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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 >> Gopaul & Anor v Naidoo & Anor [2014] EWHC 2684 (QB) (31 July 2014) URL: http://www.bailii.org/ew/cases/EWHC/QB/2014/2684.html Cite as: [2014] EWHC 2684 (QB)

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IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		31/07/2014

His Honour Judge Richard Seymour Q.C. :

1. This action arose out of a collaboration between the first claimant, Mr. Coossialsing Gopaul, and/or a company of which he was the managing director and principal shareholder, the second claimant, Gopaul Investment Ltd. ("Gopaul Ltd."), and the defendants, Mr. and Mrs. Kresen Naidoo, and/or a company of which he was a director and they were principal shareholders, Rosebeech Investment Ltd. ("Rosebeech"). Who precisely were the collaborators was one of the main issues in the action. The collaboration was for the purposes of the undertaking of the redevelopment of two properties by conversion into six flats. The two properties in question were, respectively, that known as and situate at 79, Chiltern Street, London W1, the title of which was registered at HM Land Registry under title number NGL466642 ("No. 79"), and that known as and situate at 81, Chiltern Street, London W1, the title of which was registered at HM Land Registry under title number NGL814731 ("No. 81"). In this judgment I shall refer to No. 79 and No. 81 collectively as "the Chiltern Properties".
2. Rosebeech was incorporated as company no. 535938 on 4 February 2005. It seems that, as incorporated, Rosebeech had an authorised share capital of £100, divided into 100 shares each of the nominal value of £1. As I understand it, 98 of the authorised shares were issued initially, with Mr. Naidoo and his wife each having 49 shares. Mr. Naidoo appears to have been the sole director of Rosebeech, but his wife was the company secretary. At some point, apparently in about July 2005, Rosebeech acquired the freehold titles to each of the Chiltern Properties. A scheme of redevelopment was devised and work began. By the date of the annual return of Rosebeech made to Companies House on 24 April 2007 the registered office of Rosebeech was at the Chiltern Properties and the shareholdings in Rosebeech had been altered so that each of Mr. Naidoo and Mrs. Naidoo held 35 of the authorised, issued shares, but the remaining authorised shares had also been issued, so that, with shares transferred to it by each of Mr. and Mrs. Naidoo, Gopaul Ltd. held 30 shares. According to the annual return the alterations to the shareholdings in Rosebeech took place on 4 February 2007.
3. It was common ground that the alterations to the shareholdings in Rosebeech reflected an agreement which had been made between Mr. Gopaul and Mr. and Mrs. Naidoo, although there was a dispute as to whether, in making the agreement, the individuals concerned had been acting in their respective private capacities or as agents of, on the one hand, Gopaul Ltd., and, on the other, Rosebeech.
4. The background to the agreement was that Rosebeech and Mr. and Mrs. Naidoo were having difficulties as a result of one of the funders of the development of the Chiltern Properties, Britannia Building Society ("Britannia") threatening to appoint a receiver. Mrs. Naidoo runs some sort of nursing business in the course of which she has a requirement to place nurses in care settings for the purposes of adaptation of their existing skills. Mr. Gopaul runs two nursing homes, and it was in that capacity that Mrs. Naidoo first came to have dealings with Mr. Gopaul. In addition to his nursing homes, Mr. Gopaul is the controlling shareholder in two companies, one of which is Gopaul Ltd. Gopaul Ltd. owns some ten buy-to-let properties and a nursing home. Given the property interests of Mr. Gopaul, when confronted with difficulty in the form of the threat of the appointment of a receiver by Britannia, Mr. and Mrs. Naidoo approached Mr. Gopaul for advice and assistance. After giving some advice to Mr. and Mrs. Naidoo concerning the raising of finance for Rosebeech, Mr. Gopaul suggested to them in about January 2007 that he should, in effect, fund the completion of the redevelopment in return for being sold a flat within the development for a concessionary price of £300,000.
5. Mr. Gopaul was called to give evidence at the trial. At paragraphs 28 and 29 of his second witness statement made for the purposes of this action, dated 10 October 2013, Mr. Gopaul, explained his version of what had been agreed and how:-

"28. I had a meeting with the Defendants and my accountant Mr. Anil Bhanot on 1^st February 2007 at his office and he made a Minute of the proposed transaction at that time …. Subsequently it was decided that I would invest via Gopaul Investments Limited.

29. At that point, the Defendants agreed with me that, to enable them to proceed with the development of Chiltern Street I would lend them up to £300,000 and for that I would receive the flat: the money was to be lent by me to the Defendants although it transpired that the loan was to their company RIL [i.e. Rosebeech]. It was intended then that Gopaul Investments Limited would take a second charge over Chiltern Street, but RIL's mortgagee would not agree to the grant of a second charge. Accordingly, as was recorded in clause 2.3 of The Agreement [to the detail of which I shall come later in this judgment] (and as set out in the Amended Particulars of Claim at paragraph 5) the Defendants arranged at Mr. Bhanot's suggestion to transfer 30% of the shares in RIL, a company at that time wholly owned by them. The shareholding was transferred to Gopaul Investments Ltd. (which me [sic] and my family wholly owned). I took shares in RIL as security for the loan: at that stage my shareholding was limited to 30% of the company. The intention then was that these would be returned when I received what had been agreed at the end of the development. My accountant prepared the Stock Transfer Forms whereby each Defendant transferred 15% of each of their shareholdings to my company (i.e. Gopaul Investments received 30% of the shares in RIL)."

6. That passage clearly revealed what seemed to lie at the root of the one of the issues in this action – the failure of Mr. Gopaul to differentiate between individuals and the companies which they controlled. However, it was plain, from what Mr. Gopaul said in the passage which I have quoted, that it was decided on his side that the investment to be made was to be made by Gopaul Ltd., and not by him personally. He said as much in the last sentence of paragraph 28 of his witness statement. That the investment was to be made by Gopaul Ltd. was born out by the fact, which was not in dispute, that it was to Gopaul Ltd., and not to Mr. Gopaul personally, that shares in Rosebeech were transferred. However, in paragraph 29 of his witness statement Mr. Gopaul said, inaccurately, "I took shares in RIL as security for the loan: at that stage my shareholding was limited to 30% of the company". One might expect that, as title to each of the Chiltern Properties was vested in Rosebeech and Rosebeech was undertaking the redevelopment of the Chiltern Properties, any payments made by Gopaul Ltd. would be to Rosebeech, and not to Mr. and Mrs. Naidoo. Obviously it was not impossible that any anticipated loans could have been made to Mr. and Mrs. Naidoo personally for onward lending by them to Rosebeech, but that would have been somewhat artificial. Hence it came as no surprise to find Mr. Gopaul saying, as he did in paragraph 29 of his witness statement, that, "it transpired that the loan was to their company, RIL".
7. Bearing in mind what subsequently transpired, it was interesting to see Mr. Gopaul, speaking, in paragraph 28 of his witness statement, of him deciding to "invest". At paragraph 29 he said that what he was going to get, in return for providing up to £300,000, was a flat. Thus it was not obvious, even on the evidence of Mr. Gopaul, that the nature of the arrangement was Gopaul Ltd. providing loans, rather than investing money in Rosebeech in return for a flat.
8. The principal evidence led at the trial on behalf of Mr. and Mrs. Naidoo was in fact that of Mrs. Naidoo. Mr. Naidoo was also called to give evidence, but, so far as witness statements were concerned, largely in a supporting role. The account of what was agreed with Mr. Gopaul which Mrs. Naidoo gave in her third witness statement, dated 11 October 2013, in which she commented upon what was said by Mr. Gopaul in a first witness statement, was this:-

"7. Paragraph 22 of the First Claimant's Witness Statement is not entirely correct. In fact, what happened was that we showed the First Claimant the valuation of the Chiltern Street property, which stipulated a requirement of between £100,000 and £136,000 to complete the conversion of the property into flats. However, the First Claimant was of the opinion that the flats should be completed to a higher specification than originally planned. This was agreed, and the First Claimant lent £300,000 not to ourselves, the Defendants, personally, but to Rosebeech Investments Limited ("RIL"), a company which we controlled. In return the First Claimant was given a 30% shareholding in RIL. It is important to note that this was a business deal, not a personal arrangement. The intention was for the First Claimant to purchase the Chiltern Street property.

8. The loans made by the First Claimant referred to in paragraph 26 of the First Claimant's Witness Statement and elsewhere were not made to us, the Defendants, personally, but to RIL, in which the First Claimant had a 30% shareholding.

9. …

10. The money referred to in paragraph 28 of the First Claimant's Witness Statement was RIL expenses, not for personal expenses. The amounts of money for which we signed were for building works on behalf of RIL: materials, wages and equipment. We reiterate that we did not receive a penny, because the First Claimant was distributing the money for specifics as agreed at the time. The £120,000 that we said [sic] the First Claimant was the amount that we were able to account for through Bhanot & Co, the accountants. The First Claimant together with Bhanot managed all the accounts, as Bhanot were the accountants for RIL and also for the Second Claimant. No supplementary information was disclosed and we were not able to access any more information with regard to further payments, if any.

11. It has to be said once again in relation to paragraph 29 of the First Claimant's Witness Statement, the loans made by the First Claimant were not to us, the Defendants, personally, but to RIL."

9. Thus it was apparent that Mrs. Naidoo did not have any much more firm a grasp of the difference between Mr. Gopaul and Gopaul Ltd. than the grasp which Mr. Gopaul had of the difference between Mr. and Mrs. Naidoo as individuals and Rosebeech. While Mrs. Naidoo was firm that loans were to Rosebeech, and not to her and her husband personally, in which view, for the reasons which I have explained, she concurred with the evidence of Mr. Gopaul, she seemed to think that it was Mr. Gopaul personally, and not Gopaul Ltd., who was the lender and also the holder of 30% of the shares in Rosebeech after the transfer of shares on 4 February 2007.
10. How the parties operated after the making of the agreement in February 2007 did rather emphasise that the nature of the arrangement was, indeed, that Gopaul Ltd. was paying money to, or for the benefit of, Rosebeech. In particular, Mr. Gopaul became involved himself in ordering goods and in engaging the work force which undertook the development. It is inconceivable that he would have acted in that way if the sums which were expended were for the account of Mr. and Mrs. Naidoo personally. They had no direct control over Mr. Gopaul's decisions or the sums which he chose to approve, so, in effect, if his professed view at the trial that everything spent was by way of advance to Mr. and Mrs. Naidoo personally were correct, he was the person who determined the amount of their liability.
11. There was put in evidence a reconciliation ("the Reconciliation") prepared by Mr. Anil Bhanot, a partner in Bhanot Partnership, the accountants to Gopaul Ltd., of the sums which were said to have been lent by Gopaul Ltd. to Mr. and Mrs. Naidoo. The Reconciliation commenced with a payment of £4,000 in cash by Mr. Gopaul to Mrs. Naidoo on 7 April 2007 and ended with a payment of an invoice rendered by DTZ Debenham Tie Leung Ltd., surveyors, for a valuation of the Chiltern Properties on 23 October 2007. The total sums spent were said to have been £300,228.44. Of that sum, £13,287.50 was said to have been expended on or after 25 September 2007. In total there were seventy entries in the Reconciliation. From the descriptions given in the Reconciliation 33 of the entries seemed to relate to direct payment by Gopaul Ltd. to suppliers of materials, or for work done. Two entries related to direct payment to surveyors for valuations, and two related to payment of solicitors, Messrs. MTG Solicitors ("MTG") for legal work. In two instances payments (totalling £16,500) were made by cheque to Rosebeech. The largest single payments, of £46,000 and of £45,389.50, were paid to discharge outstanding mortgage payments owed by Rosebeech. The remaining payments, by cheque, in cash or, in one instance, by bank transfer, were made to Mr. and Mrs. Naidoo.
12. The Reconciliation was said to be supported by a variety of documents. Some were cheques. Some were invoices. Some were rather scrappy notes. However, it was contended by Mr. and Mrs. Naidoo that at least one of the alleged supporting documents indicated that actually the Reconciliation and the documents relied upon as supporting it were unreliable. The document in question was an invoice dated 13 June 2007 from a company called S4 Design Ltd. and addressed to Mr. Gopaul at the Chiltern Properties. It related to seven "Steam rooms", seven vanity units and ten lavatory pans. Although Mr. Gopaul was asked in cross-examination about the invoice, he did not explain satisfactorily the numbers seven for "Steam rooms" and vanity units. Although Mr. Gopaul asserted that a "Steam room" was actually some sort of bath, he was quite unable to explain why one might need seven of them for the redevelopment of six flats, each of which contained only one bathroom. He was also unable to explain why seven vanity units might have been required or why it was appropriate to have ordered ten lavatory pans when each of the six flats required two. The key to the understanding of the invoice seemed to me to be the notation on it of the words "Stock to be Delivered to above address and Ealing". Ealing is the location of the two nursing homes run by Mr. Gopaul, and also his private residence. However, in cross-examination he professed that it was in fact to a property belonging to Mr. and Mrs. Naidoo that the location "Ealing" referred. That, I think, could not be right. In June 2007 Mr. and Mrs. Naidoo lived at 148, Wood End Lane, Northolt ("the Northolt Property"). They owned in their own names two other properties. One was at 78, Western Avenue, Acton ("the Acton Property"). The other was at 29, Gaywood Street, Southwark ("the Southwark Property"). Mr. Gopaul asserted that Mr. and Mrs. Naidoo diverted monies which should have been spent on the redevelopment of the Chiltern Properties to work on the Northolt Property, the Acton Property or the Southwark Property. The scope for Mr. and Mrs. Naidoo to do that was limited, and did not arise in relation to materials or labour organised by Mr. Gopaul and paid for directly by Gopaul Ltd. However, I am satisfied that Mr. Gopaul did have the opportunity to charge to the loan to Rosebeech materials actually provided, or work actually done, for the benefit of one of his, or Gopaul Ltd.'s, businesses and that, at least on the occasion identified in the invoice to which I have referred, he did so. For reasons which I shall explain it was not necessary for me to reach any conclusion as to how much Gopaul Ltd. had paid to, or for the benefit of, Rosebeech. What was important was that, in the light of the Reconciliation, it seemed that, as at about 20 September 2007, what had been paid did not exceed £286,940.94.
13. Rosebeech had initially funded the redevelopment of the Properties with monies borrowed from a number of sources. I have already noted that one of those sources was Britannia. Another was Mortgage Agency Services Number One Ltd. ("MAS"). Rosebeech had entered into a deed of mortgage with MAS dated 6 July 2005. It appeared that on 26 February 2007 MAS contended that Rosebeech was in breach of one of the terms of the deed of mortgage dated 6 July 2005 and appointed as receivers of the Chiltern Properties Mr. Derek Reeves and Mr. Derek Kay ("the Receivers"). It was common ground before me that at that time Mr. and Mrs. Naidoo, on behalf of Rosebeech and at the suggestion of Mr. Gopaul, instructed MTG to challenge the receivership. Certainly there was put in evidence at the trial a copy of a letter dated 1 June 2007 written by MTG, on behalf of Rosebeech, to Messrs. Teacher Stern Selby, solicitors acting on behalf of MAS, in which MTG both challenged the legality of the appointment of the Receivers and indicated that Rosebeech was seeking funds to discharge the existing mortgage.
14. It is not necessary for the purposes of this judgment to seek to catalogue in detail the financial problems of Rosebeech in the summer of 2007 and the steps taken to try to relieve those problems. However, it is necessary to record that, the initial receivership of the Chiltern Properties at the instigation of MAS having been set aside, the Receivers were again appointed as receivers by MAS on 17 August 2007. Against that background, towards the end of August the question arose, in the context of dealing with the financial problems of Rosebeech, of selling the Chiltern Properties to a newly-formed vehicle, BCA Management Ltd. ("BCA"). Once he became aware of that possibility, so it seemed, Mr. Gopaul decided to take steps to seek to protect the investment of Gopaul Ltd. in the redevelopment of the Chiltern Properties. Acting, no doubt, on the advice of the solicitors then acting for Gopaul Ltd., Messrs. Prince Evans, Gopaul Ltd. decided to make applications to HM Land Registry in forms UN1 to enter a unilateral notice in respect of each of No.79 and No. 81. The applications were mutatis mutandis in identical terms. Each needed to include a statutory declaration made to support it. The declarant in each case was Mr. Gopaul. Each statutory declaration was made on 4 September 2007, although the application in each case was dated 7 September 2007. The statutory declaration in each case was set out in panel 12 of the application form, which, with the relevant printed words, read, as made by Mr. Gopaul in each instance:-

"The declarant solemnly and sincerely declares that the beneficiary [that is, Gopaul Ltd.] is interested in the property described in panel 4 as

…

Entitled to legal security as a result of monies in excess of Three Hundred Thousand Pounds (£300,000) having been loaned to Rosebeech Investments Limited and in respect of which security was to have been provided.

The monies were advanced in respect of refurbishment and building works at the Property."

15. Save that the amount of money stated is erroneous – the true amount due being something less than £286,940.94 – and save that there was a dispute, with which I do not need to concern myself, as to whether it had been agreed that security, other than the shareholding which I have mentioned, was to be provided for the loan, what was plain from the statutory declaration was that what was declared was that the lender was Gopaul Ltd. and the borrower Rosebeech. It is also important to notice that, although erroneous, the amount of money said to have been lent was "in excess of Three Hundred Thousand Pounds", and not £400,000. I shall explain the significance of the sum of £400,000 shortly. The case for Mr. and Mrs. Naidoo at the trial was that, subject to the caveats which I have noted, the statutory declarations made by Mr. Gopaul on 4 September 2007 were correct. In cross-examination Mr. Gopaul agreed that the statutory declarations were correct when made, but seemed to contend that in some way the factual assertion that Gopaul Ltd. had lent money to Rosebeech became incorrect later. That reservation was unintelligible unless it was to be contended that, for good consideration, some novation was made after 4 September 2007 between Gopaul Ltd., Rosebeech and some third party by which the third party agreed to become liable to repay to Gopaul Ltd. sums loaned by Gopaul Ltd. to Rosebeech.
16. From this point on matters became, on the evidence, decidedly murky.
17. There was put in evidence a copy of a letter dated 6 September 2007 – so written between the date of the statutory declarations in the forms UN1 to which I have referred, and the dates of the applications themselves in that form – written by MTG to Mr. and Mrs. Naidoo. The letter was in the terms of what is known in the trade as a client care letter. It began in this way:-

"RE: LOAN AGREEMENT

We refer to our recent meeting in the office and thank you for instructing this firm. This letter explains the basis on which this firm will carry out all the work in your case. We apologise if this letter seems somewhat lengthy but we are required by the Law Society to provide this information at the outset of your matter.

Confirmation of Instructions and Advice

You informed us that you had borrowed £400,000 from Mr. Gopaul for the refurbishment and renovation work that you carried out on 79 – 81 Chiltern Street.

You instructed us to draft a loan agreement detailing the terms of the loan.

The main clauses of the Agreement are:

1. Repayment within one year

2. Share of the profit to Mr. Gopaul

3. You will honour the loan in your personal capacity

4. You will consent to Mr. Gopaul entering a restriction on

a. 79 – 81 Chiltern Avenue [sic]

b. 78 Weston Avenue

c. 29 Gayward Street

Please find enclosed herewith a copy of the draft agreement. Kindly peruse the same and if you are happy with the contents, all three parties will need to sign before two witnesses. We have mailed a copy of the agreement to Mr. Gopaul also."

18. There was put in evidence a copy of a letter also dated 6 September 2007 addressed to Mr. Gopaul, although the actual text of the letter began, "Dear Mr. Naidoo". The letter was, so far as material, in these terms:-

"We have been instructed by Mr. and Mrs. Naidoo with regard to the preparation of a loan agreement, accordingly please find enclosed herewith a draft agreement for your perusal and agreement. You may wish to seek independent legal advice in this regard.

Kindly note that if you are happy with the contents of the agreement the original document will need to be executed by all three parties. We will contact you with regard to the practical arrangements in this regard."

19. What was the draft loan agreement enclosed with that letter was obscure. The original was produced during the trial. As produced the letter was stapled at the top about a quarter of the way across the page, to a document ("the Draft") which itself comprised three pages and was separately stapled in the top left hand corner through a cardboard corner protection piece printed with the name "MTG solicitors". It appeared that the staple fixing the letter to the Draft was the only staple which had ever attached the letter to the Draft – in other words, there was no indication that the two documents had ever been separated for the purposes of photocopying. However, the photocopy of the Draft included in the trial bundle ostensibly as a photocopy of the Draft attached to the letter, showed plainly in the top left hand corner of the first page the cardboard corner protection piece which I have mentioned. With the staple between the letter and the Draft in the position in which it was in the original, that copy of the Draft could not have been made from the original. If the letter had been folded to reveal the first page of the Draft the cardboard corner protection piece would have been concealed. It thus appeared that either the Draft had not been attached physically to the letter dated 6 September 2007 when received, but had been attached later, or that the version of the Draft photocopied for the purposes of the trial was not that actually sent with the letter dated 6 September 2007.
20. The Draft was in these terms:-

"PERSONAL LOAN AGREEMENT

This LOAN AGREEMENT is made on the between the parties

Mr Coossialsing Gopaul of 46 Gunnersbury Avenue, London W5 4HA (hereafter referred to as the LENDER), and Mr Kresen Naidoo and Mrs Nalini Bala Naidoo of 148 Wood End Lane, Greenford, Middlesex UB5 4JR (hereafter referred to as the BORROWERS) for the loan of £400,000.00

(1) The Borrowers acknowledge receipt of the £400,000, which they have utilized, in their capacity as directors of Rosebeech Investments Ltd, towards the refurbishment and renovation work of 79 – 81 Chiltern Street, London W1U 6NW

1.1) The Borrowers acknowledge they are indebted to the Lender for the value of the loan

1.2) The Borrowers are willing to honour the terms of the Loan Agreement in their personal capacity.

(2) The Loan term is for a period of one year.

2.1) The Loan repayment is to be made at the end of the one year period. The loan repayment amount will comprise the initial payment of £400,000 and a 30% share of the profit on 79 – 81 Chiltern Street, London, W1U 6NW. (The Profit)

2.2) The profit will be calculated by the following sum

Sale Price – (Purchase Price + Associated Sale Costs) = Profit

2.3 In the interim the Borrowers have given the lender a 30% shareholding in Rosebeech Investments Ltd, as consideration for utilizing the loan amount.

(3) The entire Loan amount, including The Profit, will be paid back to the Lender upon the sale or remortgage of

79 – 81 Chiltern Street, London, W1U 6NW, and, or

78 Weston Avenue, Acton, W3 7TX, and, or

29 Gayward Street, Southwark, London, SE1 6HG

3.1) If the Loan amount is not paid back within the one year period, the Borrowers shall pay interest on the Loan amount, calculated at 8% per annum, and 30% of The Profit, when the Loan repayment is made.

3.2) If the Loan amount is not paid back to [sic] within the one year, the Lender shall apply to the Court for an order for sale of the properties situate at

79 – 81 Chiltern Street, London, W1U 6NW, and, or

78 Weston Avenue, Acton, W3 7TX, and, or

29 Gayward Street, Southwark, London, SE1 6HG

(4) The Lender shall register a restriction on the Borrowers [sic] properties situate at

79 – 81 Chiltern Street, London, W1U 6NW, and

78 Weston Avenue, Acton, W3 7TX, and

29 Gayward Street, Southwark, London, SE1 6HG

IN WITNESS WHEREOF the parties hereto have subscribed their respective hands, hereunder, on the day and the year first above written

Signed

………………………… ………………………….

………………………….

LENDER BORROWERS

In the Presence of:

Witness 1 Signed………………………..

Address

Witness 2 Signed………………………….

Address

The OWNER and the BORROWERS should each retain a signed copy of the agreement."

21. It has to be said that the Draft was a very strange document. It was not a loan agreement in the ordinary sense of an agreement to make a loan, with terms as to repayment. The Draft seemed merely to record the making of a loan in the past by Mr. Gopaul to Mr. and Mrs. Naidoo. However, not merely had Mr. Gopaul himself not made any loan, because he had carefully arranged that any payments should be made by Gopaul Ltd., no loans had been made to Mr. and Mrs. Naidoo. The relevant payments had, as I have explained, all been made to Rosebeech. Moreover, as at the date at which the Draft appeared to have been prepared, on no view had loans totalling £400,000 been made by anyone to anyone. The Reconciliation indicated, on the assumption that all of the items in it had properly been included, that no more than £286,940.94 had been advanced. The Draft seemed to recognise, in clause 1, that the payments made had been utilised in the redevelopment of the Properties, and thus prima facie had been made to Rosebeech. The purpose of clause 1.2 was especially difficult to discern. There could be no question of Mr. and Mrs. Naidoo needing to be "willing to honour the terms of the Loan Agreement in their personal capacity", if the loan alleged had actually been made to them as individuals. Thus what the sub-clause appeared to be designed to achieve was to make Mr. and Mrs. Naidoo liable for repayment of a loan which had not actually been made to them as individuals. However, the provisions of the sub-clause were wholly ineffective unless supported by some sort of consideration. The provisions as to repayment in the Draft were also bizarre. Whilst clause 2 provided for the loan to remain outstanding for one year, clause 3 provided for immediate repayment "on the sale or remortgage of" the Chiltern Properties, and/or the Acton Property, and/or the Southwark Property. Moreover, what was to be repaid was not the alleged amount of the loan and interest, but the alleged amount of the loan and "The Profit", as defined. "The Profit", as defined, was most obviously an amount payable by Rosebeech, rather than Mr. and Mrs. Naidoo personally, because it depended upon the sale price of the Chiltern Properties, and only Rosebeech could sell them. Clauses 3.2 and 4 of the Draft were not really terms of an agreement, but rather declarations of intent on the part of the lender. What was odd about those declarations of intent was that under an agreement in the form of the Draft to which only Mr. Gopaul and Mr. and Mrs. Naidoo were parties, steps were indicated as intended to be taken in relation to the Chiltern Properties which Mr. and Mrs. Naidoo did not own. These various peculiarities in the Draft suggest that it was unlikely that it had been drafted by a lawyer, or at any rate by a competent lawyer.
22. For reasons which I shall explain later in this judgment, the layout of the Draft was of some significance. The first page comprised the heading and the text as far as the first line of clause 2.2. The second page comprised the second line of clause 2.2 and continued to the end of clause 4, which was actually at the bottom of the second page. The third page contained the rest of the document, beginning with the words, "IN WITNESS WHEREOF". It is convenient to refer to that page as "the signature page of the Draft".
23. The position of Mr. and Mrs. Naidoo concerning the letter dated 6 September 2007 addressed to them by MTG was explained in the third witness statement of Mrs. Naidoo at paragraph 32:-

"The client-care letter alleged in paragraph 41 of the First Claimant's statement to have been sent to us by MTG solicitors on 6^th September 2007 never reached us. It was returned to the firm unsigned and not received by us. The First Defendant only had sight of the letter much later on at a meeting at the Claimant's solicitors' office with our then solicitor, Mr. Tim Clarke. When Mr. Clarke asked where the First Claimant had obtained the letter, the First Claimant replied that he had been given it by the Second Defendant. This is obviously untrue, as we had no knowledge or receipt of the supposed agreement prepared by MTG. The instructions were give[n] by the First Claimant, not by us, and he was sent the document directly by MTG. …"

24. At paragraph 47 of his second witness statement Mr. Gopaul asserted that what had prompted the production of the Draft and the sending by MTG of the letters dated 6 September 2007 to which I have referred were these circumstances:-

"Accordingly towards the end of August I went with the Defendants at their request to the firm of solicitors called mtg (sic) of Second Floor, Warley Chambers, Warley Road, Hayes, Middlesex: we met one of the partners, Malik Saeed. We discussed how my loan could be protected in the changed circumstances. The Defendants put forward the terms that are in the loan agreement and I broadly agreed to those terms. (It had been envisaged initially that Gopaul Investments would take a second charge over the three properties that were to be mentioned in The Agreement but no such security was provided because RIL's mortgagee would not consent to a second charge: in light of this, the security was to take the form of restrictions registered in form RX1.) The Defendants instructed mtg in my presence to prepare a personal loan agreement to reflect those agreed terms."

25. That is a very strange account. If the object of the exercise was to secure protection for Mr. Gopaul, or for Gopaul Ltd., one might have expected that Mr. Gopaul would instruct his own, or Gopaul Ltd.'s own, solicitors to prepare whatever documentation was considered appropriate. However, if Mr. Gopaul had been present at a meeting with Mr. Saeed and Mr. and Mrs. Naidoo, one might have expected that the letter dated 6 September 2007 to him would have referred to his presence and to whatever indications he alleged that he had then given as to whether he was content with what was proposed. Again, one might have expected that the letter dated 6 September 2007 to Mr. and Mrs. Naidoo would have mentioned that Mr. Gopaul had been present at the meeting referred to in the letter, if that was indeed the case. It seems wildly improbable that Mr. and Mrs. Naidoo suggested that the Draft refer to a loan of over one third more than, even on the case for the claimants, had actually been advanced by the end of August 2007.
26. Although the Draft was, as contended on behalf of the claimants, sent to Mr. and Mrs. Naidoo, as well as to Mr. Gopaul, on 6 September 2007, nothing seems to have been done about it immediately. Instead on 7 September 2007, as I have recorded, the applications in forms UN1 in respect of the Chiltern Properties were made to HM Land Registry.
27. The Receivers arranged for the Chiltern Properties to be sold at auction. Some of the evidence adduced at the trial indicated that the date of the auction was fixed as 20 September 2007, although it may have been a few days later, on 25 September 2007.
28. In his second witness statement Mr. Gopaul contended that what happened in the light of the fixing of the date of the auction was:-

"61. As I have said, Chiltern Street was due to be auctioned on 20^th September. In the event it was withdrawn from auction because it had been sold on that very day to Mr. Mirza's contact Ms Dhillon. As it had been sold, the Defendants came to me and said we must sign the Personal Loan Agreement [meaning what I have called in this judgment the Draft]. I was naturally very concerned to have the agreement signed as it would be impossible for the Defendants to deliver the promised flat if they had sold Chiltern Street.

62. I agreed with the Defendants that the Personal Loan Agreement tendered by mtg [meaning MTG] would be executed at mtg's office in the evening on 20^th September. In the event the Defendants managed to procrastinate to such an extent that mtg's office had closed by the time we were anywhere near it: for example, the First Defendant insisted that he was hungry and needed to buy some fast food. Eventually, we went to my own office where The Agreement was typed up by Mr. Maremootoo on my instructions in the form relied on in the Particulars of Claim - a form very slightly amended from that provided by mtg.

63. I had arranged for Mr. Bisnauthsing, a fellow Mauritian and a trainee solicitor at that time to be there as a witness, and my Office Administrator Mr. Mauremootoo was also present and able to witness the document. The Agreement was duly signed by all parties; at my request the First Defendant also wrote the Land Registry Title Number against each property mentioned in the preamble on the first page and this was initialled by me and by him.

64. …

65. Both versions of the Personal Loan Agreement – that prepared by mtg and that signed by the parties – conclude with the statement that "The owner and borrowers should each retain a signed copy of the Agreement": on 20^th September both sides had an executed copy of The Agreement in the form annexed to the Particulars of Claim and exhibited at CG1. I met my solicitor Mr. Lemon of Prince Evans on 25^th September and he took a copy of The Agreement. I would not wish to speculate on why the Defendants' [sic] claim that they do not have their copy.

66. I should point out that it was only by a personal loan agreement with the Defendants that my investment could be protected, because the Defendants' mortgagees were not prepared to grant a second charge over any of the properties involved. I should also make it clear that I lent more money to the Defendants after the Personal Loan Agreement had been executed in the amount of £13,287.50.

67. The figure of the loan made by me which appears in the Personal Loan Agreements (both versions) was suggested by the Defendants. There was no negotiation over the figure of 30% for my share of the profit on the sale of Chiltern Street – Mr. Malik of mtg had suggested 50% and the Defendants reduced that offer to 30%: I had begun to feel very concerned that I would be lucky to recover the money I had lent to the Defendants let alone make a profit, hence I was willing to accept something very much less favourable than the ground floor flat and basement which I had envisaged at the outset would ultimately be worth around £675,000."

29. Once more, the account given by Mr. Gopaul appears to be challenging. According to him, it was Mr. and Mrs. Naidoo who approached him and said that the Draft needed to be signed, yet it was also they who procrastinated over going to the offices of MTG in order to execute it. It was asserted, in effect, that it was only that procrastination which necessitated the production of a revised version of the Draft, yet, as I shall shortly explain, the agreement ("the Alleged Agreement") which it is alleged that Mr. and Mrs. Naidoo actually signed, although mostly in terms similar to the Draft, was in one respect – the parties to it – significantly different. It must follow, logically, that it was unlikely that it had ever been intended that the Draft should be executed at the offices of MTG. If it had been important to Mr. Gopaul for the parties to be altered from those identified in the Draft, the requisite alteration would have had to have been made before the document was executed. Only if the alteration of the Draft occurred to Mr. Gopal on the spur of the moment once, according to him, it became necessary for the document to be executed at the offices of one of his nursing homes, could he be right in contending that the original intention had been for the Draft to be executed at the offices of MTG. Mr. Gopaul seemed to accept, in paragraph 66 of his second witness statement, that the Reconciliation set out the maximum amount of the loans prior to 20 September 2007, because the sum which he asserted was lent by him after signature of the Alleged Agreement, £13,287.50, is derived from the Reconciliation in the way which I have explained. His explanation of the "figure of the loan" at paragraph 67 is simply incredible. It frankly defies belief that any sane or sensible person who actually owed someone less than £300,000 on any view would insist upon agreeing to pay £400,000. In cross-examination, in answer to a question from me, Mr. Gopaul made up an alternative explanation for the figure of £400,000, namely that the £300,000 odd figure represented loans by Gopaul Ltd., whilst the balance represented personal advances by him to Mr. and Mrs. Naidoo. That straightforward lie, coupled with the other unsatisfactory features of his evidence to which I have drawn attention, meant that I felt that I could not accept the evidence of Mr. Gopaul on any contested issue.
30. The Alleged Agreement differed from the Draft in adding, before the name of Mr. Gopaul, the words, "GOPAUL INVESTMENTS Ltd (Managing Director)"; adding, in clause 1 after the existing text and before clause 1.1 the details of the Acton Property and those of the Southwark Property; and in having a typographical error in clause 3 where the expression in the Draft "the sale or remortgage" was rendered as "the sale of the remortgage".
31. The circumstances in which the typescript of the Alleged Agreement came to be produced were elaborated in the evidence of Mr. Raden Maureemootoo. He was called on behalf of the claimants at the trial. In his second witness statement, dated 24 October 2013, Mr. Maureemootoo explained his involvement in the matter of the production of the typescript, and what happened to the Alleged Agreement, in this way:-

"6. On the 20^th September 2007, I receive [sic] a call from Mr. Gopaul at around 7 pm informing me that the Defendants were coming in for a meeting. He also instructed me to type up the hard copy of the draft loan agreement that we had received from a solicitors' firm: he told me that this needed to be done as a matter of urgency. In that conversation, Mr. Gopaul dictated some minor alterations that he wanted me to make to the draft hard copy agreement that we had already received from the solicitor's firm. Later Mr. Gopaul reached the Office accompanied by the Defendants. I remember putting all my work aside in order to type that loan agreement for Mr. Gopaul, reflecting the urgency of the matter.

7. On the same evening, Mr. Gopaul's friend, Mr. Sanjiv Bisnauthsing came to the Office as well. He told me that he had been asked to act as a witness for a contract. A few minutes later, Mr. Gopaul called Mr. Bisnauthsing into his office and asked me if I would be willing to be a witness to a contract between the Defendants and himself: I agreed.

8. I had typed the contract as in the draft with the minor alterations which Mr. Gopaul had dictated to me: I printed two copies of the contract and then took them into Mr. Gopaul's office.

9. Mr. Gopaul gave one copy to the Defendants to read and to confirm if they agreed with the terms of the agreement. The Defendants pointed out that they were aware of the terms of this agreement because they had themselves initially instructed their solicitor to draft the contract in these terms. However, the Defendants read the agreement and then expressed their gratefulness towards Mr. Gopaul for providing them with £400,000 which had indeed prevented them from going bankrupt.

10. Mr. Gopaul asked the first Defendant to write down the registration numbers of their properties on both copies of the loan agreement and then the First Defendant wrote the Land Registry title number of each of their properties against the respective address on the first page of each copy of the loan agreement and he and Mr. Gopaul initialled that addition. Both Defendants signed each copy of the loan agreement. Then Mr. Gopaul signed each copy of the loan agreement followed in each case by Mr. Bisnauthsing and me. I then made two copies of the original for record purposes for Mr. Bisnauthsing and myself.

11. The Defendants took one of the two originals and left shortly afterwards."

32. That account had its oddities. On Mr. Gopaul's evidence the original intention had been that the Draft should be executed at the offices of MTG. It was therefore strange that the hard copy of the Draft should have been not with him, but in the office at his nursing home. According to the evidence of Mr. Gopaul, the Draft had been instigated by Mr. and Mrs. Naidoo, yet, according to Mr. Maureemootoo, "Mr. Gopaul gave one copy to the Defendants to read and to confirm if they agreed with the terms of the agreement". One might have expected Mr. Gopaul, if he were right about the instigation of the Draft, simply to have said, "This is the same as the Draft, but I have substituted Gopaul Ltd. as the lender, and added the Acton Property and the Southwark Property in clause 1. Is that alright?" It could not be the case that Mr. and Mrs. Naidoo expressed their gratitude to Mr. Gopaul for providing him with £400,000, because he had not done so. No one other than Mr. Maureemootoo suggested that Mr. and Mrs. Naidoo had been facing bankruptcy, from which they had been saved by Mr. Gopaul's loan. Moreover, there was the peculiar evidence of Mr. Maureemootoo concerned him making "two copies of the original for record purposes for Mr. Bisnauthsing and myself." In cross-examination he expanded upon his second witness statement. He said that he had in fact made two copies of each of the two originals of the Alleged Agreement. When asked why, he said that he had made one copy of each original for his file. The other copy of each original was distributed as to one to him, because he liked to have a copy of any document which he had witnessed, and as to the other to Mr. Bisnauthsing so that he would have a copy of what he had witnessed. This is frankly nonsense. Assuming that it was appropriate for a witness to have a copy of any document which he had witnessed, what Mr. Maureemootoo and Mr. Bisnauthsing each needed was a copy of each of the two originals which he had witnessed, not just a copy of one of them. In any event, according to him, Mr. Maureemootoo already had copies to which he could have access, if necessary, in his file. In the result I did not feel able to accept the evidence of Mr. Maureemootoo on any contested issue.
33. The Alleged Agreement which Mr. Maureemootoo said that he had typed out was set out differently from the Draft. The first page now contained the part between the heading and the end of clause 2.3. The second page contained clauses 3 and 4 and finished about three-quarters of the way down the page. There was room for the words, "IN WITNESS", and so forth to have been typed there, and also room for the signatures of the parties. However, there would not have been room for both the signatures of the parties and the signatures of the witnesses. In fact the signature page of the Draft was reproduced as the third page of the Alleged Agreement.
34. The second witness to the Alleged Agreement, Mr. Gheerjanand Bisnauthsing, known as Sanjiv, was also called to give evidence on behalf of the claimants at the trial. He made a second witness statement dated 11 October 2013. At paragraph 4 of that witness statement Mr. Bisnauthsing stated that at the material time he had been a trainee solicitor with MTG, a circumstance which neither Mr. Gopaul nor Mr. Maureemootoo had identified in his witness statement. Mr. Bisnauthsing stated in paragraph 3 of his witness statement that he was a friend of Mr. Gopaul. About the events of 20 September 2007 Mr. Bisnauthsing said this in his witness statement:-

"5. [I] was present on the 20^th September when the Agreement was signed at the office of Mr. Gopaul at 28 Kenilworth road [sic], Ealing W5 3UH ("the Office").

6. Mr. Gopaul contacted me by telephone on the 20^th September 2007 at about 7.00 pm and asked me to come to the Office at about 7.30 pm in order to witness a loan agreement.

7. At the time I was working not very far from the Office and I arrived there at about 7.30 pm.

8. When I arrived at the Office, Mr. Gopaul was already there with a couple that I knew to be the Defendants.

9. I was shown the Agreement which was already dated in manuscript to be made on that day, namely 20^th September 2007. The document was already prepared and ready to be signed by the parties: no documents were prepared in my presence.

10. There were two original copies of the Agreement which were signed by Mr. Gopaul and the Defendants: I witnessed their signatures, signing on the third page of the Agreement as did Mr. Raden Mauremootoo [sic] who had been asked to attend as a second witness. I already knew Mr. Mauremootoo [sic] to be Mr. Gopaul's Office Administrator.

11. I confirm that both documents were identical and in the form of the Agreement which has been produced to me and that that bears my signature.

12. Before the parties signed the Agreement, Mr. Gopaul asked Mr. Naidoo to write the Land Registry title numbers against the addresses of the Defendants' properties on the first page of the Agreement and they both initialled those additions. I was present when Mr. Gopaul made this request and when Mr. Naidoo added the land registry numbers.

13. I was still at the Office when the Defendants left at about 9.30 pm."

35. It did seem somewhat strange that Mr. Bisnauthsing, who, on the face of it was only a witness to the signatures on the Alleged Agreement, should have thought it appropriate in his witness statement to say that both versions of the Alleged Agreement on which he said he witnessed signatures were identical. It was really none of his business what were the contents of the Alleged Agreement. However, he told me in cross-examination that he had actually consciously read one copy of the Alleged Agreement. He also said that at the time he was telephoned by Mr. Gopaul he, Mr. Bisnauthsing, was in fact in the offices of MTG. He thought that other members of staff might have been there, and that, if desired, it might have been possible for Mr. Gopaul and Mr. and Mrs. Naidoo to have gone to the offices of MTG at that time. Mr. Bisnauthsing did not positively say that it would have been possible for Mr. Gopaul and Mr. and Mrs. Naidoo to have visited the offices of MTG at about 7.00 p.m. on 20 September 2007. Rather what he said was that, if the person they wished to see had been there (which he did not know), and had been prepared to see them at that time (which he did not know), a meeting in the offices out of hours would have been possible, as he sometimes saw people out of hours. Mr. Bisnauthsing did not recollect being given a copy of any version of the Alleged Agreement by Mr. Maureemootoo. Mr. Bisnauthsing had not asked to be given a copy, and if he had been given one, he had not kept it.
36. The significance of the alleged copies of the two originals of the Alleged Agreement was that there were produced at the trial not merely the original of one of the versions of the Alleged Agreement, but also a photocopy of another version. The signature pages of the original and of the photocopy were, to the untutored eye, plainly different. Obviously some explanation needed to be given as to why the claimants' side was able to produce what was said to be a photocopy of the original of the version of the Alleged Agreement which it was said that Mr. and Mrs. Naidoo had taken away with them.
37. To complicate matters further, it was correct that the first page of the original Alleged Agreement produced and the first page of the photocopy of the other alleged original bore title numbers written in manuscript and also indecipherable initials of two individuals. To the untutored eye the manuscript additions to each of the first pages seemed different. In other words, there did seem to have been two different versions of originals of the Alleged Agreement.
38. Rosebeech was dissolved on 7 September 2010.
39. This action was commenced by a claim form issued on 23 August 2010. Originally there was only one claimant, Mr. Gopaul, but two defendants, Mr. and Mrs. Naidoo. The claim form was served with Particulars of Claim. So far as is presently material those Particulars of Claim were in these terms:-

"1. The Claimant is the lender and the Defendants are the borrowers under a Personal Loan Agreement dated 20 September 2007, wherein the Defendants acknowledge receipt of a £400,000 loan from the Claimant, …

2. The following are the express terms of the Personal Loan Agreement:

[clauses 2 and 3 were then set out in their entirety]

3. In breach of clause (2.1) of the Personal Loan Agreement, the Defendants failed to repay the loan "at the end of the one year period".

4. Pursuant to clause (2.3) of the Personal Loan Agreement, in or about April 2007 [that is, before the alleged agreement had been made] the Defendants arranged to transfer 30% of the shares in Rosebeech Investments Limited, a company wholly owned by them [sic – the sentence has no obvious end]. This shareholding was transferred to Gopaul Investments Limited, a company wholly owned by the Claimant.

5. On 14 April 2008, the Defendants sold 79-81 Chiltern Street London W1U 6NW for £2,500,000. In breach of clause (3.2) of the Personal Loan Agreement on the sale of this property the Defendants failed to repay the entire Loan amount including the Profit" [sic]

6. On 21 April 2008, the Defendants re-mortgaged 29 Gaywood Street Southwark London SE1 6HG with Mortgage Express. In breach of clause (3.2) of the Personal Loan Agreement on the re-mortgage of this property the Defendants failed to repay "the entire Loan amount including the Profit".

7. The full amount due under the Personal Loan Agreement remains outstanding, which needs to be assessed. It is not possible for the Claimant to calculate the "Profit" pursuant to clause (2.2) of the Personal Loan Agreement, as the "Purchase Price" and "Associated Sale Costs" of 79-81 Chiltern Street London W1U 6NW are not within the Claimant's knowledge. The Claimant reserves the right to plead further once these amounts have been disclosed by the Defendants.

8. Pursuant to clause (3.1) of the Personal Loan Agreement, the Claimant claims interest at 8% per annum on the "Loan amount … and 30% of The Profit". The amount of interest needs to be assessed.

9. Pursuant to clause (3.2) of the Personal Loan Agreement, the Claimant is entitled to and claims an order for sale of 78 Western Avenue Acton W3 7TX and 29 Gaywood Street Southwark London SE1 6HG."

40. The claims at that stage were thus claims on behalf of Mr. Gopaul alone for payment of the alleged loan of £400,000, together with 30% of the profit on the sale of the Chiltern Properties, interest at 8% per annum, and orders for sale.
41. A Defence dated 9 February 2011 was served on behalf of Mr. and Mrs. Naidoo. The Defence adopted a narrative approach to deploying the case of Mr. and Mrs. Naidoo. However, it did include these pleas:-

"1. Paragraph 1 of the Particulars of Claim is denied as is the authenticity of the purported agreement dated 20^th September 2010 [sic] annexed thereto ("the Purported Agreement"). The Purported Agreement is a false document prepared by or on behalf of the claimant in the circumstances hereafter set out.

…

[After a lengthy explanation of attempts to obtain finance for the completion of the redevelopment of the Properties]

17. Thereafter the defendants met on several more occasions with Mr. Mirza [a mortgage broker] to finalise his proposal to acquire the property prior to the auction for a price of £2.5m with a 10% deposit. Mr. Mirza so contracted to acquire the property on the day before the auction or on the auction day itself. The property did not go into the auction in September 2007.

18. The Defendants thereafter me[t] with the claimant both in order to tell him that a contract had been entered into and to explain Mr. Mirza's joint venture proposals for the completion of the conversion.

19. The meeting took place at the claimant's offices. Present were the claimant, the defendants, the claimant's receptionist and one of his friends. Terms were agreed and reduced to writing by which GIL [sic. GIL refers to Gopaul Ltd., but the sentence ended at this point]

20. The terms were:

a. GIL would receive 30% of the profits RIL [Rosebeech] made from the Mirza deal.

b. That such repayment was to be made when the redevelopment with Mr. Mirza was completed.

c. Shares in RIL transferred to GIL as security for repayment were to be transferred back to the defendants upon receipt of 30% profits.

…

21. It was also agreed that the claimant and/or GIL would provide a breakdown of their expenditure.

22. Such terms, having been reduced to writing were signed by the claimant (on behalf of GIL), and the defendants and were witnessed by the claimant's receptionist and the friend. The claimant promised to send a copy of the agreement to the defendants but failed to do so.

23. The Purported Agreement is not that executed on the 20^th September 2007 by the defendants but is a false document which has been composed by or on behalf of the claimant. Either it is wholly false and the signatures of the defendants on the execution page were forged or the document was prepared by attaching the execution page of the genuine agreement signed on the 20^th September 2007 to earlier pages which were false and on which the purported initials by the first defendant had been forged.

24. Unbeknown to the Defendants, in order to protect what GIL contended (in fact wrongly) amounted to a beneficial interest in the Property it lodged an Unilateral Notice (in form UN1) against RIL's title thereto. Such notice, which was supported by the sworn declaration of the claimant made on the 4^th September 2007, asserted that "monies … advanced in respect of refurbishment and building works at the Property" were owed not by the defendants but by RIL and not to the Claimant but to GIL. Copies of the UN1s are annexed hereto …

…

29. By reason of the premises paragraphs 3 to 8 inclusive of the Particulars of Claim are denied as is the relief sought thereunder. The Defendants are not liable to the claimant under the Purported Agreement which is a forgery. However, even were the Purported Agreement genuine:

a. on its true construction the only party entitled to claim relief is GIL and not the Claimant, and

b. there was no consideration from either the Claimant or GIL for the Defendants' undertaking to repay either the sums mentioned in the agreement or any money due from RIL."

42. In the light of those pleas the Particulars of Claim were amended so as to add Gopaul Ltd. as second claimant, and to amend paragraph 1 and add a new paragraph 2, as follows:-

"1. The First alternatively the Second Claimant [sic] is the lender and the Defendants are the borrowers under a Personal Loan Agreement dated 20 September 2007, wherein the Defendants acknowledge receipt of a £400,000 loan from the alternatively the Second Claimant [sic] Claimant …

2.In the alternative to paragraph 1 above, the First and Second Claimants contend that on its true construction the Personal Loan Agreement amounted to a contract of guarantee on the part of the Defendants, pursuant to which the Defendants agreed to guarantee the indebtedness of monies advanced and/or to be advanced by the First alternatively the Second Claimant to Rosebeech Investments Limited, and recorded in the Personal Loan Agreement."

43. In the light of the amendments to the Particulars of Claim the central issues at the trial of this action were, first, whether the Alleged Agreement was what it purported to be, and, second, if so, whether the Alleged Agreement was unenforceable for want of consideration.
44. Given the pleas at paragraph 23 of the Defence, Mr. Michael Handy, a forensic examiner of handwriting, was instructed on behalf of Mr. and Mrs. Naidoo to examine the original ("the Original") of the Alleged Agreement in the possession of the claimants. That was a bold step to take if actually Mr. and Mrs. Naidoo knew perfectly well that they had signed the signature page of the Alleged Agreement. Mr. Handy produced a report ("the Handy Report") dated 12 March 2012 following his examination of the Original. He summarised his findings, at paragraph 3 of the Handy Report, as:-

"There was conclusive evidence that Mr. Kresen Naidoo had signed the Personal Loan Agreement and limited evidence that Mrs. Nailini Naidoo had signed."

45. At the trial both Mr. Naidoo and Mrs. Naidoo accepted that they had signed the signature page of the Original. Mr. Naidoo, who was alleged on behalf of the claimants to have added the title numbers in manuscript on the first page of the Original and to have initialled those additions, denied at the trial that he had done so. Mr. Handy did not deal with the manuscript additions on the first page of the Original. As I understood it, the size of the manuscript to be assessed was insufficient to permit of any reliable conclusion.
46. Mr. Handy did describe at paragraph 8 of the Handy Report what it was that he had looked at:-

"The Loan Agreement consisted of three sheets of plain A4 size paper stapled together in their top left hand corner. There were three sets of 'redundant' staple holes, indicative of dismantling and re-stapling."

47. The Original was produced in court at the trial. It was clear that by that time staples had been removed from, and replaced in, the Original several more times. Some restapling seemed to have been in, or very close to, existing staple holes, so it was not easy to assess exactly how many times there had been restapling, but it might have been as many as six times altogether. To an untutored eye it was not possible to reach any conclusion as to whether all of the staple holes in each of the three sheets in the Original matched, so the possibility existed that not all of the sheets had been stapled on all of the occasions upon which other sheets had been stapled. It was also obvious from folds in the top left hand corner of the Original that it had been photocopied at least three times by someone not unstapling all of the sheets, but simply turning over the various pages whilst keeping them stapled in the photocopying process.
48. The upshot of all this, I think, was that it was not possible to be confident that the third, signature, page had always been associated with the other two pages of the Original.
49. Mr. and Mrs. Naidoo were both called to give evidence at the trial. However, they also called a further witness, Mr. Timothy Clarke. Mr. Clarke is a member of Clarke Barnes LLP, solicitors. He first had dealings with Mr. and Mrs. Naidoo on 20 September 2007, when he was asked to give them independent legal advice in the context of the possible refinancing of the redevelopment of the Properties. Subsequently, after the commencement of this action, Mr. and Mrs. Naidoo instructed Mr. Clarke to act for them in defending the claim. However, by the time he came to give evidence, Mr. Clarke was no longer acting on behalf of Mr. and Mrs. Naidoo in this action.
50. At the time when he was acting for Mr. and Mrs. Naidoo Mr. Clarke prepared a witness statement dealing with the circumstances in which he first came to have dealings with Mr. and Mrs. Naidoo, and the events of 20 September 2007, so far as known to him. Mr. Clarke produced that witness statement, dated 14 November 2011, but not signed by him at the time, at the trial. He drew attention to one typographical error, but subject to that, he confirmed the accuracy of the statement. So far as is presently material the statement was in these terms:-

"3. Mr. Saeed Mirza had been a client of mine for some time. He used to refer me complex situations. That is, he would send me clients who needed independent legal advice. This might happen once or two times a year.

4. On 19 September 2007 he called me and asked me would I act for Mr. and Mrs. Naidoo and their company Rosebeech. He explained that he was going to enter into a joint venture with them and they therefore needed independent legal advice. His office was down the road from mine and I went down there and met him. I explained that I would need to see them separately. At this initial meeting things seemed somewhat unclear. Mrs. Nalini Naidoo was telling me that Saeed was getting her a mortgage from the Bank of Ireland. Mr. Mirza was telling me that it may require a third party to obtain the mortgage because the Naidoos and/or the company's credit rating was very poor. I enquired who was to pay my fees and Saeed said he would pay them up to £1,000 plus VAT and disbursements. I arranged to meet Mr. and Mrs. Naidoo separately the following day.

5. I met them at my offices on 20 September 2007 where they explained that they owned a company which owned a property in Chiltern Street near Baker Street. A Receiver had been appointed over that company and the property was to go into auction on 25 September 2007. The immediate problem was that it was anticipated that that property would not redeem the outstanding debt and their home and another property that they owned was also in the security package for the Building Society, the Britannia, and they were beside themselves with worry that they were about to lose their home the next week.

6. The[y] explained that they had approached various parties with a view to remortgaging to take Britannia out, but because of the Receivership they had not been able to do this. They had been introduced by Mr. Mirza who had told them that he could get them a mortgage with the Bank of Ireland. Since their dealings with him, though, it appeared that he could not but was now proposing to obtain a mortgage in the company's name which would be a joint venture vehicle. He was prepared to get the property out of the mortgage by agreeing that a joint venture would pay £2.5m for it.

7. I explained that this was all very interesting but in fact, somewhat embarrassingly, there was actually nothing for me to do. There was no mortgage offer, no joint venture agreement and no paperwork. Rather surprisingly, Mr. and Mrs. Naidoo told me that in any event Mr. Mirza was going to proceed to speak to the Receivers and agree to acquire the property. My, rather simplistic, advice was that if he was prepared to do that then that was good as it would avoid losing the house. Mr. and Mrs. Naidoo were of the opinion that the property probably was not worth £2.5m but could be if the development was completed. I said I would write some letters to Mr. Mirza to find out whether there was a mortgage offer and what he was going to do. As we were speaking, Mr. Mirza was in further negotiations with Britannia.

8. Mrs. Naidoo then began to tell me about Mr. Gopaul. This arose out of my enquiry as to who were the directors of the company and therefore who could give me instructions. She explained that herself and her husband were the only directors, but there was another investor who was not a director who invested monies. He owned 30% of the shares of Rosebeech Limited. I explained that whilst I could take instructions from the directors, given that he was such a substantial shareholder, he would need to be involved. That involvement, to my mind at that point, related to the proposed joint venture agreement. Mrs. Naidoo told me that after leaving my office they were going to see him to discuss all these matters further.

9. Mr. and Mrs. Naidoo probably left my office at about 6:00 pm that night.

10. I had arranged to go with a friend of mine to a meeting at 8:00 pm at a Church in Islington near my office. I recall, quite vividly, Mrs. Naidoo telephoning me at about 7:30 pm wherein she told me that she was with Mr. Gopaul.

11. I recall this because I was quite annoyed. I had spent longer than I wanted to with them in the afternoon and the matter seemed much more complicated that a simple "independent legal advice". I had also not received the £1,000 plus VAT as promised and felt, to be frank, that they were bothering me and to a certain extent taking advantage of me. However, I liked Mrs. Naidoo and was concerned for her and her losing her home.

12. She had called me because she wanted to talk to me and for me to talk to Mr. Gopaul (whom of course I did not know and only had a vague understanding of his role in all of this). She explained to me that Mr. Gopaul wanted her to sign something and that she had told him, as I had earlier in the day, that she was not to sign anything upon her solicitor's – me – advice. She told me that Mr. Gopaul was pressing her and wanted to speak to me to explain to me what the document was about so that she could sign it. I told her I did not want to speak to Mr. Gopaul and that she was [to] tell him that he was to fax it to me in the morning and I would give her independent legal advice about it. I curtailed the conversation at this point and carried on towards the Church. She called again about 10 minutes later. She said that Mr. Gopaul was adamant that he wanted to talk to me and reluctantly I agreed to take his call. I spoke with him. He was quite arrogant and sounded drunk. He told me the following:

i. The document was very straightforward and just recorded the situation.

ii. Nalini had agreed to sign it and just wanted my approval of it.

13. I explained to him that if it was straightforward I could look at it in the morning and it would be better for him if she was given independent legal advice and signed it away from his office. I also explained that she had signed documents earlier for Mr. Mirza which I had not seen and I was unhappy about being put in situations which are fait accompli. It was important to Mrs. Naidoo that she be given advice on it and I could not do that now, I was standing in a Churchyard and it was pitch black. At this point he became quite aggressive and arrogant and told me that I was new to all of this, did not know what I was talking about and did not know what had gone on. I agreed with him stating that it was precisely for those reasons that I could not give independent legal advice over the telephone about a document I had not seen. To get them to sign it would be worthless to him but clearly the issue of them understanding it was important to all or otherwise no one would have called me. In his drunken way he told me that this was a waste of his time and passed the phone back to Mrs. Naidoo. I told Mrs. Naidoo that I was very busy and that she must sign anything and we would talk in the morning.

14. I telephoned Mrs. Naidoo on 21 September 2007 and asked her whether she had signed this document. She told me that she had not signed the document he wanted her to sign but had signed something that was not very important."

51. The typographical error which Mr. Clarke identified in verifying his witness statement dated 14 November 2011 was the omission of the word "not" between the word "must" and the word "sign" in the last sentence of paragraph 13.
52. At the time when he was acting as the solicitor to Mr. and Mrs. Naidoo in this action, Mr. Clarke wrote a letter dated 21 January 2013 to Mr. Bisnauthsing seeking information. At paragraph numbered 4 of that letter Mr. Clarke recorded:-

"The writer, Mr. Clarke, spoke to Mr. Gopaul on a few occasions on the telephone that night when he stated that the Naidoos' solicitor was present at the meeting for the purposes of giving advice as to whether to sign this document."

53. When he was called to give evidence at the trial Mr. Clarke confirmed that he had indeed been told by Mr. Gopaul what he recorded in that passage.
54. It was common ground between Mr. Clarke and Mr. Bisnauthsing that Mr. Bisnauthsing telephoned Mr. Clarke after receiving Mr. Clarke's letter dated 21 January 2013. Mr. Clarke made an attendance note of that telephone conversation and that attendance note was adduced in evidence at the trial. It included this:-

"He [Mr. Bisnauthsing] explains that he is Mr. Gopaul's friend and was not involved in the drafting of the document; he was and is a criminal solicitor. He thinks that Mr. Gopaul drafted the document himself and did not know that MTG were involved in it whatsoever."

55. Mr. Bisnauthsing denied, in cross-examination, saying to Mr. Clarke that he thought that Mr. Gopaul himself had drafted the Alleged Agreement and that MTG had not been involved.
56. Although the evidence of Mr. Clarke seemed tolerably clear as to what had happened on 20 September 2007, the evidence of Mr. and Mrs. Naidoo about it was curious. Mr. Naidoo made a witness statement dated 11 October 2013 in which he contented himself with saying that he adopted in its entirety the third witness statement of Mrs. Naidoo. As I have already observed, Mrs. Naidoo adopted the course of making her witness statement as a commentary on a previous witness statement of Mr. Gopaul. The part of her third witness statement where she dealt with the events of 20 September 2007 was paragraphs 42 to 45 inclusive:-

"42. Contrary to what is alleged in paragraph 52, terms were agreed with the First Claimant and were reduced to writing, signed by the First Claimant and witnessed by an employee and friend of his. No copy of the agreement was ever sent to us or received by us as promised. When the two of us arrived at Kenilworth nursing home the First Claimant and a Mr. Sanjiv Bithnauthsing [sic] were already drinking and offered us whisky and tea respectively. We assumed we were celebrating the purchase of Chiltern Street by a Ms Dhillon for £2.5 million.

43. The facts stated in paragraph 53 are false. We certainly did not come to the First Claimant and say "we must sign the Personal Loan Agreement". The reason we came to the meeting had nothing to do with any personal loan agreement. It was just to celebrate the sale of the property. We had no knowledge of any such agreement as is suggested by the First Claimant and there never was any such agreement.

44. The facts stated in paragraph 54 are false. In fact, we were both with our solicitor Mr. Tim Clarke all afternoon and only left his office at 6 pm. If the First Claimant is right, we would have met him at Mr. Clarke's office and signed the agreement there if we were in support of it. However this was not the reason why we were meeting. Furthermore after leaving Mr. Clarke's office we went to collect our daughter from college and met the First Claimant at Kenilworth Nursing Home at approximately 7 pm. In the statement of Raden Mauremootoo [sic] he states that the First Claimant called him whist [sic] he was on his way to Kenilworth and that the agreement was prepared prior to our arrival. However, in this statement it is suggested that the statement was prepared in our presence, but in Sanjiv Bisnauthsing's statement it is suggested that nothing was prepared in his presence and to our knowledge he was there on our arrival. There are many inconsistencies about when the agreement was compiled. We believe this is due to false allegations and that the agreement we did sign was to reduce to writing totally different agreement altogether, under which the Second Claimant would receive 30% of the profits that RIL [Rosebeech] made from the arrangements with Saeed Mirza and that payment would be made after completion and that the shares already transferred would be transferred back upon receipt of the 30% profits.

45. Contrary to what is said in paragraph 56, we never had a copy of the agreement that we signed, although we were told that it would be posted to our then solicitor Tim Clarke. It was a simple agreement stipulating the above conditions in relation to profits and the 30% shares. We did not sign any "personal loan agreement"."

57. It was implicit in the evidence of Mr. Clarke that actually on the evening of 20 September 2007 Mr. Gopaul had sought the signatures of Mr. and Mrs. Naidoo on the Alleged Agreement, or on something very like it. Neither of them said anything about that in the witness statements prepared for the purposes of the trial. Again, neither of them said anything about Mrs. Naidoo telephoning Mr. Clarke on two occasions, or about Mr. Gopaul wanting to speak to Mr. Clarke, or about Mr. Gopaul telling Mr. Clarke that Mr. and Mrs. Naidoo's solicitor was present at the meeting. Mr. Clarke told me in his oral evidence that he understood that Mr. and Mrs. Naidoo had gone to Kenilworth Nursing Home on the evening of 20 September 2007 because he had told them that they needed to tell Mr. Gopaul about the intended arrangements with Mr. Mirza. In cross-examination at the trial both Mr. and Mrs. Naidoo gave the same explanation for the reason for the visit. However, at paragraph 43 of her witness statement, with which Mr. Naidoo agreed, the reason for the meeting was said to be "just to celebrate the sale of the property". This all seemed to me to be very peculiar.
58. Another strange feature of the account of Mr. and Mrs. Naidoo was that it did not obviously explain why there were two signature pages which they had each signed, one attached as part of the Original and the other said to have been part of a photocopy of the version of the Alleged Agreement which Mr. and Mrs. Naidoo were said to have taken away with them. They did not in terms say that they had signed two counterparts of the agreement which they contended that they had signed, nor did they explain why, if they had signed two, they did not simply take one of them away with them. Paragraph 45 of the third witness statement of Mrs. Naidoo appeared to say that there was but one original, and a copy of it was to be sent to Mr. Clarke.
59. The peculiarities of the case unfortunately did not end at that point. In the course of seeking to prepare evidence in support of the defence of the claims made in this action Mr. Clarke engaged in correspondence with MTG. His primary aim was to secure the files of MTG in relation to dealing with Mr. and Mrs. Naidoo, but he also raised some questions about the circumstances surrounding the preparation of the Alleged Agreement. He suggested in terms that the Alleged Agreement had not been prepared on the instructions of Mr. and Mrs. Naidoo. It has to be said that it was unclear, in the relevant correspondence, whether the author of letters written on behalf of MTG, appreciated that it was specifically about the Alleged Agreement that Mr. Clarke was enquiring. There was the possibility of misunderstanding if, as I have explained may have been the case, what was sent with the letters dated 6 September 2007 written by MTG to Mr. and Mrs. Naidoo and to Mr. Gopaul, was not actually the Draft, but some other agreement. However, leaving that possibility on one side, what was written on behalf of MTG in a letter to Mr. Clarke dated 5 December 2011 was certainly not consistent with the version of events for which Mr. Gopaul contended:-

"Whilst we wait for these files [those to be delivered to Mr. and Mrs. Naidoo] to come to our offices, please note that Mr. Saeed [the senior partner in MTG] made our position very clear to Mrs. Naidoo last week; the agreement has been prepared in accordance with her and her husband's instructions as confirmed in our client care letter. The agreement was sent in the post to their usual address but came back to us with remarks "addressee has gone away", although we do not understand the reason for this, as other correspondence was not returned. We chased Mr. and Mrs. Naidoo for our fees and as no payment was forthcoming we closed the file. The file closing letter makes it clear that our fees are outstanding and we reserve the right to pursue these.

Mr. and Mrs. Naidoo had various meetings with our Mr. Saeed, including a conference with Counsel. Mr. Gopaul was introduced to us by Mr. and Mrs. Naidoo as a potential partner/investor in their business affairs. There were several meetings with them and instructions to prepare the agreement were given, as Mr. and Mrs. Naidoo were perhaps unsuccessful in securing a re-mortgage. We refute the allegations that this agreement has been prepared with out [sic] instructions….

With regard to your point in relation to the nature in which the agreement has been executed, this issue is of importance, especially since our draft was returned to us. …

In respect of the production of the agreement you will note from the file notes that it has been drafted by Parminder Mattoo of our offices and upon receipt of our files we will confirm to you the nature in which the instructions were received."

60. On that account, Mr. Gopaul could not have received a copy of the letter dated 6 September 2007 written, on the face of it, by MTG to Mr. and Mrs. Naidoo from Mrs. Naidoo, because the original letter was returned undelivered. The account is puzzling because it asserts that Mr. and Mrs. Naidoo had various meetings with Mr. Saeed, including a conference with Counsel, concerning the preparation of an agreement on their instructions, yet at the end of the letter it was said that the nature in which the instructions were received (which one would have thought was during the various meetings with Mr. Saeed) would be confirmed on receipt of the relevant files.
61. A further very strange feature of how MTG responded to Mr. Clarke concerned the fees of MTG. In the letter dated 5 December 2011 it was asserted in terms that in respect of the preparation of the agreement, "our fees are outstanding and we reserve the right to pursue these". In a letter dated 9 December 2011 MTG wrote to Mr. Clarke in these terms:-

"Further to our letter of 8 December 2011, please note we have retrieved the files from archive and enclose herewith three bills of cost that are outstanding.

Please advise your clients to arrange payment of £1306.62 or alternatively provide us with an undertaking that our costs will be discharged. We also await your client's signed letter of authority permitting the release of the files."

62. None of the bills of costs enclosed related to the drafting of any agreement. All were paid by a cheque enclosed with a letter dated 16 February 2012 written by Mr. Clarke to MTG. Receipt of the cheque was acknowledged by MTG in a letter to Mr. Clarke dated 21 February 2012.
63. Each of Mr. Gopaul, Mr. Maureemootoo and Mr. Bisnauthsing was asked in cross-examination about the telephone calls made by Mrs. Naidoo to Mr. Clarke on the evening of 20 February 2007 and about the drinking of whisky by Mr. Naidoo and Mr. Gopaul. Mr. Gopaul flatly denied either drinking whisky or speaking to Mr. Clarke on the telephone. He also denied that Mrs. Naidoo had made any telephone call to Mr. Clarke. Mr. Maureemootoo and Mr. Bisnauthsing were more circumspect. Each said that he did not recall any telephone call being made by Mrs. Naidoo, although Mr. Bisnauthsing went so far as to express the view that he did not think it had happened. However, each was definite that neither Mr. Gopaul nor Mr. Naidoo drank whisky that evening.
64. Viewed as a whole the evidence led before me, both that from witnesses and that in documentary form, was inconsistent and contradictory. I have already indicated my view of the evidence of Mr. Gopaul and of that of Mr. Maureemootoo. I was not impressed by the evidence of Mr. and Mrs. Naidoo, for the reasons which I have explained. The one person who was called to give evidence in person who did impress me was Mr. Clarke. He is a solicitor and an officer of this court. So, of course, is Mr. Bisnauthsing. So, also, are the partners in MTG. I have drawn attention to some oddities in the contributions of MTG which are inexplicable and incapable of being resolved, at least in this action. Mr. Bisnauthsing had been a friend of Mr. Gopaul since about 1999 or 2000. That ought not to have affected the accuracy of his evidence, or at least his desire to assist the court so far as he could, but I was less impressed by Mr. Bisnauthsing than I was by Mr. Clarke, and I am confident that where the evidence of the two differ, I can rely on the evidence of Mr. Clarke. By the time he came to give evidence before me Mr. Clarke had no interest in seeking to support one side as against the other. Indeed, he told me, candidly, that would have preferred it if he had not been called to give evidence.
65. In the result the determination of the outcome of this trial depends upon the application of the maxim potior est conditio defendentis. It was for the claimants to satisfy me on a balance of probability that the Alleged Agreement was what it purported to be and that the signature page apparently part of it had not been taken from another document. The claimants have failed to discharge that burden. Consequently this action fails and is dismissed.
66. Had I been persuaded that the Alleged Agreement was what it purported to be I should have held that it was unenforceable for want of consideration.