so far as the ULS was concerned, two separate teams, the Platform Development Team dealing with the Lower Mechanical Latch Assembly and the Rover Team, dealing with the Upper Level Electronic Assembly. There would then be a separate Valeo team.
288.	Their main recommendations were that Mr Cummings should  be allocated 100% to lead the Platform Development Team and the Valeo project, that Honeywell should hire in a mechanical engineer with at least 5 years experience in the latch industry, enabling Mr Shelley to work 100% on the upper assembly, that Mr Trickett should be transferred to the Platform Development Team and that a manufacturing engineer with around 10 years design experience in the latch industry should be hired in to help ensure that the ULS was producible. On the Rover Team, they proposed hiring a project or team leader with about 10 years of design experience in the latch industry, to bring experience and credibility to ensure a successful launch with Rover, that Mr Shelley be allocated 100% to designing and developing the upper level electronic assembly and that a controls engineer with 5 to 10 years experience in the automotive industry be hired. They recognised that hiring in external resources might take 3 to 6 months so that consideration needed to be given to what to do in the short term.   
289.	A telephone conference then took place later that day between Mr Bur and Mr Ricks in the United States and  Mr Cummings, Mr Kettle and Mr Shelley, all of whom were apparently supportive of the proposal, although Mr Shelley could not remember participating in the call. The next day, 27 February 2002, Mr Mitchell responded to Mr Chevalier’s e-mail of 26 February 2002 about resources, saying that Mr Bur and Mr Ricks had made a recommendation as to the team which needed to be in place, which he and Dr Turnbull were to discuss later that day. 
290.	Mr Mitchell asked Mr Ricks and Mr Bur to indicate what the short term needs were, on the basis that it would take time to phase in external resources. Mr Ricks prepared a Resource Proposal Spreadsheet for presentation to a meeting of the Project Approval Committee in Freeport on 6 March 2002, which set out in tabular form their recommendation, including the hiring of four engineers externally and what the short term approach should be, on the basis that it would take time to hire in such external resources. It was proposed that in the short term, Mr Cummings should be 100% on the Platform Development Team and Valeo projects and that, pending the hiring of a mechanical design engineer from the latch industry, Mr Shelley should fill in the gaps and oversee the soft tooling order. They noted that he was currently supporting both aspects of the ULS and Valeo Keyless and Valeo Headlamp Levelling. In the corresponding mechanical design position on the Rover team for the upper assembly, they recommended bringing in Mr Abanni Maxwell, a mechanical design engineer at Freeport to help design the upper assembly, with a 6 to 9 months commitment. 
291.	In relation to the manufacturing engineer they recommended hiring, their short term approach was that Mr Gibson should continue to support but that he should be 100% on the automotive program to ensure success. They also recommended that Mr Bill Eaton, a manufacturing engineer in Freeport be brought in to assist Mr Gibson. As project leader until someone was hired in from the latch industry, they recommended Richard Hayes. Before the Controls Development engineer from the automotive industry was employed, they recommended that Mr Vaidhyanathan would fill the gap short term with some electronics engineering resource from Freeport. In terms of priority for the external recruiting the top priority for Mr Bur and Mr Ricks was the project leader for the Rover Team, followed by the manufacturing engineer, then the mechanical design engineer and finally the controls/software development engineer. 
292.	In a subsequent business plan prepared by Mr Bur at Mr Mitchell’s request on 28 March 2002, Mr Bur emphasised the need to employ the four industry experts (either as employees or as consultants) by 30 June 2002. What is interesting though, is that his reasons for this view were the need for Honeywell to “come up the learning curve fast” because of its need to show it was now a latch supplier.  Mr Bur also accepted in his evidence that one of the reasons why he and Mr Ricks wanted latch experts on board, was a perception that Honeywell was too dependent on Mr Chevalier’s expertise. Their game plan was to come up the learning curve fast so that Honeywell would become latch experts. They envisaged changes being made to the JCA, with Mr Chevalier becoming a consultant and ALS receiving just royalties. 
293.	This is important because ALS now seeks to make much of these internal discussions about hiring experts in an effort to demonstrate that Honeywell should have acted sooner and that it took Mr Bur and Mr Ricks to shake them up. However, the discussions about the desirability of hiring experts were not taking place in the context of Honeywell’s obligations under the JCA, but of how Honeywell could assume more design control under a different form of contract.
294.	What is clear is that the recommendations which Mr Bur and Mr Ricks made were accepted by the Project Approval Committee. Thus, on 12 March 2002 Mr Ricks informed the team that Mr Maxwell, Mr Eaton and Mr Vorwald (who was already supporting Mr Shelley) together with Mr Lynn Miller (mechanical engineer, modelling and analysis expert) and Mr Greg Furlong (engineering supervisor in the Platform Development Group) had been assigned to the ULS project from Freeport. Ultimately Mr Paul Trickett did not join the project, because his line manager would not release him from the other work he was on, a normal incident of business life. In other words, most if not all of the short term resources recommended were put in place. Mr Maxwell was lead engineer coordinating efforts at Freeport, concentrating on developing design concepts for the upper electronics assembly. Mr Maxwell in fact came to Newhouse for three months in June 2002 to work on the upper assembly.
295.	Much was sought to be made by ALS of the fact that Mr Ricks referred to the fact that the design of the upper electronic assembly, involving moulded plastic parts, (i.e. the housing), lead frames, the printed circuit boards and various sensors, “is not receiving the attention it so desperately requires”, which ALS effectively contends is an admission that, in the first 10 months of the project, those aspects had been neglected. However, whilst as a matter of chronological history that is right, it simply does not follow that there was accordingly a breach of the JCA by Honeywell.
296.	 Quite apart from the fact that it was contemplated by the JCA itself that drawing transfer would precede any development work, so the real complaint is about the time taken to transfer the design, it is also the case that it was not until slightly after this time that the parties agreed that Honeywell would develop the control electronics in parallel with ALS’s contractors. Up until March 2002, Honeywell was still waiting for a design transfer in relation to control electronics from ALS and its sub-contractor VVLP, before commencing its own work on control electronics. I return to this point in the context of ALS’s criticisms about control electronics later in the judgment.  
297.	Furthermore, there is what I regard as an irreconcilable inconsistency between the allegation put forward by ALS based on Mr Ricks’ e-mail that Honeywell was at fault for failing to develop the design of the upper assembly (specifically the housing) until Mr Maxwell came on board and the case put forward at considerable length by Mr Chevalier in his evidence that Honeywell and specifically Mr Maxwell were at fault for developing a design of housing for the upper assembly, effectively without ALS’s consent.  In fact, as emerges when the issue of the housing is examined closely, that allegation is without merit. However, ALS cannot have it both ways.  I would be extremely reluctant to conclude on the basis of ALS’s evidence that Honeywell was in breach in failing to start development work on the upper assembly until the spring of 2002 and I decline to reach that conclusion.
298.	So far as the short term deployment of resources is concerned, Mr Bur (of whom I have already commented that what was something of a diatribe against Honeywell and its lack of resources in his witness statement bore no relation to his actual evidence given orally, which was much more measured and reasonable) said that, at this time, his real complaint was that if Honeywell had hired the four latch experts that he and Mr Ricks were asking for, it could have resolved the technical difficulties. However, he accepted that he and Mr Ricks had not considered how difficult it would be to hire external resources.
299.	In fact, it is clear that senior Honeywell management had approved the employment of two latch industry engineers by 3 May 2002, as demonstrated by Mr Bur’s own slides of that date for presentation to Mr Chevalier.  Mr Bur accepted that by 21 May 2002, senior management had approved the hiring of all four external industry experts as shown by Mr Mitchell’s e-mail to Mr Chevalier of that date. Mr Bur tried to suggest in his evidence that senior management subsequently changed their minds, but there was no evidence to support that assertion, which was one area where I thought Mr Bur’s evidence was not satisfactory. On the contrary, it is clear that recruitment consultants were instructed and efforts began to fill all four roles. In fact it appears from the Personnel Requisitions sent by Mr Ricks to Mr Mitchell on 13 March 2002 that approval in principle to all four hires may have been given by the Project Approval Committee at its meeting. 
300.	In his evidence Mr Bur accepted that between March and June 2002, there was a surge in the number of people within Honeywell allocated to the project. In addition to the personnel from Freeport identified in Mr Ricks’ e-mail of 12 March 2002, Mr Pete Suknaich joined as a software engineer in March 2002, followed by Mr Johnson and Mr Lamb as electronics engineers and Mr Ken Bechtold as an additional mechanical design engineer in about June 2002. Mr Bechtold initially worked on the clutch and gear train from June 2002 and then on the springs from December 2002.
301.	Mr Bur also accepted that by June 2002 the short term plan he had put forward until latch experts had been employed was satisfied and that Honeywell was doing the best it could in the circumstances.  What in fact happened is that, after a brief period of two teams, the Product Development Team led by Mr Cummings and the Rover Team led by Mr Hayes between the end of March 2002 and early May 2002, on 6 May 2002 Mr Mitchell decided that there should be a single manager for the whole project, Mr Hayes. 
302.	Whenever precisely approval to all four hires was given by the Project Approval Committee, the problem encountered was not the unwillingness of senior Honeywell management to hire latch experts, but the difficulty of hiring such people in a relatively limited and established industry. Apart from Mr Spurr (who had his own reasons for leaving Arvin Meritor and who was able to negotiate both that he remain at Arvin Meritor until he had earned his Christmas bonus for 2002 and that he should essentially work from home in Solihull) people who were approached and even interviewed either turned down the job (as in the case of Veronique Mejean who was offered the job of project leader in August 2002) or were induced to stay in their current employment, as was the case with Mr Steve Wright, who was due to join Honeywell from Arvin Meritor at the same time as Mr Spurr. Honeywell only learnt that Mr Wright would not be joining it as applications engineer at the end of December 2002 not long before he was due to start.   
303.	As I have already said, Mr Douglas was reduced to suggesting that Honeywell should have offered more money to prospective industry experts to entice them away from their current employers. Not only does that go beyond taking all reasonable actions under Article 4.5, but there is absolutely no evidence that this would in fact have induced any prospective employees to join Honeywell.  The same point can be made about Mr Bur’s contention in his evidence that Honeywell never explored his alternative suggestion of seeking to engage such external experts as consultants. However, there is no evidence that any of the people approached who were unwilling to join Honeywell as employees, would for some reason have been prepared to join as consultants instead. Indeed, common sense suggests that, if the reluctance derived, as it seems to have done, from unwillingness to leave the employ of an established latch manufacturer, the prospective latch experts would have been no more willing to join a rival newcomer as consultants and their current employers equally unwilling to countenance their acting as such consultants. 
304.	In conclusion on the issue of resources as it stood after twelve months of the project in May/June 2002, even if there were any force in criticisms of under-resourcing of the project prior to March 2002 (as to which, as I have indicated, I am sceptical) it seems to me that there would be absolutely no grounds whatsoever for such criticisms by May/June 2002. ALS can draw no sustenance from Mr Mitchell’s decision to abandon the two team approach in early May 2002, since the removal of Mr Cummings is what Mr Chevalier was evidently pressing for. As I have said, Honeywell’s inability to fill the external latch expert roles other than with Mr Spurr was not itself a breach of contract. Accordingly, even if there had been under resourcing as at January 2002 and that was a breach of the JCA (about which I have considerable doubts), any breach had clearly been cured by June 2002. 
Drawing transfer
305.	 I have dealt with the issue of drawing transfer in a separate section both because of the time it occupied in the context of the overall project and because it leads as neatly as anything does in this case into the next section dealing with delays after the drawing transfer and, specifically, issues relating to changes in design. I propose to deal first with what the task of drawing transfer involved, then with the history of the drawing transfer and finally with the issues relating to breach of contract, namely did Honeywell do the wrong thing and whether it was right or wrong, did it take too long.
306.	 As I have already said earlier in this judgment, Honeywell was unable to open the ALS disks of drawings created in Auto CAD prior to the JCA being entered. It was not until Mr Shelley purchased an Auto CAD LT package in about June 2001 that Honeywell was able to view the 2D drawings, but not the 3D models created in Auto CAD by Mr Chevalier. Mr Shelley’s evidence was that there would have been no point in buying an Auto CAD package which would show the 3D models because, when he reviewed the files with Mr Chevalier at his flat, Mr Chevalier’s 3D models did not coincide with his 2D drawings, so the 3D models were of no use. He did not recall whether Mr Chevalier gave an explanation for this, but Mr Shelley assumed that the explanation was that Mr Chevalier made design changes to his 2D drawings but did not update his 3D models.
307.	The evidence of both Mr Shelley and Mr Cummings was that they had investigated whether there was any translation software package that would facilitate the transfer of Mr Chevalier’s 3D models and 2D drawings created in Auto CAD into the ProE system which Honeywell used, but there was no such system. Despite some sweeping statements by Mr Chevalier that there were such translation packages and that the totality of his computerised information in Auto CAD could have been transferred in hours or certainly days, no evidence was ever produced by ALS to back up that rather extreme assertion. I prefer the Honeywell evidence that no such translation package was available, not least because if one was available, it is inconceivable that Honeywell would not have purchased it, particularly when faced with Mr Shelley’s assessment that the drawing transfer would take 9 months to a year for him to carry out.  
308.	That assessment was made when he viewed the drawings he had with the Auto CAD package in late June or early July 2001. Although he did not recall which ones they were, these were probably the drawings sent by Mr Chevalier in May 2000 and handed over at the meeting on 29 November 2000. In his evidence Mr Chevalier claimed he had handed over another CD of drawings at the signing meeting on 17 May 2001. However that seems unlikely for two reasons. First, had such a CD been handed over, I feel sure Mr Cummings would have recorded that in his note of the meeting. Second, after the termination of the JCA, ALS’s then solicitors wrote to Honeywell in February 2004 requesting the return of all confidential proprietary material. The CDs of drawings listed did not include anything handed over at the meeting on 17 May 2001. Such was the care Mr Chevalier took over his intellectual property, I am sure that such a CD would have been listed if anything was handed over at the meeting.
309.	As I have already said earlier when dealing with the issue as to whether Honeywell appreciated from the outset of the collaboration the amount of design development work required before a soft tooled build could take place, when Mr Shelley was able to view the drawings in late June or early July 2001, he appreciated that the drawings were suitable for the process of machining but not for the process of production using tools. It was in that context taken with the fact that there was no translation package available, that Mr Shelley and Mr Cummings concluded that the best way to transfer the design knowledge to Honeywell was to re-draw the product from the bottom up with frequent discussions with Mr Chevalier, as set out in Mr Cummings’ e-mail of 6 July 2001.  
310.	Mr Wright questioned whether this was useful deployment of engineers’ time in an e-mail to Dr Turnbull the same day, suggesting the need for a discussion of the whole approach to transfer from Auto CAD to ProE. Later in July 2001 it was agreed that additional mechanical design resource would be deployed to assist Mr Shelley, not least because he was involved in all the projects at Newhouse including Valeo. Following the Executive Review on 14 August 2001 Mr Scott Vorwald in Freeport was brought in to assist with the drawing transfer and drafting. Mr Shelley’s recollection was that the transfer started at the beginning of September 2001.
311.	In his evidence, Mr Shelley could not remember the reason for some delay in starting the process. It seems likely though that there were two reasons. First, the determination by Honeywell management as to whether the suggested approach to drawing transfer was the correct one and the deployment of the additional resource of Mr Vorwald. Second, in July and August 2001 Mr Chevalier had made some alterations to the drawings for the purposes of the manufacture of the prototypes for the Frankfurt motor show and it was evidently decided not to start the drawing transfer until those revised drawings were available. Accordingly, the CD which Mr Shelley was given by Mr Cummings at the beginning of September 2001 and from which he started the process of transfer was of the latest revisions of the drawings dated July and August 2001. Mr Chevalier was critical of Honeywell in his evidence for not starting the process of transfer until September 2001, but I would be reluctant to conclude that there was any breach of the JCA in doing so. It would seem sensible to have waited for the latest revisions of the drawings and there was no pressing urgency, in circumstances where a contract with an OEM had yet to be obtained.
312.	 Mr Shelley described what the process of transfer entailed in his evidence. He used Mr Chevalier’s 2D drawings wherever possible to create his own 3D model in ProE. Sometimes he would access the Auto CAD 2D file to check the dimensions. On a complex part such as the upper retention plate, it would take 2 to 3 days to create the 3D model in ProE from the 2D drawing. For simple parts like pins, the process would take anything from 5 to 15 minutes. 
313.	Once he had created the 3D model in ProE, he then had to create the 2D drawings in ProE. The views and the nominal dimensions would come across directly from the 3D model. Thus in ProE the problem which Mr Chevalier had had in Auto CAD (that his 3D model had not been updated in line with his 2D drawings) would not occur. The parametric modelling in ProE meant that whatever work you did in 3D would alter the 2D drawings automatically and vice versa. However only about 70% or so of the dimensions would transfer across from the 3D model to the 2D drawings, so that it was always necessary to add dimensions. In addition it was necessary to add geometric tolerancing details and critical dimensions. Again, on a complex part such as the upper retention plate, the process of generating the 2D drawings from the 3D model could itself take another 2 to 3 days. It was also necessary to generate about 50 sub-assembly drawings which Mr Chevalier had not provided. 
314.	Mr Shelley also said that Mr Vorwald was assisting from sometime in September 2001. He did the detailing on the drawings and would then send them back to Mr Shelley. For example he would be given the right hand model of a part in order to produce the left hand detail. Mr Vorwald also did some simulation work later.  From some time in 2002 (Mr Shelley could not be specific save that he thought it was earlier than May 2002) Mr Bechtold in Freeport was also helping with the drawing transfer.
315.	In terms of the progress made, it appears from a Power point presentation Mr Cummings had a hand in preparing for a meeting with Mr Mitchell dated 6 November 2001, that by that stage, the 3D model of the mechanical sub-assembly had been created and 29 of 74 component drawings for the mechanical sub-assembly had been detailed. However, some three weeks later on 29 November 2001, Mr Shelley produced an Excel spreadsheet giving estimated timescales for the completion of the drawings. 
316.	At one point in his evidence Mr Shelley said that at the same time as doing the transfer, he and Mr Vorwald were making simple changes to parts in the drawings to make them manufacturable. However in his e-mail of 29 November 2001 attaching the spreadsheet, Mr Shelley said in terms that the timescale did not include “engineering analysis or redesign at this stage, it’s basically just documenting the existing prototypes to Honeywell standards”. He accepted this in his evidence and Mr Cummings agreed that Mr Shelley was just transferring drawings at this stage and not doing any developments or modifications. It seems to me that Mr Shelley’s recollection about making simple changes to the parts relates to a later stage of the process of drawing transfer.  
317.	What the spreadsheet shows is all the drawings (whether the main ones or the sub-assembly ones) were either to be completed or to be detailed. This is inconsistent with what Mr Cummings had said in the power point slide about 29 drawings having been detailed and Mr Cummings was unable to explain this. It seems to me that Mr Shelley’s detailed spreadsheet is more likely to be accurate. What that shows in terms of time needed to complete the task is that another 1,751 hours were needed between Mr Shelley and Mr Vorwald.  It is to be noted in the context of Mr Bland’s complaint about the absence of FMEAs that the timescale includes 280 hours in total for detailing FMEAs, including of the mechanical design (Mr Shelley with Mr Chevalier) and of the mechanical assembly (Mr Shelley with Mr Gibson).
318.	A few weeks later, on 17 December 2001, Mr Shelley produced an update of his Drawing History spreadsheet. The total time outstanding to complete the transfer had come down to 1641.25 hours. Although only a rough guide because some timings are reassessed, this suggests in just over 2 weeks about 100 hours of work between Mr Shelley and Mr Vorwald. A further update was produced on 16 January 2002 which showed a reduction to 1592 hours. Again as a rough guide (as Mr Shelley confirmed in evidence) this suggests in a period of a month (when Newhouse was closed for two weeks over Christmas and New Year) some 50 hours of work on drawings.
319.	As had been contemplated in Mr Cummings’ e-mail of 6 July 2001, the process did involve Mr Shelley e-mailing drawings to Mr Chevalier and discussing them with him as they both accepted in evidence, but the contacts seem to have been limited prior to March 2002. Between 13 and 15 March 2002, Mr Shelley visited Mr Chevalier in London for what appears to have been their first major discussion of the design since the drawing transfer started. 
320.	Before those meetings, Mr Shelley produced in a diagrammatic form the questions he wanted to discuss. These included, as he elucidated in his evidence, the clutch mechanism and gears and their manufacturing technique and possible re-design as a consequence, tolerancing analysis, various issues to do with material and parts concerned with manufacturability, design changes necessary for soft tooling, the timescale for soft tooling, reduction in piece part count, modifications generated from the six sigma exercise,  re-design of the “sensing head” which he explained was the mouldings, re-design of the retention plates for soft tooling and the knock on effect of that on levers and pins.
321.	Mr Shelley’s evidence was that, by this stage, he was already looking at reducing the piece part count, looking at the redesign of plastic mouldings for manufacture and the issue of the clutch redesign because of the manufacturing technique, a matter which was taken over by Mr Bechtold in May 2002. Mr Shelley was already effecting simple changes to develop for manufacture during the process of drawing transfer. It is clear from the issues raised by this diagram that, by this stage, Mr Shelley had a reasonable grasp of the design. He had also appreciated that design changes would be needed not just to make the ULS manufacturable but for soft tooling, although he had obviously not appreciated the extent of the changes and development required as identified by the latch experts for the purposes of this litigation. Mr Chevalier accepted in evidence that the diagram was of steps to be taken after the design transfer took place and that the next step after such transfer would be tolerance analysis to ensure that the tolerances were suitable for tooled as opposed to machined production. 
322.	It is also clear from Mr Shelley’s notes of the meetings, that a number of design changes were put forward by Mr Chevalier. In his witness statement (on which he was not challenged) Mr Shelley identified these as changes to the clutch plate, the gear cap and the retention plates. Mr Chevalier wanted to use elastomer on the lower retention plate to absorb noise and rubber in the strengthening grooves. Mr Shelley also said that they discussed sealing the gasket between the upper retention plate and the lower housing to reduce noise. In his oral evidence, he said there was some discussion about springs but Mr Chevalier did not have any calculations available at the time. Thus, it is clear that Mr Chevalier had started to propose changes to the design, concerned not only with soft tooling and manufacturability, but in particular the issue of noise raised by a number of OEMs, before Honeywell had completed the transfer of the drawings as they stood in August 2001.
323.	On 21 March 2002, a teleconference took place between Mr Shelley and Mr Gibson in Scotland and Mr Vorwald and other personnel in Freeport now on the project, Messrs Maxwell, Eaton and Miller. It appears from a note of this that at that time prototypes off soft tools were required by the week of 23 June 2002, which would mean that the drawings would have to be completed at least six weeks before by the week of 28 April. 
324.	A higher level teleconference between amongst others Mr Ricks, Mr Mitchell and Mr Hayes took place on 11 April 2002. From the notes of that, a similar aggressive timetable emerges, with the start of production date for the Rover RDX60 in the first quarter of 2004. This would require production acceptance by 1 October 2003, which allowing for 12 months for the design, development and debugging of a complex production line would require the assembly line to be ordered by 1 October 2002. That in turn required the start of design validation by 1 July 2002.  This seems to me to demonstrate a continuing lack of appreciation by Honeywell that significant design development work was required before any soft tooled build could take place.
325.	On 23 April 2002, Mr Shelley produced another update of his drawing history spreadsheet.  Since the teleconference on 21 March 2002, responsibility for both the lower and upper housings and for the upper assembly (including the motor, clutch, gears and springs) had transferred to Freeport. On the spreadsheet those items were shown as “USA” and the timings previously entered for them were taken out. As Mr Shelley said in his covering e-mail “note this timescale is only to detail as per JP’s design info.. modifications to improve manufacturability/reduce piece part count will extend timeline, plus USA will have to add times in for their remit”.
326.	This was evidently an attempt to arrive at a “bare minimum” outstanding time to complete the transfer which remained the responsibility of Mr Shelley and Mr Vorwald, as the 240 hours for FMEAs has also been removed.  However even allowing for drawing responsibility transferred to Freeport and for the removal of the FMEAs having reduced timings, the outstanding time required had reduced dramatically to 730 hours. Comparison with the previous update at 16 January 2002 shows that a substantial number of drawings had now been completed.  In very broad terms that comparison reveals some 400 hours of work in that period.
327.	Mr Shelley’s evidence in his witness statement (on which again he was not challenged in cross-examination) was that during the course of April 2002, Mr Chevalier continued to make further design modifications. This is borne out by a number of contemporaneous documents. Thus on 11 April 2002 Mr Hayes e-mailed Mr Chevalier saying that Honeywell was now reviewing options for soft tooling suppliers, expecting to be ready to order for 22 April. Any tweaks or adjustments by Mr Chevalier to the design would need “definition”, in other words a design freeze in the next 2 to 4 weeks. 
328.	Then there is Mr Ricks’ e-mail response to Mr Shelley’s e-mail of 23 April 2002, in which he says: “Also we need to get a better handle on drawing changes and modifications made by JP who is still in direct contact with the customer [i.e. MG Rover]. As I understand it, JP has made recent drawing modifications and no one is sure of the latest revision of each part. How are we going to know when the design is frozen so we can order soft tools?” When these documents were put to Mr Chevalier he did not deny that he was making design changes at this time. He just said that Honeywell had not finished the design transfer.
329.	Mr Shelley was also making changes following the meetings in March 2002, amongst other things to improve manufacturability. Thus, for example on 2 May 2002, he sent Mr Chevalier some jpeg files showing a change to the spring retaining clips on the lower retention plate made at a supplier’s request. In the same e-mail he mentioned other changes Honeywell was considering. He also asked Mr Chevalier to send him a set of the latest drawings (i.e. including all the design modifications Mr Chevalier had made)  as he would soon be conducting tolerance studies and finalising drawings for the production of soft tooled parts. Mr Chevalier’s response the same day was that the modified files would be sent to Mr Shelley some time the following week once Mr Chevalier had settled into his new flat. Mr Shelley’s evidence in his witness statement (again not challenged) was that Honeywell was still waiting for the revised drawings a month later. 
330.	This was significant because, at that time in early May 2002, it was contemplated by those managing the project, Mr Cummings, Mr Hayes (who was about to replace Mr Cummings as project manager) and Mr Bur that once drawing transfer was completed in May, soft tools and prototype equipment would be purchased in June and July and the prototype build off soft tools would take place in August 2002.  This intention appears from Mr Bur’s update sent to Mr Hayes and Mr Cummings on 2 May 2002 and Mr Hayes’ e-mail of 3 May 2002, setting out his input for an ALS review with Mr Wright. What was entailed in terms of any design work was what Dr Turnbull referred to in his evidence as “relatively small changes to the overall design” to improve manufacturability. A similar picture emerges from an e-mail circulated by Mr Cummings on 9 May 2002 headed “ALS platform-mechanical design activity”, from which it is also clear that the activity contemplated included a tolerance analysis.
331.	By May 2002 Mr Shelley and Mr Vorwald had substantially completed the transfer of Mr Chevalier’s drawings in relation to the lower half of the latch (the mechanical sub-assembly). This is apparent from the last version of Mr Shelley’s drawing history spreadsheet dated 30 May 2002. This shows the drawings for which they were responsible as completed and provides an estimate of 185.25 hours as the time now needed to develop Honeywell drawings from Mr Chevalier’s design for soft tools (piece parts only) for the lower latch. In contrast a longer time is shown of 437 hours for work (principally in Freeport) to develop Honeywell drawings for the soft tools on the upper latch. This is because that included items where Mr Chevalier had not provided drawings, such as the housing.
332.	The upshot is that the process of drawing transfer took Honeywell between 8 and 9 months from early September 2001 until sometime in May 2002. Before considering whether that time was so excessive as to amount to unreasonable delay in breach of Article 4.5, I should deal with the allegation that Honeywell ought not to have undertaken this exercise at all.  This allegation was essentially founded on the evidence of Mr Bland to the effect that it was only necessary to produce a 3D model, because in his experience, toolmakers and component manufacturers would receive the computerised model and work off that. Production of an appropriate model would have taken four weeks, which Mr Bland regarded as generous, given that Mr Spurr had produced a ProE model in 23 hours.
333.	In my judgment, there are two principal fallacies in this allegation. First Honeywell can hardly be seriously criticised for doing what it did, given that it had a specific contractual obligation under Exhibit 4 of the JCA to transfer the drawings into the internal Honeywell format. Mr Chevalier tried to counter that by saying that transfer was not the same as re-drawing from scratch. However the answer to that was to be found in Mr Shelley’s evidence that, in the absence of a translation package, in order to recreate on Honeywell’s system a live parametric model and drawings, it was necessary to engage in the task he performed. Mr Bland’s four week exercise would simply create a “dead” 3D model which would not be parametric.
334.	Second, Mr Bland’s evidence that toolmakers and component manufacturers would only need to work off the 3D model is against the weight of the other evidence. Mr Shelley’s evidence was that toolmakers would only receive the 2D drawings although he would maybe provide the 3D model to the manufacturer who was going to manufacture the part.
335.	Mr Spurr’s evidence was that the modelling exercise that took 23 hours was the one he undertook earlier this year referred to in Appendix 19 to Mr Drysdale’s report. It involved taking the ALS drawings and producing a 3D solid parametric model. The double size prototype he helpfully produced in his evidence in Court was then made, by sending the CAD data to the prototype shop.  He said of soft tooled prototypes, that he would send the CAD data to tool makers who would do most of tool designs from it. Drawings would follow with critical dimensions that require greater control.  He expanded on this in re-examination, adding that a great deal more work would be required beyond the 23 hours to produce detailed drawings and to produce a meaningful model so that any future modifications to the parts could be undertaken, without completely remodelling them. 
336.	Mr Drysdale’s evidence was that most component suppliers would not have been able to make parts for a soft tooled build simply from the CAD information but would require drawings, which would also have been required for quality control purposes. In the circumstances, I much prefer the evidence of the other witnesses to that of Mr Bland. Furthermore, no doubt had Honeywell merely created a 3D model and then found, as seems likely, that toolmakers or component manufacturers required 2D drawings, ALS would have complained that Honeywell had failed to comply with its obligation to transfer the drawings to its system. 
337.	Turning to the question of whether the time taken to effect the drawing transfer was such as to constitute unreasonable delay. ALS’s case at its most extreme is manifested in Mr Chevalier’s assertion that the whole transfer should have taken no more than twenty one hours, for which he claimed to have obtained a quotation, which was never produced. This evidence was literally incredible and completely out of line with that of either Mr Shelley himself or the experts.
338.	Mr Bland’s assessment was that, as already noted, it should take four weeks to produce the 3D model then a further two months to produce the drawings and the detailing. Mr Drysdale’s assessment, which I much preferred to that of Mr Bland, was that the whole task to transfer and remodel the drawings, not taking account of design changes in the meantime, should take about six months. 
339.	As to the time it in fact took, Mr Shelley accepted fairly that with two people engaged on drawing transfer, the time taken should be shorter. However, common sense would suggest that it would not be simply a question of halving the time taken. As Mr Drysdale said, the task would still take between three and six months. Throughout the transfer, Mr Vorwald was assisting Mr Shelley, which would suggest that Mr Drysdale’s six months should come down to about four months. 
340.	In fact of course, the transfer took between eight and nine months. As to why this was so, ALS inevitably pointed the finger at Mr Shelley’s involvement in other projects, specifically Valeo, and Mr Cummings’s assessment in January 2002 that Mr Shelley had only a 60% commitment to the ULS project. As I have already indicated, I suspect that Valeo and Mr Shelley’s other commitments may well have intruded, but did so to a greater extent in the first few months leading up to December 2001. After about December 2001, it seems to me that his own Drawing History updates demonstrate a substantial commitment to the ULS project. 
341.	It is also important to note that nothing in the JCA required the project team to be exclusively dedicated to the ULS project. This is what one would expect in the real world: a number of projects being run by Honeywell, on one of which at least (Valeo) Mr Shelley had been involved before the ULS project was taken on. It would be unreal to expect a mechanical design engineer of Mr Shelley’s obvious competence to drop everything else. ALS sought to rely upon Mr Mitchell’s call for a “tiger team” dedicated to the ULS, but that was an ideal, not a contractual requirement. Certainly prior to the Rover nomination in February 2002, there was no particular urgency attached to the project.
342.	It would only be if the limitations on deployment of resources caused by other projects were such as to cause unreasonable delay that there would be a breach of Article 4.5. Accordingly, as I see it, some leeway is permissible on my figure of 4 months for the transfer to take account of the involvement of the personnel engaged on the drawing transfer in other projects and perhaps some additional time to allow for their lack of experience of the ULS, at least at the start of the process. An overall period of 5 months or so would not seem untoward.
343.	There were also some design changes made by Mr Chevalier or by Mr Shelley himself in the period of design transfer after the meetings on 13 to 15 March 2002, which probably delayed completion of the drawing transfer by Mr Shelley and Mr Vorwald by a few weeks. Thus the time which should have been taken for the transfer was about 6 months overall, rather than the 8 to 9 months actually taken. However, when this is being considered in the context of allegations of breach of the JCA, there is an important caveat. Some of the design changes which Mr Chevalier had started to effect from March 2002 onwards were responsive to actual or perceived requirements of MG Rover. It is not suggested that the obtaining of the RDX 60 nomination was in any sense delayed by drawing transfer not having been completed.
344.	Thus, although the 6 months which, as I have indicated the transfer should have taken, commencing at the beginning of September 2001, would have completed at the end of February 2002, the practical reality is that the design changes required to respond to MG Rover as Mr Chevalier was working them out in the March to May period, would always have delayed the finalisation of the drawing transfer or the project overall by a few weeks. Thus in my judgment, the correct analysis is that, allowing for those design changes, the drawing transfer should have completed by about the middle of March 2002, some two months or so before it did. Thus, at the end of the drawing transfer in May 2002, there was a breach of Article 4.5 by Honeywell in the sense that that transfer had taken two months longer than it should have done.
The project from May 2002 until January 2003
345.	This section of the judgment covers the period from when drawing transfer was substantially completed until when drawings were sent out to toolmakers and component manufacturers for the soft tooled build. By way of overview, at the outset of this period, it was contemplated that once the design was frozen (which it was anticipated would be later in May 2002) there would be a full tolerance analysis of the entire latch (estimated to take 22 days) and then a design review, before going out to soft tooling which was due to commence at the latest in the first week in July 2002. This is clear not only from Mr Shelley’s diagram of the issues for the meetings with Mr Chevalier between 13 and 15 March 2002, but also from the proposed plan sent out by Mr Cummings on 9 May 2002. In the event, the drawings for soft tooled prototypes were not sent out to toolmakers and component suppliers until December 2002 and January 2003 and were sent out without any tolerance analysis or design review having taken place.
346.	The obvious question is why this happened and whether the delay which undoubtedly occurred was attributable to breach of the JCA by Honeywell. On this question as on so many other issues in the case, the parties’ positions are polarised at opposite extremes. Honeywell’s case is that the delay was caused by constant changes to the design made by Mr Chevalier and further delay in his signing off the drawings. As a consequence, the design was not frozen until very late and the urgency to get drawings out to toolmakers and component suppliers in order to build a prototype latch to take back to Volkswagen was such that it was not possible to do any tolerance analysis or design review. Other matters also delayed progress such as the absence of a detailed specification from MG Rover.
347.	ALS on the other hand contends that the changes in design were of no great significance and that in any event matters were delayed by abortive work carried out by Honeywell at its own instigation on the housing. It points to continued under-resourcing and lack of direction and focus in the management of the project.
348.	It is necessary to look at the contemporaneous documents and the evidence carefully to ascertain whether, as ALS contends, Honeywell was in breach of Article 4.5 or its other obligations under the JCA in (i) not going out to soft tools until it did and (ii) going out to soft tools without doing all design development work required, including a full tolerance analysis and design review. I propose to examine these issues under various headings, design changes, the housing, resources, further dealings with OEMs and process development.
Changes to the design
349.	 I have already dealt in the previous section of the judgment with the fact that following the meetings on 13 to 15 March 2002 between Mr Shelley and Mr Chevalier, both Mr Chevalier and, to an extent, Mr Shelley were making design changes for manufacturability. Mr Cummings’ e-mail sending his proposed plan on 9 May 2002 refers to changes to the retention plates on which 24 parts were affected and on the need to complete a “data dump” by the end of May 2002 of all other changes being made by Mr Chevalier, in relation to which it was estimated that 15 additional parts were affected. By reference to this e-mail, Mr Douglas suggested to Mr Shelley that no design changes were being made by Mr Chevalier at this stage, but Mr Shelley disagreed. It seems to me that this e-mail bears out Mr Shelley’s evidence.  
350.	On 4 June 2002, Mr Hayes, who was now project manager, sent out to the project team a plan for the development of the entire latch for the RDX 60 project. That contemplated going out to soft tooling about the beginning of July 2002, with a prototype build in October 2002. Mr Douglas sought to suggest to Mr Hayes in cross-examination that what this contemplated was reverse engineering, in other words prototype build first, followed by tolerance analysis afterwards. However Mr Hayes denied that and said the plan contemplated the various processes taking place in parallel not in reverse, which seemed to me to be borne out by the form of Mr Hayes’ plan. 
351.	What matters for present purposes though, is that the plan contemplates completion of Phase 2 (Concept Development) by early July 2002. Reverting to the Work Breakdown Structure (since this plan is obviously operating according to Six Sigma principles) that contemplated completion of the transfer of design (and therefore by definition a design freeze) by the end of that phase. This is borne out by a note at the end of the plan which states “Drawings underway presently. Now require JPC urgent to conclude all adjustments”. 
352.	On 25 June 2002, Mr Chevalier visited Newhouse for a review of design progress. In an e-mail to him the previous day, Mr Hayes identified as three areas for discussion (i) design completion of the bottom half of the latch to enable progress to procuring components, (ii) questions arising from the design risk FMEA driven by Mr Shannon which Mr Hayes described as part of the technical knowledge transfer and (iii) a top half concept review, getting Mr Chevalier’s input in that process. Mr Shannon also gave evidence about this visit as having been a “brain-storming session” with Mr Chevalier on concerns with the project which he said was a good starting point for a DFMEA.
353.	On 27 June 2002, a meeting took place between Mr Chevalier and Messrs Shelley, Maxwell and Bechtold. Mr Shelley’s evidence about this was that they had turned up for a design review but instead the meeting involved changes that were going to have to happen following a visit by Mr Chevalier to MG Rover. These were changes to the design of the claw and pawl to prevent so-called slam locking. Mr Chevalier said in evidence that this was a minor change required by MG Rover which would not take much time to implement.  Both Mr Drysdale and Mr Shelley disagreed with him about the significance of this change to the design. 
354.	 There was a further meeting on 3 and 4 July 2002 to discuss changes to the ring and index gears, the sliders and the pawl. Mr Chevalier said in evidence these were necessary at this stage of development. Although it was suggested to Mr Shelley that changes which related to the clutch did not impact on him because those were matters for Mr Bechtold, he said that they would still have to sit and go through the changes as a team.  Also, in so far as there continued to be claw and pawl changes following the visit to MG Rover, they necessitated rebuilding the 3D models to check for jams due to the changes. 
355.	Furthermore, although Mr Chevalier sought to downplay the time required for such changes to be effected, he had not completed these particular changes three weeks later. On 24 July 2002, Mr Shelley chased Mr Chevalier as to whether he had completed the changes from his last visit and asked for the Auto CAD drawings to be e-mailed as soon as possible. In reply Mr Chevalier sent a file with drawings of some of the changes and said there were still three or so parts which required to be modified which he would e-mail later that week, which he did on 26 July 2002. 
356.	These continuing changes seem to be what prompted Mr Hayes to e-mail Mr Chevalier on 31 July 2002 about signing off the design either as a package or on a drawing by drawing basis. When it was put to Mr Chevalier that there was pressure on him to sign off the drawings, his original extreme and obviously inaccurate response was that there were no drawings to sign off, but he did then agree that there was pressure to sign off and had been for some time. This evidence ties in with Mr Bur’s e-mail to Mr Shelley and Mr Maxwell of the same date, saying he would like formally to get Mr Chevalier to sign off on the drawings, to freeze the design. This would mean that Honeywell could say no more changes and that Honeywell owned the design as the project went forward. 
357.	In that e-mail Mr Bur also asked for a table with the latest revision for the parts. In reply on 1 August 2002, Mr Shelley said he hoped to update the FTP site (an internal Honeywell web site) with the latest drawing files. He went on that freezing the design was a few weeks away from completion on the bottom half of the latch. The reasons for this were (i) that Mr Chevalier had not finalised the design changes, a problem which had cost the plan probably about three weeks due to sitting down with Mr Chevalier along with potential latch builds into Volkswagen doors; (ii) Honeywell then had to modify the models and detailed drawings to suit the new upper and lower retention plates (to which some of Mr Chevalier’s changes related); (iii) tolerance analysis had to be completed on critical areas.
358.	ALS understandably alighted on this e-mail and the reference to Mr Chevalier’s changes costing the plan three weeks to date to demonstrate that Honeywell was exaggerating the delay caused by design changes. However, I consider that, viewing the matter objectively, the design changes had in fact delayed the plan for more than three weeks. After all, the reason why the design freeze is still a few weeks away is, inter alia, Honeywell’s need to modify the models and detailed drawings in the light of design changes. It seems to me that the reality is that, without ascribing any blame for design changes to anyone, those changes, together with the need to do a tolerance analysis, which at least in Mr Shelley’s assessment, could only be done once there was a fixed design, had set the plan back by six weeks or so. Mr Shelley’s estimate of three weeks delay was thus something of an under-estimate. 
359.	That interpretation is consistent with Mr Hayes’ plan at the beginning of June having envisaged a design freeze in the first week of July 2002. Mr Shelley was now assessing that such a freeze on the bottom half of the latch was a few weeks away i.e. some time towards the end of August 2002. ALS itself put forward no specific explanation for delay in the design freeze on the bottom half between early July and mid to late August as having been caused by anything other than changes in design. Problems with the housing (to which I will return) cannot account for delay in a design freeze on the mechanical portion of the latch, despite Mr Chevalier’s attempt to contend that in his evidence. 
360.	Following a visit to Newhouse between 11 and 16 August 2002, Mr Chevalier made further changes to the sliders, levers, claw and gear as set out in drawings sent to Mr Shelley on 17 August 2002. It is evident that by this stage Mr Chevalier was feeling the pressure of what Mr Bur accepted in evidence was a perception within Honeywell that it was the design changes being made by Mr Chevalier that were holding up the design freeze. This is demonstrated by what Honeywell correctly describes as the somewhat self-serving terms of his e-mail of 17 August 2002, containing the suggestion that the changes had been explained to Mr Shelley’s full satisfaction on 15 August 2002 and should require “a maximum of one to two working days to complete”. 
361.	That view was not shared by Mr Ricks, Mr Shelley or Mr Bechtold, all three of whom thought that estimate unrealistic. On 23 August 2002 Mr Ricks told Mr Chevalier:-
“Although you properly show outlines of each part and compare the changes visually, the changes appear to be subject to Mike’s or HW’s interpretation. These parts are extremely critical in the latch design...
...
I am very concerned over the way we are making changes extremely late in the game, and also the fact that these changes do not seem to be tracked under document revision control”
362.	 In his reply to that e-mail on 24 August 2002, Mr Chevalier said that the particular design changes under debate were minor but went on to say, somewhat inconsistently with that statement and what he had said in earlier e-mails, that there was an “...urgent and serious volume of work to be shifted in a short period of time”. When this inconsistency was put to him in cross-examination, Mr Chevalier’s evidence was distinctly unimpressive and evasive. He tried first to explain this away as a reference to all the testing and validation that would be necessary for customer and assembly line requirements. 
363.	When he was reminded that what he had said in the e-mail was in the context of developing the design for the soft tooled build, he then said the delay was all the fault of Mr Maxwell who had taken three and a half months with housing design. That answer was indicative of a tendency in his evidence to blame all delays and problems on the housing. However, nowhere in his e-mail is there any reference to the housing being the problem.  The reality is that by this stage of the project, Mr Chevalier had realised that a lot of changes to the design would be required before there could be a soft tooled build and he did not want to be blamed for the delay.  It is of some significance in this context that the e-mail of 24 August 2002 also appears to be the first time that Mr Chevalier suggested that design changes were Honeywell’s responsibility and that, because Honeywell engineers had not complied with that responsibility, he had had to effect the necessary changes himself. 
364.	So far as the particular design changes under discussion are concerned, Mr Shelley fairly accepted that they had not taken him a great deal of time, being completed by 27 August. However he made the fair point, which seems to me to apply generally to this process of design change, that he would have had to dimension the parts in Auto CAD which took time and that sometimes when making changes to the ProE model, this would cause the model to crash or it would affect more than one dimension. 
365.	The potential knock-on effect of even minor changes was something he described clearly in his evidence:
“If you can envisage the changes that are going to happen in the future you will be okay, but if you can't envisage the changes, you don't know what the changes are going to be because it affected more than one dimension. You could change other areas and it could have a knock-on effect. So then you have to go through the model and say what's the knock-on effect and you have to start building it up from there...”.
I see no reason not to accept that evidence. It seems to me to demonstrate that the whole process of transferring design changes which were being made, into the ProE 3D model and then the drawings, was nothing like as straightforward as Mr Chevalier sought to suggest in his evidence. Furthermore, an obvious consequence of even minor changes would be that there could not be a design freeze and that it would not be possible to order components for the soft tooled build. 
366.	By September 2002, Mr Chevalier had recognised that a considerable amount of work still required to be done on the design of the housing. He says as much in an e-mail to Mr Mitchell of 11 September 2002. Significantly, in view of his attempt in evidence to blame all the problems with the housing on Honeywell and, specifically, Mr Maxwell, he did not seek to blame any of this need for more work on Mr Maxwell (a matter to which I return below).  He suggested two options. The first was that he should make the changes on Auto CAD, but the drawbacks with that were that he would have to explain the drawings to Mr Shelley and that Mr Shelley would then have to transfer them into ProE. That would set the project back by a further six weeks at least. That statement is an interesting one as it seems to me to be a realistic recognition at the time of what Mr Chevalier steadfastly refused to accept in his evidence, that the process of transfer of the drawings and specifically of transferring changes into ProE was a complex and time-consuming one. 
367.	The second option was that Mr Shelley, Mr Maxwell and colleagues should come to see Mr Chevalier in London, so that they could complete the necessary work together and he would then sign it all off for soft tool production as soon as possible. He estimated that the time needed to complete the work would be five complete days. This is the option which was adopted. Accordingly, Messrs Shelley, Vorwald and Maxwell spent a week at Mr Chevalier’s flat from 23 to 27 September 2002 during which they assisted Mr Chevalier in making changes to the design of the upper and lower housings and various aspects of the mechanical sub-assembly. 
368.	Mr Chevalier reported to Mr Hayes on this visit that despite the fact that they had achieved a considerable volume of work, there was still a reasonable amount of work to be completed. In his evidence about this visit, Mr Chevalier accepted that even after the visit five days of work was still required and substantial inputs to the design were going on.   
369.	There was a clear perception within Honeywell that the design changes which Mr Chevalier was making were delaying the project. As Mr Ricks put it, in forwarding Mr Chevalier’s report to other members of the team: “the never ending design saga continues”.  Mr Bur admitted in evidence that by this stage, the perception within Honeywell was that the design changes being made by Mr Chevalier were creating a “serious problem with the timetable in relation to Rover”.  On 18 October 2002 Mr Bur made a presentation to Mr Mitchell and others for the purposes of preparing some costings for Volkswagen in which he described the design of the MG Rover design (“base latch”) as “not complete-2 weeks away” (as it transpired another under-estimate) and that the design needed to be finalised before Honeywell could get further procurement quotations. 
370.	During October 2002, Mr Chevalier made a number of further changes to the design, particularly to the lower housing. This prompted Mr Ricks to send an e-mail on 28 October 2002 saying that they were “already 4 weeks behind schedule with releasing the soft tooling orders because of continued design modifications and changes.” Mr Ricks said he appreciated Mr Chevalier’s desire to design the housing to get the quietest latch possible, but made the point that the priority had to be MG Rover. In effect he was saying that the housing design could be improved later because MG Rover was not as concerned about noise as other OEMs.  At around the same time as Mr Ricks’ e-mail, Mr Hayes observed on 30 October 2002 that procurement of prototype components was “on hold” pending the finalisation of the mechanical design. Mr Bur accepted in evidence that everything was on hold at the end of October 2002 until the drawings were finalised and released.
371.	This is also confirmed by Mr Hayes’ e-mail sent to all members of the team and to more senior management such as Dr Turnbull and Mr Mitchell on 14 November 2002. He attached a revised plan and stated:
“Summary (3 bullets only) of project.
•	6-8 weeks late against plan
•	Just starting to order prototype materials-6 weeks late v plan and limited to what can be ordered
•	Design release now looking like wk 47-impacting prototype ordering, process development etc.”

The reference to design release in week 47 seems to have been to a proposed meeting with Mr Chevalier for him to sign off the drawings.
372.	The evidence about whether and when drawings were signed off by Mr Chevalier was somewhat confused. His own evidence was that he did not sign off drawings in December 2002, but only signed off some drawings a few months later. Somewhat surprisingly in view of that evidence, Mr Douglas put to Mr Shelley that Mr Chevalier had indeed signed off A3 prints of the drawings at design freeze meetings (so described by Mr Ricks in an e-mail of 27 November 2002) in London between 18 and 22 November 2002 [ i.e. in week 47]. Mr Shelley agreed that a meeting had taken place, the purpose of which was for Mr Chevalier to sign off the drawings, but when the Honeywell representatives arrived, there were more changes made to the parts by Mr Chevalier. Mr Shelley did not think drawings for the full latch were signed off at the meeting. Mr Bechtold confirmed this. He said Mr Chevalier would not sign off, because of changes to the clutch and other changes he wanted to make.
373.	 In the event, the signing off of at least some of the drawings seems to have taken place on a piecemeal basis. In its written Closing Submissions, Honeywell said that it had identified 33 drawings with Mr Chevalier’s signature on them, which was not challenged by ALS. Thus, it appears the process may never have been formally completed, but Honeywell started sending out drawings to toolmakers and parts suppliers during the course of December 2002, in effect some five months later than anticipated and then without the tolerance analysis or design review contemplated by Mr Cummings and Mr Hayes having taken place. 
374.	ALS (principally through the expert evidence of Mr Bland) was critical that no such tolerance analysis and design review (i.e. development of a DFMEA) had taken place before Honeywell went out to soft tooling. That is an issue to which I shall have to return in more detail in the context of examining the reasons for the failure of the soft tooled build. However for the present I should record that the delay which had taken place in effecting a design freeze (which to the extent it took place at all did not occur until December 2002) was such that, in order to try to meet the deadlines on a successful prototype build imposed by the requirements of MG Rover and Volkswagen (to which I refer below), there was insufficient time to carry out a full tolerance analysis or a design review before going out to soft tooling.
375.	In terms of the cause of the delay of five months in going out to soft tooling, I have no real doubt that the cause was the numerous changes in design. Mr Douglas for ALS sought to argue that Honeywell had exaggerated both the extent of the changes and the time taken. He relied on Mr Drysdale’s assessment that the changes made to the design were not all that significant and that the design of the ULS was still nowhere near ready for the soft tooled build when that took place. Mr Drysdale may be right in absolute terms, but the fact remains that, however significant the changes were, they took time, not only for Mr Chevalier and others to make them but for them then to be incorporated into the ProE model and drawings.
376.	The question remains as to who is responsible for the delay which occurred whilst these changes were made and in the meantime no design freeze took place. At the time and in his evidence, Mr Chevalier sought to blame Honeywell for the delay, essentially in two respects. First he contended that Honeywell and specifically Mr Abanni Maxwell had effectively embarked on a frolic of its own taking time producing a design of housing which was useless in the sense that it did not solve the problem of noise encountered with some of the functions of the latch. Second he contended that the problem was the lack of experience and expertise of the Honeywell engineers, a return to the theme of inadequacy of resources, in circumstances where the development of the design was Honeywell’s contractual responsibility. These contentions were essentially adopted by ALS in its closing submissions. I shall consider each in turn.
The housing
377.	Before considering the matter in more detail, I should note that Honeywell contended that the allegations made about the housing were not part of any pleaded case by ALS and for that reason it had not been thought necessary to call Mr Maxwell to give evidence. Whilst I accept that the full significance of what Mr Chevalier was saying in his evidence may not have been appreciated by Honeywell, the fact remains that the allegation that Honeywell had frequently changed the design of the latch without ALS’s written consent, in Paragraph 27(13) of the Amended Particulars of Claim, did include an allegation about changes to the design of the housing. 
378.	Having said that, the absence of Mr Maxwell did not impede the proper resolution of this issue, not least because the true position emerges fairly clearly from the contemporaneous documents which bear little or no relation to the extreme position adopted by Mr Chevalier in his evidence. 
379.	The story can be picked up for present purposes at the time of Mr Chevalier’s visit to Newhouse between 11 and 16 August 2002. In cross-examination, Mr Chevalier sought to contend that when he went to Newhouse on this visit, he found that Mr Maxwell had completely redesigned the housing which was a block of plastic. This is relied upon by ALS in its Closing Submissions to contend that the housing was a completely new design by Honeywell which never worked.
380.	However, that is not borne out by contemporaneous documentation. It is clear from a detailed e-mail which Mr Chevalier sent to Mr Maxwell on 17 August 2002 referring to “the following changes to the upper housing of the latch have explained to your full satisfaction and agreed on 16 August 2002” that they had worked on the housing together and that it was Mr Chevalier who was instigating design changes. What is conspicuously absent from that e-mail, is any suggestion that this was some entirely new and flawed design for the housing which Honeywell had developed without his knowledge or consent. Mr Maxwell made some of the changes which Mr Chevalier was suggesting in that e-mail and others were the subject of discussion between them, as appears from Mr Maxwell’s e-mail of 27 August 2002. 
381.	It is clear from Mr Chevalier’s e-mail to Mr Mitchell of 11 September 2002, that he recognised that there was a considerable amount of work to do on the housing to complete it and make it sufficiently robust and soundproof. That e-mail led to the visit of Messrs Shelley, Maxwell and Vorwald to London in the week of 23 to 27 September 2002, to which I have already referred. When it was put to Mr Chevalier that he had not been critical of Mr Maxwell in that e-mail he accepted that, but said he had been critical in later e-mails. However, that is not what emerges from the later documents. 
382.	No criticism of Mr Maxwell is made by Mr Chevalier in his own report of the meetings during that week of 23 to 27 September 2002. It is clear from that report that substantial changes were made to the design of the housing at those meetings and that those changes were being led by Mr Chevalier. This is entirely what one would expect and accords with what he said, at one point in his evidence, to the effect that he did not see it as the job of people like Mr Shelley to come up with changes in design, but rather that he, Mr Chevalier, would provide instructions on changes. It seems to me that what was true of Mr Shelley was equally true of Mr Maxwell.
383.	Following that meeting Mr Chevalier e-mailed two sets of further design changes to the housing on 9 and 10 October 2002 and Mr Maxwell implemented those changes and sent an attachment showing the housing assembly to, inter alia, Mr Chevalier on 22 October 2002. This evoked the immediate response from Mr Chevalier: “Abanni.  The housing looks neat-excellent”. In evidence Mr Chevalier tried to explain this away, saying the engineers were under pressure, so he had to give them compliments, but that he had never thought it was an excellent design. I did not find that evidence at all convincing. It seems to me that the e-mail from Mr Chevalier reflected what he thought at the time, although of course that is inconvenient for the case he is now seeking to run.
384.	A few days later, on 25 October 2002, Mr Chevalier began for the first time to criticise the work being done by Mr Maxwell on the housing, specifically some work done by Mr Maxwell on the ribs in the gear compartment of the housing. This Mr Chevalier considered contrary to his clear instructions and said that this work would have to be scrapped and re-done. In response, Mr Ricks sent an e-mail pointing out that the number one priority had to be finalising the design for the sake of the Rover program and that with several more weeks of design and time to build the moulds for the housing, there would not be initial housings available until the end of December. Since prototypes were due in January, this would leave no slack time in the schedule. Changes to the housing to reduce noise could be made later.
385.	That e-mail seems to have caught Mr Chevalier on the raw, since his response to it was to e-mail Mr Mitchell on 29 October 2002, saying that Mr Ricks was seeking to blame ALS for delay in the project, but ALS was not responsible for one iota of delay. He accused Honeywell engineers of being unable to follow clear guidelines (meaning from him) and to want to introduce endless modifications and fruitless ideas which have to be scrapped and the work revert to the original design. He said that Mr Maxwell had been working on the housing for more than six months and 90% of his work was totally erroneous and had to be scrapped and redone again.
386.	Whilst Mr Chevalier disavowed any criticism of Mr Maxwell in his evidence, he maintained that this e-mail set out the facts. In my judgment it does not, but rather is illustrative of the sort of distorted exaggeration to which Mr Chevalier was prone time and again in his oral evidence, whenever he felt that he or his invention were being criticised.  I consider that a much more accurate and measured assessment of the design of the housing was given by Mr Shelley, who said in evidence that it still needed some work on it, but the suggestion of 90% change was way too high. He thought that the changes required were probably due to Mr Chevalier having ideas on dampening sound, because he knew that otherwise there were going to be problems with noise from gear train ratios and other matters. In other words, the changes were required to endeavour to make a quieter latch.
387.	That ties in with what Mr Ricks had said in his e-mail. Furthermore, it ties in with what Mr Chevalier was actually saying at the same time to Mr Maxwell, in their internet meeting on 28 October 2002, where Mr Chevalier talked about four particular items to do with the housing but did not suggest 6 months or 90% of work was wasted. Mr McQuater correctly suggested to Mr Chevalier that what he was complaining about there was the fact that Mr Maxwell had gone off at something of a tangent over the last few weeks. Mr Chevalier’s reaction in his evidence was to reiterate his theme that the housing was useless.
388.	However, despite that theme in his oral evidence and his outburst in his e-mail to Mr Mitchell, contemporaneously on 5 November 2002, he e-mailed Mr Maxwell to say that the housing at long last looked like the final product. In cross-examination he accepted that he was reasonably happy with the housing at that date. Although in re-examination he sought to resile from that somewhat and to say that there were still errors in design that prevented it being assembled correctly, it seems to me he was indeed reasonably happy with the housing at the time. 
389.	In any event, whatever problems there may have been with the design of the housing, the reality is that that design was developed at Mr Chevalier’s instigation and under his instruction. Even if Honeywell did develop the design of the housing, Mr Chevalier was fully aware of what was happening and was directing the development of the design. In this regard, I accept entirely the evidence of Mr Shelley, who although not directly concerned with the housing, was intimately involved with the process of design change. He said that Mr Maxwell did not create his own design but was following instructions from Mr Chevalier, that Mr Chevalier was the design leader on the full project with overall design control and although there were some problems with the housing that persisted, Mr Chevalier’s complaints about 90% of the design of the housing having to be scrapped were exaggerated. 
390.	It may be that Mr Maxwell had gone off at a tangent with some ideas of his own, between the meetings in the week of 23 to 27 September 2002 and the end of October 2002 and that this infuriated Mr Chevalier at a time when he was under extreme pressure from Honeywell to finalise the design and sign off drawings. However, I do not consider that any real delay to the project was caused by Mr Maxwell’s work (since Mr Chevalier was still making other changes to the design at that time) and in any event do not consider that it can even begin to be said that what Mr Maxwell was doing constituted a breach of the JCA by Honeywell.
Resources and contractual responsibility
391.	Mr Chevalier’s other contention, in relation to delay caused by changes in design, was that his intervention in making the changes was only required because Honeywell did not have any engineers of sufficient experience or expertise to effect the changes in design necessary to make the design of the ULS suitable for the soft tooled build. I have already concluded that although the contractual obligation of Honeywell was to take all reasonable actions to develop the design from wherever it was at the date of the JCA to make it manufacturable, the question of what is reasonable depends upon all the circumstances. Those include the fact that, as I have also concluded, Honeywell was misled by Mr Chevalier as to the state of the design of the latch. That considerable additional design work was required before any soft tooled prototype build, only really emerged during the period from about March 2002 onwards and then in a piecemeal fashion, without as Mr McQuater put it, a “Eureka moment”. The message from Mr Chevalier himself as to how much design work was required was a contradictory one.
392.	In those circumstances, as I have also concluded, I do not consider that Honeywell can be criticised for not taking steps to recruit latch experts until sometime in March 2002 and, in any event, it is evident that there were considerable difficulties in recruiting any such experts with the exception of Mr Spurr, difficulties which would have been just as acute if the process of hiring had started earlier. Accordingly, I do not consider that Honeywell can be criticised for not having a latch expert in place in the period between March 2002 and December 2002 when changes to the design were being made. In the absence of such an expert, as Mr Chevalier accepted in his evidence, he had to lead the design process.
393.	That is what in fact happened. It was Mr Chevalier who “called the shots” on design changes and who dictated what changes were in fact made, as is clear from the contemporaneous documents to which I have referred. Mr Chevalier was jealous of his design and clearly regarded himself as the only person who should make any changes to it, a concern reflected in the “design veto” in item 7 of the Scope of Work at Exhibit 4 to the JCA. I consider that this process of having to filter all changes or modifications or improvements through Mr Chevalier inevitably caused delays in the project at various stages, including at this time in the second half of 2002. 
394.	That is not the same thing as saying that Mr Chevalier was obstructive about changes (a suggestion Mr Douglas was keen to refute), just that, because he wanted to have overall control of the design, the process of making changes inevitably took more time than if Honeywell had been free to make changes unimpeded. Nor, in my judgment, is there any question of ALS (through Mr Chevalier) having been in some way in breach of the JCA by reason of the design changes. The only issue which matters is whether the delay between May and December 2002 caused by the design changes is a matter which is attributable to a breach of contract by Honeywell. I am very clearly of the view that it is not. In circumstances where the changes were all being either made by or at the least controlled by Mr Chevalier, it is difficult to see what else Honeywell could have done.
395.	There does not seem to have been any problem with the resourcing of the project generally in the second half of 2002, other than the inability to hire latch experts, which, as I have held, was not Honeywell’s fault.  As noted in Section IX above, by June 2002, a number of new Freeport personnel had come on board, described by Mr Hayes in an e-mail of 24 June 2002 to Mr Chevalier as a “small army”. These engineers were trained by Mr Chevalier in small groups on the workings and design of the latch. So much training had gone on that by 25 June he was looking to change the format to larger groups of 10 or 15, because training smaller groups was taking up too much of his time. No doubt appreciating that this was inconsistent with his case at trial that Honeywell was under-resourced throughout, he tried to claim rather bizarrely in his oral evidence that this had been Mr Kettle’s idea not his. That suggestion was refuted by Mr Kettle. 
396.	The Honeywell engineers working on the project do not seem to have been distracted to any significant extent during the second half of 2002. There is certainly nothing obvious in the documentation to which my attention was drawn showing any serious clash between the two projects. Dr Turnbull’s evidence was that he did not believe Valeo was a significant distraction at the end of 2002 and I accept that evidence.
397.	Equally it seems to me that any criticism of the individual Honeywell engineers with whom Mr Chevalier was dealing is misplaced. In his evidence Mr Chevalier reserved his criticism for Mr Maxwell and the housing, but I have already held that criticism was unjustified. So far as Mr Bechtold is concerned, at one stage in November 2002 Mr Chevalier was highly critical of his competence, at a time when he (wrongly) thought that Mr Bechtold was trying to claim intellectual property in changes to the design of the clutch. As with Mr Maxwell and the housing, this was indicative of the protective attitude Mr Chevalier maintained towards his invention. Whenever he felt that Honeywell design engineers were encroaching on his territory of the design of the ULS, he had a tendency to become prickly and critical. 
398.	In his oral evidence he went out of his way to make it clear that he was not now questioning Mr Bechtold’s competence and he accepted that Mr Bechtold had done good work on the gears and clutch and then subsequently the springs. Similarly, he accepted that Mr Shelley would perform as a good engineer when given the right direction. He also accepted that, to an extent in the absence of anyone at Honeywell who was an expert in latch design, he would have to lead the process. 
Further meetings with OEMs
399.	At this point it is necessary to examine in more detail developments taking place with the OEMs. This is not only to deal with ALS’s case that Honeywell failed to follow up interest in the latch or to market the latch properly. It is also to deal with the issues which arise in relation to MG Rover and Volkswagen specifically. I will look briefly first at the position in relation to other OEMs.
400.	On 24 May 2002 a further meeting took place with Mr Steve Cox of Jaguar 2002 at which a latch fitted with control electronics developed by MLE was demonstrated with full functionality. Mr Kettle reported that Mr Cox was sufficiently impressed to say he would send an internal e-mail to his counterparts in Land Rover and Jaguar recommending that they see a demonstration.  Mr Kettle told Mr Cox they were demonstrating the latch to Land Rover on 28 May.  He asked the Jaguar representatives whether there was any feature they would like on the latch that was not there and they could not think of any. Mr Henshaw of Jaguar also referred to their interest in passive entry and power opening because that was the way the market was going. Mr Kettle justifiably referred to this in his evidence as a positive meeting but made the point that there was no further meeting with Jaguar for 15 months.
401.	In relation to the demonstration of control electronics to these various OEMs, it should be noted that as Mr Johnson said in evidence, the MLE control electronics were great for demonstration purposes but not for production intent which was what Honeywell was focused on. That this was all that MLE was being asked to do is clear from their Statement of Work which refers to producing 5 prototypes “in test rig supplied for demonstration to prospective clients”.
402.	On 18 June 2002, a meeting eventually took place with Mr Tim Goodchild of Ford in Dearborn. It emerged that Ford had recently sourced a new corporate latch from Arvin Meritor and that the next corporate latch opportunity was likely to be in 2006. Mr Goodchild articulated concerns about the noise of the latch. It seems from the notes of the meeting that the enhanced features of the latch, such as super locking and passive entry, were of little if any interest in the United States, reflecting what Honeywell had been told by the Ford representative who came to its stand at the Frankfurt motor show in September 2001. 
403.	On 20 June 2002, Mr Kettle and Mr Bur had a meeting with representatives of Viper, an American sports car company owned by DaimlerChrysler. The meeting went well but representatives from the core latch engineering group of DaimlerChrysler who had been invited to the meeting did not turn up. It was put to Mr Kettle that, since DaimlerChrysler was in German ownership and Mercedes had a strong relationship with Kiekert, it would have been difficult for Honeywell to break into DaimlerChrysler. Mr Kettle would not accept that, at least in relation to Viper, which had its own specific latch requirements. However in relation to DaimlerChrysler generally, it seems to me that the non-attendance of their representatives speaks volumes and suggests very strongly that, at least whilst under German ownership, the group would have been unlikely to want to contract with Honeywell.
404.	In July 2002 Honeywell had a meeting with Fiat instigated by Lear Corporation but matters do not seem to have gone further. They also had a meeting with Volvo and arrangements were made for representatives of Volvo to attend a demonstration of the latch to Jaguar which was planned for 24 September 2002. In the event, that demonstration did not take place. 
405.	Turning to the position with MG Rover, this is relevant to two questions. First, there is an issue on the evidence as to whether MG Rover ever provided a full specification for the RDX 60 to Honeywell and whether that delayed the project. Second there is the issue concerning the extent to which the course taken by Honeywell in relation to the soft tooled prototype build was dictated by deadlines imposed by the Rover project. 
406.	Since I have already concluded that the delay between June and December 2002 was not a matter which amounted to a breach of the JCA by Honeywell, I can deal with the first of those issues fairly briefly. It was the evidence of Mr Chevalier that Honeywell had had a full specification from MG Rover. This was supported to an extent by Mr Alder, who maintained that there may have been an issue about the electrical specification for the latch but that MG Rover had provided a full test specification.
407.	This was contradicted by Mr Kettle’s evidence that Honeywell had some information from MG Rover but it was not in a very good format and that Honeywell ended up more or less writing the specification for MG Rover, which was not its role. This evidence was confirmed by Mr Hayes, who said that the problem was the absence of any test specification. Honeywell had pulled together the information it had, which was limited so far as the mechanical performance expected of the latch was concerned, and put together a specification which it presented back to MG Rover.
408.	I much prefer the evidence of Mr Kettle and Mr Hayes on this. The absence of any meaningful specification from MG Rover, thus requiring Honeywell to prepare a specification for itself, is borne out by the contemporaneous documents. Mr Hayes had prepared a draft specification from which he prepared a summary, which he sent to Mr Alder on 20 August 2002. Although Mr Alder claimed in his evidence that MG Rover had provided a test specification but that Honeywell had rewritten its own and he had wondered why, he does not seem to have raised such a query with Mr Hayes. Rather, as Mr Hayes told the team on 5 September 2002, Mr Alder approved the summary, but MG Rover was still trying to pull together the test specification. Mr Johnson also reported on a meeting with MG Rover the same day at which the electrical specification, which was already late, was still not provided.
409.	The problems which Honeywell was encountering in getting the specification from MG Rover were highlighted in an e-mail on 22 November 2002 from Mr Kettle to Mr Alder and Mr Devlin, expressing concern that whilst Honeywell was committed to supplying latches to MG Rover’s specification, it was increasingly being asked what the specification would be and had spent time preparing a test specification for the latch, which Mr Kettle believed should have been done by MG Rover. The e-mail set out the difficulties in obtaining the test specification, electrical specification and mechanical specification (as Mr Alder in fact accepted in cross-examination), which had only recently been agreed.
410.	Subsequently on 23 January 2003, MG Rover put the RDX 60 programme on hold and asked all those involved including Honeywell to stop work on the programme. MG Rover asked Honeywell for a statement with respect to the RDX 60 programme, which was provided in an e-mail from Mr Hayes of 11 February 2003.  Amongst other things, Mr Hayes complained about difficulties in obtaining information. It is clear that the difficulties in obtaining detailed specifications from MG Rover did cause some delay to the project, specifically, as stated by Mr Bechtold in September 2002, the ordering of equipment and tooling was very difficult in the absence of a fixed specification requirement. In reality, that delay coincided with the delay in sending out drawings for the soft tooled build, because of the changes in design which were being made. Either way, in my judgment the delay was not caused by any breach of contract on the part of Honeywell.
411.	At the time when the RDX 60 nomination was received in February 2002, the timescale for production of the ULS and supply to MG Rover was an aggressive one, with start of production for the RDX 60 in the first quarter of 2004, which required the process of design validation to start in July 2002. Honeywell was to deliver to MG Rover by the end of November 2002 200 or so prototype latches manufactured off soft tools. As has been seen, changes in design delayed the project.  There was also an issue as to who was to pay for the 200 or so latches. Honeywell expected either MG Rover or TWR (to whom MG Rover had sub-contracted the RDX 60 programme) to do so. Mr Kettle chased Mr Devlin as to who was going to place the order for these latches in e-mails on 26 September 2002 and 22 November 2002. This question had not been resolved at the time that MG Rover suspended the RDX 60 programme in January 2003, as is apparent from the report Mr Hayes sent MG Rover on 11 February 2003. 
412.	However, before that suspension Honeywell continued to work towards providing MG Rover with prototypes made off soft tools as soon as possible. The changes made to the design meant that it was not possible to achieve this by the end of November, but Honeywell was aiming to provide the 200 prototype latches by January 2003. 
413.	In fact, at around the time that Mr Spurr joined Honeywell in January 2003, Honeywell was renewing discussions with MG Rover about supplying the ULS to the existing models, Rover 25, Rover 45 and MGF. This had first been raised by MG Rover at a meeting Mr Kettle had with them on 19 April 2002, at which they asked how quickly Honeywell would be in a position to supply latches for their existing 25, 45 and MGF models due to problems they were having with their existing latch supplier. The matter does not seem to have been raised again until around the time that the RDX 60 project was put on hold. However, from January 2003, both parties proceeded on the basis that this alternative was an active possibility, although no letter of nomination was provided by MG Rover prior to the termination of the JCA. 
414.	What happened in the meantime was that a further meeting took place with Volkswagen on 18 September 2002, attended by Mr Kettle and Mr Holger Friedrich of Honeywell. The people met from Volkswagen apart from Mr Schrenke were Mr Meyer and Mr Petersen who Mr Kettle described as two of the decision makers in the Volkswagen latch department. The two Passat doors were returned fitted with the latches and one of them was used to demonstrate all the functions of the latch both mechanically and electronically. There are two e-mail reports of the meeting, one by Mr Kettle which exhibited his usual boundless enthusiasm and one by Mr Friedrich, which was more balanced and in my view more realistic. The meeting was undoubtedly a positive one. However, as Mr Kettle accepted in his evidence, two issues still remained for Volkswagen. They still thought that the latch was too noisy and were concerned about price. Mr Friedrich recorded that there would be no business opportunity for power closing unless those issues were resolved.
415.	Addressing the noise issue, Mr Kettle promised to provide Volkswagen with soft tooled prototypes in January/February 2003, with 90-95% reduction in noise. On price, it was agreed that Volkswagen would send Honeywell the PQ46 programme [i.e. Passat] information in order for Honeywell to quote on that programme. Volkswagen was evidently working with Audi and Magna on a power closing latch but there were technical problems and concerns about price. If Honeywell was able to solve the two issues Volkswagen had, then Mr Friedrich records that Volkswagen would be open to considering a running change to use the ULS. Mr Kettle says in his e-mail report that if Honeywell could reduce the noise level during the power closing function, Volkswagen would like to work with them on the Passat programme.
416.	ALS made much of this meeting in its case on quantum, specifically that it demonstrated that if Honeywell had delivered prototypes of a quieter latch in January or February 2003, in all probability Volkswagen would have adopted the ULS on the new Passat. I will need to consider this in more detail when I address the quantum issues, but for the present I simply record, first that Mr Kettle accepted in evidence that, even after this meeting, there was still a long way to go and, second that Mr Friedrich records that Volkswagen expected new low noise electronically operated latches in January/February 2003 “to decide on the next steps”, suggesting to me that there was no question of Volkswagen committing themselves at this stage. It is clear that it was following the meeting that Mr Chevalier began to become particularly concerned with making changes in the design of the housing to ensure that noise problems were reduced and that prototypes of a quieter latch could be delivered to Volkswagen. 
417.	On the outstanding issue of price, ALS also placed considerable reliance upon the fact that, when, in October 2002, Honeywell provided a quote to Volkswagen as requested of 13 Euros for the basic latch and 40 Euros for the high end latch, Mr Schrenke indicated that these were “in the ballpark” which ALS interprets as meaning that the prices were acceptable to Volkswagen. However, there is no evidence from any of the relevant decision makers in Volkswagen as opposed to relatively junior engineers, that they were prepared to contract on the basis of these prices. For reasons which I will elaborate later, I have considerable doubts whether Volkswagen would in fact have been prepared to agree to pay the substantial differential between the price of the basic latch and the price of the premium latch. 
418.	Finally on this area of the case, I consider that any suggestion that Honeywell failed to follow up interest in the ULS or to market it properly to OEMs in this period is wholly without merit.
Process development
419.	As I have already noted in my overview of ALS’s case on breach, by the end of the trial one area where ALS was particularly critical of Honeywell was its failure to have Design and Process FMEAs in place or to have conducted a full tolerance analysis before the soft tooled build was undertaken. It seems to me that there is much force in Honeywell’s complaint that this was not a case which was pleaded by ALS and so the Honeywell witnesses had not addressed it specifically. Furthermore, since it depends in large measure on the evidence of Mr Bland, which fell outside the Scope of Expert Evidence as ordered by the Court (and with whose evidence I was not in any event particularly impressed), it is an area which has to be approached with some circumspection. 
420.	It is necessary first to say something about Design for Six Sigma (“DFSS”), then to describe what steps were in fact taken by Honeywell and why further steps were not taken and finally to consider whether any of this amounted to a breach of the JCA by Honeywell. 
421.	A useful summary of Six Sigma was provided by Mr Shannon, the “black belt” six sigma facilitator who joined the project in 2002, in cross-examination:
“I think it's important to clarify something. It’s a common misconception that Six Sigma is a quality process or a quality system.  That's not the case at all.  You've heard people talking about QS9000, TS16949, these are quality systems, the demand that you document things in certain ways and that you can prove to an auditor that you have followed what you say. 
Someone once put it very succinctly to me. These processes say document what you do, and do what you document.  Whereas Six Sigma is different.  It's a set of tools, there's nothing new under the sun.  A set of tools, many of which have existed for a long time.  Some statistical, analytical, some more organisational, which you can use if and when appropriate in order to move any process or design forward. So they're the means to an end.
Q.  Right.  For the sake of example -- I don't want to run ahead on this -- something like a DFMEA which appears to be part of the Six Sigma process would also be part of a QS9000 process, and I just wondered where Six Sigma, as it were, distinguished itself, or where do you distinguish what's Six Sigma and what's --
A.  It's a very good point.  I think QS for example clearly dictates that you should have -- you should use DFMEAs and PFMEAs and so on.  What's unique about Six Sigma is that rather than just applying certain tools because QS says it's the right thing to do, in Six Sigma, as I said, all the tools in Six Sigma are actually pretty old tools, FMEAs were developed by NASA on the Apollo missions in the 1960s.  But what Six Sigma does is it gives you a very logical path to follow in order to employ the tools at the right time in a project in order to solve certain problems or to answer certain questions. So there's a Six Sigma process that helps you decide when to apply certain tools, and the outcome of those tools will help you achieve the requirements of, for example, TS16949.
Q.  So they're there to assist in a way in complying with or fulfilling the quality standards which are necessary; they're there to assist?
A.  They help you do it, and they help you do it, I think more efficiently.”
422.	Honeywell intended to use DFSS on this project from the outset, as is apparent from the Work Breakdown Structure to which I have already referred. However, this was Honeywell’s choice; there was no contractual obligation on it to do so. That is a fundamental point of which I thought ALS and its expert Mr Bland lost sight in the sustained attack which was made on Honeywell for not having followed Six Sigma processes. 
423.	Furthermore, the criticism now levelled at Honeywell, for not having initiated a DFMEA before the drawings went out for the soft tooled build, is at odds with the position contemporaneously. Of course ALS can point to Mr Drysdale’s opinion that Honeywell should have had a DFMEA before going out to the soft tooled build, but Mr Drysdale also thought that ALS should have already developed a DFMEA itself at the time of the JCA, a matter on which he was not challenged.   Although Mr Chevalier had said at the meeting on 24 July 2000 that he had an FMEA, none was ever produced. Furthermore, at no stage of the project prior to the soft tooled build, despite his many criticisms of Honeywell, did Mr Chevalier suggest that Honeywell was at fault for not having a DFMEA. 
424.	An initial DFMEA meeting took place just before 20 June 2002 (prior to Mr Chevalier’s visit to Newhouse for what Mr Shannon described as the “brain-storming session” on 25 June 2002). Mr Shannon was to prepare a draft and distribute it. The meeting with Mr Chevalier then took place and Mr Shannon said that it was a good starting point for a DFMEA. In fact the DFMEA was not started then. Mr Bur asked if there was a DFMEA on the mechanical sub-assembly and on 3 July 2002, Mr Shannon said no, but it was one of the things they had to start “ASAP”. Mr Shannon pointed out that what they did have was very detailed Process Maps and a Process Cause and Effect Matrix. Mr Shannon explained in his evidence that, initially, because they had thought that they had a finished design, they had focused on those design tools, which would be used for process or production development after design validation. 
425.	By late October 2002, Mr Shannon and Mr Eaton were working on an FMEA which Mr Shannon said was a high level system FMEA looking at potential risks which would then be carried through to a DFMEA and PFMEA. In fact the first DFMEA was not produced until 24 January 2003. The reason why it was not produced before does not seem to me to be lassitude or neglect on the part of the Honeywell engineers. On the contrary, it is clear from their planning documents from May and June 2002, that a design review was intended to be completed before going out to soft tools. The real reason seems to have been the absence of a frozen design. 
426.	Once some sort of design freeze had been secured towards the end of November 2002, Honeywell was more focused on getting the drawings out to tool and parts manufacturers with a view to carrying out a prototype build as quickly as possible in line with the requirements of MG Rover and the undertaking given to Volkswagen. It can hardly be criticised for that approach.
427.	What is remarkable, in view of the criticism now levelled against Honeywell for not having a DFMEA before 24 January 2003, is that there was no hint of any such criticism from Mr Chevalier at the time when that DFMEA was presented to him. Mr Chevalier sought to explain this away in his oral evidence by saying why bring up the past, but I did not find that very convincing, since the fact that something happened in the past does not seem to have ever prevented him from ventilating criticisms of Honeywell’s performance. 
428.	The reality is, that although, on the basis of Mr Bland’s evidence, much is now made for forensic reasons of the absence of a DFMEA at an earlier stage, Mr Chevalier was not really concerned about this at the time.  The evidence of Mr Hayes and Mr Shannon was that Mr Chevalier was rather dismissive of the DFMEA and did not think it very valuable. It is important to have in mind that any changes to the design had to have the written approval of Mr Chevalier, so that even if a DFMEA threw up a problem which Honeywell considered required a change in design, the contractual position was that, unless Mr Chevalier approved it, Honeywell was not entitled to make it. This can be seen in the fate of the Honeywell suggestion that helical gears be used to make a quieter latch, one of the matters thrown up by the design review after the soft tooled build, as reflected in the Design Change Log, to which I will return later.
429.	Although Honeywell had clearly intended to carry out a full tolerance analysis before going out to soft tooling, in the event the only tolerance studies done were done by Mr Shelley on pins and washers in February and early March 2003, before sending out the drawings of those parts. Again the reason why no full analysis was done was that this was impeded by the constant design changes before December 2002.  That this was the case emerges clearly from a report that Mr Shannon made of a visit he, Mr Shelley and Mr Murchie made to Freeport between 2 and 6 December 2002 to discuss the Six Sigma aspects of the project with the engineers in Freeport. In that report Mr Shannon says 
“While the mechanical engineers have pushed to complete the part drawings, there has been very little time for detailed analysis (tolerancing, motion, stress). The main reason for this has been the influence of JP Chevalier. Constant requests for modifications to the parts have severely limited the engineers’ progress. Some of the changes are important although many others are either cosmetic or to do with mechanical noise reduction. While JP clearly wants the latch to be the very best, a great deal of time has been lost on these modifications which could have been undertaken once prototype parts were ordered.”
Since Mr Shannon was not cross-examined about this report, it was never suggested to him that this was in any way inaccurate and I accept it as accurate. 
430.	What is perhaps most extraordinary about the criticism of Honeywell for having failed to carry out a full tolerance analysis on the ULS, is not only that there was no hint of any such criticism from Mr Chevalier at the time but that, in his oral evidence Mr Chevalier seemed on occasion to be criticising Honeywell for having conducted a tolerance analysis on the rivet stacks. In a particularly odd, somewhat incoherent and frankly unbelievable passage in his evidence, Mr Chevalier suggested that the reason why the soft tooled build failed was that Honeywell had made changes to the tolerances and clearances of his design, without his knowledge or consent, before they went out to soft tools, in the period between November 2002 and January 2003 and that is what caused the clashes in the build. He even claimed to have asked Mr Shelley why this was done and Mr Shelley had said “we changed everything for Six Sigma, that’s where the trouble started”. 
431.	This was one of many allegations made by Mr Chevalier in his evidence which Mr Douglas evidently did not feel able to put to the relevant Honeywell witness, on this occasion Mr Shelley. ALS sought to overcome this omission in its written Closing Submissions by suggesting that, in his Supplemental Witness Statement, Mr Shelley had not denied in terms that he had told Mr Chevalier that he had changed all the tolerances and drawings.  In my judgment, that is a very unsatisfactory approach. It is clear from what Mr Shelley was saying in his Supplemental Statement and in his oral evidence that the only changes to tolerances made were to pins and washers, following the limited tolerance analysis he did conduct. The 20 to 40 drawings he referred to were clearly those for pins and washers. If ALS had wanted to challenge this and suggest that changes made to tolerances were wholesale, let alone that Mr Shelley had admitted as much to Mr Chevalier, that could and should have been put fair and square to Mr Shelley in cross-examination.
432.	I find that this evidence about the alleged admission by Mr Shelley was pure invention on Mr Chevalier’s part. What it does demonstrate though is that the absence of a tolerance analysis was not something which concerned Mr Chevalier at the time. The criticism is essentially a construct based on Mr Bland’s expert evidence. Whilst it is true that Mr Drysdale agreed that you would normally do a full tolerance analysis before a prototype build, it does not follow that the failure to do so was a breach of contract.
433.	I consider that, as with the DFMEA or any proposed design review originally contemplated before the prototype build, so with the full tolerance analysis. The reason why these steps in the design process were not undertaken before Honeywell went out to soft tools was not some deliberate neglect on its part. Rather, pressure of time was such that Honeywell decided to do the soft tooled build first with a view to getting prototype latches to MG Rover and Volkswagen within February 2003 if possible. This was confirmed by Mr Spurr in his evidence.
434.	Honeywell took what Mr Shelley described as an “intelligent risk” in a passage in his evidence which I found compelling:
“We were being strapped for time to get this latch manufactured, so sometimes you have to take intelligent risks in these projects to keep them moving, as we had been presented with a concept latch, Mr Chevalier had manufactured it was fully functional in the lower half, and we would like to believe it had been tested and it met most of the specifications, we could say, well, on that side it should be okay.”
Mr Shelley also said that a full tolerance analysis would have taken another two to three months. This was somewhat longer than the 22 days allowed in Mr Cummings’ plan in May 2002 and may have been a more cautious assessment based on Mr Shelley’s experience of the ULS and of Mr Chevalier in the meantime. It was certainly not suggested to him that he was exaggerating.
435.	Mr Bland expounded a theory in his expert evidence that Honeywell could have carried out mini design freezes on parts of the latch and conducted tolerance analyses on these. This was put to Mr Shelley, it being suggested that Honeywell could have done tolerance analyses on parts as early as July 2002. In cross-examination, Mr Shelley said the main reason why this was not done was “workload”, but in re-examination he expanded on that and said that, to do tolerance analyses at an earlier stage, the design would have to be completed, but it was not and was constantly changing. I suspect that, if you were to do a tolerance analysis on a part which was worthwhile, you would have to know in advance that no further design changes to the particular part would be required. In any event, any suggestion that Honeywell’s failure to do this was a breach of the JCA seems to me unarguable.
436.	Accordingly I conclude that the failure to have a design review (with a DFMEA in place) and a full tolerance analysis before going out to soft tools was not a breach of the JCA on the part of Honeywell. However, even if it were, as I said in the overview of ALS’s case on breach, I am not impressed by the suggestion, essentially driven by Mr Bland’s evidence, that this failure was somehow the reason for the alleged lack of progress with the project as at the date of termination. 
437.	It may well be that, if there had been a DFMEA in place in the autumn of 2002 and if a full tolerance analysis had been conducted before going out to soft tools, the problems with the design of the latch which were identified subsequently during and after the soft tooled build, would have been identified earlier. However, those problems, including tolerance issues, were identified during and after the build and, thereafter, in about May 2003 prototypes were successfully made with soft tooled components.  I do not see any basis for the contention that somehow the absence of these design processes caused delay to the project, let alone its failure. It may be that the cost of the project was increased, because of the wasted cost of the unsuccessful initial prototype build but that was not passed on to ALS.
Conclusion on the progress of the project as at January 2003
438.	Before leaving this area of the case, I should deal with two pieces of evidence on which ALS particularly relied in support of its case that the slow progress of the project up to January 2003 is attributable to breach of Article 4.5 of the JCA by Honeywell. 
439.	First, the evidence of Mr Spurr that, when he joined the project team in January 2003, he was surprised that the project was not more advanced than it was. This is a point with an obvious superficial forensic attraction: here is the new man, look how behind he thought it was. However, whilst Mr Spurr could no doubt assess that the project was not as far advanced as he would expect it to be, I doubt very much whether he could assess the reasons for that. He did not have the benefit of the detailed analysis of the events and the progress of the collaboration which the documents and the evidence have given me.
440.	Second, ALS relies on the e-mail of 24 January 2003 from Mr Hayes to the team in which he said:
“I believe that we're going to hit a lull in activity now. We have a design freeze and await components arriving. During this time we have an opportunity to work on the following:
1. Modelling and statistical tolerance analysis. DFSS.
2. Understanding the design in detail - making models and really getting into the guts of the movements, forces, torques, etc using engineering analysis and ProE.
3. Putting together a kind of guidebook to the latch showing the outputs of 2 in particular that can be used for training.
4. Starting to capture ideas for cost reduction. FMEA score improvement etc”
441.	ALS relied on this as demonstrating what a mess Honeywell was in, contending that these were all matters which Honeywell should have been undertaking at the outset of the project, not twenty months into it. However, I do not regard this as somehow an admission of breach, but rather as an indication of how the project had proceeded in practice. Although Mr Shelley and other engineers had gained increasing technical knowledge of the latch over time, until the arrival of Mr Spurr at around this time, Honeywell did not have a latch expert. Mr Chevalier remained the only latch expert, in charge of the mechanical design of the ULS. All changes in design were (as I have held) either made by him or made by Honeywell on his instructions. 
442.	In practice, the limited transfer of technical knowledge which had taken place was a function of Mr Chevalier’s approach, exemplified by what he accepted in cross-examination, that Honeywell was looking to him for guidance and instruction on the work to be done on the latch design and that he did not see it as the job of people like Mr Shelley to come up with changes to the design, but he would provide instructions on changes. He also accepted that any changes in design had to be approved by him.  It was that approach by Mr Chevalier and the changes in design which it generated, that was responsible for the delay between the time when Honeywell had originally intended to go out to soft tools and the time when it actually did, not any breach by Honeywell of the JCA. 
443.	I reject Mr Chevalier’s suggestion, made for the first time in his e-mail of 24 August 2002 (at a time when he must have appreciated that far more work on the development of the design was required than he had consistently represented to Honeywell in the past), and repeated in his oral evidence, that he only adopted this approach because Honeywell had failed in its responsibility.  
444.	It follows that, in my judgment, as matters stood in January 2003, the only delay for which Honeywell was responsible which amounted to a breach of the JCA had been the two months longer to transfer the drawings than should have been taken which I have already identified. On that basis, Honeywell should have been starting to order soft tooled components at about the end of September 2002, rather than when that process actually started, at the end of November/beginning of December 2002. Of course, if as ALS contends, there should have been a full tolerance analysis before that ordering process started, on the basis of how long Mr Shelley thought that process would take, it is doubtful whether the ordering would in fact have started any earlier than it did. The prospects of the first prototype build being successful would have been increased, but it is pure speculation as to whether it would in fact have been successful.
The soft tooled prototype build
Quality Control
445.	The process of ordering parts for the soft tooled build appears to have begun at the very end of November 2002. In fact during the period from September to December 2002, Mr Smillie the Honeywell procurement engineer, had prepared a full bill of materials and obtained prices from a range of suppliers from Newhouse and Freeport suppliers’ lists. He said in evidence that this was not easy, as he did not always have drawings and he pressed Mr Shelley and Mr Bechtold for drawings. He had a meeting on 18 December 2002 with Mr Chevalier, who had some ideas and leads. At around the same time, Mr Eaton was chasing up potential suppliers in the United States. 
446.	Mr Smillie also explained the production parts approval process (“PPAP”) which was engaged in by Mr Martin Dalziel, another Honeywell engineer with whom he worked closely. In the period between January and March 2003, as prototype parts came in from suppliers, Mr Dalziel went through the PPAP, which involved checking the key dimensions of the parts against the drawings. Mr Smillie said Mr Dalziel went further and checked every dimension on every drawing. That this exercise had been carried out was borne out, as it seemed to me, by the documents in Trial Bundles T and U and by the spreadsheet produced by Mr Dalziel entitled “ALS VW Build: Parts Summary (21 Mar 03)”.  
447.	There was no case pleaded by ALS that there was some shortcoming in the Honeywell quality control system, let alone that this had caused or even contributed to the failure of the soft tooled build. Rather, this was another point which emerged from Mr Bland’s expert report and from the experts’ meeting. Because it had not been a pleaded allegation, Honeywell did not call Mr Dalziel, but was able to address the points ALS was making, through producing the documents in Bundles T and U and through the evidence given by Mr Smillie. It was clear that, in so far as the allegation emanated from Mr Bland, he had only considered a fraction of the relevant documentation. 
448.	After Mr Smillie had given evidence, ALS clarified that it was not amending its pleadings. However, the way the point was put in its written Closing Submissions was: “Whilst ALS are not pursing a direct claim based upon the failure to have any proper quality control system, it is nevertheless the uncontested fact that the March build took place with parts which were not to print and that, in the design change log, as Mr Bland states ..., the quality of the parts was not covered”. This is a rather unsatisfactory way to leave an aspect of the case upon which Mr Bland placed some emphasis (albeit on the basis of limited information) and which, whatever ALS may now say, was never pleaded. 
449.	I will deal with the design change log (“DCL”) later, but the reference to parts not being to print is evidently a reference to the “NG” [No Good] notation in the Parts Summary spreadsheet. This reveals that some parts (specifically the housings and internal levers and sliders) were “out of spec” but it is evident that they were approved by the relevant Honeywell engineers or in the case of the housings, an engineering judgment was made to use the parts “as is” for the prototype build. 
450.	Mr Smillie’s evidence is that he could not actually recall any of the parts being sent back.  It is evident from the Parts Summary, which is a living document, that discussions were held, for example with the manufacturers of the mouldings, PMP in Arbroath, after the build. This was confirmed by Mr Smillie, who said that Honeywell had used PMP for the housings because they had already made housings for the Valeo project, they met the correct standards and Honeywell had good experience of them. He said that there were subsequently many discussions between the Honeywell design department, PMP and Alumould who made the tooling, through to April 2003 to achieve good housings.
451.	One of the other parts noted as “NG” on the Parts Summary is the Rivet Pin (PP) the diameter of which was slightly oversized but it was judged “still ok” for use in the prototype build. Again that was obviously an engineering judgment.
452.	In my view, to the extent that the quality of the parts contributed to the failure of the prototype build, that was not due to any failure in the quality control system which Honeywell had in place, which Mr McQuater rightly described as comprehensive. Nor do I consider that there is any question of the decision to carry on with parts which may have been out of spec was in any respect being a breach of the JCA by Honeywell. It was an engineering judgment, which ALS cannot demonstrate was unreasonable.
Tolerance analysis and first attempted prototype build
453.	As I have already recorded, in the limited time available, Mr Shelley was not able to do a full tolerance analysis on the ULS. However he did do tolerance analyses on the pins and washers, which did not require to be made off soft tools and which therefore had a quick turn-around in terms of manufacture.  The circumstances in which Mr Shelley undertook these analyses were that Mr Shelley felt that work on the stack tolerances was necessary due to Mr Chevalier’s “interesting thoughts” on how the stacks would perform within the latch, as Mr Shelley put it in an e-mail to Mr Ricks of 27 January 2003. His evidence was that, at a meeting the previous week, he had asked Mr Chevalier how he would go about stack tolerances and Mr Chevalier had said he would make all the sizes nominal, and put a plus or minus tolerance on all parts. Mr Shelley’s view was that this would not work, because it would probably end up crushing the top washer, so he disregarded Mr Chevalier’s views.
454.	ALS complains about the tolerance analysis and the alterations made to the drawings in three respects. First, it contends that there was delay in completing the revised drawings for the pins and washers from the completion of the tolerance analysis on 5 February 2003 until the drawings were completed on 3 March 2003, because Mr Shelley was diverted onto working on the Valeo project. Second it contends that there was inadequate analysis of the ALS design by Mr Shelley and third it contends that (presumably in his rush to complete the drawings) he sent out drawings which contained mistakes or incorrect dimensions. 
455.	I will deal with the question of delay separately below. So far as the allegation of inadequate analysis is concerned, the tolerance analysis was carried out in accordance with Six Sigma requirements. Mr Shelley explained that the analysis was based on standard figures because Honeywell had no historical data for the ULS. Mr Drysdale agreed that the tolerance figures used by Mr Shelley were not unreasonable.
456.	The first attempted prototype build took place between 12 and 14 March 2003 but was unsuccessful because, as Mr Spurr put it, the clearances between operative components of the latch were too great to achieve functionality. Mr Shelley said in evidence that the first latches were “sloppy”, and he thought that a contributing factor may have been the fact that the actual pins obtained from the manufacturers were not plated, whereas the tolerance studies had made an allowance for plating. He accepted though that it was highly unlikely that the absence of plating alone had contributed to sloppiness. 
457.	However, what matters is that there is no basis whatsoever for any suggestion that the work done by Mr Shelley in his tolerance analysis was anything other than thoroughly professional. Indeed it is faintly ironic that ALS (founding itself primarily on the views of Mr Bland) roundly criticises Honeywell for not doing a full tolerance analysis before the soft tooled prototype build and yet criticises the limited tolerance analysis which was done. Furthermore, it remains wholly unclear what it is said by ALS that Mr Shelley did or did not do which was wrong.
458.	What was put to Mr Shelley in cross-examination was a suggestion that problems with the build may have been caused by the fact that he sent out incorrect drawings to parts manufacturers. This was not a pleaded case, but it seemed to me that in any event it backfired seriously on ALS. It was put to Mr Shelley that a revised drawing for one of the rivet pins was inconsistent with an earlier drawing, but Mr Shelley said that the earlier drawing was only a reference drawing which would not have been sent out to the part manufacturer. He was able to demonstrate that the revised drawing was in accordance with the tolerance analysis.
459.	In relation to another part, Mr Shelley accepted that there was a difference of 0.2 mm in the mean diameter of one of the pins between the tolerance analysis and the detailed drawing. Unsurprisingly, he was unable to recall the reason for this, but speculated that it might have been an alteration at the request of the manufacturer, such as were clearly made by at least one of the manufacturers of parts, Garconnet. In any event, the difference was irrelevant to whether the build was going to succeed or not, since as Mr Shelley said, the pins were self-centralising and did not pose any problem in the actual build.  
460.	Over the weekend of 15 and 16 March 2003, Mr Shelley made adjustments to reduce the clearances and remove the sloppiness, although his evidence was that by doing so it would double the risk of failure in production through parts clashing.  Despite his denial in his evidence, Mr Chevalier was aware that these adjustments were taking place, as he offered to assist. 
Second attempted prototype build
461.	Despite the adjustments, when the second build took place in the week of 17 to 21 March 2003, it too failed. It is clear from the preponderance of the evidence that the causes of the failure were design issues with the latch, specifically its inherent sensitivity to even minor variations in tolerances. In an e-mail of 20 March 2003 Mr Hayes set out what had happened:
“Yesterday we were almost there but got a kick in the guts at the very end of the day. We had a full functional (very smooth action) latch at 5pm last night. We then fitted on the plastic lower half housing and went to fit the G4 registration gear. At this point we suffered disaster - the PP pin bent when we were fitting the gear - the pin is supposed to spread open to clamp the gear internal diameter. Unfortunately this screwed up our whole latch unit completely so we're back at square 1 again on building the base latch.”
462.	In evidence both Mr Hayes and Mr Spurr confirmed what had happened. Mr Chevalier had hit the end of the PP pin rather too hard in an effort to make it expand and engage properly, at which point the pin bent. Mr Spurr said that they were not happy with the installation method for the G4 registration gear because it was easy to bend the pin and Mr Murchie subsequently developed an improved process. 
463.	Mr Hayes’ e-mail went on to list the problems encountered during the build:
“1.	 Metals used on sliders and goose neck components are too soft and malleable!
2. 	Method of fixing gear 4 is no good.
3. 	Springs need redesigned in general and spring material is too hard and brittle -using old springs instead!
4. 	Clearances need to be worked on to make a producible item. The difference between working units and non working is minimal leading to worry re producibility in volume
5. 	Tolerances needed to be tightened on all pins and washers before unit worked. As per 4 above this gives us longer term issues re producibility.
6. 	BMW latch has very wide tolerancing and clearance in its construction. It is very much designed for assembly. We've studied it fully and continue to do so but this much is obvious from the start!”
464.	Mr Spurr confirmed in evidence that that accurately reflected what had been found. In his witness statement (which was not challenged by ALS) he said that it seemed to him at the time that the failure was indeed the result of the design not being sufficiently developed or robust and that was a failing in Mr Chevalier’s design itself. He also said (which again was not challenged) that it was his impression at the time that Honeywell had been led to believe that the design as released was robust and would assemble and work well and therefore that the prototype build was justified.
465.	His evidence accorded with Mr Shelley’s evidence, which was that the failure was due to problems with actuation of the ULS. Mr Chevalier had designed for the perfect position of the latch which does not happen and the travel distances were not being achieved.  When design changes were considered, Honeywell looked at changing the length of the sliders. As Mr Shelley put it “So we say Mr Chevalier had worked in the perfect world when he created his latch design”.
466.	The inherent sensitivity of the design of the ULS to even minor variations in tolerances which this attempted prototype build threw up was something which the latch experts agreed was a significant design issue with the latch. Mr Drysdale’s conclusion was that he would not have proceeded with the prototype build without further design development work, specifically “resolving significant clashes in the geometry of certain components, lack of functionality and very significant tolerance and jamming problems around the pivot stacks and sliders”. I have already dealt with why Honeywell was justified in carrying out the prototype build when it did, but Mr Drysdale’s views of the design problems accord with the views expressed by the Honeywell personnel as to why the build failed.
467.	The one person who was and is out of line about this is Mr Chevalier. In an e-mail at the time on 22 March 2003, he complained about intractable mistakes with the housing parts and incorrect clearances and tolerances. When I asked him about this during his evidence, he accepted that what he was really complaining about was not the housing itself, about which he was broadly happy, but wholesale changes to the tolerances and clearances, which he said Honeywell had made and which were not authorised by him. This led into the evidence about wholesale changes during the period between November 2002 and January 2003, which I have already rejected as invention on Mr Chevalier’s part. Although it remains ALS’s case in its closing submissions that there were wholesale changes to the clearances and tolerances, I reject that case as against the weight of the evidence.
468.	ALS also contends that whatever changes were made to the tolerances and clearances in the drawings sent out to the manufacturers not only caused the failure of the soft tooled build, but amounted to a breach of the JCA by Honeywell because they were changes in design which were never approved by Mr Chevalier, contrary to item 7 of the Scope of Work. I have already concluded that it was not the changes to tolerances and clearances made by Mr Shelley as a consequence of the tolerance analysis of pins and washers which led to the failure of the second attempt at a prototype build.
469.	I was left with the lasting impression that both at the time and now, Mr Chevalier was unable to face the reality that there were substantial problems with the manufacturabilty of his design, in effect with translating it from concept hand built prototype to manufacture in any volume  from tools. Rather than accept that reality, Mr Chevalier sought to blame Honeywell and the component manufacturers, in this instance for making unauthorised changes to his design, whereas the real problem was his design.
470.	Even if I had concluded that the changes made to tolerances and clearances as a consequence of the tolerance analysis had caused or contributed to the failure of the prototype build, given that any suggestion that the tolerance analysis was not professionally done or that incorrect revisions were made to the drawings is unsustainable, all that would demonstrate was the very susceptibility to minor changes in tolerances and clearances which Mr Spurr considered was a problem with Mr Chevalier’s design. 
471.	The case that to make changes to tolerances and clearances in the light of the tolerance analysis without Mr Chevalier’s consent, was a breach of the JCA is a case which is difficult to reconcile with that part of ALS’s case (based on Mr Bland’s evidence) which contends that it was a breach of the JCA not to have effected a full tolerance analysis before the prototype build.  Presumably on ALS’s case, all changes to the design required according to a full tolerance analysis would have had to be approved in writing by Mr Chevalier. It must be a matter of complete speculation whether that approval would have been forthcoming. It has occurred to me that what this all demonstrates is that the problems encountered during this collaboration were not so much due to breach of the JCA by either party but inherent conflicts and unworkability within the structure of the contract itself. However, no specific submissions were addressed to me on that point and, in the light of my findings of fact, ALS’s case that changes in design made by Honeywell caused or contributed to the failure of the soft tooled build fails on the facts, so that it is unnecessary to say any more about that point.
Delay in producing revised drawings and problems with resources
472.	There remains for consideration whether the delay by Honeywell in producing the revised pins and washers drawings amounted to a breach of Article 4.5.  The tolerance analysis was completed by 5 February 2003 and on the basis of Mr Shelley’s evidence, the revisions to the drawings before they were sent out to parts manufacturers would have taken another five days or so.  That assessment is borne out by the fact that by 11 February 2003, as Mr Hayes confirmed in his evidence, he wanted the analysis and drawings completed and considered this was all too late. In an e-mail of that date which he sent to the team, he talks about focusing on getting sample latches (ideally 10) to Volkswagen by the beginning of March 2003.
473.	It is clear from an e-mail exchange between Mr Kettle and Mr Hayes on 19 and 20 February 2003 that there was an issue about obtaining claw parts from the supplier Garconnet in time for the soft tooled build for Volkswagen. However, in his e-mail Mr Hayes also says he still does not have the pins and washers drawings and that he had talked to Mr Willi Krupp (who had taken overall charge of the relevant division of Honeywell at around this time) about getting Mr Shelley full time on the ULS until the drawings were done, to which Mr Krupp had agreed.
474.	On 25 February 2003, Mr Hayes e-mailed Mr Krupp to say that he had expedited Mr Shelley on the pins and washers drawing set for the Volkswagen build, but that Mr Shelley had been told by Mr Mitchell the previous Friday to “move back onto Valeo product design work” and, as a result, “this jeopardises us for pins and washers”.  Mr Hayes indicated his concern that this “really could place Honeywell in a poor light with both JP and also potentially our customer [VW]”. The same day Mr Krupp assured Mr Chevalier that Mr Shelley was now completely available for the latch programme.
475.	However, by the end of that week, work on the drawings had not completed and Mr Shelley had to work on them over the weekend, the drawings eventually being hand-delivered to the manufacturers on the morning of Monday 3 March 2003, 26 days after the tolerance analysis was completed. 
476.	It is quite clear that during that period in February and March 2003, some crisis occurred on the Valeo project, which meant that Mr Shelley was distracted from the pins and washers drawings. Although I am sure that Mr Shelley did everything he could to catch up, including as he said working evenings and weekends, the fact remains that there was a delay and it was caused by his being required on Valeo. As he said, when something was in production, as Valeo was, the problem has to be solved and Valeo tended to win out in a conflict. 
477.	Mr Hayes as project manager was clearly frustrated and under pressure as a consequence. In his e-mail to Mr Krupp he complained fairly bitterly about being fed up with having a small resource pool and, in a meeting report at this time, he assessed the risk of resources being tied up on other projects at 80%. Understandably, ALS seized on this as demonstrating that a serious problem with the project remained the lack of resources.  No doubt a continuing conviction that this was a serious problem was compounded by Mr Hayes’ somewhat evasive evidence in cross-examination, about the complaints that he made at the time in the period between February and May 2003, exhibiting an apparent inability to accept what he had said. This seemed to me to have more to do with not wanting to recall what must have been an unhappy time for him, with the prototype build failing, than with not telling the truth in the witness box.
478.	Whatever the explanation for Mr Hayes’ reluctance to accept what he had said, it is clear that his perception at the time was that the project remained under-resourced. Furthermore, in his e-mail of 22 March 2003 sent after the build failed Mr Chevalier said “All of the trouble can be attributed to lack of resources”.
479.	However, I do not regard this as a point which should just be accepted uncritically. When one analyses whether the failure of the build is attributable to lack of resources, then it seems to me that the answer is no. As I have already concluded, the real reason for the failure was the design of the ULS. By the time of the build itself, Honeywell had a full team in place, including Mr Spurr who attended the build. I have already concluded that there was good quality control and only a limited number of personnel needed to be involved in the actual build.
480.	To the extent that what is being complained of is the continued absence of experts other than Mr Spurr, it is factually correct that no further experts were hired. It is also correct that after the failed attempt to hire other experts in the summer of 2002, the matter seems to have fallen off the agenda for a while. In a subsequent e-mail in May 2003, Mr Hayes refers to having energised this again with Dr Turnbull in November 2002, but says that due to “organisational changes” the opportunity to start the recruitment process in January 2003 had been lost and it was only then, in May, that they had started to re-interview. Mr Hayes was unable to recollect what those organisational changes were but it seems likely that this was the reorganisation that led to the forming of the Secure Vehicle Systems group (comprising both ULS and Valeo) of which Mr Willi Krupp became head in February 2003. 
481.	This picture does justify some criticism of Honeywell for not continuing with a rigorous recruitment campaign throughout 2002, but the difficulty for ALS in its contention that that amounts to a breach of the JCA, which was causative of the delay to the project and the failure of the build is that it is quite clear that whatever recruiting was done never persuaded any latch expert other than Mr Spurr to join the project. I have already held that the failure to hire more experts in the summer of 2002 was not a breach of the JCA and I see no reason to reach a different conclusion in relation to position in the spring and summer of 2003. 
Conclusion on breach of the JCA as at March 2003
482.	What Honeywell can undoubtedly be criticised for is the fact that it took nearly a month to revise drawings after the stack tolerance analysis. Given that only Mr Shelley was engaged on this exercise, it seems to me that it was incumbent on Honeywell to ensure that he was engaged on it full time and not distracted by other projects. To that limited extent, Honeywell was in breach of its obligation to act without unreasonable delay under Article 4.5 of the JCA. 
483.	As for the amount of delay caused by this breach, given that there was delay anyway in obtaining claw parts from Garconnet, I doubt very much whether the drawings delayed the project and the build by more than two weeks. If one adds that to the two months or so delay in making the drawing transfer, the total delay to the project caused by breach of Article 4.5 of the JCA was in the region of three months.
484.	Of course this enables ALS to say that but for those breaches, the build would have occurred in December 2002 and it might well have been possible to make the changes in the design identified in the DCL within three months so as to deliver quieter prototype latches built off soft tools to Volkswagen by the beginning of March 2003. It is ALS’s case that in that event, Volkswagen would have agreed to use the ULS on the new Passat. I shall have to deal with that contention in more detail in relation to quantum, but suffice it to say I am sceptical about that proposition for a number of reasons, not least that problems with noise remained even after the DCL had identified issues with the design and it remains extremely unlikely that those problems with noise would have been resolved by early March 2003, even if the three months delay had not occurred.
485.	Because at least two months of that delay had occurred by May 2002 when the drawing transfer completed, I have considerable doubts whether ALS could in fact have terminated the JCA pursuant to Article 10.1 in March or April 2003 in the wake of the failure of the soft tooled build for those past breaches. I will return to this question later when I consider the issue of termination and the correct construction of Article 10.1. However, even assuming in favour of ALS that it could have terminated in March or April 2003 for three months delay at that stage, the difficulty for it is that it did not do so and did not serve a notice until 11 September 2003, nearly six months later. I will consider the effect of that delay when I deal with the issue of termination later in the judgment. 
Technical difficulties with the design and their resolution by Honeywell after March 2003
486.	In considering the project between the failed soft tooled build and termination of the JCA by ALS in September 2003, I propose to deal first in some detail with the question of the difficulties with the design of the ULS which were thrown up by the soft tooled build and the steps taken by Honeywell to resolve those difficulties. In the next Section of the judgment, I will deal with the progress of the project prior to termination, including the development of the smaller latch and the issue of resources and project management.  I will then set out my conclusions about control electronics in a separate Section. Finally in another separate Section, I propose to deal with the reasons for the deterioration of the relationship between the parties and for termination and whether termination was justified.
487.	The failure of the soft tooled build in March 2003 was obviously a stressful and disappointing time for all involved not least Mr Chevalier. He became ill and was effectively away from the project from soon after the failed build until sometime in June 2003. Honeywell though was not inactive during this period. In the aftermath of the failed soft tooled build, Honeywell set about identifying the problems with the design and what solutions could be found. 
488.	A design change log (DCL) was created which set out the various problems with the design identified in the failed build and subsequently, together with proposed solutions. This was a living document over which Mr Spurr had overall control. He explained that it was posted on the team website so that all the team had access to it. Although Mr Bland was critical of the DCL, apparently because it did not have details of who was responsible for what, I regarded that as a matter of form rather than substance. It was never put to Mr Spurr that the DCL was defective in some way.  I would reject Mr Bland’s criticism and consider that the DCL was a useful tool, through which Honeywell did make real progress in developing the design to eliminate the difficulties it identified.
Seriousness of the difficulties Honeywell faced with the design
489.	That the design of the ULS as it stood at the time of the failed build posed serious technical difficulties was the view of Mr Spurr at the time, as he explained in his witness statement and in the demonstration he gave with the twice size model of the latch he had made for the purposes of the trial, at the beginning of his evidence. Although ALS in closing criticised Mr Spurr in a number of respects for having a negative approach, it was not seriously suggested to him in cross-examination that his description of the difficulties was exaggerated or wrong. If anyone knew about the technical difficulties in making the latch manufacturable, it was Mr Spurr, since he was the person who was responsible for trying to build a number of prototypes over the period prior to termination and for developing the design. 
490.	In view of the serious attack on Mr Spurr’s credibility launched by Mr Chevalier at the time and in his evidence, I should say straightaway that I found Mr Spurr a particularly impressive witness, not only because of the obvious depth of his knowledge about latch design and development, but because of his transparent honesty and integrity and the dignified manner in which he had dealt with the continuous and unjustified complaints about him by Mr Chevalier. It is striking how little of the evidence he gave in his witness statement was seriously challenged by ALS in cross-examination.
491.	Furthermore, Mr Spurr’s view was fully supported by the expert evidence of Mr Drysdale, who had undertaken a detailed analysis of the ULS design in its various developments from the drawings and CAD data, as well as having the latch remodelled by Mr Spurr. I have no hesitation in accepting the evidence of Mr Spurr and Mr Drysdale about the technical difficulties with the ULS design and in preferring their evidence to that of Mr Bland, who had only considered a handful of drawings and who had a tendency to downplay the difficulties as the sort of thing you would always encounter on a latch project. 
492.	I do not propose to go through all the design difficulties identified, but to focus on the same four areas as Honeywell did in its closing submissions: the issues of tolerances and clearances, springs, assembly and noise.   
Tolerance and clearance issues
493.	Mr Drysdale’s evidence was that the original design was particularly sensitive to tolerance and clearance issues, especially around the pivot stacks and intermediate sliders. Three examples of tolerance and clearance issues were explored in the evidence at the trial.  
494.	First, the pawl rivet which had nine components, five spacers and four levers, each of which had its own individual, different tolerance. The multiplying of components on one stack magnified the sensitivity to tolerances, which had a cumulative effect compounded by lever tilt if there were any axial free-play. The inside and outside opening levers also sat on the pawl rivet and lever tilting had to be factored in. The lever ratio on the levers meant that a small variation in dimension at the rivet end resulted in a very large change in lever travel at the outside end. As explained by Mr Spurr, it multiplied the variation by a factor of 5, a problem which was complicated by lever tilt resulting from the tolerance issues around the pawl rivet. The build up on this stack clearly posed functionality and assembly problems.
495.	Second, the intermediate sliding levers which were very close together and which were prone to jamming. The alignment of the sliding levers was critical. The correct index tooth had to engage with each lever, but they were very close together and if they bound or failed to return (for example through water or dust ingress or otherwise) the latch jammed. It is interesting to note that Herr Loock of Volkswagen had expressed some concern about the close spacing of the levers at the meeting on 20 November 2001, in the context of possible dust ingress and corrosion. 
496.	These problems with the pawl rivet and the intermediate sliding levers were identified in the DCL created by Honeywell after the failed build. Mr Spurr explained the solution in relation to the pawl rivet which he eventually arrived at in Revision E (Rev E) of the latch of greatly reducing the complexity of the stack, in other words the number of components on it to make it producible.  Mr Spurr also described in his evidence that in Rev E, he had resolved the problem with the sliding levers jamming by making the index a thick toothed arrangement, alleviating the need for the sliding levers to be so close together.  Their axial alignment was not so critical.
497.	The third tolerance issue concerned the Rivet Pin RP6. This had a number of sliding levers on it and, even after changes Mr Chevalier had made to his original design, there was still a potential problem of crushing of the rivets and binding of the levers.	This was undoubtedly a serious design problem, again identified in the DCL. In the smaller latch design developed for the MG Rover models (the so-called Rev D of which more later) Honeywell resolved this problem by eliminating this stack altogether. Instead, a new pin was incorporated in the chassis assembly which Mr Spurr designed. This also greatly improved the control of the intermediate sliding levers which had sat on RP6.
Springs
498.	There were a number of problems thrown up concerning springs. Of particular significance were two of these. First, in the original design, the return spring for the intermediate sliding levers did not ensure that the levers returned to the correct position, which was critical. Part of the force of the spring was trying to lift the lever rather than slide it, which tended to cause jamming. This problem was again identified in the DCL. Honeywell solved it by introducing the so-called “scissor mechanism”, which applies the force as close as possible to the direction of the slider so that binding and jamming do not occur. Mr Bland accepted that this was a novel idea which improved manufacturability.
499.	Second, the original toggle springs had problems caused by the axial clearance of the toggle lever around the pivot and the force of the spring being out of alignment with the direction of movement of the toggle lever. This problem was also identified in the DCL. Mr Spurr and Mr Shelley designed a beam spring to replace the toggle spring, which alleviated the problem. This also aided assembly. The beam spring support was incorporated into the new chassis. Honeywell also redesigned the toggle levers.
Assembly issues
500.	When he first saw the ULS, Mr Spurr thought it looked like an awful latch to put together. He showed in his demonstration at the beginning of his evidence how one side of the latch had to be assembled in a rather insecure way, then the upper retention plate added and the latch turned over and the same process repeated on the other side. Mr Drysdale’s view was that, in the original design, no consideration had been given to assembly or part count. That view resonates with Mr Shannon’s description of the latch as being like a Swiss watch in terms of the difficulty of assembling a lot of small moving parts.
501.	The DCL identified a number of assembly issues. The solution which Honeywell came up with was the chassis, which supports the building of the latch from the bottom up in layers and is largely the reason it can now be assembled from one direction only. The chassis also protects most of the components from dust and water. Mr Drysdale thought this was a good idea involving a fundamental change. A number of other ideas were also developed by Honeywell for reducing part count. 
The issue of noise
502.	Throughout the project, the noise of the latch particularly during power closure posed a challenge. A number of the OEMs to whom the latch was demonstrated expressed concern about noise. As Mr Spurr explained during his demonstration at the beginning of his evidence, the ULS as designed by Mr Chevalier had a relatively high speed small motor which tended to be noisy. That, combined with a straight cut spur gear with nine teeth or less, tended to cause an undesirable high pitched whining noise during power closing. He identified a number of other factors contributing to noise, including the alignment of the lower and upper housing. The motor was in the upper housing whereas the gear mesh was controlled in the lower housing. Gear alignment and tooth geometry were absolutely critical, in the sense that, unless they were precisely aligned, noise would result. In addition, the clutch sometimes creates a click and the tension springs create an unpleasant noise. 
503.	Noise was identified as an issue in the DCL. In fact, in relation to the gear ratios and gear mesh, Mr Bechtold had already consulted gear specialists, Davall and Winzeler before the soft tooled build, who had identified issues with the gears. Mr Spurr’s main proposals to reduce the noise from the motor and gears were to substitute a larger motor and helical gears for the small motor and spur gears.  When he returned to the project in June 2003, Mr Chevalier rejected the ideas of the larger motor and helical gears. However, he did introduce helical gears for a prototype demonstrated to Jaguar in September and October 2003 and the VSS latch as it now is also uses helical gears.
504.	Although Honeywell did not solve the issue of noise to its satisfaction during the remainder of the collaboration, it did make what Mr Drysdale regarded as progress on the noise issue in the design of the smaller latch, Rev D, particularly the redesign of the upper retention plate to protect the gears and potentially reduce noise. Mr Spurr also gave evidence about a proposal for a new motor mounting to reduce noise.
505.	In that part of his re-examination, where he sought to resile from his previous acceptance that he was broadly happy with the housing by November 2002, Mr Chevalier said that it was impossible to have a quiet latch using the Honeywell housing and that this remained a significant issue during the course of 2003. Mr Spurr considered that the housing remained a problem, because of the need to have the top and bottom halves fitting together and the need to achieve exact and repeatable alignment between the motor (in the upper housing) and the motor shaft bearing (in the lower housing). Any misalignment caused a big variation in noise. 
506.	At the time of the design review undertaken by Honeywell between 17 and 26 June 2003, Mr Spurr was looking at resolving this issue by a new design of housing. Instead of the gear being supported on the housing, it would be supported on the upper retention plate, then the motor would be inserted through a pocket in the housing. At the end of the collaboration, Honeywell had not completed this change, but Mr Spurr was looking at locating the motor directly on the upper retention plate. Some of this design work was done on the CAD model for Rev E, the version of the latch on which Mr Spurr was working at the very end of the collaboration, to cater for the problems of packaging the latch in the MG Rover doors, and which he said was presented to the ULS team in Power point on 15 December 2003.
507.	Mr Spurr’s evidence about the prototype latches which were successfully built by Honeywell, after the failed build and which incorporated some of the changes designed to reduce noise, was that whilst they did manage to produce quieter working latches, none of these came below the level of 60 decibels at one metre which Volkswagen required. The quietest produced achieved a noise level of 62 decibels at one metre.  In July 2003, Mr Chevalier claimed to have successfully built a quieter latch which would satisfy Volkswagen with a noise level of about 45 decibels at one metre. As Mr Spurr said in his witness statement (on which he was not challenged):
“I believe that this must have been either when the ULS was not under load or running at low voltage (or possibly with clearances increased to levels not appropriate for production), which were not realistic operating conditions. The ULS Project team never assembled a latch that produced less than 60dB, and certainly Mr Chevalier never disclosed to the team or introduced to the design the manner in which he said that he had been able to reduce noise to such an extent.” 
508.	Furthermore, given that as late as 13 November 2003 when Mr Chevalier and Mr Murchie successfully installed latches in a set of Jaguar doors, the general opinion of the ULS team was that these were noisier than previous builds, I have considerable doubts whether Mr Chevalier had really been able to successfully build a sufficiently quiet latch to satisfy Volkswagen during the collaboration, let alone one of which repeatable prototypes could be produced in some volume. 
509.	I agree with Honeywell that it may well be that, if Mr Chevalier had accepted all its proposals to reduce noise, including the larger motor and helical gears, from the moment of his return, further progress would have been made with the noise issue. However, given that item 7 of the Scope of work required all changes of design to be approved by ALS, it was Mr Chevalier’s prerogative to refuse to agree such changes. Having done so though, limits the scope for any legitimate criticism of Honeywell for not having solved the noise issue before the end of the collaboration. 
510.	In his evidence, Mr Chevalier sought to contend that the VSS latch as it now is (for which he said that he has reverted to a simple housing not unlike the one in his original ULS design) is acceptable to OEMs. It continues to have the small motor and he said that a larger motor is only used on sliding doors for which Inteva recently provided a quote to Chrysler.  However it is quite clear that despite Mr Chevalier’s attempt to contend the contrary, there remains a serious noise issue with the VSS latch during power closing. 
511.	Mr Drysdale’s expert opinion as set out in his report, having seen the VSS latch demonstrated in a Rover 75 in December 2007, was that there was a “grating or grinding noise that made it sound as if it was struggling to achieve the closure”. He considers this completely unacceptable, especially since power closing is intended for high specification vehicles. He was not challenged about this evidence in cross-examination and I accept it. Furthermore, Mr Bland agreed that the noise from inside the car was probably unacceptable and that the quality of the noise would not have met Volkswagen’s requirements.
512.	In my judgment, Mr Drysdale’s opinion is borne out by the attitude of BMW in particular. In February 2007, they made it clear that they considered there was a problem with noise, because of the design of the latch and they decided not to investigate it further. Mr Chevalier and Mr Kettle both claimed that VSS has more recently produced a latch which satisfies BMW’s requirements and that VSS is talking to BMW again.  Mr Kettle claimed that the problem had been the design of the sliders which had been changed. Mr Chevalier went further and said that BMW had said it would use the VSS latch at the next opportunity. No document was ever produced to support this assertion and I reject it. I do not consider that the noise issue has even now been resolved to BMW’s satisfaction. This was another example of Mr Chevalier talking up his latch.  
513.	Mr Chevalier also claimed in his evidence that Volkswagen was also now satisfied with the noise issue and there was an imminent meeting planned. I was not at all happy about the way this matter was left at the end of the trial. After the evidence had concluded, but before the oral closing arguments, ALS produced a bundle of “up-date” documents about developments in relation to the VSS latch with various OEMs including Volkswagen. Honeywell objected to this material, so that I did not consider it in detail.  In its written Closing Submissions it was particularly critical of one document, the minutes of a meeting apparently between VSS, Inteva and Volkswagen dated 4 July 2008. I had in fact read this document out of curiosity. It was a VSS document and, as Honeywell submits, is self-serving to say the least. 
514.	It purports to record that the VSS latch “meets all of VW’s requirements” and says that the latch has “satisfied the technical requirements of VW”. As I said during the course of Mr McQuater’s oral closing argument, unless an application had been made to call evidence to that effect from a witness from Volkswagen, I proposed to pay no attention to that document. I was struck by the fact that Mr Douglas did not refer to that document at all in his closing submissions, whether written or oral.
515.	Accordingly, I consider that Honeywell is correct in its submission in its written Closing Submissions that “there is no proper evidence that [the noise issue] has ever been resolved to the satisfaction of any major European or US OEM on production versions of the ULS”. I will need to consider the status of the VSS latch post-collaboration in more detail later in this judgment, but it is also striking that Mr Drysdale did carry out a series of tests on the VSS latch earlier this year. His conclusion from his tests was that the latch would not satisfy any major European or US OEM in production. When these test results were put to Mr Chevalier, he made the outrageous statement that Mr Drysdale was biased. In view of the seriousness of that allegation, it is extraordinary that not only was that suggestion never put to Mr Drysdale, but his evidence about the testing was simply not challenged in cross-examination at all, nor was any contrary evidence from Mr Bland produced.
Conclusion on difficulties faced and solutions adopted
516.	In its closing submissions, ALS sought to suggest that the problems identified and solutions put forward by Honeywell in the DCL were “simple and routine” and that given that 38 of the 56 items in the DCL had been identified within three weeks of the soft tooled build, no real progress had been made by Honeywell to make the latch manufacturable after June 2003. 
517.	I reject that contention, which flies in the face of the evidence of Mr Drysdale and Mr Spurr (none of which was seriously challenged in cross-examination) as to the technical difficulties which Honeywell faced in March 2003 with the ULS design, and the appropriate and sensible solutions to those difficulties which Honeywell had found and was continuing to investigate, when the JCA was terminated. To the extent that this attempt to downplay the significance of the difficulties or the solutions was based on the evidence of Mr Bland (who had clearly not undertaken any serious study of the design or its various revisions), I have no hesitation in preferring the evidence of Mr Drysdale and Mr Spurr. I also reject the suggestion that somehow Honeywell was “treading water” and not making any real progress after June 2003. It is to the progress of the ULS project after the soft tooled build that I now turn.
Progress of project after the failed soft tooled build   
Further prototype builds and design development prior to July 2003
518.	During the course of May 2003 (when Mr Chevalier was away from the project) Mr Spurr had a number of prototypes constructed for the purpose of satisfying Volkswagen. This was the so-called Rev B VW design.  Mr Spurr’s evidence in his witness statement was that:
“Revision ‘BVW’ referred to the ongoing effort to build a one-off working prototype that would be suitable to demonstrate to VW (and that would be quiet enough for VW’s purposes).  As for this:
i.	In early May, i.e. during Mr Chevalier’s absence, there was a successful build of the lower (mechanical) part of this version of the ULS, and there was a successful build of an entire demonstration latch in late May 2003.  This was the first time that a complete latch (i.e. a latch including the housing and motor mounting etc) had been put together and had functioned properly.”
519.	This evidence that prototype latches were successfully built in May 2003 by Honeywell was not challenged in cross-examination. Mr Spurr explained (which again was not challenged) that this revision included a number of “significant changes”, including the scissor mechanism and helical gears. The gears were machined, not soft tooled because no modification would be made to the tools without Mr Chevalier agreeing to the change in design. This is probably just as well, since when Mr Chevalier returned to the project at the beginning of June 2003, he did not agree to the use of helical as opposed to spur gears.
520.	In addition to the Rev B VW version, Honeywell developed Rev B which, as Mr Spurr explained, was essentially the lower mechanical latch only, but incorporated the changes made for the Rev B VW version. Mr Spurr’s evidence in his witness statement was that Honeywell put the issue of the housing and upper assembly to one side, in order to concentrate on the development and testing of the mechanical portion of the latch and also, partly, because it was already considering the possibility of developing the smaller latch. As he puts it:
“In addition, we knew that a reduced size latch was a possibility in future, which would in any event necessitate modifications to the housing and upper half generally.  It was also recognised that the whole upper half concept would require revision in order to improve noise, reduce cost, improve sealing and ease final assembly and test, especially considering that the Bowden cables that were attached to, and operated, the latch would be different in each application and were  better assembled as late as possible in the assembly process.”
521.	Although ALS criticises Honeywell for not having built any physical prototypes of any revision of the design beyond Rev B, it seems to me that criticism is not justified for two reasons. First, it made obvious sense to focus on the revision for which Honeywell had had prototype parts built and to endeavour to perfect that design, by making the various changes to it, which could later be translated over to any later smaller version of the latch. Second, any changes to the design had to be approved by Mr Chevalier, so it would have made little sense to start ordering soft tooled components for revisions to the design which he had not yet approved. 
522.	ALS also sought to criticise Honeywell for the negative approach of Mr Spurr in his e-mail of 19 May 2003 about the Volkswagen specification, in which he said in effect that the ULS would fail to comply with the specification. Mr Kettle was critical of him for saying “will” rather than “may” when he had done no testing, but, by his own admission, Mr Kettle is not an engineer. Mr Spurr’s evidence was that there were issues about the latch complying with the Volkswagen specification in other respects than in relation to noise. He thought that his approach was realistic. I entirely accept that evidence.
523.	Thus, during the period when Mr Chevalier was away from the project, design work was carried out by Mr Spurr and the other Honeywell engineers on Rev C. As described by Mr Spurr in his witness statement (again not challenged) this was an attempt by Honeywell “to make further significant modifications to Mr Chevalier’s design in order to make the ULS more ‘manufacturable’ and ultimately profitable, by reducing the part count of the latch, and thereby the cost and complexity of assembly.” It was this version of the design which first incorporated the chassis. This version existed as a ProE model, but was never actually built.
524.	Soon after his return to the project, Mr Chevalier visited Newhouse on 10 and 11 June 2003 to discuss some of these proposed changes with Mr Hayes, Mr Shelley and Mr Kettle (with Mr Spurr on the telephone). He approved of the scissor mechanism and the toggle springs, but was not convinced by the chassis. It is striking that all three ideas, including the chassis concept, have been incorporated in the design of latch currently being produced by VSS. Mr Chevalier stated in his report of the meeting that he was pleased with the positive and professional interaction, although he went on to criticise the fact that some of the problems he had identified at the soft tooled build, such as the problems with the housing and with accurate assembly, had still not been resolved. 
525.	 Much was made of this meeting by Mr Douglas, as demonstrating that criticism of Mr Chevalier as being obstructive or not prepared to accept changes in design was not justified. Mr Spurr agreed fairly that Mr Chevalier was receptive to design changes. He said the problem was Mr Chevalier’s presence at prototype builds, when modifications were being made, which was regarded by Honeywell personnel as disruptive. 
526.	Furthermore, how receptive to the changes Mr Chevalier really was, is open to some doubt.  Despite the positive meeting, on 19 June 2003 Mr Chevalier sent an e-mail to Mr Hayes and Mr Kilker (who had been brought in as a project manager to give further momentum to the project) in which he complained about all the meetings they were having and the design revisions which excluded him. He referred to item 7 in the Scope of Work and threatened legal action. In evidence, he maintained all his criticisms, saying the housing was incorrect and there were tolerance issues. I suspect that the real reason for this outburst, despite his denial, was the one Mr McQuater put to him, that his concern was that he should be present at all design meetings and that he wanted to assert his design authority.
527.	It is also clear that he was incensed about the fact that prototype latches which Honeywell had built, which had gone to Freeport to have control electronics fitted and had been returned to the United Kingdom, had not functioned when demonstrated to him in a meeting with Mr Kettle at his flat on 12 June 2003.  Mr Chevalier had sent an e-mail the same day complaining about all the defects in this latch, although it is interesting to note that in the power point presentation at the design review between 17 and 26 June 2003, it is suggested that the latches had had screws over-tightened at Mr Chevalier’s flat. When they were loosened, the latches functioned.
528.	In his evidence about his complaints at this stage following his return to the project, he said that no-one had started putting into effect the 14 points of solution he had set out in his e-mail of 12 June 2003. Mr Hayes said that he agreed with some of these points but disagreed with others. I note from the written presentation for the design review, that Honeywell was in fact developing corrective actions for each of the points Mr Chevalier had raised.
The development of the Rev D smaller latch and design developments before termination
529.	By the time of the meeting on 10 and 11 June 2003, some consideration was being given to the possibility of developing a smaller latch for the MG Rover doors on its existing models. The history of this development, which coincided with Mr Spurr joining Honeywell, is dealt with by him in detail in his witness statement which was not substantially challenged by ALS in cross-examination. As a general observation at the outset of considering the course of this development, I consider that the work done by Honeywell on the Rev D latch gives the lie to the suggestion that there was no development work of any significance after June 2003.
530.	 As already noted, when MG Rover put the RDX 60 project on hold in January 2003, they indicated that they would be interested in the ULS for their existing models, subject to confirmation that it would fit physically in the car doors. It appears that at this stage, Mr Chevalier considered that it was not possible to reduce the size of the latch. In an e-mail to Mr Hayes of 27 January 2003, Mr Spurr (who had just joined the project) said that he was not in a position to disagree with that, but he was not in favour of turning the latch upside down, which seemed to be the solution favoured by Mr Chevalier to fit the latch in the Rover doors.
531.	In that e-mail, Mr Spurr expressed concern about agreeing the proposal from MG Rover, in circumstances where the ULS would not be in production until 2004 and his understanding was that the MG 25 and 45 were due to end production around 2005. As he put it: “I recommend that we decline this opportunity as it adds considerable risk to the overall programme for a small sales value”. Mr Chevalier and Mr Kettle were critical of Mr Spurr in their evidence for what they regarded as a negative approach. 
532.	In cross-examination, Mr Spurr accepted that he could have been wrong about when the models were due to be discontinued, but said that his real concern at the time was project risk. Honeywell had not yet produced prototypes and to redesign a fair portion of the latch to meet the MG Rover package requirements could divert resources away from crucial aspects of testing and gaining credibility. That was a perfectly sensible and rational attitude to have. Ironically, in view of the fact that MG Rover went into administration in April 2005 and Nanjing Automotive Company who bought the company has yet to make any production vehicles, more than three years later, Mr Spurr’s cautious approach has proved correct.
533.	On 4 February 2003, Mr Chevalier and Mr Spurr met, at the behest of Mr Kettle, to conduct a feasibility study into fitting the ULS into a Rover 25. The following day, Mr Chevalier sent an e-mail to Mr Devlin of MG Rover (not copied to Mr Spurr) in which he said in effect that there would be no problem fitting the latch into the existing models. In the meantime, Mr Spurr had prepared a written installation feasibility report summarising the findings they had made, which demonstrated that a number of fundamental changes to the design would have to be made in order to make the ULS fit in the doors, and that a study was required to examine the effect and feasibility of those changes.  In an e-mail to Mr Chevalier on 5 February 2003, Mr Spurr said that he intended to present the document to MG Rover on the following day, when he had a meeting with Mr Scott Bradley (Closures Engineer at MG Rover).  This provoked an angry response from Mr Chevalier, indicating that he did not want Mr Spurr to make a unilateral approach to MG Rover.
534.	In fact, as MG Rover’s own packaging studies demonstrated, the ULS would not fit in the existing doors without either significant modification of the doors themselves, including moving the striker, or reduction in the size of the latch, limiting the modifications needed to the doors. Fairly obviously, the latter option was chosen.  By the last week of February 2003, Mr Spurr had two ideas for making the latch smaller and informed Mr Chevalier of this. Mr Chevalier replied that he was looking forward to exploring Mr Spurr’s solutions when they were ready.
535.	When he was asked about this in cross-examination, Mr Chevalier contended that he had already introduced Mr Spurr to the smaller design at a meeting at his flat, presumably the one on 4 February 2003, and that he had shown Mr Spurr some sketches. However, this is not supported by the contemporaneous documentation, which shows that Mr Chevalier did not at that stage consider that it was possible to make the ULS smaller. There is nothing to suggest that some smaller latch solution had been devised by Mr Chevalier. Indeed, his own response to Mr Spurr in late February demonstrates that it was Mr Spurr who was finding the solution. Mr Chevalier’s attempt to explain this away as “encouraging Mr Spurr to have ownership” rather than being negative, was frankly nonsense. Although he also asserted that he had CAD data showing that he had developed the smaller latch in October 2002, nothing was ever produced to support that assertion.
536.	On 25 February 2003, Mr Spurr sent Mr Chevalier outline drawings for a smaller latch. In reply, Mr Chevalier praised this “excellent initial work” but went on, somewhat cryptically: “I have made a set of improvements, which I completed months ago. I intended them to be introduced at the next stage of product development”. He then told MG Rover, incredibly optimistically, that Honeywell had almost completed the required changes to the ULS.
537.	On 27 March 2003, just after the failed soft tooled build and just before he was away for some six weeks, Mr Chevalier sent an e-mail to all members of the team except Mr Spurr, attaching drawings and saying: “the design of the next generation latch is now complete please have a look”. His explanation in his evidence for the omission of Mr Spurr (with whom he had been corresponding fairly amicably over the previous few weeks about the design of the smaller latch), that he was annoyed with him about sending the report to MG Rover on 5 February 2003, made no sense at all. He then complained at some length about Mr Spurr’s negative approach, which is simply not borne out by the contemporaneous documentation. 
538.	I suspect that the real explanation is that Mr Chevalier was jealous of his invention. There was now someone on the Honeywell team who was a latch expert, who could be actively involved in developing the design and Mr Chevalier did not want Mr Spurr to get the credit for developing the design of the smaller latch. This is really the beginning of a fairly irrational and confrontational approach to Mr Spurr (and later to Mr Kilker and to an extent Mr Krupp), culminating in Mr Chevalier’s decision to terminate the JCA, none of which was justified by their behaviour towards him. 
539.	At all events, whatever his real motivation for this rather odd behaviour of excluding Mr Spurr, at around that time at the end of March 2003, he showed members of the Honeywell team (including on that occasion Mr Spurr) ideas for a reduced size latch on his computer which Mr Spurr thought bore a “strong resemblance” to the ideas in the drawings he had sent Mr Chevalier on 25 February 2003. Mr Spurr’s response was “looks familiar” or words to that effect.  
540.	Despite the sustained criticism from ALS of Mr Spurr for being negative (none of which was justified) he clearly was a champion of the smaller Rev D latch. Even Mr Chevalier accepted that Mr Spurr had been positive about the reduced size latch when Mr Chevalier returned to the project.  The proposal for a Rev D latch was also discussed at the design review which took place between 17 and 26 June 2003. I had the distinct impression that, in its submissions, ALS focused only on those aspects of the design review which suited its case: concerns about resources and milestones which had the finish of product validation in November 2005. However, the power point presentation as a whole shows design work ongoing in all areas and the testing already undertaken and planned. As a whole it is upbeat and seems to me to give the lie to the suggestion that nothing happened on the project after Mr Chevalier’s return.  
541.	Furthermore, Mr Chevalier attended for two days at the end of the review. Although Mr Chevalier complained about the components of the prototype latches presented to him and about the use of helical gears, even he admitted that a latch was successfully demonstrated as fully functional mechanically and electronically. However, Mr Chevalier said this latch was still too noisy and not suitable for demonstration to customers.  Overall, Mr Kilker reported that Mr Chevalier rated the design review as 10/10 for management, 8/10 for content of presentation, and 7/10 for “quality with regards to his concerns”.
542.	Positive meetings with MG Rover took place in early July 2003 at which it was indicated that MG Rover expected to introduce the ULS on the existing Rover 25, Rover 45 and MG TF models.
543.	It is clear that Mr Chevalier remained concerned that people should not think that Mr Spurr had been responsible for the design of the smaller latch.  He said in evidence that, on his return to the project he had heard the personnel at Honeywell describing the smaller latch as “the Spurr solution”, which he obviously did not like.  In early July 2003, he sought to justify to Mr Spurr his failure to include him on the list of addressees for his e-mail on 27 March by saying that he was “careful [about] handing over design information that contained his ideas...”  This is much closer to the truth about why he did not copy Mr Spurr in on the e-mail than the explanation he gave in the witness box.
544.	On 11 July 2003, Mr Chevalier provided an agenda for a meeting with Honeywell which was to take place on 15 July 2003 which included: “to clarify and resolve the contradictory claims circulating around with regard to the ownership of the ideas leading to the changes made to the existing latch to reduce its size...”  At that meeting on 15 July 2003 which was for the purposes of a wider design review, Mr Chevalier insisted that he had been responsible for the design of the smaller latch in October 2002, before Mr Spurr joined the project. Mr Spurr was surprised by this, since Mr Chevalier had never suggested anything of the sort during their discussions in February and March 2003.  However to keep the peace and in the interests of the project Mr Spurr apologised if he had hurt Mr Chevalier’s feelings even though he considered he had done nothing wrong.  
545.	At the meeting Mr Chevalier produced a so-called “Acknowledgment Receipt” which Mr Spurr signed. In his evidence Mr Chevalier contended that this was in effect an admission by Mr Spurr that Mr Chevalier and not Mr Spurr was the person who had designed the smaller Rev D latch. The document does not say anything of the sort and this evidence seems to me to do no more than demonstrate the lengths to which Mr Chevalier was prepared to go to claim that every aspect of the design, including changes clearly made by Mr Spurr and Honeywell, was carried out by him. Although it is not strictly necessary to reach a decision on the point, I am quite satisfied that the original idea for design of the smaller version of the ULS which eventuated in the Rev D smaller latch was Mr Spurr’s idea, rather than Mr Chevalier’s, although some of the changes subsequently made to the Rev D design emanated from Mr Chevalier.  
546.	The agenda for the design review meeting on 15 July 2003 which Mr Chevalier had sent on 11 July, referred to six items he wanted to address which he considered “of vital importance to the success of the project”.  Apart from the question of ownership of the smaller latch design, which I have dealt with, the other items were as follows: assisting Honeywell to put together at least two silent fully functional latches suitable for demonstration to customers, to discuss the time issue concerning delivery of prototypes and preparation of production for Rover, to discuss the pricing issue, to revisit ALS’s request to assist Honeywell to produce prototypes for the Rover models and to deliver the drawings relating to the changes required to fit the existing latch into the Rover doors.
547.	As I pointed out to Mr Douglas in his oral closing, it seems to me that these issues were clarified, if not resolved. Mr Kilker reported after the meeting that Mr Chevalier and Mr Murchie had successfully built “silent” latches. The timetable of milestones in the June design review which Mr Chevalier regarded as too long was foreshortened, there do seem to have been discussions about pricing and the request that ALS and Honeywell should work together on prototypes for MG Rover was agreed, as will be seen. 
548.	It was essentially at this design review meeting that it was agreed to move forward with the smaller latch as the mainstream product, on the basis that was the logical way to go with both MG Rover and other OEMs. Honeywell agreed that a substantial team would come to see Mr Chevalier in London, in order to convert his CAD drawings of the smaller latch into ProE. In the event, Messrs Spurr, Shelley, Bechtold and Vorwald were in London for the week of 21 to 24 July 2003, spending the mornings at a hotel and the afternoons at Mr Chevalier’s flat, the purpose being to complete the remodelling of the design of the smaller latch in ProE. Mr Spurr described these meetings as extremely positive and productive and Mr Chevalier agreed that the meetings were positive and professional. He also told Mr Krupp about the “good atmosphere and professional working style” of the team members who visited his flat. His own note of the meeting recorded that: “....the work was completed satisfactorily...Everyone expressed satisfaction with the work done and the progress made”.
549.	Following the meeting, on 25 July 2003, Mr Spurr prepared a Design Feasibility Report on the reduced size ULS which Mr Chevalier saw and approved verbally. This confirms Mr Spurr’s enthusiasm for the smaller latch concluding: “the reduced size latch offers improvements over the previous design. There is a window of opportunity to introduce it as the mainstream product”. Mr Chevalier agreed with the decision to make the smaller latch the mainstream product.   
550.	The positive atmosphere between the parties was short lived. At the end of July 2003, Mr Spurr conducted an installation study at Newhouse to see whether the smaller latch would fit in the Rover 25 and 45 doors, as a consequence of which he had some concerns. These he expressed in a document described as a “Draft Installation Study” on 13 August 2003, which he circulated to all the team, including Mr Chevalier, for comment. In that he concluded that to fit the ULS in the doors would require a major redesign of the locking mechanism and actuation element of the doors. 
551.	This study provoked an extraordinary outburst from Mr Chevalier, in an e-mail to Mr Krupp, in which he claimed that Mr Spurr had excluded him from the packaging study at Newhouse (an allegation he repeated in his oral evidence). In the e-mail, he went on that Honeywell bore full responsibility for the accuracy and consequences of its assessment. In a measured reaction to this accusation, Mr Spurr said that the installation study had taken place at Newhouse at the same time as Mr Chevalier was there building four “silent” latches, that at no time had he excluded Mr Chevalier, that they had in fact discussed various installation problems on the evening of 30 July and that he would have been available to discuss whatever Mr Chevalier required on the morning of 1 August, but Mr Chevalier had left early in the morning.  I consider that explanation of events is the correct one.
552.	In his oral evidence, Mr Chevalier went so far as to say that he had suspicions that Mr Spurr had produced the installation study in bad faith and was working to a hidden agenda, by which Mr Chevalier evidently meant that Mr Spurr was seeking to advance his own invention, the e-latch, at the expense of the ULS, something which he claimed was confirmed after the collaboration. This suggestion was outrageous and wholly without foundation. However, it is an indication of the extent of Mr Chevalier’s paranoia about and dislike of “latch experts”, something which he had exhibited from the outset of the JCA. It was also around this time in August 2003 that Mr Chevalier started illicitly recording telephone conversations with Honeywell personnel, including Mr Spurr.
553.	Mr Chevalier prepared his own installation feasibility report on 20 August 2003, which concluded that the smaller latch could be fitted to all relevant MGR doors, although it also noted that this would necessitate various features of the doors and external handle brackets being “adjusted” and further modifications to the ULS itself. He also noted that some points required “further analysis”.  
554.	The differences between Mr Chevalier and Mr Spurr clearly represented a genuine difference of professional opinion, deriving in part from uncertainty as to whether MG Rover would be prepared to make changes in the doors. Mr Chevalier refused to accept in evidence that this was a genuine difference of opinion, maintaining that Mr Spurr was pursuing his own agenda. From 13 August 2003 Mr Chevalier also excluded Mr Spurr from his e-mail circulation list because of his suspicions about a hidden agenda. This suggestion of a hidden agenda later developed into the even more serious suggestion that Mr Spurr had deliberately sabotaged the project, an allegation Mr Chevalier repeated in his evidence. This is as I have held wholly without foundation and it was quite improper of Mr Chevalier to make such allegations. It was not something which, quite rightly, Mr Douglas felt able to put to Mr Spurr in cross-examination.
555.	In cross-examination, Mr Spurr accepted that he had underestimated MG Rover’s willingness to change the door structure, although it still took a considerable amount of work between September and November 2003. I find that, in this as in everything else, Mr Spurr had behaved in a proper and professional manner and was only doing what he had been employed by Honeywell to do.  In contrast, this incident and Mr Chevalier’s reaction, both at the time and in his oral evidence does him little credit. What it does demonstrate though, is that the relationship between the parties had disintegrated, through no fault of Honeywell’s. 
556.	Despite the deteriorating atmosphere, Honeywell continued to work on developing the smaller Rev D latch. On 3 September 2003 Mr Kettle, Mr Krupp, Mr Kilker and Mr Spurr together with Mr Chevalier, attended an important meeting with nine executives from MG Rover at which the Rev D latch and Mr Chevalier’s installation study were presented. The latch received a positive reception, although there were design and packaging issues to be resolved. MG Rover pressed Honeywell on timing and it was indicated that Honeywell should be ready with a production latch within 12 to 14 months of an order from MG Rover to proceed. Mr Spurr regarded that somewhat aggressive timescale as unrealistic and risky.
557.	After the meeting, Mr Kilker asked Mr Chevalier politely in an e-mail, to reconsider his decision to exclude Mr Spurr from his e-mail circulation list. This provoked another outburst from Mr Chevalier that he was not a Honeywell employee and did not take instructions from anyone. In evidence, he said it was up to Honeywell who they copied e-mails to. 
558.	ALS sought to make much of the fact that Mr Krupp took a more emollient approach to Mr Chevalier and was annoyed with Mr Kilker for sending the e-mail to Mr Chevalier without consulting him first. Mr Kilker’s evidence was that he thought not copying in Mr Spurr would delay the programme.  The fact that they had just had a very good meeting with MG Rover, but Mr Chevalier was excluding Mr Spurr, was the sign of a dysfunctional team. He said that team morale was shaky and that, if he was going to move the project forward, he needed Mr Chevalier as “the design gatekeeper” to work with the team. That all seems to me entirely reasonable.
559.	On 11 September 2003, Mr Spurr and Mr Kilker attended a follow up meeting with MG Rover in Birmingham which Mr Chevalier was due to attend. Mr Chevalier’s train from Euston was apparently substantially delayed. Because Mr Kilker and Mr Spurr had flown in from Speyer in Germany and Switzerland respectively especially for this meeting and were on a tight timetable, they decided to go ahead with the meeting in Mr Chevalier’s absence. Neither of them was cross-examined to suggest that was an unreasonable decision. 
560.	However, when Mr Chevalier learnt from Mr Kettle that they had gone ahead without him, he e-mailed Mr Krupp, Mr Mitchell and Mr Kettle at 9.54am to say that this was “one last insult to ALS and JP Chevalier” and at 11.27am he sent the letter terminating the JCA under Article 10.1. In his oral evidence, Mr Chevalier said that MG Rover had asked him technical questions about the reinforcement of the doors on the existing models and that he had arranged this follow up meeting. He had sent them technical explanations based on his work with Mercedes. He claimed that Mr Spurr and Mr Kilker had no idea what was expected of them; they might as well talk about the weather.  Given that this was all to do with whether the smaller latch would fit into the MG Rover doors, which was an issue with which Mr Spurr had been closely involved, Mr Chevalier’s assertion that this was something Mr Spurr knew nothing about, displayed breathtaking arrogance on Mr Chevalier’s part. I suspect that the reality was that he simply did not want Mr Spurr meeting MG Rover without his being there.
561.	Mr Spurr’s evidence in his witness statement (on which he was not challenged) was that, at the meeting on 11 September 2003, MG Rover outlined a number of installation issues with the ULS, despite Mr Chevalier’s installation report. He said MG Rover were disappointed, having been led by Mr Chevalier to believe that installation would not be a problem. Mr Spurr prepared an installation review which sought to address those issues on 15 September 2003, considering whether the “S-point” (the centre point of the striker) of the ULS could be moved. Mr Spurr and Mr Kettle attended a further meeting with MG Rover on 18 September 2003. Mr Spurr provided a further report on 29 October 2003 seeking to resolve continuing packaging and technical problems and attended a yet further meeting with MGR on 3 November 2003, to agree the technical solutions proposed. In his witness statement, Mr Spurr described the remaining packaging issues as having been “ironed out” by around the time of the 3 November 2003 meeting, evidence on which he was not challenged.
562.	What was suggested to him in cross-examination was that the further work carried out for MG Rover was not difficult at all. He was very clear in refuting that suggestion, saying: “Obviously subsequent events proved me wrong, [but] nevertheless from the initial presentation on 3 September, it was still a considerable period of time and a considerable amount of work was required by both parties to achieve a satisfactory design condition for both the doors and the latch”.
563.	In parallel with these technical meetings with MG Rover, commercial meetings were also taking place. On 29 October 2003, Mr Kettle attended a meeting with Mr Devlin, the purchasing manager of MG Rover, who was not happy about a proposed increase by Honeywell of 10% on the sale price of the latch. Mr Kettle recorded that Mr Devlin was still going ahead with the latch but wanted an explanation in writing of the proposed increase. Mr Kettle in evidence described this as a game, something Mr Devlin wanted for his bosses, because in fact the latch was still cheaper than what MG Rover were currently paying for their existing Meritor latch.
564.	On 20 November 2003, Mr Devlin sent Mr Kettle an e-mail reporting on a presentation that had been made to senior management the previous day. At first sight this makes somewhat gloomy reading, since it says that although the proposal that the ULS should replace the current Meritor latch had been well received, it had foundered on two key issues, lead time and price.  In evidence, Mr Kettle accepted this was a setback, but was insistent that this did not mean that the proposal had been rejected. This was ramping up pressure to bring the price down, which was confirmed by Mr Alder. 
565.	Thus, as matters stood at the time when Mr Chevalier finally terminated the JCA on 16 December 2003, the arrangement with MG Rover for the smaller latch to be used in the doors of the existing models (although not formally recorded in a letter of nomination) was moving forward. This is further evidenced by the fact that after termination, Mr Chevalier’s new corporate vehicle VSS continued to deal with MG Rover up until the time that MG Rover went into administration in the spring of 2005. 
566.	After Mr Chevalier’s termination letter, Mr Spurr also continued with further design work beyond the Rev D version of the latch, specifically Rev E, a further iteration of the smaller latch, which sought to address issues of cost and robustness as well as ease of assembly, specifically in relation to simplifying the pawl rivet stack, as already referred to above. His work on Rev E was not complete when the relationship came to a complete end in December 2003. 
567.	As I have already said, in parallel with the development of design of the Rev D smaller latch, Honeywell was continuing design work and development of the larger Rev B latch which incorporated the various changes in design which Honeywell had come up with, to the extent that these were agreed by Mr Chevalier. In all some 98 prototypes were built. 
568.	In August 2003, Jaguar provided Honeywell with a set of doors for the fitting of the Rev B latch. On 5 September 2003, Mr Bur, Mr Kettle and Mr Chevalier had a meeting with Mr Steve Cox at which the functions of the latch were demonstrated, to show him how much quieter the latch was now, which he recognised and said he was looking forward to seeing how the latch sounded in the Jaguar doors. Honeywell said that the doors would be returned in the first week of October. Clearly this was a positive meeting, but I should add one note of caution. 
569.	During the trial and in particular in the evidence of Mr Henry, its market expert, ALS sought to make much of the provision to Honeywell by Volkswagen and Jaguar of sets of doors, as somehow being sufficiently unusual to indicate a significant interest in the latch. I was not impressed by any of this and preferred the evidence of Honeywell’s market expert Mr Brayshaw. His experience in the body structures market (clearly relevant here) was that it was the normal course of business to be supplied with doors and body structures, which were in free supply. In my judgment, there was nothing remarkable about the supply to Honeywell of sets of doors.
570.	Mr Spurr understandably thought Mr Chevalier’s presence at the installation of the latches in the Jaguar doors would be disruptive, but Mr Mitchell considered that it was in everyone’s interest if Honeywell worked closely with Mr Chevalier over Jaguar. Accordingly, the doors were fitted with latches at Newhouse about 9 October 2003, with Mr Chevalier’s involvement. Mr Spurr discovered that Mr Chevalier had altered the latch software to reduce noise, but in consequence the latch would only operate at a door seal force of 100 Newtons. Mr Spurr recommended further work on the design but this did not happen with further latches fitted on 23 and 24 October 2003 and those latches stopped working correctly.
571.	Between 10 and 13 November 2003, Mr Chevalier visited Newhouse again to install latches in Jaguar doors, principally with Mr Murchie although Mr Shelley was present during the latter stages of the build. The build was initially unsuccessful and some parts had to be shaved or smoothed before installation. Eventually on 13 November 2003, latches were fitted in a set of doors.  Mr Shelley said that the rear door latch was fully functional but noisy and the front door required tuning of connections and was also noisy. The general view of the team was that these latches were noisier than in previous builds, as recorded by Mr Murchie in a summary of the team’s findings dated 14 November 2003.
Resources and project management after the soft tooled build
572.	Mr Krupp was a very experienced and senior engineer previously with Invensys a company which Honeywell acquired in October 2002. In February 2003, as part of a restructuring of Honeywell’s Automotive On Board business, he became global leader of the new Secure Vehicle Systems (“SVS”) Group which encompassed both ULS and Valeo.
573.	The problem of Mr Shelley’s time being taken up on Valeo was addressed immediately after the failed soft tooled build, when it was agreed by Mr Erickson, a senior engineer in Freeport, that Mr Shelley should be separated from Valeo. At around that time Mr Young was recruited as a mechanical engineer and Mr Mills as an electronics engineer. Mr Krupp said they had been employed mainly to work on Valeo so that Mr Shelley could concentrate 100% on the ULS project. Mr Shelley’s evidence was that from this time until termination, he was engaged about 90% on the ULS project.
574.	Mr Kilker joined the ULS team in May 2003, initially to assist Mr Hayes on project management, although within two months he had taken over completely from Mr Hayes. It is quite clear that more senior management had formed the view that the project needed a push from someone more dynamic than Mr Hayes. Mr Kilker was described by Mr Mitchell as a “hard-acre”, a “let’s make happen type of person”, which he clearly was. He was a mechanical engineer with experience in latches and had several latch patents of his own. Although his written style in e-mails was occasionally somewhat brash, in person in the witness box he came across as an engaging personality. 
575.	Like Mr Spurr, he came in for serious criticism from Mr Chevalier both at the time and in Mr Chevalier’s evidence, none of which seemed to me even remotely justified. At various points in his evidence, Mr Chevalier accused Mr Kilker of being in conspiracy with Mr Krupp and Mr Spurr deliberately to undermine the project. That suggestion is as ridiculous as it is outrageous and again, as with Mr Spurr, it is noticeable that Mr Douglas did not put that case to Mr Kilker (or for that matter Mr Krupp).  Mr Kilker quite frankly admitted in his evidence that he was not personally over enamoured of the ULS, but notwithstanding that, it seems to me that he did his best to advance the project during his time as project leader. 
576.	ALS sought to make a great deal of two documents emanating from Mr Kilker when he joined the project. First his ULS Review of 26-28 May 2003 which was memorably headed “Where there’s smoke, there’s fire” by which he explained that he meant there was a problem and a reason for it. He had a number of criticisms of Newhouse and said that the “team has not been correctly resourced until May ‘03”. In cross-examination, he said that he had picked up that the only timeline was out of date and the dates were “blown through” and that he wanted a new timeline with dates that would be adhered to. He explained his reference to animosity between Freeport and Newhouse as being to do with the fact that there were two design sites and one wanted to be owner of the programme.
577.	It does not seem to me that too much can be made of this document. As Mr Kilker said about it in his witness statement (on which he was not challenged), the view that the project was not properly resourced until May 2003 failed to take account of a number of key factors of which he subsequently became aware, including problems with changes made to the design by Mr Chevalier and “the reality that certain resources simply could not be efficiently deployed until a particular point down the path to manufacture had been reached”. That seems to me to be an important point, which is echoed in what Mr Krupp said about his requests for further resources at a slightly later stage, that these were looking to the future of the project.
578.	Of course the reason why Mr Kilker had been introduced to the project was to shake things up and he took a more rigorous approach to structuring and planning the project than Mr Hayes had. To be fair to Mr Hayes, he had clearly been working to a tight timetable in trying to get the soft tooled prototypes built in time to present them to Volkswagen. I had the distinct impression that Mr Kilker did not think much of Mr Hayes’ management skills. That emerged from the second document on which ALS placed much reliance, a graphically worded and somewhat acerbic e-mail from Mr Kilker to Mr Erickson of 5 June 2003 in which he talks about the confusion in the team and the fact that there is no time line or action register and no solid direction. He had given Mr Hayes a completed time line and a much more logical action register (more logical that is than the DCL). In cross-examination, Mr Kilker said that, putting it in perspective, he was new to the programme, did not know all the team members and would have expected the DCL to give the names of the people responsible and target dates.
579.	I consider that it is important to recognise that, merely because Mr Kilker was critical and wanted to do things differently from Mr Hayes, it does not follow that no progress was being made under Mr Hayes’ management. This e-mail was sent just before Mr Chevalier returned to the project and, as I have already held, in the period of slightly over two months since the failed build, Honeywell had made real progress in identifying difficulties in the design and taking steps to resolve them. That was the point Mr Hayes himself was making in the e-mail to Mr Kilker which prompted Mr Kilker’s own e-mail to Mr Erickson.
580.	At all events soon after this, in early July 2003, Mr Kilker took over completely from Mr Hayes as project manager. To the extent that he brought to the project a more rigorous approach, that can only have worked to the good. He also ensured better communication between Newhouse and Freeport, as Mr Krupp said in evidence. He was one of those in management who was instrumental in organising the thorough design review between 17 and 26 June 2003, about which even Mr Chevalier seems to have been favourably impressed. Although Mr Chevalier was critical of Mr Kilker’s project management in his evidence, on analysis it is difficult to see what it was that he was criticising.  What emerged from his evidence was no more than a personal and somewhat irrational dislike of Mr Kilker.
581.	ALS relied on (i) that part of the Power point presentation for the June 2003 design review headed “Summary and Team Concerns” dealing with resources (ii) an e-mail from Mr Krupp of 7 July 2003 to Mr Mitchell about filling various positions and (iii) the ULS Review of 14 July 2003 as evidence that even at this stage, the project was under-resourced. What those documents show is that Mr Krupp had identified nine positions to be filled, consisting of an overall NPI leader for the whole SVS Group, a manufacturing engineer with latch expertise (which none of Messrs Eaton, Gibson or Murchie had) at Newhouse, a quality engineer at Newhouse, a procurement engineer at Newhouse and various technicians. 
582.	I agree with Honeywell’s submission that the mere identification of these requirements going forward is not some admission of under-resourcing at that time, let alone of a breach of the JCA. What Mr Krupp was doing was identifying the resources needed to move the project forward beyond design development, which was the stage the project was then at, following the failed build. This was explained by Mr Krupp in his evidence:
“I saw the good future, the positive future of the project, based on the progress in the last months, and I tried to adopt the organisation  accordingly to be right equipped for the ongoing things afterwards, after these steps here.”
583.	That what was involved was equipping the team to move the project forward in the future was also explained by Mr Spurr in cross-examination:
“Q.  The team itself -- we can look at it now -- felt that it was underresourced, didn't it?  There is a design review in June, I think, of 2003 where the team itself raised the question of resource, didn't it?
A.  The team was concerned about making sure the right resources were in place to move the project forward from that point.  In particular the people available to construct -- to build prototypes and undertake the necessary testing.
Q.  So what were the concerns of the team?  You help me. I've looked at figures.  I've looked at numbers of people who were required.  But what were the concerns of the team, then, about that?
A.  The team felt at that time, if I recall correctly -- I'm basing this on recollection now -- that we had a product that, okay, we may be just about to completely change the design, in effect of the design, so it was agreed to    go off in the direction of Revision D and focus on it, but we knew we could design a product, the necessary expertise was developing nicely in the team to do that, and the next challenge was to make sure we could    undertake a rigorous and thorough and professional verification, design verification process forward, and for that we identified we'd need an adequate number of technicians and also bringing in other people in the    team…”
584.	In re-examination, Mr Spurr said that he thought current resources on design, manufacture, planning and Six Sigma were adequate and his real concern was about having the resources to build prototypes in volume and test them, clearly a reference to the future. 
585.	It is also clear from Mr Krupp’s e-mail of 7 July 2003, that so far as the global NPI leader position was concerned, senior management had already approved this new resource and steps towards recruitment had begun, three candidates (one internal and two external) having been identified. Although Mr Krupp does say that the position would not be filled before October 2003 or possibly January 2004, which he regarded as too late, he says that it can be compensated for in the meantime by Mr Spurr, Mr Kilker and himself. Accordingly, it is not the case that Honeywell was doing nothing about recruiting for these new positions. As before, I suspect part of the problem was attracting the right sort of expert personnel from outside the company.
586.	In considering whether ALS’s complaint that the project was under-resourced in September 2003 is justified, it is also necessary to look critically at whether there is any evidence of delay in the project, as a consequence of inadequate resources. In terms of the ongoing design work which Mr Spurr and Mr Shelley in particular were engaged in, as I have already held good progress was made in identifying problems with the design and resolving them in the six months after the soft tooled build. Furthermore, Mr Spurr’s evidence in his witness statement (again not challenged) was that prior to the actual termination of the JCA on 16 December 2003, (when Mr Chevalier wrote saying that Honeywell’s proposal in its letter of 11 December 2003 was not acceptable to ALS) he continued with design work on Rev E having been asked to do so by Mr Sansom and Mitchell prior to their meeting with Mr Chevalier at Heathrow on 27 October 2003.
587.	In its submissions, ALS has criticised Honeywell for having done insufficient testing of the ULS by the time of termination. Mr Douglas pointed out that the only formal tests carried out were burst tests. Mr Bland was particularly critical of the first burst test in May 2003 at which the latch failed, but the later test in August 2003 seems to have been successful. Mr Eaton said in evidence that the latches in the second test had had different retention plate material, were case hardened and stronger. The latches were intact at 11,000 Newtons and appear to have withstood the forces specified in ECE11, the relevant European standard. Mr Eaton also confirmed that these were the tests which Mr Chevalier had indicated that he wanted Honeywell to perform.
588.	So far as other tests are concerned, the Power point presentation for the June 2003 design review lists the tests performed and planned. Mr Bechtold had arranged a series of tests on the clutch, the springs and gears. It is clear from that document that comprehensive testing was planned, some of it to be carried out at Freeport. To that end, Honeywell had purchased test rigs and other equipment as Mr Eaton explained in his evidence. I am unimpressed by the submission by ALS that Honeywell was somehow at fault, let alone in breach of contract, for not having carried out all these tests before termination intervened.
589.	An allied point concerns the various design tools such as the DFMEA and PFMEA. I have already said that I am unimpressed by the ALS case based on Mr Bland’s evidence that Honeywell was in breach of the JCA either because it did not have such tools in place earlier than it did or because of the content of the DFMEA and PFMEA. By the time of termination, the DFMEA had been in existence since January 2003. The first version of the PFMEA was prepared on 6 August 2003, just before a September design summit was to take place. More work was carried out by Mr Eaton by 18 August 2003. None of the criticisms made by Mr Bland of that content were put to Mr Spurr in the case of the DFMEA or to Mr Eaton in the case of the PFMEA.  
590.	Furthermore, in the case of the DFMEA, Honeywell can point to the fact that Uniworld, a consultancy with particular experience of Six Sigma conducted an audit of the ULS project in February 2003 and gave Honeywell a pretty clean bill of health. As Mr Shannon said in evidence, Uniworld was pleased with Honeywell’s technical application of tools and FMEAs.
591.	It is striking that contemporaneously, in his lengthy letter of 22 September 2003 and Appendix, setting out the reasons for termination, Mr Chevalier does not criticise Honeywell for insufficient or tardy use of Six Sigma tools. Whilst not in itself determinative of whether Honeywell was in breach of the JCA in this respect, that confirms me in my view that the whole case based on inadequacy and tardiness of design tools such as DFMEAs and PFMEAs, which assumed considerable prominence in ALS’s closing, is an elaborate and artificial construct based on unconvincing and unsatisfactory evidence from Mr Bland. Even if I had thought that Honeywell was in breach in this respect, as I have said earlier in the judgment, I am at a loss to understand how that breach is said to have been causative of the lack of progress of the project or its failure.
592.	In conclusion, I am very firmly of the view that there is no question of Honeywell having committed any breach of Article 4.5 or of the Scope of Work as regards its performance of the collaboration between the failure of the soft tooled build in March 2003 and termination on 11 September 2003.
Control electronics
593.	One of the allegations of breach in the pleadings and at Issue 16(1)(d) is the alleged failure of Honeywell to develop the control electronics. In fact, it emerged, even before the trial began, that because it was impossible to predict which OEMs might have adopted the control electronics on offer from Honeywell, as opposed to using their own on board electronics systems to power the latch, ALS simply could not show that it had suffered any loss and damage at all, as a consequence of this alleged breach of contract. 
594.	In those circumstances, I raised at the outset of the trial whether it was really necessary to have evidence and expert evidence on this issue if it had not been causative of any loss. Notwithstanding this, ALS steadfastly refused to abandon its allegations about control electronics. In the event one of the Honeywell electronics engineers Mr Curt Johnson and the software engineer, Mr Pete Suknaich gave evidence as well as the electronics experts for each side, Mr Sykes for ALS and Mr Wenham for Honeywell. This all took up, with argument, something in the region of five days of trial, which was frankly time wasted. 
595.	Mr Douglas maintained that there was a reason for keeping the point open but I could not see what that reason was, unless it was what might be described as “knocking copy”, an attempt to argue that Honeywell’s performance was so lamentable because it could not even achieve what was supposed to be its speciality, electronics.  If that is what was intended, ALS singularly failed in its objective. I formed a favourable view of both Mr Johnson and Mr Suknaich and their diligence and competence.
596.	Given that the issue remained live throughout the trial, I shall have to make findings on this area of the case, although I propose to do so in somewhat more summary fashion than on other areas of the case.  
597.	Honeywell’s obligations under the JCA were to “further develop the sensors, motor and control electronics assembly to optimize manufacturabilty and process quality” (item 4 of the Scope of Work). Originally Mr Chevalier had engaged VVLP in October 1999 to design an electronics system suitable for demonstration purposes. VVLP then started work on the software later, in May 2001, at around the time the JCA was signed. What is clear from the Scope of Work and from the surrounding circumstances, is that it was never contemplated that Honeywell would design control electronics for the ULS from scratch. Rather, what was contemplated was that there would be a design transfer from ALS of the control electronics design effected on its behalf by VVLP. Thus, item 1 of the Scope of Work provided that ALS was to provide component and assembly drawings, schematics (circuit diagrams), specifications, test results and microprocessor listings. Clearly Honeywell’s obligation to further develop the electronics was contingent upon receipt of these.
598.	Mr Want of VVLP (who provided a statement for Honeywell but whom ALS did not require to cross-examine) describes some of the difficulties which VVLP faced, specifically that ALS’s design specification changed several times. There were also difficulties with the integration of the control electronics with ALS’s mechanical prototypes. The electronics experts, Mr Sykes for ALS and Mr Wenham for Honeywell, agreed that as at January 2002, VVLP’s electronics design was still very much at the early proof of concept stage and was not suitable for volume manufacture. There were a number of deficiencies which it is not necessary to enumerate here. So far as the software developed by VVLP as at March 2002 is concerned,  I accept Mr Wenham’s evidence that it was “hacked” and contained deficiencies which demonstrated that it was not designed by an experienced software designer. Mr Suknaich also described it in his evidence as “obsolete”.
599.	Accordingly, in well over a year’s work on control electronics and ten months work on software, VVLP were still at a very basic stage of design. I agree with Honeywell that this demonstrates the difficulty of marrying the electronics with the ULS. Mr Chevalier inevitably took a different view, sacking VVLP in March 2002 and refusing initially to pay their invoices. Mr Randell of VVLP informed Honeywell on 18 June 2002: “…JP Chevalier maintains that the work we carried out was of no use to man nor beast (he actually used rather stronger language)…”
600.	At various points in its case, ALS criticises Honeywell for the fact that it did not have suitably qualified electronics engineers on the project until sometime in 2002 and that it did not start work on the control electronics until about June 2002. I agree with Honeywell that those criticisms are unjustified. VVLP was working on the design until it was sacked in March 2002 and Honeywell was waiting for a design transfer from VVLP before it began its further development of the design. 
601.	Up until March 2002, only limited information in the categories of item 1 of the Scope of Work was provided by Mr Chevalier and it was not until 20 March 2002 that he sent Mr Kettle documents which he described as “all data related to the Software and Hardware Development of the Control Electronics”. In the circumstances, any suggestion that Honeywell was in breach of the JCA in failing to start further development work on the control electronics until around that time is misconceived.
602.	A further indication that ALS never expected Honeywell to develop control electronics from scratch, as opposed to taking over the existing design, is that upon sacking VVLP, Mr Chevalier did not simply say to Honeywell that it was now for Honeywell to develop the control electronics. Instead he appointed new sub-contractors MLE, initially to re-design VVLP’s electronics work and produce a basic demonstration latch, which they had done by 12 April 2002. Mr Chevalier e-mailed Mr Sukniach on 23 April 2002 and far from complaining that Honeywell was not doing the work, made it clear that he was taking responsibility for the general electronics design: “I am at this stage very careful not to project an image that I am using MLE to get me out of this crisis”.
603.	In view of the urgency engendered by the MG Rover nomination at the end of February 2002, Honeywell had decided to develop the control electronics for MG Rover itself.  MG Rover’s requirements were not difficult as they did not require power opening or closing. In the meantime, Mr Chevalier appears to have been reluctant to provide Honeywell with further information for which it was asking in relation to the design of the control electronics. Thus, he failed to provide MLE’s source code despite requests from Mr Suknaich and Mr Ricks in April and May 2002. 
604.	Similarly Mr Vaidhyanathan and Mr Suknaich had a ten day meeting with Mr Chevalier in April 2002 ostensibly to learn about the control electronics.  Mr Vaidhyanathan describes this in his witness statement (on which he was not challenged because ALS did not require him to attend for cross-examination). Mr Chevalier restricted access to prototypes and was not willing to let them examine a motherboard or share source codes.  As Mr Vaidhyanathan explains, every time he offered to contribute to the resolution of a problem, Mr Chevalier would say that his sub-contractors (i.e. MLE) would deal with it. 
605.	ALS sought to contrast the progress of MLE in a relatively short period of time with what it categorised as in effect the absence of progress by Honeywell over a long period of time. I did not consider the criticism justified and I agree with Honeywell that MLE’s achievements have to be put in context. Although by July 2002, it had added electronic functionality to five demonstration latches, at least one of which was capable of demonstrating power opening and closing, as MLE itself was at pains to point out in its design review of 14 June 2002, the software it had developed was purely for demonstration purposes, with many short cuts and shortcomings and needed to be rewritten from scratch. It was described by Mr Hayes in a visit report on 15 May 2002 as a “lab type development lash up and not a pre production type unit”.  
606.	Mr Hayes’ evidence was that it was after this demonstration that Honeywell agreed with Mr Chevalier that Honeywell should develop a full electronics system in parallel with MLE, which would give two opportunities for success at productionisation of a design, since MLE’s design could not be productionised. This parallel development ceased in August 2002, when Honeywell decided to go ahead with the electronics design by itself. MLE continued to provide concept prototypes for demonstration purposes.
607.	ALS castigated Honeywell for what was contended to be its lack of progress on electronics design between then and the termination of the JCA. Any suggestion that the Honeywell engineers engaged on the task were somehow incompetent or idle, (which seems essentially to be Mr Chevalier’s contention) must be rejected. By the time that Honeywell decided to develop the entire control electronics, it had sufficient experienced and appropriately qualified personnel. Mr Vaidhyanathan, an electronics engineer at Newhouse, had been employed and had joined the project in January 2002. Mr Pete Suknaich was a software engineer at Freeport employed on the project from March 2002 and Mr Curt Johnson was an electronics engineer at Freeport employed on the project from June 2002. 
608.	They were all highly competent engineers. They were engaged on the project full time until termination and there is simply no basis for any suggestion that they were shirking or failing to perform their duties. Mr Johnson and Mr Suknaich both gave evidence and I formed a favourable view of their abilities and diligence.  Mr Vaidhyanathan had provided a witness statement but was not required for cross-examination. I have no reason to suppose he was not equally able and diligent.
609.	I consider that the reality is that the Honeywell engineers did put forward a number of sensible developments to improve and refine the control electronics. The failure to proceed further with the development of control electronics was largely due to the instability in the design of the mechanical portion of the latch, which, on the findings I have already made, was not a matter for which Honeywell, as opposed to ALS, is responsible.
610.	There were a number of hardware developments by Honeywell. After Mr Johnson joined the project, he was involved in identifying MG Rover’s specific sensor requirements and in the development of two new sensor solutions for the overall electronics design. The first of these was a bi-polar claw magnet, which Mr Johnson decided to develop because it enabled a single claw sensor to be sensitive to two magnet positions, ensuring sensing of the three claw positions reliably and accurately. 
611.	Honeywell’s expert, Mr Wenham, considered that this had advantages over the use of two single sensors, reducing assembly costs and increasing reliability because there were fewer external connections to the printed circuit board. ALS’ expert Mr Sykes queried whether this development was really necessary, rather than simply using two off-the-shelf sensors. However, I put to him during his evidence whether he accepted that, on the basis that Honeywell had an obligation under the JCA to develop the sensors (which it clearly did have), it was reasonable to do this development work. In answer he said that if a decision had been made that a bi-polar magnet was required then this development work was reasonable. 
612.	Mr Wenham considered that the development of the bi-polar magnet was a “significant engineering investment”. I accept that assessment. Development work began in September 2002 and the first prototypes were tested in February 2003.
613.	Another hardware development by Honeywell was a customised ring magnet sensor, developed between September 2002 and January 2003. Mr Sykes again queried whether this was necessary but accepted that it gave superior positional control. Mr Johnson’s evidence was that Honeywell would have been “very uncomfortable” moving forward without having the positional information this sensor could provide, which seems to me an entirely reasonable position.
614.	Between September and December 2002, Honeywell also carried out extensive magnet and sensor modelling. Mr Johnson explained that the modelling required on the ULS was “was very extensive in computing time and in resource time” because every movement of an arm within the latch required a new magnetic model. Mr Sykes again originally sought to query the necessity of such modelling work, but accepted in answer to me that it was entirely reasonable.
615.	Other developments were made with a view to reducing cost and approving assembly, including removing the reference sensor, reducing the number of printed circuit boards from three to two and selecting sensors with an appropriate quiescent current.
616.	Both the bi-polar sensor and the ring magnet sensor, together the other hardware developments made by Honeywell were incorporated on soft tooled prototypes during the March 2003 build. So far as electronics were concerned, this was successful. As Mr Johnson recorded in his note on the build: “…the electronics performed exactly as designed. Performance indicated that there would not be any electronic related issues for a prototype latch”. As he explained in evidence, Honeywell was focusing at this stage on integrating the circuit boards with the sensors and housing to achieve functionality for a prototype that could be demonstrated to Volkswagen.
617.	However, as he also explained the overall intent was not just to produce demonstration prototypes but something that was “directionally correct towards manufacturing for production”.  The ultimate goal was to have something robust and manufacturable and the March build was the first step in achieving that. 
618.	In parallel with the hardware developments, Mr Suknaich was working on the software from May 2002. As he explained in evidence he had to start from scratch and create a software set for the latch, as VVLP’s software was obsolete. He built the software in C-language, a higher level code than the assembler language in which VVLP’s software had been written, which Mr Sykes accepted was sensible. Furthermore, rather than using an open-loop, time based system like that in the VVLP source code, he rewrote the software using a closed loop PID system, which Mr Sykes accepted was more suitable for a product like the ULS, giving “more repeatable, more accurate control”.
619.	To begin with, Mr Suknaich’s work was hampered by the absence of a functional ALS prototype at Freeport, something Mr Johnson noted in his report dated 25 March 2003 on the prototype build:
“Development to date has been performed with initial latch prototypes that were provided to HW.  These latches did not perform consistently and did not allow for complete software development.”
The solution to that problem which Mr Suknaich devised was what Mr Wenham explained as creating flexibility in the software to allow it to be easily modified from one latch to another, to allow it to work for demonstration purposes. I accept Honeywell’s submission that developing the software under these conditions must have been very challenging. 
620.	 Notwithstanding the difficulties faced, at the time of the June 2003 design review, it was reported in the power point presentation that:
“Functional code set (software algorithm) is performing as designed on the prototype latches.  The electrical/software platform allows for reprogramming of prototypes on the fly and for data acquisition and analysis during latch operation.”
621.	However, as Mr Suknaich explained in evidence, the mechanical latches he had to work with were never sufficiently robust or consistent to develop the software further. During the whole project, he was never given a latch that worked suitably for software development. Mr Wenham agreed that to make any progress with software development, you would have to have some level of confidence that the mechanical latch was repeatable and representative of what will be there going forward. Absent consistency, it is necessary to customise the software for each latch. It seemed to be accepted by Mr Sykes that to move beyond the concept stage, you would need reliable consistent mechanical latches. 
622.	Mr Suknaich explained that the design team concluded that, until the mechanical latch was more reliable, further work could not be done on the control electronics. As a consequence of the unreliability, Honeywell never moved on to the next stage of electronics development where full systems testing would have been carried out and the electronics FMEA completed.  That is not to say that Mr Johnson and Mr Suknaich were idle. As explained by Mr Johnson in his witness statement (not challenged in cross-examination) following the soft tooled build in March 2003, he and Mr Suknaich were heavily involved in the process of fitting software to latches sent to Freeport, modifying the software algorithms for demonstration purposes and visiting Newhouse, or Mr Chevalier in London, to fit electronics and to test latches fitted into doors. 
623.	Although ALS has been critical of Honeywell for failing to make further progress with control electronics, it is quite apparent that the development of control electronics was nothing like as straightforward as ALS suggests. I agree with Honeywell that some assistance in this regard can be obtained from consideration of the control electronics developed by VSS after the JCA was terminated. Mr Wenham carried out a review of three VSS prototypes and their circuit diagrams.
624.	Neither of the Shivani latches reviewed had power opening or closing functionality. The ALI latch did, but there had been a fundamental change in the magnetic ring concept. Mr Wenham’s opinion was that the defects present in these designs of control electronics made them unfit for installation in vehicles manufactured by European, American or Japanese OEMs and, in all likelihood, for Chinese and Indian specifications as well. 
625.	In conclusion, I consider that Honeywell did make progress with the development of control electronics as far as it could, given the state of design of the mechanical latch. This part of the case added nothing to ALS’s case on the failure to develop the design of the mechanical portion of the latch. I was left with a distinct impression that what the maintenance of the case of breach in relation to control electronics demonstrated was the inability of ALS to abandon any point, whether good or bad.
Breakdown of the relationship and termination
Introduction
626.	In its submissions, ALS sought to justify the termination, essentially on the broad ground that Honeywell had failed to make any real progress with the project, either before or after the failed soft tooled build. The line which Mr Chevalier sought to take in his evidence was that, whilst he accepted that the relationship between the parties had broken down, this was because the project was going nowhere in September 2003 and because of the absence of any sensible project management. 
627.	As is apparent from the conclusions that I have already reached, I consider that the accusation that the project was going nowhere in September 2003 is wholly unjustified, as is the parallel allegation that in some way the project was treading water after June 2003. On the contrary, it seems to me that real progress was made during the period between March and September 2003 by Mr Spurr and other Honeywell engineers, in the face of not inconsiderable difficulties with Mr Chevalier’s design. Positive meetings had been held with both MG Rover and Jaguar at the beginning of September. Far from going nowhere, it seems to me that Honeywell was poised to move forward with one OEM, MG Rover. I have reached the very firm conclusion that, in terms of project development, there is no question of any breach of Article 4.5 or any other provision of the JCA in relation to matters between March and September 2003. 
628.	Equally, in relation to resources, whatever criticisms ALS had before the spring of 2003 (and I have already held that some three months delay was caused by matters before the soft tooled build) Mr Chevalier admitted in cross-examination that under the right direction (by which he meant himself) the Honeywell engineers such as Mr Shelley would have been capable of successfully bringing the ULS to production. What emerged from his evidence is that his real complaint was about an alleged absence of appropriate project management. However, when the circumstances which led to his decision to terminate are examined critically, it becomes apparent that, ultimately, this complaint comes down to Mr Chevalier’s personal animus about Honeywell project management and Mr Spurr and Mr Kilker in particular.  
Breakdown of the relationship
629.	It is clear from the chronology of the project from January 2003 onwards, which I have set out in detail above, that Mr Chevalier was never happy with Mr Spurr being involved with the project. This was symptomatic of his reluctance to have latch experts other than himself on the project, but more specifically, Mr Chevalier exhibited an obsessive jealousy about the design of his invention and his intellectual property rights in it. Mr Spurr may have unwittingly provoked this when he wrote to Mr Chevalier in the autumn of 2002 pulling his leg about finding a way around Mr Chevalier’s patents. 
630.	Whatever it was that sparked off his dislike of Mr Spurr, by the time of his return to the project, he was obviously very concerned about Mr Spurr making changes to his design. Hence the extraordinary e-mail on 19 June 2003 threatening legal action for breach of Item 7 of the Scope of Work. Hence also the lengths he was prepared to go to in claiming the idea of the smaller latch as his own, culminating in the meeting on 15 July 2003. I have already held that the idea was Mr Spurr’s not Mr Chevalier’s. His concerns about his design may have also lain behind his decision on his return to start surreptitiously taping telephone conversations with Honeywell. 
631.	Also, soon after his return Mr Chevalier seems to have learnt something about the brainstorming meeting on 18 June 2003, attended by the entire Honeywell team concerning invention disclosures. Although Mr Douglas sought to suggest that there was something sinister about this meeting, in the sense that it was an attempt to see whether Honeywell could design around Mr Chevalier’s patents, I accept Mr Spurr’s evidence about this.  He explained that this was something the team was asked to do to make sure that Honeywell’s investment in the project was protected. He had asked specifically whether this was an attempt to cut ALS off and on being told it was not, he had agreed to do it. He explained the detail of the document generated, that it had both a positive and a negative aspect. The positive aspect was that, if anything had been invented by Honeywell during the design process, Honeywell would be free to patent it. The negative aspect was looking to see if there was a way around Mr Chevalier’s patents, because if there was, Honeywell would have to do something to protect itself from its competitors.
632.	Both Mr Spurr and Mr Kilker accepted in evidence that Mr Chevalier might have got the impression that Honeywell was trying to get around his patents. However, I am quite satisfied that this process was entirely legitimate and above board. Even if it had been a meeting simply to find a way around Mr Chevalier’s patents in order to develop a rival latch, for reasons to which I will come in a while, that would not have been a breach of the JCA. 
633.	In an e-mail to Mr Krupp on 11 August 2003, Mr Chevalier purported to be incensed about the fact that he had asked for Mike Shelley to come and see him for a day or two about the smaller latch, whereas what Mr Spurr was telling him was that he, Mr Spurr, was going to come instead, with Mr Shannon as a “witness” to what was going on. Despite Mr Chevalier’s denial in his evidence, it is quite clear from the e-mail that he had recorded this conversation with Mr Spurr. I agree with Honeywell’s submission that in the circumstances, Mr Chevalier’s contention, in a later e-mail on 4 September 2003, that Mr Spurr had shown “an incredible degree of contempt and disrespect” towards him and ALS by suggesting that he would come with a witness, was extremely hypocritical. 
634.	It is clear that, by this stage, Mr Chevalier was itching for a fight with Mr Spurr on whatever pretext he could find. By contrast, Mr Spurr’s approach was reasonable and measured. In evidence, he explained that Mr Shelley was busy working to tight timescales on the design so that he did not want to disrupt Mr Shelley, but was quite happy to attend himself. He also pointed out that, under terms agreed in the June 2003 design review, he would not meet Mr Chevalier alone. He had ascertained that Mr Shannon was available to attend with him. As he says in his witness statement, he could not understand why Mr Chevalier was so vexed about this. 
635.	As already discussed, Mr Chevalier became irrationally incensed by Mr Spurr’s draft feasibility study dated 13 August 2003, concerning the installation of the ULS in the MG Rover doors. He refused to accept that there was a genuine difference of professional opinion between himself and Mr Spurr, preferring to make unjustified insinuations of bad faith. The reality is that Mr Spurr was only doing his job and, whilst he may have underestimated how accommodating MG Rover would be prepared to be about making changes to the doors, there were nonetheless installation problems which Mr Chevalier’s installation report did not recognise and which ultimately were resolved by Mr Spurr.
636.	The irrational attitude which Mr Chevalier had adopted by this stage was confirmed by what Mr Kilker said in an e-mail on 18 August 2003, reacting to Mr Chevalier’s allegation that he had been deliberately excluded from Mr Spurr’s installation study at the end of July:
“JP was in Newhouse during the ‘door investigation’ along with Curt Johnson, Nigel Spurr, Pete Suknaich, Stuart Thomson and I believe Duncan Murchie. Therefore, I have no idea how he can say this, unless there is an alternative motive.
These types of events/behavior are common daily when dealing with JP. Therefore due to this mode of operation, most of the Program Management is to conduct ‘damage control’ due to JP’s unique behavior.”
637.	 Mr Spurr was on holiday in the second half of August 2003. On his return, he sent an e-mail on 1 September 2003 which was entirely friendly and innocuous saying that he had been “...catching up with the design changes over the last couple of weeks. Plenty of good work...”  At the time, Mr Chevalier’s response dealt with the technical issues raised and did not suggest that he was offended. However, during a rather bad tempered e-mail exchange with Mr Shelley on 11 September 2003 (when Mr Shelley had the temerity to question Mr Chevalier’s suggestion that there was an error in the chassis design),  Mr Chevalier characterised Mr Spurr’s 1 September e-mail as demonstrating an “exceptional lack of tact and arrogance. He praised me for the good work done in his absence as if I report to him”. I agree with Honeywell’s submission that this reaction was bizarre.
638.	As I have already held, Mr Chevalier had another unreasonable outburst in response to Mr Kilker’s perfectly reasonable request (following the successful meeting with MG Rover on 3 September 2003) that he should reconsider his decision to exclude Mr Spurr from his e-mail circulation list. In his e-mail in response, Mr Chevalier accused Mr Spurr of “contempt and disrespect”, again (wrongly as I have held) claiming that Mr Spurr had claimed that Mr Chevalier had misappropriated his design work on the smaller latch. Mr Chevalier also alleged in an unparticularised manner that Mr Spurr had recently presented technical data of Mr Chevalier’s as his own. Mr Spurr provided a measured and reasonable internal response, refuting these unjustified allegations, which was confirmed by his evidence, which I accept.
639.	What Mr Chevalier appears to have regarded as the final straw was the fact that when his train was delayed on the morning of the meeting with MG Rover on 11 September 2003, Mr Spurr and Mr Kilker started the meeting in his absence. In my judgment, their decision to do so was perfectly reasonable in the circumstances. However about an hour and a half after learning that the meeting had proceeded in his absence, Mr Chevalier served notice to terminate the JCA.
640.	I agree with Honeywell’s submission that Mr Chevalier served his notice to terminate not because of any deficiency in the actual performance of the JCA at the time, but because he had developed a dislike for the senior project management, specifically Messrs Krupp, Kilker and Spurr. It is apparent from what he said at the time and in his evidence that he felt that he was being treated badly by them. However, in my judgment his attitude was irrational and unjustified and the objective reality was that the project management were trying to progress the project in difficult circumstances (largely caused by Mr Chevalier’s irrational behaviour) in a polite and civilised manner.
Designing round patents and the e-latch
641.	Of course it does not follow that, merely because that was Mr Chevalier’s motive for terminating and that motive may have been unjustified, that at the time ALS may not have been justified in terminating the JCA. The relevant provision is Article 10.1 which provides:
“Any failure by either party with respect to any of its contractual obligations shall entitle the other party to terminate the agreement thirty (30) days after receipt of a registered letter with acknowledgement of receipt setting forth the reasons for the termination, the said letter not having achieved its purpose during this period, unless the defaulting party satisfies its obligations within this period or has provided truth that the non-execution of its obligations was subsequent to a case of force majeure.”
642.	The critical question is obviously whether there were any breaches of the JCA justifying termination under this provision as at 11 September 2003. I have already held that, in my judgment, there were no breaches of Article 4.5 of the JCA or of any provision of the Scope of Work as regards the progress of the project between March and September 2003. However, ALS  case is that what it contends was an attempt to design round Mr Chevalier’s patents and Mr Spurr’s promotion of his own invention, the so-called “e-latch”, did constitute breaches of the JCA.
643.	So far as designing around Mr Chevalier’s patents is concerned, I have already held that, as a matter of fact, the brainstorming meeting at Honeywell on 18 June 2003 did not have as its purpose (whatever Mr  Chevalier may have thought at the time) an attempt to get round his patents, with a view to developing a rival latch. However even if Honeywell had been developing its own invention, it was perfectly entitled to do so, without being in breach of the JCA.  Article 3.5 of the JCA provides:
“This Agreement does not exclude either Party from future development, manufacture or sale of similar or competitive products providing such development does not materially breach the terms and conditions of this Agreement or the joint Confidentiality Agreement signed by both Parties.”
644.	ALS tried to avoid the effect of this provision in two ways. First it sought to argue that this provision was only concerned with future development, in the sense of development after the termination of the relationship between the parties. However, that construction flies in the face of the wording of the provision. The proviso that the development should not breach the terms of the JCA would make no sense at all if the JCA had already been terminated.
645.	Second, ALS contended that the development of Honeywell’s own latch which was implicit in the brainstorming meeting was a breach of Article 4.5. However, that contention could only begin to get off the ground if there were some evidence that the development of Honeywell’s own latch was causing Honeywell to fail to take all reasonable actions without unreasonable delay as required by Article 4.5. Despite the series of accusations levelled by Mr Chevalier against Honeywell at the time and in his evidence, as I have already held, Honeywell was not in breach of Article 4.5 between March and September 2003.
646.	Similar considerations apply to the e-latch. Mr Spurr accepted that the reason he had left Arvin Meritor was disenchantment because they were not developing new ideas, including his own. One such idea he had had for a number of years was an e-latch, an electronic latch without any mechanical connections. He said that at some stage in 2003 (in his witness statement he said from July 2003) he had started thinking in terms of an actual design solution, although at that stage it was just a few ideas and sketches. By September 2003, he had a rough working model at home.
647.	ALS relies on a number of documents produced by Mr Spurr from August 2003 onwards as demonstrating that he was promoting his own invention. Thus in its written closing submissions, it relies on an e-mail from Mr Spurr   dated 8 August 2003 (about which he was not asked anything in cross-examination):
“Where neither power release or closure are required, we are at a disadvantage. I hope this is not seen as negative or pessimistic. Rather, I am encouraging thoughts “outside the box” that will allow us to grow the business volume. There were some ideas at the brainstorm meeting that require much further work to realise a paradigm shift to give a low cost power unlatching system that could give us as good as an advantage in the lower specification high volume market as we have today in the full function market.”
648.	This view that the ULS was not necessarily competitive in the high volume low cost basic latch market was repeated by Mr Spurr in his report dated 16 September 2003 on his visit to the Frankfurt Motor Show on 13 and 14 September 2003, where under “Recommendations” he says:
“Clearly the response from VW together with the work being undertaken by Aisin Seiki and doubtless others indicates that there is considerable interest in a latch with no mechanical connections. The ULS does not have any advantage in this area over our competitors. It does retain its advantage to offer power closing and release in a small package.
In parallel to the ULS development it is recommended that an innovative design to achieve power unlatch without mechanical back up is created. This permits coverage at customers who wish to retain mechanical connections using the ULS and those who are willing to dispense with them”.
649.	The reference to the response from VW is to the meeting which he and Mr Kettle had with Mr Kai Schrenke, on which Mr Spurr also reports in this report stating “For the future it was indicated that VW desire an E-latch solution with no mechanical connection but they have still to see safe power failure management”.  Relying on Mr Kettle’s evidence that his recollection was that what Volkswagen was interested in was an e-latch with mechanical safety, in other words the ULS, ALS invites me to conclude that Mr Spurr was wrong in saying that Volkswagen was interested in an e-latch with no mechanical connection. However it seems to me that the report Mr Spurr prepared two days after the meeting is more reliable than Mr Kettle’s recollection. Also whilst ALS is no doubt correct that Mr Kettle knew Mr Schrenke far better than did Mr Spurr, that seems to me no reason for a latch engineer of Mr Spurr’s calibre to have misunderstood completely what Mr Schrenke was saying in response to a specific enquiry about interest in e-latches.
650.	On 17 September 2003 Mr Spurr sent a Strategy document to Mr Kilker which was then e-mailed to senior personnel within Honeywell.  His conclusions were: 
“The ULS has advantages but these are limited to the market that requires power closure and/or power release with full mechanical redundancy. It is too complex and expensive for other applications or where power release is required without manual back-up. If power closure is not required, the ULS must be cost competitive with existing power release systems which it probably is considering the lack of products in existence that have been designed to include power release. Market pricing studies are required to determine this.
An alternative retention system under initial investigation provides the potential to realise a small, low cost, power release system with power back up yet no manual control. It is recommended that the development of this system to a working model is formalised and invention disclosures completed. If initial verification is successful, a product launch in 2006 is likely to be of interest to VW at least.
Many latch manufacturers are spending considerable resource to graft power release onto existing latch systems where this is required to accommodate passive entry. They will be under extreme cost pressure
to provide new technologies to realise tower cost power release. Their ability to develop cost effective alternatives is severely limited due to their existing workload. This provides Honeywell with a window of opportunity.
-Or-
Vehicle manufacturers may realise the application of power release to realise passive entry is more expensive than adding a sensor to the door handle. In this case they will be more likely to adopt the Renault type system.
The SVS group should focus its efforts on providing a complete patented system solutions for passive entry, remote keyless entry and latching. It is then free to partner with other companies who do not possess the technologies in these areas but do provide door system solutions. It must be obvious that the Honeywell system is a complete integrated system, not a series of components.”
651.	ALS repeats its allegation that in effect the e-latch was being promoted at a time when the ULS project was under-resourced. However I have already held that there was no question of lack of resources at this time. In its written Closing Submissions, ALS then says this:
“Perhaps more importantly, the promotion of the e-latch entailed the accentuation of problems or potential problems with the ULS. There is no doubt that the market views of Mr. Spurr, which he set out in [the various documents referred to] were undermining people’s confidence in the ULS. Mr. Kettle certainly understood the 8 August 2003 e-mail as suggesting that the ULS did not have an obvious target market, and as contradicting the corporate latch strategy Honeywell had at the forefront of its sales..”
652.	There are a number of difficulties with this criticism. First and foremost, whether ALS likes it or not, as an expression of the state of the market for basic latches and the lack of competitive advantage of the ULS in that market, as opposed to in the high spec market for power closure, Mr Spurr’s views were almost certainly correct. ALS’s own market expert, Mr Ian Henry, found it hard to disagree with Mr Spurr when he was taken to this document, saying that he understood what Mr Spurr was saying there. 
653.	Second, although it is asserted by ALS that there is no doubt that these views were undermining people’s confidence in the ULS, there is simply no evidence to that effect. It was not suggested to any of the Honeywell witnesses that their confidence had been undermined or that they had not worked as hard on the project as a consequence, let alone that resources had been diverted from the ULS project.
654.	Third and related to the second point, what Mr Spurr was recommending was the development of an e-latch in parallel with the ULS, not instead of it. ALS sought to suggest by reference to the presentation which Mr Spurr and Mr Kilker were working on in October 2003 that they were putting the e-latch forward as an alternative to the ULS, rather than in addition to it. Mr Spurr did not accept this, although, as ALS submits, Mr Kilker did accept this in cross-examination. However, at a time when Mr Chevalier had given a thirty day notice to terminate on 11 September 2003, I consider that Honeywell was perfectly entitled to investigate its options in the event that the termination became effective (including the development of an e-latch as an alternative to the ULS), especially given the breakdown in the relationship with Mr Chevalier.
655.	Furthermore, in any event, Article 10.3 entitled Honeywell to terminate the JCA itself if it determined, in its sole discretion, that continued performance of the JCA was no longer commercially viable. In view of that provision, there can be no question of Honeywell being in breach of the JCA in investigating in September and October 2003 (or for that matter earlier) whether the ULS was still commercially viable or whether the e-latch made more commercial sense.
656.	The difficulty which ALS faces is essentially the same as in relation to the issue of designing around Mr Chevalier’s patents. Honeywell was perfectly entitled under Article 3.5 to develop, manufacture and sell its own e-latch providing that in doing so it did not breach any of the other terms of the JCA. ALS simply cannot point to any evidence that the discussions about the e-latch and investigation of its possibilities in the last few months of the collaboration between August and December 2003 caused the diversion of resources from the ULS project or any breach of Article 4.5.  ALS’s assertion to that effect is no more than assertion.
Conclusion on breach
657.	I have reached the firm conclusion that there were no extant breaches of the JCA as at 11 September 2003 or for that matter 16 December 2003 when Mr Chevalier finally terminated the JCA, either as regards the progress of the project since the soft tooled build or the state of resources or in any other respect.
658.	That leaves the question of the status of the breaches of the JCA which pre-dated the soft tooled build, consisting of delay of two months or so in the drawing transfer as at May 2002 and a further delay of a few weeks in revising drawings after the tolerance analysis as at March 2003, a delay of some three months overall. I have concluded that those delays were breaches of Article 4.5 of the JCA at the time they occurred.  
659.	I raised with Mr Douglas during his oral closing argument what the position would be if I were to conclude that there was a breach as at March 2003, but no further breaches thereafter. He contended that, if there were any breaches committed before the soft tooled build which remained unremedied, ALS could still terminate under Article 10.1 in September or December 2003 for those breaches, absent a positive affirmation of the contract or waiver of those breaches. He submitted that there had been no affirmation or waiver, because in the intervening six months, although Mr Chevalier had allowed the JCA to continue, he had done so against a background of his continued dissatisfaction and complaint. 
660.	I agree with Mr McQuater that this would be a thoroughly uncommercial construction of Article 10.1. It would mean that, in effect (unless affirmation or waiver were established), ALS could decide to terminate at any point in the future for delay up to a point in the past, even though in the intervening period no further delay had occurred and good progress had been made with the project. On the findings of fact I have made that is essentially this case.  The fallacy in ALS’s argument that it can still serve a notice of termination after six months seems to me to be the suggestion that there was some extant breach as at September 2003 which remained unremedied. The correct analysis is that this is not a case of continuing breach which remained unremedied, but of  past breaches which, in the light of the subsequent good progress with the project, were simply not continuing. 
661.	Once it is recognised that there was no continuing breach, on the proper construction of the provision, it will not bear the meaning for which Mr Douglas contends. When the provision talks about an entitlement to terminate for a failure of the other party’s contractual obligations, thirty days after receipt of a letter setting out the reasons for termination “said letter not having achieved its purpose during this period”, it is clear that the thirty day period is intended to enable the party in breach to take steps to remedy the breach.  In other words it is focussing on present breaches which are capable of being remedied. What it does not entitle the party who serves the notice to do is to say: “There were breaches of Article 4.5 in the past, sixteen months ago and six months ago. I did not serve a notice on you on either occasion, even though I might have done and, even though in the intervening period, there has been no further breach of Article 4.5, I can serve a notice on you now in respect of those past breaches”.  
662.	Mr Douglas seeks to counter this by relying on Article 12.2 of the JCA which provides: 
“Any delay or failure to enforce any rights, or remedies available to either Party under this Agreement or at law for a material breach of, or a repeated failure to perform, any obligation hereunder will not constitute a waiver of such right or remedy in respect of the same or similar or subsequent breach or failure.”

I agree with Mr McQuater that this provision is of no avail to ALS if, as I have concluded, Article 10.1 does not entitle ALS to terminate for past breaches of the JCA as opposed to present breaches. The short answer is that ALS has no right or remedy capable of being waived in those circumstances, so that Article 12.2 is irrelevant. The question of affirmation or waiver does not arise. Rather, on the correct construction of Article 10.1, ALS cannot terminate in September or December 2003 for breaches committed in or before March 2003.
663.	It follows that ALS did not have a right to terminate the JCA under Article 10.1 in September or December 2003.  The question remains whether it had a right to terminate at common law, in the sense of accepting a repudiatory breach by Honeywell as bringing the JCA to an end. It is fair to say that this aspect of ALS’s case did not loom large in its submissions, which may reflect a recognition that if it could not succeed under Article 10.1, it was unlikely to do so at common law.
664.	In any event, even if ALS had contended that it was entitled to accept a repudiatory breach in March 2003, I would have concluded that the breach of Article 4.5 in March was not repudiatory, because there was no question of the delay of some three months being sufficiently serious to go to the root of the contract. In those circumstances, any attempt to argue that ALS was entitled to accept that breach as repudiatory six months later would be absolutely hopeless.
665.	In view of my conclusion as to the correct construction of Article 10.1, it is not strictly necessary to make any specific finding about whether ALS had waived those past breaches or affirmed the JCA by September 2003. As I have said, ALS contended that because Mr Chevalier had continued to protest about Honeywell’s performance after March 2003, no question of waiver or affirmation could arise. If it had been necessary to decide this point, I would have inclined to the view that, whilst that continued protest would probably not preclude a claim for damages for past breaches (if any such damages could be proved) the issue of termination would be another matter. It seems to me that by continuing the JCA after both May 2002 and March 2003, ALS in all probability waived any entitlement to terminate the JCA under Article 10.1 or at common law, for Honeywell’s breaches as at those dates.
666.	In all the circumstances, ALS was not entitled to terminate the contract when it did and its purported termination was wrongful. Accordingly it is not strictly necessary to consider either the events post-collaboration or the elaborate arguments about causation and quantum of loss, but given the time and energy devoted to those issues at trial, I will deal with them, albeit perhaps not as fully as I might have done if I had concluded that ALS was entitled to terminate the JCA. 
Events post-collaboration
667.	Honeywell relies on events post-collaboration in a number of respects in relation to its case on liability, specifically that there have been continuing difficulties with manufacturability, that problems of noise remain and that the VSS latches would still be unacceptable to major European, American or Japanese manufacturers. Honeywell accepts that what happened following the termination also has a bearing on issues of quantum and mitigation.  In contrast, to the extent that ALS referred to post collaboration events at all in its closing, it did so essentially to suggest that the departure of Honeywell from the scene had led to the ULS being tainted and to ALS having had considerable difficulties in interesting OEMs in the latch. I propose to consider that contention in more detail in relation to quantum.
668.	In certain respects, as I indicate below, I found the position in relation to post-collaboration events unsatisfactory, principally because disclosure by ALS in relation to those events was late, piecemeal and potentially incomplete, but also because this was another area of the case where the inability of Mr Chevalier to brook any criticism of the ULS led him to make a series of sweeping statements in his evidence about the current state of the VSS latch and its future prospects, at best not capable of objective justification, at worst palpably untrue.
Shivani
669.	 Following abortive negotiations with CE Marshall in Birmingham for them to take over the development and manufacture of the ULS, which foundered over their concerns that Honeywell would claim intellectual property rights of its own in the design as it then stood, Mr Chevalier approached Shivani, an Indian latch manufacturer in about February 2004. Engineers from Shivani carried out an initial review of the ULS in April 2004, the conclusions of which (communicated to Mr Chevalier by Mr Tripathi, Chief Executive of Shivani) were illuminating:
“...your latch design was not a good design for manufacturing.  This needs a total review and they have the opinion that a lot of problems are going to come during the manufacturing process, which means we need continuous design support…Your contract does not guarantee design and we have to revisit the design again and again for the concerns raised by our manufacturing team.”
670.	This provoked a letter in response from Mr Chevalier asserting that his design had been validated in accordance with Volkswagen, Rover, Ford and BMW specifications. He accepted in evidence that, at least as regards Ford and BMW, this was not true, but described this as a “defensive letter”. That was an interesting euphemism, which revealed very clearly that when he thought that the ULS was under attack, Mr Chevalier was prone to exaggeration and untruth.
671.	Mr Chevalier said in evidence that the findings had been made by a junior engineer at Shivani who was relieved of his position. That was also the evidence of Mr Kathuria, the managing director of Shivani who gave evidence on behalf of ALS. He said the team who had produced the review had been replaced by more experienced people. I have to say that I was not entirely convinced by this evidence, particularly given that the findings of the review echo the views as to the difficulties with manufacturability of the ULS expressed by Mr Spurr, Mr Kilker and Mr Shannon. 
672.	In the event, Shivani and MG Rover executed a nomination to supply latches for the Rover 25, 45 and MGTF models in July 2004. Shivani had been concerned about the fact that MG Rover’s production schedule was extremely tight and persuaded them to incorporate revised timelines into the nomination, with start of production at Shivani in December 2004 and at Longbridge in February 2005.
673.	Despite those revised timelines, delays occurred and the date of start of production was put back several times. It is not necessary to go into these in detail, but by 18 November 2004, MG Rover were asking Mr Chevalier for details as to how VSS proposed to control Shivani “avoiding any more unacceptable delays”. Mr Chevalier sent a timing plan on 30 November 2004, which envisaged product off the assembly line delayed until week 15 (i.e. early April) 2005.  This prompted the wry comment from Mr Alder: “I am still at a loss to understand how we/Shivani could ever have considered a week 50, 2004 intro date for MGTF!”  In response, Mr Chevalier sought to blame Shivani.
674.	As a consequence of the time pressures on it, Shivani took the decision to dispense with soft tooled prototypes and carry out product validation from hard tools rather than soft tools, something which was less risky for it than it might have been for other manufacturers because it made tools in house. Shivani made two deliveries of ten prototype latches in November/December 2004. There were problems with these, as Mr Kathuria accepted. Although the problems were not fundamental, some fettling and tweaking of the prototypes was required.  
675.	A dry build to attach a latch and cabling to an MG TF took place on 15 December 2004. Certain issues were raised, which Mr Chevalier and Mr Alder said in evidence were to do with the interaction between the latch and MGR’s control electronics. In consequence, there was a requirement for the VSS latches to be modified. There was some delay in doing this as Mr Chevalier accepted and the modified latches were apparently supplied at the beginning of March 2005. 
676.	On 9 and 10 March 2005, Mr Kettle and representatives of MG Rover (including Mr Alder and Mr Devlin) attended meetings at Shivani’s plant in India.  The agenda for this meeting set out what it was hoped would be the outcomes including to “understand Shivani/VSSL issues” and to “return to MGR with a level of supplier confidence”. I agree with Honeywell that the ALS witnesses all sought to downplay the significance of this as just displaying normal issues or frustration. However, the document speaks for itself and demonstrates that MG Rover had concerns about the relationship between VSS and Shivani and about the reliability of Shivani.  
677.	Indeed, on 4 March 2005, a few days before the meeting, Mr Alder had told Mr Kettle that he was concerned about how little test work had been done at this late stage and stressed the importance of returning from India with good latches. Mr Kathuria’s evidence was that his staff had to work through the night to give MG Rover “good latches” before the team left India. 
678.	So far as testing is concerned, in his witness statement Mr Chevalier claimed that by September 2004, VSS/Shivani had “completed the development, validation and testing of the latch”, as part of his attempt to draw unfavourable comparisons between the progress made by Shivani after the JCA ended and what he characterised as the lack of progress by Honeywell during the JCA. On any view, that statement was not true. Shivani did some testing in house, but these tests did not begin until October 2004 and the documents disclosed in relation to these were not frightfully satisfactory, consisting of the front sheet of the report with a summary of results and no detail. Mr Drysdale examined these and concluded that they would not satisfy any major European or American OEM. Test requirements were not fully specified, only two latches were tested, as opposed to for example the twenty two required by MG Rover and the acceptance criteria were not specified. 
679.	Irrespective of that in-house testing, what any European or American OEM (including MG Rover) would require was the testing and validation of the latch by an independent testing organisation,  such as MIRA, which is used by most UK OEMs and was used by MG Rover. The process of testing at MIRA did not begin until February 2005, with the burst test, after which the other tests were awaiting the delivery of off-process latches from Shivani. This was no doubt the cause of Mr Alder’s concern on 4 March 2005 about the fact that so little test work had been carried out. In the event, none of the further tests was carried out before MG Rover went into administration on 8 April 2005.
680.	Mr Chevalier also claimed in his witness statement that at that date, a consignment of off-process latches to the value of US$60,000 was in transit from Shivani to MG Rover. I am firmly of the view that this was pure wishful thinking and invention on Mr Chevalier’s part to bolster ALS’s case that at the time that MG Rover went into liquidation, Shivani was already manufacturing latches off its production line. The contemporaneous time plan of MG Rover dated February 2005 did not envisage off tools latches from Shivani until week 20 which is about the middle of May 2005. Furthermore, ALS has failed to produce a single shipping document to substantiate the allegation that these latches were in transit, which is extraordinary if they were indeed in transit on 8 April 2005.
681.	When confronted with these matters in cross-examination, Mr Chevalier said that he relied on a statement by Shivani that it had shipped the consignment, evidently a reference to Mr Kathuria’s statement. However, that statement merely said that Shivani was in the process of delivering the latches, not that they were actually en route. Mr Kathuria’s oral evidence on this was extremely unsatisfactory. He was vague in the extreme, though he claimed that he remembered a requirement for 6,000 latches and then, that he thought that in March 2005, Shivani had made off-process latches and sent some £9,000 to £10,000 worth to MG Rover. I do not accept that evidence. I was left with the distinct impression that Mr Kathuria had failed to learn the script which supported ALS’s case and, specifically, Mr Chevalier’s evidence, correctly.
682.	I agree with Honeywell that despite its experience as a latch manufacturer, Shivani faced delays and difficulties in relation to the production of the ULS. At the time that MG Rover went into administration in April 2005, the start of production by Shivani envisaged at the time of the nomination as December 2004, had fallen back to mid May 2005, according to the MGR time plan. Mr Alder said this was a “very very tight timescale”, so that I have considerable doubts whether Shivani would in fact have produced off-production latches by mid-May 2005. In any event, even if it had, testing by MIRA had to take place thereafter.
683.	In his evidence Mr Chevalier sought to blame the delay on changes to its requirements made by MG Rover, a contention in which he was supported by Mr Kathuria and Mr Alder. However, contemporaneously, both Mr Chevalier and MG Rover were blaming the delay on problems with Shivani. It is also striking that, in his evidence, Mr Chevalier sought to downplay the significance of the delay, saying that such delays were common at this stage of a project, a contention which lies uneasily with his willingness to blame Honeywell for every single delay however minor during the course of the JCA. The truth is that, despite its experience as a latch manufacturer, Shivani faced problems and delays in bringing the ULS to production, which were no more and no less than the sort of delays and problems any such project faces, without any blame being ascribed to Shivani.
684.	Furthermore, although Shivani received a nomination in April 2008 to supply the ULS to Mahindra, an Indian OEM, for the W201 project, a sports utility vehicle, it has to be recognised that, in global terms, Mahindra is a very minor player. The start of production date envisaged is May 2010, so that it still seems that Shivani is a long way off any mass production of the ULS. 
685.	As a general observation, to the extent that ALS is relying upon the performance of Shivani to demonstrate success where Honeywell failed, in my judgment it has singularly failed to demonstrate that. No production latches were ever delivered to MG Rover and most MIRA testing had yet to commence when MG Rover went into administration. More than four years after it first collaborated with ALS/VSS, Shivani has yet to produce the ULS on a mass-produced basis in any significant numbers.
Nanjing Automotive and Chinese latch manufacturers
686.	Nanjing Automotive Corporation (“NAC”) acquired the business of MG Rover after it had gone into administration. It is fair to say that despite considerable publicity about NAC reopening the Longbridge plant to manufacture the MG TF, MG3 and MG7 (the latter two corresponding to the Rover 25 and 75), NAC has yet to commence volume production of any of the former MG Rover models either at Longbridge or in China. 
687.	JHA, an established Chinese latch manufacturer with which VSS entered a manufacturing agreement in April 2006, was nominated by NAC at that time to supply the ULS for the MG7. It was envisaged that it would take about six months to start of production. However, JHA encountered very considerable difficulties in supplying latches which met NAC’s requirements and ultimately failed to do so. By June 2007, NAC had decided that rather than use the ULS, it would go into production with a Delphi latch for the MG7. 
688.	It is not necessary to set out the detail of the difficulties encountered and the complaints from NAC, save in relation to two aspects which were both very telling. First, it is apparent from a letter which Mr Chevalier wrote to Mr Zhang of NAC dated 19 December 2006, that the three principal areas of concern for NAC were the reliability of the electronics, the tolerances of some of the mechanical parts, and the stability of the plastic housing to the mechanical latch, three of the main problems faced by Honeywell during the JCA. This rather gave the lie to Mr Chevalier’s assertion that all these problems were of Honeywell’s doing and that they had been subsequently resolved.
689.	Second, Mr Chevalier initially took the same line in his evidence that he had in relation to the difficulties encountered by Shivani, that these were all routine problems, to be expected at this stage of a project, asserting that “at the end of the day, [JHA] managed to put everything right”. However, when confronted by documents from February 2007 onwards which demonstrated that the problems were not resolved, he changed his stance and sought to suggest that he was not really aware of what was going on whereas Mr Alder was, and these were all matters which Mr Alder could deal with in his evidence.
690.	ALS did not lead any evidence in chief from Mr Alder about the relevant problems (which he had not dealt with in his witness statement). After Mr McQuater had cross-examined Mr Alder, but not asked any questions about these matters, Mr Douglas complained about the failure to cross-examine on matters which Mr Chevalier had said were for Mr Alder to deal with. I consider that complaint to be misconceived. Honeywell was not obliged to cross-examine Mr Alder about matters on which ALS had not led any evidence from him. 
691.	Furthermore, I formed the clear view that Mr Chevalier was being evasive in suggesting that he did not know about the problems with JHA and that these were matters exclusively within Mr Alder’s knowledge. Having seen how “hands on” Mr Chevalier was about what he regarded as his latch throughout the JCA, I find it inconceivable that he was not fully aware at all times of the problems encountered with JHA. His attempt to suggest the contrary and, in effect to pass responsibility to Mr Alder was wholly unconvincing.
692.	ALI is another Chinese latch manufacturer with whom VSS has had a manufacturing agreement since August 2006. ALI was expected to supply the ULS to NAC for use in its MG3 model. Mr Chevalier sought to portray a positive picture of ALI, saying that it had an automated assembly line in place and was simply awaiting the go-ahead from NAC to start production. However, the contemporaneous documentation shows that ALI has also experienced problems in achieving manufacturability of the ULS.  For example, in an e-mail of 16 January 2008, problems were identified with the latches produced by ALI which included tolerance issues. Mr Chevalier refused to accept in evidence that these related to design of the ULS as opposed to problems encountered in the normal course of the manufacturing process, repeating what he had said in relation to Shivani and JHA, that such problems were normal and expected.
693.	However, again, the contemporaneous documentation demonstrates (as I pointed out during his evidence) that Mr Chevalier was clearly expressing his disappointment with the progress of the MG3 project and he ultimately accepted that he was “unhappy about things that are not going to schedule”. Despite very late disclosure of documentation in Chinese after the evidence and before closing submissions, it remains unclear whether ALI is about to commence volume production for the MG3 for NAC.
Dealings with other OEMs
694.	At one point in cross-examination, Mr Chevalier accepted that the ULS was still at the stage where it was not being mass produced on a satisfactory basis, but he then sought to qualify that answer by reference to Connaught and Tesla. The former is a very small niche manufacturer of sports cars with a factory in Cwmbran in South Wales. VSS has an agreement to supply its latch to Connaught, but it is clear from the correspondence in 2006 and 2007 that Connaught was complaining about delay in supply of the ULS and the fact that it had been let down, more than once. In February 2007, Connaught complained that it had been let down before, and had had to do expensive redesign work which it was not prepared to do again.
695.	When pressed about this in cross-examination, Mr Chevalier ducked the issue and tried to claim that he had not seen the relevant e-mail before, which frankly I find incredible, for the same reason as in relation to ALI.  Mr Chevalier then asserted that VSS was supplying production latches to Connaught “as we speak”. As I pointed out at the time, there is no evidence that the Connaught car is in production “as we speak”, so that seems to be another instance of Mr Chevalier’s tendency to invent or exaggerate when faced with criticism.
696.	So far as Tesla is concerned, this is an electric sports car manufacturer based in California. Mr Chevalier asserted that VSS and Shivani had supplied Tesla with off tool production components for a while but they had then fallen out over supply agreements. This is all on a very small scale and hardly demonstrates satisfactory mass production.
697.	Much was made by ALS of the agreement VSS entered last year with Inteva (the former latch division of Delphi) but in reality, little has yet come of that. Although Inteva provided a quote to Chrysler for the supply of a basic latch in 2007, it did not win any contract to supply the latch. Slightly more than a week before the end of the trial, on 8 July 2008, ALS claimed, through its solicitors, that VSS/Inteva had received a nomination on the Dodge Grand Caravan, but no evidence of this was produced and, as Honeywell points out, even if this is true, it may relate to the sliding side doors which give rise to further issues, such as whether a larger motor is involved.
Issues of noise and testing
698.	I have already dealt in the section above concerning the technical difficulties which Honeywell faced in relation to the design, with the persistent problems with noise which continued after the JCA terminated and the evidence of the latch experts to the effect that the VSS latch still does not satisfy Volkswagen’s noise requirements. I have also referred in the same section to the tests on the VSS latch carried out by Mr Drysdale earlier this year. Those tests led him to the conclusion (not challenged in cross-examination) that, particularly as regards noise, but also as regards other factors, the state of the ULS is still not such as would satisfy the specification and requirements of any major European or American OEM.
Conclusion in relation to events post-collaboration
699.	It is striking that in neither its written nor its oral closing submissions did ALS address these post-collaboration events in any detail. I suspect that the reason for that is not hard to find. Any detailed analysis of the documents disclosed (as opposed to the sweeping optimistic statements by Mr Chevalier in evidence) does not assist ALS’s case. This is because what such an analysis reveals is continuing difficulties faced by other latch manufacturers, more experienced than Honeywell, in relation to the manufacturability of the ULS. 
700.	Even now, nearly five years after the collaboration was terminated, the ULS is still not being produced in any volume by any latch manufacturer, nor is it yet in a state which would satisfy the specification or requirements of any major European or American OEM.  I consider that this is not because of any blight caused by the failure of Honeywell to develop the latch, as Mr Chevalier would have it. Rather, it is caused by difficulties with the design of the latch. 
Causation
701.	Honeywell advances a number of arguments as to why, even if ALS were entitled to terminate the JCA because of breaches by Honeywell of Article 4.5 or other provisions of the JCA, those breaches did not cause the loss and damage in respect of which ALS claims.
Rev D
702.	Honeywell contends that because (as was accepted by Mr Chevalier and was common ground between the latch experts) the Rev D version of the latch would have required a new set of soft tooled prototypes and its own design validation, any breach of the JCA as regards the ULS prior to the decision to adopt Rev D had lost its causative effect, because it would always have been necessary, in any event, to start again with design validation as a consequence of Rev D. 
703.	In the context of the delay of three months in breach of Article 4.5 as at March 2003, I have already held that it was not open to ALS to terminate for that breach as at September or December 2003. However, even if I had reached a contrary conclusion and held that ALS could terminate, it seems to me that ALS would have insuperable difficulties in establishing that that breach had caused the loss by reason of delay of which it complains, on the basis that the decision to develop the Rev D latch which was made in July 2003 was always going to cause at least three months delay to the project because of the need to build soft tooled prototypes of Rev D and validate that design.
704.	I agree with Mr Douglas that the position might well have been different had I found in favour of ALS that there was continuing and serious delay as a consequence of breach of the JCA by Honeywell and had I accepted its case that, but for such breach, design validation of the Rev B latch would have been completed sometime around the autumn of 2002. It may well be that in those circumstances, the development of the Rev B latch would have been sufficiently far advanced that Honeywell and ALS would have decided not to develop the smaller latch at all. However, since I have found against that case on the facts, it is not necessary to speculate as to what the position might have been in those circumstances.
Article 10.3
705.	Even had I concluded that ALS was entitled to terminate the JCA in September or December 2003 in respect of a breach in March 2003, I consider that any case that ALS had suffered any substantial recoverable loss as a consequence would face another formidable obstacle in the form of Article 10.3 of the JCA. This provides:
“HONEYWELL shall be entitled to terminate immediately the Agreement in case of the determination by HONEYWELL, in its sole discretion, that the continued performance of the Agreement is not commercially viable. No penalty or other consequence shall result in the event that such determination is made.”
706.	Honeywell argues that this provision gives it an option to terminate the contract, the exercise of which would operate to extinguish or reduce the loss suffered by ALS. Accordingly, Honeywell contends that the well-established principle (recognised in the decision of the Court of Appeal in Laverack v Woods of Colchester Ltd [1967] 1 QB 278 and many subsequent cases) applies that, in assessing damages, it will be assumed that the defendant would have performed the contract in the way least onerous to himself.  In the application of that principle to the present case, Mr McQuater submits that the Court must assume that Honeywell would have exercised this option.
707.	In support of that submission, he relies on passages in the judgments of the Court of Appeal in The Mihalis Angelos [1971] 1 QB 164. At page 196H Lord Denning MR said:
“: ...if the defendant has under the contract an option which would reduce or extinguish the loss, it will be assumed that he would exercise it.”
To like effect in the same case is the judgment of Davies LJ:
“The assumption has to be made that, had there been no anticipatory breach, the defendant would have performed his legal obligation and no more.”
708.	The same principle was recognised by Staughton LJ in SIB International SRL v Metallgesellshcaft Corporation, “The Noel Bay” [1989] 1 Lloyd’s Rep 361 at 363: 
“It is established law that, at any rate if the option has not already been exercised at the date of the breach, the charterer must be assumed to have exercised that option in a way most favourable to himself.”
709.	Mr McQuater submits that this principle is to be distinguished from a different but related question which arises where a party’s obligations under the contract, for example the right to terminate, are contingent upon the occurrence of an event extraneous to the contract, in which case the Court may have to consider the probability of that event occurring in its assessment of damages. The distinction appears from the judgment of Diplock LJ in  Laverack v Woods of Colchester Ltd [1967] 1 QB 278 at 294:
“The general rule as stated by Scrutton LJ in Abrahams v Herbert Reiach Ltd [1922] 1 KB 477…that in an action for breach of contract a defendant is not liable for not doing that which he is not bound to do, has been generally accepted as correct, and in my experience at the Bar and on the Bench has been repeatedly applied in subsequent cases…if the contract is broken or wrongly repudiated, the first task of the assessor of damages is to estimate as best he can what the plaintiff would have gained in money or money’s worth if the defendant had fulfilled his legal obligations and done no more.
Where there is an anticipatory breach by wrongful repudiation, this can at best be an estimate, whatever the date of the hearing.  It involves assessing that what has not occurred and never will occur has occurred or will occur, i.e. that the defendant has since the breach performed his legal obligations under the contract, and if the estimate is made before the contract would otherwise have come to an end, that he will continue to perform his legal obligations thereunder until the due date of its termination.  But the assumption to be made is that the defendant has performed or will perform his legal obligations and nothing more.  What these legal obligations are and what is their value to the plaintiff may depend upon the occurrence of events extraneous to the contract itself and, where this is so, the probability of their occurrence is relevant to the estimate.”
710.	The same point was made by Staughton LJ in Kurt A Becher GmbH v Roplak Enterprises SA v Tradax Ocean Transportation, “The World Navigator” [1991] 2 Lloyd’s Rep 23 at 32-3:
“No doubt it was a necessary step to that conclusion [in The Mihalis Angelos] that the ship would beyond doubt have missed her cancelling date. But I cannot find any suggestion in the judgments of the Court of Appeal that it was also an essential step to prove that the charterers would beyond doubt have exercise the right to cancel, rather than that they could have exercised it.”
711.	I am not entirely convinced by Mr McQuater’s argument in relation to Article 10.3 that I must simply assume that Honeywell would have exercised the right to terminate without more. Although the right given is widely drawn (“in its sole discretion”), in circumstances where the right was exercised, the Court would still have to be satisfied that Honeywell had not acted perversely or arbitrarily, as Honeywell accepts. Honeywell could not simply decide that the contract was no longer commercially viable when it clearly was: see on this the judgment of Rix LJ in Socimer International Bank Ltd v Standard Bank Ltd [2008] EWCA (Civ) 116 at paragraph 66. Equally, Mr Douglas must be right at least to this extent, that Honeywell could not exercise the right where the only reason why the contract was no longer commercially viable was because of Honeywell’s own breach of the contract. 
712.	Thus, it seems to me this case is more akin to those where the right to exercise an option depends upon an event extraneous to the contract, such as the outbreak of war. The Court does have to assess the extent to which the contract was no longer commercially viable at the end of 2003 or would have become commercially unviable soon thereafter. As I see it that is not the same thing as Honeywell having to establish that on a balance of probabilities it would have exercised the right to terminate under Article 10.3.  Rather what has to be considered is in a narrower compass: were the circumstances of the collaboration such that (due to matters other than Honeywell’s own breach of contract) Honeywell could have formed the view, without acting arbitrarily or perversely or irrationally, that the contract was no longer commercially viable.
713.	Where I do agree with Mr McQuater is that the line of cases relied upon by ALS of which the decision of the Privy Council in Lion Nathan v CC Bottlers [1996] 1 WLR 1438 is an example, are of no relevance in the present context. Those are not cases where the party has an option to perform the contract in two different ways, but a single contractual obligation to act fairly and in good faith, which the party cannot choose to perform in the way most beneficial to itself.  
714.	The distinction between that sort of case and the case exemplified by Lavarack where the party has an option to perform is made by the judgment of Lord Hoffmann in Lion Nathan, a case concerning the liability of a vendor of shares who had given a warranty as to the preparation of a profit forecast on which the purchaser had relied:
“22. Mr. Sumption Q.C., who appeared for the appellant, said that the court should choose the highest figure, which on the information reasonably available at the time of the forecast, could without negligence have been put forward as the mean. He said that a court should assume that the vendor would have performed the contract in the way least onerous to himself, that is to say, the way calculated to secure for himself the highest possible price consistent with his warranty. In support of this argument he relied upon cases such as Lavarack v. Woods of Colchester Ltd. [1967] 1 Q.B. 278 and Paula Lee Ltd. v. Robert Zehil & Co. Ltd. [1983] 2 All E.R. 390 in which the courts had to calculate the damages payable upon a wrongful repudiation or termination of a contract. In order to compensate the plaintiff for what he has lost, the court must in such cases determine what benefits the plaintiff would have derived from the performance by the defendant of his outstanding obligations under the contract. It is well settled that the court will assume that the defendant would have performed those obligations in the way least onerous to himself. If his duty was to act reasonably, it will be assumed that from various reasonable methods of performance he would have chosen the one least unfavourable to himself: see Mustill J. in Paula Lee Ltd. v. Robert Zehil & Co. Ltd. [1983] 2 All E.R. 390 at page 394. 
23. All this makes perfectly good sense when damages depend upon a prediction of how the defendant would have performed outstanding contractual obligations which gave him a choice of what to do. But this is not such a case. Paragraph 32 did not allow the vendor to choose from the range of figures which would have counted as reasonable forecasts and put forward the highest figure in the range in order to obtain the highest possible price. The PRS had to be "calculated in good faith" and therefore had to be a bona fide estimate made without regard to whether it would have produced a higher or lower price. There is accordingly no basis for calculating the damages on the assumption that the vendor was contractually entitled to choose the highest figure. All that can be said is that there would have been a range of possible figures. But there is no legal basis for assuming that the hypothetical figure would have been at the upper rather than the lower end of the range. So far as the estimates which could reasonably have been made differed from the mean of those estimates, it would have been on a random basis and not because the vendor was entitled to choose the highest figure. In those circumstances, the only rational course open to a court is to choose the figure which it considers that a forecast made with reasonable care was most likely to have produced. “
715.	In my judgment Article 10.3 is a provision which gives Honeywell an option in certain circumstances to terminate the contract, not merely, as ALS sought to characterise it, a power to make a determination in good faith. Accordingly, the principle of cases such as Lavarack and The Mihalis Angelos applies, albeit with the qualification I have indicated.
716.	At the end of the day I am quite satisfied that the circumstances of the collaboration as it stood at the end of 2003 were such as would have fully justified Honeywell in determining that the continued performance of the JCA was not commercially viable. The following matters are of particular significance in that context, although this is not intended to be an exhaustive catalogue. 
717.	First, there was clearly an issue as to the competitiveness of the ULS in relation to other latches, certainly in terms of the basic latch market. I will look at the evidence about this in more detail in the Quantum section below, but in summary, Mr Spurr’s assessment in his strategy document of 17 September 2003 seems broadly correct and accords with the evidence of Honeywell’s market expert, Mr Brayshaw. Whilst the ULS had considerable advantages in relation to other premium latches offering features such as power opening and closing, there was only limited demand for such products. In relation to basic latches, with which the ULS would have to compete to achieve any significant market penetration, the ULS did not offer any competitive advantage.
718.	Second, in late 2003, some two and a half years after the JCA was entered, and through no fault of Honeywell, ALS had still not agreed the basis upon which profits would be shared between the parties. I found earlier that there was no agreement as to the share of profits at the meeting on 24 July 2000, contrary to the assertions made by Mr Chevalier in his witness statement. Thereafter, Honeywell did seek to renegotiate the terms of the collaboration going forward at various stages, including after Mr Chevalier had served the notice of termination in September 2003. Honeywell wanted to put ALS’s share of the profits on a royalty basis. In the letter of 11 December 2003 from Mr Sansom, President of Sensing and Control, to Mr Chevalier putting forward proposals for the future of the collaboration, Mr Sansom stressed the urgent need to agree a royalty structure, in order for the collaboration to be commercially viable. 
719.	However, whether through greed or otherwise, Mr Chevalier was never prepared to enter a royalty agreement with Honeywell and did not even put forward a counter-proposal, simply terminating the contract finally on 16 December 2003. Accordingly, towards the end of 2003, Honeywell was faced with the position that it did not know what proportion of any gross or net profit it would make from the sale of the ULS once manufacture commenced. This was hardly a sound basis for committing further resources to the project.
720.	Third, even if Honeywell had been able to estimate what proportion of any net profit it would receive, the financial prospects for the project from Honeywell’s perspective as at the end of 2003 were not promising. At the time that the JCA was entered, Honeywell had required an internal rate of return of 25% over a five to ten year period for investments in electromechanical projects. The assumptions made by Honeywell in its business plan at the outset of the project, reflected in Exhibit 6 to the JCA, were that the ULS could be manufactured for £6.95 and sold for £8.20. This would have given an internal rate of return of slightly over 30%.
721.	However, as the project progressed, Honeywell found itself unable to reduce the projected manufacturing costs to that estimated level. I have already referred to the evidence of Mr Eaton about prices obtained from prospective suppliers, often with input from Mr Chevalier as to who should be approached. It was not suggested to Mr Eaton in cross-examination that he had failed to obtain competitive quotes or that there were other, cheaper suppliers whom he should have approached. 
722.	It is true, as ALS points out by reference to Mr Smillie’s evidence, that at least immediately prior to the soft tooled build, the question of the cost of components had not been finally determined and it was anticipated in due course that prices could be driven down. However ALS has not produced any evidence of lower prices Honeywell could have obtained, other than the Inteva model which I refer to below and which I did not find reliable. Towards the end of the project, Honeywell was looking into reducing labour costs through manufacture in the Czech Republic, at that time a so-called low cost jurisdiction.
723.	Following Mr Chevalier’s termination notice and in the light of feedback from Mr Spurr and Mr Bur on 10 October 2003, Mr Mitchell produced a tabular analysis of cost and price for various levels of latch. As he confirmed in his evidence, the assessment was that a basic latch selling at $6 to $8 was simply not feasible. As Mr Mitchell put it in the document: “Low end latches declining with $6 to $8 pricing. We cannot play in this entrenched commodity world”. The material and labour costs for a mid range latch (with passive entry and power unlocking) were $12.20. Mr Mitchell said in evidence that at that cost, they could not have made money. 
724.	To do so would require reducing material and labour costs (and the document refers to the need to reduce these from $12.20 to $11.20, although how feasible that would have been remains unclear) and/or increasing the sale price. How that was to be achieved was also unclear. At that time in October 2003, the only actual customer for the ULS, MG Rover, was resisting a proposed price increase of 10% to reflect increased manufacturing costs. Any increase in price to other prospective customers would only reduce the competitiveness of the ULS.
725.	I see no reason not to accept at face value the assessments made by Honeywell at that time as to the costs of manufacture and the likely level of profitability. I was not assisted by the evidence of Mr Manning of Inteva on the issue of manufacturing costs. That evidence came forward rather late in the day: Mr Manning was interposed between two Honeywell witnesses on Day 24 of the trial. He gave evidence about the projected costs of manufacturing a low specification latch set out in a spreadsheet dated October 2007. However, this was all based on estimates, not upon actual quotes from component manufacturers (in contrast to Honeywell’s costs figures) and, since Inteva has yet to manufacture the ULS, it remains far from clear whether it could manufacture the ULS at that projected cost.
726.	Furthermore, the relevant financial model in the spreadsheet contained sales prices for the latch which had been selected to produce a 10% operating profit over the lifetime of the contract with the projected OEM, Chrysler. For legitimate reasons of commercial confidentiality, Mr Manning was not willing to disclose the actual prices quoted to Chrysler nor whether those prices were acceptable, although it appears that VSS/Inteva did not obtain the contract. Overall, the spreadsheet was essentially a theoretical exercise, not grounded in hard reality and no basis for any suggestion that Honeywell management were acting irrationally in relying upon the costs estimates it had obtained.
727.	ALS sought to suggest in this context that, given that Honeywell had invested US$3.7 million in the project by late 2003, it would hardly have terminated under Article 10.3 at this stage. Mr Mitchell was asked in evidence whether the fact that Honeywell had invested that amount of money might not have made it more flexible about taking a lower internal rate of return rather than simply terminating the contract. His answer was a compelling one:
“It would vary with how quickly the project would end. I mean, it would say that we can get our 25 per cent on these other projects, let's stop, it's not financially viable, let's take our money and put it on something else.  Good money after bad does not usually work.”
728.	Furthermore, whilst I see the logic of ALS’s point, it does not seem to me to be of any real assistance. The issue here is whether in late 2003, Honeywell could have formed the view without acting arbitrarily or perversely or irrationally that the contract was no longer commercially viable. The fact that it had already spent that much money would not prevent it from legitimately forming that view. 
729.	Fourth, as at the end of 2003, Honeywell had only managed to procure a letter of nomination from one OEM, MG Rover. Contrary to ALS’s submissions, as I have already indicated in detail in the sections of this judgment dealing with liability, the reasons for this are not attributable to breach of the JCA by Honeywell. That one customer had financial difficulties of which Honeywell was well aware having described these internally as a “major risk”. MG Rover had suspended the RDX60 project (for which the letter of nomination was actually received) indefinitely and although Honeywell and MG Rover were proceeding on the basis that the ULS would be supplied for use in the existing models, there was no contractual commitment to that effect.
730.	The final matter which would have justified Honeywell in concluding at the end of 2003 that the continuation of the JCA was not commercially viable was the deterioration in the relationship between Mr Chevalier and Honeywell personnel. When the future of the project was under consideration internally in October 2003, Mr Mitchell’s preferred solution as to what would work best for both parties was continued Honeywell control of the project, with a review board which would include Mr Chevalier and one team in a single location and the hiring of a new team of experts as a matter of priority. This was the proposal he put forward to senior Honeywell management. 
731.	Although Mr Mitchell was reluctant to accept in his evidence that that proposal was rejected by senior management, it is apparent from Mr Sansom’s letter of 11 December 2003 that it was rejected and that senior management wanted Mr Chevalier just as a consultant, receiving a royalty on sales. 
732.	Given what I have concluded is the correct construction of Article 10.3 it is not necessary to make any finding as to whether, on a balance of probabilities, Honeywell would have exercised its rights under Article 10.3 if Mr Chevalier had not terminated the JCA on 16 December 2003. However, it is my strong suspicion that by December 2003 senior Honeywell management had had enough of what was seen as excessive involvement and meddling by Mr Chevalier and that, unless ALS had agreed a limited role for Mr Chevalier and an appropriate level of royalty payments for ALS, Honeywell would have exercised its right to terminate under Article 10.3, which (on the findings I have made) it would have been perfectly entitled to do.
733.	It follows that, even if I had concluded that Honeywell was in breach of the JCA so as to justify ALS in terminating under Article 10.1, that breach has not caused ALS any recoverable loss, because of Honeywell’s right to terminate under Article 10.3 independently of its own breach in any event. 
Quantum
Introduction
734.	The findings I have made on liability and causation mean that ALS cannot show that there has been any breach of the JCA by Honeywell which has caused any of the loss it claims. In those circumstances, detailed consideration of ALS’s case on the quantum of its loss is in one sense academic. However given the amount of time taken up in submissions and evidence (particularly that of the market experts and expert forensic accountants) I propose to make findings about the quantum of the claim, albeit not in as much detail as I would have done if it had been determinative.
735.	The basis for the claim is that because of Honeywell’s breach of contract in failing to develop the ULS so as to have it in a manufacturable state by sometime in early 2003, ALS has lost the opportunity of making a considerable profit from selling the ULS to OEMs. Because, apart from MG Rover, there were no actual customers for the latch, the claim is put forward by ALS on a “loss of a chance” basis, supported by a quantum model devised by its expert forensic accountant Mr Mathew-Jones, who in turn relies upon the evidence of ALS’s market expert Mr Ian Henry, to assess the probabilities of particular OEMs taking up the ULS at particular times. On the basis of those probabilities, the likely sales of the ULS are projected forward until 2024. 
736.	A number of different variants of the model were put forward in Mr Mathew-Jones’s reports and his evidence. The one upon which his oral evidence was eventually founded was the one set out in tabular form in Appendix 6 to his Supplemental Report. This has removed some of the more extreme probabilities in the original model.  It gives two figures for the quantum claimed, depending upon the date to which the claim is discounted. On the basis of discounting to the date of trial, assumed to be 1 January 2008, the claim is some £457 million. Taking the more conventional approach of discounting to the date of the loss (assumed to be 1 January 2004), the claim is just under £332 million. Of course, from those figures would fall to be deducted any profits made or anticipated to be made by ALS/VSS from actual sales of the latch made since the collaboration ended.
737.	In my judgment there are a number of fundamental problems with the claim for loss of profits based on this model. Those can be summarised as follows:
i)	The model simply assumes that Honeywell’s profit share was 15% and calculates ALS’s share of the lost profits accordingly. However, as I have already found there was never any agreement between the parties as to the profit sharing. In those circumstances, the whole claim put forward on this basis faces the fundamental stumbling block that it is impossible for ALS to say what its share of any profits made would in fact have been.
ii)	The claim based on this model is entirely predicated upon Honeywell having obtained contracts for the supply of the ULS for two specific models, the Volkswagen Passat and the Jaguar XK. Even if the ULS had been fully developed by early 2003, I have considerable doubts whether those contracts would in fact have been obtained. 
iii)	Thereafter, the model and the claim depend upon an assessment of the level of market penetration with OEMs which is not in any sense grounded in reality and which seems to me to disregard the nature of the automotive market and, specifically, the latch market within that overall market. 
iv)	It also depends upon an assessment of the competitiveness of the ULS in that market which seems to me to be wholly unrealistic. I will consider this issue in more detail below, but I should say without more ado that I do not accept that the ULS is a “ground breaking product”. It is interesting and innovative and certainly has advantages over other latches at the limited premium end of the market. However, as Mr Mitchell recognised in October 2003, it simply cannot compete with the sort of basic latches which sell for around $8 and which make up the vast preponderance of the latch market. Mr Henry fairly and candidly accepted in evidence that his case for market penetration of some 20% by the ULS, on which the quantum model was based, could not stand if I did not consider that the ULS was a ground breaking product. On that ground alone, it seems to me that the claim based on the Mathew-Jones/Henry model founders.
738.	I propose to consider these matters in more detail in the following order: (i) the effect of the absence of any agreement as to profit sharing; (ii) the nature of the latch market; (iii) whether the ULS provided any competitive advantage over other latches; (iv) the probability of the two specific contracts being obtained and (v) the extent to which the claim in relation to OEMs generally which depends upon that springboard is a realistic one. I will then go on to consider the alternative quantum model put forward by Honeywell and its expert forensic accountant Mr Maher. 
Absence of agreement as to profit share
739.	As I have already held, there was no agreement before, at the time of the JCA or subsequently, as to how any profits were to be shared. If the figure of 15% mark up on costs was ever mentioned as a potential share of profits for Honeywell at all, about which I have some doubt, it was certainly never agreed by Honeywell. In its closing submissions, ALS sought to address this difficulty essentially in two ways. 
740.	First it focused and relied upon Article 5.2 of the JCA. That provides as follows:
“Honeywell and ALS shall establish a separate legal entity…whose sole purpose shall be to receive payment for Product from a Customer and distribute such revenue according to the schedule attached as Exhibit 6. Either party may request a change to said schedule once in any twelve (12) month period, except by mutual consent…In the event that the parties cannot mutually agree to a change, then the schedule in force prior to the requested change will continue. Notwithstanding any suggestion to the contrary and except as explicitly provided herein, the Parties agree that each shall bear its own costs and expenses in carrying out the terms of this Agreement.”
741.	Upon the basis of that provision, ALS argued that this provided for the distribution of revenues from the sales of the ULS in accordance with Exhibit 6 and that, accordingly, Exhibit 6 is not just an estimate of costs but the schedule by which profits are to be distributed. ALS recognises that it still faces the hurdle that Exhibit 6 does not state in terms how profits are to be distributed but seeks to overcome that by submitting that the Court has to interpret Exhibit 6 as providing that Honeywell would get its costs of production and 15% return on its investment.
742.	There are two related but fundamental problems with all of this. First whilst it is correct that Article 5.2 refers to distribution of revenue according to Exhibit 6 (or indeed any revision to it), if, as is undoubtedly the case Exhibit 6 does not make any provision as to how profits are to be to divided, I do not see how Article 5.2 can be used to fill the gap. Second, I cannot see how I could possibly construe Exhibit 6 in the manner in which ALS invites me to. The only reference to “profit” in the Exhibit, in context is a reference to that proportion of the costs of obtaining the mechanical sub-assembly from a sub-contractor which represents the profit element for that sub-contractor. Nothing in the Exhibit even begins to deal with the division of profits between the parties to the JCA.
743.	This leads on to the second way in which ALS seeks to overcome the absence of any agreement as to profit sharing. It contends that if Honeywell had performed the JCA properly, then it is probable that the contracts for the Passat and the XK would have been obtained, in which case it is inconceivable that the parties would not have reached an agreement about profit sharing. Accordingly it is submitted that the Court should somehow assess the likelihood of any agreement being reached as part of the loss of a chance in relation to quantum generally.
744.	Again, that way of putting the case faces fundamental problems. The principle of “loss of a chance” is designed to cover cases where the contingency of a future event is dependent upon the acts of a third party, not where it is dependent upon the act of one of the contracting parties who is under no pre-existing contractual obligation in the relevant respect. I agree with Mr McQuater that the applicable principle in such circumstances is that stated by Diplock LJ in  Lavarack v Woods of Colchester Ltd [1967] 1 QB 278 at 297:
“The law is concerned with legal obligations only and the law of contract only with legal obligations created by mutual agreement between contractors – not with the expectations, however reasonable, of one contractor that the other will do something that he has assumed no legal obligation to do. And so if the contract is broken or wrongly repudiated, the first task of the assessor of damages is to estimate as best he can what the plaintiff would have gained in money or moneys worth if the defendant had fulfilled his legal obligations and had done no more.
...
I know of no principle upon which he can claim as damages for breach of one service agreement compensation for remuneration under which might have become due under some imaginary future agreement which the defendants did not make with him but might have done if they wished. If this were right, in every action for damages for wrongful dismissal, the plaintiff would be entitled to recover not only the remuneration he would have received during the currency of his service agreement but also some additional sum for loss of chance of it being renewed upon its expiry.”
745.	The highest ALS can put its case is that there was an agreement to agree (although I am not sure it can even go that far) but as a matter of general principle, agreements to agree are legally unenforceable, not least because it is no part of the function of the Court to lay down terms of an agreement the parties have not made. There is simply nothing in what was agreed between the parties from which I could even begin to determine what agreement the parties might have reached about profit sharing. Frankly, it is no answer for ALS to say that on a balance of probabilities agreement would have been reached, because that does not answer the question what agreement.
746.	The absence of any agreement about profit sharing presents an insuperable obstacle to the claim based upon loss of profits, which would fail on that ground alone. As for the plea in misericordiam that this would leave ALS without a claim, which is somehow unjust, there are two answers to that. The first is the brutal but as I see it unanswerable one that ALS only has itself to blame if it finds itself in this difficulty, having failed to agree some proper basis for profit sharing in the two and a half years between inception of the JCA and its termination.
747.	The second answer is that, as Mr McQuater points out, a claim for loss and damage as a consequence of Honeywell’s breach does not have to be formulated exclusively as a claim for loss of profits, but could also be put as a claim for wasted expenditure incurred by ALS as a consequence of an abortive collaboration. Indeed as Mr McQuater also pointed out, a claim along those lines was pleaded by ALS, although not ultimately pursued at the trial. 
The latch market
748.	There is no doubt that the automotive industry generally is intensely competitive and that segment of it which involves the manufacture and sale of latches is no different. Honeywell’s industry expert, Mr Brayshaw, set out in detail in his expert report the barriers which face any supplier seeking to penetrate this intensely competitive market, particularly as regards a safety critical component such as a latch. 
749.	I found Mr Brayshaw a measured and careful expert, whose evidence was therefore all the more compelling and generally of considerable assistance. In contrast Mr Henry, at least in his reports, had a tendency to be far too optimistic and unrealistic. In cross-examination, he fairly recognised this in a number of respects and withdrew from some of the extreme positions adopted. Where he and Mr Brayshaw differed however, generally I preferred the evidence of Mr Brayshaw.
750.	In fact, in relation to the nature of the market and the barriers to entry, Mr Henry did not substantially disagree with Mr Brayshaw, save as to the significance of what I would describe as “the Honeywell factor”, that is ALS’s case that because Honeywell was already a large, well-recognised and respected supplier to the automotive industry (for example of turbochargers), albeit not of latches, that would have made all the difference and Honeywell would have been able to overcome the barriers to entry which a new entrant to the market would otherwise face. I will address that point below.
751.	In terms of the latch market generally, it is dominated by the two major players, Kiekert and Meritor, who between them have a 45% share of the market and the five largest manufacturers have a 60% share of the market between them. There has been only one new entrant into the market in the past twenty years, Magna, and that by acquisition of an existing latch manufacturer.
752.	Even the major players struggle to achieve profitability in this market. Thus, Permira which invested in Kiekert had to write down that investment in both 2003 and 2005. Kiekert went through a restructuring in 2007 in which Permira lost the whole value of its equity and a 20 million Euros capital injection was required. Meritor reported higher than expected net losses in 2007 of US$219 million. 
753.	Mr Henry accepted that OEMs are generally quite conservative about changing suppliers and that it would certainly be difficult and challenging for a new entrant to persuade an OEM to change to it in relation to a safety critical component. He also accepted that an OEM would undertake a risk/benefit analysis in relation to any decision to go with a new supplier and would need to be overwhelmingly convinced of the benefits of the change before it would risk making it. That evidence seems to me to have considerable bearing on the question, to which I will turn later, of the probability of the ULS being adopted by any particular OEM, specifically Volkswagen and Jaguar.
754.	There is some evidence that geographical ties between OEMs and suppliers are not as significant as they may have been in the past. Mr Bland’s evidence about the Turkish latch manufacturer with which he was involved supplying latches to Ford for its Transit vans may be taken as an example. However, it is clear that a strong mutual dependency remains between a number of major OEMs and their Tier One suppliers. 
755.	This was described convincingly by Mr Brayshaw in his oral evidence:
“...each of the OEMs has a network of tier 1 suppliers, and the ability of an OEM to produce a competitive and high quality vehicle, rich with technological features, is in part driven by a contribution of its tier 1 suppliers.  It relies upon them to bring them new technologies, high quality product, competitive prices and so on.  And that relationship between the OEM and its collection of tier 1 suppliers is a mutual interdependency, that the tier 1 supplier can only be successful if he has a long-term supply partnership with the OEM which brings him long-term stable supply positions which allows him to invest in technology and in capacity and in return for which he brings technology to the OEMs.
…. the relationship between the OEM and the tier 1 is a mutual interdependency.  The OEM cannot survive without its network of tier 1s and the tier 1s cannot survive without their OEM customers, and although there is an intensity of negotiation between those two, they are mutually interdependent upon each other, and they are broken -- those relationships get broken very rarely.
They are constantly under stress, on occasions they reach breaking point in some of those discussions, but generally speaking, those mutual interdependencies remain intact for extremely long periods of time.  For example, Kiekert's relationship with Volkswagen will go back many decades.”
756.	In my judgment, that passage is also of considerable significance in relation to one of the other issues, namely to what extent the ULS was a ground breaking product. If it really was, it is surprising that one or more of the major OEMs has not told its latch supplier, be it Kiekert or Meritor or someone else that it wants the ULS, whatever it takes.
757.	Mr Henry accepted that it was highly likely that established suppliers would react aggressively if the ULS started to penetrate the market. In fact, there is a concrete example of this, which also demonstrates the strength of existing relationships between OEMs and Tier One suppliers, in this instance, significantly, between Volkswagen and Kiekert. Mr Chevalier asserted in his evidence that recently Volkswagen engineers were keen to use the ULS in the new Passat coupe. However, Kiekert had found out about this and complained to the Volkswagen board, successfully squeezing VSS out. 
758.	Accordingly, in my judgment there are substantial barriers to entry into the latch market for any new entrant. I do not accept ALS’s submission that these barriers have been exaggerated in some way by Honeywell. ALS relies upon the enthusiastic response received by the ULS from OEMs, including Mr Kettle’s report of the comment of Mr Cox of Jaguar at the meeting on 5 September 2003 that the latch was the best he had ever seen. However, what is striking is that for all the compliments, ALS/VSS has been unable to convert interest into a contractual commitment (other than with MG Rover which was something of a special case once it could no longer take advantage of the BMW corporate latch set up).
759.	The question remains to what extent the problems of barriers to entry into the latch market of a new supplier could or would have been alleviated by the commercial and financial reputation of Honeywell. Understandably, ALS’s submissions in this area of the case focus on this point. Whenever Honeywell sought to rely upon the fact that in almost five years since the collaboration ended, ALS/VSS has still not secured a contract (or even a letter of nomination) to supply the ULS to a major European or American OEM, the response from ALS was that this was all because the ULS was tainted by the failure of Honeywell to develop it and the collapse of the collaboration and that it would all have been different if Honeywell had performed its obligations under the JCA and the collaboration had continued.
760.	I consider that this is another area of the case where it is important to distinguish between hard evidence on the one hand and assertion by Mr Chevalier or other ALS witnesses on the other. In relation to whether the Honeywell name and clout would have made all the difference, the evidence in support of that proposition is the market evidence of Mr Henry. However, his thesis that Honeywell could have broken down barriers to entry was clearly predicated upon his belief that the ULS was a ground breaking product. Not only did he accept, as I have already stated, that if he was wrong about that, then his thesis could not stand. He also accepted that it would be “much more difficult, if not close to impossible” for any new supplier (thus even Honeywell) to penetrate the latch market profitably with a latch which was not ground breaking and not significantly different from other latches. For reasons which I will elaborate, I am very firmly of the view that in the basic and mid-range latch market where the bulk of any supplies of the ULS in volume could be made, the ULS does not offer any, let alone any significant advantages over existing latches available in the market.
761.	In relation to the point about “taint” of the ULS as a consequence of the failure of the collaboration, it is important to have in mind that the only evidence about this is the assertions to that effect by Mr Chevalier and Mr Kettle. It is striking that there is not a single piece of evidence from an OEM that it was deterred from using the ULS by what might be described as the debacle with Honeywell. Indeed, so far as MG Rover, the one OEM which had agreed in principle to use the ULS, was concerned, once ALS/VSS had procured a manufacturing agreement, in the event with Shivani, rather than CE Marshall, letters of nomination were signed and the development proceeded.
762.	What might be described as the high point of the evidence actually called by ALS about OEMs being put off by the debacle with Honeywell is Mr Kettle’s evidence about the coolness demonstrated by Volkswagen. This was based on no more than the meeting at the Frankfurt motor show with Mr Kai Schrenke and his girlfriend. Mr Kettle said that he regarded this as no more than a social visit and that his view was that at this stage, it was only his personal relationship with Mr Schrenke which was surviving. This apparent froideur does not seem to have struck Mr Spurr who was also there, either in his contemporaneous visit report or his evidence.
763.	What is evident from the visit report is that Mr Schrenke considered that the quality of the prototype parts was good and the latch had all the functions required, but that the issue remained that he considered the ULS too noisy. It seems to me that is not an indication of a cooling of relations but the reiteration of a concern about the ULS, which Volkswagen had expressed at a number of previous meetings. In cross-examination, Mr Kettle accepted that the issue of noise remained. I formed the very strong view that the suggestion made by Mr Kettle in his evidence that there had been a breakdown of trust with Volkswagen was grossly exaggerated.  
764.	Somewhat surprisingly, given how critical the attitude of Volkswagen to the ULS was to a number of important issues in the case, ALS did not call any evidence from any Volkswagen personnel, whether Mr Schrenke or anyone else. Accordingly, the Court has no evidence as to what the real attitude of Volkswagen was, as opposed to Mr Chevalier’s or Mr Kettle’s subjective assessment of what it was, which I regard as unreliable. 
765.	However, judging by Mr Spurr’s contemporaneous visit report for the Frankfurt motor show (which I have already indicated I found more reliable than Mr Kettle’s evidence in relation to the “e-latch” issue), even if there was any cooling of relations with Volkswagen, this was not to do with any debacle with Honeywell (not least because Mr Chevalier had only served his termination notice a few days previously and there is no evidence that Mr Schrenke knew about it). Rather it was to do with the fact that the ULS remained too noisy for Volkswagen, a matter which was to do with the design of the ULS and not, for the reasons I have set out in detail in my findings on liability, attributable to any breach of the JCA by Honeywell. 
Competitiveness
766.	ALS’s case is in essence that the ULS offers competitive advantages over other latches and because it can be fitted in all car doors and has all functions that might be required, it is ideally suited for adoption as a corporate latch by any major OEM, which would have happened if Honeywell had performed the JCA properly. My very firm view is that this flattering perception of the latch does not accord with reality either as regards the ULS or the latch market.
767.	It is certainly correct that the ULS offers advantages over other premium latches with features such as power release, power closing and electronic child lock. In particular it requires only one motor and actuator, is smaller, lighter and easier to fit in car doors. However, the problem which ALS faces is that the demand for such features either from OEMs or their customers other than on low volume luxury models such as the Mercedes S Class and the BMW 7 Series does not seem great. Mr Brayshaw said in evidence that he could detect no great appetite for power opening or closing on standard high volume vehicles (such as the bulk of the Volkswagen or Ford range).  It appears from both what the Ford representative said at the Frankfurt motor show in September 2001 and the note of the meeting with Mr Goodchild of Ford in Dearborn in June 2002 that there was a lack of interest in the North American market in premium features such as power closing. Furthermore, in September 2001, the indications from BMW were that it was not interested in power opening or closing. 
768.	Even Mr Henry (whose projections I considered wildly optimistic) was only projecting about 17-18% power opening and 1-4% power closing for Volkswagen by 2017. Corresponding figures for Ford Volvo are 9 and 2%. These are hardly consistent with a sudden surge in interest for the complex features of the latch. In his oral evidence Mr Henry sought to argue that his projections understated the likely take up for the mid-range and complex version of the latch over the whole period. I found this evidence wholly unconvincing and, if anything, damaging to Mr Henry’s credibility as an independent expert. 
769.	In fact, I consider that the projections he and Mr Mathew-Jones have produced overstate the likely take up of the mid range and complex versions of the latch. As Mr Henry said himself power opening and closing “are still very rare on the market” and he agreed with Mr Brayshaw that at present the hunger for this technology is not there in the market. In the light of those market conditions which are essentially common ground between the experts, a suggestion of 17-18% take up for Volkswagen by 2017 seems to me optimistic to say the least.
770.	In contrast, when it comes to basic and mid-range latches there is a great deal of evidence suggesting that any competitive edge the ULS had over basic and mid-range latches already available in the market was non-existent or at best marginal. This was Mr Spurr’s view following the Frankfurt motor show as expressed in his report of the show and his strategy document dated 17 September 2003. I have already said that Mr Henry had difficulty in challenging this. 
771.	Mr Henry also agreed that a light cheap basic latch can be purchased for $6 to $8 (a price at which Mr Mitchell considered that Honeywell could not compete) and that as regards weight the ULS offers no particular advantage over such basic latches. Mr Chevalier had commissioned a report from Alix Partners (probably for the purposes of litigation) which compared the ULS with other latches available in the market. That showed, as Mr Henry accepted, that at 66 the part count for the ULS was higher than for other basic latches. Although Mr Spurr accepted that (at least with the modifications to the design he put forward) it would be easier to assemble than some other latches, this does not seem to have been a universal view. Mr Kilker and Mr Shannon regarded it as being complicated to build, like a Swiss watch. 
772.	In its written Closing Submissions ALS sought to counter this evidence that the ULS was not competitive in the basic latch market by relying on a statement in Mr Drysdale’s report that if the ULS performed fully to the ALS specification, it would be “very competitive in the marketplace”. In my judgment, this is of little if any assistance. Mr Drysdale is a latch engineering expert, not a market expert and he was not asked about this passage in cross-examination, specifically whether he had in mind the basic latch market or the premium end of the market. I suspect from the context, that he was talking about the position if the ULS met the specification in full, that he had in mind the premium end of the market. However, in any event, what he says does not even begin to counter all the cogent evidence to which I have already referred to the effect that the ULS is not competitive in the basic latch market.
773.	Faced with what I regard as overwhelming evidence that the ULS does not provide any competitive advantage over other basic or mid-range latches available in the market, Mr Henry was reduced to arguing that its advantage was its flexibility in the sense that it would be attractive to OEMs because they could add features to it at a later stage. I have to say that I found this argument wholly unconvincing. I found the suggestion that an OEM would pay more for the ULS as a basic latch for most of its models, because it would give flexibility to introduce its more sophisticated features onto that OEM’s models in the future, fanciful in the extreme.
774.	I consider that Mr Brayshaw portrayed accurately what the attitude would be of a major OEM with a wide range of standard high volume vehicles and some top of the range vehicles, taking Volkswagen as an example:
“…there's a fundamental cost/benefit equation here which I'm just speculating about for a moment. If we take Volkswagen as a manufacturer, most of Volkswagen's products are in the low priced competitive end of the marketplace, and they have very few product offerings in the very expensive D&E segments as we would call them.  The Phaeton is their very much top end product made in extremely low volume… whereas the Polo, Golf, Passat are their very high volume models.  So my hypothesis is they wouldn't accept some form of disadvantage in those extremely high volume low margin products in order to secure some incremental benefit at the very top end of its product range.
Now, that analysis might be different in Jaguar where [all] its products are at the D&E end of the range, but in a manufacturer such as Volkswagen, I have to leave it open as a question whether that would be a worthy decision.”
775.	In other words all an OEM like Volkswagen needs for its high volume vehicles is a basic latch, which it can purchase cheaply elsewhere and it would be disinclined to pay more for the ULS as a corporate latch merely to achieve marginal benefits on its high end models. The position might well have been different if Honeywell had been prepared to offer the ULS as a corporate latch at a price cheaper than the basic latches available in the market at $6 to $8, but apart from the fact that it could not hope to do so and make a profit, that strategy would have presented another sort of problem.
776.	Because most OEMs insist on open book costing from their suppliers, any OEM would be able to ascertain that, in terms of its mechanical features the ULS for the top-end models with power opening and closing is really no different from that for the low-end models. Accordingly any OEM would be likely to baulk at paying appreciably more for the top-end ULS than for the basic ULS.  This was a potential problem which Mr Spurr identified at the time and which he explained in evidence:
“I don't think it's actually a problem selling it. I think you'd have a problem selling it profitably or as profitably as anticipated.  A low function latch will be competing against many other products in that end of the market which may be a lot cheaper, and the high function latch, if it's perceived to be little different, then the customers may not wish to pay such a high premium for it.”
777.	Mr Spurr had in fact identified precisely this problem in an e-mail to Mr Shannon on 6 August 2003:
“An interesting question will be whether to peruse [pursue] the high volume low return business for it will require us to make considerable investment in tooling and assembly equipment for what? Also, the OEM are no fools, they will see the small difference between high and low spec. product and not expect to pay much more for the high spec. is there enough high spec business between BMW, VW and PAG to make the venture pay??? Food for thought. Best regards, Nigel.”

778.	ALS was critical of this e-mail because it ran against the sales strategy of Mr Kettle and Mr Bur to sell the ULS as a corporate latch, capable of satisfying the functionality needs of any OEM. However that criticism seems to me to miss the point which Mr Spurr’s e-mail is making, which is whether that sales strategy would ever have worked in practice so as to achieve extensive market penetration. In my judgment, for the reasons Mr Spurr identified, it would not.
779.	In this context, ALS sought to place reliance on the fact that when Honeywell quoted prices to Volkswagen of 13 Euros for the basic latch and 40 Euros for the top end of the range latch in October 2002, Volkswagen indicated that these were within the range they expected and acceptable. However, in my judgment not much can be read into this. The response was in a telephone call from Mr Schrenke to Mr Kettle and there is no evidence that the quote was approved by the Volkswagen purchasing department or finance department, let alone by senior management. I find it inconceivable that on a close examination of the different functions the ULS provided, such as would inevitably have taken place before any agreement to nominate the ULS for a Volkswagen model, Volkswagen would have agreed to pay three times the cost of the basic latch for the luxury of power closing and opening. That just flies in the face of commercial common sense.
780.	There is also the obvious problem (which Honeywell encountered in practice) that several OEMs already had corporate latches in place. This was certainly true of BMW and of Ford USA. No OEM is going to abandon a corporate latch programme mid-term for a new untried product like the ULS, however innovative. At most it might consider the ULS when next re-examining its corporate latch policy some years hence. Even at that stage, the disruption to the business of the existing supplier which would be caused if the OEM switched to the ULS would lead the existing supplier to fight tooth and nail to retain the business.
781.	Of course, if the ULS really were a ground breaking product, the position might be different. However, if it were, the obvious question is why major OEMs (all of whom know about it and most of whom have seen it demonstrated, sometimes more than once) have not been clambering over each other to buy it or at least to procure the technology. Mr Henry accepted in evidence that it was a reasonable line to take that if it really was a ground breaking product with the potential to change the latch market significantly, by now some major OEM would have said to its latch supplier: “go and get that licence, buy VSS, buy ALS, do what you need to get the technology”.
782.	The only answer ALS appears to have to this conundrum is to say that it is all Honeywell’s fault that the latch has not been adopted by major OEMs. However, that facile response will not do. I have already indicated that I am sceptical about the “taint” argument generally, but it is frankly nonsensical to suggest that, even if the debacle with Honeywell did cause ALS/VSS a set back, major OEMs would not want the ULS now five years on, if it really was ground breaking.
783.	The truth is that whatever Mr Chevalier, Mr Kettle and, for that matter, Mr Henry may believe, the ULS is not ground breaking at all. As I have said its features offer advantages at the top end of the market, but not in the market for basic or medium range latches (which covers the vast preponderance of vehicles worldwide), where it offers no real advantage.
Volkswagen and Jaguar
784.	Once the conclusion is reached that the ULS is not ground breaking, the whole ALS claim based on the Mathew-Jones/Henry model must fail. Mr Henry fairly accepted this in cross-examination:
“I completely accept that if the court decided that this was not a ground-breaking product, then the case that I’m making for its adoption would largely not stand, I have to accept that, yes.
If the perceived benefits were not there or marginal, then I would accept it also calls into question whether the latch would be used.”
785.	In the light of that concession, in one sense it is not necessary to consider further the factual predicate upon which the model is based, namely that Honeywell would have procured contracts for the Volkswagen Passat and the Jaguar XK, since that falls away too if the ULS is not ground breaking. However, given the emphasis placed by ALS on how promising the signs were that such contracts would have been procured if Honeywell had only performed its obligations under the JCA, it is necessary to consider the matter further. 
786.	In relation to Volkswagen, the thesis is that following the meeting on 19 September 2002, if Honeywell had performed its obligations under the JCA and, in consequence, Honeywell/ALS had been able to get back to Volkswagen by January/February 2003, then in all probability, Honeywell would have secured the use of the ULS on the Passat B6 programme. I have already indicated in relation to that meeting, that I consider Mr Friedrich’s note of the meeting was more realistic than that of Mr Kettle, the eternal optimist. At all events, although the meeting was positive, as Mr Kettle accepted in his evidence, two issues remained for Volkswagen. They still thought that the latch was too noisy and were concerned about price. Mr Friedrich recorded that there would be no business opportunity for power closing unless those issues were resolved.
787.	Mr Brayshaw was very firmly of the view that the Volkswagen engineers were doing no more than “horizon scanning”, obtaining the best information they could on new technology, possibly with a view to putting pressure on their existing suppliers. He had personal experience of the approach of Volkswagen at that time from having been at Wagon PLC. He described how Volkswagen were sending out hundreds of requests for quotation to components manufacturers. Wagon was brought in for technical discussions on the Passat B6 programme, none of which came to anything.
788.	It seems to me that although this evidence is certainly cogent, on balance the Volkswagen engineers were going beyond horizon scanning at the meeting on 19 September 2002 and were expressing genuine interest in the latch. There was specific mention at the meeting of the Passat, whereas horizon scanning tends to be general, not related to specific vehicles, as Mr Brayshaw accepted. To that extent, I agree with ALS. 
789.	However, it is a very long way from genuine expressions of interest by relatively junior engineers, who on any view were not the decision makers within Volkswagen, to the adoption of the ULS as the latch for the Passat. If Volkswagen had been seriously considering the ULS for the Passat, there would have been a great deal of activity after the 19 September 2002 meeting. Mr Brayshaw described this graphically and in a compelling manner in his evidence:
“…If the expression of interest that’s conveyed by Mr Kettle transcended into Volkswagen, I would have expected a whole number of other things to be happening in parallel, and none of those things were happening…I would expect, for example, the supplier quality engineers to be visiting the Honeywell facilities, to be writing program of manufacturability.  I would expect finance and supply chain and all of the other dialogues to have been advanced.  I would have expected these people to be put in front of the chief program engineer. So I would have expected a whole number of parallel activities to have been taking place.   Equally, it's worth saying that the engineers in all of these car companies spend their lives encouraging suppliers to spend money to develop new technologies and new ideas and bring them to them for free, and they do that by continually dangling the carrot of potential future business. It's an enormous leap to take an expression of interest from one of those people and make it into a business model.”
790.	Of course, none of that happened, which is a strong indication that the expression of interest had not gone beyond the relatively junior engineers at that stage and had certainly not reached anyone in a position within Volkswagen to make either a technical or a commercial decision as to whether to adopt the ULS. That absence of documentation is also telling in relation to the “ballpark” quote in October 2002 on which ALS relies. If it really was a quote which was acceptable to senior management at Volkswagen, one would have expected to see correspondence to that effect and further communications between the parties. It is also striking that, if Volkswagen was really seriously considering the ULS for the Passat, no-one at Volkswagen chased Honeywell when it failed to get back with quiet latches by sometime in February 2003. 
791.	That in fact serious consideration was not being given to the use of the ULS on the Passat programme is demonstrated by the complete insouciance with which Mr Schrenke greeted the news from Mr Kettle in his e-mail of 1 April 2003 that because of problems with the tool for the upper housing, it would have to be remanufactured, latches would not be ready for demonstration to Volkswagen until mid-May. Mr Schrenke responded:
“..you should not work with the start of production time plan of the Passat B6 because there are several other cars, where we can use your latch. The Passat B6 will start in the end of 2004. Please show us a serial like latch and then we will think about the usage.”
792.	Even if Honeywell had got back to Volkswagen with quiet soft tooled prototype latches early in 2003, I consider it extremely improbable that Honeywell would in fact have procured a contract for the use of the ULS on the Passat B6, for a number of reasons. 
793.	First, Mr Schrenke’s insouciance and the time scale for the introduction of the Passat indicate pretty clearly that Volkswagen was already working with other suppliers and had another latch in mind, as Mr Henry accepted in evidence.  The latch which is in fact now on the current Passat is one designed by Meritor (or possibly by Intier) and produced by Kiekert and Meritor. It is likely that by early 2003 with start of production at the end of 2004 this latch had been in development for some time. Mr Henry also accepted that by 1 April 2003, Volkswagen would already have issued a letter of nomination to the supplier, be it Kiekert or someone else.
794.	The second reason follows on from the first. If in early 2003, Volkswagen had started showing serious interest in using the ULS on the Passat, that would have been bound to come to the attention of Kiekert and Meritor.  They would not have been willing to lose out to a new competitor on a core vehicle programme like the Passat, not just because of the development work that must have gone into their own latch by that stage but because (at least in the case of Kiekert) of the long-standing relationship with Volkswagen. They would have been bound to make representations to Volkswagen at board level and just as Kiekert subsequently saw off VSS on the Passat coupe, it seems to me the overwhelming probability is that they would have persuaded Volkswagen by one means or another to remain with their latch.
795.	Third, even if sufficient interest had been shown within Volkswagen to consider the ULS seriously at a level within the company where technical and commercial decisions are made, it is improbable in the extreme that Volkswagen would have been prepared to use the ULS which was untried technology from a new supplier which had never manufactured a latch before on one of its core vehicle programmes. The latch on a car door is a safety critical product and it is inconceivable that it should fail, particularly on a mainstream model like the Passat. If Volkswagen were going to use the ULS at all, it would have done so on a low-volume high specification vehicle such as the Phaeton.
796.	Mr Brayshaw’s evidence about this was clear and compelling:
“...strategically from a supply position I cannot imagine that they would take a mainstream model such as Passat and put a new supplier with a new product on to a safety critical item on to a vehicle of that scale.  I just do not believe that those steps would ever happen.”
Mr Henry did not dissent from that general proposition, although he took issue on the facts of the case, presumably because of his belief that the ULS was ground breaking. I cannot see any good reason why a major OEM like Volkswagen would risk its reputation for producing reliable vehicles by using the untried ULS on a mainstream product like the Passat and I reject the suggestion that they would have done so.
797.	So far as Jaguar is concerned, Mr Steve Cox was clearly personally interested in the latch. Whilst I am prepared to conclude, in ALS’s favour, that Mr Cox at least was doing more than horizon scanning, there is no evidence that the interest went higher up the company to those who were the relevant decision makers. Indeed, on the contrary, Honeywell called Mr Robert Dover, the Chief Executive of Jaguar at the time. He was an impressive and independent witness. He had never heard of the ULS or had it referred to him.  
798.	Honeywell contended in its closing submissions that the ULS could never have met the time scale for the new XK model. I am not sure that is its best point, because Mr Dover accepted in cross-examination that provided repeatable soft-tooled prototypes were available by the spring of 2003, the timing would have been capable of being met. On ALS’s case, Honeywell should have been able to meet that deadline.
799.	A much more compelling point against the suggestion that Jaguar would have taken up the ULS for the new XK is the same point as has already been made in relation to the Passat, the inherent improbability of a major OEM risking previously untried technology from a new supplier (even one with Honeywell’s clout) on a flagship model.  As Mr Dover said: “Car companies live or die on their reputations”.
800.	In his witness statement, Mr Dover described the important role of the Product Committee in Jaguar, which would be making any decision as to whether to adopt any safety critical product such as the latch. It was clearly this body rather than Mr Cox which made the relevant decisions and I reject the suggestion which ALS seemed to be making that any deliberations of the Product Committee were somehow just a rubber stamping exercise of decisions made by engineers.
801.	Mr Dover went on to say this:
“Further, as a member of this committee for three years, I am firmly of the view that, in the unlikely event any recommendation to incorporate a new latch from a new and unestablished supplier were made, the committee would almost certainly have rejected it.  The only situation in which I can imagine the incorporation of an unproven latch would be if our present latch supplier, or another well established latch supplier was offering their new generation latch.  Even then, such approval would be predicated on Jaguar having already undertaken an extensive testing programme in respect of that latch.  ”
802.	Although in cross-examination he fairly accepted that he would not say that the Committee would never have agreed to take up the latch and his real concern was timing (which may, as I have said, have been a false point), that does not diminish in my judgment the force of what he said in his statement. It accords entirely with Mr Brayshaw said about the risk/benefit analysis which would be undertaken by any OEM in considering a new untried product. I consider it improbable in the extreme that Jaguar would have taken up the ULS for the new XK, even if quiet, repeatable soft-tooled prototypes had been available in early 2003. 
803.	There is also the point which Honeywell makes which has considerable force that if, as ALS contend, Jaguar were showing a significant interest in using the ULS on the new XK, that is not mentioned in any document or at any meeting, even by Mr Cox. In 2001, Honeywell provided quotes on the X-Type, S-Type, XJ8 and XK8 but there was no specific discussion of the new XK at all. At the meeting in May 2002, no particular models were discussed at all. Even at the positive meeting on 5 September 2003, Mr Cox did not mention the new XK but rather the Range Rover, Discovery and Jaguar XKR. That is the limited volume high specification turbocharged version of the XK. Of course the possibility of using the ULS on the XKR would correspond entirely with Mr Brayshaw’s evidence that if an OEM were going to use a new safety related product like the ULS, it would try it out first on a low volume high specification model, not on its mainstream or flagship models.  
804.	As originally put forward the Mathew-Jones/Henry model assessed the probability of Honeywell obtaining a contract to supply the ULS to Volkswagen for the Passat and to Jaguar for the XK at a breathtaking 100%. Being charitable to them, this may have been due to a misunderstanding as to the legal implications of a 100% probability. Nevertheless, in the revised model at Appendix 6 to Mr Mathew-Jones’ Supplemental Report, the revised probability of such a contract was put at the only fractionally less breathtaking level of 75%.
805.	In his oral evidence, Mr Henry was disposed to take a somewhat more realistic line and say that he believed that on balance Volkswagen and Jaguar would have used the ULS. However, it will be apparent from the analysis that I have set out that I cannot accept even that more realistic line. My conclusion is that it is improbable in the extreme that Honeywell would have procured the use of the ULS on the Passat and the XK.   
The claim in relation to follow-on business
806.	Using the springboard of the 75% probability of the ULS being taken up on the Passat and the XK, Mr Henry then predicted the likelihood of take up of the ULS across other model ranges, OEMs and sectors of the global market. Some of the figures are as breathtaking in their optimism as the 75% figure itself. One could take examples at random from the tabular form of the model at Exhibit 6 to Mr Mathew-Jones’ Supplemental Report, but the three identified by Honeywell in its written Closing Submissions will suffice. Mr Henry anticipates a 60% probability of an 80% take up of the ULS across the entire Volkswagen group by 2014, a 60% probability of a 70% take-up for the whole of Ford by 2014 and a 100% probability of a 20% share of the North American Free Trade Area (NAFTA) market by 2017. The model overall produced a market penetration for the ULS of 20%.
807.	Of course, if the ULS was not a ground breaking product and if the necessary predicate on which the model was based, the probability of take up of the ULS on the Passat and XK, was, as I have held, a false one, none of this can stand. However, even looking at it separately on its own merits, it emerges as an entirely speculative exercise. Mr Henry was unable to explain what the science was behind the probabilities he had attributed to particular predictions. He was asked specifically about his figures for the take up on Volvo and was reduced to saying: “At the end of the day, I have to say to you that it’s a judgment that I have to make, have made”. Equally, the rationale for the NAFTA figures I have already referred to was no more scientific than that 1% of that market reflected a low volume model at Ford or General Motors taking up the latch, what Mr Henry described as his “best estimate”.
808.	The model is also heavily dependent on so-called “running changes”, that is the ULS being taken up on a particular model half way through its life, when an OEM will often make changes to the model or give it a facelift. Mr Henry anticipated a number of these, for example on the BMW 7 Series on its 2005 facelift and on the Jaguar XJ in 2007.
809.	I agree with Honeywell that Mr Dover’s evidence about running changes is instructive in this regard. Although running changes which had been made to the S-Type which had required crash testing were put to him in cross-examination, he confirmed in re-examination that this had not led him to change his views that Jaguar would have avoided incorporating the ULS as a running change at all costs. This was because there would have to be a complete re-test of the body structure, and re-homologation would be required, whereas the whole point of a facelift is to avoid the expense of all that.
810.	What was true for Jaguar would be true for any other OEM. Of course there may be specific circumstances where an OEM would introduce a new latch as part of a running change, for example where there was a problem with the existing latch supplier. In one sense, MG Rover’s decision to use the ULS on its existing models is an example of that. However, outside that case, it seems to me unless the ULS was such a ground breaking product to be “too good to miss” (which I have already held it was not) it is unlikely in the extreme that any OEM would have introduced it as part of a running change.
811.	Frankly, I considered this whole exercise so speculative as to be worthless and not in any sense the proper basis for a claim for what on any view is hundreds of millions of pounds. Mr Henry and Mr Mathew-Jones were keen in their evidence to emphasise the flexibility of the model, so that the Court could adjust all the probabilities downwards if so inclined, a suggestion which ALS also made in closing. However, I agree with Honeywell that playing games with the numbers is unacceptable. The willingness to emphasise the flexibility of the model merely demonstrates the artificiality of this entire approach. Equally, I decline any suggestion that I should adapt the model in relation to a later date of first adoption or initial take up on a different vehicle. As Honeywell puts it succinctly in its written Closing Submissions:
“The only lost opportunity which [ALS] has sought to prove is that embodied in Mr Henry’s model: the VW and Jaguar opportunities and follow-on business. It cannot invent another opportunity based on different assumptions.”
812.	Even in “loss of a chance” cases, if the Court considers the relevant probability entirely speculative, a claimant cannot recover damages: see Allied Maples Group v Simmons & Simmons [1995] 1 WLR 1602 at 1614D. I have formed the very firm view in this case that ALS has not demonstrated more than an entirely speculative chance lost, even if Honeywell had been in breach of the JCA as alleged. Accordingly on its own quantum model, ALS has not established any entitlement to damages. 
Mr Maher’s alternative model
813.	It was precisely because it was not possible properly to predict the probability of a particular income stream arising in relation to a particular OEM or sector of the market that Honeywell’s forensic accounting expert Mr Maher did not adopt a probability based model like that used by Mr Mathew–Jones to assess whether ALS had suffered any loss of profits, although he recognised that in most cases, use of such a model would be the correct approach. Instead, he used a model which looks at cash flows, on the basis of a series of scenarios which vary in their degree of what might be described as pro-ULS optimism. He estimated sales revenue (based on average figures derived from market sources including the market experts). From that he deducted all the various costs to parties of the collaboration, such as costs of production, overheads, tooling, Honeywell’s pre-production costs and ALS’s ongoing costs, to arrive at a net profit, which is then discounted. How that profit might be divided up between the parties is then a matter for the Court, although since there was no agreement on loss of profits and as I have already said that I am not prepared to fill that particular gap in ALS’s favour, this model does highlight the insuperable hurdle ALS faces in that regard. 
814.	Mr Maher clearly recognised that in forensic accounting, this methodology is used for project appraisal but was firm in his evidence that he was not engaged in project appraisal. ALS was highly critical of the use of this methodology and Mr Mathew-Jones made a series of trenchant criticisms of Mr Maher’s model both in his Supplementary Report and in his oral evidence, but I consider these to be completely unjustified. 
815.	I have to say that I did not find Mr Mathew-Jones a satisfactory expert witness. He had a tendency to be argumentative and didactic in the witness box and, on occasions strayed way beyond what could conceivably have been the expertise of a forensic accountant in the opinions he was prepared to express. In marked contrast, Mr Maher was measured and careful in his evidence and as a consequence helpful to the Court in a way in which Mr Mathew-Jones was not.
816.	In view of the criticisms levelled by ALS at Mr Maher’s methodology, it was faintly ironic that in the last resort, ALS submitted that if I did not accept Mr Henry’s model, I should still award it substantial damages based on Mr Maher’s model. Inevitably though, ALS invites me to accept either one of Mr Maher’s more optimistic scenarios or an even more optimistic variant based upon the opinions of Mr Mathew-Jones, which would lead to recovery of substantial damages, rather than what Mr Maher regarded as the most realistic scenario, which would result in no loss of profits for ALS. In the circumstances, it is therefore necessary to examine the model and the various scenarios in a little detail.
817.	I accept entirely Honeywell’s submission that Mr Maher’s average values are soundly based, founded so far as possible on a combination of independent sources and matters agreed between the market experts. He also makes assumptions in favour of ALS, including a maximum possible market penetration for the ULS of 12%, on the basis that that is ALS’s pleaded case.  He has not factored in matters such as competitor retaliation which might reduce Honeywell’s market share, on the basis that these are not capable of quantification. 
818.	In assessing the sales price and the cost of sales and arriving at a gross margin, Mr Mathew-Jones uses the price from the Volkswagen quote as the sales price and the £6.95 in Exhibit 6 as the cost of sales. I agree with Honeywell that these are not appropriate either together or separately. The Volkswagen quote is only one of several prices quoted during the collaboration and the Exhibit 6 figure of £6.95 was on the basis of sub-contracting the mechanical sub-assembly and, in any event, was superseded by later Honeywell costs estimates much more closely based on reality. Furthermore there is no obvious correlation between the Volkswagen quote and Exhibit 6 and one might be forgiven for thinking that these two figures have been taken because they produce huge gross margins which would be entirely favourable to ALS. 
819.	Mr Maher’s approach is much more realistic in my view. He takes an average sales price of 12 Euros, derived from the Just-Auto Report he relies on in his expert Report, which is actually not all that different from the weighted average used in Mr Mathew-Jones’ model. Mr Maher’s model assumes significant sales of the latch up until 2024. Even his least optimistic scenario assumes 20 million sales in that period. On the basis of my conclusion that the ULS was not a ground breaking product, even that figure seems to me over-favourable to ALS.
820.	Mr Maher then derives the cost of sales from an assessment of the likely gross margin, which he took as 10-14%. This is where the lines for one of the fiercest battles between Mr Mathew-Jones and Mr Maher were drawn. Mr Mathew-Jones argues for a gross margin of something in the region of 30%. In his evidence that the ULS could have achieved this sort of gross margin, he relied in a particularly insistent manner on two matters. First the gross margins achieved by Gentex. However they supply a very different product, auto-dimming mirrors and appear to have cornered the market for such products which may explain the sort of margins they are able to achieve. I did not find the comparison with Gentex helpful at all, despite Mr Mathew-Jones’ insistence on it. 
821.	Second, Mr Mathew-Jones relied upon the position of Kiekert, but as Honeywell rightly points out the evidence about Kiekert remains opaque because the available accounting documents do not show matters such as staff costs. If one assumes a realistic allocation of staff costs to the costs of production and also makes a deduction for depreciation, it appears that for 2004, Kiekert’s gross margin may have been slightly more than 13%. Since 2004, the financial position of Kiekert has if anything worsened, suggesting that its gross margin may not be any better than that now and may be appreciably worse.
822.	Accordingly, I did not find the matters relied upon by Mr Mathew-Jones in support of the gross margin he put forward at all reliable. It is also important to note that this gross margin was itself predicated upon the ULS being a ground-breaking product, which I have concluded it is not. In those circumstances I consider that the level of gross margin which Mr Maher put forward of somewhere between 10 and 14% as entirely realistic. 
823.	It was a weighted average gross margin across a broad range of latch manufacturers and door module suppliers from publicly available figures for the period 2004 to 2006, with the overall average being 10% and the average of the three companies with the highest margins being 14%. It did not include Kiekert because no accounts were available for the later period but for the reasons given above, its gross margins are likely to have been in the same range. It seems to me unlikely in the extreme that Honeywell could have achieved a gross margin in excess of the higher average of 14%.  Apart from anything else, it seems likely that Honeywell would have had to discount its prices to achieve any significant market penetration.
824.	There was a difference between the forensic accounting experts as to the appropriate discount rate, caused by a difference as to where they take account of the probabilities of the projected cash flows arising. Mr Mathew-Jones has applied the probabilities to the cash flows themselves, but because Mr Maher considers (correctly on the findings I have already made) that it is too difficult to be certain about the probabilities of the cash flows arising, he has factored the uncertainty of cash flows into his discount rate. I accept Honeywell’s submission that that is the correct approach and also that Mr Maher’s discount rate of between 20 and 30% is appropriate. 
825.	The other difference between the parties concerning discounting is the date to which discounting should take place. The normal approach would be to discount a claim for future loss of profits in respect not only of market risk and project risk, but also the time value of money. To the extent that a claimant has been out of its money, the Court then has a discretion as to whether to award interest under section 35A of the Supreme Court Act 1981 for some or all of the period from the date of breach to the date of judgment and as to the rate of interest.
826.	In the present case, Mr Mathew-Jones has only discounted for project risk back from the date of trial to the date of breach, therefore only discounting the claim for lost profits in respect of market risk and time value of money to the assumed date of trial and judgment, taken as 1 January 2008. ALS sought to justify this approach by reference to the recent decision of the House of Lords in The Golden Victory [2007] 2 Lloyd's Rep 164 to the effect that whilst the general rule is that damages are assessed as at the date of the breach, that is always subordinate to the fundamental rule that the innocent party should be put into the same position as if the contract had been performed. 
827.	ALS used that as a platform for an argument the effect of which is to enable ALS to recover damages as if it were recovering compound interest on those damages as well, in circumstances where the present case does not fall within any of the limited categories of case where the Court can award compound interest. This argument seems to me to be heterodox and I see no reason for departing from the normal approach in this case.
828.	When Mr Maher had taken account of detailed points made by Mr Mathew-Jones about ramp up and ramp down, four of his scenarios showed ALS’s loss as zero and even his most optimistic scenario only showed a loss which although substantial at £30.2 million, is modest compared with the extravagant figures for loss put forward on the Mathew-Jones/Henry model. Mr Maher considers his less optimistic scenarios more realistic and therefore concludes that it is more likely than not that ALS’s loss as a consequence of any breach of the JCA by Honeywell is in fact zero.
829.	It will be apparent from the findings I have already made that I consider that his less optimistic scenarios are far more realistic than either the approach of Mr Mathew-Jones to the Maher model or Mr Maher’s own more optimistic scenarios. Like Mr Maher himself, I have obviously given careful consideration to whether the conclusion that ALS’s loss is zero, is a reasonable conclusion to reach. 
830.	I do consider that this is a reasonable conclusion. The ULS is not a ground-breaking product and whether Mr Chevalier likes it or not, in nearly five years since the JCA was terminated, he has yet to procure any contract to supply the ULS to a major OEM for reasons which simply cannot be attributed to the Honeywell factor. Even with Honeywell manufacturing and selling the product, the barriers to entry and the competitive nature of the market, together with the fact that the ULS is not itself competitive with basic, high volume latches, are such that I am sceptical as to whether the ULS would ever have achieved market penetration, even at the level Mr Maher assumes in his less optimistic scenarios. Even if market penetration could have been achieved to a significant extent, I am equally sceptical as to whether it could have been sold at a profit.
831.	Accordingly, even if I had concluded that ALS was entitled to terminate the JCA for breach by Honeywell in September or December 2003 and even if ALS had been able to overcome all the causation hurdles it faced, let alone the fatal problem with a claim for loss of profits that there had been no agreement on profit sharing, I would still have found that ALS had not suffered a loss.
Mitigation
832.	In the circumstances, it is not necessary to reach a conclusion about Honeywell’s case that in the period since the JCA terminated, ALS has failed to mitigate its loss.  If I had been in favour of ALS on all the other issues, I would have been disinclined to conclude that it had failed to mitigate its loss, but the point does not arise on the findings I have made.
Overall conclusion
833.	ALS was not entitled to terminate the JCA, as it purported to do in December 2003, and that termination was wrongful and itself a repudiatory breach of the JCA. In the circumstances, no question arises of any damages being recoverable in any event.
834.	Even if I had concluded that ALS was entitled to terminate the JCA, there are a number of obstacles to the recovery by ALS of any substantial damages, principally Article 10.3 of the JCA, under which Honeywell would have been entitled to terminate the JCA itself on the grounds that it was no longer commercially viable.
835.	In any event, even if ALS could have overcome that obstacle, it faced another insuperable obstacle in the way of recovery of any damages for loss of profits, that the basis upon which profits were to be divided between the parties had never been agreed. 
836.	The loss of a chance model for quantum upon which ALS relies is wholly unrealistic and the claim on that basis so speculative that no damages would be recoverable on the basis of the loss of a chance. To the extent that ALS sought to rely in the alternative on Honeywell’s quantum model, that does not assist ALS, since the most probable scenarios under that model are ones which lead to zero profitability.
837.	Accordingly, I have concluded that, on a multitude of grounds, ALS’s claim in this litigation must fail.