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Cite as: [2010] EWHC 1801 (QB)

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Neutral Citation Number: [2010] EWHC 1801 (QB)
Case No: HQ09X01514

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

Royal Courts of Justice
Strand, London, WC2A 2LL
26/07/2010

B e f o r e :

HIS HONOUR JUDGE RICHARD SEYMOUR Q.C.
(sitting as a Judge of the High Court)

____________________

Between:
Osteopathic Education And Research Limited (Trading As European School Of Osteopathy)

Claimant
- And -

Purfleet Office Systems Limted (Formerly Known As Ncs Management Limited)

Defendant

____________________

Ross Fentem (instructed by Moon Beever) for the claimant
James Pickering (instructed by Salans LLP) for the defendant
Hearing dates: 29, 30 June, 1, 2 and 5 July 2010

____________________

HTML VERSION OF JUDGMENT
____________________

Crown Copyright ©

    His Honour Judge Richard Seymour Q.C. :

    Introduction

  1. The claimant, Osteopathic Education and Research Ltd. ("OER"), is a company limited by guarantee. One of its principal activities is the operation of the European School of Osteopathy ("the School"), which provides higher education in osteopathy and related medical sciences. The School is based at premises at Boxley House, Boxley, Maidstone, Kent. The other principal activity of OER is the operation of an osteopathic clinic ("the Clinic") from premises at 104, Tonbridge Road, Maidstone.
  2. OER is not, and has not been, during the period relevant to this action, registered for the purposes of Value Added Tax. That has meant, so far as is presently material, that any amount of Value Added Tax which OER has had to pay it has had to bear as an additional cost, as it has not been able to recover input tax.
  3. Unsurprisingly, for the purposes of running both the School and the Clinic OER has, for some years, had need of photocopying facilities. This action arises out of how OER sought to meet that need from about September 2003. It was in about August 2003 that Mr. Michael Ward, at that time employed as a Regional Sales Manager by the defendant company, approached Mr. Robert Read, at that time employed by OER as its bursar, with a view to the defendant becoming the supplier of photocopying machines to the claimant. Until June 2009 the name of the defendant company was NCS Management Ltd. and it is convenient in this judgment to refer to the defendant as "NCS". NCS in fact ceased to trade in May 2009, shortly before the change of name to its present name, Purfleet Office Systems Ltd. The claim form in this action was issued on 8 April 2009.
  4. The material transactions between OER and NCS

  5. Over a period of some four years, between September 2003 and March 2007, OER entered into a total of eight transactions in relation to photocopying machines with NCS. There was no real dispute concerning what the transactions were. However, there was some difference between the representatives of OER involved in the transactions and Mr. Ward, who acted throughout on behalf of NCS in its dealings with OER, on a few important points. I shall come to those points later in this judgment.
  6. The individuals who dealt, on behalf of OER, with Mr. Ward were, in the period August 2003 until April 2005, Mr. Read and Mr. Ian Fraser, who was at that time deputy to the bursar. Mr. Read retired as bursar in May 2005. His duties in relation to negotiating contracts for the provision of photocopying facilities were taken over by Mr. Nigel Hales, who was employed as Head of Corporate Operations. Mr. Fraser continued to assist Mr. Hales concerning dealing with Mr. Ward. Each of Mr. Read, Mr. Fraser and Mr. Hales was called to give evidence on behalf of OER at the trial.
  7. Mr. Ward gave evidence at the trial on behalf of NCS, as did Mr. Michael Hayes, a director of NCS.
  8. The position of OER in relation to photocopying machines in August 2003 when Mr. Ward made his approach was that it was leasing four Infotec machines pursuant to an agreement ("the Infotec Agreement") made with GE Capital Equipment Finance Ltd. ("GE") at about the beginning of 2002 under which GE let the machines to OER for a term of five years at a quarterly rental of £3,649.55. The Infotec machines were maintained by Danka UK plc ("Danka"). The cost of servicing the machines was dependent upon the quantity of photocopying carried out using the machines. Two of the Infotec machines were at the School and two were at the Clinic. Those at the School were in a photocopier room and in the library.
  9. The Infotec Agreement could be terminated prior to its determination by effluxion of time, but, if OER elected to terminate it, OER was bound to pay the sums which would have been payable had the agreement run its full term, less a modest discount for early payment.
  10. The basic sales pitch of Mr. Ward in August 2003, according to Mr. Read, was that NCS was in a position to save OER money in relation to the cost of photocopying. After an initial meeting Mr. Ward prepared a proposal ("the Initial Proposal") suggesting that OER acquire, in place of the four Infotec machines the subject of the Infotec Agreement, four Toshiba photocopying machines, two of which were to be of the model E – Studio 200, and the others a model E – Studio 550 and a model E – Studio 35. The Initial Proposal was in writing. It included the suggestion that the proposed new photocopying machines be the subject of a five year lease, under which the rental would be £8,400.61 per quarter. Clearly that was considerably more than the sum payable under the Infotec Agreement. However, the Initial Proposal, in the form put in evidence, went on, after stating the amount of the rental:-
  11. "The aforementioned Lease Costing includes the following:
    * £35,266.03 ÷ 8 quarters = £4,408.25
    take this from the £8,400.61 quarterly rental previously quoted = £3,992.36 p qtr
    The £35,266.03 could be allocated how we like against our copying costs.
    ** This is an average quarterly figure over 2 years and additional copy costs would not be incurred for exceeding this figure in particular quarters during the 2 year period.
    No additional charges eg for networking.
    £95 admin charge to be waived.
    Fixed costs over 2 years."

    The penultimate bullet point and the words after the first asterisk were in fact in the manuscript of Mr. Read. The remainder of that which I have quoted was typed in the Initial Proposal as prepared by Mr. Ward.

  12. It appears, therefore, that the Initial Proposal included the provision of maintenance without additional cost, at least as long as the then current level of photocopying by OER continued.
  13. On a sheet entitled "BENEFITS OF CHANGE" produced by NCS in relation to, or as part of, the Initial Proposal these advantages were identified:-
  14. "1) Cost saving of £615.37 per quarter
    2) All machines faster copy output
    3) Improved response
    4) Improved reliability
    5) Structured savings over the course of the agreement"
  15. The figure of £615.37 identified as a cost saving appears to have been calculated by comparing the figure of £3,992.36 with the quarterly payment due under the Infotec Agreement, £3,649.55, plus a cost of maintenance payable per quarter of £958.18. The numbers only work on the assumption that the proposed new lease, at a quarterly rental of £8,400.61, attracts the "cash back" of £35,266.03, and the new lease is terminated after two years without continuing liability on the part of OER. If the proposed new lease continued after two years, for the last three years of the term the rental payable under it would not attract any subsidy.
  16. Mr. Read was persuaded of the attractiveness of the Initial Proposal, and confirmed, on behalf of OER, in a facsimile transmission sheet dated 11 September 2003 that OER wished to proceed with what was suggested.
  17. The form in which the various agreements made between NCS and OER were embodied was a standard form document used by NCS entitled "National Supply and Service Agreement". In this judgment I shall refer to that form as an "NSSA".
  18. On 12 September 2003 Mr. Read signed an NSSA, numbered 030195 ("the First NSSA"), in relation to the equipment proposed by Mr. Ward. In a section of the First NSSA entitled "Additional Terms" appeared this:-
  19. "(1) First 1,225,990 copies at no cost
    (2) Customer to receive cashback amount of £35266.03 inc VAT.
    (3) Includes full settlement to GE Capital Lease No. 11056684-T [the Infotec Agreement]
    (4) Full contract review after 8 quarters to achieve further 30% reduction in costs."
  20. The full contract review was thus timed to occur at the point at which the subsidising effect of the "cashback" ceased to be operative.
  21. An NSSA included a part which was in fact intended to be a leasing agreement between a finance company and the customer of NCS. In this judgment I shall refer to that part of an NSSA as a "Lease". There was space in a Lease for the name and address of the finance company to be inserted, but no pre-printed details. There was also a section of a Lease entitled "How your Payments are calculated". In this judgment I shall refer to that section as an "Explanation". Pre-printed parts of an Explanation envisaged that the calculation of the payment of quarterly rentals due under a Lease would show the price of the equipment the subject of the Lease, the amount needed to settle any current lease, and a rate of interest.
  22. The Lease ("the First Lease") included in the First NSSA was completed to show, as the finance company from which OER was to lease the new Toshiba photocopying machines, HFGL Ltd., trading as BNP Paribas. In this judgment I shall refer to that company as "HFGL". The Explanation in the First Lease was completed to show the price of the equipment the subject of the Lease as £65,480.11 and the amount needed to settle the Infotec Agreement as £32,457.70. That made a total of £97,937.81 Interest on that sum was specified as £73 per £1000, or 7.3%, per quarter. Quarterly rentals were stated as £7,149.46 plus Value Added Tax. With Value Added Tax at 17.5% the quarterly sum payable was £8,400.61. The total of rentals due over a five year period amounted to £142,989.20 plus Value Added Tax.
  23. For its own internal purposes NCS prepared a document entitled "Sales Order Summary" (a "Summary") in relation to each transaction into which it entered. As I understood it, a Summary was intended to include a statement of the cost to NCS of the equipment to be supplied by it; any amount included in a sum in respect of which funding was to be sought for the ultimate user from a finance house in connection with the transaction in respect of settlement of the obligations of the ultimate user under an existing lease which was to be terminated and replaced by a new lease; and any other elements of cost to be borne by NCS. These items were then totalled as "Total Base Price". Another item which appeared in a Summary was "Customer Inv. Price", which was the price to be charged to the finance house through which the equipment was to be leased to the ultimate user. The "Customer Inv. Price" differed from the "Total Base Price" because it included an element of profit on the "Total Base Price". Another item included in a Summary was "Board GP". That was supposed to show the total gross profit on the transaction, including a commission paid by the finance house to NCS. In other words, "Board GP" was a statement of the difference between "Total Base Price" and "Customer Inv. Price", to which had been added the commission payable by the finance house on the particular transaction.
  24. A Summary ("the First Summary") dated 12 September 2003 prepared by Mr. Ward revealed that the actual cost to NCS of the equipment to be supplied under the First Lease was £20,233.60. However, the First Summary also showed that the calculation of the total of £97,937.81 shown in the Explanation included in the First Lease took account of both an amount in respect of "FOC Copies" and an amount of £30,013,64 in respect of "Marketing Support". Interestingly, the latter sum, with Value Added Tax of 17.5%, amounted to £35,266.03, the precise amount of the "cashback" promised in respect of the transaction by NCS. It thus appeared that, under the First Lease, OER funded its own "cashback" by having the amount of it included in the sum to be financed by HFGL, which sum was, of course, to be paid by HFGL to NCS. As OER was to pay interest at 7.3% on the amount of the "cashback", it was actually considerably worse off having the "cashback" than if it had gone without it. If the sum financed by HFGL had been reduced by £35,266.03, it would have been £62,671.78, and the quarterly rental payments would have been £4,575.04. On the figures produced by Mr. Ward in the Initial Proposal, that figure was actually slightly less (by £32.71) than his calculation of the quarterly cost to OER of leasing photocopying machines under the Infotec Agreement and having them maintained by Danka. The First Summary noted the total gross profit, after allowance for all costs identified in the document, to be made by NCS as £23,548. The calculation of that sum appeared to have included an amount of £7,149.46, the amount, net of Value Added Tax, of a quarter's rental under the First Lease. It seemed that on this occasion, and in relation to most of the other transactions, to which I shall come, NCS invoiced OER for the first quarter's rental under the relevant Lease. That sum NCS kept and treated as part of its profit. The case for OER was that Mr. Ward represented to OER that it would pay the first quarter's rental to the finance house on behalf of OER, and that was why it invoiced for the first quarter's rental, but in fact NCS never did pay the first quarter's rental to the finance house.
  25. Mr. Read signed a further NSSA, numbered 030046 ("the Second NSSA"), on 24 November 2003 in relation to a Toshiba model E – Studio 45 photocopying machine. The evidence as to the circumstances in which this occurred was somewhat indefinite. From the copies of contemporaneous documents put in evidence it seemed that NCS contended to OER that the sum which it had had to pay to GE in order to secure the termination of the Infotec Agreement had been greater than envisaged at the time of the First Lease. In order to address this problem, according to Mr. Ward, so it was said on behalf of OER, it was appropriate for OER to enter into a further Lease ("the Second Lease"). Mr. Ward's account of the matter in his first witness statement prepared for the purposes of this action was, as originally written, different, but I shall come to that separately.
  26. In a letter dated 21 November 2003 to Mr. Read Mr. Ward wrote, so far as is presently material:-
  27. "Further to our conversation today regarding the solution to the additional settlement amount, we have paid GE Capital on your behalf I can confirm the following:-
    1) NCS will provide an additional Toshiba E-45 digital copier to your business at a rental of £1,764.19 per quarter.
    2) NCS will re-visit your contract in four quarters time (instead of eight quarters) to achieve a further 30% saving on your contract.
    This means you will retain £17,633.02 of the cash back amount that will not be required.
    3) You will need to make £7,056.76 in additional rental payments for the Toshiba E45; this means that the nett financial benefit to Osteopathic Education and Research will be £10,576.26.
    4) You will also have the benefit of a brand new back up machine for the staff should your main machine be out of action."
  28. That there was a connection between the First Lease and the Second Lease was suggested not only by the terms of that letter, but also by the fact that the Second NSSA was endorsed, in the hand of Mr. Ward, "This contract supersedes 030195 see Additional Notes". 030195 was, of course, the number of the First NSSA. Each NSSA contained a section entitled "Additional Terms" ("the Additional Terms"). The Additional Terms in the Second NSSA included:-
  29. "(1) NCS to conduct full contract review of all numbers after four quarters to achieve a further saving of 30% in costs.
    (2) Customer to retain any unused portion of marketing support."
  30. The Second Lease was entered into by HFGL and OER. In the Explanation part of that lease an element in respect of "Amount needed to settle current agreement" of £7,501.14 was included. The finance company which required to be paid was named as GE. The "Agreement reference number" relevant to the settlement with GE was specified as "111056684-T (Part)". That number was the number of the Infotec Agreement, which was to have been settled under the First Lease. The price of the equipment the subject of the Second Lease was specified in the Explanation as £12,518.06. The quarterly rental payment due under the Second Lease was £1,501.44, plus Value Added Tax.
  31. A Summary ("the Second Summary") dated 24 November 2003 showed that the actual cost to NCS of the equipment the subject of the Second Lease was £3,803. In the calculation of price charged to HFGL account was taken of a number of matters, including "Shortfall c/f [carried forward] from last deal" of £6,427.89. The gross profit, after allowing for all costs set out in the Second Summary, which was to be made by NCS was recorded as £15,692.67. The calculation of that sum included a first quarter's rental of £1,501.44.
  32. The third transaction between NCS and OER concerned a Toshiba model E – Studio 4511 colour photocopying machine. Mr. Read signed an NSSA, numbered 030764, dated 27 January 2004 ("the Third NSSA") in relation to that machine. The envisaged quarterly rental for the machine, as set out in the Third NSSA, was £2,495.50 plus Value Added Tax, such sum to be paid over a term of five years. In the Additional Terms there were included:-
  33. "(1) NCS to provide marketing support of 9982 + VAT.
    (2) NCS to revisit contract in four quarters in line with existing agreements to achieve further savings.
    (3) Customer can cancel agreement after one year without penalty."
  34. On the face of the Additional Terms the deal proposed in relation to the Toshiba model E – Studio 4511 was a good one, if OER had wanted the machine just for one year, because the marketing support covered the whole of the rental payable, and the contract could then be cancelled without penalty.
  35. The Lease ("the Third Lease") included in the Third NSSA was concluded between GE and OER. As made it did not contemplate termination after one year, with no further payments being due from OER to GE. The Explanation in the Third Lease specified the price of the equipment as £25,872. Rather confusingly it also included an amount of £9,128 in respect of "Amount needed to settle current agreement". The lease in question was said to be with "Siemens" and to have the "Agreement reference number" 048-6657. No agreement seems in fact to have been made between OER and "Siemens". The closest the contemporaneous documentation copied before me came to identifying an agreement between "Siemens" and OER was that Siemens Financial Services Ltd. wrote a letter dated 24 November 2003 to NCS which was entitled "Proposal Acceptance" and appeared to relate to a proposal made by NCS on behalf of OER for financing of a photocopying machine, the details of which were not specified, at a cost of £22,000 plus Value Added Tax. The date of the letter was the same date as that upon which Mr. Read signed the Second NSSA, but there was no evidence that any lease was ever made between Siemens Financial Services Ltd. and OER. The quarterly rental payment due under the Third Lease was £2,495.50, plus Value Added Tax.
  36. A Summary ("the Third Summary") dated 28 January 2004 disclosed on behalf of NCS in relation to the Third Lease contained no reference to any element in respect of settlement of a lease with "Siemens" being included in the calculation of the total sum of £35,000 which was indicated in the Explanation in the Third Lease as the total amount of finance provided. £35,000 is the arithmetical total of the expressed price of the equipment the subject of the Third Lease, £25,872, and the alleged "Amount needed to settle current agreement", £9,128. However, the Third Summary recorded the total cost to NCS of the equipment to be provided in respect of the Third Lease as £7,123.90. The only other substantial element of cost built in to the calculation in the Sales Order Summary was "marketing support" in the sum of £9,982. The gross profit to be made by NCS, after allowance for all costs noted in the document, was £20,753. On this occasion it seems that the calculation of the gross profit did not include a first quarter's rental under the new Lease.
  37. In July 2004 OER was persuaded to exchange its existing Toshiba model E – Studio 550 for a Toshiba model E – Studio 810. Mr. Read signed an NSSA, numbered 31045 ("the Fourth NSSA"), in respect of the new machine on 26 July 2004. The contemplated quarterly rental in respect of the new machine was £4,485, plus Value Added Tax and the term of the lease ("the Fourth Lease") in respect thereof was five years. There was but one clause in the Additional Terms in that NSSA:-
  38. "NCS to provide marketing support of 5541.96"
  39. HFGL entered into the Fourth Lease with OER. The Explanation included in the Fourth Lease identified the total amount of finance provided as £59,800, made up of the price of the equipment, £31,519.90, and "Amount needed to settle current agreement", £28,280. The "current agreement" identified was the First Lease, to which HFGL had assigned the number 438290. In fact, of course, the First Lease was not to be wholly discharged, because only one of the four photocopying machines the subject of the First Lease was to be altered.
  40. A Summary ("the Fourth Summary") dated 26 July 2004 was prepared in relation to the Fourth Lease. A copy was disclosed on behalf of NCS. The document revealed that the actual cost to NCS of the equipment to be supplied was £10,940. The calculation of the amount of finance required, £59,800, included both a settlement sum of £28,280.10 in respect of the partial discharge of the First Lease, and "Marketing support" of £5,541.96. The gross profit on the transaction for NCS, after allowance for all costs, was recorded as £24,391.94. The calculation of that figure did include a first quarter's rental of £4,485.
  41. A meeting took place in December 2004 between Mr. Ward, Mr. Read and Mr. Fraser at which the desirability of replacing one of the Toshiba models E – Studio 200 with a Toshiba model E – Studio 45 and the other with a Toshiba model E – Studio 35 was discussed. There was also discussion of the merits of amalgamating the existing four leases into one. OER was persuaded to change the two Toshiba model E – Studio 200 machines with those proposed, and also to seek to amalgamate the existing four leases into one. On 20 December 2004 Mr. Read signed an NSSA, numbered 31310 ("the Fifth NSSA"), which was intended to give effect to what had been agreed. The anticipated new quarterly rental for all of the machines to be the subject of a new lease ("the Fifth Lease") was £18,750, plus Value Added Tax. The aggregate sums due under the First Lease, the Second Lease, the Third Lease and the Fourth Lease amounted to £15,631.40 (£7,149.46 + £1,501.44 + £2,495.50 + £4,485), plus Value Added Tax. The Additional Terms in the Fifth NSSA included provision for the payment of "marketing support" of £62,943.12.
  42. The Fifth Lease was made between HFGL and OER. In the Explanation in that Lease the price of the equipment included was stated as £67,421.50, and the "Amount needed to settle current agreement" was noted as £190,381.33, making a total amount to be financed of £257,802.83.
  43. A Summary ("the Fifth Summary") was prepared in relation to the Fifth Lease. In it the total cost to NCS of the equipment included was recorded as £12,226. The cost of settlement of the four previous leases was included at £186,377.33, and "marketing support" at £53,568.61. Despite the discrepancies between the sums here stated and, first, the "Amount needed to settle current agreement" stated in the Explanation included in the Fifth Lease, and, second, the amount of "marketing support" written in the Additional Terms in the Fifth NSSA, the total "Customer Inv Value" noted in the Sales Order Summary accorded with the total to be financed recorded in the Explanation in the Fifth Lease, £257,802. On that figure the gross profit for NCS was said to be £44,355, including a first quarter's rental of £18,750.
  44. Quite shortly after the coming into force of the Fifth Lease, OER decided to exchange the Toshiba model E – Studio 4511 included in the Fifth Lease for a Toshiba model E – Studio 211C. It was arranged through Mr. Ward with HFGL that, in effect, the Fifth Lease would be discharged and replaced by a new lease ("the Sixth Lease"). In order to achieve that Mr. Read signed, on 6 May 2005, NSSA numbered 31713 ("the Sixth NSSA"). The new quarterly rental payment under the Sixth Lease was to be £21,880 plus Value Added Tax. The Explanation contained in the Sixth Lease included a price for the equipment of £33,931.29 and an "Amount needed to settle current agreement" of £257,802.05, the figure included as the total sum financed by the Fifth Lease. The total amount financed by the Sixth Lease was thus £291,733.34. The Fifth Lease had, by the date of the Sixth Lease, been in existence since December 2004 and one payment of rental had been made under it. In effect, therefore, the sum paid under the Fifth Lease, plus the amount by which the total sum financed increased as between the Fifth Lease and the Sixth Lease, were the price exacted by HFGL for the discharge of the Fifth Lease and its replacement by the Sixth Lease.
  45. The quarterly rental payable under the Sixth Lease was £21,880 plus Value Added Tax.
  46. NCS agreed to pay an amount of £11,033.25 by way of "marketing support" on the execution of the Sixth Lease.
  47. A Summary ("the Sixth Summary") was prepared in relation to the Sixth Lease. In the usual way that set out the "Customer Inv Value" in the sum which appeared as the total amount of finance provided as stated in the Explanation in the Sixth Lease. It also recorded the actual cost to NCS of the new photocopying machine as £9,189 and the cost of settling the Fifth Lease, put at £313,615.92. "Marketing support" of £11,033 was also noted as included in the calculations which resulted in a gross profit for NCS from the transaction of £11,250. The gross profit, in the usual way, included the amount of the first quarter's rental. As that amount was £21,880 it seems to have been a crucial element in ensuring that NCS made a gross profit on this transaction.
  48. On the retirement of Mr. Read as bursar of OER in May 2005 Mr. Hales took over responsibility for negotiating contracts in relation to the provision of photocopying facilities to OER. His first encounter with Mr. Ward was in the context of the making of a further lease ("the Seventh Lease") under which it seems that two of the photocopying machines the subject, originally, of the Fifth Lease were exchanged for different models, and the new models, respectively a Toshiba E – Studio 850 and a Toshiba E – Studio 452, and, curiously, one of the existing models, the Toshiba E – Studio 211C the express subject of the Sixth Lease, were let. The Seventh Lease was made between GE and OER. The Explanation contained in the Seventh Lease recorded the price of the equipment the subject of it as £101,431, and the "Amount needed to settle current agreement" as £60,201, producing a total sum financed of £161,632. The quarterly rental payable under the Seventh Lease was £12,856 plus Value Added Tax.
  49. Mr. Hales signed the NSSA, numbered 33572 ("the Seventh NSSA"), in respect of the Seventh Lease on 31 March 2006. The Additional Terms as completed in that NSSA were:-
  50. "(1) NCS to provide marketing support of £84,552.
    (2) NCS to conduct full review March 2007.
    (3) NCS to provide additional marketing support at this point to achieve target rent subject to no significant change in volume (+/- 10%)."
  51. While £84,552 represented about 5.6 times the quarterly rental, inclusive of Value Added Tax, payable under the Seventh Agreement alone, there remained a continuing liability of OER to make payments under the Fifth Lease as varied by the Sixth Lease. The evidence before me did not identify precisely how much the continuing liability was.
  52. A Summary ("the Seventh Summary") dated 30 March 2006 was prepared in relation to the Seventh Lease. In it the cost to NCS of the new models of photocopying machine to be provided was identified as £19,192. The sum of £41,999.98 was noted as the cost of settling the liabilities under the Fifth Lease, as varied by the Sixth Lease, insofar as that was done. The calculations included the amount of £84,552 in respect of "Marketing support". The Seventh Summary indicated that the gross profit made by NCS as a result of the Seventh Lease was £28,497. That figure did not appear to include a first quarter's rental amount.
  53. The final transaction between OER and NCS resulted in the making of a further Lease ("the Last Lease") between HFGL and OER, which came into force on 26 April 2007. It came about as a result of a review conducted on 22 March 2007 at a meeting attended by Mr. Ward, Mr. Hales and Mr. Fraser. In advance of the review meeting Mr. Ward prepared a proposal ("the Final Proposal") in which it was contemplated that two of the photocopying machines the subject of the existing leasing agreements be changed for Toshiba models E – Studio 3500c. The Final Proposal included the following:-
  54. "3 year rental @ £62,814.32 per quarter
    Annual spend £251,257.28
    Less marketing support £138,159.20
    Proposed effective annual spend £113,098.08
    4 year rental @ £49,622.53 per quarter
    Annual spend £198,490.12
    Less marketing support £138,159.20
    Proposed effective annual spend £60,330.92
    5 year rental @ £41,754.80 per quarter
    Annual spend £167,019.20
    Less marketing support £138,159.20
    Proposed effective annual spend £28,860.08
    NCS take pride in customer care and retention and maintaining good customer relations. In order to build a good foundation for customer relations, we will offer customers incentives to assist to help fund the cost of acquiring new equipment and technology. In your case we are delighted to make the following proposal:-
    On entering into both the National Supply & Service Agreement and Lease, NCS will pay you a marketing support payment of £138,159.20. This payment will be made by us to you, within twenty-eight days from the later of (a) The lease company confirming the lease has commenced and (b) the lease company paying us for the equipment supplied to you. On the expiry of the first four quarters of your supply and service agreement, NCS will commit to conducting a full review of your equipment, without charge, in order to establish whether through change in circumstances or otherwise, your use and financial requirements could be better served by the provision of a restructuring of your equipment agreements.
    "
  55. The review proposed that in fact three of the existing Toshiba models of photocopying machine, the E – Studio 211C, the E – Studio 4511 and the E – Studio 200, be replaced each by a model E – Studio 3500c, but with OER retaining the model E – Studio 850 and the model E – Studio 452. OER was attracted by that suggestion, and opted for the proposed five year transaction. Accordingly an NSSA, numbered 34935 ("the Last NSSA"), was completed and was signed by Mr. Hales on behalf of OER. In the event the "marketing support" identified in the Last NSSA was the sum of £155,159.30, rather than the figure set out in the Final Proposal. The Additional Terms set out in the Last NSSA included:-
  56. "(1) NCS to conduct full contract review Jan 2008 and subject to no significant change in volume +/- 10% maintain effective rental of 28860.
    (2) …
    (3) Should NCS fail to pay marketing support within 28 days of activation customer may cancel agreement.
    (4) This agreement covers all photocopiers located within Osteopathic."
  57. In the usual way a Summary ("the Last Summary") was produced in relation to the Last Lease. It contained rather less information than its predecessors, but it did note "marketing support" of £155,159, gross profit of £61,988 and a first quarter's rental of £41,754 included in the calculation of gross profit. The total cost to NCS of the equipment to be provided in relation to the Last Lease was recorded as £25,812.
  58. The review contemplated in January 2008 did not take place. It was cancelled by OER, after an initial arrangement for a review had been made. The cancellation was preceded by the writing by Mr. Hales to Mr. Ward of a letter dated 8 February 2008:-
  59. "Photocopier Review, Marketing Support
    In anticipation of your visit next week, we have been reviewing the existing arrangements together with the history of your involvement with the School. As part of this process, we have also taken some advice.
    I thought I would let you know now that our interpretation of our various agreements (or certainly those in place since I have been involved) is that NCS is obliged to provide the School with payment by way of marketing support irrespective of whether the School retains or changes its current arrangements.
    We have been in a relationship with NCS since about 2003, when we moved from multi-functional equipment supplied by Danka to equipment supplied by NCS. When we revised the arrangements in March/April 2006, we specifically agreed that NCS would pay on-going, additional marketing support upon the annual review so as to keep our on-going annual costs the same subject only to significant changes in volume usage. So far as we know, our volume usage has remained more or less constant after the first couple of years with NCS equipment. When we reviewed our relationship and needs in 2007, NCS specifically described to us an annual spend of about £28,060 [sic] for a five year lease, which would be achievable by the provision of marketing support payable annually.
    It has been your practise [sic] to tell us that both the School's and NCS's overall costs would be lower by us getting replacement machines each year (ie because, so you have told us, Toshiba were eager to try out new machines with us) and to draw up new leasing agreements to achieve this. However, if this year the existing arrangements remain as they are upon our review, please note that we will nevertheless expect that you will provide us with annual marketing support so as to keep our effective annual spend at about £28,860 subject only to a modest reduction if our copying usages have increased significantly since last year. If upon each succeeding annual review the arrangement were not to change until the end of the existing 5 year lease, the agreed marketing support would consist of a further 4 more tranches of roughly what we should have received since March 2007.
    I am also conscious that you have all too often dragged your feet in agreeing marketing support payments upon the annual reviews and thereafter abiding by them. At the current time, a total of £21,921.27 is outstanding under the figure agreed for last year's tranche. As we understand it, the delay in payment puts you in breach of contract. If this payment is not forthcoming within 7 days please note that we shall have little choice but to terminate our agreement with NCS and take the necessary or appropriate action against NCS for the School's losses.
    In view of the timescale, I would be grateful for your urgent reply and look forward to your cheque for £21,921.27."
  60. No further payments by way of "marketing support" or otherwise in reduction of the liabilities of OER to HFGL under the Last Lease were made by NCS to OER.
  61. The claims of OER in this action

  62. The principal claim of OER in this action was for payment of the sums said to be necessary to ensure that, for the duration of the Last Lease, the effective cost to OER annually did not exceed £28,860.
  63. At its simplest that claim was pleaded in the Amended Particulars of Claim as a claim for sums due under, and for damages for breach of, a contract, namely that contained in the Last NSSA, as follows:-
  64. "42. In reliance on the aforesaid advice, confirmation, recommendations and representations, during the said meeting [that of 22 March 2007]:
    (d) The Claimant entered into a further National Supply and Service Agreement ("the 2007 NSSA") with the Defendant pursuant to which the Defendant agreed among other things to:
    (i) provide a "marketing support" payment in such sum as was necessary to ensure that the effective rental expenditure incurred by the Claimant under the draft lease as executed would amount to no more than an annual sum of £28,860.00;
    (ii) to carry out a full contract review of the Claimant's photocopying leases in January 2008; and
    (iii) ensure (by means of further or continued payments of "marketing support") that whether or not any new leasing agreement or agreements were entered into in consequence of the said contract review the Claimant would continue to pay an effective rental of no more than £28,860.00 per annum, subject to the use made of the Toshiba photocopiers by the Claimant not increasing or decreasing in volume by 10%.
    49. Further, in breach of the terms of the 2007 NSA [sic], the Defendant has failed to make any payment of marketing support since payment of £155,159.20 made during 2007.
    50. Following substantial correspondence by the Claimant to which the Defendant did not or did not adequately respond, the Claimant accepted the Defendant's breach of the 2007 NSSA as terminating the 2007 NSSA by a letter dated 7th April 2009.
    51. Between March 2007 and 7th April 2009, the Defendant failed to make the following payments of "marketing support":
    PARTICULARS OF PAYMENTS NOT MADE
    2007-08 The sum required to ensure that the actual cost to or effective rental payable by the Claimant under the 2007 HFGL Lease was no more than £28,860.00 per annum for the period from 26th April 2007 to 25th April 2008:
    £12,596.72
    2008-09 The sum required to ensure that the actual cost to or effective rental payable by the Claimant under the 2007 HFGL Lease was no more than £28,860.00 per annum, calculated on the annual rentals payable under the 2007 HFGL Lease plus VAT for the period from 26th April 2008 to 25th April 2009:
    [£167,019.20 + VAT of £29,228.36] less £28,860.00 =
    £167,387.56
    Total: £179,984.28
    52. By reason of the Defendant's breaches of the 2007 NSSA, the Claimant has suffered loss and damage.
    PARTICULARS OF LOSS
    (1) The sum of £179,984.28 that the Defendant has failed to pay under the 2007 NSSA.
    £179,984.28
    (2) As follows:
    i) The sums that it expected to receive during the term of the 2007 HFGL Lease in order to ensure that the real cost to the Claimant of its liabilities under the 2007 HFGL Lease or for the hire of the Toshiba photocopying equipment does not exceed £28,860.00 per annum. In addition to the sum set out at sub-paragraph (1) above, the Claimant expected to receive "marketing support" payments until 25th April 2012. Assuming a VAT rate of 15%, the annual price of the 2007 HFGL lease [sic] is [£167,019.20 + VAT of £29,228.36] = £196,247.56. An annual payment of "marketing support" was payable in the sum of £167,387.56. For the three years of the 2007 HFGL Lease from 26th April 2009 to 25th April 2012, the Claimant claims:
    £502,162.68
    ii) Alternatively, because of the Claimant's delay in paying the quarterly rentals (caused by the Defendant's failure to make the payments of "marketing support"), HFGL threatened to terminate the 2007 HFGL Lease pursuant to its powers thereunder and to demand or claim a sum calculable according to the mechanism set out in paragraph 20 above.
    iii) The Claimant was unable to pay the termination sum or the quarterly rentals under the 2007 HFGL Lease as they fell due. Accordingly and in mitigation of its loss, the Claimant chose to negotiate a compromise with HFGL in respect of such claim.
    iv) On or about 16th April … 2009, the Claimant and HFGL agreed to restructure the Claimant's liability under the 2007 HFGL Lease so as to provide that the Claimant will continue to hire the equipment for 19 quarters commencing on 1st May 2009 at a quarterly rental of £30,000.00 (with no VAT to be charged on that sum).
    v) Accordingly, the Claimant's annual liability from 1st May 2009 is £120,000 per annum until 1st February 2014. In order to achieve an annual effective or target rental of £28,860.00, the Defendant is obliged to pay the sum of £91,140.00 to the Claimant for each year of the restructured lease:
    £455,700.00
    vi) Charges and fees claimed by HFGL for the Claimant's delay in paying the quarterly rentals payable under the 2007 HFGL Lease and caused by the Defendant's failure to make the payments of "marketing support" that were due to the Claimant. As at 16th April 2007, HFGL had charged the sum of £982.00 to the Claimant in contractual interest and late payment fees.

    £982.00

    vii) The Claimant has suffered loss by way of diverted management, director and staff time and expense, full details of which will be provided.
    To be assessed"
  65. A rather more complicated way in which the basic complaint that the alleged, promised "marketing support" was not paid was pleaded was that the promise, or promises, of support were in the nature of misrepresentations which had induced OER to enter into the Last Lease.
  66. However, the claims pleaded on behalf of OER in the Amended Particulars of Claim went considerably wider than the relatively straightforward case in relation to the non-payment of "marketing support" after about April 2008. In effect it was sought to challenge each of the First to Last Leases, respectively, and to contend that OER was entitled to recover by way of damages that amount, pleaded as £772,976.00, which it was said represented the excess of the liability of OER under the Last Lease over what the liability of OER would have been under the Infotec Agreement, if OER had never entered into any of the First to Last Leases.
  67. After the amendment of the Particulars of Claim, a further basis upon which the claim to recover the alleged amount of the excess of the liability of OER under the Last Lease over the liability it would have had under the Infotec Agreement, had that agreement been allowed to run its course, was said to be misrepresentation as to the nature of "marketing support". The case was pleaded in this way, omitting underlinings and crossings out:-
  68. "52A. Further or alternatively, the Defendant and MW [Mr. Ward] on behalf of the Defendant represented orally (by stating that the Defendant would pay "marketing support" or "cash-back" in specified sums) at each meeting with the Claimant's representatives since (and inclusive of) the meeting or meetings held in September 2003 that the payments of "marketing support" would be made by the Defendant (whether from its own resources or from resources made available to it by a third party or third parties) without the Claimant thereby incurring any additional liability, and that the Defendant's obligation to pay "marketing support" would not adversely affect or increase the rental payments that the Claimant would be obliged to make under the lease or leases that the Defendant proposed that the Claimant should enter into. The Claimant relied upon each and every such representation by entering into the leases and NSSAs in the manner set out in these Amended Particulars of Claim above.
    53. The representations made by the Defendant and MW on behalf of the Defendant set out at paragraphs 39 to 41 and 52A above were false.
    (a) The Defendant did not intend to provide the Claimant with "marketing support" payments during the term of the 2007 HFGL Lease (or any lease for the Toshiba equipment hired or to be hired to the Claimant) and did not intend to ensure that its annual effective rental was no greater than £28,860.00 or to ensure that any lease entered into after the meeting in March 2007 would be in the Claimant's best financial interests.
    (b) As had been its practice since at least the date of the First 2003 HFGL Lease (which practice was not known to the Claimant until the disclosure exercise undertaken by the Defendant in these proceedings in May 2010), the Defendant intended to and did include the sum of the first "marketing support" payment in the price or amount to be financed by or under each of the leases particularised above including the 2007 HFGL Lease, with the effect that (unbeknownst to the Claimant):
    i) The Defendant intended to be and was paid a capital sum by HFGL or as appropriate GE Commercial or another finance house, purportedly representing the cost of the equipment supplied under each lease including the 2007 HFGL Lease together with the amount required to settle the or any existing leases, but which included the sum of the first "marketing support" payment;
    ii) The total amount to be financed and each rental payment was calculated by HFGL or as appropriate GE Commercial or another finance house to take into account the price of the "marketing support" (whether HFGL or GE Commercial or any finance house knew of the same or not);
    iii) The Defendant did not (and did not intend to) make or procure the said "marketing support" payment from its own resources or resources made available to it without the Claimant thereby incurring any additional liability;
    iv) The Claimant became liable to repay the sum of the first "marketing support" payment as part of the rental instalments payable under the [sic] each lease including the 2007 HFGL Lease; and
    v) The cost of the rental of the equipment supplied under each lease including the 2007 HFGL Lease included and so was increased by the payment of "marketing support".
    54. The said representations as to the Defendant's intentions were made fraudulently in that the Defendant and/or MW knew that the Defendant did not have those intentions, alternatively recklessly as to whether the Defendant had those intentions, or negligently insofar as they were made without any or any sufficient inquiry into the Defendant's intentions or practices or of the nature of the liability to be incurred by the Claimant under each lease and/or the 2007 HFGL Lease. Alternatively, MW made the said representations asserting belief in them when he had no such belief.
    55. Because of the Defendant's and MW's misrepresentation or misrepresentations, the Claimant has suffered and continues to suffer loss and damage in the sums set out at paragraph 52 above, which consist of the difference between the sums that the Claimant is obliged to pay under the 2007 HFGL Lease and the sums that it would have paid had the representations been true, together with the Claimant's consequential losses."
  69. In essence it seemed that the case for OER concerning misrepresentation in relation to "marketing support" really came down to the proposition that the very expressions "cashback" and "marketing support" conveyed, implicitly, that the sums being offered were by way of reduction in the sum or sums which would have been payable in respect of the agreement or agreements into which OER was induced to enter by the offer of "cashback" or "marketing support", but for the "cashback" or "marketing support". It made no sense, commercially, contended Mr. Ross Fentem, who appeared on behalf of OER, for a prospective contracting party to enter into an agreement to pay sums which were calculated as including the amount or amounts of the so-called "cashback" or "marketing support", together with interest thereon, in order to receive the "cashback" or "marketing support". In effect such a transaction involved the party contracting to pay rentals in himself borrowing, at interest, the amount of the "cashback" or "marketing support", and thereby increasing his liabilities. The offer of "cashback" or "marketing support" in those circumstances was manifestly not a reduction in the sum which would have been payable under the relevant agreement without "cashback" or "marketing support".
  70. However, there was also a section of the Amended Particulars of Claim which appeared under the rubric, "Negligence and Breach of Fiduciary Duty". Omitting underlining, that section was in the following terms:-
  71. "56. Further or in the alternative, by reason of the facts and matters set out in paragraphs 5 to 41 above, the Defendant acting through MW undertook a duty and assumed a responsibility to take care of the Claimant's financial interests insofar as they related to leasing photocopiers and associated equipment and undertook duties as fiduciary of the Claimant.
    57. The said duty of care arose by reason among other things of:
    (a) MW expressly advising the Claimant on numerous occasions as to the course of action it should take and the liabilities that it should incur and to costs savings that it would obtain by following the advice and recommendations of the Defendant;
    (b) The fact that to MW's knowledge the Claimant relied on him and on the Defendant for such advice and recommendations;
    (c) The superior knowledge and experience of the Defendant and MW in the negotiation and arrangement of asset finance facilities when compared with the knowledge and experience of the Claimant, BR [Mr. Read], NH [Mr. Hales] and IF [Mr. Fraser]; and
    (d) The fact that MW was expressly entrusted by the Claimant with the responsibility of negotiating, arranging and completing leases with finance houses for photocopying equipment.
    58. The aforesaid fiduciary duties arose by reason of the Defendant agreeing to act as the Claimant's agent for the purposes of negotiating and arrangement [sic] of asset finance facilities and lease agreements.
    59. The Defendant was negligent and/or in breach of fiduciary duty in that it:
    PARTICULARS OF BREACH OF DUTY
    i) Failed to take any or any reasonable steps to ensure that the Claimant understood the nature of the agreements that it was making and of the extent of its liabilities thereunder;
    ii) Failed at any time to explain that the only basis upon which the lessor under any of the leases would agree to early termination was on the basis of a termination sum or settlement figure;
    iii) Failed at any time to explain that such termination sum or settlement figure would be repayable by the Claimant as part of the quarterly rentals under each subsequent lease;
    iv) Failed at any time to explain that the structure that the Defendant had advised that the Claimant follow would necessarily result in total rental charges increasing exponentially over time (to the extent that the initial total rental charge of £62,120.00 plus VAT under the 2001 GE Capital Lease was replaced eventually by a total rental charge of £835,096.00 under the 2007 HFGL Lease despite the fact that the number of photocopiers used by the Claimant had increased only from three to five;
    v) Failed to complete each lease including the 2007 HFGL Lease with true and accurate costs or valuations of the Toshiba equipment to be sold to HFGL or if different the relevant finance house and thereafter hired out to the Claimant;
    vi) Inflated the true or accurate cost or valuation of each lease (including inflating the Toshiba equipment in the 2007 HFGL Lease to a sum of £294,854.00) to the Claimant's detriment in order to obtain a greater sum of money from HFGL on the sale to HFGL of the said equipment;
    vii) Failed to inform HFGL or any other finance house of the Claimant's expectations and intentions with respect to the total sum payable for any hire agreement;
    viii) To the extent that the 2007 NSSA does not (contrary to the Claimant's primary case) provide that the Defendant is obliged to pay the "marketing support" payments set out at paragraph 42(d)(i) above, failed to take any or any reasonable steps to ensure that the Claimant's total annual liability under the 2007 HFGL Lease would amount after accounting for payments to be made by the Defendant to a sum of no greater than £28,860.00 or a reasonable sum for the hire of the Toshiba photocopying equipment hired thereunder;
    ix) Included as part of the capital price of each piece or set of equipment to be sold to each finance house the sum of the "marketing support" payment that the Defendant had agreed to pay to the Claimant, with the effect that the Defendant was provided with funds to pay the "marketing support" payment by the relevant finance house and that the Claimant came under an obligation itself to repay the "marketing support" payment with interest;
    x) Thereby made an undisclosed and secret profit from the leasing transactions and NSSAs and/or the relationship with the Claimant and/or put its duty to the Claimant in conflict with its own financial interests and/or acted disloyally to the Claimant's detriment and/or knowingly and deliberately defrauded the Claimant;
    xi) Induced the Claimant to enter into each of the leases set out above on the basis that the Defendant's payment of "marketing support" would mitigate the Claimant's rental liabilities under each lease, when in fact the Defendant created and maintained a transactional structure whereby each of the "marketing support" payments made or to be made by the Defendant were (unbeknownst to the Claimant) intended by the Defendant to be repaid by the Claimant to the finance house funding each of the leases set out above (together with interest) as part of the rental payments due thereunder.
    60. By reason of the Defendant's negligence and/or breach of fiduciary duty, the Claimant has suffered loss and damage. But for the Defendant's negligence and/or breach of fiduciary duty, the Claimant would not have entered into the 2007 HFGL Lease or any lease agreement negotiated and arranged by the Defendant on the Claimant's behalf. The Claimant claims as damages:
    (a) The sums set out at paragraph 52 above, on the basis that the Defendant's negligence caused the Claimant to enter into the 2007 HFGL Lease in the belief that its total annual liability would be no greater than £28,860.00;
    (b) Alternatively, the difference between the rental payments payable under the 2007 HFGL Lease and the rental payments that would have been payable had the Defendant accurately and truthfully described the Toshiba E850 and Toshiba E452 as "not new" equipment;
    (c) Alternatively, the difference between its total liability under the 2001 GE Capital Lease and its total liability under the 2007 HFGL Lease, being £772,976.00.
    60A. In the further alternative, the Claimant is entitled in the circumstances to an account and payment of the profits that the Defendant has made in breach of its fiduciary duties to the Claimant and/or to recover from the Defendant the sum total of those portions of the price paid to the Defendant for the purchase of the equipment sold to the various finance houses (in order to be leased under the various leases set out above) which constituted the "marketing support" payments that the Defendant had agreed and represented were to be paid by the Defendant itself."

    The answers on behalf of NCS to the claims of OER

  72. The response on behalf of NCS to the principal claim made on behalf of OER, namely that based on the contention that NCS had been in breach of contract in failing to pay "marketing support" after the first year of the Last Lease, was conveniently set out by Mr. James Pickering, who appeared at the trial on behalf of NCS, in his written skeleton argument dated 25 June 2010:-
  73. "38. The claimant's primary claim is for breach of contract. In short, it would appear to be the claimant's case that under the terms of the eighth and final transaction, the defendant was obliged to pay marketing support in the sum of £155,159.20 not just within 28 days after the entering into of the new lease (which payment the defendant did make) but also at various (as yet unspecified) other points in the course of the lease up to its expiry in April 2012.
    39. It is submitted that the above claim for breach of contract must fail for the following reasons:
    (1) Under the terms of the contract, the defendant was obliged to make a single one-off payment of marketing support; there was no obligation to make any further payment unless a new lease was entered into (which it was not).
    (2) If (which is denied) the defendant was obliged to make multiple payments of marketing support (without a new lease being entered into), such obligation only arose in the event of the change in volume being no greater than +/- 10% (which it was).
    40. As for (1) above (single obligation only), reliance is placed on the following matters:
    (1) The words "NCS to conduct full contract review Jan 2008 and subject to no significant change in volume +/- 10% maintain effective rental of £28,860 …" are clearly written in the context of a new lease being entered into. The above wording was added by hand by Michael Ward of the defendant in a fairly short-hand manner. This is perhaps not surprising given that the parties had been dealing with each other for some 5 years during which 8 leasing transactions had been entered into. In each previous transaction in which marketing support had been offered, it was done so as a single obligation. It is inconceivable that the eighth and final transaction would be on a different basis, ie with marketing support being not a single obligation but an ongoing one too.
    (2) The written proposal which preceded the eighth and final agreement stated (with emphasis added):
    "On entering into the [NSSA] and Lease, [the defendant] will pay you a marketing support payment of £138,159.20 …"
    The above, it is submitted, confirms that only a single marketing support payment was contemplated in the event of a new agreement and lease being entered into.
    (3) The written proposal further stated (with underling [sic] added):
    "This payment will be made by us to you, within 28 days from the later of (a) the lease company confirming the lease has commenced and (b) the lease company paying us for the equipment supplied to you …"
    The above, it is again submitted, confirms that the payment of marketing support was to be made on the occurring of the later of 2 events but on no other occasion. If it was the intention of the parties that the obligation to pay marketing support was not a single one, the above proposal would have gone on to provide a mechanism for the payment of such further payments. From the fact that the above wording provides for a single payment only, it can be inferred that the parties did indeed intend for only one such payment to be made.
    (4) If the claimant's contention were to be correct, the written proposal – providing quotations for leases over 3, 4 and 5 years – would not make commercial sense with the claimant paying less total rentals over a 5 year term than over a 3 year term: see paragraph 26 of Michael Ward's witness statement.
    (5) The claimant appears to be stating that the terms of the eighth and final contract were commercially disastrous for it. First, this is simply not true. The claimant had always had the choice to retain its existing photocopying machines, however out-dated (and expensive to repair) they might have become. Instead, however, it chose to regularly update its stock and indeed increase the number of machines. It is therefore inevitable that the cost of supply would increase over time. Second, it is not for the court to legislate as to what is a good or bad bargain. If the claimant has acted naively (and it is contended that it has not) that is a matter for it and does not entitle it to have this transaction – or indeed any of the eight transactions – set aside.
    (6) The claimant's evidence falls short of establishing an agreement to pay the sum of £155,159.20 for each of the 5 years of the lease. What was discussed and agreed was that there would be a single payment of marketing support (as with all previous transactions) and that, in the event of a new lease being entered into, further marketing support would be offered. The most significant difference between the first 6 transactions and the last 2 transactions is that in relation to the first 6, in the event of a new lease being entered into, there was no obligation on the part of the defendant to offer marketing support and nor was any particular sum pre-agreed; in relation to the last 2, however, the defendant was prepared to agree that in the event of a new lease being entered into, a further payment of marketing support would be offered and (subject to there being no significant change in volume) that such marketing support would be at a level sufficient to enable the claimant to achieve its target rental. In the event of no lease being entered into, however, no such obligation would arise.
    40. As for (2) above (obligation only arising in event of no significant change in volume), reliance is placed on the witness statement of Michael Hayes which evidences an increase in volume over the relevant period of between 21% and 23%. Accordingly, if (which is denied) there was an ongoing obligation to pay marketing support for each year of the 5 year term of the lease, it is submitted that the obligation did not in fact arise by reason of the change in volume being greater than 10%."
  74. There were thus two points in relation to the claim based on non-payment of "marketing support". The first was that, as a matter of construction, marketing support in respect of the Last Lease was only payable once, and not during each year of the term. The second was that, if that were wrong and "marketing support" was due from NCS as a matter of contract in respect of each year of the term of the Last Lease, such was conditional upon the volume of copies produced using the photocopying machines at the premises of OER not varying by more than 10% from the volume prevailing at the date of the Last Lease, and it was contended that, as a matter of fact, there had been a variation of more than 10% between the year 1 February 2006 – 31 January 2007 and the year 1 February 2007 – 31 January 2008.
  75. The answer on behalf of NCS to the claim that offers of "cashback" or "marketing support" were misrepresentations because use of such words indicated that accepting such offers would have the effect that the liabilities of OER would be less than they would have been, but for acceptance of "cashback" or "marketing support", was really set out in the second witness statement of Mr. Ward made for the purposes of this action, dated 25 June 2010:-
  76. "2. I understand that the Claimant is now seeking to make the additional claim that in my dealings with them I told them that:
    (i) the payment of the marketing support would come from the funds of the Defendant or a third party and
    (ii) that there would be no additional liability upon the Claimant and that the rentals under the lease would not be affected by the payment of marketing support.
    3. In short, that is simply not true. The marketing support payments are derived out of the Defendant's profits on any given deal, and that profit may come from three sources, being a) the margin on the sale of the equipment to the finance provider, b) the finance commission paid by the finance provider and c) a retrospective discount from the manufacturer on the purchase of the equipment from it by the Defendant. Since any lease deal will comprise elements of the purchase price of the equipment, the margin applied to it by the Defendant upon sale to the finance company, and the finance company's own margin, clearly the lease payments payable by the lessee will reflect the profit that each party makes. As the marketing support payment comes out of the Defendant's profit, it is obvious that the marketing support is a component of the lease payments payable by the Claimant.
    4. I have been asked countless times by various customers, before they enter into any lease transaction, how the marketing support payment is funded and my answer is always the same, namely the truth: that it comes out of the Defendant's profits and in particular one of, or a combination of, those three income sources.
    5. I am sure that at some point this was discussed with the Claimant because it almost always is. However, I am absolutely certain that I did not state that the lease rentals would not increase as a result of the marketing support quite simply because I never would say that, it not being true. The mere fact that the rentals were increasing markedly must make it obvious, even if I had not identified the source of the marketing support payment, that it was a component of the overall lease cost. Since the lease rentals are quite clearly affected by marketing support, I would never state otherwise."
  77. On behalf of NCS it was denied that it was liable to OER in respect of any misrepresentation, whether in relation to "cashback" or "marketing support", or otherwise.
  78. It was denied that NCS owed any duty of a fiduciary nature, or duty of care in tort, to OER.
  79. The proper construction of the Additional Terms in the Last NSSA

  80. In the first instance, at least, the claim of OER that it was entitled to be paid by NCS such amount in each year of the term of the Last Lease as resulted in the net cost to it of renting photocopying machines under the Last Lease not exceeding £28,860 depended upon the proper construction of the first numbered provision ("Additional Term 1") in the Additional Terms in the Last NSSA.
  81. Bearing in mind the submissions of Mr. Pickering as to the significance of the wording of the Final Proposal, it is, perhaps, helpful to remind oneself of the well-known guidance as to the construction of written instruments given by Lord Hoffmann in his speech in Investors Compensation Scheme v. West Bromwich Building Society [1998] 1 WLR 896 at pages 912H to 913E:-
  82. "The principles may be summarised as follows.
    (1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.
    (2) The background was famously referred to by Lord Wilberforce as the "matrix of fact", but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.
    (3) The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion on which to explore them.
    (4) The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax: see Mannai Investments Co. Ltd. v. Eagle Star Life Assurance Co. Ltd. [1997] AC 749.
    (5) The "rule" that words should be given their "natural and ordinary meaning" reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had. Lord Diplock made this point more vigorously when he said in Antaios Compania Naviera SA v. Salen Rederierna AB [1985] AC 191, 201:
    "if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion which flouts business commonsense, it must be made to yield to business commonsense."
  83. Mr. Pickering, in support of the construction of Additional Term 1 for which he contended, invited attention to those parts of the Final Proposal which he quoted in his written skeleton argument. As it seemed to me, the Final Proposal was in fact a document produced in the course of the negotiation of the Last NSSA, and thus a document to which it was not appropriate to have regard in construing Additional Term 1.
  84. In my judgment, it was appropriate, as a matter of the factual matrix in which the Last NSSA was agreed, to notice that it was preceded by seven agreements concerning similar subject matter, the supply of photocopying machines by NCS to a finance company which would let such machines under a Lease to OER, and that in respect of the liabilities to be assumed by OER under such Leases NCS agreed to pay an amount, or amounts, by way of "cashback" or "marketing support". However, what could be derived from giving such notice to previous agreements was limited. The first such agreement, when made, seemed to contemplate "cashback" being utilised to reduce the net liability of OER under the First Lease to make payments of rentals over a period of two years, until a review. The Second NSSA made no provision whatsoever for "cashback" or "marketing support". The remaining NSSAs up to, and including, the Sixth, provided for an amount to be paid by way of "marketing support" for a period until a review, such review usually being anticipated as taking place in about a year. The effect of the Third NSSA seemed to be that the "marketing support" eliminated the net need to make any payment at all in the first year of the term of the Third Lease. None of the first six NSSAs expressly contemplated that NCS assumed any commitment whatsoever to make any payments of "marketing support" beyond that for which it provided, where it did make such a provision. One could not see in terms from any of the first six NSSAs that NCS would only agree to make a payment of "marketing support" if OER entered into a new lease of some kind, because no such commitment was stated in any of the relevant NSSAs.
  85. Insofar as it might be relevant, none of the First to Sixth Leases, inclusive, endured so long that the question arose what was the position in relation to further payment of "marketing support" after the period of one year. Mr. Read told me, in cross-examination, that he understood from his discussions with Mr. Ward that the source of "marketing support" was the manufacturer of the photocopying machines supplied by NCS, Toshiba. He said that he was not aware that payments of "marketing support" were one-off payments, but he did understand that such payments were only made if OER entered into a new lease. Mr. Fraser, too, told me that Mr. Ward had told him that the ultimate source of the "marketing support" was Toshiba. Mr. Ward, who was called to give evidence on behalf of NCS, disputed that he had ever said to Mr. Read or to Mr. Fraser that the source of the "marketing support" was Toshiba. I have already set out the passage from his second witness statement in which he dealt with what he contended he had said about the source of "marketing support".
  86. I was very impressed by each of Mr. Read, Mr. Fraser and Mr. Hales. I accept their evidence without hesitation. Mr. Ward, on the other hand, I am afraid that I found most unsatisfactory as a witness. I shall come to the explanation for my view. For the present it is enough that I accept that he did, indeed, tell Mr. Read and Mr. Fraser that Toshiba was the source of "marketing support", Mr. Ward saying, according to Mr. Fraser, that Toshiba was trying to enter new areas of potential consumers of photocopying machines, in particular education, and was consequently prepared to provide effective cost reductions on acquisition of products which it manufactured.
  87. It was plain, as it seemed to me, that, whatever course of dealing between NCS and OER had occurred whilst Mr. Read was negotiating on behalf of OER with Mr. Ward, and whatever expectations Mr. Read had, things changed once Mr. Hales came on the scene for OER. In the Seventh NSSA the Additional Terms included a provision which had not appeared before, namely that numbered 3, "NCS to provide additional marketing support at this point [March 2007] to achieve target rental subject to no significant change in volume (+/- 10%)". It is, of course, correct that the clause numbered 2 in the Additional Terms of that NSSA referred to a "full review" taking place in March 2007. However, those provisions in the Additional Terms did not expressly provide for marketing support to be paid from March 2007 only if OER entered into a new lease. Rather, the provision numbered 3 plainly contemplated that "additional marketing support" would be provided, subject only to there being no significant change in volume. It would be wrong, therefore, in my judgment, to approach the construction of Additional Term 1 on the footing that it was understood between the parties, as a result of their previous course of dealing, that "marketing support" was only payable if a new lease was entered into by OER, and only payable on one occasion in respect of each Lease. On the contrary, from the making of the Seventh NSSA it appeared to be the common understanding that OER was only prepared to enter into a new Lease if the "target rental" of £28,860 net per annum was achieved somehow for each year of the Lease, subject to there being no significant change in the volume of photocopies made. Given that the rental reserved on the face of the Seventh Lease exceeded that "target rental" by a considerable amount, the "target rental" could only be achieved by the making, by or through NCS, of a substantial amount of "marketing support" each year.
  88. Simply as a matter of the words used in Additional Term 1, in my judgment the effect of it was that NCS contracted to maintain, by payment of whatever sum was necessary, the net cost to OER under the Eighth Lease at £28,860 per annum, provided only that the volume of photocopies produced by all of the photocopying machines in use did not vary from that prevailing as at the date of the Last NSSA by more than 10%. There was no express provision that the "effective rental" would only be maintained at the agreed level if OER in January 2008, or at some other point, entered into a new lease. For the reasons which I have explained, the factual matrix in which the Last NSSA was made did not require Additional Term 1 to be interpreted as if there were such a condition.
  89. The condition to which the continued payment of "marketing support" was subject, there being "no significant change in usage +/- 10%" was, it seemed to me, to a degree uncertain in its effect. The condition did not in terms identify over what period the question of whether there had been a significant change was to be assessed. As a matter of common sense, in my judgment, what was necessary was to compare a period ending on the date of the Last NSSA with another period. Since the issue whether there had been a significant change would arise in January 2008, it seemed to me that the comparison intended was a period ending at that time. The obvious date at which the period ending in January 2008 should commence for the purposes of comparison was the date of the Last NSSA. If that was the period relevant to the assessment of whether there had been a change of more than 10% in the volume of photocopying, the period with which the volume of photocopying in that period should be compared really had, logically, to be a period of equivalent length ending on the date of the Last NSSA. In my view, both as a matter of common sense, and because of the terms of the provision numbered 4 in the Additional Terms of the Last NSSA, it was the total volume of all photocopying undertaken by OER in each relevant period which was to be compared. However, it was agreed between Mr. Fentem and Mr. Pickering at the conclusion of the trial that in fact the comparison required to be made was between the volume of photocopying generated by OER in the year ending 31 January 2008 and the volume of photocopying in the preceding year, that ending 31 January 2007.
  90. As I have noted, it was the case of NCS that the volume of photocopying undertaken in the year ending 31 January 2008 exceeded by more than 10% the volume in the equivalent previous period. I shall shortly come to the evidence in relation to that question.
  91. Even if, contrary to my view, one should have regard to the terms of the Final Proposal in construing Additional Term 1, in my judgment the material terms did not support the construction for which Mr. Pickering contended. The words upon which he focused did not state that only one payment of "marketing support" should be made. Rather they provided for one payment to be made within 28 days of the later of the lease company confirming that the Last Lease had commenced, or the lease company paying NCS. In other words, whilst the material part of the Final Proposal stated that a payment would be made at the time indicated, it did not expressly state that that would be the only payment made. If the words upon which Mr. Pickering relied were read together with the table of figures showing what was payable depending upon whether the term of the Lease was three, four or five years, those words could only be interpreted as relating to the first of a number of payments. In the table, whichever length of the term was taken, there were figures for "Annual spend", "Less marketing support" and "Proposed effective annual spend". The table was only capable of being understood as relating to "marketing support" being paid in each year of the term, whatever the length of the term. Mr. Pickering contended that the table contained obvious errors, because the effect of the table, on its face, was that the longer the term of the lease, the lower the total payments to be made by OER. He was correct as to the arithmetic, but the table was clear and no obvious error, such as a transposition of digits or erroneous inclusion of words, could be demonstrated.
  92. In fact, therefore, having regard to the terms of the Final Proposal would actually have reinforced the construction of Additional Term 1 which it seemed to me, leaving the terms of the Final Proposal out of account, was correct.
  93. Significant change in usage

  94. In my judgment it was for NCS to prove that it was not bound by Additional Term 1, by reason of a change of more than 10% in the volume of photocopies used by OER in the year ending 31 January 2008, as compared with the volume used in the previous year, to furnish to OER in each year of the Last Lease whatever funds were necessary to ensure that the net cost to OER under that Lease was £28,860 per annum, inclusive of Value Added Tax.
  95. NCS sought to shoulder that burden.
  96. The evidence as to the volume of photocopying undertaken by OER in various periods did not take the form of expert evidence, but rather evidence of exercises undertaken by considering records of usage of varying types. It seems that each of the photocopying machines used by OER in the period 2006 to 2008, at least, made a record automatically of the number of copies produced. Those records were periodically noted in log books. They were also noted in invoices from time to time. Mr. Hayes of NCS analysed the relevant records, as did Mr. Fraser. Mr. Hayes considered only the usage made of the photocopying machines the subject of the Seventh Lease and those the subject of the Eighth Lease, as he considered that that was the appropriate comparison. His calculations produced an excess in the year ending 31 January 2008 over the year ending 31 January 2007 in the number of photocopies produced of either 21% or 23%, depending upon which precise records one considered. Mr. Fraser checked Mr. Hayes's evaluations. He identified one error in the data used which was significant, but not, of itself, enough to transform an increase in volume of over 20% to a figure less than 10%. Mr. Hayes accepted the error once it was pointed out to him in cross-examination. What did transform Mr. Hayes's calculations from an increase in volume of over 20% to a small decrease, of 3.42%, was taking into account two photocopying machines which OER in fact used in the period January 2006 to April 2006 which Mr. Hayes had left out of account because they were changed in the Seventh Lease. Mr. Hayes accepted Mr. Fraser's calculations, if it were appropriate to bring into account the two machines, the model E – Studio 45 and the model E – Studio 810. The difference between the parties was thus whether it was appropriate to take into account the two machines and the usage of them at the beginning of 2006, or only appropriate to take into account the machines the subject of the Seventh Lease and those the subject of the Eighth Lease.
  97. I think that it was common ground that the significance, in the context of the Last NSSA, of the volume of photocopying was the effect it could have on the obligation of NCS to maintain the machines the subject of the Eighth Lease. An excessive increase in the existing volume would make the obligation to maintain the machines more burdensome for NCS, whereas an excessive decrease would have the effect that OER was paying too much for maintenance, given that a fixed allowance for maintenance was included in the Last NSSA, as it had been in its predecessors. In the result, what was material to take into account, as it seemed to me, was the volume of photocopying undertaken using machines which NCS was maintaining.
  98. I am satisfied that the correct comparison was that undertaken by Mr. Fraser. As I have noted earlier in this judgment, the provision numbered 4 in the Additional Terms of the Last NSSA was consistent only with his comparison being the appropriate one. On his figures the volume of usage of photocopying machines by OER did not alter by more than 10% between the year ending 31 January 2007 and the year ending 31 January 2008.
  99. Conclusion in relation to contractual claims

  100. In the result I am satisfied that NCS was bound by Additional Term 1 to pay to OER during each of the years of the term of the Last Lease the sum necessary to ensure that the net sum paid by OER each year under that Lease did not exceed £28,860, inclusive of Value Added Tax.
  101. I am satisfied that, because NCS paid only an amount of £155,159.20 by way of "marketing support" in respect of the Last Lease, OER found itself in difficulty in making payment of the quarterly rentals for which that Lease provided. A consequence of those difficulties was that OER did not make a payment when due, and on 16 April 2007 HFGL charged OER an amount of £982 in respect of interest and fees in respect of late payment.
  102. The sum of £155,159.20 was not sufficient to reduce, in the first year of the term, the obligation under the Last Lease to pay quarterly rentals of £41,754.80, together with Value Added Tax at a rate of 17.5%, amounting to £7,307.09, so a total of £196,247.56 per annum, to £28,860. The shortfall was £12,228.36.
  103. In the second year of the term of the Last Lease what NCS should have paid was a sum of £165,299.82, namely £167,019.20, plus applicable Value Added Tax, but less £28,860. Because of changes in the rates of Value Added Tax, two quarters' rentals attracted Value Added Tax at 17.5% and two attracted Value Added Tax at 15%.
  104. As a result of the difficulties in which it found itself, OER entered into negotiations with HFGL for the termination of the Last Lease. On 24 April 2009 there was substituted for the Last Lease an agreement ("the Settlement Agreement") made between BNP Paribas Lease Group (Rentals) Ltd. ("BNP"), the successor to HFGL, and OER under which OER agreed to pay to BNP amounts of £30,000, inclusive of Value Added Tax, at quarterly intervals over a period of 19 quarters. That liability will be discharged in 2014. The total sum payable over that period amounts to £570,000.
  105. Had the Last Lease not been terminated in April 2009, a further two quarters' rental would fallen due on which Value Added Tax would have been payable at a rate of 15%, and then four quarters' rental would have fallen due on which Value Added Tax would have been payable at 17.5%. The Government has announced that the rate of Value Added Tax will be increased to 20% as from 4 January 2011. Consequently it appears that until the expiration of the Last Lease by effluxion of time, the quarterly rentals for the remaining six quarters would have attracted Value Added Tax at the rate of 20%. Thus, but for the termination of the Last Lease, OER would have had to pay 2 x £(41,754.80 x 115%), 4 x £(41,754.80 x 117.5%) and 6 x £(41,754.80 x 120%). This totals £592,504.16. By entering into the Settlement Agreement OER had mitigated its liabilities by reducing them by £22,504.16. However, but for the termination of the Last Lease, NCS would have had to pay OER that amount by which £592,504.16 exceeded 3 years at £28,860, totalling £86,580, namely £505,924.16.
  106. At the end of the trial Mr. Fentem claimed as sums due under the Last NSSA or as damages for breach of the obligation contained in Additional Term 1, the amount of £982 which I have mentioned, plus the short-fall on the payment due in the first year of the Last Lease, plus the sum which should have been paid in the second year of the Last Lease, plus the sum which should have been paid over the remainder of the Last Lease, had it not been determined, but giving credit for the saving achieved by the making of the Settlement Agreement. On my figures, which differ from the figures which Mr. Fentem put before me, because he did not take account, as I think should correctly be taken into account, the announced increase in the rate of Value Added Tax as from 4 January 2011, the total sum claimed comes to £661,930.18.
  107. On the hypothesis that OER had made out its case under Additional Term 1 Mr. Pickering did not, I think, dispute the figures as figures.
  108. Alleged misrepresentations

  109. It was accepted by Mr. Fentem in his closing submissions that the claim based on alleged misrepresentation by Mr. Ward by use of the words "cashback" and "marketing support" was, in reality, an alternative to the contractual claims, in the sense that any damages due in respect of the alleged misrepresentations fell to be calculated in the same amount as the sums due in respect of the contractual claims and that amount could only be claimed in respect of one basis of claim.
  110. Mr. Pickering submitted that in fact the quantification of damages was different, because on proper interpretation of the Amended Particulars of Claim, notwithstanding what was pleaded in paragraph 52A, the damages claimed in paragraph 55 related only to the alleged entry into the Last NSSA and the Last Lease. I am not sure that that was correct on the statement of case as it stood, although there was a degree of lack of clarity as to what exactly was being claimed. The formula in paragraph 55, "the difference between the sums that the Claimant is obliged to pay under the 2007 HFGL Lease and the sums that it would have paid had the representations [those pleaded in paragraphs 39 to 41 and 52A] been true", struck me as encompassing, if not exactly emphasising, the claim for damages which Mr. Fentem explained in his submissions OER wished to pursue.
  111. The issue whether the references to "cashback" and to "marketing support", which it was accepted Mr. Ward had made at each negotiation of each relevant NSSA and each relevant Lease were misrepresentations turned simply upon what those words conveyed as ordinary English words. In particular it turned upon whether those expressions indicated, as a matter of English usage, and in the context in which they were employed in the present case, that the sum being offered as "cashback" or "marketing support", would have, if accepted, the effect of reducing the financial liability of the offeree being invited to enter into the transaction in relation to which the offer was made, as compared with his liabilities if he entered into the transaction without accepting the offer. In my judgment that is exactly what those expressions conveyed in relation to each of the transactions in which Mr. Ward mentioned them. In transactions for the acquisition of capital goods, as it seems to me, an offer of "cashback" or of "marketing support" conveys, as a matter of English, a reduction in the net price to the offeree of the transaction. It is the opposite of what was the reality of each of the transactions into which OER entered, namely, in effect, OER borrowing, at a substantial rate of interest, the amount of the "cashback" or "marketing support" from the finance house which was funding the acquisition of the photocopying machines. In some circumstances, for example in a supermarket, the expression "cashback" does not mean an effective reduction in the net price of something, but the facility to draw cash, as one might from a bank. However, that is a context a long way from the present. The focus of the discussions involving Mr. Ward were, on the OER side, I am satisfied, savings in the costs of obtaining photocopying machines and containing the net effective costs of such machines. Mr. Ward did not, in his evidence, suggest that the focus was something different. His evidence was to the effect that NCS was offering effective reductions, because it was offering "cashback" or "marketing support" out of its own profits. Whilst I reject that analysis of where the funds were coming from, it is significant that even Mr. Ward presented the "cashback" and "marketing support" as reductions in the liabilities which OER would otherwise have incurred.
  112. Mr. Ward's suggestion that "cashback" or "marketing support" was being paid out of the profits of NCS was just nonsense. As I have noted, in each Summary in respect of which an entry was made for "marketing support", it was specifically identified as to nature and amount. From each Summary it seemed that the amount of "marketing support" was taken into account in calculating the sum to be charged to the finance house. Mr. Ward would have it that in fact the calculation began with the figure to be charged to the finance house, and then items like "marketing support" were included as costs in order to see whether the proposed transaction would be profitable. That just makes no common sense. The logical way in which to build up a price at which to sell goods is to factor in the relevant direct costs in order to decide at what cost the goods need to be sold for the transaction to be profitable. It is ridiculous to pluck a figure out of the air as a possible sale price and then see whether a sale at that price would be worthwhile, once direct costs have been allowed for.
  113. That the offer of "cashback" or "marketing support" was made with intent to deceive appears, in my judgment, from the facts that the financial benefit to NCS of including the cost of "cashback" or "marketing support" in the calculation of the sale price of photocopying machines in the way in which it was done in the cases concerning OER was limited, but its effect upon OER was seriously disadvantageous. Save insofar as NCS made a profit by the inclusion of a sum in excess of the cost to it of "cashback" or "marketing support" in arriving at a sale price, or from the fact that some sort of commission was based on the total amount financed by a finance house, NCS had nothing financially to gain from the inclusion of an allowance for "cashback" or "marketing support" in its calculations. The inclusion of the amount of the actual cost to NCS of "cashback" or "marketing support" in calculating a price was simply counter-balancing a cost. If the allowance for "cashback" or "marketing support" were not included, but also the cost was not incurred, NCS would be in exactly the same position in financial terms. On the evidence of Mr. Ward, NCS made a profit on the inclusion of a counter-balance to the cost to it of "cashback" or "marketing support" in two ways. First, it seemed that an element of profit was applied to the "Total Base Price", including "marketing support", set out in a Summary to produce the "Customer Inv. Value". Second, NCS made a commission from the finance house based on the size of the funding provided by the finance house to the customer of NCS. However, for NCS to make those profits, the customer had to accept a liability to repay the entire amount of the "cashback" or "marketing support", together with interest at a level of about 7.3% per quarter, spread over five years. If NCS simply wanted the profit it could make on "cashback" or "marketing support", it could easily have increased its mark-up on the "Total Base Price", whilst omitting the element for "cashback" or "marketing support", and thereby saved its customer a significant amount of money. The only obvious reason for not following that course was to delude the customer into thinking that the "cashback" or "marketing support" was valuable to it, whilst not in fact costing NCS anything.
  114. Mr. Pickering submitted that, even if the customer was financing his own "cashback" or "marketing support", that was of value to him in cashflow terms. However, as I have demonstrated in relation to the first transaction involving OER earlier in this judgment, nothing like as valuable as not incurring the liability to finance the "cashback" or "marketing support".
  115. In the end I am satisfied that the references by Mr. Ward to "cashback" or "marketing support" at the times of the negotiations of the First Lease and the Third to Last Leases, inclusive, did amount to misrepresentations and were made by him deliberately, with a view to deceiving OER to thinking that what was being offered was a reduction in the liabilities which it would incur, but for the "cashback" or "marketing support". The evidence of Mr. Read and Mr. Hales was that they would never have entered into any of the relevant agreements if they had understood that the cost of "cashback" or "marketing support" was in reality going to be borne by OER, together with substantial interest on the amount paid as "cashback" or "marketing support". I accept that evidence.
  116. It was common ground that the basis upon which damages for misrepresentation fall to be determined as a matter of law is that sum necessary to put the person being compensated in the position in which he would have been if he had not entered into the relevant contract, credit being given for the benefits derived by that person from entering into the transaction. Mr. Fentem accepted in his closing submissions that, in the circumstances of the present case, it was difficult to approach the calculation of damages on a precise arithmetical basis, but that, approaching the matter broadly, it seemed that the damages resulting from the misrepresentations resulted in the same figure as that was due to OER in respect of its contractual claims. It was obviously possible, as a matter of arithmetic, to calculate how much OER would have had to pay under the Infotec Agreement, had that agreement continued in existence until expiry by effluxion of time. It was also possible, as a matter of arithmetic, to calculate how much, in total, OER had paid under the First to Seventh Leases, inclusive, and how much had been paid, or OER remained liable, at the date of the Settlement Agreement, to pay, in respect of the Last Lease. However, there was difficulty in assessing, as a matter of arithmetic, the benefits which OER had derived under the First to Last Leases, respectively, and the NSSAs associated with those leases. Broadly, under each NSSA and Lease OER had acquired at least one photocopying machine of a higher specification and performance than it had had before. Also, OER had benefited from performance by NCS of maintenance obligations provided without additional charge. If one took a broad view, OER had been prepared to pay what was described as the "effective rental" per quarter from time to time for the package of benefits which it derived under each NSSA and associated Lease. In the absence of any detailed evidence as to the worth of particular photocopying machines from time to time, or of the value of maintenance, it appeared reasonable to treat what, from time to time, OER was content to pay as an "effective rental", as evidence of the fair value of what it received. On that basis, the loss which OER sustained as a consequence of the various misrepresentations was the liability to discharge the sums payable in respect of the "cashback" or "marketing support" provided from time to time. Because of the way in which each NSSA and associated Lease succeeded a predecessor, those total liabilities were in fact crystallised in the sums payable under the Last Lease, insofar as they exceeded £28,860 per annum. In the result, the damages payable by NCS to OER in respect of the misrepresentations equate to the sum of £661,930.18, the calculation of which I have already explained. However, that sum is only payable once. The payment of that sum pursuant to, or as damages for breach of, the Last NSSA eliminates the loss consequent upon the misrepresentations.
  117. Mr. Pickering did not, I think, oppose in principle the calculation of the damages for misrepresentation for which Mr. Fentem contended in his closing submissions. However, he contended that, given how the claims in respect of misrepresentation were pleaded in the Amended Particulars of Claim, the appropriate comparison was between the position of OER as it was under the Seventh Lease, subject to the liability to pay the quarterly rentals for which that Lease provided, and the position under the Last Lease.
  118. I have already mentioned that it appeared to me that the way in which the alleged consequences of the misrepresentations complained of was pleaded in the Amended Particulars of Claim was not as clear as it might have been. However, it was plain from the terms of paragraph 52A of the Amended Particulars of Claim that OER intended to pursue claims in respect of misrepresentations made inducing all of the First and Third to Last Leases, and associated NSSAs. Moreover, in paragraph 60 of the Amended Particulars of Claim, admittedly in the context of the claims based on alleged breaches of fiduciary duty and negligence, the following allegations were included:-
  119. " … But for the Defendant's negligence and/or breach of fiduciary duty, the Claimant would not have entered into the 2007 HFGL Lease or any lease agreement negotiated and arranged by the Defendant on the Claimant's behalf. The Claimant claims as damages:
    (d) Alternatively, the difference between its total liability under the 2001 GE Capital Lease and its total liability under the 2007 HFGL Lease, being £772,976.00."
  120. As it seemed to me, Mr. Pickering's point, if a good one, was nonetheless a pleading point. Had it been necessary, I should have been prepared to consider an application for permission to re-amend the Particulars of Claim to make clear the claims which OER desired to pursue in respect of misrepresentation. I do not think that the position of NCS would have been prejudiced had I acceded to such an application. No evidence, in addition to that led before me, would have been necessary in consequence.
  121. However, a further problem which arose, had Mr. Pickering's point been a good one, in my view, was the provision numbered 3 in the Additional Terms of the Seventh NSSA. Whilst the actual wording of that clause was different from that of Additional Term 1, it seemed to me that its effect was the same. Consequently, the position of OER under the Seventh Lease and the Seventh NSSA was, in my judgment, that NCS was obliged by contract to maintain the "target rental" at £28,860 per annum, inclusive of Value Added Tax, for the length of the term of the Seventh Lease. When one takes that into account, even accepting Mr. Pickering's point, the same damages would be payable as that which I have found to be due.
  122. Claims for damages for alleged breaches of fiduciary duty

  123. The claims for damages for alleged breaches of fiduciary duty had assumed, by the end of the trial, less prominence than at earlier stages. The alleged justification for the claims was explained by Mr. Fentem in his written skeleton argument in this way:-
  124. "28. A financed lease structure such as the present involves three parties (customer, financier and supplier), which will generally deal with one another as principals: Branwhite v. Worcester Works Finance Limited [1969] 1 AC 552. The caveat, "generally", is important. There is no rule of law that a supplier will not have undertaken obligations as agent of the customer, and it may in proper circumstances be held to have entered into a relationship of agency. For instance, where the supplier undertakes to submit and supply the customer's leasing proposal (or offer) to a finance house, it does so on behalf of the customer: see Branwhite at 578A-B per Lord Upjohn.
    29. In this case, NCS went further than simply to agree to submit ESO's [that is, OER's] proposals to a particular finance house, although this in itself gives rise to an ad hoc agency. Further indicia of express or implied agency (see Bowstead & Reynolds on Agency, Arts 7 and 8) are:
    (1) ESO did not propose or nominate any particular financier at any time. NCS searched the market, on ESO's behalf, in order to identify a financier that would be willing to underwrite and enter into each of the proposed leases with ESO.
    (2) NCS, through the medium of Mr. Ward, completed most of the financial information in each of the leases after they had been signed on behalf of ESO. It could only have done so on ESO's behalf and so as its agent.
    (3) Mr. Ward's approach to and dealings with ESO was couched in terms of NCS taking steps to ensure that ESO would continue to realise financial "savings" in its photocopier leasing obligations by way of review and negotiation or re-negotiation with finance houses if necessary. ESO was considered as NCS's client. The periodical "contract reviews" carried out by Mr. Ward further continued and entrenched the relationship.
    (4) Mr. Ward did indeed negotiate on ESO's behalf with finance houses. By way of example, Mr. Ward states at MW[19] that in May 2005 he was able (on ESO's behalf) to persuade HFGL to "unwind" the transaction of December 2004.
    (5) Because of the nature of the structure that Mr. Ward introduced to ESO, and encouraged it to enter into, ESO very quickly became "locked into" a relationship of dependency on NCS. The nature of the transactions, whereby earlier leases were repeatedly terminated early and "redemption charges" were added into the amount to be financed under each new lease, meant that without NCS's financial and organisational support ESO would be left with extremely high liabilities under the extant leases. To avoid this, ESO was in effect obliged to enter into each new lease proposed by Mr. Ward/NCS, which merely put off for another year (at most) the need to re-negotiate the finances once again.
    (6) As Mr. Ward states at MW[2], he was thoroughly familiar with the leasing of office equipment; unlike ESO, he knew what he was doing and knew that ESO had become dependent on NCS. ESO looked to him for advice and proposals on their leasing contracts, and he habitually provided it."
  125. The nature of the case of OER seemed to be that because, so it was said, NCS undertook certain functions, such as forwarding various Leases, completed on behalf of OER and signed, to finance houses, NCS was an agent of OER and, consequently, owed fiduciary duties, in essence to act loyally and not to profit from its agency without giving full disclosure.
  126. It was not in dispute that, in its dealings with OER, NCS, by Mr. Ward, acted in its own interests and not in the interests of OER, where the interests of NCS and those of OER conflicted.
  127. However, Mr. Pickering disputed the proposition that NCS owed to OER the duties for which Mr. Fentem contended. The case for NCS was, in effect, that just because, having undertaken to forward to a finance house on behalf of OER an offer to enter into a Lease, it did not follow that NCS assumed a whole raft of onerous obligations which might have been appropriate if NCS had agreed to undertake different tasks as agent of OER. I accept the submission of Mr. Pickering.
  128. On the evidence in the present case all NCS did as agent of OER was essentially to act as a scribe in completing, and as a postman in forwarding, documents. In its role as scribe NCS no doubt owed OER a duty to take reasonable care to complete the relevant documents correctly. In its role as postman NCS probably owed OER a duty to take reasonable care to ensure that the relevant documents reached the intended recipient. However, the assumption of these roles came nowhere near, in my judgment, imposing upon NCS a duty to advise as to the wisdom of the intended transactions, or a duty to disclose all of the ramifications of the intended transactions, including, in particular, the profits anticipated to be made by NCS.
  129. It is, perhaps, not without significance that only the first two, and the fourth, of the six matters specifically identified in paragraph 29 of the written skeleton argument of Mr. Fentem appeared to address NCS actually doing something as agent of OER. No complaint was made that OER sustained any loss as a result of some deficiency on the part of NCS in performing, as agent of OER, the tasks identified in those three sub-paragraphs of paragraph 29.
  130. Whilst I accept that NCS did undertake some tasks as agent of OER, that did not, in my judgment, have the consequence that NCS assumed the obligations contended for on behalf of OER. Consequently the role of NCS as agent of OER was simply irrelevant to the matters of which OER complained in this action.
  131. Claims for damages for alleged negligence

  132. In his closing submissions Mr. Fentem explained that the case of OER that NCS owed it duties of care in tort was closely bound up with the case based on agency.
  133. The way in which the case in negligence was expounded in the written skeleton argument of Mr. Fentem was:-
  134. "46. ESO says that NCS undertook an obligation governed by the law of tort to take reasonable care and skill in advising ESO as to the photocopying leasing transactions that it entered into and in preparing the leasing documentation on ESO's behalf so as not negligently to cause it economic loss by reason of those transactions. This is therefore a "pure economic loss"-type claim, which most recently saw high-level exposition by the House of Lords in Customs and Excise Commissioners v. Barclays Bank plc [2007] 1 AC 181. In that case at [4], Lord Bingham re-iterated the three tests disclosed by the authorities which have been used in determining whether a defendant may be found to have owed a duty of care in tort to take reasonable care to avoid causing economic loss to a claimant:
    (1) Assumption of responsibility, where the defendant has, or is to be treated as having, voluntarily assumed responsibility is to be analysed objectively by reference to all the relevant circumstances: see Lord Bingham at [5] and Smith v. Eric S. Bush [1990] 1 AC 831, and the label "voluntary" is not to be taken as meaning "without remuneration" but instead "without compulsion"/ "conscious" / "considered" / "deliberate": see Lord Walker at [73];
    (2) The "threefold" test, where the loss is foreseeable, the parties are in a sufficiently proximate relationship and it is in the circumstances fair, just and reasonable to impose a duty; and
    (3) The incremental test, where the development of novel categories of negligence proceeds incrementally by analogy with established categories.
    47. The three "tests" disclose no single denominator by which liability may be determined, such that the court is required to analyse all the detailed circumstances of a given case and the parties' relationship as a whole. Nonetheless, assumption of responsibility likely remains the best rationalisation for this head of tortious liability: see per Lord Steyn in Williams v. Natural Life Health Foods Ltd. [1998] 1 WLR 830 at 837. Clerk & Lindsell on Torts helpfully lists a number of "relevant factors" at para 8-92 to 8-107 when considering whether a relevant duty arises:
    (1) The purpose of the defendant's statement or service. At para 8-94, the editors note that "[t]he purpose of a service may indicate that the provider assumes a responsibility to those intended to benefit from it";
    (2) Knowledge of the defendant, including knowledge of the "use" to which the statement or service is to be put and of the fact that the claimant will rely on the defendant's skill;
    (3) Reasonable reliance or dependence by the claimant on the defendant's words, acts and skill. In this regard (as generally), the scope of any contract between the parties may be relevant to the imposition of a duty, as will any special authority or skill of the defendant in the particular business context.
    48. It is submitted that once the facts of this case are analysed, it is clear that NCS, acting through its Area Sales Director Mr. Ward, assumed a responsibility to ESO to take reasonable care to advise it as to the commerciality of its leasing transactions, to manage the leasing proposals and transactions carefully, and to ensure that the proposals put to the financiers were accurate and prudent."
  135. It is, I think, material to remind oneself both that, in relation to the question whether a party owed a duty of care having a particular scope to another party, each case depends upon its own facts, and that there are some relationships of common occurrence, such that if a decision is made that a duty of care was owed in one case of common occurrence, it would be likely that a similar duty would be owed in other relationships of the same type. A further material consideration, in a case in which it is said that a duty of care comprehended the need to give advice of some kind, is whether, on the facts of that case, it should reasonably have appeared to the party alleged to owe the duty that the other party was in need of the relevant advice. In addition, in my judgment, a factor to be considered in the context of a contention that a party owed a duty of care in tort having a particular scope to another party, is whether the law already affords a remedy in respect of what is characterised as a breach of a duty of care. That seems to have been a feature in the case to which Mr. Fentem drew attention, Customs and Excise Commissioners v. Barclays Bank plc [2007] 1 AC 181.
  136. Mr. Ward was acting throughout in his dealings with OER as a salesman of the products sold by NCS. In the course of performing that role perfectly legitimately he could be expected, where it was accurate to do so, to commend the products he was selling and to put together proposals as to the terms upon which the products might be made available to potential customers which might appeal to the potential customers. Any inaccurate statements made by a salesman like Mr. Ward in the course of his attempts to sell would be likely to be caught by the law in relation to misrepresentation or the well-established principles of negligence in relation to false statements. It was not that sort of duty of care in tort for which Mr. Fentem contended in the present case. The duty of care for which he contended appeared to amount to an obligation positively to advise as to the merits, from the point of view of OER, of the various proposals which Mr. Ward put to representatives of OER from time to time. That is not the sort of obligation which one would usually expect a salesman, or his employers, to assume. Ordinary commerce rather depends upon the assumption that adults of sound mind are capable of managing their own affairs, and, in particular, capable of assessing the advantages and disadvantages of entering into particular transactions. The question, perhaps, arises whether there were any particular features of the dealings between Mr. Ward and OER which meant it was appropriate to impose on Mr. Ward or on NCS a duty to advise OER as to the merits, from the perspective of OER, of the various proposals put to it from time to time by Mr. Ward.
  137. Although OER is an academic institution, it had, in Mr. Read, a bursar who was experienced in matters of business. He told me that he understood perfectly well that if a lease of equipment was terminated earlier than the expiry of the term of the lease, a termination charge was payable. He also said that he knew that if the occasion of the early termination was OER entering into a new lease, the amount of the termination charge would be included in the finance provided under the new lease. Prior to encountering Mr. Ward Mr. Read had entered, on behalf of OER, in the course of three years into four leasing transactions which had had the features which I have mentioned. Mr. Read told me that he read, and understood, each of the NSSAs and associated Leases put to him by Mr. Ward before signing them. He also looked at the versions of the various Leases which were sent to him by the respective finance houses after signature. He saw the quarterly rentals specified in each relevant Lease. Mr. Fraser told me that he had an accounting qualification and he, too, understood how commercial leases of equipment were structured. Mr. Hales, also, was an experienced, and, as it seemed to me, astute, businessman. In those circumstances there was no objective reason to suppose that OER was not well-placed to assess for itself whether to enter into the various NSSAs and associated Leases presented to it by Mr. Ward. The only unusual features of any of the relevant transactions were the misrepresentations in relation to "cashback" or "marketing support" which I have already considered, and various other odd circumstances, like the inclusion in the calculation of the gross profit of NCS of a first quarter's rental payment, which were not the subject of a claim.
  138. In the result, it did not seem to me that it would be fair, just or reasonable to impose upon NCS or Mr. Ward a duty of care in tort specifically to advise OER as to the merits, from the perspective of OER, of the various proposals put by Mr. Ward.
  139. Mr. Ward

  140. I have already noted that I was not impressed by Mr. Ward as a witness. The main problem was that, while much of his evidence was plausible on its face, when confronted by something which he could not explain away convincingly, he resorted to asserting, however improbably, that what could not be explained away was an error, or just not offering an explanation at all. He also made other assertions in the course of his evidence which simply flew in the face of common sense.
  141. A good example of an asserted "error" was Mr. Ward's efforts to avoid the implications of the table included in the Final Proposal. About that he said at paragraph 26 of his first witness statement made for the purposes of this action, dated 10 June 2010:-
  142. "The review of the Seventh Transaction was due in March 2007. In preparation for that I produced a proposal illustrating how the Seventh Transaction could be reworked by entering into a new lease, with payment of marketing support, and how the payments would vary dependent on the term of the lease for 3, 4, or 5 years. This proposal showed that, on a three year rental, the annual rental would be £251,257.28; on a four year rental it would be £198,490.12; and for a five year rental it would be £167,019.20. The fixed marketing support would be the same in all cases, namely £138,159.20. Although the proposal describes the net rental in each case (being £113,098.08, £60,330.92 and £28,860.08 respectively) as being an "effective annual spend", in fact I intended it to mean the effective spend for the period of the review, which would have been one year. In other words, that the "effective annual spend" meant the first year only of each of the leases, with the remaining term being the gross annual rental, which is how all the previous leases had worked. That this must be the case is obvious from the fact that, if the effective annual spend really were to last throughout the term of the lease, the total rentals for a three year lease would be £339,294.24, for a four year lease it would be £241,l323.68 and for a five year lease it would be £144,300.00. This is nonsensical, since no one would expect to pay less in total rentals the longer the lease term – precisely the opposite would be the expectation."
  143. The wording used in the table was clear, as it seemed to me, and set out, for each rental term postulated, an "Annual spend" and a "Proposed effective annual spend" after deduction of "marketing support". The table could only be read as showing an annual amount of "marketing support" of £138,159.20, whichever rental term was chosen. Whilst asserting in paragraph 26 of his first witness statement that that interpretation was not intended, Mr. Ward offered no explanation as to how the table came to be produced in the unambiguous form it was.
  144. At paragraph 10 of his first witness statement Mr. Ward dealt with the Second Lease. He said, so far as is presently material:-
  145. "I next saw Mr. Read in November of 2003 when it was agreed that the Defendant would supply a Toshiba E45 to replace the E200 being one of the machines hired under the First Transaction. This would involve a partial settlement of the amounts owed to HFGL under the lease agreement in question."
  146. By the time Mr. Ward came to give evidence attention had been drawn to the Second Lease, and it was appreciated by all in court that in fact the Toshiba E – Studio 45 the subject of the Second Lease was not in place of any existing machine in the possession of OER, but an addition, and the occasion of the addition was a transaction at least one of the purposes of which was to generate for NCS an amount of £7,501.14 which it had had to pay to have the Infotec Agreement discharged, but had not recovered from OER. When he was called to give evidence Mr. Ward corrected paragraph 10 of his witness statement to bring it into line with what was clear from a consideration of the documents relating to the Second Lease. He explained that he had made an error in his witness statement by not checking the relevant documents.
  147. The account Mr. Ward gave in his first witness statement concerning the sixth transaction between NCS and OER included, at paragraph 19:-
  148. "I next saw Mr. Read in May 2005. It appears that the Claimant had a need for a new colour machine. Ordinarily the usual way would have been to provide a new machine under a new lease agreement and leave the existing lease agreement for the remaining machines in place. However, as only one quarterly rental had fallen due under the Fifth Transaction, I was able to persuade HFGL that, instead of requiring that their settlement figure be paid, to "unwind" the Fifth Transaction, meaning that all they required was a refund of their initial outlay rather than payment of rentals for the remaining term (less a rebate for early settlement). This was a sum considerably less than HFGL were contractually entitled to ask for, and was therefore much more beneficial to the Claimant than entering into a fresh agreement for the new machine. The Defendant derived no benefit from this course of action."
  149. The last sentence of that passage was untrue, as Mr. Ward accepted when he was cross-examined by reference to the Sixth Summary, which showed a gross profit to NCS on the transaction of £11,250. However, Mr. Ward offered no explanation as to how he had come to assert that NCS derived no benefit from the transaction.
  150. A further error, apparently totally inexplicable, was not in a witness statement but in the Third Lease. In the Explanation in that Lease Mr. Ward had completed in his own hand a figure of £9,128 as the "Amount needed to settle current agreement" and stated that that sum was required to settle an agreement with "Siemens" numbered "048 – 6657". In cross-examination Mr. Ward accepted that he had not seen any lease with that number made between Siemens and OER. He accepted that in fact no sum was actually paid in settlement of any existing agreement on the occasion of the making of the Third Lease. He agreed that the reference to the Siemens agreement was clearly not right. However, he could not explain it. He rejected the suggestion put to him by Mr. Fentem that the element of settlement of an existing agreement he had introduced so that the finance house would not notice that the cost of a single photocopying machine, the Toshiba E – Studio 4511, was supposed to be £35,000. However, on the evidence of Mr. Ward, one seems to have straightforward lies being told in the completion of the Explanation in the Third Lease which he was wholly unable to explain.
  151. On the face of the Explanation in the Third Lease, the actual cost of the Toshiba E – Studio 4511 was £25,872. The Third Summary showed the "Total Equip Value" as £7,123.90 and the "Total Base Price" as £17,380.90. The "Customer Inv Value" was recorded as £35,000. In an e-mail to Mr. Ward dated 1 March 2004 Mr. Read enquired as to the value of the photocopying machine for insurance purposes. Mr. Ward replied in an e-mail dated 3 March 2004 that:-
  152. "The value of the colour photocopier for insurance is £25872 plus VAT."
  153. That answer was plainly incorrect. Mr. Ward told me that the actual selling price of equipment sold by NCS to a finance house with a view to letting to OER was the figure set out in the Summary as the "Customer Inv Value". If that were accurate, the value of the Toshiba E – Studio 4511 was £35,000. The figure £25,872 did not appear anywhere on the Third Summary and could not easily be derived from any combination of the figures which were stated in that document. The only possible conclusion had to be that Mr. Ward passed on to Mr. Read a figure wholly artificial on any basis, but which was consistent with what appeared on the face of the Third Lease.
  154. Another very sporting assertion made by Mr. Ward was that he intended that the word "agreement", when used in clause 3 of the Additional Terms in the Last NSSA to describe that which could be cancelled if "marketing support" were not paid within 28 days, was to mean the Last NSSA and not the Last Lease. That is not a construction which clause 3 could sensibly bear. Either Mr. Ward did not, in truth, intend the meaning which he asserted in cross-examination, or, if he did, he set out deliberately to mislead Mr. Hales as to which agreement was intended to be referred to. It was only the "marketing support" which made the Last Lease viable from the perspective of OER, as Mr. Ward knew perfectly well.
  155. A final example of the unsatisfactory evidence of Mr. Ward was what he said in relation to the practice, demonstrated from most of the Summary documents to which I have referred, of NCS collecting a first quarter's rental from OER which was treated as pure profit by NCS. Mr. Ward rejected the suggestion made by Mr. Fentem that he had told representatives of OER that NCS would pass the amount so paid to the finance house concerned, or that NCS had already made payment of the amount in question on behalf of OER. However, he offered no explanation of why, so it appeared, OER was prepared to make 21 quarterly payments of rental, 20 to the finance house and one to NCS, under Leases which only required 20 quarterly payments to be made.
  156. It was difficult to resist the conclusion that, at least as conducted on its behalf by Mr. Ward in relation to OER, the business of NCS was fundamentally dishonest, and that Mr. Ward was prepared to utter whatever untruths were necessary to foster that business.
  157. Conclusion

  158. In the result, there will be judgment for OER in the sum of £661,930.18.


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