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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Alfano & Ors v National Westminster Bank Plc [2013] EWCA Civ 1703 (20 December 2013) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2013/1703.html Cite as: [2013] EWCA Civ 1703

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IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM
HIGH COURT QUEEN'S BENCH DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		20/12/2013

Lord Justice Pitchford :

1. On 20 April 2012 Cranston J gave judgment for National Westminster Bank plc (the claimant/respondent), to whom I shall refer as "the Bank", in its claim against four members of the Alfano family (the defendants/appellants), to whom I shall refer as "the appellants", to enforce personal guarantees each in the sum of £100,000, given to the Bank on 6 February 2009. Seventeen grounds of appeal are advanced, all of which concern or depend upon challenges to the judge's findings of fact.
2. Cranston J set out the factual background to the claim at paragraphs 4 - 40 of his judgment at [2012] EWHC 1020 (QB) and I shall confine my summary to the essentials. Ciborio Limited ("Ciborio" or "the company") was a family business established in 1951 to supply (principally) Italian food and drink products to restaurants and other outlets in the United Kingdom. In 2007 Paul Alfano was finance director and managing director elect. His father was one of the founders. Other members of the family were directors or senior managers. Ciborio owned the freehold of its main office and warehouse in Greenford, Middlesex. Ciborio's parent company was Alfano Brothers Limited. Alfano Brothers Limited Retirement Benefits Scheme ("Alfano Retirement") held leases on further Ciborio premises in Rochdale, Newcastle, Cardiff and Glasgow.
3. In October 2007 Ciborio re-financed its business with a loan of £3.4 million from Five Arrows Commercial Finance Limited ("Five Arrows") secured against the Greenford property, then valued at £4.5 million. Five Arrows, which also provided revolving stock and confidential invoice discounting facilities, held a debenture (a fixed and floating charge) over Ciborio's assets. Five Arrows was subsequently taken over by GE Commercial Finance ("GE").
4. The claimant Bank was the banker for Alfano Retirement. The company's contact at the Bank was Mr Paul Stevens who was then a commercial relationship manager working from the Bank's offices at Charing Cross in London. Mr Paul Alfano and Mr Stevens enjoyed a good business relationship. They happened to live within 3 miles of one another, sometimes shared transport from meetings, and attended Bank social functions together. In 2007 and 2008 talks took place between Mr Stevens and Mr Paul Alfano with a view to the Bank replacing HBOS as Ciborio's banker. Mr Andy Thomson joined the Bank from HBOS on 7 January 2008 as associate director, business development, also working from the Charing Cross branch. He assisted Mr Stevens in his development of the working relationship with Ciborio from the summer of 2008. The objective was that the Bank should replace HBOS and GE. The Bank would become Ciborio's sole banker/banking creditor by:

(1) providing a net nil currency facility account, the effect of which was to permit an overdraft of up to £1 million in Ciborio's sterling bank account provided that the overdraft was matched by funds standing in other currency accounts;

(2) making a loan to redeem and replace GE's mortgage of the Greenford property;

(3) introducing Royal Bank of Scotland Invoice Financing ("RBSIF") to replace GE's stock facility and confidential invoice discounting arrangement;

(4) taking a debenture over the company's assets thereby replacing GE as the sole debenture holder.

5. The currency facility was completed by an agreement dated 9 June 2008. The Greenford security had however reduced in value to £3.5 million. An arrangement was made that the Bank would lend £2.83 million against the Greenford security. The agreement was signed on 16 October 2008. The balance of about £500,000 required to redeem GE's mortgage was found from Ciborio's stock facility with GE, hopefully as a temporary measure. The four point plan referred to in paragraph 4 above faltered when RBSIF, having examined Ciborio's underlying asset and trading position, declined to take over GE's stock facility and confidential invoice discounting arrangement. By this time it was evident that Ciborio was experiencing significant cash flow problems, partly as a result of the pressure on the stock facility caused by the shortfall in the Greenford security. On 6 October 2008 Mr Stevens wrote to Ciborio deferring the requirement for the provision of a debenture for a period of three months after the date that the property loan was drawn down, that is until 17 January 2009.
6. On 6 January 2009 Mr Thomson put to the Bank's commercial credit section a proposal to overcome the cash flow difficulties. The Bank would make a loan of £500,000 to Alfano Retirement against the security of a Scottish property. In turn, Ciborio would borrow that sum from Alfano Retirement. By this means it was hoped that the informal overdraft on Ciborio's sterling currency account would no longer be required. The deputy head of commercial credit at the Bank, Mr Tony Conroy, reviewed the proposal on 21 January 2009. That month Ciborio's overdraft had fluctuated between £114,319 and £246,819. Mr Conroy noted that Ciborio was in default of repayments of the secured loan and the overdraft limit had been exceeded. He responded to the application as follows:

"If I am to consider continuation of the existing facilities and agree to the pension loan I would wish further conversations to be undertaken with the company as I believe the updated position calls for additional equity to be made available to support the business going forward. I accept that the current position we are in does point to the need to support this business, however this must be in tandem with shareholders to ensure that sufficient working capital is available to support the business (PGs [personal guarantees] may have a role to play here)."

7. On 26 January 2009 a meeting took place at the Bank's Charing Cross offices between Mr Thomson, Mr Stevens and Mr Paul Alfano. The overdraft then stood at £295,244. Monthly salaries and duty payable to HMRC were due for payment at the end of the month. Mr Alfano said that he would recommend that eight members of the family should give personal guarantees to the Bank. Asset and liability forms were despatched that day for completion, although Mr Paul Alfano completed his before he left. The Bank authorised payments of £170,000 for salaries on the following day and a payment of £164,000 to HMRC on 29 January. On 5 February 2009 the Bank revised the company's currency facility by permitting a net overdraft in the sterling account of £150,000.
8. On 6 February 2009 Mr Stevens met with six members of the Alfano family by arrangement at Brookman's Park hotel in Hertfordshire for the completion of the guarantees. It was a convenient venue for Mr Paul Alfano and Mr Stevens since they lived close to the hotel. The guarantors signed their personal guarantee and waiver of legal advice forms. The date of each of the deeds (6 February 2009) was inserted by Mr Stevens' assistant at some stage after the return of the documents to the Bank. However, the waiver of legal advice forms appear to have been signed and dated then and there. Two members of the family, Mr Franco Alfano and Ms Pina Alfano, were not directors of Ciborio. They received independent legal advice from Lester Aldridge, solicitors, on 16 February 2009. Their signed personal guarantees were sent to the Bank on the same date. By this stage Ciborio's overdraft had risen to £542,796; on 1 March it was £678,289. Ciborio's position worsened in the following months and at the end of July 2009 the directors gave notice of their intention to appoint administrators. On 3 August 2009 the Bank gave notice of default and sought re-payment of the loan (£2,728,983.38 and interest) and the overdraft (£692,597.55). The Greenford security was realised and £2,442,813 was recovered by this means. On 13 October 2009 the Bank sent letters of demand to the personal guarantors and on 17 February 2011 commenced proceedings against the four appellants.
9. Shortly before trial, in circumstances to which I shall return later in this judgment, the thrust of the appellants' case was recast. By the close of the evidence the appellants raised the following defences for consideration by the judge:

(1) it was a condition precedent to the enforcement of the personal guarantees that the Bank would take a second debenture over the assets of Ciborio (see TCB Limited v Gray [1988]1 All ER 108; Byblos Bank SAL v Al Khudhairy [1987] BCLC 232);

(2) the guarantees were not delivered as deeds intended to be immediately binding (see Longman v Viscount Chelsea [1989] 58 P & CR 189 at 195, 196; Bolton MBC v Torkington [2004] Ch 66 at paragraph 35);

(3) the guarantees had been materially altered by the insertion of dates after delivery;

(4) the guarantees had been procured by the Bank's misrepresentation; or

(5) there was a relationship of trust between Paul Alfano and the appellants; the Bank knew of that relationship and were liable for the consequences of his misrepresentations to the appellants (Royal Bank of Scotland v Etridge (No.2) [2002] AC 773).

The evidence at trial

10. It was common ground that the meeting of 26 January 2009 was arranged during a telephone conversation between Mr Thomson and Mr Alfano on 21 January. Mr Thomson had no personal recollection of the call but gave evidence that its purpose was to follow up Mr Conroy's response to his proposal. Mr Thomson said that his invariable practice in such circumstances was to inform his customer of the purpose of the meeting. Mr Paul Alfano gave evidence that there was no explanation but only an arrangement for a meeting.
11. Neither Mr Thomson nor Mr Stevens had an independent recollection of the meeting at the Bank's Charing Cross offices on 26 January. They had to reconstruct the meeting from documents and from events that undoubtedly had occurred. Mr Thomson accepted that there would have been discussion about the need for the Bank to take personal guarantees and/or for the injection of private investment, and the proposal for a second debenture over the company's assets. It was accepted that the conversation led to contact between Mr Alfano and the proposed guarantors by telephone. Mr Alfano was left alone in the office for that purpose. Asset and liability forms were despatched that day for completion by the proposed guarantors and Mr Alfano completed his before he left the meeting. Mr Paul Alfano gave evidence that Mr Thomson and Mr Stevens told him the Bank would not continue to support the company unless it obtained personal guarantees from the directors and others. It would also require a (second) debenture which had been outstanding since the secured loan was made in October 2008 (when it had been anticipated that the Bank would take a first debenture by replacing GE). Mr Alfano's evidence was that he told Mr Thomson and Mr Stevens that provided the Bank took the debenture he would be prepared to recommend that family members should give the personal guarantees requested. Neither Mr Thomson nor Mr Stevens would accept that any threat was issued to withdraw existing facilities or that they would have accepted any conditional offer of guarantees.
12. Mr Stevens gave evidence that at midday on 5 February 2012 he took possession of draft guarantees, waiver forms and forms for nomination of a legal advisor. He also received the Bank's standard instructions with which he was already very familiar. A formal signing meeting was required for directors who were prepared to waive their entitlement to independent legal advice. The proposed guarantor should be given the guarantee to read. Mr Stevens should recommend that the guarantors obtained legal advice. If the guarantor was prepared to proceed without legal advice the guarantor should sign the guarantee and the waiver of legal advice form in Mr Stevens' presence. The guarantee should then be dated. Mr Stevens also received a revised multi-currency facility document whose effect was to create a permitted overdraft of £150,000. It was recorded in the document that a debenture was to be taken as security. Mr Stevens therefore arranged for the signing meeting to take place with six of the proposed guarantors on the following day at Brookman's Park hotel.
13. Mr Stevens' evidence was that on his arrival at Brookman's Park he was shown to a private room near to the bar. He was the last to arrive. He dealt with each guarantor separately. He handed the guarantors the forms. They were read by the guarantor and signed by both parties. Each guarantor took away a copy of the guarantee and the waiver. Having had sight of the guarantors' witness statements dated 20 and 21 February 2012, Mr Stevens made a further witness statement dated 8 March 2012. In it he denied the suggestion that any guarantee was stated to be conditional upon the taking of the debenture and denied that he had told anyone the guarantee would not take effect until the debenture was in place. In the same witness statement Mr Stevens said that he would have dated the guarantees at the meeting in the presence of the guarantors. However, in his evidence in chief, Mr Stevens changed his account as to the dating of the guarantees. Unlike the waiver forms, in which the date was to be inserted in a box alongside the signatures on the last page, the date on the guarantees was to be inserted on the front sheet. In the case of the guarantees the handwriting which inserted the date 6 February 2009 was that of his assistant. Mr Stevens said that the date would have been inserted either before or after the signing. It was pointed out to Mr Stevens in cross-examination that the copies left with the guarantors were undated. Mr Stevens conceded that the dates must have been inserted after he had left the meeting and returned the guarantees to the Bank. He had several guarantees to counter-sign and collect and it must have been expediency that caused him to have the documents dated after the meeting. He agreed that since Salvatore ("Frank") and Pina Alfano were not directors of the company the Bank required them to obtain independent legal advice. They were told in the forms sent to them by Mr Stevens that the Bank intended to take both personal guarantees and a debenture over the company's assets. On 18 February 2009 Mr Stevens sent the revised multi-currency facility arrangement (referring to the taking of the "new" debenture) to Mr Paul Alfano.
14. Mr Paul Alfano gave evidence that at the meeting on 6 February 2009 Mr Stevens passed two original guarantee forms to each of the proposed guarantors. They were asked to sign the last page of the guarantee adjacent to Mr Stevens' signature which had already been appended and to retain one original set for themselves. He said that as the documents were being passed around he queried the need to sign personal guarantees when the second debenture had not yet been put in place. Mr Stevens said that it was unnecessary to date the personal guarantees. Mr Paul Alfano made clear that they regarded the personal guarantees as not binding until the debenture was in place, the same reservation that he had previously expressed in the meeting of 26 January. Mr Stevens continued that when Tony Alfano, who was the last to sign his personal guarantee, handed the document back to Mr Stevens he noticed that there remained the waiver of legal advice which Mr Stevens had already signed and dated. Tony Alfano asked whether it was necessary to sign the document. Mr Stevens responded that he had forgotten to pass the waiver documents around with the personal guarantees and he required their signatures. The Alfanos expressed their unhappiness with this requirement but Mr Stevens repeated that without the documents the Bank could not continue to support the company and facilities would be withdrawn.
15. Gaetano Alfano was the sales and marketing director of Ciborio. He gave evidence that on 26 January 2009 he received a telephone call from Paul who was still at the Bank where the meeting was taking place. He was informed by Paul that the Bank was demanding personal guarantees from directors and members of the family. This was to enable the company to honour commitments to HMRC and staff salaries. Paul told them that "we should not worry too much as the Bank were getting a second debenture. … [T]his was to be in addition to a charge on the building and also the release of £500,000 from the Alfano Brother's pension fund. As such, any personal guarantees would effectively be a "third" charge after the debenture and charge of the property". As to the meeting of 6 February Mr Gaetano Alfano gave evidence that the guarantees had been pre-signed by Mr Stevens who said that it was unnecessary to date the front of the document. He recalled Paul Alfano asking Mr Stevens about the second debenture. He distinctly recalled Mr Stevens confirming that the personal guarantees would not be binding until the debenture was in place. He confirmed the evidence that the waiver of legal advice document was an after-thought.
16. Tony Alfano was currently a customer accounts manager in the company. He had formerly been sales director. On 26 January 2009 he received a call from Gaetano Alfano requesting him to attend a meeting at the company's office in Greenford where he was joined by Franco, Giuseppa (Pina) and Rose-Marie Alfano-Rogers ("Rose"). Gaetano explained the requirements of the Bank as conveyed by Paul over the telephone and informed them that the guarantees would be additional to the second debenture and the charge over the Greenford premises. £500,000 would then be released from the pension fund. At the meeting on 6 February Mr Stevens called out their names one by one and handed them the documents for signature. He recalled Mr Paul Alfano asking Mr Stevens whether the front of the document should be dated. Mr Stevens replied that it need not be dated at which point Paul raised the second debenture. Mr Stevens confirmed that the guarantee would not be binding until the debenture was in place. He too gave evidence that the documents had been pre-signed by Mr Stevens. Mr Tony Alfano said that he noticed the separate document about which nothing had been said. Mr Stevens confirmed that it needed a signature as well. Mr Stevens had to re-distribute the documents for signature.
17. Mr Franco Alfano also stated that he was called to a meeting with Gaetano on 26 January. However, he said it was Paul who later that day or the following morning explained "that we should be covered by the fact that he was assured the guarantees would only be executed once the Bank had put into place the second debenture". Since Mr Franco Alfano was not a director, he attended Lester Aldridge with Pina on 16 February 2009, separately to be provided with legal advice. Mr Franco Alfano confirmed that he did not inform the solicitors that the guarantees were not to be executed until the second debenture was in place.
18. Rose Alfano-Rogers was the administrations director of the company. She spoke of the meeting with Gaetano on 26 January. She said it was her understanding, from which she took some comfort, that the personal guarantee would sit behind the debenture and the charge as explained by Gaetano. She said that she arrived at the meeting on 6 February later than anyone else. She had got lost. She also gave evidence that the guarantees were pre-signed by Mr Stevens. Paul asked about dating the front of the document and Mr Stevens replied that it was not required. Paul asked how this would impact on the second debenture and "again I remember distinctly Mr Stevens confirming that the personal guarantees would not be binding until that second debenture was in place". She recalled Mr Tony Alfano asking a question about the second document and Mr Stevens handing back the waiver forms for signature.

The judge's findings

19. At paragraph 3 of his judgment Cranston J acknowledged that Mr Thomson and Mr Stevens had limited memories of the events of 21 January, 26 January and 6 February. That was not surprising since each of them would have had many meetings with many different customers during the relevant period. They were, however, experienced bankers and it was legitimate for them to give evidence based upon their normal practice and the Bank's standard procedures. Their evidence as to what they would have said or done by reference to the documents or to the Bank's practices and their own experience the judge regarded as "on the whole" reliable. On the other hand, the judge noted that the Alfanos had a strong family tie and they had discussed the case together on a number of occasions. The first time they had raised the conditionality of the personal guarantees, now the main defence to the claim, was when they served their witness statements shortly before the trial.
20. At paragraph 19, the judge found that although there was disagreement between Mr Paul Alfano and Mr Thomson as to the conversation between them by telephone on 21 January 2009, it was unnecessary to resolve it. What mattered was what occurred during the meetings of 26 January and 6 February. At paragraphs 22 and 23 the judge rejected the evidence that Mr Thomson and Mr Stevens threatened to withdraw support for the company unless personal guarantees were provided; he held that no statement was made on behalf of the Bank and no agreement was reached to the effect that the personal guarantees were conditional upon the taking of a debenture. The judge concluded that Mr Paul Alfano had not stated either to the Bank or to the proposed guarantors that a condition precedent to the enforcement of their guarantees was the taking of the debenture.
21. As to the meeting at Brookman's Park on 6 February the judge found at paragraph 28 that much of the disagreement as to detail was not relevant to the matters he had to resolve. He found at paragraphs 28 and 30 that no statement had been made by Mr Stevens that the Bank would withdraw support should the guarantees not be signed; nor had he said that the guarantees would not take effect before the debenture was taken; nor had Mr Stevens pre-signed the draft guarantees. Also at paragraph 30 the judge held that the dating of the guarantees had been withheld purely for convenience. Contrary to the evidence of the defendants "it had nothing to do with the guarantees being conditional on a bank debenture over Ciborio being in place". As to the guarantee given by Mr Franco Alfano, the judge found that there was no understanding that it was conditional upon the taking of a debenture.
22. At paragraph 46, the judge found that no immediate steps were taken by the Bank to advance the debenture. He concluded that the guarantees were unconditional; there was no understanding between the parties that they were conditional; the addition of the date on the deeds was not material to their enforceability; no misrepresentation was made by the Bank or by Mr Paul Alfano to the effect that the guarantees were conditional; and the relationship between Mr Alfano and other members of the family did not fall within the "Etridge principle" (judgment paragraphs 41-55).

The grounds

The approach to the evidence generally

23. Grounds 1 and 2 concern the treatment respectively of the evidence of Mr Stevens and Mr Thomson on behalf of the Bank and of Paul, Tony, and Rose Alfano on behalf of the appellants. Mr Paul Alfano had a lively recollection of the telephone conversation on 21 January and the meetings held on 26 January and 6 February 2009. The other witnesses had good recollections of the events in which they participated. On the other hand, the recollections of Mr Stevens and Mr Thomson were patchy and, at times, internally inconsistent. While they spoke of abiding by the Bank's standard procedures, it was clear that in at least one important respect, the dating of the documents, Mr Stevens had not. He had changed his evidence three times on the subject. It was thus not reasonably open to the judge to find that standard procedure substituted satisfactorily for an actual memory of events. The judge's finding that in this respect the evidence of the Bank's witnesses was on the whole reliable was plainly wrong. On the contrary, it is submitted, their evidence, and Mr Stevens' evidence in particular, was on the whole unreliable where it was in conflict with that of the appellants' witnesses.

Failure to reach conclusions of fact

24. The appellants contend in ground 3 that the judge should have reached a conclusion whether there was no discussion by telephone as to the purpose of the meeting to be held on 26 January. If the difference in the evidence had been resolved in favour of Mr Paul Alfano, as it should have been, the judge would have had a more accurate impression of the context of the signing meeting that took place on 6 February. As to the signing meeting there were several differences in detail between the accounts of the Bank's witness and the appellants' witnesses. The judge should have resolved these differences. If he had grappled with the detail he would have concluded that the evidence given on behalf of the appellants was the more reliable. That conclusion should have informed the judge's consideration of the critical issue whether the guarantees were given conditionally.

Findings against the weight of the evidence; inadequate reasons

25. In grounds 4 and 5 the appellants contend that it was not reasonably open to the judge to conclude that the Bank was not threatening to withdraw its support and that Mr Paul Alfano did not express to Mr Thomson and Mr Stevens his willingness to recommend that the family provided personal guarantees conditional upon the Bank taking a debenture. It was conceded by Mr Thomson that both the guarantees and the debenture would have been discussed at the meeting. Since neither Mr Thomson nor Mr Stevens had any recollection of the meeting they were not in a position to contradict the evidence of Mr Paul Alfano who remembered events clearly. The assertion is that there was no denial that Mr Alfano told Mr Thomson and Mr Stevens that the guarantees were to be given conditionally. By its conduct in proceeding to take the undated guarantees the Bank plainly signified its agreement to the condition imposed. Alternatively, the deeds of guarantee were never "delivered".
26. The subject of ground 4 is the Bank's underlying threat to withdraw facilities from the company. The appellants contend that this is the meaning implicit in Mr Conroy's response to the proposal submitted by Mr Thomson on 6 January (see paragraph 6 above). The plain inference is that the risk of imminent demise of the business was the occasion for an urgent meeting. It follows that it was more probable than not that at the meeting on 26 January Mr Thomson and Mr Stevens made it clear that without personal guarantees support from the Bank would be withdrawn and that at the signing meeting on 6 February the threat was repeated by Mr Stevens.
27. In ground 6 the appellants contend that the judge's finding as to conditionality was against the weight of the evidence. In ground 7 it is asserted that the judge was wrong to find that Mr Tony Alfano had been inconsistent in his account. In his witness statement Tony had said that Mr Stevens informed the group that the personal guarantees were being given conditionally upon the taking of the debenture. However, at paragraph 28 of the judgment the judge erroneously declined to accept his evidence because it had been inconsistent.
28. In ground 8 the appellants contend that the judge gave no reason for preferring Mr Stevens' evidence that he had not arrived at the meeting with his signature already applied to the deeds of guarantee. There was no proper foundation for the judge's decision. In ground 9 the appellants contend that the absence of dates from the personal guarantees was "a critical pointer" to the accuracy of the evidence given on behalf of the appellants that they were to take effect on an unknown date in the future when the debenture had been completed. The conclusion reached by the judge that the date was left uncompleted for "convenience" provided no explanation and Mr Stevens did not give one. Ground 10 asserts that there was no evidence to support the judge's finding that the documents had been dated "shortly after" the meeting when Mr Stevens took them to the Bank.
29. The appellants contend in ground 11 that the judge was wrong to find that the Bank did not immediately take steps to obtain the debenture. The evidence was that in early March Mr Stevens was doing just that. In grounds 12, 13, and 17 the judge is criticised for holding that the guarantees were unconditional and binding. They add nothing of substance to grounds 6, 7 and 8.

Material alteration

30. The appellants' case was that the decision not to date the personal guarantees at the signing meeting was deliberate. The absence of the date fulfilled a material purpose namely to demonstrate that the deeds were not to be enforceable until such time as the debenture had been taken. In ground 14 the appellants challenge the judge's finding that the subsequent alteration of the guarantees to insert the date was not material. It was material because the date was inserted in breach of the agreement or understanding that the guarantee should take effect only upon completion of the debenture.

Misrepresentation

31. The appellants contend in grounds 15 and 16 that if the guarantees were unconditional and immediately enforceable, Mr Stevens misrepresented the Bank's position when informing the appellants that the guarantees were taken conditionally or Mr Paul Alfano misrepresented to the appellants (in circumstances to which Etridge applied) that the Bank was taking the guarantees conditionally, and the judge was wrong to hold to the contrary. It is contended that if, as a matter of fact, the deeds of guarantee were delivered so as to be binding upon the guarantors, the mistaken understanding of the Alfano guarantors as to the conditionality of the guarantees could only have been induced by the Bank or by Mr Paul Alfano for whose misrepresentation the Bank was, in the circumstances, responsible.

Discussion

32. The appellants' criticisms of the judge's approach to his findings of fact can be seen to fall into the following categories:

(i) An unjustified confidence in the generality of the evidence of witnesses who did not claim to have a personal recollection of important events (grounds 1, 2, 5 (in part), 6 (in part), 8 (in part), 12 (in part), 13 (in part), and 17 (in part);

(ii) A failure to make findings of fact which, had the judge done so, would have served to educate his decision upon the central issues (ground 3);

(iii) A failure to act upon the weight of the evidence (grounds, 4, 5 (in part), 6 (in part), 9, 12 (in part), 13 (in part), and 17 (in part);

(iv) Errors of fact (grounds 7 and 11);

(v) Inadequate reasons (ground 8).

Grounds 14, 15 and 16 all depend on the success of other grounds.

33. No complaint is made on behalf of the appellants that the judge misdirected himself in law. The judge referred to the statement made by Purchas LJ in TCB Limited v Gray which followed his discussion of authority:

"[The position] can be summarised in the proposition that where a guarantor wishes to make his guarantee dependent on the giving of some other valid collateral security by a third party, he must establish that this formed part of the contract under which the guarantee was given … [I]n the absence of it being established by the guarantor that the taking of a valid security is a term of the contract between him and the lender, the guarantor cannot rely on the failure of the lender to provide himself with a valid collateral security, although he may have indicated that he was going to do so. Moreover, for such a term of the contract to be established, not only must it be intended subjectively by the guarantor but it must also be brought home and accepted by the lender." (at pages 110G-112E).

34. In Byblos Bank SAL v Al-Khudhairy at page 242 the Court of Appeal decided that if the parties have signed a guarantee which on its face is complete and effective as soon as it has been signed little short of an express mention to the Bank's officers that the guarantee was conditional would be sufficient to give rise to a contractual term.
35. As to the alternative argument that the guarantees were never delivered as deeds (section 1(3)(b) of the Law of Property (Miscellaneous Provisions) Act 1989), if they were received by the Bank on the basis that they were not to become binding until the Bank had taken its second debenture they were not "delivered". The onus was on the appellants to demonstrate that possession of the deeds was given up on the basis claimed (Rowley v Rowley (1854) Kay 242 at 251, 257-8, 69 ER 103, at 107-110).
36. As to this court's approach to an appeal against the trial judge's findings of fact, there is no dispute. The appellants bear the burden of establishing that the judge's finding was plainly wrong (Assicurazioni Generali v Arab Insurance Group [2002] EWCA Civ 1642). The judge should make necessary findings of fact (English v Emery Reimbold and Strick Ltd) [2002] EWCA Civ 605 at para 19). Where the appellate court concludes that the judge's reasoning is at fault it may substitute its own decision (Watt or Thomas v Thomas [1964] AC 484 at 488). This court is invited by the appellants to reverse the judge's relevant findings; in the alternative, to remit the matter for a fresh hearing.
37. It is clear to me that the judge's conclusions on the main issues did not depend upon his judgment of the demeanour or 'performance' of witnesses; neither, in the main, did they depend upon a close textual analysis of what they said. The judge set out at paragraphs 41-47 of his judgment the principal reasons for his decision. I shall approach those reasons in a different order than did the judge.
38. The judge examined the commercial reality in which the personal guarantees were being sought by the Bank (paragraph 47, judgment). On 26 January 2009 the unsecured overdraft stood at £295,244. Monthly salaries and duty payable to HMRC were due for payment within days. It followed that the Bank, if it approved those payments, was shortly to be exposed to Ciborio's unsecured overdraft of over £600,000. The Bank's credit section was not prepared to consider authorising a further loan of £500,000 to relieve the cash flow crisis without discussions as to the introduction by the directors of private equity or the provision of personal guarantees. Any debenture taken by the Bank over Ciborio's assets would rank second to that of GE because RBSIF had declined to authorise replacement of the stock and discount invoicing facility. In his witness statement no. 2, at paragraph 10, Mr Thomson observed that it would make "absolutely no commercial sense for the bank" to have agreed to hold the personal guarantees conditionally upon the taking of the debenture. During cross-examination on this subject Mr Thomson remarked (page 635):

"What would be the point of taking them [the personal guarantees] if we made a condition that they would not come into force until something that we could not technically have [happened]?"

Mr Thomson was making the point that GE already held a debenture and RBSIF had declined to replace the facility which their debenture secured. Similarly, in his witness statement no. 2, paragraph 10, Mr Stevens stated "it is clear that the suggested conditionality would make absolutely no commercial sense for the bank and would never have been agreed to". In cross-examination Mr Stevens insisted that as far as he was concerned no link had been made between the two as suggested by the defendants. Mr Alexander QC endeavoured to persuade both witnesses that since it was intended to take the second debenture shortly in any event it would be no surprise if one was treated as conditional upon the other. Neither of the Bank's witnesses would accept the commercial reality of this proposition.

39. Secondly, the terms of the personal guarantees were themselves inconsistent with the alleged conditionality (paragraph 42, judgment). At Clause 8 each of the deeds of guarantee provided:

"Preservation of the bank's rights

8.1 This deed is in addition to any other guarantee or security present or future held by the bank in respect of the Debtor's Obligations and shall not merge with or prejudice such other guarantee or security or any contractual or legal right of the bank.

8.2 This deed shall not be released or affected by any failure of the bank to take any security or by any other guarantee or security held by the bank or any intended guarantee or security in respect of the Debtors' obligations being void or unenforceable or not completed or perfected …"

Had Mr Thomson and/or Mr Stevens permitted the delivery of the deed to be conditional upon the obtaining of the debenture they would for some unidentified reason have chosen to deprive the Bank of its entitlement under Clause 8 and, in practice, contrary to the Mr Conroy's requirements, to expose the Bank to the unsecured consequences of making further advances to the company.

40. Thirdly, no contemporaneous record within the Bank or Ciborio or between the Bank and Ciborio supported the assertion now made that the personal guarantees were given or accepted conditionally (paragraphs 45 and 46, judgment). Such documents as there were tended to undermine that assertion. I shall develop this aspect of the judge's finding below.
41. Fourthly, the judge found (paragraph 44, judgment) that the way in which the defence emerged for the first time shortly before trial "throws a dark shadow over the evidence now proffered". On 11 March 2009 Mr Stevens' assistant, Clive Pickering, sent an email to Mr Paul Alfano informing him that:

"We are currently pulling together all your security and I am trying to finalise the debenture. From what I have been told GE Capital already hold one and we will need to produce a temporary and conditional release document. This basically means that GE Capital will have the charge over the debtors/book debts and we would have the rest (I believe?). What I need from you is a name and contact number for GE Capital, plus a DX address just to quote on the documentation."

Mr Paul Alfano responded:

"I'm not comfortable with this, GE will start to get suspicious."

Mr Stevens then replied personally. He said that he was seeking to fulfil expectations set at the time the Bank made the loan to Alfano Brothers and to assist to allay fears arising from the constant excesses in the account. He continued:

"One of their [commercial credit's] key requirements was holding a debenture and it has only come to my attention this week that this should be in place by tomorrow!"

In due course, Mr Stevens said, it was his intention to return to RBSIF with a view to putting the invoice discounting facility in place but, for the time being, the second debenture was required.

42. On 17 July 2009 the debenture had still not been given. Ciborio, in a Terms for Continuation of Facilities agreement dated 17 July 2009, acknowledged that the second debenture was to be received by the Bank within 10 working days, and, more significantly, directors of both Ciborio and Alfano Brothers acknowledged that the "security in place" included "8 individual personal guarantees of £100,000 each totalling £800,000". This document was inconsistent with the appellants' case that the guarantees would not be in place until the debenture was taken.
43. Following the Bank's letters of demand of 13 October 2009, Addleshaw Goddard, Solicitors, wrote on the Bank's behalf seeking payment of £100,000 under each of the guarantees. No substantive response was received until 2 February 2010 when Lake Jackson, the appellants' solicitors, sought a postponement of further action until sale of the Greenford security had taken place. Particulars of Claim were served on 15 February 2011. In their defence dated 11 April 2011 it was asserted by the appellants that:

(i) they were told that unless they signed the personal guarantees the Bank would immediately withdraw its banking facilities and the company would be unable to meet its wage and HMRC liabilities;

(ii) only the third defendant had been afforded the opportunity to take legal advice. The solicitor advising the third defendant acted in conflict of interest;

(iii) in these respects the "manner in which the claimant's sought to have the same executed amounted to economic duress and undue influence going considerably beyond normal commercial hard bargaining".

44. On 4 May 2011 the Bank served a Reply to Defence joining issue with the allegations of duress and undue influence. On 13 October 2011 the defendants served a rejoinder (called a 'Reply to Reply to Defence') in which at paragraph 3 it was again asserted that the personal guarantees "secured by the claimant were unlawful in that they were secured by the exercise of economic duress and actually and/or presumed undue influence". Unusually, in their covering letter, the appellants' solicitors informed the Bank that "in an attempt to narrow the issues" they were enclosing together with the Reply to the Reply to Defence, a copy of the Bank's Reply to Defence in which Mr Paul Alfano had personally made typewritten annotations and comments. In paragraph 15 of the Bank's Reply to Defence the draftsman was dealing with the circumstances in which the personal guarantees were given. The comments added by Mr Paul Alfano were as follows:

"Paragraph 5.2(ii): "[whilst the waivers are also dated for the same period of time, they were not presented and explained to us by the officer of the claimant until AFTER the PGs had been signed and handed back to Paul Stevens]".

Paragraph 15.3: The Bank had denied that the defendants were coerced or that the bank acted unreasonably in seeking to obtain additional security for the company's indebtedness in excess of £3 million. Mr Alfano added the comment, "[the bank already had sufficient security in place with a legal charge over the Greenford property]".

In paragraph 16 the draftsman dealt with the events that followed 6 February 2009:

Paragraph 16.3: The bank averred that the Continuation of Facilities agreement dated 17 July 2009 was issued on the basis that the personal guarantees were in place. Mr Alfano added the comment, "[as well as, and perhaps more significantly, the ADDITIONAL SECURITY required, which they omit to refer to …]". The bank averred that at the time of signing the facilities document the company and/or the defendants were acknowledging their personal guarantees and, moreover, they made no representations nor raised any concerns as to the validity of the guarantees. On the contrary, they had relied on the existence of the guarantees as a means of securing further investment from the Bank, namely the additional loan to the pension fund of £500,000. Mr Alfano commented "[they would have to prove this, we relied upon the bank taking additional securities as a means of securing further investment]".

45. The significance of these comments was that Mr Paul Alfano was expressing the hope of the appellants that the Bank had or would with the second debenture have sufficient security without recourse to the enforcement of the personal guarantees (paragraph 49, judgment); there was no hint of the case subsequently put forward at trial that the giving of the guarantees was conditional upon the taking of the debenture.
46. On 17 October 2011 Master Fontaine set a timetable. Witness statements were to be served by 9 January 2012. The appellants' witness statements were served on or shortly after 20 February 2012. For the first time it was apparent the appellants would be asserting that the personal guarantees were given conditionally upon the taking of a second debenture over the company's assets. A draft amended Defence dated 29 February 2012 was served in preparation for an application to amend at trial fixed for 13 March. At paragraph 44 of his judgment Cranston J said this:

"44. However, I do not accept the evidence that there was an agreement to make the guarantees subject to a condition precedent. First, the defendants never raised this point with the Bank or, it seems, anyone else. Frank Alfano, who sought independent legal advice when signing his guarantee, did not inform the solicitor. When the Bank pursued the debenture in March 2009, a good month after the guarantees were signed, Paul Alfano said that he was uncomfortable about approaching GE for a waiver. That sits ill with the evidence he now gives that he proposed, and the Bank agreed, that the guarantees be conditional. The matter was simply not raised by the defendants until shortly before the trial, notwithstanding that they had experienced legal advice for several years. No adequate explanation has been given by the Alfanos to explain this. In my view it throws a dark shadow over the evidence now proffered."

47. The appellants' case as presented to the judge was that Mr Paul Alfano was the family's representative in his contacts with the bank. It was he who, on 26 January 2009, had made clear to Mr Thomson and Mr Stevens that he would recommend to the Alfano directors and others that they provide personal guarantees but "strictly conditional on the bank taking the second debenture" and so informed the proposed guarantors, confirmed by Mr Stevens at the signing meeting. Mr Alfano well knew that the second debenture had never been obtained. It seems to me, as it seemed to the judge, that it was almost inconceivable that if the case advanced at trial was genuine it had not emerged, even in embryo, until 2 years 4 months after the Bank's demand and 3 weeks before the hearing. There could hardly be a plainer example of circumstances in which an inference adverse to a defendant's case was appropriate. The judge used moderate language when he described the effect of the background upon the evidence adduced by and on behalf of the appellants as throwing "a dark shadow" but it is clear to me that it permeated his judgment of the credibility of the witnesses called.
48. In the course of his narrative of the relevant events the judge made clear that he rejected Mr Paul Alfano's evidence that at the meeting on 26 January 2009 Mr Thomson and Mr Stevens threatened to withdraw support. What the Bank wanted to do was to cover the excess in the account which it was being asked to fund. The judge did not accept that Mr Alfano imposed any condition on his approach to other family members, or that he pretended to the others that he had (paragraphs 22 and 23 judgment). The judge did acknowledge (paragraph 49, judgment) that it may well be that some of the Alfanos did find comfort in the fact that the Bank was to take a debenture over Ciborio's assets. This, I would add, appears to have been the state of mind of those who attended the meeting with Gaetano Alfano at the Greenford premises on 26 January (see paragraphs 15 – 18 above). However, the judge found, there was no credible evidence that the guarantees were delivered to Mr Stevens at the signing meeting on 6 February subject to any such condition (paragraph 49, judgment). The judge rejected Mr Paul Alfano's evidence that Mr Stevens made another threat to withdraw the company's banking facilities. None of the other Alfano witnesses supported that assertion (paragraph 28, judgment). He did not accept Mr Paul Alfano's evidence that Mr Stevens told the meeting that the personal guarantees were given conditionally. Paul was not in this respect supported by Mr Gaetano Alfano. Mr Tony Alfano had given evidence in support of Paul but he added that Mr Stevens had told the meeting he would enter a date on the agreement "when the debenture came into force". In his witness statement Tony Alfano had confined himself to saying that he made the assumption that he was not being asked to date the agreement because it would not come into effect until the debenture was in place. The judge noted the inconsistency and rejected both the assertions made (paragraph 28, judgment). He also rejected the evidence given by the Alfano witnesses that Mr Stevens arrived at the meeting having already signed the agreements (paragraphs 28 and 29, judgment). It seems to me that there was an almost wholesale rejection of the defence for reasons amply supported by the evidence.
49. The appellants' main argument upon the judge's approach to credibility, as advanced orally in the appeal, was that he failed to analyse the implications of the admitted fact that the signed guarantees left the hotel in Mr Stevens' possession without having been dated. The appellants' arguments were that (i) the absence of the date from the personal guarantees made it more likely that Mr Stevens did confirm that the personal guarantees were not to take effect before the second debenture was obtained; (ii) the only rational explanation for the omission, made contrary to the Bank's policy, was that it was designed to fulfil a purpose, namely to preserve the guarantee in escrow pending the receipt of the debenture; and (iii) the later addition of the date 6 February 2009 was therefore a material alteration. Mr Stevens' explanation that it was "expedient" was itself unexplained. The judge failed to confront the argument and failed also to reflect upon Mr Stevens' changes in account.
50. Mr Hornett on behalf of the Bank accepted that Mr Stevens' evidence upon this issue was contradictory and, for that reason, less than satisfactory. So, also, the judge had found, was the evidence of the appellants' witnesses. There was, submitted Mr Hornett, an abundance of material upon which the judge could express his views that, despite the evidence of some of the appellants' witnesses, the absence of the date "had nothing to do with" the guarantees being conditional on a Bank debenture (paragraph 30, judgment), and there was "no credible evidence" that this was the basis on which the defendants delivered the guarantees to Mr Stevens at the signing meeting (paragraph 40, judgment). I accept this submission. Had the evidence of conditionality otherwise been credible, I would accept that the judge's approach to the undated documents should and would have been different. In my view, however, the judge concluded, and was entitled to conclude, that so tainted was the evidence of conditionality that Mr Stevens' inconsistency and the fact of the omission of the date cannot have sustained the appellants' case. The judge was, as Mr Hornett submitted, left to decide between two unsatisfactory accounts of the reason for the omission of the date. It did not follow that because "expediency" was not an altogether satisfactory explanation, the judge was bound to find that the reason was a condition placed upon the guarantees. In the end, the more probable explanation was that provided by Mr Stevens. Although he had not, in this respect, followed the Bank's policy, nor had he expanded upon his explanation, the date had been omitted "for convenience" (paragraph 30, judgment). The judge was entitled to infer as he did that the dating of the guarantees 6 February 2009 was an immaterial formality carried out shortly after Mr Stevens returned them to the Bank. The terms of the judgment leave no room for doubt as to the judge's reasoning towards his conclusion and, in my view, he had ample material upon which to reach the conclusion he did.
51. I do not accept the appellants' submission that the judge was plainly wrong to consider that he could, in general, rely upon Mr Thomson's and Mr Stevens' evidence as to what their normal procedure or the Bank's standard procedure would have been. It was not suggested that either of them had any purpose of his own to serve by giving the evidence he did. Their evidence was supported by commercial reality, contemporary documents and later events. It is clear that the judge did not repose blanket trust in their evidence of their usual practice. He noted the appropriate concessions made by both witnesses in the course of cross-examination. However, on the central issue of conditionality neither of them would accept the proposition put to them. They would not have accepted and did not accept a condition that had the effect of undermining the very purpose of obtaining the personal guarantees which was, on the advice of their credit section, to provide immediate cover for the severely extended overdraft in the company's sterling current account which the Bank was about to approve and to support the company's application for a loan of £500,000.
52. I reject the criticism made of the judge for his conclusion at paragraph 19 of his judgment that it was not necessary to resolve the dispute between Mr Thomson and Mr Paul Alfano as to whether Mr Thomson gave Mr Alfano advance warning of the subject of their meeting on 26 January 2009. No-one on the appellants' side suggested that any question of conditions or threats was raised in the course of the telephone call in which the meeting was arranged. It may be that had the appellants, at the conclusion of the evidence, been maintaining their case of duress or undue influence, secrecy of purpose would have been relevant. The appellants had abandoned that case. The judge was concerned only with the question whether a condition was agreed by the Bank or was imposed on it by the appellants. It was, therefore, of peripheral significance which of the two witnesses should be preferred as to the content of the telephone call and, I agree with the judge, was unlikely to assist him to a conclusion on the main issue.
53. I also reject the submission that the judge should have resolved the finer factual differences between Mr Stevens and the Alfano witnesses as to the circumstances of the 6 February meeting such as: whether the meeting was held in an open or private room; whether Paul Stevens or Rose Alfano-Rogers was the last to arrive; how many pens Mr Stevens brought with him; whether he distributed the signing packs at once to everyone or to individuals one at a time; whether he called up guarantors for the signing one at a time or made a general collection; and whether he received the signed waiver documents at the same time as or after the signed guarantees. Had this been a case requiring judgments upon the evidence of witnesses who were doing their best to assist the judge, the fine detail may have required closer analysis; alternatively, if resolution of the differences might have had legal consequences, then a decision upon them would have been required. This, however, was not such a case. The conclusion could hardly be avoided that one side or the other was not telling the truth on the central issue of conditionality. Since there was an abundance of evidence to support the view that the defence must be rejected as a recent invention I do not accept that it was necessary for the judge to reach decisions on matters of inconsequential detail.
54. As to grounds 7 and 11, I can find no basis for the argument that the judge erred in his conclusions that Mr Tony Alfano's evidence had been inconsistent in a material respect and that the Bank had not "immediately" sought to obtain a debenture after the 6 February meeting. They were plainly justified on the evidence the judge had heard and read.
55. Since the judge had rejected the underlying factual basis for the defence it was inevitable that he would also reject the alternative assertion that the Bank misrepresented its position to the guarantors either by Mr Thomson and/or Mr Stevens, or by Mr Paul Alfano upon Etridge principles.
56. Mr Hornett sought to raise for the first time in the alternative an argument that if this court found the appellant was entitled to succeed but only upon the issue of non-delivery of the deed, the appellants could not be heard in equity to deny the burden of the deeds when they had obtained their benefit knowing that the Bank relied upon them. In the circumstances I do not consider it necessary to address this argument.
57. For the reasons I have given, I conclude that the criticisms of Cranston J's judgment below are unmerited and I would dismiss the appeal.

Lord Justice McFarlane

58. I agree

Lord Justice Richards

59. I also agree.