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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 >> Daniels & Anor v Lewis & Anor [2005] EWHC 473 (QB) (23 March 2005) URL: http://www.bailii.org/ew/cases/EWHC/QB/2005/473.html Cite as: [2005] EWHC 473 (QB)

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IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		23/03/2005

Mr. Justice Forbes:

1. Introduction.The Claimants ("Mr and Mrs Daniels) are the parents of the second Defendant ("Mrs Lewis") and the parents-in-law of the first Defendant ("Mr Lewis"). By their Amended Particulars of Claim ("the Particulars of Claim"), Mr and Mrs Daniels claim a total sum of £81,000 against Mr and Mrs Lewis. The claim is made in respect of two separate loans, one made in August 1993 for £31,000 and the second made in June 1994 for £50,000.
2. It is Mr and Mrs Daniels' case that the two loans were made pursuant to informal oral agreements, without any express stipulation as to the time for repayment, and that the circumstances and nature of the loans were such that they constituted present debts that were either repayable without previous demand or were, at most, by implication repayable on demand: see Chitty on Contracts, 29^th edition at paragraphs 38-223 and 38-232, as follows:

"38-223 Definition of loan. A contract of loan of money is a contract whereby one person lends or agrees to lend a sum of money to another, in consideration of a promise express or implied to repay that sum on demand, or at a fixed or determinable future time, or conditionally upon an event which is bound to happen, with or without interest. …

38-232 Time for repayment. Where money is lent without any stipulation as to the time of repayment, a present debt is created which is generally repayable at once without any previous demand. But it is, of course, open to the parties to fix a time for repayment, or to agree that the loan will only be repayable on demand, and doubtless suitable implications as to such matters would readily be made in appropriate circumstances

3. The Claimants' primary case is that both loans were made to Mr and Mrs Lewis by Mr Daniels. However, since Mr and Mrs Lewis admit that the loans were made but contend that both loans were made by Mr and Mrs Daniels jointly (not by Mr Daniels alone), Mrs Daniels has been joined as a party to the proceedings. However, in the event, nothing of significance turns on this particular aspect of the matter.
4. Written demands for the repayment of the loans were made on 19^th May 2003 and 5^th June 2003 but Mr and Mrs Lewis have not repaid any part of the £81,000 that was lent to them and maintain that they are not under any obligation to do so.
5. It is common ground that both loans were made in order to assist Mr and Mrs Lewis in the purchase of their family home at Park Farm, Old Warden, Bedfordshire ("Park Farm"). The first loan was for the purposes of making up the deposit on Park Farm and the second loan was to enable Mr and Mrs Lewis to complete the purchase in June 1994. The central issue between the parties is whether there was any express stipulation as to the time for the repayment of either loan and, if so, the terms of that stipulation. However, as it seems to me, it is very important to bear in mind that neither of these loans was a commercial or quasi-commercial transaction. Each loan was very informal in nature and each was an act of considerable generosity made solely because of Mr and Mrs Daniels' natural love and affection for their daughter and their son-in-law.
6. As I have already indicated, it is the Claimants' case that both loans were either repayable without previous demand or were repayable on demand, because there was no express stipulation as to the time for the repayment of either loan and the circumstances of each loan were such that it was repayable without previous demand or, at most, were such as to give rise to an implied stipulation it would only become repayable on demand. In fact, there was no issue as to whether, if the loan agreements contained no express stipulation as to the time for repayment (as claimed by Mr and Mrs Daniels), the loans would have been repayable by Mr and Mrs Lewis. Subject to Mr and Mrs Lewis' second defence (as to which, see paragraph 8 below), it was therefore common ground that Mr and Mrs Daniels would be entitled to repayment of the loans, absent any express stipulation as to the time for repayment. Accordingly, since it is also common ground that written demands for repayment have been made, nothing turns on whether these loans were payable without previous demand or were only repayable on demand.
7. However, it is Mr and Mrs Lewis' case that, in the case of each loan, it was expressly agreed that it was to be repaid only when Mr Lewis was paid the outstanding "salaries" said to be due to him from a number of companies controlled by Mr Daniels of which Mr Lewis had been appointed a director. Since the outstanding salaries have not been paid, it is the Defendants' case that the loans were not (and are still not) repayable (the "first defence").
8. Furthermore, it is the Defendants' case that, at a meeting held on 17^th June 1997, Mr Lewis agreed to an offer made by Mr Daniels that both loans should be offset against the outstanding director's "salaries" due to Mr Lewis and thus "written off". It is said that, as a result of this agreement, the Defendants no longer owe any money to the Claimants in respect of the two loans in any event (see paragraph 17 of the Defence), because each has been, in effect, repaid by the credit that has now been given for the full amount of the loans against the sum of the monies due to Mr Lewis in respect of the unpaid "salaries" (the "second defence").
9. As Mr Morgan observed on behalf of Mr and Mrs Daniels (see paragraph 45 of his written closing submissions), the case is essentially a simple one. However, it is also a very sad one because the two loans, each of which was (as I have already indicated) undoubtedly made by parents out of love and affection for their daughter and her husband, have given rise to a bitter, protracted and ruinous family dispute fought out in the Courts, with no quarter given by either side.
10. The Facts. I now turn to give an account of the main facts of this case as I find them to be on the evidence that I have heard and read and in the light of the detailed written and oral submissions by Mr Morgan on behalf of the Claimants and Ms Kennedy-McGregor on behalf of the Defendants. Although I have had careful regard to all the points made on behalf of the parties, I do not propose to give a detailed account of all the factual matters that were raised at the trial on the issue of credibility.
11. Mr Daniels qualified as an engineer in 1952, working in pattern making. In 1955 he and Mrs Daniels were married. They have four children, Heather (Mrs Lewis) born in 1957, Cheryl born in 1958, Richard ("Mr Daniels junior") born in 1959 and Jenny born in 1968.
12. In 1958, Mr Daniels began to work in a small way in the property business, starting with single house developments and then progressing on to more ambitious housing and industrial projects in the 1970s. In July 1981, Mr Daniels started to trade through a small number of private property-development companies of which he was the controlling shareholder, managing director and chairman. Although not a group of companies in any legal or accounting sense, it is convenient to describe the companies as "the Daniels group". Mrs Daniels, their son Richard (Mr Daniels junior) and Mr Daniel's brother Martin ("Martin Daniels") were also involved in the business to a greater or lesser extent and were made or treated as directors of the companies in the "Daniels group".
13. In 1981 the Daniels group consisted of Richard Daniels Homes Limited ("Daniels Homes") and Richard Daniels Developments Limited ("Daniels Developments"). In 1985 Bondor Developments Limited ("Bondor Developments") was formed and in 1987 Richard Daniels (Hitchin) Limited ("Daniels Hitchin") and Bondor Estates Limited ("Bondor Estates") were also formed. By then the central core of the Daniels group essentially consisted of these five main companies (some of which had subsidiaries): i.e. Daniels Homes, Daniels Developments, Daniels Hitchin, Bondor Developments and Bondor Estates.
14. Although Mr Daniels' property development business was conducted at all material times through the relevant company or companies in the Daniels group (in broad terms, each development had its own company), it is clear that Mr Daniels regarded the entire business very much as his own personal business and one that was entirely under his personal control. Thus, although Mr Daniels was firmly of the view that his brother and son had been made directors of the various companies in the group almost immediately after each company had been set up, this was manifestly not the case according to the records (see, for example, the company records for Daniels Developments). Having seen and observed him give evidence, I am satisfied that the explanation for this is, as he said in evidence, that so far as he and his wife were concerned his son and brother were directors of the companies in question. Mr Daniels' evidence to that effect was a clear manifestation of his general attitude and approach to the business and the Daniels' group generally, namely that it was what he considered to be the case that mattered, rather than the legal niceties and technicalities of company law and procedure.
15. Mr Lewis is a Chartered Engineer. He and Mrs Lewis were married in 1978. In June 1989, Mr Lewis left his employment with Taylor Instruments and joined the Daniels group at Mr Daniels' invitation. Mr Lewis' main contract of employment was and remained throughout his time with the Daniels group (i.e. until 2002) with Daniels Homes and, so far as material, was in the following terms set out in Mr Daniels' letter of offer dated 26^th April 1989, which Mr Lewis countersigned to indicate his acceptance:

"I am pleased to make the following offer of employment to you as Commercial Projects Manager with the Company. If you accept this offer we would wish you to take up this position from 5^th June, 1989.

The following terms apply and are supplemental to your rights under the Employment Protection Act 1978.

SALARY:-

£33,750 per annum, paid monthly in arrears …

TERMINATION OF EMPLOYMENT:-

Termination of employment will be by 3 months written notice from either side. …"

16. In December 1990, Mr Lewis was appointed a director of Daniels' Homes and his salary was increased to £41,840. At the same time, he was also appointed a director of Daniels Developments at an annual "salary" of £5000, Daniels Hitchin at an annual "salary" of £10,000 p.a., Bondor Developments at an annual "salary" of £15,000 and Bondor Estates at an annual "salary" of £5,000, i.e. a total of £35,000 per annum in addition to his basic salary of £41,840 from Daniels Homes. In each case, the letter from the relevant company containing the offer of the directorship and "salary" was dated 11^th December, signed by Mr Daniels and countersigned by way of acceptance by Mr Lewis.
17. I accept Mr Daniels' evidence that Mr Lewis was well aware that the recession was "hitting the property industry hard" when Mr Lewis joined the Daniels group. The only one of the Daniels group of companies that was able to and did pay its salaries was Daniels Homes. As a result, Mr Lewis was not paid any of the other "salaries" that were theoretically due to him from the other companies to which he had been appointed a director.
18. Obviously, Mr Lewis was well aware that only Daniels Homes was paying him the salary to which he was apparently entitled. It was Mr Daniels' case that Mr Lewis, like the other directors, not only knew that the other companies in the Daniels group could not pay any salaries but that he also knew and accepted that no "salary" would be payable by any of the other companies in the group until the company in question was in a position to pay the salary in question. In effect, each of the directors (including Mr Lewis) had waived his or her entitlement to any director's remuneration until the company in question was in a position to start paying it.
19. To that end, it was Mr Daniels' case that each director had been sent a "side letter", explaining that such was the case and that each director accepted the position. According to Mr Daniels and Martin Daniels (who prepared the various letters and sent them out) appropriate "side letters" were sent to Mr Lewis on 11^th December 1990, when he was appointed director of the various companies in the Daniels' group. The letters were in similar (although not identical) terms. The side letter from Bondor Developments to Mr Lewis, was expressed in terms that appeared to be to the effect that he was not entitled to any salary until the company was in a position to pay it, as follows (D1, page 330):

"Dear Mr Lewis,

I enclose herewith your Contract of Employment with this Company, but as you are aware, due to the current economic climate, we are having to discontinue Director's remuneration until such time as we are able to recommence. Which we trust will not be for too long."

20. However, the side letters from the other companies were more ambiguously expressed and are arguably more capable of being construed as a deferral of payment, rather than as a statement of waiver or non-entitlement. Thus the letter from Daniels Hitchin was in the following terms:

"Dear Nigel,

I enclose herewith your Contract of Employment with this company, but as you are aware, due to the economic climate we are unable to pay remuneration until further notice. I trust that this will not be for too long a period."

21. It is a crucial part of the Defendants' case that Mr Lewis always remained entitled to be paid the outstanding unpaid remuneration by each of the companies to which he had been appointed a director and that he had never agreed to waive any such remuneration. In effect, therefore, each of the companies (other than Daniels Homes) became progressively more and more indebted to Mr Lewis as time went by and the total due to him steadily increased at the rate of £35,000 per annum. It was Mr and Mrs Lewis' case that Mr Lewis never received any of the side letters and that, in any event, payment of his remuneration as a director of the other companies in the group (apart from Daniels Homes) was merely postponed or deferred, not waived or cancelled indefinitely. The existence of this continuing entitlement to the unpaid "salaries" is fundamental to Mr and Mrs Lewis' case that it was a term of each loan that it would only be repayable when the outstanding "salaries" were paid (their first defence) and/or that the loans were "written off" against those unpaid salaries (their second defence). It follows that if, in truth, these were not deferred payment "salaries" but that the entitlement to each of the "salaries" had been waived by Mr Lewis until such time as the company in question was able to pay it, a major if not the entire foundation of Mr and Mrs Lewis' case falls away.
22. Understandably, much was made by Ms Kennedy-McGregor, in her criticisms of the credibility of the evidence called on behalf of the Claimants, of the unsatisfactory and misleading evidence of (in particular) Mr Daniels, Mr Daniels junior and Martin Daniels about when the side letters were composed and sent out to the various directors and the purpose of those letters. The evidence in question had been to the general effect that the contracts and accompanying side letters had been drawn up and sent out on or about the dates appearing on the letters in question, going back (in some cases) to the 1980s, and that the purpose of the letters was to confirm that all directors' entitlement to remuneration by the companies in question had been, in effect, waived by the directors. There is no doubt that it was not until Martin Daniels' third witness statement that the true position with regard to the side letters was made clear, as follows:

"The contracts and letters dated 15^th April 1987 and 12^th October 1987 were drawn up in 1990 on the verbal advice of our accountants at around the same time Nigel signed his contracts of employment (i.e. December 1990). They informed us that we could acquire some degree of protection in respect of unpaid salary in the event of the companies being wound up, if we put the remuneration letters in place. We were advised to do this for all the companies. I have no specific recollection of backdating these documents but I would have drawn up the appropriate letters for each company and where needed the associated contracts as well. …"

23. In his third witness statement, therefore, Martin Daniels eventually confirmed that most of the side letters had been backdated and that the purpose of the letters had been to protect the directors' unpaid remuneration from the companies' creditors (an apparently dishonest exercise if, in truth, the directors were not entitled to the remuneration in question). In my view, Mr Daniels' evidence that the directors were owed their salaries "in the context of that" (Transcript, day 1 pp. 70-71) was an untruthful attempt to disguise the apparently dishonest purpose of the side-letters, which was to protect the directors' salaries against the companies' creditors even though, at that stage, the directors had all waived their entitlement to those salaries and there were no such outstanding "salaries".
24. However, notwithstanding the obvious criticisms that can be made of the truthfulness of Mr Daniels, Mr Daniels junior and Martin Daniels on this aspect of the matter, I am satisfied that Mr Lewis was, in fact, perfectly well aware of the existence of the side letters, the general nature of their contents and their purpose (see below). I consider that it is unlikely that he was ever actually sent his side letters, because it was the Claimants (and not Mr Lewis) who disclosed the originals of the side letters addressed to Mr Lewis, a situation for which no adequate explanation was forthcoming. Nevertheless, I am satisfied that the side letters referable to Mr Lewis' directorships were composed by Martin Daniels in or about December 1990, when he composed all the side letters for all the directors and I am equally satisfied that Mr Lewis clearly knew about the side letters and their purpose. Thus, in a letter to his own solicitors dated 15^th September 2003 (part of a body of correspondence/documents in respect of which Mr and Mrs Lewis waived privilege), Mr Lewis stated as follows:

"I have a feeling that (these) were put in place much later than their dates would suggest (in my view, this clearly includes reference to the pre-1990 side letters) … I do recall discussions about the directors being exposed when the banks got aggressive and that all these documents were produced at the same time. It may be that the letter to me postponing payment was also done in this way."

25. Furthermore and importantly, I reject Mr Lewis' evidence that he was entitled to be paid his unpaid director's "salaries", because actual payment of his salary had merely been postponed or deferred in each case. I am completely satisfied that Mr Lewis, like his fellow directors, knew perfectly well and accepted that none of the directors (including himself) were entitled to any "salary" from any of the other companies in the Daniels group (other than Daniels Homes) unless and until the company in question was in a position to pay the salary.
26. Thus, there is no mention of any accumulating debt due to Mr Lewis on account of unpaid remuneration in any entry in or note to any statutory accounts of any of the companies in question, many of which were signed by Mr Lewis (see K5). Furthermore, the fact that Mr Lewis knew perfectly well that he had waived entitlement to his director's remuneration (except in the case of Daniels Homes) is very evident from the terms of the letter that he signed on 14^th December 2000 (a letter addressed to Bondor Developments for the purposes of the preparation of that company's statutory accounts), as follows:

"Dear Sir,

In accordance with the Companies Act 1985, I confirm:

1. There were no emoluments received or receivable (my emphasis) by me or any other person in respect of my services to the company or its subsidiaries for the period ended 31 July 1999;

2. The balance on my current account as at 31 July 1999 was £41390.35 DR

3. There were no loans, quasi-loans, etc made available by the company or its subsidiaries to me or my connected persons;

4. There were no transactions and arrangements in which I, or a connected person, had a material interest;

I confirm to the best of my knowledge and belief that the above particulars are in accordance with Schedules 6 and 7 of the Companies Act 1985 and that the information is complete in all respects."

27. Of course, if Mr Lewis' version of the facts is correct, on the date he signed that letter Bondor Developments actually owed him £150,000 in respect of his unpaid director's remuneration (about £142,500 as at 31^st July 1999) and the total amount owed to him by the companies other than Daniels Homes was £350,000. I simply cannot accept and do not believe his evidence that the letter of 14^th December 2000, which expressly states that he was not owed anything at all by Bondor Developments, was simply placed in front of him by accountants and that he signed without reading it. I found his evidence in cross-examination to that effect wholly unconvincing and I did not believe a word of it.
28. In short, I am satisfied that Mr Lewis was perfectly well aware of the contents of the letter of 14^th December 2000 and that he signed it because he recognised that the letter represented the true state of affairs, i.e. that he was not owed any money by Bondor Developments in respect of any unpaid director's remuneration because his entitlement to remuneration had been waived and/or cancelled by agreement until the company was in a position to pay it. Furthermore, I am also satisfied that the same was true of the other companies of which Mr Lewis was a director (apart from Daniels Homes). It is to be noted that it was never any part of Mr and Mrs Lewis' case that the position with regard to Mr Lewis' entitlement to "unpaid salary" from Bondor Developments was any different from that of the other companies of which he was a director. The truth is that Mr Lewis was not and is not owed any unpaid "salary" by any of the companies in the Daniels' group and he is and has always been well aware that such is the case.
29. As I have already indicated, I am not only satisfied that Mr Lewis knew about the side letters but that, as is made clear from the terms of his letter of 15^th September 2003 (see paragraph 24 above), he was well aware of the underlying and apparently dishonest purpose of the side letters which was, as Martin Daniels stated in his third witness statement, to provide the directors with some degree of protection against the bank and other creditors in respect of unpaid salaries, in the event that any of the companies was wound up.
30. Even though the side letters are said to have been written on the advice of accountants and were (for the most part) couched in terms that made it possible to argue that payment of the salaries in question had been deferred and not waived or cancelled by agreement, I am satisfied that there were no unpaid salaries outstanding (as I have already indicated). Although I am not prepared to state conclusively that the underlying purpose of the letters was fraudulent, without hearing from the accountants and going into the nature and purpose of their advice (if any) in much more detail, the underlying purpose (as explained by Martin Daniels) certainly has all the appearance of being dishonest or (at the very least) improper, because all the directors (including Mr Lewis) knew perfectly well that they were not owed any unpaid remuneration by any of the companies at the time the letters were prepared and composed. In that respect, as it seems to me, the side letters operate to impugn Mr Lewis' credibility, just as they call into question that of Mr Daniels and Martin Daniels.
31. In my opinion, however, the critical conclusion (for the purposes of this case) that I have reached on this aspect of the matter is that Mr Lewis knew perfectly well, as he clearly acknowledged in his letter of 14^th December 2000 concerning Bondor Developments (see paragraph 26 above), that he was not owed any outstanding salary by any of the Daniels group. It is that letter in particular, not the side letters, that gives the lie to Mr Lewis' claim that he was entitled to a large amount of unpaid director's remuneration at the time that he and Mrs Lewis were lent the two sums of money that is the subject matter of this claim.
32. However, there is no doubt that Mr Daniels' misguided attempt to support his claim by reference to the side letters plainly backfired when their true purpose emerged in the course of Martin Daniels' evidence and the credibility of Mr Daniels' evidence, as well as that of his son and his brother, suffered significantly as a result. Obviously, this has meant that I have had to give very anxious and careful consideration to the truthfulness and reliability of the remainder of their evidence, in particular that of Mr Daniels.
33. Of course, the fact that Mr Daniels has not been truthful about the origin and purpose of the side letters does not mean that he was untruthful about the circumstances of the informal loans that he and Mrs Lewis made for reasons of parental love and affection. In fact, it is clear from my firm conclusion that Mr Lewis knew perfectly well that he was not owed any unpaid salary by any of the Daniels group (a view that was obviously shared by Mr Daniels), that there was simply no factual basis for agreeing terms that were referable to any such fictional "unpaid salary". It follows that it is extremely unlikely (to put it mildly) that the informal agreements, pursuant to which the two loans were made, included any stipulation that repayment was conditional upon Mr Lewis being paid arrears of salary to which he was not entitled (the first defence) or that it was later agreed to "write off" the loans against any such fictional unpaid salaries (the second defence). I therefore now turn to consider the factual circumstances of the two loans and the alleged subsequent meeting of 17^th June 1997.
34. In early 1993 Mrs Lewis approached her mother, Mrs Daniels, and told her about a property she had seen called Park Farm and she took Mrs Daniels to see it. I accept Mrs Daniels' evidence that Mrs Lewis described Park Farm as her "dream home", because it was large enough for all the family and it had stables for the ponies that the children were learning to ride at the time. Mrs Lewis was very keen to buy Park Farm but, as she made clear to her mother at the time, she and Mr Lewis needed financial help in order to secure the property. In short, Mrs Lewis told her mother that they still needed £31,000 in order to have sufficient money to pay the required deposit of £36,000 on exchange of contracts for the purchase of Park Farm, and she asked whether Mr and Mrs Daniels could help by lending them the necessary money to do so.
35. Mrs Daniels was very sympathetic to her daughter's plea. She wanted her daughter to be able to buy the family home that she was so keen to have. As she said in evidence, she and Mr Daniels were not averse to lending money to their children and they had done so regularly in the past for expenses such as school fees. I have no doubt that Mrs Daniels was very anxious that her daughter should be lent the money required to secure her "dream home" if at all possible and so, although she was not sure whether she and Mr Daniels were in a position to lend as much as £31,000, Mrs Daniels decided to and did talk to her husband about the matter.
36. As it happened, Mr and Mrs Daniels did have sufficient money held to their personal account by their solicitors to be able lend Mr and Mrs Lewis the amount they required. Most of the money had come from the recent sale of furniture from Pickenham Hall, Norfolk. Mr and Mrs Daniels therefore decided to lend the required money to their daughter and her husband so that they could go ahead and exchange contracts for the purchase of Park Farm, their daughter's dream home. It was a generous decision by Mr and Mrs Daniels, motivated only by parental love and affection.
37. So it was that, in the early part of August 1993, Mr Daniels met briefly with Mr Lewis at the business' Grange House offices at Stotfield and told him that he was able to lend them the £31,000 that Mr and Mrs Lewis needed for the deposit on Grange Farm and that he was willing to make the necessary loan. I reject Mr Lewis' evidence that he reminded Mr Daniels about the director's remuneration that was outstanding and owing to him (by then, on Mr Lewis' version of the facts, totalling about £87,500). Nothing was said or understood by either Mr Lewis or Mr Daniels at any stage to the effect that the loan would be repayable only when Mr Lewis was paid his unpaid director's remuneration. Such a stipulation would have made no sense at all, because Mr Lewis was not owed unpaid salary by any of the Daniels group. As Mr Daniels said, the meeting and agreement was very informal – it was more a case of Mr Daniels confirming that he was able to make the requested loan and confirming his agreement to doing so. The important aspect of the matter was that Mr Daniels agreed to and did lend his daughter and son-in-law the money that they needed to go ahead and exchange contracts on Park Farm. Nothing was actually said or agreed with regard to the time for repayment of the loan. To the extent Mr Daniels thought about repayment at all, he assumed that his daughter and son-in-law would repay the loan when they were able to do so and he may have made some observation to that effect. It was a family affair, not a commercial transaction.
38. Given that the assumption was that Mr and Mrs Lewis would repay the loan when they were able to do so, but that there was no express stipulation as to the time for repayment of the loan, I am satisfied that the loan of £31,000 constituted a present debt repayable without demand. At most, the circumstances were such that the loan was subject to an implied stipulation that it was to be only repayable on demand. In my view, the essential nature of the transaction was accurately and truthfully summarised by Mrs Daniels in the course of her evidence, when she said this:

"As far as I can remember there were not any terms. They needed the money and we decided to lend it to them.

My daughter asked me if she could borrow money to buy a house. I said I would discuss it with my husband. We agreed that we would lend them the money and that is the end of the matter as far as I am concerned."

39. Having been lent the necessary £31,000, Mr and Mrs Lewis went ahead and exchanged contracts for the purchase of Park Farm on 17^th August 1993. Everybody was delighted. It was a time for celebration and gratitude. Mr and Mrs Daniels went to Park Farm with Mr and Mrs Lewis for a drink of champagne with the then owners in order to celebrate the exchange of contracts. Mr and Mrs Lewis also took Mr and Mrs Daniels out to dinner as a gesture of thanks to them for lending the money and to celebrate Mrs Lewis' birthday. For reasons that I have already made clear, I am completely satisfied that there was never any discussion about the loan being repayable when Mr Lewis had been paid his back salary (see paragraph 38 of Mr Lewis' first witness statement).
40. I am satisfied that Mr and Mrs Lewis were well aware that they were going to find it very difficult to complete the purchase of Park Farm unless their financial situation improved. Although I am not persuaded that Mr Daniels said or did anything to encourage undue optimism, I have no doubt that Mr Lewis very much hoped that there would soon be an upturn in the property market that would enable the various companies in the Daniels group to start paying him the appropriate director's remuneration. So it was that, Micawber-like and hoping that something would turn up, Mr Lewis negotiated a delayed completion of 11 months with the vendor of Park Farm, with completion scheduled to take place on or before 15^th July 1994.
41. Unfortunately, in the state of the property market as it then was, Mr and Mrs Lewis found it difficult to sell their existing house. They therefore arranged a bridging loan and short term let of their house and this necessitated moving in with Mr and Mrs Daniels for about a month. Having negotiated the maximum available bridging loan and mortgage, Mr and Mrs Lewis were still £50,000 short of what was required to complete the purchase of Park Farm.
42. As the time for completion approached and with no apparent prospect of raising the balance required for Mr and Mrs Lewis to complete the purchase of Park Farm, Mr Daniels suggested that Mr Lewis should try and negotiate a reduction in the purchase price. As a result, Mr Lewis approached the vendor and sought either a reduction in the price or a delayed payment of part of the price, but without success.
43. Of course, if Mr and Mrs Lewis were unable to complete on the due date they were at risk of losing both their deposit and Park Farm. I accept that Mr Lewis was at his wits' end and did not know what he and his wife were going to do to resolve the situation. Mrs Lewis was also very anxious and so they decided to ask Mr and Mrs Daniels for a further loan of £50,000 and this is precisely what they did in May 1994. It was apparent, as he himself acknowledged, that Mr Daniels did not have a clear recollection of the precise circumstances of the second loan. However, I am satisfied that Mrs Daniels' account is accurate and truthful, as follows (see paragraph 11 of her second witness statement):

"For reasons that I do not recall the completion of the purchase of the property took very much longer than I had imagined. Heather and Nigel came to see Richard and I and asked if we could loan them a further £50,000 to complete the purchase. I was agreeable to this provided we had the money to spare. At the end of the day we knew that without the loan Heather and Nigel would lose the house and their deposit. Richard and I agreed to make the further loan."

44. Although Mr Daniels did not have a clear recollection of the precise circumstances of the second loan or the words that he used when agreeing to lend the money, this is because there was little to remember other than the fact that he agreed to make the loan of £50,000. As Mr Morgan observed, the second loan arose out of the same spirit of parental love and generosity. It was not a commercial transaction. There was no agreement (express or implied) that repayment of the loan was conditional upon Mr Lewis being paid his outstanding director's salaries, because there were no such outstanding salaries. Nothing was actually said about how or when the loan was to be repaid. Again, it was Mr Daniels' assumption that Mr and Mr Lewis would repay the loan when they were in a position to do so. In my view, the second loan was also a present debt repayable without demand or, at most, was subject to an implied stipulation that it was to be repayable on demand, just like the first loan and for the same reasons.
45. I therefore accept the evidence of Mr and Mrs Daniels as to the circumstances of the two loans with which this case is concerned. To the extent that the evidence of Mr and Mrs Lewis differed from that of Mr and Mrs Daniels on this crucial aspect of the matter, I reject it and prefer that of Mr and Mrs Daniels. In my view, when dealing with the circumstances in which they lent their money to their daughter and son-in-law, the evidence of Mr and Mrs Daniels had the ring of truth. These were not complicated transactions in which monies allegedly due from ailing private companies were to be taken into account for the purposes of repayment. These were simple family loans, made by Mr and Mrs Daniels out of parental love and affection and using their own personal resources to enable their daughter and her husband to buy their "dream home". Although Mr Daniels has always regarded himself as being solely responsible for making each loan, I have come to the conclusion that, having regard to Mrs Daniels' evidence, the loans were actually made from their joint personal resources and were therefore joint loans.
46. As it happened, Mr and Mrs Lewis' waiver of privilege resulted in disclosure of a number of letters of instruction to their solicitors. I agree with Mr Morgan's submission that these documents illustrate the manner in which Mr and Mrs Lewis' account has become refined with the passage of time, as the need to demonstrate a single clear and strictly limited condition governing the repayment of the loans emerged as the litigation progressed: see paragraphs 13 and 14 of Mr Morgan's written closing submissions. I accept Mr Morgan's suggestion that this lends strong support to his submission that there never was any such condition.
47. In this regard, I consider it significant that, in his letter dated 20^th June 2003 (K7, pp 6-7), Mr Lewis stated that it was their understanding that the loan (i.e. the total of £81,000) was to be repaid "when the Group paid me or when we could afford it" (my emphasis). Significantly, a condition that the loan was to be repaid when Mr and Mrs Lewis could afford it (a condition that would have been satisfied by now, assuming that it is sufficiently clear to constitute a contractual condition) played no part in Mr and Mrs Lewis' case as originally presented at trial (see, in particular their various witness statements). Furthermore, I accept Mr Morgan's submission that the penultimate paragraph of Mr Lewis' letter clearly shows that his principal and unattractive defence strategy was to seek to delay matters as long as possible, thus increasing the threat of bankruptcy and forcing a settlement of the claim, as follows:

"Delaying these proceedings for as long as possible will allow Richard's Revenue problems and other pressures to unfold still further, helping us to reach an out-of-court resolution."

48. Mrs Lewis' early letter of instruction, dated 3^rd August 2003 (K7, pp. 14-18), is also inconsistent with Mr and Mrs Lewis' case at trial that repayment of the loans was entirely conditional upon Mr Lewis being paid the company salaries that were outstanding to him, as follows:

"I also took my mother to see Park Farm, she agreed that it was perfect for our needs and I think persuaded Dad to lend us £31,000 to make up the £36,000 required as a deposit for the farm in August 1993. I remember going to my parents' house later that month, around my birthday I think, and thanking them for their help. Dad always gave us the impression that he had lent us the money personally, this was a verbal agreement and there was never any mention of interest or a repayment schedule, it was "pay it back when you can" (my emphasis).

…

Mum and Dad knew that Park Farm was ideal for us and I can't remember if we asked or Dad offered to lend us the further £50,000 we were short of to complete the purchase. I don't remember where the matter of the loan was discussed but I do remember being present at the time. I also recall this as being another very informal agreement and absolutely no mention was made of interest on the loan or repayment on demand. I recall we promised to repay the loan as soon as we could afford it (my emphasis) – when Nigel's salary was increased to the level of the other Directors and the companies paid the money owed to him in back pay. I fretted about the loan somewhat over the next few years but Dad never raised the subject of repayment.

…

My recollections regarding the loan are as stated previously in this letter and they are my true belief and knowledge. Though they are somewhat limited, I absolutely recall the loan being made, that there were no conditions attached and that the money would be repaid when we could afford it (my emphasis). I was told by Nigel that the loan was completely cancelled by Dad at their meeting in 1997 due to what was owing to him in outstanding pay at that time and at that meeting Dad also said that he considered the money that we spent on installing central heating at Park Farm when we moved in, approximately £30,000, was also deemed part payment of back pay owed by the company."

49. I have therefore come to the firm conclusion that there is no substance in Mr and Mrs Lewis' first defence to this claim, namely that "the loans were expressly agreed to be repayable when Mr Lewis was paid salary he was owed by companies controlled by Mr Daniels" (see paragraph 4(1) of Ms Kennedy-McGregor's opening written skeleton argument). There never was any factual basis or justification for such a condition and no such condition was ever agreed, whether expressly or otherwise. I therefore turn to consider the second or alternative defence upon which Mr and Mrs Lewis relied, namely that "in June 1997 when the salaries had still not been paid, Mr Daniels wrote them off and said that they would be offset against the money still owing to Mr Lewis" (see paragraph 4(2) of Ms Kennedy-McGregor's opening written skeleton argument).
50. As it seems to me, my conclusion that Mr Lewis was not, in truth, owed any unpaid director's remuneration and that he was perfectly well aware that such was the case is as fatal to Mr and Mrs Lewis' second defence as it was to their first. There simply was no factual basis or justification for any agreement that the loans would be "written off" against Mr Lewis' unpaid director's salaries because there were no such unpaid salaries.
51. However, as Mr Morgan observed (see paragraph 21 of his written closing submissions), on any view there was a discussion between Mr Daniels and Mr Lewis on or about 17^th June 1997. Given that there was no factual basis for any discussion about outstanding remuneration as asserted by Mr Lewis, I accept Mr Daniels' evidence that the meeting was concerned with the money that he had put into the companies from his personal resources over the years and which he regarded as having been lent to the companies. Mr Daniels' account of the meeting is supported by the handwritten document that he produced for the meeting (K2), which is headed "RJD Loans to Companies" and shows various "loans" totalling £905,500 "at 18 June 1997". I am satisfied that it was this that was the main subject matter of the meeting. For the purposes of this case, it is not necessary for me to decide (nor am I in a position to do so), whether Mr Daniels' views as to what he was owed by the companies are correct or not.
52. I agree with Mr Morgan that document K2 is clearly the source of the information contained in the typewritten document thereafter prepared by Mr Lewis and headed "RJD Loan Account by Company and Year" (K1). I also accept Mr Morgan's submission that Mr Lewis' answers in cross-examination and the handwritten document, headed "RJD's list of matters to be considered" (D2/506), confirm that this topic (i.e. Mr Daniels' alleged loan account) was undoubtedly under active discussion shortly before the meeting of 17^th June 1997.
53. Furthermore, I agree that it is significant that the document relied on by Mr and Mrs Lewis as their agenda for the meeting (D1/338), a document that Mr Daniels agreed was handed to him at the meeting (as the handwritten note on it suggests), makes no mention of any outstanding remuneration being owed by any of the companies to Mr Lewis (said to amount to £233,000 by then). The explanation for that omission, that the document was only setting out the comparative position between Mr Lewis and the other directors (a matter in respect of which Mr and Mrs Lewis undoubtedly nursed a considerable sense of grievance), is wholly unpersuasive and contrary to the purpose and meaning of the document as stated expressly on its face: i.e. the document is headed "NL/HJL Company Financial Position June1997." In my view it is also very revealing that the filename given to this document by Mr Lewis was "NLOWED.XLS", i.e. representing "Nigel Lewis Owed" etc. If Mr Lewis was really owed money by the companies in respect of unpaid salaries at the time, this was manifestly a document in which reference to such a debt could be expected to appear. Furthermore, I am satisfied that Mr Lewis' suggestion in evidence that his handwritten note at the foot of D2/506, "Group – NL – 91 Directors salary", was a reference to the sum of £233,000 that he was owed at the time is plainly no such thing. I agree with Mr Morgan that this is a note of the same matter as is mentioned as the second item in D1/338, i.e. "NL reduced directors salary Dec 90 to Nov 91 (? check MGD, RJD ii earnings for year 40,000". It has nothing to do with any outstanding unpaid director's remuneration due to Mr Lewis and extending over a period of 7 years. This note refers to one of Mr Lewis' other grievances, namely that he believed that he had received an unfairly reduced salary for the year 1990 to 1991, compared with the salaries paid to the other directors.
54. I accept Mr Morgan's submission (see paragraph 24 of his closing written submissions) that the true state of affairs is that, at the meeting on 17^th June 1997, nothing was said by Mr Lewis about the allegedly outstanding remuneration of £233,000 because there was none outstanding. That is the reason why D1/338 is silent on the point. Had Mr Lewis truly believed at the time that he was owed £233,000 and had its payment been the primary purpose of the meeting, the document D1/338 could not possibly have failed to mention it. Finally, as Mr Morgan stressed, not only is there no mention of any outstanding director's remuneration being owed to Mr Lewis in D1/338, but there is not a single document that makes any mention of or reference to any such outstanding remuneration until Mr and Mrs Daniels sought repayment of the loans and this dispute arose.
55. I have therefore come to the firm conclusion that there is no substance in Mr and Mrs Lewis' second defence. There was never any agreement that the loans were to be "written off" against Mr Lewis' unpaid director's salaries, there were no such unpaid salaries owed to Mr Lewis and there never was any discussion at any meeting to the effect alleged by Mr Lewis for the purposes of this particular defence to the claim. I am afraid that I have come to the conclusion that Mr Lewis' assertion that Mr Daniels agreed to write off the loans against the unpaid salaries due to Mr Lewis is a complete fiction, devised for the sole purpose of avoiding repayment of the loans in question.
56. Although my foregoing conclusions are sufficient to dispose of these proceedings, it is helpful to give a short account of some of the subsequent events.
57. In March 2002, the business differences between Mr Daniels and himself had become such that Mr Lewis went into business with others and resigned his various directorships of the companies in the Daniels group.
58. On 19^th May 2003, Mr Daniels wrote to Mr Lewis as follows:

"Dear Nigel, Re: Loan

As you are aware by now from Alan I am now under extreme pressure from the Inland Revenue to repay an old and fairly recent Tax debt to them.

Unfortunately and with regret I have to call on you to pay back my loan to you of £81,000 with interest (from back in mid 1994) which enabled you to purchase Park Farm at that time.

I really have unsolvable problems and need help. As we're going on a short break tomorrow until 30^th May your reply and arrangements would be appreciated."

59. On 21^st May 2003 Mr Lewis wrote an extremely aggressive and abusive reply to Mr Daniels' request in which (inter alia) he stated "The debt between us is as defined by our solicitors if you think it is any other way then I suggest you proceed to collect it."
60. On 5^th June 2003 Mr Daniels' solicitors wrote a further demand for repayment of the loans and included a claim for interest of £60,707.24. On 6^th June, Mr Lewis responded with an invoice for £75,000 for "Rent of Storage space at Park Farm to 31^st May 03". This wholly fictitious invoice was subsequently and sensibly withdrawn by Mr Lewis by letter of 5^th March 2004. On 14^th August 2003, Mr Lewis' solicitors wrote to Daniels Developments, Daniels Hitchin, Bondor Developments and Bondor Estates and demanded from each payment of the allegedly unpaid salary, plus interest. No payment has ever been made by any of the companies in response to those demands and, so far as I am aware, no proceedings were ever taken to recover any of the allegedly outstanding salaries.
61. Finally, I should mention that, having regard to my findings with regard to the central issues in this case and the existing length of this judgment, I have come to the conclusion that it is neither necessary nor appropriate for me to go into the details of Mr Daniels' misguided attempt to attack Mr Lewis' credibility by calling into question the accuracy and honesty of information provided by Mr Lewis for the purposes of an application for a mortgage from the Nationwide Building Society. Suffice it to say that the allegation should never have been made, as Mr Daniels accepted, in effect, when he was driven to withdraw his allegation of dishonesty against Mr Lewis in the course of his evidence (Transcript, Day 1 p.120). Although the outcome of the Nationwide issue does not affect my conclusions on the central issues in the case, there is no doubt that it revealed a somewhat ruthless aspect of Mr Daniels' character that did him no credit at all.
62. Conclusion. Having regard to all the foregoing, I find myself in agreement with Mr Morgan's conclusions as expressed in his written closing submissions, as follows:

"45. The case is in reality a simple one. It is also a very sad one. Parents made 2 loans from love and affection to their daughter and her husband. The arrangement was a purely informal one, the discussion as to its repayment at the time being at most "Pay us back when you can afford to". When repayment was in fact requested 9 years after the 2^nd loan was made it was denied. That was not because of any legal defence but because of a disinclination to pay following the business differences between father and son-in-law and a misplaced conviction that it was not fair in the circumstances that it should be repaid

46. A loan made without any stipulation as to the time of repayment is repayable even without demand … That is … also so if an unenforceably vague term such as "when you can afford it" is used. In different forms of contract, the use of such vague words might render the contract void for uncertainty. Money paid under such a contract would be recoverable in restitution. In the case of a loan of the present nature, exactly the same result is achieved by simply once again treating the loan as immediately repayable."

63. To Mr Morgan's conclusions I would only add that, in my view, if there is an assumption or observation to the effect that repayment of a loan is to be "when you can afford it", that would, at most, give rise to an implied stipulation that the loan was to be only repayable on demand, if the agreement was otherwise silent as to the time for repayment. In this case, it does not matter whether the loans were present debts repayable without demand or repayable only on demand. Either way, Mr and Mrs Daniels are entitled to repayment of the £81,000 that they lent to their daughter and son-in-law.
64. For all the foregoing reasons, I have come to the conclusion that the Claimants are entitled to judgment in the sum claimed together with interest. There will be judgment for the Claimants accordingly.