Neutral Citation Number: [2004] EWCA Civ. 817
Case No: A3/2003/2773
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CHANCERY DIVISION
Mr David Oliver QC, sitting as a Deputy Judge of the Chancery Division

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 29/06/2004
Before :

LORD JUSTICE MANCE
LORD JUSTICE NEUBERGER
and
MR JUSTICE BODEY
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Between :

	CAPITAL BANK CASHFLOW FINANCE LTD.	Appellant	
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	IAN SOUTHALL	Respondent	

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Mr. Richard Sheldon QC & Mr. Michael Gadd (instructed by DLA) for the Appellant
Mr. Roger Ellis QC & Mr. Robert Lamb (instructed by Boyes Turner) for the Respondent

Hearing dates : 24 May 2004
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Judgment 

Lord Justice Mance:

Introduction
1.	This is an appeal by Capital Bank Cashflow Finance Ltd. (formerly Kellock Ltd.) (“the Bank”) from a judgment given on 17 December 2003 by Mr David Oliver QC sitting as a deputy judge in the Chancery Division. He thereby dismissed the Bank’s claim against the respondent, Mr Ian Southall, under an undertaking given to the Bank in July 1996 in relation to a company, VSLI Group plc, of which Mr Southall was a director and the majority shareholder.  The judgment followed a five day trial in July 2003.  The claim was dismissed on the basis that Mr Southall’s undertaking was either (1) conditional on a separate undertaking being executed in identical terms by the company’s finance director and minority shareholder, Mr McCaffrey, whose undertaking proves not to have been in identical terms, or, if not, (2) that all parties’ respective levels of expectation that Mr McCaffrey’s undertaking would be executed in identical terms were such as to make it unjust in equity to hold Mr Southall responsible, in circumstances when Mr McCaffrey’s undertaking was not in identical terms.
2.	The background is that the company approached the Bank for a cashflow finance agreement which was eventually entered into on 3 July 1996.  It is unnecessary to set out its detailed terms.  Essentially the company was to assign its claims to debts becoming due to it as well as associated rights to the Bank in return for a 75% payment of their face value less commission as and when such debts became payable and balance payments as and when the Bank actually received payments in respect thereof from the relevant customer.  Discount and late payment fees were payable in certain events.  The company gave warranties by clause 9 as follows:
“9 Warranties
You warrant in respect of each Debt that:
(a)  you will not waive or modify your normal trading terms with any Customer without obtaining our prior written consent and in particular you will not extend the time for payment;
(b)  we shall obtain a valid binding and enforceable title to the amount owing to you thereunder and to all assigned rights and remedies included and that no supplier to you will retain title to any goods sold by you which are the subject matter of a Debt;
(c)  you have already performed all the obligations required for enforcement of the Debt including delivery of goods or performance of services;
(d)  the Customer will pay the full amount of each Debt by the Late Payment Date;
(e)  the Customer has an established place of business, is not an Associate of you and has no right which would reduce or extinguish that Gross Book Value of the Debt.”
3.	The negotiations with the Bank were conducted by Mr McCaffrey who had a preliminary meeting in April or May 1996 with Mr Whittaker of the Bank in Bristol. The nature of the facility was explained and Mr Whittaker said (as the judge accepted) that he introduced Mr McCaffrey “in outline” to the sort of documentation that would be required.  After a probable second meeting, Mr Whittaker submitted a credit proposal to the Bank’s credit committee which envisaged that there would be security from the company and associated companies and (over and above this) “Personal Undertakings: Ian Southall, Peter J. McCaffrey”.  The judge found:
“Capital’s witnesses were unanimous in accepting that this would fall to be construed as Personal Undertakings in the Bank’s standard form, and that any deviation from this form would have required express specific approval from the credit committee.”
That is on its face a finding about the Bank’s internal thought process and intention.  It does not go, at least directly, to any inter partes understanding.
4.	The credit committee evidently approved the proposal.  On 18 June 1996 Mr Whittaker was able to write to Mr McCaffrey this letter:
“Dear Peter
I refer to our telephone conversation yesterday and give below the revised terms of our offer for Confidential Invoice Discounting for VLSI International Ltd (including Sprint Business Machines Ltd).  The terms of this offer are in accordance with the Agreement and the funding and charges are as follows:
Initial Payment:		75.0% of the Gross Book Value of a Debt
Commission Fee:		0.10% of the Gross Book Value of a Debt
Minimum Annual Fee:	£20,000.00
Discount:		2.00% per annum above Bank of Scotland Base Rate
Refer Limit:	£2 million
Net Worth Covenant:	£500,000
In addition to our standard cashflow finance agreement we will require a Debenture and Personal Undertakings from Ian Southall and yourself, as discussed.
I wish you the best of luck with the AIM listing, and look forward to welcoming you as a client in due course.”
That letter was accepted by Mr McCaffrey on behalf of the company on 1 July    1996 by signing a copy of the letter.  Mr McCaffrey then arranged for a meeting at the Bank’s offices on 3 July 1996 to sign the necessary formal documentation.  Mr McCaffrey and Mr Southall attended the meeting with Mr MacGill and Mr Dlugiewicz of the Bank, and signed the cashflow agreement, a copy of the Bank’s standard conditions, a corporate guarantee, an indemnity and a debenture, all of which were then taken away for countersignature by the Bank. Mr Southall and Mr McCaffrey were then given a short further document to sign individually, and each signed his separate document without examining the other’s.
5.	Mr Southall’s document (which was in the Bank’s standard form) contained an undertaking as follows:
“Dear Sirs,
VLSI GROUP PLC (“the Company”)
In consideration of your agreeing, at my request, to enter into or continue with a Cashflow Finance Agreement (“the Agreement”) with the Company I hereby undertake to indemnify you against all losses, costs, damages and expenses of whatever nature you may suffer or incur in consequence of any breach of the warranties or undertakings given to you by the Company in conditions 5(a), 5(c), 6 and 9(a), (b), (c) and (d) in the Standard Conditions of the Agreement.
My obligations to you shall not be affected by any variation of the Company’s obligations to you, by your granting any time or indulgence to the Company or by your releasing any security or other surety’s obligations.
I may terminate my obligations hereunder after you receive three month’s written notice from me, but such termination will not affect any liability I may have in respect of the Company’s breaches at that date.
I have taken such legal and other independent advice as I have thought necessary before undertaking these obligations.”
By what the judge described as a mystery, Mr McCaffrey’s undertaking (although otherwise identical to Mr McCaffrey’s) deviated from the Bank’s standard form in referring not to clause 9 (d), but to clause 9 (e).  During the meeting of 3 July 1996, photocopies of the corporate documents signed by Mr Southall and Mr McCaffrey were given to them, but not photocopies of the undertakings.  At some time later, copies of the corporate documentation as executed by the Bank was also sent, but again no copies of the undertakings.
6.	The difference between the two undertakings had potential significance for all parties, and has in fact proved significant - at all events for the Bank (cf paragraph 28 below).  In late 2000 the company developed a bad debt problem, which prompted the Bank to terminate the agreement and to appoint administrative receivers who took steps to recover outstanding debts.  The Bank now has a claim against Mr Southall for unpaid debt under clause 9 (d) totalling some £2.8 million while Mr McCaffrey, not having given any undertaking in respect of performance of clause 9 (d), has not been sued and is not, on the face of it, liable to make any payment to the Bank or (though this might only have arisen in the event of their joint assets exceeding the Bank’s claim) contribution to Mr Southall.  This difference only came to Mr Southall’s attention on 8 July 2003, just before trial, when the Bank for the first time disclosed Mr McCaffrey’s undertaking (probably prompted by  a request by Mr Southall’s solicitors by letter dated 1 July 2003 to confirm that no such undertakings existed or that, if they did, they be disclosed).  Just before such disclosure, Mr Southall’s solicitors had obtained and served a witness statement from Mr McCaffrey, saying that he had no recollection of signing any undertaking and had been told by the Bank that they had no such undertaking on file.  
7.	In these circumstances Mr Southall raised as defences at trial: (a) misrepresentation, (b) that it was a condition precedent to his undertaking that Mr McCaffrey should have entered into an undertaking in identical terms in the Bank’s favour, (c) fundamental mistake and/or (as I read paragraph 16A(d) of the amended defence, although this is predicated upon there having been a misrepresentation), (d) estoppel, and finally (e) that the difference between the two undertakings made it inequitable for the Bank to enforce his undertaking against Mr Southall.  In the circumstances described in the previous paragraph, permission was only sought and obtained to raise defences (b), (c), (d) and (e) on the first day of trial.  This may help explain why not all the case law relevant to them was put before the judge.  The judge accepted defence (b) or, if necessary, (e).  The Bank now appeals.  Mr Southall cross-appeals in respect of misrepresentation.  I will start by outlining in greater detail the issues which arise.
Misrepresentation
8.	The limited ambit of the pleaded defence is important. In the following extract, paragraphs 8 and 11 were part of the original defence, while the remaining paragraphs derive from the amendment allowed on the first day of trial:
“8.  At the said meeting Robert Whittaker informed Mr McCaffrey that he and the Defendant would be required by the Claimant to sign an “anti-fraud” document which document Robert Whittaker represented to Mr McCaffrey as being a document which would make Mr McCaffrey and the Defendant personally liable to the Claimant in the event that VLSI acted fraudulently in relation to any business conducted between the Claimant and VLSI pursuant to the Agreement by raising or “cutting” false invoices.
8A.  The document referred to in the previous paragraph was referred to in the Claimant’s revised terms of offer in a letter to Mr McCaffrey dated 18 June 1996 as “Personal Undertakings from Ian Southall and yourself” and on 1 July 1996 Mr McCaffrey accepted the terms and conditions of that letter on behalf of VLSI by sending a countersigned copy of that letter to the Claimant.
8B.  The matters set out in the previous two paragraphs hereof amount to an express representation on the part of the Claimant to Mr McCaffrey that the undertaking or undertakings to be executed by the Defendant and himself on completion of the transaction between the Claimant and VLSI would be in identical terms and would impose identical liabilities upon himself and the Defendant towards the Claimant.
8C.  Alternatively the matters set in paragraphs 8 & 8A hereof amount to an implied representation by the Claimant to Mr McCaffrey to the same effect as set out in paragraph 8B hereof.
…..
11.  The Agreement was executed in the following circumstances:
…..
(g)  Sandy MacGill informed and represented to the Defendant that the personal undertaking he was being asked to sign was an “anti-fraud” personal undertaking to cover the possibility that VLSI might raise or “cut” false invoices in order to secure payments in respect thereof from the Claimant under the Agreement to which VLSI was not entitled and that accordingly there was nothing to worry about because VLSI would not be involved in cutting false invoices;
(hh)  Sandy MacGill produced to the Defendant and Mr McCaffrey two documents both headed “Undertaking” and both addressed to the Claimant – one for each of them to sign:  these documents were the undertakings referred on in paragraphs 8-10 hereof and (g) above: the Defendant executed the document provided to him a copy whereof is at page 7 of the annexure to the Particulars of Claim and Mr McCaffrey executed the document provided to him a copy whereof is attached hereto.
(11A)  The matters set out in paragraph 11(g) and 11(hh) hereof amounted to an express alternatively an implied representation by the Claimant to the Defendant that the documents referred to in paragraph 11(hh) hereof were in identical terms and imposed identical liabilities upon the Defendant and Mr McCaffrey towards the Claimant.”
  The focus of the defence, prior to the amendment on the first day of trial, was thus the defence of representation regarding fraudulent activity and, even after the amendment, this remained an important first line of defence.
9.	The Bank’s witnesses, Mr Whittaker and Mr MacGill, were adamant that they would not have made any representation to the effect that Mr Southall’s undertaking was limited to circumstances in which the company engaged in fraudulent activity.  Both Mr Southall and Mr McCaffrey were adamant that such representations had been made.  The judge found this:
“25. I am not prepared to find that any of these witnesses was dishonest in the evidence that they gave.  Moreover, I think that it is quite probable that Mr Whittaker and Mr MacGill did proffer some form of explanation as to the reasons why undertakings were required, and am prepared so to find.  On the other hand, I am not prepared to find that those explanations were as specific as the Defendant and Mr McCaffrey asserted in the witness box, or that they achieved the status of representation, let alone misrepresentation, in the form and with the effect claimed.  So to find would fly in the face of the undertakings themselves, which are plain in their language, and which each of the Defendant and Mr McCaffrey read (at least in the case of the Defendant’s undertaking).  Moreover, from seeing them in the witness box, I formed the clear view that each of the Defendant and Mr McCaffrey were intelligent men, well versed in their business, and experienced in undertaking transactions of this nature.  I have little doubt that one of the reasons why Capital requires such undertakings is to protect itself against, e.g. fraudulent invoicing.  I also have no doubt that they are intended to go further, and so intended in a fashion and language that makes that intention plain.  In my judgment, each of Mr McCaffrey and the Defendant in their own minds have genuinely convinced themselves that they are justified in elevating what at best was a casual partial explanation into a promise that it palpably was not.”
10.	The judge thus only dealt expressly with the allegations in paragraphs 8 and 11(g) of a representation that the undertakings were (only) directed at the possibility of fraud. Since he confined himself to finding common expectation, he may have felt that nothing in paragraphs 8A and 11(hh) and 11A could justify a finding of any positive misrepresentation. The allegation of such a misrepresentation appears to have been treated at trial as very much a subset of the issue whether it was a condition of the two undertakings that they were in identical terms (or whether equity would grant relief if they were not). That is how it appears in the written notes used by Mr Ellis QC for Mr Southall during his final submissions at trial, which rely on the same facts compendiously in support of the allegations of both a condition and a misrepresentation. It is possible in theory to conceive of a situation where the facts justified a finding of material misrepresentation but were insufficient to justify a conclusion that there was a condition (or that equity should, if it could, intervene). The fact that Mr Southall’s guarantee was not linked by its terms to any other guarantee might be said to militate in support of such a conclusion. But, even then, if  there was a clear statement as to the identical nature of the intended or actual guarantees, on which Mr Southall was entitled to rely when executing his undertaking, this could often be analysed as giving rise to a collateral condition of its validity, and such an analysis would also assist to avoid some of the possible problems associated with misrepresentation (e.g. any need for a misrepresentation of current fact). Nevertheless, Mr Ellis submits if necessary that such findings as the judge did make, read together with other uncontrovertible evidence, justify a conclusion that there was a simple representation that the two undertakings presented on 3rd July 1996 were in identical terms; or, alternatively, that, if they do not justify such a conclusion, then we should consider ordering a new trial in order for the facts to be more fully found. 
Conditional Agreement or Relief in Equity
11.	The judge made the following findings of fact:
“21.  Also at the meeting, according to Mr McCaffrey and the Defendant, Mr MacGill produced a further short document which, according to the Defendant, Mr MacGill stated had to be individually signed by each of the Defendant and Mr McCaffrey.  This was the form of undertaking.  It is not in issue that the Defendant signed his form of undertaking.  Nor is it now in issue that there were two such forms of indemnity, and that Mr McCaffrey signed his, although, until its production relatively late in these proceedings.  Mr McCaffrey had no recollection of doing so.  The circumstances in which the respective undertakings were signed, however, are controversial, and I deal with them later in this judgment.
26.  Secondly, the Defendant maintains that in signing the undertaking, he expected that the undertaking signed by Mr McCaffrey would be in the same terms, so that their liability would, in effect, be joint and several; and that, given the vitally different nature of the undertaking in fact signed by Mr McCaffrey, he is entitled to be relieved of liability.
27.  I have no hesitation in accepting the Defendant’s evidence in this regard.  Indeed, none of the witnesses on behalf of Capital suggested that they themselves expected any differently, or were able to suggest any credible explanation for the disparity between the two forms of undertaking.  The overwhelming evidence is that Capital itself expected the undertakings to be in identical terms, and that had it not done so, a specific approval from the credit committee, of which there is no trace, would have been required.”
He then turned to the law.  He regarded the undertaking as analogous to a guarantee, and on that basis referred to authorities establishing that when parties have in mind a joint and several guarantee and one party does not sign (even if he may appear to have signed because someone else has forged his signature), the other guarantor who has signed is not liable.  He referred to James Graham & Co. (Timber Ltd) v Southgate Sands [1986] 1QB 80, Greer v Cattle [1938] AC 156, and a quotation from a New South Wales case, Bleyer v Neville Jefferson Advertising Pty Ltd (1987) (unreported), quoted in The Modern Law of Capital Guarantee by O’Donovan & Phillips (3rd Ed.), pp. 90-91.`
12.	He went on:
“31.  Moreover, the basis for this doctrine appears to have more than one origin: at law, it is predicated upon an express or implied term in the contractual arrangements between the parties that the signature of one is conditional upon the signature of all; in equity, which seems to have taken (typically) a less strictly contractual view, the scope of the circumstances in which relief is available seems to extend beyond contractual terms strictu senso into arrangements entered into within the framework of a particular belief, understanding or expectation to which the proposed beneficiary of the guarantee was party: see judgment of Hope JA in Bleyer v Neville Advertising Pty Ltd (1987) (unreported) in the Court of Appeal in the Supreme Court of New South Wales, helpfully quoted in The Modern Law of Guarantee, O’Donovan & Phillips 3rd Ed. At pp 90-91, where he is quoted as saying:
“A guarantor, even though liable at law, may be relieved of his obligation in equity in a number of circumstances, of which those relevant to the present proceedings are if he enters into the guarantee on the basis of a belief or understanding, induced in whole or in part by some statement or other act by or on behalf of the creditor, including the terms of any document provided by the creditor…that another person or other persons will also guarantee the debt.”
32.  The findings of fact that I have made seem to me well arguably to give rise to the kind of implied term to which I have referred to above, and in my view give rise unquestionably to the belief, understanding or expectation to which I have also referred. ”
13.	Meeting the Bank’s submission that the position was different where each surety expected to sign a different document in identical terms, he said:
“33. ….. I can see no reason in principle or logic why such circumstances are to be distinguished from the general rule.  Indeed, the statements of principle in some of the higher courts both in this jurisdiction and other common law jurisdictions strongly suggest the contrary:  see in addition to the passage quoted above from the Bleyer case, the speech of the then Lord Russell of Killowen in Greer v Kettle…at p.165, a case which involved not merely non-execution by a proposed co-surety but also a failure to give further security by the principal debtor.  The number of documents in issue is not, in my judgment, normally to be regarded as a factor in the exercise of an equitable discretion, nor indeed as the determining factor in the implication of a term at law. ”
He concluded his short reasoning as follows:
“34. I do not accept, therefore, that Mr Gadd’s submissions on this aspect of the claim succeed: and find that I have the jurisdiction to relieve the Defendant from his undertaking in the manner proposed.  I fully recognise that, in so far as this arises in equity, the jurisdiction is discretionary.  However, given my clear view that each of the Defendant, Mr McCaffrey and the relevant representatives of Capital expected and regarded the undertakings to be coterminous I would conclude (i) that each was conditional upon the other being executed in identical terms and (ii) that even if they were not contractually so conditional, the respective levels of expectation of the parties were such that it would be unjust to hold the Defendant responsible alone.  In my judgment, therefore, this claim falls to be dismissed.”
14.	The judge’s central finding of fact was that all parties to all the documents held the same expectation that the two undertakings would be in identical form.  As I have already mentioned, Mr Ellis submits pursuant to the respondent’s notice that the judge should have gone further, to conclude or find that there was a misrepresentation that they were in fact in identical terms.  Mr Ellis also invites us to make certain further findings to justify the conclusion that the undertaking was conditional, particularly a finding that
“it must have been obvious to the representatives of the appellant present at the meeting of 3 July 1996 that had the differences between the two undertakings been pointed out to the respondent he would have refused to execute his undertaking absent a satisfactory explanation which (on the judge’s findings) the Bank would have been unable to provide”.
There is no respondent’s notice to that affect, and the Bank points out that the suggestion was not put to their witnesses.  But Mr Ellis submits that the conclusion is itself justified not by any particular oral evidence (of which we have no transcript) but by facts which the judge has found or evidence which he has accepted or which was uncontroversial, some coming from the Bank’s own side.
The relevant case-law  
15.	The authority of James Graham, which the judge cited briefly in relation to the position of a joint and several guarantee, contains a valuable analysis, which the judge did not address, of previous authority - particularly as to the basis on which a joint and several contract or deed may be unenforceable where not all the contemplated guarantors have signed.  Further there are at least two subsequent English authorities dealing with the position of separate securities which were and are binding on the judge and on us, but to which the judge was unfortunately not referred although they are discussed, together with James Graham, in Rowlatt on Principal and Surety (5th Ed.) (1999).  These authorities are Byblos Bank Sal v Al-Khudhairy [1987] BCLC 232 and TCB Ltd.v Gray [1988] 1 AER 108. In none of these cases, however, was there (or could there on the face of it have been) any allegation of misrepresentation. Leaving aside for the moment, therefore, the possibility of misrepresentation, the reasoning in all three authorities establishes that the relevant question is whether Mr Southall’s agreement to execute and his execution of his undertaking was, expressly or impliedly, conditional upon Mr McCaffrey executing an undertaking in identical terms.  That, as indicated in the headnote to TCB Ltd. v Gray, depends upon a proper analysis of the contractual relationship between the Bank and Mr Southall.
16.	The judge accepted a proposition that equity may relieve in circumstances wider than those where the common law can assist, although he introduced the proposition initially by saying that “it appears” or “seems” to exist.  He relied on the extract from a judgment of the Court of Appeal in New South Wales in the case of Bleyer quoted in paragraph 12 above. But the reasoning in James Graham, Byblos and TCB does not in my opinion leave room in the present case for any wider equitable relief.  It is true that the 19th century cases referred to in James Graham make considerable reference to the position in equity. But both O’Connor LJ and Browne-Wilkinson LJ in James Graham explained the establishment of an equitable doctrine in Evans v Brembridge (1856) 25 LJCh 334 (CA) as referable to a pleading problem in common law which might have led to the signing surety being held liable at law (see pp 88G-H and 94D-E).  I add only that it seems at one stage to have been, or to have thought to be, the law that, in the case of a joint and several deed (as distinct from an ordinary contract), execution by any one party bound him or her, even if other anticipated parties did not sign: see e.g. Lady Naas v Westminster Bank Ltd. [1940] AC 366 at pp. 375-409.  But that principle has (like any pleading difficulty) disappeared: see e.g. James Graham itself, a case of a deed.  In James Graham equity’s power to intervene was narrower than the common law’s, because equity only operates on the conscience of a plaintiff  and on the facts in James Graham the plaintiff had no knowledge or notice that one of the surety’s signatures was a forgery: see per Browne-Wilkinson LJ at pp. 93G-94D.  Mr Ellis argued that, although it is now recognised that the law can intervene whenever one surety’s signature is expressly or impliedly conditional on another’s signature (cf Byblos and TCB), equity retains still wider power to intervene “in circumstances affecting the conscience” of a claimant.  But this stands the reasoning in James Graham, Byblos and TCB on its head.  If the circumstances amount to no more than the expectation which was found insufficient in Byblos and TCB to make the other surety’s signature a condition, where is the equity to be found?  The Bank is, absent any condition as to liability, entitled (whether deliberately or by inadvertence or mistake) to take another guarantee in different terms, and it cannot be said to be inequitable to do so.  In summary, there is, in a case like the present, no wider discretion in equity based on mere expectation, not amounting to a term or condition.  In so far as the New South Wales courts may have held that there is, that does not represent English law.
17.	There is, with respect to the judge, also a relevant distinction between the position where a single document is on its face intended to be signed by more than one person undertaking liability as a guarantor or indemnifier and the position where different documents are prepared, each to be signed separately by a single guarantor or indemnifier.  This distinction is also recognised in Rowlatt where the text after referring to Byblos states at p.118:  
“The position is very different where the form of the guarantee expressly shows that it is intended to be the guarantee of more than one party and one of the intended sureties does not sign.”
The distinction follows the nature of the relevant document.  Where a single document is prepared for signature by several persons, the document on its face points to a conclusion that the signatures of all are essential to its validity.  Where separate documents are prepared, each for separate signature by a separate individual, the contrary applies.  Of course there are cases where an individual document is, according to its express terms or impliedly when construed in the light of its express terms and all the surrounding circumstances, conditional upon the signature of another document: see e.g. Greer v Kettle.  But it is not by itself sufficient that the documents are all part of some larger transaction, as was the case in Byblos and TCB as well as in the present case.  That would beg the question whether all the documents which were part of that larger transaction were conditional upon each other – and that cannot be assumed in the case of separate documents sought from separate people.  Further, even if the signature of all such documents by their intended signatories is regarded as important by the parties seeking the same, it cannot be assumed without more that each intended signatory also regards the other’s signature as critical, let alone that he regards it as critical that the other is signing an identical document.
18.	The judge in his findings of fact found that all parties expected that the undertakings would be in identical terms.  A common expectation without more is not sufficient to provide a defence.  Byblos is instructive.  The credit facility there granted by the Bank to a company was to be secured by two separate guarantees (in the event, one for £1 million the other for £1.3 million).  The March 1984 letter offering the facility had stated:
“(a) Cash collateral deposit for £1 million…deposited by Ron Holdings SA – Panama to cover the loan account (2a) only.
(b) Cash collateral deposit for £400,000…deposited by Laith Al-Khudhairy to cover total banking facilities.
(c) A first fixed charge over the lease of premises at Ransom Industrial Estate…and plant and machinery worth £1 million and a floating charge over all assets…of the company…to cover total banking facilities.
(d) Personal guarantee of [Mr Al-Khudhairy] for a maximum amount of £1,600,000.
(e) Personal counter-guarantee of [Mr Al Bunnia] for £1,600,000 only on a separate letter.”
Mr Al-Khudhairy executed his guarantee, Mr Al Bunnia refused.  Nicholls LJ said at p.240C-E:
“That a term such as is asserted here can, in appropriate circumstances, be implied from parties’ conduct is not in doubt.  But what are the relevant circumstances in the present case?  The starting point is the negotiation and arrangements which culminated in the March 1984 letter.  In those the bank stated the items of security that it required for its protection and benefit, before providing the desired banking facilities.  I do not consider that that fact by itself should have caused the bank’s officers to realise that the validity of Mr Al-Khudhairy’s guarantee as one of the sureties was dependent on all the other securities being given.  Further, and this is important, it is not suggested anywhere in the voluminous evidence filed on the various applications in the three actions that at any time Mr Al-Khudhairy (or anyone else) in the course of discussions with the bank before the present disputes arose ever expressly referred or alluded to the question of whether his guarantee was to be binding even if Mr Al Bunnia should never sign his contemplated guarantee.”
In the present case the wording of the offer letter of 18 June 1996 is similar in so far as it states what the Bank “required” – in another words, for its own protection.  At p. 240i Nicholls LJ pointed out that the test was not the guarantor’s own state of mind, i.e. a test of subjective expectation.  And at p.241c he said:
“That the guarantees and other securities formed part of “one package of securities” is not in dispute: on the evidence, at the outset all parties contemplated and, according to Mr Al-Khudhairy, they agreed that all the securities required by the bank would be forthcoming.  But more than this is required to establish the existence of a term which would have the effect that if the bank did not obtain one of the securities it was seeking, Mr Al-Khudhairy’s guarantee was not to be enforceable.”
Any defence based simply on the judge’s finding of common expectation must therefore fail in the present case.
Further analysis of  the circumstances
19.	Counsels’ skeleton on behalf of Mr Southall invokes the surrounding circumstances in support of a conclusion that there was a term making the execution by Mr McCaffrey of an identical undertaking a condition of Mr Southall’s execution of his undertaking.  The skeleton refers to these facts:
“(i) the Respondent and McCaffrey were the sole directors of VLSI and were both working directors;
(ii) the terms and conditions set out in the Appellant’s letter of 18th June 1996 had been accepted by McCaffrey on 1st July 1996 [see letter hereto attached which is that referred to in paragraph 19 of the judgment] which terms included undertakings from the Respondent and McCaffrey;
(iii) the object of the meeting of 3rd July 1996 was for the Respondent and McCaffrey to sign the documents in the transaction viz. those on behalf of VLSI and the two personal undertakings which they did [cf. paragraphs 20 & 21 of the judgment];
(iv) all the representatives of the Appellant, the Respondent and McCaffrey assumed and intended the two undertakings to be in identical terms [judgment paragraphs 26, 27 & 34];
(v) the Appellant was responsible for presenting McCaffrey with a form of undertaking materially different from the Respondent’s undertaking, which was in the form of the Appellant’s standard documentation
(vi) the Respondent’s evidence, which on this point was not challenged, was that he would not have signed his undertaking had he realised that McCaffrey’s was materially different [see paragraph 5 of his second Witness Statement dated 11th July 2003 attached hereto;
(vii) the Respondent did not sign his undertaking relying on any assurance or other statement by the Appellant that it would [i.e. at some future date] procure McCaffrey’s undertaking on the same terms: the undertakings were signed simultaneously: thus the Respondent did not provide the Appellant with his undertaking without himself and all other parties thinking that McCaffrey was bound by an identical undertaking given at the same time;
(viii) the unchallenged evidence of the Respondent and McCaffrey was that the Appellant did not provide or send to VLSI, the Respondent or McCaffrey any copies of the undertakings which they had signed.”
20.	However no suggestion that it was obvious that Mr Southall would have refused to sign was put to the Bank’s witnesses.  Mr Ellis submits that the judge found, or alternatively should have found, more than a mere expectation.  Particular reliance is in this connection placed on the Bank’s letter dated 18 June 1996, accepted by Mr McCaffrey on behalf of the company, and the joint signing meeting of 3 July 1996.  But the letter merely set out the Bank’s requirements.  It was in principle no different from the letter of March 1984 (cf paragraph 18 above) which was considered in the judgment in Byblos at p.240c-d.  I do not consider that the letter involved any necessary promise or representation about the terms of the undertakings, still less that they would necessarily be identical.  The joint signing meeting gave effect to this letter in so far as the Bank pursued its requirement for and obtained signatures to two separate undertakings.  I do not see any basis for concluding from the simultaneous nature of the signing ceremony that the Bank thereby promised or represented that the two undertakings were necessarily identical, still less that it must have realised that Mr Southall and or Mr McCaffrey required this to be so.  I note that in TCB the guarantee was executed in the context of what was effectively a single transaction, even though the guarantee happened to be executed the day before the debenture because the guarantor was about to travel to Switzerland.
21.	Mr Ellis referred us to paragraph 21 in the judge’s judgment where the judge was setting the background before moving to controversial matters.  The first sentence of paragraph 21 echoes a similar sentence in each of the first witness statements of Mr Southall and Mr McCaffrey where both were on the face of it asserting that only one undertaking – one document – was produced at the signing meeting as an undertaking which Mr MacGill stated had to be individually signed by both Mr Southall and Mr McCaffrey.  The unamended defence at this stage also only referred to a personal undertaking to be signed by Mr Southall (see paragraph 11(c)(d), originally numbered paragraph 6 (c)(d)).  Very shortly after preparation of these first witness statements, the Bank disclosed Mr McCaffrey’s separate undertaking.  Mr Southall then served a second witness statement saying this:
“5. I refer to paragraph 13 of my first Witness Statement.  I should make it clear that Sandy MacGill produced two documents; one each for Peter and me to sign.  No difference between the documents was mentioned.  All discussion about these documents was on the basis that both documents were identical (other than the person signing or witnessing).  I certainly thought they were and am sure everyone else thought the same.  I would not have signed my undertaking if I had thought that the terms of the other undertaking being signed by Peter were different or materially different and I most certainly would not have signed if I had known that the terms of my undertaking were more onerous than those of Peter’s.”
22.	Mr Ellis says that, despite the way in which the defence and first witness statements were formulated, it was always Mr Southall’s recollection that Mr McCaffrey had signed a separate undertaking.  In that case, the defence and first witness statements seemed to me surprisingly silent about this recollection – indeed, as I have said, Mr McCaffrey’s witness statement said that he had no recollection of signing any undertaking and that the Bank had confirmed it had none.  But, assuming it always to have been Mr Southall’s recollection that Mr McCaffrey had signed a separate undertaking, the judge in the first sentence of paragraph 21 cannot be read as doing anything more than recite the apparent effect of Mr Southall’s and Mr McCaffrey’s original account.  In the last three sentences of paragraph 21, he sets out their ultimate evidence, which uncontroversially accepted that there were two documents.  In those sentences the judge leaves the circumstances of the signing of the two documents, which were controversial, until later.  In paragraph 27 in the first sentence, the judge accepts Mr Southall’s evidence “in this regard”, in other words to the effect stated in paragraph 26, namely that Mr Southall “expected that the undertaking signed by Mr McCaffrey would be in the same terms, so that their liability would, in effect, be joint and several”.  That, as I have said, is the limit of the judge’s finding.
23.	Nor in my opinion could paragraph 5 of Mr Southall’s second witness statement (cf paragraph 21 above) provide the basis for any further finding.  Most of paragraph 5 goes to Mr Southall’s subjective state of mind, and to the fact that no-one at the meeting mentioned that there was any difference between the two undertakings.  Mr Southall’s further general statement that “all discussion about these documents was on the basis that both documents were identical (other than the person signing or witnessing)” might by itself be taken to be suggesting that there was some unspecified express indication that the two documents were identical.  But no such indication was pleaded, and it was not suggested before us that the oral evidence supported any such oral indication.  
24.	In his reply Mr Ellis also referred to the last sentence of paragraph 15 of the judgment.  This relates to the first meeting in April/May 1996.  Mr Ellis seemed to suggest initially that this amounted to a finding that Mr Whittaker had produced the Bank’s standard form of undertaking as the form of undertaking which would be required.  No such suggestion was pleaded, and Mr Southall’s and Mr McCaffrey’s evidence at trial was that the first time they saw any documentation at all was on 3 July 1996.  Mr Ellis then made clear in his reply that he was not seeking to say that there had been any representation by Mr Whittaker at the meeting in April/May 1996 or that Mr Whittaker produced the standard form of undertaking.  However he did seek to rely on Mr Whittaker’s evidence that Mr Whittaker carried the standard form of undertaking in a briefcase with him and, in common with other officers of the Bank, intended that the undertaking should be in its form.  Mr Ellis submitted that such matters should be taken into account as part of the “matrix”.  However, that cannot be so, if (as was the case) Mr Whittaker said nothing about such intention or about the contents of his brief case and did not produce any such standard form at the meeting in April/May 1996.
25.	The result is that, despite the judge’s sparse treatment of the facts, his essential factual finding stands, and there was and is no basis for a further finding that Mr Southall’s guarantee was subject to, or was only entered into upon or in consideration of, a condition that Mr McCaffrey’s should be or was in identical terms.  This was a case of unexpressed common expectation, no more.  Consideration of the pleadings and of such of the evidence as we have seen or been told about shows that the matter could not have been put any higher.  The judge’s conclusion that such an expectation could and should be formulated or treated as giving rise to a condition of liability cannot be supported.  His conclusion ignores the distinction between subjective states of mind and the objective assessment which is required in contract.  It also ignores the fact that an expectation, even a shared expectation, is not without more the equivalent of a requirement or condition by the party to whom the document is presented for signature.  The judge was wrong in law to conclude that equity could afford relief in such circumstances, where the law could not.  It is unfortunate that he was not referred to the relevant authorities in this court.  
26.	I must say a brief word about the clause in the undertaking whereby Mr Southall’s obligations were not to be affected “by your releasing any security or other surety’s obligations”.  Such a clause was treated as important in TCB: see pp. 112e-h and 115f.   But in Evans v Brembridge at first instance Page Wood V-C pointed out the difference between a security that never existed and a security that existed but might be released.  He said this:
“I do not think…that the two cases are precisely similar, because the surety may speculate on the probability or improbability of a deed of release being given, and may be willing to take the chance of the creditor diminishing his security by afterwards discharging one of his sureties.”
And in Greer v Kettle where a guarantee was in terms conditional on the existence of other security for the payment of the debt, it was held that the lender could not derive assistance from the concluding words of the guarantee which purported to provide that the guarantor’s liability should not be affected by various events including any dealing with other security.  See also Keith Murphy at pp. 343-4.  Mr Sheldon QC for the Bank accepted that the provision could not be a defining factor, but submitted that it was a strong indicator.  Mr Ellis accepted that it was a factor, but submitted that it was not even an indication of a prima facie position.  To my mind there is force in Page Wood V-C’s dictum and, although the provision is a factor pointing in the same direction, it does no more than confirm a conclusion at which I would anyway arrive.  
27.	I return to the allegation of misrepresentation as to the identical nature of the two guarantees, with which the judge did not expressly deal. Mr Ellis invites us to find that the circumstances gave rise to such a misrepresentation, as pleaded in paragraphs 8A, 11(hh) and 11A (cf paragraph 8 and 9 above). However, once one concludes that there was nothing in the pre-agreement negotiations (particularly the meeting of April/May 1996 and the letter of 18th June 1996) and nothing in the presentation of the two undertakings at the signing meeting of 3rd July 1996 to give rise to any condition (whether part of or collateral to Mr Southall’s undertaking), I do not consider that there was or is on the facts of this particular case any realistic scope for a conclusion that there was an implied misrepresentation, on which Mr Southall was entitled to rely in his own interests, to the effect that Mr McCaffrey’s undertaking was in identical terms. It follows also that there is no basis for ordering the new trial that Mr Ellis sought as a final resort.
28.	There is also no call to consider the nature or scope of any relief that might have been available in equity, since equity offers no possibility of relief in circumstances wider than those in which the common law could intervene.  Nor is there any call to consider Mr Sheldon’s submission that, if there had been a misrepresentation, the court should refuse rescission under s.2(2) of the Misrepresentation Act 1967, and award damages in lieu; and I need not therefore speculate as to how any such damages might have been assessed. I note only that the judge was told that neither Mr Southall nor Mr McCaffrey had or has the means to meet even half the Bank’s large claim.  It thus appears that, on the particular facts of this case, even if Mr McCaffrey had been liable in identical terms to Mr Southall as Mr Southall expected, this would not in the events which have actually occurred have reduced Mr Southall’s exposure to the Bank, which is to the full tune of his assets.  It might thus have been open to the Bank to observe under s.2(2) that Mr Southall has not in fact suffered any loss in consequence of Mr McCaffrey being fortunate enough not to be under any liability. That is not, of course, to gainsay the fact that in other circumstances Mr Southall might have suffered considerable detriment as a result of Mr McCaffrey not being liable. All this is, however, irrelevant in the absence of any relevant misrepresentation or any basis to apply s.2(2).
Conclusion
29.	The result is that, despite all parties’ common “expectation” that the two undertakings which the Bank required for its own protection would be or were in identical wording, there was no term or condition and no misrepresentation to that effect in Mr Southall’s favour. Mr Southall was and is liable to the Bank, irrespective of the fact that Mr McCaffrey undertook no identical exposure. This appeal must, in my judgment, be allowed accordingly.
Lord Justice Neuberger:
30.	I agree
Mr Justice Bodey:
31.	I also agree.