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	England and Wales High Court (Queen's Bench Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Queen's Bench Division) Decisions >> Destiny 1 Ltd v Lloyds Tsb Bank Plc [2010] EWHC 1233 (QB) (15 June 2010) URL: http://www.bailii.org/ew/cases/EWHC/QB/2010/1233.html Cite as: [2010] EWHC 1233 (QB)

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IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		15/06/2010

His Honour Judge Richard Seymour Q.C. :

Introduction

1. In this action the claimant, Destiny 1 Ltd. ("Destiny") claimed damages against Lloyds TSB Bank Plc ("Lloyds") in respect of the alleged breach on the part of Lloyds of an agreement under which, so it was contended, Lloyds agreed to enter into a form of guarantee ("the Lloyds Guarantee") of the liabilities of Destiny in favour of a company called Nisa-Today's (Holdings) Ltd. ("Nisa") up to a limit of £30,000. It was not in dispute that Lloyds had not entered into the Lloyds Guarantee, but the position of Lloyds was that it had never entered into a legally binding agreement with Destiny to enter into such guarantee.
2. The case advanced on behalf of Destiny at trial that Lloyds had agreed with Destiny to enter into the Lloyds Guarantee depended simply upon one document emanating from Lloyds and the alleged response to that document on behalf of Destiny.
3. The document in question was a letter ("the Fox Letter") dated 11 September 2008 written by Julie Fox of Lloyds to Destiny. The Fox Letter was in these terms:-

"OUR REFERENCE: GTSD080025752

IN FAVOUR OF: Nisa Today's (Holdings) Ltd

AMOUNT: GBP30,000.00

This is to advise you that we agree to provide the guarantee you have requested (referred to here as 'the undertaking'), providing you accept the following points.

Authentication of Claims

No provision is made for authentication by a bank of claims (whether submitted in writing or by teletransmission) and/or supporting documents, if any.

Therefore:

We shall have the right to regard a claim which purports to emanate from any party entitled to claim under the undertaking as having been actually despatched and authorised by that party.

We shall have the right to regard any documents required to be presented in support of a claim as valid if they purport to be issued or signed by or on behalf of the party who is to issue the same without any obligation on our part to verify that they have been issued by that party or that any signature(s) thereon is/are the signature(s) of that party or of persons authorised by that party.

Termination of liability

There are no provisions relating to expiry, or expiry is expressed in terms which do not enable us to establish a date after which we could refuse to pay claims.

Therefore:

Termination of our liability under the undertaking shall be subject to our being released from liability in a form and manner which we in our absolute discretion regard as satisfactory. Until receipt of such release we shall have the right to pay claims on the basis that our liability has not been terminated.

If you are satisfied with these conditions, please sign and return this letter to us at Lloyds TSB Bank plc, BIG Unit, PO Box 63, 4^th Floor, Two Brindleyplace, Birmingham B1 2AB."

4. At the end of the Fox Letter there were printed the words, "We hereby agree to the above terms and conditions". Those words were followed by spaces for a date to be inserted and for a signature to be appended, "for and on behalf of Destiny 1 Limited".
5. On the copy of the document put in evidence the space for the date was completed "12/09/08" and a signature appeared as well. The signature was identified by him in his oral evidence as that of Mr. Shaheen Khalid, the sole director of Destiny. He told me that he had sent the signed version of the document ("the Alleged Acceptance") to Lloyds by facsimile transmission. It was not accepted on behalf of Lloyds before me that the Alleged Acceptance had been signed by Mr. Khalid prior to about 21 October 2008, a date the significance of which I shall come to, or sent by Mr. Khalid to Lloyds.
6. Destiny's case was that the Fox Letter amounted to an offer, capable of acceptance so as to give rise to a binding contract, and that Destiny had accepted that offer by the signature of Mr. Khalid and the return of the Alleged Acceptance to Lloyds.
7. The principal case for Lloyds was that the Fox Letter should not be looked at in isolation, because there was in fact a package ("the Package") of transactions under discussion between Lloyds and Destiny at the material time, of which the possible provision of the Lloyds Guarantee was but one. It was contended on behalf of Lloyds that it was not in the contemplation of the parties that any legally binding contract be entered into otherwise than in respect of the entire Package, so that while, at first sight, it might seem that a contract had been made in the terms of the Fox Letter and the Alleged Acceptance (if the Alleged Acceptance had been despatched, which was, of course, in dispute), when viewed in the wider context of the discussions between the parties it was plain that the Fox Letter was in the nature of an indication in principle that Lloyds was prepared to enter into the Lloyds Guarantee, if the other matters being discussed resulted in the complete Package being agreed.
8. The response on behalf of Destiny to that analysis was that there was no reason in law why a separate contract between Lloyds and Destiny could not have been made to the effect that Lloyds enter into the Lloyds Guarantee, and that, as a matter of construction, that was what had happened.
9. By way of rejoinder to that contention, it was submitted on behalf of Lloyds that any alleged separate contract was not legally enforceable, as it was not supported by consideration.
10. In answer to that point, it was contended on behalf of Destiny that consideration had been provided in this case by the execution by Mr. Khalid personally on 17 July 2008 of a guarantee ("the Khalid Guarantee") in favour of Lloyds of the liabilities of Destiny, limited to the sum of £40,000, and the execution of a debenture ("the Debenture") dated 17 August 2008 by Destiny over its assets and undertaking in favour of Lloyds.
11. On behalf of Lloyds it was contended that what was relied on on behalf of Destiny as amounting to consideration was past consideration and not such as, in law, could render binding the alleged agreement contained in the Fox Letter and the Alleged Acceptance.
12. It is convenient, before considering further the submissions of law on behalf of each of the parties, to look at the evidence as to the discussions between them in the period from about June 2008 until about 21 October 2008.

The discussions between the parties between about June 2008 and about 21 October 2008

13. The only witness called to give evidence on behalf of Destiny was Mr. Khalid.
14. The background to the discussions which took place between him and representatives of Lloyds between about June 2008 and about 21 October 2008 was that Mr. Khalid had, in 2000, acquired premises at 109 – 111, Belsize Avenue, Woodston, Peterborough on the ground floor of which was a shop ("the Existing Shop"). On the first floor there were two flats ("the Flats"). Mr. Khalid had purchased the Existing Shop and the Flats with the aid of a loan, on the security of a mortgage, made to him by HSBC Bank plc ("HSBC"). From about 2002 Mr. Khalid had operated a business in the Existing Shop under the trading style "Costcutter". That business ("the Costcutter Business") had also been financed by HSBC. In consequence, by about June 2008 Mr. Khalid was indebted to HSBC in the total sum of about £230,000. There were two loans secured by mortgages, one, called a Flexible Business Loan, of the order of £43,000, and the other, called a Commercial Mortgage, of the order of £141,000. In addition Mr. Khalid had overdraft facilities in respect of a business account amounting to £50,000, the whole of which had been utilised.
15. Over the years Mr. Khalid had built up something of a property portfolio. By about June 2008 he owned, in addition to the premises which comprised the Existing Shop and the Flats, properties at 105 and 113, Belsize Avenue, Woodston, and 152 and 181, London Road, Woodston.
16. Towards the end of 2006 Mr. Khalid found a property ("the New Shop") to let in Park Farm Crescent, Stanground, Peterborough. The New Shop had been used as a nursery. It had been let to BUPA Investments Ltd. ("BUPA") by a lease dated 8 September 2003 for a term expiring on 26 August 2024. Mr. Khalid considered that the New Shop was ripe for conversion into a shop. He seems to have had in mind from at least about May 2007 that it would be desirable for any business which he operated from the New Shop to trade under the brand of Nisa. As I understand it, Nisa is a consortium of retailers, wholesalers and cash and carry operators which is owned by the members of the consortium. In order to operate under the Nisa brand one has to become a member/shareholder. Once one has become a member/shareholder one is able to acquire goods from Nisa with a view to selling them by retail. Nisa also supplies appropriate signage and other materials to indicate that a particular retail outlet is operated by a member.
17. Destiny was incorporated as a private limited company on 1 August 2007.
18. By about March 2008 Destiny had applied to become a member of Nisa. In a letter dated 11 March 2008 to Messrs. A & B Law, solicitors acting on behalf of Destiny in its dealings with Nisa, Nisa's solicitors, Messrs. Wilkin Chapman, recorded the requirements of Nisa, if Destiny was to become a member:-

"We act for Nisa-Today's (Holdings) Limited and understand your client has applied for membership of our client. In this regard, and in the usual course, our client requires certain security to be provided by your client as an individual in order to secure the trading account until satisfactory accounts are available.

We understand your client has offered his property at 105 Belsize Avenue, Woodston, Peterborough PE2 9HZ as security to secure the personal guarantee which will be given by him regarding the trading account. We shall let you have draft Personal Guarantee and Legal Charge in due course. As your client trades as a limited company in the usual course we would expect a Debenture to be given by that company in our client's favour."

19. By an underlease ("the Underlease") dated 24 April 2008 and made between (1) BUPA (2) Destiny and (3) Mr. Khalid BUPA sub-demised the New Shop to Destiny for a term commencing on 24 April 2008 and expiring on 26 August 2024. Planning permission for change of use of the New Shop to retail use had been granted by Peterborough City Council on 26 February 2008. After the execution of the Underlease works commenced converting the New Shop from a nursery to the permitted use.
20. In connection with a transaction which did not proceed Mr. Khalid had made contact with Mr. Christopher Fitzwilliam, a business relationship manager employed by Lloyds. Mr. Fitzwilliam had sought to persuade Mr. Khalid to transfer his banking arrangements from HSBC to Lloyds. In the context of that effort Mr. Khalid had opened an account with Lloyds in December 2006 which had the benefit of an unsecured overdraft facility of £10,000. The terms of the overdraft were set out in a letter dated 21 September 2007 written by Mr. Fitzwilliam to Mr. Khalid. However, no further steps had been taken to transfer Mr. Khalid's banking arrangements to Lloyds.
21. According to Mr. Khalid, his solicitor advised him that it would be prejudicial to the ability of Destiny to raise funds, if required, if it had entered into a debenture in favour of Nisa. It was unclear on the evidence led before me exactly how it came about, but it appeared that in the course of discussion between Mr. Khalid and Mr. Fitzwilliam the possibility was floated of Mr. Khalid transferring his banking arrangements from HSBC to Lloyds and, as part of the new arrangements, Lloyds entering into the Lloyds Guarantee as an alternative to Destiny entering into a debenture in favour of Nisa.
22. At this point Mr. Fitzwilliam was transferred to other duties within Lloyds. His replacement as business relationship manager was Mr. Tim Knighton. Mr. Knighton was called to give evidence on behalf of Lloyds in this action. On a number of points his evidence differed from that of Mr. Khalid. Those differences were not actually material to any issue which I had to decide.
23. It was common ground that Mr. Knighton introduced Mr. Khalid to Mr. Jonathan Wright, who was, and is, employed by Lloyds as a business development manager. The dealings material to the factual issues in this action took place principally between Mr. Khalid and Mr. Wright. Mr. Wright was called to give evidence on behalf of Lloyds. Again his evidence differed from that of Mr. Khalid on a number of points.
24. Mr. Wright and Mr. Khalid met first in about the middle of June 2008. Following the meeting Mr. Wright completed a document in a standard form used by Lloyds and entitled "Application for Advance". In the section, Section 1, which invited completion of the details of the name of the customer Mr. Wright inserted both the name of Mr. Khalid and the name of Destiny. Section 4 of the document bore the rubric "Purpose/Amount". In that section Mr. Wright completed this information:-

" COSTCUTTER

The client has improved his store offering over the past 8 years and it has undergone no less than 7 different extensions.

All improvements have given the shop a large additional space for the sale of products.

Also the client has also installed a pharmacy area, counter, sales shelving and consulting rooms. He has gained PCT permission to do this.

The client requires the following funding from LTSB [that is, Lloyds].

Re-mortgage of the existing loan at HSBC £220,000 is forecast to be o/s [outstanding] taking into account the loan statements provided and the interest charges, overdraft of £10k and also to repay the LTSB OD [overdraft] of £10k. This totals £240k

DESTINY 1

The client requires approx £10,000 by way of overdraft as this is a new start up business.

The new store has been taken on via lease and is being fully refitted via NISA. In return the client has to purchase 75% of all stock requirements via Nisa.

This store also will have the benefit of a pharmacy as does the clients [sic] existing Costcutter.

Also, the client purchasing a run down pharmacy 3 doors down. He will employ the technicians and use locums. He will entice the [this sentence had no end]

Due to the clients [sic] stocking requirements and that he is running the new business as a Ltd. Co. Nisa have requested from LTSB a deed of guarantee in relation to the business stock requirement. This is for a sum of £30,000.

Having discussed this with NISA they would consider cancelling this after 2 years.

The new store is in a very good position with a large parking area and is in a more affluent area of Peterborough, various assessments have been completed for the viability of this business and [I] have attached this.

This request will meet the client's needs."

25. The Application for Advance was completed in Section 10 to indicate that the security offered in connection with the anticipated transaction was, for the Costcutter Business, a first legal charge over the Existing Shop and the Flats, and, for Destiny, a second legal charge over 152, London Road, the Khalid Guarantee and the Debenture.
26. In Section 13 of the document Mr. Wright commended the proposed transactions. However, in Section 17 he listed the conditions upon which he considered it appropriate for Lloyds to insist if the transactions were to proceed. These were:-

"VALUATION

CVN INSTRUCTED VALUATION on both assets

Comments to cover, condition and suitability, location, value.

Comments in relation to the benefit of the work and likely impact on both value and trade.

GENERAL CONDITIONS

1. STL [safe to lend] on the property prior to draw down.

2. Loan statement from HSBC proving that loan has been serviced satisfactorily.

3. 3 months statements to be obtained from HSBC.

SECURITY

1st LEGAL charge in the Banks [sic] standard form to be taken. STL prior to advance.

2^nd legal charge over resi invst [residential investment] property.

Debenture.

£40k guarantee linked to assets charged to LTSB."

27. The evidence of Mr. Wright was that it was not for him personally to decide whether Lloyds should enter into the transactions postulated in the Application for Advance. A Commercial Credit team made decisions about things like that. A member of that team, Mr. Simon Fell, was particularly concerned with the cases of Mr. Khalid and Destiny. Mr. Fell reviewed the Application for Advance which Mr. Wright had completed following his meeting with Mr. Khalid. In an e-mail to Mr. Wright dated 7 July 2008 Mr. Fell confirmed that the team would approve the transactions subject to:-

"1. Your conditions Section 17 to be met in full.

2. Charge to be taken on lease on the new store.

3. Guarantee to NISA to be approved by BIGs unit (Bonds, Investments & Guarantees)."

28. Mr. Wright made contact with Mr. Philip Lee of Nisa about the possibility of Lloyds providing the Lloyds Guarantee. In a letter to Mr. Lee dated 10 July 2008 Mr. Wright wrote, so far as is presently material:-

"Further to our recent telephone discussion I would like to confirm that I have set the wheels in motion for LTSB to enter into a guarantee for the sum of £30,000.

You have kindly supplied me with your standard guarantee form that has now been submitted to my legal team to process.

This may take a little time but I do have sanction from my credit team to progress."

29. That letter was relied upon by Mr. David Ball, who appeared on behalf of Destiny, as indicating that Lloyds had decided, as early as 10 July 2008, to enter into the Lloyds Guarantee. However, that seems to me to be reading far more into the letter than it can reasonably bear. All, I think, that Mr. Wright was seeking to convey in the letter was that the process of considering whether Lloyds should enter into the Lloyds Guarantee, in the standard form used by Nisa, had commenced by the form being sent to the legal team. Obviously what happened thereafter depended, in the first instance, on the views of the legal team.
30. The next stage in the process of determining whether Lloyds would deal with Mr. Khalid and Destiny in relation to the Package was obtaining valuations of the properties offered as security. Valuations dated 17 July 2008 were provided by a company called Alexanders Surveyors Ltd.
31. Also on 17 July 2008 Mr. Khalid executed the Khalid Guarantee in a standard form used by Lloyds. The signature of Mr. Khalid on the document was witnessed by Mr. Wright. By a letter dated 21 July 2008 addressed to the Secretary of Destiny Mr. Mohammed Imran of Lloyds advised that the Khalid Guarantee had been completed and that a fee of £115 was payable.
32. The valuation of the Existing Shop and the Flats was at a figure lower than expected. Mr. Wright discussed the position with Mr. Khalid, and Mr. Khalid offered as an additional security a second charge over 181, London Road. Mr. Wright conveyed that offer to Mr. Fell in an e-mail dated 8 August 2008. Mr. Fell replied in a memorandum dated 12 August 2008 that the team was still prepared to consider the Package in respect of Mr. Khalid and Destiny, but required further information as follows:-

"1. The HSBC loan statement shows an outstanding balance of £42076.99 as at 10/07/08. This conflicts with your initial comments on the application which stated the loan was £220k. Please clarify and provide full details of what the £178k discrepancy is for.

2. Why is the Costcutter premises valued at £285k not showing on the accounts balance sheet?

3. It looks like the pharmacy will be operated by Alfa Chemist Ltd. Therefore a lease will need to be in place at a fair market rent. We will need the valuer to provide a side letter to confirm the valuation subject to a lease and to advise the fair market rent figure. Please provide.

4. In addition to your outstanding conditions of sanction I requested 3 months business bank statements which have not yet been received. Please obtain and forward to Commercial Credit."

33. Mr. Wright's evidence was that he had a meeting with Mr. Khalid on 15 August 2008. The evidence of Mr. Khalid as to whether they met on that day was different at different times.
34. In a witness statement dated 9 March 2009 Mr. Khalid said, in paragraph 19:-

"On the 15^th of August 2008 Mr. Wright filled out an application form for the guarantee which he and I signed. He put in box 11 marked 'transaction details' "consideration of agreeing to supply goods as a retail convenience store". I attach hereto marked "SK3" a copy of that application."

35. However, at paragraph 34.1.3 of a witness statement dated 16 April 2010 Mr. Khalid said, in respect of the evidence of Mr. Wright in a witness statement dated 12 March 2009 that he had handed over to Mr. Khalid at a meeting on 15 August 2008 a letter ("the Wright Letter") wrongly dated 10 October 2007,

"I confirm that he did not produce that letter on the 15^th August 2008 as firstly no meeting took place that day."

36. In cross-examination, when first asked whether he had met Mr. Wright on 15 August 2008, Mr. Khalid said that he had. When he was reminded of what he had said at paragraph 34.1.3 of his witness statement dated 16 April 2010 Mr. Khalid reverted to the position that there had been no meeting on 15 August 2008. He was then reminded of what he had said at paragraph 19 of his witness statement dated 9 March 2009. His reaction was to maintain that there had been no meeting. He contended that the witness statement dated 9 March 2009 had been prepared by Counsel then acting for him, that Mr. Khalid had signed it without reading it, and that the witness statement was in error in recording a meeting on 15 August 2008.
37. Mr. Wright was not cross-examined to the effect that there had been no meeting with Mr. Khalid on 15 August 2008.
38. The document referred to at paragraph 19 of the witness statement of Mr. Khalid dated 9 March 2009 was put in evidence. It was in a standard form used by Lloyds in a case in which a customer requested Lloyds to issue a guarantee, bond or indemnity. It had been completed in the hand of Mr. Wright, apart from the signature of Mr. Khalid, which he accepted was his, on behalf of Destiny. The quotations from the form as completed set out at paragraph 19 of the witness statement dated 9 March 2009 were accurate. The signature of Mr. Khalid was witnessed by Mr. Wright, who dated his signature 15 August 2008.
39. Mr. Wright's evidence was that, in addition to the signing of the application for the issue of a guarantee in favour of Nisa, what happened at the meeting on 15 August 2008 was that he, Mr. Wright, handed Mr. Khalid the Wright Letter, which Mr. Wright had prepared that very day. That letter described itself as an "OFFER LETTER". It was addressed to Mr. Khalid. It was in the following terms:-

"Further to recent meeting I would like to inform you that LTSB is happy to provide financial support to yourself as I have detailed below. I have also highlighted the terms and conditions that will need to be satisfied prior to final agreement and drawdown.

Basis of loan

(1) Interest rate of 2.0% over the Banks [sic] Standard base rate.

(2) Arrangement fee of 1.5% of the amount borrowed to be charged (added to the loan)

(3) Costcutter – Sole Trader: Business loan for a sum of £240,000. This is to repay the borrowings at HSBC.

(4) Professional Valuations have been carried out and arranged via LTSB on the assets that have been offered as security to this loan, fee to be paid via client.

(5) The valuation will need to comment upon the value of the asset along with demand and suitability as security.

(6) Capital repayment loan. (Interest charged on the outstanding balance daily, charged monthly).

(7) Term of the loan is 20 years.

(8) Destiny 1 Limited: An overdraft facility at £10,000 has been agreed.

(9) A guarantee from LTSB to Nisa Today's (holdings) [sic] Limited for the sum of £30,000. This is for a 2 year period.

SECURITY

(1) 1^st Legal Charge over 109 – 111 Belsize Avenue, Woodston, Peterborough PE2 9HZ.

(2) 2^nd legal charge over – 152 London Road, Peterborough, Cambs.

(3) 2^nd Legal charge over – 181 London Road, Peterborough, Cambs.

(4) Directors [sic] Guarantee for the sum of £40,000 to Destiny 1 Limited supported by the assets listed above.

(5) Debenture provided by Destiny 1 Limited.

Information required

(1) Provision of existing loan statements from HSBC.

(2) Valuation on the assets to be used as security.

(3) Approval of the wording of the guarantee required for Nisa Today;s [sic] (holdings) [sic] Ltd.

(4) 3 months business statements from HSBC.

(5) Confirmation of the structure in relation to the operation of the pharmacy."

40. The position of Mr. Khalid in relation to the Wright Letter was stated differently on different occasions.
41. In his witness statement dated 9 March 2009, at paragraph 23, he said of it:-

"On the 10^th of October 2008 I was sent a letter dated 2007, but signed electronically by Jon Wright who I had not met prior to Summer 2008. That letter is exhibited hereto marked "SK6". In that letter the bank appeared to suggest that the guarantee and debenture which had already been processed were linked to the £240,000 loan I had with HSBC and a number of other matters. This was simply not the case: that was lending I had absolutely no need of and which Mr. Wright wanted to get under Lloyds control."

42. At paragraph 34.1.3 of his witness statement dated 16 April 2010 Mr. Khalid stated, in relation to the Wright Letter, "I also confirm that on the 15^th July 2008 he did not produce it to me and has never produced it to me".
43. That form of words suggested that Mr. Khalid contended that he had not seen the Wright Letter until after the commencement of this action. However, in cross-examination he told me that he had in fact seen it at about the beginning of September 2008 when a copy was emailed to his solicitors. He explained that by the words, "he … has never produced it to me", he intended to convey not that he had not seen it before the commencement of this action, but that when he did see a copy of it it was not as a result of Mr. Wright giving it to him.
44. The Debenture was signed by Mr. Khalid on behalf of Destiny and forwarded to Lloyds. A copy of the executed, but undated, Debenture was put in evidence. A Companies Form No. 395 completed in relation to the Debenture, of which a copy was put in evidence, noted the date of creation of the debenture registered as 17 August 2008. The form itself, signed by Mr. Khalid, was dated 18 August 2008. A Certificate of Registration put in evidence recorded that registration was effected on 20 August 2008. By a letter dated 28 August 2008 addressed to the Secretary of Destiny Lloyds informed him that the debenture had been completed.
45. Mr. Wright wrote a letter dated 9 September 2008 to Mr. Derek Chapman of Nisa. The heading of the letter identified Destiny and Mr. Khalid. The substance of the letter was:-

"I am writing to you as the business development manager at Lloyds TSB involved in arranging the guarantee from Lloyds TSB to Nisa Today in connection with the above client.

I can confirm that all paperwork in relation to this guarantee has been submitted to our internal Guarantees team to progress direct.

The specialist team that process this type of request have confirmed safe receipt and have confirmed that they will be processing these documents urgently.

Normally these documents are reviewed by the Banks [sic] legal team to ensure the wording is acceptable. However, I would like to make it CLEAR that they have been given the authority to set this agreement up, with great urgency, for the benefit of Nisa Today and our client Destiny 1 Limited.

My understanding is that the process could take up to 10 days, but, as mentioned, they have the authority to but [sic] this in place as soon as they can."

46. Mr. Ball relied heavily on the terms of that letter as indicating that Lloyds had decided to enter into the Lloyds Guarantee.
47. In essence what happened after the despatch of the Fox Letter was that Lloyds changed its mind as to whether it wished to deal with Mr. Khalid or Destiny in relation to the Package. Lloyds, at the level of Mr. Fell, considered that Mr. Khalid and Destiny were not such good bets as they had first seemed. The decision not to proceed seems to have been taken on about 21 October 2008. In a memorandum of that date to Mr. Wright Mr. Fell wrote, so far as is presently material:-

"Kevin King and I have reviewed the information in detail and we are not prepared to support the application. The loan statements show regular returned items for both parts whilst the bank statements show the £50k limit (please note we were advised that the limit on this was £10k) exceeded with regular charges made to the account. This in addition to the excesses and unpaids for our accounts with Destiny 1 Ltd. and Khalid S t/a Costcutter.

Overall the deal is different from the one originally presented and we would not have supported in the first place had we known what we know now."

48. In a letter dated 13 October 2008 to Mr. Khalid Mary Mayo, Technical Manager, Guarantees, of Lloyds, wrote:-

"GBP30,000.00 guarantee in favour of Nisa Today's (Holdings)

With reference to the above, we do not appear to have received a response to our letter of 11^th September. If you wish to proceed, can you please sign and return the documentation to us as soon as possible."

49. Mr. Khalid was cross-examined about that letter. He said that, before sending the Alleged Acceptance he had telephoned to ascertain whether a copy of his acceptance sent by facsimile transmission would be acceptable, or whether a hard copy was required. He was told that a copy sent by facsimile transmission was satisfactory. When he received the letter dated 13 October 2008 he again telephoned and was assured that the letter had been written in error and that Lloyds had received the Alleged Acceptance.

Assessment of the witnesses

50. I am afraid to say that I was not at all impressed by Mr. Khalid as a witness. I have already pointed out his inconsistent accounts of whether he met Mr. Wright on 15 August 2008 and whether, and, if so, when, he received the Wright Letter. Quite apart from the difficulties in accepting his evidence on disputed matters which those inconsistencies represented, Mr. Khalid generally seemed to me to be evasive on points which he perceived not to suit the case of Destiny. He was inclined to argue with Mr. Giles Wheeler, who appeared on behalf of Lloyds, and to ask him questions, as ways, I thought, of deflecting attention from questions which Mr. Khalid did not wish to answer.
51. In contrast, both Mr. Wright and Mr. Knighton seemed to me to be careful witnesses, anxious to recall as accurately as possible events about which he was asked. They each struck me as very fair-minded, prepared to accept points apparently in favour of Mr. Khalid or Destiny when invited to consider them.
52. Consequently, I accept the evidence of Mr. Wright and that of Mr. Knighton in preference to that of Mr. Khalid where their evidence was in conflict. The only real differences which were material to the issues which I had to decide were whether Mr. Khalid had met Mr. Wright on 15 August 2008 and whether, on that occasion, Mr. Wright had given Mr. Khalid the Wright Letter. I find that Mr. Khalid and Mr. Wright did meet on 15 August 2008 and that, on that occasion, Mr. Wright did give Mr. Khalid the Wright Letter.
53. Although not the subject of a direct conflict, there was evidence – the letter dated 13 October 2008 written by Mary Mayo to Mr. Khalid – which suggested that Mr. Khalid had not, by the date of that letter, communicated to Lloyds acceptance on behalf of Destiny of the terms set out in the Fox Letter. It was for Destiny to prove that it had communicated to Lloyds that it accepted the terms of the alleged offer contained in the Fox Letter, if it were to have any prospect of success on its case. The evidence relied upon was, essentially, that of Mr. Khalid. Whilst, as I have noted, a copy of the Alleged Acceptance was put in evidence, the only evidence that that document had in fact been sent to Lloyds by facsimile transmission was that of Mr. Khalid. Mr. Khalid did not say in either of his witness statements that he had sent the Alleged Acceptance to Lloyds by facsimile transmission. He was asked about that matter orally in supplemental examination in chief. The copy of the Alleged Acceptance which was put in evidence bore upon it the word, "Faxed", but no indication, such as printing from a facsimile transmission machine, that it had in fact been sent by facsimile transmission on or about 12 September 2008. There was a partial print indicating that the document had been sent by facsimile transmission, but on an unknown date in December 2008. No record of transmissions made from a facsimile transmission machine available to Mr. Khalid was put in evidence.
54. In his witness statement dated 9 March 2009 Mr. Khalid said this about the Fox Letter:-

"21. On the 11^th of September 2008 I was written to with an offer of a guarantee for £30,000. My copy of that letter is exhibited hereto marked "SK5". It informed me that the bank had agreed to proceed with the issue of the guarantee provided I accepted the terms described therein. I indicated my acceptance of those terms by my signature and I returned the offer letter to Lloyds at the address provided."

55. The form of words adopted by Mr. Khalid in that paragraph suggested that his evidence was that he had posted the Alleged Acceptance to Lloyds, not that he had sent it by facsimile transmission. However, as I have noted, Mr. Khalid told me that his witness statement dated 9 March 2009 was prepared by Counsel then acting for him, and he had signed it without checking it. The witness statement dated 16 April 2010 he had prepared himself, he told me, and that was accurate. It is interesting, therefore, to notice that all Mr. Khalid said in the witness statement dated 16 April 2010 about the Fox Letter, upon which the whole case of Destiny depended, was:-

"34.1.7 The 11^th September 2008 I received a letter from Lloyds TSB on behalf of the claimant essentially following up yet further confirmation that they were giving the guarantee. This is from the "Bonds Indemnities and Guarantees unit". This is a standard letter regarding acceptance of points regarding various points. This is again bearing in mind John Wrights [sic] position for the defendant saying that this was all part of a package and they pulled the plug on me later on because the security did not come up to proof. I refer back to Jonathon [sic] Wrights [sic] letter of the 10^th July 2008 which states "I do have sanction from my credit team to progress" which is the letter to Nisa …"

56. In that witness statement Mr. Khalid said nothing about the Alleged Acceptance.
57. In the Amended Particulars of Claim the Fox Letter, and the reaction to it of Destiny, were pleaded in this way:-

"6. On the 11^th of September 2008, Julie Fox wrote from the Defendant's Bonds, Indemnities and Guarantees Unit in Birmingham ref: CTSD080025752 correctly identifying the sum and the recipient of the guarantee. She wrote that the Defendant agreed to provide the guarantee provided the Claimant accepted two limitations on liability contained in that letter. It ended "if you are satisfied with these conditions, please sign and return this letter to us".

7. The Claimant signed the letter and returned it to the address specified."

58. Again that form of words indicated that Destiny's case was that the Alleged Acceptance had been posted back to Lloyds.
59. Paragraph 7 of the Amended Particulars of Claim was admitted in the Defence at paragraph 13.
60. Mr. Khalid himself prepared a Reply to the Defence. It was a lengthy document, more in the nature of a witness statement. It was dated 19 July 2009. No reference was made in it to the Fox Letter or the Alleged Acceptance.
61. In the result, but for the admission in paragraph 13 of the Defence, I should not have been satisfied on the evidence that Mr. Khalid, on behalf of Destiny, ever did counter-sign and return to Lloyds a copy of the Fox Letter prior to the date Lloyds made clear to Mr. Khalid that it did not wish to enter into the Package first discussed with Mr. Wright in June 2008. I have indicated my view of the reliability of Mr. Khalid as a witness. He did not assert that he had counter-signed and returned a copy of the Fox Letter by facsimile transmission on about 12 September 2008 until he actually came to give evidence at the trial. One would have expected there to be documentary proof, at least in the form of a record of the sending by facsimile from a machine to which Mr. Khalid had access, of a document of at least two pages on about 12 September 2008 to 0121 623 4903, the facsimile transmission number of Lloyds recorded on the Fox Letter, if Mr. Khalid had sent the Alleged Acceptance as he told me orally, but there was none. Although Mr. Khalid was challenged in cross-examination as to whether he had in fact despatched a counter-signed copy of the Fox Letter to Lloyds, in the light of the admission in paragraph 13 of the Defence I do not think that it was open to me, despite my assessment of the evidence, to find that it had not been proved on a balance of probability that Destiny had sent to Lloyds the Alleged Acceptance.

Offer and acceptance

62. It is trite law that the process of contract formation under English law is not akin to a game of Snap, in which a party can say he has accepted what on the face of it was an offer which the other party had made, and had thereby brought into existence a binding contract, regardless of the surrounding circumstances. Lord Bingham once described parties negotiating a contract as the masters of their contractual fate, meaning that it was for the parties to determine whether they wished to make a contract, and, if so, on what terms, and it was not for the Court, with the benefit of hindsight, to impose upon the parties a contract which they had not made for themselves. What I might call "the Snap hazard" has long been recognised by the English courts as one which needs to be avoided, as failure to do so will have the consequence of a contract being imposed on parties neither of whom, at the time of the relevant negotiations, had it in mind to contract on the terms later said to have been agreed. In the case of a contract alleged to have been made in correspondence it is notorious that it is necessary to consider the whole of the relevant, or potentially relevant, correspondence, in order to see whether the parties have in fact reached agreement, and, if so, on what terms.
63. The case of Destiny in this action depended critically upon the isolation from a chain of correspondence and continuing discussion of a single letter dealing only with one aspect (the consequences of Lloyds entering into the Lloyds Guarantee on Nisa's standard form of guarantee) of one part (the possibility of Lloyds entering into such guarantee) of the Package of transactions under discussion, which included the refinancing of Mr. Khalid's loans from HSBC and the unsecured overdraft on the Lloyds' account in relation to the Costcutter Business, the provision of overdraft facilities by Lloyds to Destiny, and the giving of security to Lloyds in the form of legal charges over real property, the Khalid Guarantee and the Debenture. It is, I think, clear, that what was under consideration was the whole Package, and that, at the time, neither Lloyds nor Mr. Khalid had any thought that component parts of the Package being discussed might be agreed in separate contracts.
64. I am satisfied on the evidence that the parties did not intend to enter into a contract simply in relation to the Lloyds Guarantee. Thus the contract upon which Destiny relied was not made out and this action fails.

Consideration

65. My conclusion that no contract was made out on the evidence is supported by a feature which would otherwise have needed to be addressed, consideration.
66. On the face of the contract for which Destiny contended no consideration moved from the promisee, Destiny, to the promisor, Lloyds. Absent consideration, the agreement for which Destiny contended was not legally enforceable anyway, and the action failed on that account.
67. The issue of consideration was addressed in the Amended Particulars of Claim in this way:-

"8. Consideration for the guarantee had already passed, in the form of any or all of the following: in the claimants having given a debenture to the defendant and the defendant having registered that debenture on 20 August 2008; in the Claimant's continuing to negotiate with the Defendant to transfer all his accounts to the Defendant; in the payment of the £115 [the fee paid by Destiny to Lloyds in respect of the Khalid Guarantee]; in the signing and return of the form. The Defendant made its offer as at paragraph 6 above and specified what action the Claimant had to take to accept that offer. The Claimant acted in accordance with the Defendant's instructions whereupon the contract was complete."

68. On the face of it, the giving of the Debenture could not be consideration for the alleged contract, as it had been executed prior to the alleged contract. Destiny had no accounts with HSBC to transfer to Lloyds, and clearly negotiating with Mr. Khalid for the transfer of his existing accounts could not amount to consideration moving from Destiny, even if, which I doubt, continuing to negotiate for the transfer of accounts could, in the circumstances, amount to consideration at all in relation to an agreement on the part of Lloyds to enter into a guarantee with Nisa. The £115 was paid by Destiny, but prior to the alleged contract and as part of the completion of the Khalid Guarantee. Payment of the sum of £115 had nothing to do with the Lloyds Guarantee. It seems to border on the absurd to suggest that accepting an offer by the means of acceptance specified in the offer itself supplies consideration for the contract said to have resulted from the acceptance of the offer.
69. In his written skeleton argument on behalf of Destiny, Mr. Ball dealt with the question of consideration in this way:-

"28. Firstly, there is the deed of guarantee and indemnity dated 17 July 2008 for £40,000 made from Mr. Khalid to the bank. It is clear that the purpose of this guarantee that Mr. Khalid gave the bank was to cover the £30,000 guarantee the bank were in turn giving to Nisa on behalf of Destiny 1. This is clearly not past consideration. It is merely executed consideration. The bank's guarantee to Nisa on behalf of Destiny 1, and Mr. Khalid's guarantee to the bank for any losses incurred by Destiny 1 are "substantially one transaction". It is well established that the courts do not take a strict chronological view.

29. Secondly, in the alternative, there is the Claimant's simple promise to indemnify the bank for any loss it might suffer under the guarantee to Nisa.

30. Thirdly, in the alternative, there is the debenture dated 17 August 2008 in which Destiny 1 agreed that all money owed by Destiny was secured by the goodwill of the company, it's fixtures and fittings etc. and all the properties set out in the schedule.

31. It is submitted there is clearly consideration for the agreement to provide the guarantee."

70. The fact that, both in paragraph 8 of the Amended Particulars of Claim, and in the written skeleton argument of Mr. Ball, consideration for the alleged agreement to provide a guarantee to Nisa is to be found in other aspects of the transactions under discussion gives the game away, as it seems to me. Each element in the transactions being considered was part of the whole Package, and no part was intended to have an existence separate from the whole Package being agreed and implemented.
71. In fact Mr. Ball's submissions not only seem not to recognise the issue of past consideration, but also to conflate Destiny with Mr. Khalid. The Khalid Guarantee was made between Mr. Khalid and Lloyds, not between Destiny and Lloyds, and so could not possibly be consideration supporting an agreement between Destiny and Lloyds under which Lloyds was to provide the Lloyds Guarantee to Nisa. It was also, plainly, a document executed prior to the alleged contract to provide the Lloyds Guarantee to Nisa.
72. The Debenture, although executed on behalf of Destiny, was also executed prior to the date of the alleged contract to provide the Lloyds Guarantee to Nisa, and on that account could not supply consideration for the alleged contract.
73. In the circumstances of the present case it seems to me that the Khalid Guarantee and the Debenture both fall to be treated as having been executed in escrow, and not intended to take effect unless and until the whole Package had been agreed and implemented.
74. The second of Mr. Ball's alternative analyses of consideration was not supported by any evidence. There was no suggestion anywhere in any document put before me, or in any witness statement, that Destiny had given a simple promise to indemnify Lloyds against any loss it might suffer under a guarantee given to Nisa.
75. In the result, therefore, had I concluded that an actual agreement had been made between Lloyds and Destiny under which Lloyds agreed to enter into the Lloyds Guarantee, I should have concluded that that agreement was not legally enforceable because it was not supported by consideration.

Alleged losses

76. In a Claimant's Schedule of Loss which was put before me were listed various alleged financial consequences of the failure of Lloyds to enter into the Lloyds Guarantee. In summary, it was contended that the whole adventure of the New Shop failed by reason of the failure to provide the guarantee, and the costs incurred in anticipation of the operation of the New Shop had adversely affected the Costcutter Business also. It is unnecessary to consider any of the items of alleged loss in any detail. Even if I had reached the conclusion that Lloyds had been in breach of contract by not providing the Lloyds Guarantee, I should not have found that any of the alleged losses was caused by that failure.

Conclusion

77. In the result this action fails and is dismissed.