Linden Gardens Trust v Lenesta Sludge Disposals

The first claimant bought computer hardware and software from the defendant and from a finance house. It went into liquidation. Arrangements were made for some of the claims to be assigned to the second claimant who applied to amend the statement of claim. The application involved consideration of Rules 1.1, 1.4, 16.5 and 51 of the Civil Procedure Rules, of Don King Productions Inc v. Warren (1998) (Court of Appeal), and of Darlington Borough Council v. Wiltshier Northern Ltd [1995] 1 WLR 68 . The decisions and orders made appear from the judgment which although given in private it may be treated as if given in open court.

Alastair Wilson QC appeared for the second claimant, instructed by Humphreys & Co.

Roger Henderson QC and Daniel Worsley appeared for the defendant, instructed by Group Legal Dept, Racal Group Services Ltd.

Applications have been made by the second claimant, Mr Basten, and by the defendant, Racal. Mr Basten applies to re-re-amend the statement of claim. Racal opposes that application and itself applies to strike out the statement of claim in its previously amended form. I annex to this judgment the proposed re-re-amended statement of claim as I shall have to refer to it extensively during the course of this judgment.

In order to understand the background to these applications, it is first necessary to outline the history to this action, much of which can of course already be found in the reports of judgments already given (by His Honour Judge Havery QC (1994) 42 Con LR 120; by the Court of Appeal [1996] 3 All ER 748; and by the House of Lords [1997] 1 WLR 721; [1996] 3 All ER 748). I shall in part draw on the agreed statement of facts presented to the House of Lords on the hearing of Racal's appeal. The first claimant, Circuit, was a company run by Mr Basten who formed it in October 1983. Prior to its liquidation it provided computer aided design ("CAD") services to electronics manufacturers. It produced designs of printed circuit boards using computers to assist in the design work. Racal is a company which supplied computer hardware and software, including CAD hardware and software, for the design of printed circuit boards. In the summer of 1985, following discussions between Mr Basten, representing Circuit, and Racal, Circuit bought from Racal an Apollo DN660 computer and a "Visula" system, which was a CAD system devised by Racal. Circuit was one of Racal's first customers to acquire the system. Circuit experienced problems in operating the system (System 1) and took them up with Racal, but, according to Circuit, the equipment and software supplied by Racal remained defective. In 1986 Racal offered to supply Circuit with System 2 together with a further DN660. Circuit arranged for Black Arrow Finance Limited to provide the money to buy both hardware and software from Racal. Circuit entered into software licensing and maintenance agreements with Racal. I shall refer to some of these agreements more fully later. However Circuit's problems were not solved by the new equipment and (System 2 even though in 1987 the DN660 was replaced by a DN3000, and agreements with Black Arrow were varied accordingly.

Circuit ceased trading during 1988. The company went into creditors' voluntary liquidation and a liquidator was appointed on 22 March 1988. It was insolvent with estimated claims against it of about £350,000. The writ in this action was issued on 22 March 1988. Circuit was then the sole plaintiff. Its statement of claim set out causes of action in contract, negligence or negligent misrepresentation. Later by amendment, following joinder of Mr Basten as a plaintiff, other causes of action in negligence and intimidation were asserted. Racal served a defence denying the defects, breaches of contract, negligence and misrepresentations, and counterclaimed about £108,000 due under various agreements. When ultimately a schedule and particulars of damage were served (in July 1994) Circuit's claim was estimated to be about £2.2m (to 30 June 1994) and continuing at a yearly figure of £216,000, as well as loss of goodwill claimed at £1m and loss of enhanced profits and interest. In 1992 Black Arrow obtained a judgment against Mr Basten for £277,216 as he had guaranteed Circuit's obligations.

In September 1988, Circuit was ordered to provide £10,000 by way of security for costs. Ultimately security was provided in March 1990. The action was in the meantime stayed. During this period Mr Basten sought help in meeting legal costs to enable the action to proceed. The claimants' present solicitors came on the scene and, amongst other things, achieved, on 12 April 1990, an assignment of Circuit's causes of action in favour of Mr Basten. The assignment provided that the company, in consideration of a payment of £1 and the right to 40% of the net proceeds of prosecution of certain causes of action, assigned:

"2.1. The full benefit and burden of the agreement [viz. all agreements between the company and the Racal Group including, but not limited to specified lease/rental, maintenance and software licence agreements]; and

2.2. causes of action, including those the subject of the action, and the right to prosecute the same; and

2.3 the right to prosecute the action in the name of the company; and

2.4. The right to the "proceeds"."

In June 1990 Mr Basten obtained legal aid. In July 1991 Racal applied for leave to amend his defence to include an attack on the validity of the assignment and sought an order that that issue should be tried as a preliminary issue. By consent leave to amend was given and Racal's application was dismissed. In November 1993 the action was transferred to this court. On 15 April 1994 I decided that there should be a trial of certain preliminary issues arising under paragraphs 21A and 21B of the re-amended defence and counterclaim (i.e. whether the assignment was valid as being contrary to certain clauses prohibiting assignment contained in various agreements or on the grounds of improper purpose, respectively). The preliminary issues were tried by His Honour Judge Havery QC in the autumn of 1994. He found in favour of Racal in respect of the issue raised by paragraph 21B of the defence and he also struck out certain parts of the statement of claim. In March 1996 the Court of Appeal reversed the decision of Judge Havery under paragraph 21B and dismissed the appeal against the decision under paragraph 21A, namely that the assignment was ineffective to transmit to Mr Basten's causes of action purportedly assigned contrary to non-assignment clauses in the lease/rental agreement. However the Court of Appeal allowed the appeal against part of Judge Havery's order which struck out part of the re-amended statement of claim. In consequence, in addition to causes of action which did not fall foul of valid non-assignment clauses, Mr Basten had a claim under an assignment dated 7 January 1993 from Black Arrow and a claim based upon alleged duty of care owed to him as someone known to have guaranteed certain liabilities of the company. The House of Lords dismissed Racal's appeal from the decision of the Court of Appeal in respect of the plea in paragraph 21B of Racal's defence.

The upshot is that, when the action returned here, the following claims were made against Racal:

i. Collateral Contracts:

Circuit claimed that, for the reasons set out in paragraphs 5 to 11 of the statement of claim and elsewhere, an indefinite number of collateral contracts were made between it and Racal arising out of discussions that had taken place over the years between Circuit and Racal. These are causes of action assigned to Mr Basten under the 1990 assignment.

ii. Misrepresentation:

Similarly Circuit claimed that Racal were liable for negligent misrepresentations arising out of statements that had allegedly been made to the company. These causes of action were also assigned to Mr Basten in 1990.

iii. Software Licence Agreements:

There are five such agreements made between June 1985 and January 1988. Racal's original challenge to claims by Mr Basten based on them on the grounds that they were non-assignable was rejected by Judge Havery and accordingly the causes of action based upon breaches of these agreements had also vested in Mr Basten as a result of the 1990 assignment.

iv. Lease/rental Agreements:

There are three such agreements. The Court of Appeal decided that the bar on assignment prevented Mr Basten claiming from Racal. Circuit could still maintain a claim.

v. Maintenance Agreements:

There were also three agreements. It was similarly held by the Court of Appeal that the clauses prohibiting their assignment were effective to prevent Mr Basten from making a claim in this action against Racal.

Mr Basten now claims pursuant to the 1993 assignment for the causes of action which Black Arrow have or may have against Racal for breach of contract subject to the issues which arise for determination on these applications.

vii. Intimidation or Economic Duress:

Circuit maintain that Racal intimidated or required it, under threat of economic duress, to enter into certain agreements. Mr Basten claims that Circuit's rights were validly assigned to him in 1990.

viii. Mr Basten's Own Causes of Action:

As I have already mentioned Mr Basten has certain causes of action personal to him.

In the latest version of proposed re-re-amended statement of claim (which was not proffered until 8 June 1999) the claims in the action have also been summarized in tabular form in paragraph 1A.

In November 1998 a summons was issued for leave to serve certain particulars of the statement of claim which had been served voluntarily in October 1996; or in the alternative to have leave to amend the existing particulars by the inclusion of those voluntary particulars; in the alternative to have leave to re-amend the statement of claim by the addition of those voluntary particulars viz. as particulars under paragraph 74. In my decision on that application I said, amongst other things:

"The principles which apply are well known and well established. First, all proper amendments should be allowed which will enable the true issues in the case to emerge, as the issues in the case ought to be those which are to be found in, and derived from, the pleadings. Secondly, leave to amend should not be granted for any case that is bound to fail. It would also be wrong to allow an amendment (and it would be embarrassing to Racal) to introduce a case to which it will plead, if there will then inevitably be re-pleading by the plaintiffs and by Racal, all of which could be avoided if the plaintiffs first sorted out their case and so avoided such additional expense. Modern practice, certainly in this court, is not to be hidebound to a course which requires a party to be granted leave to amend, but then particulars have to be sought, and then further amendments have to be made, if the case ought properly to be managed by an active set of directions requiring a party to look hard at its own case, to anticipate what is clearly going to be the case of the other party, and to set out what may not prove to be its final and complete answer to that case, but which is its best answer at the time and which lays the foundations for the real issues.

Mr. Henderson suggests that these objectives would best be met by the court refusing leave to amend and directing the plaintiffs to go away and to look again at paragraph 47(a) and decide how many contracts they have got, how they were made, whether or not Black Arrow should be made a party, to take the necessary steps, and to come back with a better formulated pleading, if they can sustain it. The implication for the future conduct of the case from Mr. Henderson's submissions is that, he would then not be able, unless there is some other deficiency, to oppose such an amendment. I have indicated, and I should perhaps make it clear, that on the face of it the amendment itself, qua amendment, to the pleadings to quantify the plaintiffs' alleged loss and damage, is in principle acceptable, despite the fact that the text deserves reconsideration."

I decided that I would neither allow nor refuse the application since, although the particulars were, at least in part, crucial to the claimant's case, Racal had raised a number of objections that had not been anticipated in the proposed pleadings and which, in my judgment, had to be overcome before leave to amend could be granted. I rejected the submission that leave to amend should be granted, even on conditional terms, because in my view there was a real danger that the action would be repeating the course it had taken so far with a proliferation of pleadings, one superseding the other. I came to the conclusion that, as there was nothing fundamentally wrong with the proposed amendment but there was a lot wanting in the statement of claim, the right course was to require the Plaintiff to provide the necessary procedural framework i.e. to put their house in order. I said:

"However it is not for the court to direct precisely how the party is to plead its case. There are a number of ways in which this case could be better presented by the plaintiffs. It is very much in their interests, and possibly also in the interests of the Legal Aid Board in looking over the plaintiffs' shoulders at the new pleading, to ensure that the case is presented in as attractive a way as possible that will get funding from legal aid and will set out clearly the case which Racal has to meet. The court is not in the business of stating how a case should be pleaded, but it certainly is in the business of stating what it expects to see in a pleading as part of a party's case."

I therefore ordered that application should be

"adjourned until 16 April 1999 to enable the Plaintiff to reconsider the amended statement of claim and to formulate any amendments that they considered necessary to paragraphs 47 and 74, in particular:

(a) to state how the contract of supply between Black Arrow and the defendant was made and, if more than one contract was made, the subject matter and the terms of each;

(b) to state whether any such contract incorporated the defendant's standard terms and conditions;

(c) if so, to what extent the terms set out in paragraph 47A(a) and (b) are to be maintained;

(d) to join Black Arrow in the proceedings whether by way of plaintiff or defendant,

and otherwise to give effect to the previous orders (and observations) of the courts."

The latter was a reference to what had been said, in particular in the Court of Appeal, about the difficulties facing the plaintiffs and about the manner in which they presented their case. I therefore expected the plaintiffs to re-examine the pleadings and to recast them radically. I also ordered that the trial of the action should commence in January 2000 with estimated length of 6 weeks. The hearing fixed for 16 April 1999 was vacated by consent.

Subsequently Racal applied for and obtained from me an order increasing the security for costs required of Circuit by £45,000. Circuit is unable to find that sum of money so its claim has been stayed. Accordingly, as the preface to the proposed pleading records, the action is now concerned only with those claims which Mr Basten can pursue himself. For this additional reason one might have expected the statement of claim to have been more substantially rewritten. In addition on the application for security Mr Roger Henderson QC mentioned that the pleading then proposed still created difficulties. I suggested that a letter should be sent by junior counsel to explain them so that counsel for the plaintiffs could take them into account. The letter was apparently sent (as was a letter from Racal's solicitor) but the present proposal is not far removed from the pleading attached to the application notice.

Since January 1999, the Civil Procedure Rules have come into effect. Paragraph 11 of the Practice Direction to Rule 51 provides that, where any step is to be taken in existing proceedings it is to be taken under the CPR. Paragraph 14 provides:

"(1) Any application the court made on or after 26 April 1999 must be made in accordance with CPR Part 23... .

(2) Any other relevant CPR will apply to the substance of the application, unless this practice direction provides otherwise. ..."

Paragraph 15(2) states:

"The general presumption will be that the CPR will apply to the proceedings from then on unless the judge directs or this practice direction provides otherwise."

I have not directed to the contrary so the CPR affect these applications. That means that, amongst other things, I must give effect to the overriding objective set out in Rule 1.1 both when deciding whether or not to allow either of the applications and in the interpretation of the rules governing those applications. "Dealing with the case justly" includes:

"so far as practicable

(a) ensuring that the parties are on an equal footing;

(b) saving expense;

(c) dealing with the case in ways which are proportionate -

(i) to the amount of money involved;

(ii) to the importance of the case;

(iii) to the complexity of the issues;

(iv) to the financial position of each party;

(d) ensuring that it is dealt with expeditiously and fairly;

(e) allotting to it an appropriate share of the court's resources, while taking into account the need to allot resources to other cases."

The sums of money in this case are large and it is clearly important to both parties, especially to the reputation of Racal. So far as the financial position of the parties is concerned the fact that Mr Basten is legally aided means that he is in the same position as a litigant with adequate resources for litigation of this kind and is entitled to expect that the court will not order or authorise steps that are not proportionate in terms of costs. Saving expense is an important consideration, and, where the claimant is legally aided, is probably of cardinal importance to the defendant. A claimant such as Mr Basten is however in no worse (and no better) a position than another litigant. I naturally also heed Rule 1.4 although it covers virtually all matters which this court regularly took into account prior to 26 April 1999.

As a result of Circuit's inability to continue to maintain its claims in these proceedings, Mr Basten has had to consider how he can pursue a claim in respect of those of Circuit's claims which cannot be validly assigned to him and in respect of Black Arrow's claims (on the basis that there is a valid non-assignment provision, which is the subject of the second substantive point) so that he can pursue them against Racal, i.e. the "type 4" claims (as set out in the table to paragraph 1A of the proposed re-re-amended statement of claim) which are claims arising out of breaches or alleged breaches of contract of supply between Black Arrow and Racal. In addition to the paragraphs of the statement of claim set out in paragraph 1A concerning the "type 4" claims, paragraphs 70B-70D and 75B - 75E are relevant as some of the claims described as "type 2" are also covered. The manner in which Mr Basten seeks to achieve this objective is the subject of substantive points on his application to amend. All were raised on the previous application to amend.

"Don King v. Warren"

Mr Basten's case is that, where any contract with Racal could not be assigned, then the effect of the decision of the Court of Appeal in Don King Productions Inc v. Warren, 21 December 1998, unreported, was that Circuit held its rights as trustee for the putative assignee, namely Mr Basten, and did assign those rights to Mr Basten who was then entitled to enforce them against Racal, i.e. as set out in paragraph 75F(c):

"As assignee of Black Arrow's cause of action, the second plaintiff is entitled to recover in respect of such damage".

Mr Alastair Wilson QC submitted that Don King v Warren was no more than a continuation of an application of the principle In re Turcan (1888) 40 Ch D 5. In Don King the question before the court was, essentially, the meaning of a provision in a partnership agreement between the plaintiff and Mr Warren and other parties. Schedule 2 of the agreement provided that the initial capital contribution of the partners (i.e. the plaintiff and the other party) should be deemed to be satisfied by:

"....(b) The assignment by FW [Mr Warren] to the Partnership of all the contracts referred to in Clause 6 of the preliminary agreement."

This was a reference to "the full burden of all existing promotional, management agreements with boxers together with all and any associates' sponsorship, closed circuit, television and radio contracts absolutely." However the benefit of many such contracts could not be assigned so as to vest them in the partners. Lightman J recorded that the parties had agreed that some effect might be given in equity to an intention to vest them in the partners jointly, but there was a difference as to what the effect could be. Mr Warren contended that the effect would be limited to creating a trust of the receipts in the hands of the would be assignor. The plaintiff submitted that a trust of the contract and the right under it could be and had been created. Lightman J decided:

"Accordingly in principle I can see no objection to a party to contracts involving skill and confidence or containing non-assignment provisions from becoming trustee of the benefit of being the contracting party as well as the benefit of the rights conferred. I can see no reason why the law should limit the parties' freedom of contract to creating trusts of the fruits of such contracts received by the assignor or to creating an accounting relationship between the parties in respect of the fruits. The broader approach which I favour appears to be in accord with the authorities, so far as they go. The leading authority is Re Turcan (1888) 40 Ch D 5. The Vice-Chancellor in that case held that an agreement to assign a non-assignable policy constituted the assignor a trustee of the policy for the assignee. The Court of Appeal dismissed the appeal. At the date of the hearing of the appeal the proceeds of the policy were represented by certain assets and the Court of Appeal upheld the validity of the trusteeship of these assets, and Lord Browne-Wilkinson in Linden Gardens (at page 104) referred to Re Turcan as an authority for the proposition that a party to a contract may agree with a third party to account for him the fruits he receives from the other contracting party. No doubt was cast by the Court of Appeal in Re Turcan or by the House of Lords in Linden Gardens on the decision of the Vice-Chancellor. As Lord Browne-Wilkinson said in Linden Gardens (at page 107) the House of Lords only had to consider the validity of the restriction of an assignment which would have the effect of bringing the assignee into direct contractual relations with the other party to the contract. The view of the Vice-Chancellor finds some support in Devefi at pages 55-6 and Williams v. CIR [1965] NZLR 395 at 401. (See also First National Securities v. Hegarty [1985] 1 QB 850 at 854). But most importantly this view accords with common-sense and justice and achieves the commercial objective of the parties."

An appeal was dismissed. The judgment of the court was given by Morritt LJ. He said at paragraph 26:

"I agree with the judge that Re Turcan (1888) 40 Ch D 5 at page 10 shows clearly that the court will protect the interests of those contractually entitled to have the benefit of an inalienable asset before the fruits of the asset have been realised. In that case, as the House of Lords considered in Linden Gardens Ltd v. Lenesta Ltd [1994] 1 AC 85 , 206, the court gave effect to the intention of the parties by means of a declaration of trust. But, it is objected, the existence of such a trust would enable one partner to interfere in the management of the personal contract made by a third party with the other partner. I do not agree. The other partner cannot insist on rendering vicarious performance of the personal obligations arising under the contract. Rules and procedures designed to enable a beneficiary to sue in respect of a contract held in trust for him would not be applied so as to jeopardise the trust property. As Lord Browne-Wilkinson observed in Target Holdings Ltd v. Redferns [1996] 1 AC 421 at page 435

"In my judgment it is in any event wrong to lift wholesale the detailed rules developed in the context of traditional trusts and then seek to apply them to trusts of quite a different kind. In the modern world the trust has become a valuable device in commercial and financial dealings. The fundamental principles of equity apply as much to such trusts as they do to the traditional trusts in relation to which those principles were originally formulated. But in my judgment it is important, if the trust is not to be rendered commercially useless, to distinguish between the basic principles of trust law and those specialist rules developed in relation to traditional trusts which are applicable only to such trusts and rationale of which has no application to trusts of quite a different kind.""

At paragraphs 29 - 30 Morritt LJ accepted the proposition that a partner who was a party to a management agreement of the kind before the court but which could not be assigned, held the benefit of that agreement in trust for the partnership:

"For the reasons I have given earlier, the fact that the benefit of the agreements could not be sold and were otherwise unassignable, is no reason to refuse to recognise the trust which was necessary to give effect to the manifest intention of the partners."

As may be seen from paragraph 70D of the proposed pleading, a deed and notice of appointment of 22 March 1999 has been executed by Circuit's liquidator whereby Circuit "hereby confirms and declares that it holds such causes of action and the fruits thereof and flowing therefrom on trust for Mr Basten that he may apply the same in accordance with the assignment." The assignment is that of April 1990. A similar declaration of trust has been made by Black Arrow on 15 April 1999.

Mr Henderson submitted that the route of the supposed trust was a device to get round the fact that the causes of action were not assignable. He referred to Lord Browne-Wilkinson's speech in Linden Gardens Ltd v. Lenesta Sludge Ltd [1994] 1AC 85 at page 106B:

"These possibilities of confusion (and many others which could be postulated) persuade me that parties who have specifically contracted to prohibit the assignment of the contract, cannot have intended to draw a distinction between the right to performance of the contract and the right to the fruits of the contract. In my view they cannot have contemplated a position in which the right to future performance and the right to benefits accrued under the contract should become vested in two separate people. I say again that that result could have been achieved by careful and intricate drafting, spelling out the parties' intentions if they had them. But in the absence of such a clearly expressed intention, it would be wrong to attribute such a perverse intention to the parties. In my judgment, Clause 17 clearly prohibits the assignment of any benefit under the contract."

"In the face of this authority, the House is being invited to change the law by holding that such a prohibition is void as contrary to public policy. For myself I can see no good reason for so doing. Nothing was urged in argument as showing that such a prohibition was contrary to the public interest beyond the fact that such prohibition renders the chose in action inalienable. Certainly in the context of rights over land the law does not favour restrictions on alienability. But even in relation to land law a prohibition against the assignment of a lease is valid. We were not referred to any English case in which the courts have had to consider restrictions on the alienation of tangible personal property, probably because there are few cases in which there would be any desire to restrict such alienation. In the case of real property there is a defined and limited supply of the commodity, and it has been held contrary to public policy to restrict the free market. But no such reason can apply to contractual rights: there is no public need for a market in choses in action. A party to a building contract, as I have sought to explain, can have a genuine commercial interest in seeking to ensure that he is in contractual relations only with a person whom he has selected as the other party to the contract. In the circumstances, I can see no policy reason why a contractual prohibition on assignment of contractual rights should be held contrary to public policy."

Mr Henderson submitted that Don King v. Warren was not an authority for the proposition that a person can, by breach of a valid non-assignment clause in the contract, put the third party, such as Mr Basten, in a better position than a would be assignor who nonetheless respected the rights and terms of the contract. The decision in Don King said nothing about the rights of the beneficiaries of the trust as against the other parties to the agreements which could not be assigned e.g. the boxers and staff - their rights would be unchanged as between themselves and their manager or promoter.

As a preliminary applicable to all the substantive points, in approaching an application which seeks to introduce by way of an amendment a new case in law to which exception is taken, it is now necessary to consider the applications in the context of Rule 1 of the CPR. Rule 1.4(2) restates that active case management includes:

"(b) identifying the issues at an early stage;

(c) deciding promptly which issues need full investigation and trial and accordingly disposing summarily of the others;

(i) dealing with as many aspects of the case on the same occasion;

(j) dealing with the case without the parties needing to attend at court."

Where, as here, there can be identified either a point of pure law or a point of law which arises on facts which cannot change, then it would not be right simply to allow the amendment and then to have a further hearing at which the point of law is decided, if the point can be decided upon the application to amend, as envisaged by paragraphs (c) and (i) (and thus (j)). This is perhaps no more than a continuation or extension of the previous practice whereby amendments were not allowed if the case sought to be introduced was liable to be struck out. Not only has there been preliminary argument on the previous application but that argument has been continued on these applications and I am sure that there is now no more that can be said. It would be a waste of expense, time and resources to defer a decision. Accordingly, in my judgment, I ought now to consider all the substantive points of law raised by Mr Basten or by Racal to see whether they are valid and, if valid, then to decide whether the amendment should be allowed in the form put forward or what other course is to be taken.

First, I consider that Mr Henderson is right in his submission that no distinction is here to be made between the assignment of the performance of the contract and the assignment of the fruits of that performance: see Linden Gardens at page 106B. Secondly, that a non-assignment clause means what it says and is to be implemented in accordance with the intentions of the parties. In commercial contracts of this kind, this means that the party with the benefit of the clause is not to have to deal with any party other than the other party to the contract or otherwise in a way that would in effect mean that the contract was marketable or transferable in the sense that another person could take the benefits of it vis-a-vis the original contracting party. In my view this is clear from Linden Gardens - see for example Lord Browne-Wilkinson at page 108:

"Therefore the existing authorities established that an attempted assignment of contractual rights in breach of a contractual prohibition is ineffective to transfer such contractual rights. I regard the law as being satisfactorily settled in that sense. If the law were otherwise, it would defeat the legitimate commercial reason for inserting the contractual prohibition, vis, to ensure that the original parties to the contract are not brought into direct contractual relations with third parties."

There may be an assignment of the benefit of a contract, but it is not to affect the other contracting party. It operates only as between the putative assignor and assignee. The assignment is valid in law as between those two parties but it is ineffective as regards the party who contracted with the assignor. If it is not contrary to public policy to have non-assignment clauses, then it must be equally consistent with public policy to protect the rights of the party for the benefit of the contract. On the other hand in Linden Gardens Lord Browne-Wilkinson accepted that a non-assignment clause did not "preclude A from agreeing, as between himself and C, that will he account to C for what A receives from B: Re Turcan" (see page 104E-H).

Accordingly either the 1990 assignment or the 1999 declaration of trust may in law have the effect of creating Circuit a trustee of its rights against Racal or of whatever it may receive from Racal as damages for breach of Racal's contract or contracts with Circuit. (The 1999 declaration of trust appears to recognise that the 1990 assignment was ineffective to transfer any contractual rights in Mr Basten which were the subject of a non-assignment clause in the contract.) However it does not follow that Mr Basten can step into the shoes of Circuit so as to pursue a claim in these proceedings in his name against Racal in respect of breaches of contracts where there exists a valid non-assignment clause. In my judgment Circuit is the only person who can pursue its claims against Racal in respect of causes of action which it may hold on trust for Mr Basten. In re Turcan and Don King v. Warren make clear that the trust is of the rights or of the receipts that may be obtained. These cases only show, as Morritt LJ said in the latter "that the court will protect the interests of those contractually entitled to have the benefit of an inalienable asset before the fruits of the asset have been realised". They do not establish that a person so entitled can deal with the party with the benefit of a contract that was not assignable. Morritt LJ went on to say:

"But, it is objected, the existence of such a trust would enable one partner to interfere in the management of the personal contract made by a third party with the other partner. I do not agree. The other partner cannot insist on rendering vicarious performance of the personal obligations arising under the contract. Rules and procedures designed to enable a beneficiary to sue in respect of a contract held in trust for him would not be applied so as to jeopardise the trust property."

In my judgment Mr Henderson was right in his submission that to permit Mr Basten effectively to engage with Racal would be to excuse the breach of contract in assigning the contracts and to deprive Racal of its contactual rights for which it had so carefully stipulated for good commercial reasons.

It is therefore for Circuit (or Black Arrow) to pursue a claim for breach of contract in is own name against Racal. If it obtains a judgment the amounts recovered are held on account but for this to happen there must be a judgment in the name of Circuit or Black Arrow. Since a judgment creates a new contract of record which is not subject to a non-assignment provision, the judgment creditor could then assign it, although that would not be necessary here. Mr Basten will (and will only) get the benefit of the trust when a judgment exists and when Racal satisfy it. The amendments proposed to plead a trust in favour of Mr Basten of rights under non-assignable contracts will therefore not be allowed. They are also irrelevant. Since Circuit is admittedly unable to pursue its claims, it would also be an abuse of the process of the court to allow such a case to maintained.

In addition in the case of Black Arrow's rights, the present pleading is incomplete since it lacks any claim by Black Arrow against Racal for damages for breach of any contract. For reasons which will become apparent a claim of this kind may be made on behalf of Black Arrow. The present amendment to join Black Arrow will not therefore be permitted. However, subject to Mr Basten showing how he intends to overcome limitation, Black Arrow might be joined in the action so that any causes of action which it may have may be pursued against Racal. Its contracts with Circuit apparently permit some one to take over the conduct and control of such claims. If a judgment is obtained in its favour then it will hold the damages on trust.

Black Arrow

The next question is whether the original contract between Black Arrow and Racal was subject to a non-assignment clause. If so, then no claim could be maintained by Mr Basten in respect of breaches of it since the assignment of 1993 would not entitle him to pursue Racal for whatever Black Arrow might have recovered from Racal. This point arose in January on the original application since it affected the amount of damages claimed by way of amendment. On that occasion I gave Circuit and Mr Basten not only further time to enable them to see whether there were additional facts upon which they might wish to rely but also the chance to plead clearly how the contract between Black Arrow and Racal was made so that a decision could be taken as to whether or not such a claim should be allowed or whether it should be struck out on the grounds that it was bound to fail. The case has now been pleaded in paragraph 2A, 47A, 47B, 65, 65A, 75 and 75A-75F. No other facts are known. Discovery has taken place. In the circumstances I decline to defer a decision in case something turns up. The point of law can and should now be decided. The facts are simple.

On 15 May 1986, Racal submitted a quotation to Circuit for a DN660 computer plus software, including the Visula System 2 package (and accessories). The total came to £145,000 exclusive of VAT. On its face, the quotation was "subject to Racal-Redac's United Kingdom Terms and Conditions of Sale, printed on quotation." and comprised two sections: the pricing details and the Standard United Kingdom Terms and Conditions of Sale. There were also three notes on the face of the quotation, one of which read:

"3. Two copies of the Software Licence Agreement number are provided separately to the quotation. Both copies should be initialled and signed on behalf of the Customer and forwarded to Racal - Redac Ltd for signature. On acceptance of the Order, which cannot occur until both parties have signed the Software Licence Agreements, one copy will be forwarded to the Customer."

Paragraph B(ii) of section 1 (the pricing details) stated:

"If an order is placed and a signed Software Licence Agreement received by the Seller before the date stated at B(i) above [none was stated], then the prices quoted shall be fixed up to delivery."

In section 2 of the quotation, the Standard Terms and Conditions of Sale included the following:

The "Seller" shall mean Racal-Radac (U.K.) Limited.

The "Buyer" shall mean the other contracting party.

The "Products" shall include all the goods and services to be supplied by the Seller.

The "Hardware" shall include all processing and peripheral equipment supplied as part of the Products under this Contract.

The "Software" shall include all the computer programmes in a machine readable form and related documentation supplied as part of the Products.

The "Software Licence Agreement" shall refer to the separate agreement agreed between the Buyer and the Seller for the Software supplied as part of the Products.

The "Order" shall mean the order placed by the Buyer with the Seller for the products.

The "Contract" shall mean the contract made between the Seller and the Buyer for the Products.

The "Specification" shall mean the Seller's proprietary specification supplied on the Seller's product description sheets.

GENERAL

(a) These conditions form an integral part of every Contract for the supply of the Products by the Seller. The Order shall be deemed to be placed subject to these conditions and no variation of these conditions is applicable unless expressly accepted in writing by the Seller.

(b) Software is supplied subject to the terms and conditions of the Software Licence Agreement.

(c) The Seller shall have no obligation to make alterations in design or construction of Products previously accepted and delivered even though any design changes or alterations are incorporated in Products subsequently being delivered against any Order.

DELIVERY AND RISK

(a) Subject to the following sub-clauses of this Clause all risks shall pass to the Buyer upon delivery.

(b) Unless otherwise specified, delivery shall be deemed to take place when the Products have been delivered to the Buyer's premises or other specified delivery point in the United Kingdom or to the Buyer's carrier if to be collected.

(c) The dates of delivery shall be as specified at Section One a hereto unless otherwise agreed. The Seller shall not have any liability for delay or for any damages or losses sustained by the Buyer as a result of such dates not being met. The Buyer shall not be able to refuse acceptance of the Products as a consequence of such delay.

(d) The Seller may at its absolute discretion withhold delivery pending payment of any sum due from the Buyer to the Seller.

(e) If the Buyer does not accept delivery of a consignment of Products at the agreed date then:

(i) The Seller shall be entitled to claim payment in accordance with Clause 4 (Payment) above.

(ii) The Products refused shall in all respects be at the Buyer's risk.

(iii) The cost of storing the Products shall be borne by the Buyer.

(iv) If such failure to accept delivery continues for more than ten days the Seller shall have the right to terminate the Contract pursuant to Clause 11 (Termination).

WARRANTIES

(a) If there is discovered by the Buyer within 90 days from the date of acceptance (as defined in Clause 19 (Acceptance)), any defect in any part of the Hardware, due to faulty design material or workmanship, the Seller will at its option procure the repair of the defective part or the supply of a new part, free of charge, provided that:...

LIABILITY

(a) The Warranty given in Clause 9 above is the only Warranty given by the Seller and this Clause 10 specifies the entire liability of the Seller.

(b) The Seller does not exclude liability for death or personal injury attributable to the negligence of the Seller.

(c) The Seller does not exclude liability for any breach by the Seller of any undertaking implied by Section 12 of the Sale of Goods Act 1979.

(d) Subject to sub-clauses (b) and (c) above, the Seller shall not be under any liability for any loss or damage or injury to the Buyer howsoever arising and will not, save as provided in Clause 11 below, be under any liability in respect of any claim made against the Buyer by any third party.

(e) Subject to the sub-clause (b) and (c) above, the Seller shall not be under any liability for any indirect, contingent or consequential loss howsoever arising.

(f) Subject to sub-clause (b) and (c) above, in the event of the Seller being found liable whether under the terms of the Contract or at common Law or in any other way for any loss, damage or injury arising out of the Products its total liability shall not under any circumstances exceed, for any breach or breaches, the purchase price of the Products.

(g) Except as specified in these conditions, any warranties, terms or conditions including those related to but not limited to quality and fitness for purpose of the Products, are hereby expressly excluded. Unless specifically agreed the Seller does not warrant that the Products are suitable for any particular application.

PATENT INDEMNITY

If the Buyer is threatened with any action alleging that the Products in the form sold infringe any Patent, Copyright, Registered Design or other intellectual property rights then provided that the Buyer promptly informs and fully co-operates with the Seller and in cases where the Seller so requests allows the Seller to defend any action on the Buyer's behalf and have the sole control of any and all negotiations for settlement, then the Seller will indemnify the Buyer against any award of damages and costs against the Buyer arising from such action. Further, if such event occurs the Buyer agrees that the Seller shall have the option at its own expense either:

(a) to modify the Products so that they do not infringe or

(b) to replace the Products with non-infringing goods or

(c) to procure for the Buyer the right for the Buyer to continue its use of the Products or

(d) to repurchase the Products from the Buyer at the price paid by the Buyer less depreciation.

The Seller shall have no liability in respect of claims for infringement or alleged infringement of third parties patent or other proprietary rights arising from the execution of the Order in accordance with the Buyer's designs, plans and specifications and the Buyer shall indemnify the Seller against all losses, damages, expenses, costs or other liability arising from such claims.

ASSIGNMENT

This Contract is personal to the Buyer and Seller and shall not be assigned in whole or in part by either Party except by prior written consent of either party."

Mr Basten evidently passed the quotation to Black Arrow for on 20 June 1986 it wrote to Circuit to inform it that Black Arrow was

"prepared to grant you a leasing facility relating to Racal Redac equipment as detailed in a quotation No. 1287/A/RW.

This facility is granted on the following Terms and Conditions:

Amount of Facility: £145,000 + VAT....."

Black Arrow then wrote to Racal on 25 June 1986:

"Further to your quotation dated 15 May 1986 to Circuit Systems Limited, reference 1287/A/RW, I would like to take this opportunity to request an invoice to be made out to Black Arrow Finance Limited.

This is further to a leasing facility agreed between this company and Circuit Systems Limited."

Racal issued an invoice dated 27 June 1986 to Black Arrow recording all the hardware and software described in its quotation which was referred to on the invoice as "Customer Purchase Order Number". The invoice also provided for delivery to Circuit. The equipment was delivered to Circuit. Black Arrow paid Racal £145,000.

Decision

On the face of it there would appear to be little doubt that a contract was made between Black Arrow and Racal for the supply and delivery of the hardware and software at a price of £145,000. The contract was made by an offer, namely Black Arrow's letter of 25 June 1986, in which Black Arrow offered to buy the hardware and software on the terms contained in Racal's Quotation No. 1287/A/RW of 15 May 1986, and an acceptance, namely by Racal submitting the invoice requested by Black Arrow in its letter of 25 June 1986, which signified Racal's agreement to contract with Black Arrow rather than with Circuit to which the quotation had originally been sent. A contract made in this way therefore incorporated Racal's Standard Terms including Clause 15 which precluded assignment. The Products as defined in clause 1 include both hardware and software and both are subject to all the terms and conditions. The fact that clause 9 refers only to hardware does not in my judgment mean that clause 10 does not also apply to software. Clause 10(g) for example extends to the Products. The only warranty is that given in relation to hardware.

Racal's Standard Terms and Conditions, like many others, are not free from blemishes. For example, although the "Buyer" is defined as "the other contracting party", there are references also to "the Customer". However, it seems to be that "the Customer" is to be read as "the Buyer" for the purposes of a contract made on Racal's Standard Terms. I can see no reason to differentiate between the two. In any event although Circuit was originally envisaged to be the Buyer/Customer, by the time of Black Arrow's letter of 25 June 1986 it was clear that Black Arrow put itself forward as the potential Buyer and was accepted as such by Racal.

I do not consider that the reference in Note 3 at the foot of the quotation form means that the quotation is not to be regarded as an offer. First, such note is not appropriate to convey such an important condition or restriction. Secondly, "acceptance" of the order in the context of the quotation, means only the time at which the Buyer's order is received by Racal. At that stage Racal has also to get the Software Licence Agreement for otherwise it would not regard itself as bound by the contract.

Racal's apparent wish to have a Software Licence Agreement signed by the Buyer creates slightly more difficulties. However, I accept Mr Henderson's submission that such a provision is included for the benefit of Racal who could decide to waive it or not to require it to be performed before delivery of the products (hardware or software). A Software Licence Agreement was ultimately signed by Circuit so it existed and Racal had the benefit of it. In addition, clause 2 incorporates the terms of the Software Licence Agreement as part of the terms of the contract applicable to software. The terms are clearly Racal's standard terms and are therefore ascertainable. The fact that they did not accompany the quotation is therefore irrelevant.

I have already set out the passages from the speech of Lord Browne-Wilkinson in Linden Gardens which show clearly that there is to be no distinction between an assignment of the performance of the contract and an assignment of the fruits of the contract. Clause 15 bears the meaning for which Racal contends. First, it equates the contract to a contract for personal services which, by its nature, is normally non-assignable. Secondly, it reinforces that intention by expressly stating the contract is non-assignable. I see no reason in principle why such a condition should not apply to a contract with a finance house. Black Arrow could (and did) make arrangements whereby Circuit could step into its shoes and so be able to pursue against Racal such rights as Black Arrow might have for any breach of the contract committed by Racal.

That is sufficient to deal with the main arguments advanced against Racal. Clause 5(b) is met because Racal's invoice specifies otherwise; Clause 5(c) is met because there is an agreement otherwise made in the same way. Clause 11 is perfectly capable of applying where the finance house is the Buyer. Thus none of the reasons advanced by Mr Basten persuade me that I was wrong in my preliminary view that a contract was concluded with Black Arrow which incorporated Racal's Standard Terms and Conditions. The contract (and any variation of it) was therefore subject to Clause 15 and was not assignable by Black Arrow other than in breach of the contract. The proposed pleading is maintaining otherwise is impermissible.

Darlington v. Wiltshier

There was some argument as to whether or not Circuit could bring itself within the principles of Darlington Borough Council v. Wiltshier Northern Ltd [1995] 1 WLR 68 so that Black Arrow could recover losses suffered by Circuit as part of any damages recoverable from Racal. There is indeed more than a passing similarity between the structure of the facts of that case and the arrangements made in this case. Wiltshier contracted with Morgan Grenfell to provide a leisure centre which was to be operated by Darlington Borough Council who owned the site. Morgan Grenfell was a finance house and had no other interest in the project, but as Dillon LJ said at page 75B:

"It was plainly obvious to Wiltshier throughout that the Dolphin Centre was being constructed for the benefit of the Council on the Council's land."

So too was the contract with Black Arrow made for the benefit of Circuit to the knowledge of Racal. In Darlington v. Wiltshier it was common ground that the Council as assignee of Morgan Grenfell could not recover any damages from Wiltshier beyond those which Morgan Grenfell could have recovered from Wiltshier if there had been no assignment (see page 72H where Dillon LJ so stated, relying upon Dawson v. Great Northern and City Railway Co [1905] 1 KB 260 at pages 272 and 273). Nevertheless the Court of Appeal held that the Council was able to recover losses which it alone would have incurred and which would not have been incurred by Morgan Grenfell. There were two reasons. First, the Court of Appeal considered that the facts of the case fell within the principle set out in Linden Gardens Trust Ltd v. Lenesta Sludge Disposal Ltd [1994] AC 85 and, secondly, by majority, that the effect of the assignments made Morgan Grenfell constructive trustees of the benefit of any rights under or for breach of the building contract.

Whether Circuit can bring itself within the same principles will depend upon the facts. At present, it seems probable that it would be able to do so. There is certainly no reason not to permit an amendment of the statement of claim or to strike out any part of it in its unamended form, on the grounds that Black Arrow would in law be quite unable to recover losses incurred by Circuit. However Circuit have yet to show how it will overcome clause 10(f) which limits the damages to no more than the purchase price.

Racal's Application

In addition to opposing the application for the re-re-amendment of the statement of claim, Racal applied to strike out the existing pleading for a number of reasons. I shall try to record most of them but for convenience I will combine some of the points made by Mr Henderson in his submissions which attacked both the proposed pleading and the existing pleading.

In essence he submitted that the proposed pleading contained a number of deficiencies which ought by now to have been put right and that it was embarrassing in its present form since it did not enable the defendant to know precisely the case being advanced against it. Mr Henderson submitted that a statement of claim should be a coherent and chronological whole setting out, in a manner which would enable it to be easily understood by those for whom it was intended, the facts giving rise to each cause of action (duty, breach and the resulting damages) with, in the prayer at the end, a clear summary of the effect of the preceding paragraphs. This was not found either in the existing pleading or in the proposed pleading. Circuit's inability to advance its own claims (see the preface) and the switch to Mr Basten's claims (albeit incorporating Circuit's claims) ought to have lead to a clear re-presentation of the claims being advanced by Mr Basten. Instead, all that one got was the table of cross references in paragraph 1A which served only to highlight the disorder of the pleading. To understand the case now being advanced it was necessary to reconstruct the facts for each cause of action in a proper order so that effectively the defendant and the Court would each have to replead the case by tracing the paragraphs identified in paragraph 1A, on the assumption that it was complete - an assumption which turned out to be incorrect. The table did not help since it did not do anything to correct a major structural deficiency in the statement of claim which placed the chronology after the agreements and effectively the causes of action.

Mr Henderson gave as an example the cause of action entitled "Intimidation in respect of the Black Arrow Agreement". He submitted that, if one were to trace the references in the relevant part of the table, then if one turned to paragraph 52 that was in itself was incomplete without its preceding paragraphs, and so too paragraph 65 required paragraphs 46A and 47C to be read. On arrival at paragraph 47C, the reader was told to go on to paragraph 43A and then 52A. Reverting to the table paragraph 58 led one, once again, to paragraph 47C and next went to paragraph 65, which had a different date and a requirement again to take on board paragraphs 47A and 47C. The losses alleged to arise were apparently to be found in paragraph 47C, but that merely referred the reader back to paragraph 43A and 52A and referred only to sums paid for a consideration which had wholly failed. If that were the case, it did not appear in the prayer. Therefore there was no claim for the recovery of any liquidated sums.

On a more general basis, the chronology was not even chronological. The losses alleged were set out all over the pleading, neither separately for each cause of action or brought together as a whole. Paragraph 14 referred partly to a schedule and partly to special damage to follow in the chronology. Lastly, paragraph 75F(c) on page 26 referred the reader to three different places to find the damages claimed - the statement of claim itself; the amended schedule of loss (which might not be that referred to in paragraph 14) and also the Scott Schedule. The terminology was not consistent. Mr Henderson suggested that the more sensible course would have been to have made a fresh start and to have used the names of those involved, e.g. Mr Basten, Racal, Circuit and Black Arrow. Paragraph 1E required the reader to pencil in the names to understand it.

Mr Henderson also raised the following specific points.

1. The Collateral Contracts: It was not possible to find out how many contracts were alleged or how any individual contract was made since paragraph 5 simply identified the statements which were to be relied on but did not state when or how they were relied on or when or how there was an acceptance of a quote respectively succeeding "delivery or installation" of hardware or software whereby some collateral contract was constituted. No clarification had been provided by the particulars served in 1991. Since the contracts had not been identified there was also no means of telling which of the alleged defaults by Racal were breaches of which collateral contracts (or indeed the written agreements).

Mr Wilson maintained that it was clear: one looked for a statement followed by a relevant act of reliance.

2. Negligent misrepresentations: Similarly these were not carried through into identifiable acts of reliance or acceptance, nor were the breaches identifiable.

3. Written agreements: It was unclear whether paragraph 9, in referring to "the said agreements", was intended to be a reference to the collateral contract or to the agreements entered into for the delivery and installation of hardware and software.

Mr Wilson maintained that paragraph 5 covered those written agreements.

4. In any event, it was by no means clear

(a) which of the written agreements was alleged to have been broken;

(b) how the breach occurred;

(c) what damages flowed from the breach.

For example, what constituted any breach of a Software Licence Agreement or any Maintenance Agreement or even the Black Arrow agreements? There was no allegation which clearly was referable to any such breach nor to the damages allegedly flowing from it.

Mr Wilson suggested that the breaches were to be found in general references to the persistence of problems, crashes and other such matters.

5. There was no attempt to link the new statement of claim to the existing Scott Schedule.

6. There was no attempt to deal with the points raised in the Court of Appeal (contrary to the order made in January) or with paragraph 13F of the re-amended defence, namely that paragraphs 74 and 75 were "not understood" and were embarrassing, alternatively disclosed no cause of action. Both paragraphs were unchanged: it was not at all clear what the breaches were and how Black Arrow could have suffered any damage.

7. Limitation: When the statement of claim was amended in November 1993, the defendant's right to object on the grounds that the amendments introduced causes of action which were then statute barred was preserved. Mr Henderson submitted that, when one examined the Scott Schedule, only a couple of items relied on occurred within the 6 year limitation period expiring on 19 November 1993, the date of the amendment, and that any breach of contract which occurred before 19 November 1987 was prima facie statute barred. Furthermore unless it could be shown that the claims made in paragraphs 74 and 75 were not statute barred, there would be no point in allowing the amendments proposed to paragraphs 75A-75F, as they were dependent upon a cause of action which could never have been maintained by Black Arrow. Mr Henderson recognised that it would be quite a task otherwise to try to track the causes of action introduced in 1993 to the items in the Scott Schedule (which was not served until July 1994), but maintained that, at the least, the claimant's failure to take the opportunity of clarifying the position on limitation should be taken into account in deciding whether or not this statement of claim should stand or whether it was not time to start again and to have a fresh approach.

In my judgment, Mr Basten's present and proposed pleadings provide textbook examples of the justification of the reform introduced by the Civil Procedure Rules whereby the court can now take a grip of an action and require a party to it to present its case in a form which will satisfy the overriding objective and which will enable it to be understood clearly and to be managed properly, i.e. it will identify the claims clearly and precisely and, in so doing, it will lead to the definition of the issues in a way that will be just and fair to both parties. There is no reason to suppose that the underlying case against Racal is unmeritorious. Racal has fairly and properly admitted that there were some deficiencies but has equally fairly and clearly maintained that their cause were not matters for which it was as a matter of fact or law liable. It does not however wish to go to the expense of preparing for a trial of an action by a party who is legally aided unless and until it is clear that a tenable case in fact (eg on causation and quantum) and in law (ie a precise and thought through legal basis) is pleaded against it. It believes that if this is done then the Legal Aid authorities will be better placed to be advised as to the prospects of Mr Basten succeeding.

Whilst it is not for the court to assist a party for an ulterior purpose (such as enabling Racal more effectively to campaign for the withdrawal of legal aid) its duty to deal with a case justly now includes the need to ensure that it is presented justly and in a cost-effective and efficient manner. In the past the court has not been able to direct a party as to how it should present its case in anything but an outline manner. The customary approach has been seen in a number of cases of which GAB Robins Holdings Ltd v Specialist Computer Centres Ltd (1998) 15 Con. LJ 43, is typical. In that case Lord Woolf MR re-affirmed that "it is for the parties and not for the court to determine how the case should be framed, even in a judge-managed list such as those in specialist courts", but he then said, "I would add, in the first instance". I trust that I do not read too much into the last words if I infer from them that, under the old rules, and now certainly under the new rules there will be a limit to the extent to which a party will be allowed not to frame its case in a manner which will enable the other party and the court to know clearly what that case is. The CPR introduce, by way of reforms, powers of management which enable a court to take greater control of the proceedings. Some are quite extensive, but even in relation to evidence and proof, they do not confer on the court the powers which are to be found in other jurisdictions - commonly called "inquisitorial" or "investigative" - by which the court itself decides the areas of enquiry and what facts it wishes to establish and, in some cases, by whom the facts are to be established. In my view, the CPR, in emphasising the need for clarity and precision in the parties' statement of case and elsewhere in the rules, do not signal a major departure from the general principle that it is primarily for each party to decide what its case is and how best it is to be presented to the other party or parties and to the court. The party most affected may seek clarification or further information, as may the court, acting on its own initiative. However, if a party does not heed the need to reconsider its case, then, in my judgment, the court has now not only the power but also the duty, under Rule 1, to intervene - not to take the case out of a party's hands and to require a party to put forward a case which is not its preferred case - but to direct a party as to how its case is to be presented to the court, in other words, in a form which will enable the case to be properly managed in the interests of all.

In my judgment, the defendant has satisfied me completely that the time has come when the court could and should intervene to direct Mr Basten, and those advising him, to start again so that both the defendant and the court know clearly what Mr Basten's case is. I gave a clear warning in January that I expected a revised statement of claim which would "make it very clear indeed how that claim is maintainable in anticipation of the points which Mr Henderson has so clearly set out". That has not been done. What has been done is the antithesis of what should have been done. If anything the pleading is less clear. The present statement of claim and the proposed statement of claim remain essentially back to front: the facts i.e. the chronology, are in the wrong place. Had not Mr wilson said that the chronology culminated about paragraph 69 it was a matter of speculation where it came to an end. The pleading meanders towards its conclusion but peters out in a swampy delta with no certain foothold, eg in the form of specific prayers. The tables in the beginning of the new pleading are, in places, incomplete and, in any event, are not a proper way of presenting a case. They serve only to show the lack of organisation and clarity. I have set out only one of Mr Henderson's illustrations of how in following the references in the tables one has to go backwards and forwards to try to see what is being alleged. Each of the cases on collateral contract and misrepresentation is, quite frankly, a shambles, as is much else of the pleading. It is not acceptable to have to divine what statement led to what act of reliance and which delivery or installation perfected the contract. I do not accept Mr Wilson's suggestion that, in some way, the written agreements are comprehended by paragraph 5 of the existing statement of claim. On any ordinary and fair reading of the case, the claim was originally, and still is, presented primarily as one which is intended to bypass the written agreements, presumably on the basis that they could not be used as the main plank of the case against Racal. As the case has developed that may no longer be Mr Basten's basic position. Mr Basten must now, in my view, decide which are his principal planks and which are presented as alternatives to the principal planks. He may well succeed on a subsidiary case even if he fails on a primary case.

It is not possible to know whether a particular written agreement is said to have been broken and, if so, what caused the breach and what were the losses flowing from that breach. I cannot tell what constitutes breach of each individual Software Licence Agreement. I do not know what is relied as breach of a maintenance agreement. Mr Wilson said that it was a failure but that may be due to breach of a primary contract. Breach of a maintenance agreement generally means a failure to tackle a notified fault so the fault, the notice, the failure, and the resulting loss or damage should be clearly shown. These cannot be found. Furthermore if Mr Basten were to be the inheritor of the rights of Black Arrow, then Black Arrow's case must be presented as a case against Racal. At present, viewed solely in presentational terms, there is no clear plea which shows what sum of money Black Arrow might or might have been entitled to recover from Racal, the rights to which have been either assigned to or held otherwise for the benefit of Mr Basten.

What ought to have been done, as Mr Henderson submitted, was to serve a substituted statement of claim. Permission to do so is readily granted in this court when it is clear that the existing pleading is no longer capable of being used intelligibly. Mr Henderson was also right in saying that the text of a substituted statement of claim in a case of this kind would naturally and logically not use titles such as claimant or plaintiff (and would in any event make all necessary changes consequent on the CPR) and instead use the names of those involved so that the pleading was more comprehensible.

In my judgment permission to make the re-re-amendments should therefore not be granted, for the substantive reasons which I have already set out, and for the procedural reasons to which I have just referred. I also consider that the existing pleading can no longer be tolerated, and that unless a satisfactory substituted statement of case can be produced, it must be struck out. Mr Basten has had since January to correct the deficiencies in the pleading and has failed to do so. He has had more than adequate opportunity to do so. In arriving at this decision I bear in mind the expense that has already been incurred in producing the original and revised versions of the re-re-amended statement of case and the fact that this order will require further expenditure. However against those factors I take account of the need that the case should be presented fairly to the defendant and the fact that all this expenditure could and should have been avoided had what I said in January been heeded. Ample time was then given but the opportunity has been wasted.

I consider that the defendant has a solid prima facie case for maintaining that, some at least, of the causes of action are statute barred. However, in the present state of the pleadings, it is not possible to be certain as to which of the causes of action are or are not statute barred, since there has been no attempt to connect the facts set out in the Scott Schedule, for example, to the causes of action. Accordingly, I intend to adjourn and defer a decision on this part of the defendant's application until a new statement of case has been prepared. This must also show how it is intended to defeat any limitation defence available to Racal in respect of a claim by Black Arrow. Until this is done it would be futile to grant unconditional permission to join Black Arrow.

The orders which I propose to make also include directions leading to the trial, but these directions are dependent on compliance with the time table. They are in my view otherwise feasible. I regret that it is necessary to set out objectives for the new pleading since they are elementary. Precisely how the objectives are attained is a matter for the judgment of Mr Basten and his advisers. The dates have been fixed on the basis that it is not expected that either Mr Basten or Racal will need to deal with any case or allegation that has not already been made in some form or another. The parties must conform to the requirements of the CPR. This means that not only must the defendant observe Rule 16.5 but Mr Basten must present his case in such a form that the defendant is able to comply with that duty. It will be apparent that, in giving Mr Basten a further opportunity to serve a substituted statement of case, this must be regarded as his last chance or virtually his last chance for otherwise his claims are liable to be struck out. The orders do not deal with the Scott Schedule as I expect that its status will depend on the extent to which its items are utilised in the Mr Basten's new case. A PTR will be held in early December 1999. In this way the trial date may be maintained. A rolling timetable has been provided to avoid Mr Basten having to make an application for a little more time for the new pleading. However the trial date will be in peril if the new statement of case cannot served by 30 July, in which Mr Basten will need to apply for more time in order to avoid the consequences. The costs reserved from the January hearing will be paid by the claimants in any event, since I am quite satisfied that the costs of that occasion and of the applications and of the hearing on 11 June 1999 are entirely the fault of one or other of the claimants. Accordingly, the defendant is also entitled to its costs of the hearing of 11 June 1999. As there is no challenge to the figures these costs will be summarily assessed in the figure of £24,597.80 to include the costs of today, subject to the usual provisos, as they are to be paid by Mr Basten who stands to gain most from this action and for whose benefit the application to amend has been made.

Mr Wilson sought legal aid taxation for Mr Basten's costs of attending by counsel on the application for security for costs on which occasion there was uncertainty as to whether anybody (leading counsel, junior counsel or solicitor) had been instructed to appear. Mr Wilson says now that the Legal Aid Fund was approached before that hearing and was persuaded to fund the attendance of counsel who were accordingly instructed on behalf of both claimants. Whilst I do not accept that Mr Basten needed to be represented to ensure that no order was made against Circuit since a stay against Circuit would not extinguish any rights that it had assigned to Mr Basten or which it held on trust for him I can see that Mr Basten had some interest in the outcome, even if no one was aware of being instructed to safeguard it. In the circumstances that interest would have been sufficiently protected by the attendance of junior counsel on a watching brief basis without the attendance of any solicitor and there will therefore only be legal aid taxation to that extent. Since Mr Shipley would have had to have been present in any event, I think that a proportion, not exceeding one-quarter, of that part of his fee referable to actual attendance, thus excluding any preparatory work, would be sufficient.

The orders and directions that I have in mind are:

1. The Second Claimant, Mr Basten, shall by 4.30 pm on 9 July 1999 serve a substituted statement of case. The sanction for failure to do so shall be that the statement of claim shall be struck out and the defendant shall have permission to enter the judgment against him.

2. The substituted statement of case shall meet the following objectives:

2.1. The facts relied on must be clearly set out in chronological order, (unless it is essential to depart from it);

2.2. Each cause of action must be clearly identified:

2.2.1 The formation of each contract, whether collateral or otherwise, must be clearly pleaded so as to show what was the offer or acceptance etc;

2.2.2 Any statement alleged to have been a representation must be clearly identified as such;

2.2.3 The facts relied on as a breach of a contract or giving rise to negligence in a representation must be clearly identified (so far as they are to be found in the Scott Schedule there must be a clear cross reference in the statement of case to the relevant item in the schedule);

2.2.4 The loss or damage flowing from each breach must also be clearly set out so that the chain of causation between breach and damage is shown.

2.3. In so far as it is said that Mr Basten is entitled to the right or proceeds of any of these causes of action and is entitled to maintain directly a claim against the defendant, the route by which Mr Basten has become so entitled must be set out clearly in the statement of case for each claim or cause of action.

3. If and to the extent that the substituted statement of case shows how Black Arrow can still be made a party to this action as defendant for the purposes of maintaining a claim against Racal, the proceeds of which are to be held for the benefit of Mr Basten, then permission is given for Black Arrow to be joined as a defendant to the action. Black Arrow shall be served with an amended writ and the statement of case by 4.30 pm on 16 July 1999.

4. The defendant shall serve its statement of case by way of defence to the substituted statement of case by 4.30 pm on 30 July 1999, unless or to the extent by 16 July 1999 it shall have applied to set aside the substituted statement of case or a part of it. The defendant's application to strike out the statement of claim is therefore adjourned with liberty to restore.

5. Standard disclosure of any documents not so far disclosed shall be given by 4.30 pm on 30 July 1999.

6. Signed statements of witnesses of fact shall be served and filed by 4.30 pm on 1 September 1999. Supplementary or additional signed statements of further evidence of fact necessitated by the intended evidence of the other party shall be served and filed by 4.30 pm on the 21st day after the date for service of the principal statements.

7. Permission to call expert evidence limited to the numbers, fields and people set out below is conditional on:

7.1. the agreement by all parties (in default settled by the court) of a statement of the issues and of the facts (both agreed and assumed) upon which expert evidence is required before an expert is instructed to hold any discussion or to prepare the first report authorised by the court;

7.2. filing the statement with the court;

7.3. reports being exchanged and filed by 4.30 pm on the dates specified below;

7.4. the experts in like fields meeting by 4.30 pm on 1 October 1999 to agree facts and technical issue and having further discussions after the exchange of reports and preparing a statement pursuant to Rule 35.12 (3) by 4.30 pm on 1 November 1999.

8. The parties are to consult with each other and the judge's clerk with a view to arranging service and (where required) filing of statements of case, witness statements, experts' reports, disclosure lists and other documents in computer readable form as well as in hard copy. Format for court disks: WordPerfect 5.1.

9. Pre-trial Review: [early] December 1999. Time allowed: 1 hour. Parties to complete, file and serve pre-trial questionnaire, after consultation, not later than 4.30 pm three days beforehand.

10. If Mr Basten notifies the defendant and the court by 10.30 am on 5 July 1999 that he is unable to serve a substituted statement of case by the time set out above and if he at the same time notifies the defendant and the court of the time by which he will serve and file the statement then provided that it is no later than 4.30 pm on 30 July 1999 all the dates set out above shall be automatically extended by the additional time required.

11. The application to re-re-amend the statement of case is dismissed.

12. The second claimant shall pay in any event the costs of and occasioned by the application to amend including the costs of the hearing on 22 January 1999. Those costs are summarily assessed at £24,597,80. The costs assessed at £24,597.80 and the costs of and occasioned by the amendment ordered to be paid by the second claimant to the defendant shall not be enforced without further order of the court under section 17 (1) of the Legal Aid Act 1988 , save by way of set-off against any damages and/or costs ordered or which may be ordered to be paid by the defendant to the second claimant.

13. Legal aid taxation of the second claimant's costs of appearing on 27 May 1999 limited to the attendance of junior counsel on a watching brief basis without the attendance of any solicitor, namely to a proportion, not exceeding one-quarter, of that part of the fee of junior counsel that is referable to actual attendance, excluding any preparatory or other work.

Re-Amended pursuant to the leave of Master Tennant

Writ issued the 2nd day of March 1988

F3 . At all material times the First1 Plaintiffs' Plaintiff's 1 business was that of a bureau providing computer aided design ("CAD") services to electronics manufacturers. It produced designs for printed circuit boards ("PCBs") using computers to assist in the design work. The end product of the First1 Plaintiffs was usually a photographic representation of the board required but on occasions could be other output such as on tape for numerically controlled machines. Until the matters hereinafter set out it was successful, profitable and well regarded in the industry.

The First3 Defendants (hereinafter "the Defendants")3 were at all material times and are an electronics company supplying computer hardware (computer equipment) and software (computer program me s) 3 and in particular CAD hardware and software for the design of PCBs.

From in or about early 1985 the Defendants offered for sale to or for rent or hire by potential customers such as the First1 Plaintiffs, CAD software for the design of PCBs under the name "Visula" which it had developed together with hardware on which to run the same. Thereafter the Defendants continued to develop the same and offered the same for rent or sale or hire as so developed. Hereinafter the software and hardware together and as developed from time to time are called the "Visula System".

From time to time the Defendants their servants or agents duly authorised in that behalf made statements in writing and/or orally to the First1 Plaintiffs about the Visula System. Particulars of these statements are set out in the `Chronology' hereto. In the case of some of those statements explanations as to the meaning and/or significance thereof is appended thereto in square brackets.

Those statements by the Defendants their servants or agents and each of them which are underlined 3 in italics3 in the said Chronology were intended to be relied upon by the First1 Plaintiffs and were successively so relied upon by the First1 Plaintiffs in consideration whereof the First1 Plaintiffs accepted the respectively succeeding deliveries and installations by the Defendants of the items of hardware and software and each of them listed in Chronological order in the Chronology hereto and tried to use the same and entered the respectively succeeding agreements and each of them listed in the Chronology hereto and thereby there were constituted collateral contracts between the First1 Plaintiffs and the Defendants whereby the Defendants promised the accuracy of those statements.

Further and in the alternative the said statements and each of them were representations made by the Defendants with the intent of inducing the First1 Plaintiffs to accept the respectively succeeding deliveries and installations by the Defendants of the items of hardware and software and each of them listed in the Chronology hereto and to try to use the same and to enter into the respectively succeeding agreements and each of them listed in the Chronology hereto.

The consideration for the delivery and installation of the items of hardware and software prior to specific written agreement in respect thereof was the First1 Plaintiffs' agreement to try to use the same.

Further and in the further alternative it was expressly or by implication warranted in each of the agreements with the Defendants that those statements and each of them were accurate and true and each such agreement expressly or by implication contained a term to that effect.

Further and in the further alternative there were in the said agreements terms implied by the Supply of Goods and Services Act 1982 as follows:

(a) that the hardware and software would comply with the descriptions inherent or contained in the said statements,

(b) that the hardware and software would be of merchantable quality,

(c) that the hardware and software would be reasonably fit for the purposes of the First1 Plaintiffs' business and would perform as stated in the said statements.

(a) not to make any representation or description with regard to the characteristics, capabilities, suitability for any purpose, merchantability of otherwise in respect of the Visula System which the Defendant s3 knew or ought, as developer of such system, to have known to be untrue or misleading in any material respect; and2

(b) having made any such representation or description, not to supply any Visula System which did not comply with such representation or description, and in particular not to supply such Visula System without making it clear that such representation was not being or would not be or could not be complied with, as the case may be.2

Those statements were untrue and were misrepresentations and were made wrongfully in that the underlined 3 in italics3 statements in the Chronology hereto were untrue and were made negligently.

Particulars of Negligence2

In respect of each statement:2

(a) the Defendant s3 either knew the same to be untrue and failed to institute such system as would prevent such untrue statements being made; or2

(b) by reason of inadequate testing or design or software management did not know the same to be untrue; and2

(c) the Defendant s3 failed to ensure that such Visula Systems as were supplied to the First Plaintiff complied with such statement.2

There were breaches in the said collateral contracts in that the underlined 3 statements in italics3 in the Chronology hereto were untrue.

There were breaches of the implied terms of the said agreements in that the underlined 3 in italics3 statements in the Chronology hereto were untrue.

There were breaches of the terms implied by statute in that the Visula Systems and each of them did not comply with the descriptions inherent in the the underlined 3 statements in italics3 in the Chronology hereto, they were not of merchantable quality or fit for the First1 Plaintiffs' said purposes.

By reason of the said misrepresentations, negligence and breaches and other wrongs hereinafter complained of2 the First1 Plaintiffs have suffered loss and damage:

Particulars of Damage

Particulars of loss and damage exceed three folios in length and will be 2 have been2 delivered hereafter 2 by way of schedule. The Plaintiffs further rely upon the special damage particularly pleaded hereinafter.2

The Visula System purported to be multi-tasking (that is capable of performing several tasks at once).

In the Defendants' brochure "Visula Routers" Issue 1, January 1985 -

[This meant that all the routes for the connections between components on a PCB design would be handled and devised by the computer in the case of most boards without the need for the operator to devise the routes one by one.]

In the same brochure -

[This meant that the router facility on the Visula Package was capable of handling designs of up to 50 levels or layers on a PCB. It implied that the capacity of the Visula System was enormous and for practical purposes practically limitless.]

On or about 22 May 1985 in a meeting at the Defendants' Tewkesbury offices between William James Basten ("Mr Basten") for the First1 Plaintiffs and `Bill' Penketham 2 Penkethman2 ("Mr Penketham 2 Penkethman2") for the Defendants -

When explaining the advantages of the Visula System Mr Penketham 2 Penkethman2 said that the Visula System was as user-friendly as was Racal Redac's previous systems.

[The First1 Plaintiffs already had earlier types of CAD hardware and software from the Defendants such as `Cadet' equipment. They were easy to use and relatively efficient.]

In the same meeting -

In the same meeting -

When told that the First1 Plaintiffs at that time had a problem in being limited with the number of layers and the amount of components and tracks Mr Penketham 2 Penkethman2 said that the Visula System was virtually limitless in that there were 50 tracking layers, a surface area of 3 metres square and would take as many components and tracks as the First 1 Plaintiffs would wish.

[In practical terms such a number of layers and such a surface area would be virtually limitless]

In the same meeting -

When asked how good the autorouting facility was Mr Penketham 2 Penkethman2 said that it was a `rip-up' router and would route the majority of the First 1 Plaintiffs' designs 100%.

The First1 Plaintiffs agreed to have one Visula System and the same was delivered and installed in or about June 1985 ("System 1"). This included an Apollo DN660 computer.

A member of the First1 Plaintiffs' staff was trained to use the Visula System by the Defendants.

Despite continual attempts the Visula System failed to produce a usable design and was very slow in use. It continually `crashed', that is to say seized up or failed to complete a task without any justifiable reason. It was very slow in re-drawing the screen. Spooling

was slow. Autorouting only ever worked fully once during the entire period hereinafter referred to. It could not practicably be used to multi-task (that is to do other work) when autorouting. It is 2 was2 not user-friendly (that is it is 2 was2 not easy to use). Full particulars of these defects and the others hereinafter mentioned will be 2 have been2 disclosed on discovery.

On or about 26 August 1985 Dennis Clayton 2 Caten2 for the Defendants was asked by Mr Basten at the First1 Plaintiffs' offices whether the First1 Plaintiffs were operating the Visula System wrongly. Dennis Clayton Caten2 replied that the Visula System had in excess of 300 bugs in the software and that these faults were the major problem with the First1 Plaintiffs' lack of production.

On or about 28 August 1985 at the Defendants' Tewkesbury offices -

Mr Basten asked a person whom Mr Basten had recollected as being called2 David Deasy but who is now believed to have been one David Ramsey2 of the Defendants if the said bugs would be fixed. David Deasy (or Ramsey)2 replied that they would be they were just teething troubles.

In that same meeting -

Mr Basten asked David Deasy (or Ramsey)2 why the system was so slow. David Deasy (or Ramsey)2 told him that the operating system was slow but that a general speed up was imminent.

On or about 18 September 1985 in a meeting at the Defendants' Tewkesbury offices -

Mr Basten asked Stuart Allsworthy 2 Elsworthy2 for the Defendants why the Visula System was so dramatically slow and kept crashing apparently due to bugs in the system and why the First1 Plaintiffs has not yet been able to produce any finished work on the system. Mr Allsworthy 2 Elsworthy2 did not deny the problems and replied that most of the problems would be sorted out within the next month or two.

In a meeting of a group of users of the Visula System (a user group meeting) on 1 October 1985 -

A representative of the Defendants said that the 300 bugs had been fixed and that they were confident that releases of the software to overcome many of the user problems especially speed up would be released in November 1985.

In about October 1985 the filter on the DN660 was altered to provide improved cooling.

A new version of the software was provided in about November 1985 but effected only marginal improvement.

The First1 Plaintiffs' Visula System continued to crash and to fail. The Defendants made repeated visits to the First1 Plaintiffs to attempt to deal with problems but without any noticeable success.

On or about 30 January 1986 at a meeting at the Defendants' offices in Reading between Mr Basten, Stuart Arrons ("Mr Arrons") and Don Andrews ("Mr Andrews") both for the Defendants -

Mr Basten asked Mr Arrons if the continual crashing was caused by software bugs. Mr Arrons replied that the Defendants felt that the hardware was to blame.

In the same meeting -

The two representatives of the Defendants told Mr Basten that major improvements in reliability and speed-up of the router would be available within the next few months . Mr Andrews said that later in 1986 the Defendants would be providing new hardware for the Visula System and that this coupled with their software improvements would ensure that the First 1 Plaintiffs could satisfy their customers . Mr Arrons confirmed this and added that the automatic router would enable the First 1 Plaintiffs to produce a finished result to customers efficiently and economically.

In the same meeting the Defendants promised to refurbish the First1 Plaintiffs' existing system and to provide on loan two other Visula Systems whilst they refurbished the first system (replacement System 1 and System 2) and shortly thereafter this was done.

The slowness and continual crashing continued. The Autorouter did not complete any job 100%.

On or about 12 February 1986 in a meeting at the Defendants' Reading offices between Mr Basten, Don Youd ("Mr Youd") and Mr Andrews -

Mr Basten complained of the unreliability and inadequacies of the Visula System and could not deal with any large job. Mr Arrons then attended and said that in order to overcome such unreliability and inadequacies the First 1 Plaintiffs needed a larger capacity hard disc (information storage device). 2 more memory (which the Plaintiffs now understand to be a reference to RAM memory).2

When told the First1 Plaintiffs would have to pay for this Mr Basten said that he would return the Systems the First1 Plaintiffs had. Mr Arrons then said the disc 2 memory2 would be provided free of charge.

In that meeting -

Mr Youd said that he understood that 40% of the First1 Plaintiffs' problems were due to operator error.

[this implicitly accepted that the Defendants accepted that 60% of errors were due to the Visula System.]

In that meeting -

Mr Youd said that as the First1 Plaintiffs were now going to have the larger disc 2 memory2, that new software was imminent, new staff of the First1 Plaintiffs were being trained and the System I was being refurbished all the First 1 Plaintiffs' problems would be over.

In that meeting -

Mr Youd promised to change one of the DN660s for the Defendants' new DN3000 later in 1986.

By letter of 24 March 1986 the First1 Plaintiffs wrote to the Defendants that the DN660 hardware was unacceptable to run the Visula System.

In or about March 1986 Mr Youd and Mr Andrews asked Mr Basten to be patient as revision 3 of the software was imminent and claimed that by a resolution of the hardware problems the Defendants had `proved' themselves.

In return for the Defendant 's s'3 further assistance and promises they required the First1 Plaintiffs to accept System 1 and to enter into an agreement with Concord Leasing for financing of the same.

(a) the First Plaintiffs who were dependant for the survival of their business upon the Visula System being made to work were left with no option but to agree to enter into the said Agreement, and the requirement by the Defendant s3 that the First Plaintiff did so amounted to economic duress;2

(b) it was the intention of the Defendant s3 that the First Plaintiff would enter into financial obligations to Concord Leasing in order to keep and have maintained and corrected the Visula System, which the Defendant s3 knew or ought to have known was incapable of being modified so as to meet the First Plaintiffs' needs timeously or at all;2

(c) by reason thereof, the said requirement of the Defendant s3 amounted to the tort of intimidation, by reason of which the First Defendant 2 /3 Plaintiffs3 suffered damage.2

Particulars of Damage2

The Plaintiffs rely upon:2

(i) the payments at £17,573.00 to Concord Leasing for a consideration which wholly failed.2

The Visula System being used by the First1 Plaintiffs continued to crash, fail and work slowly and incompletely. On occasions it introduced items that should not have appeared and on other occasions left items out. The First1 Plaintiffs were losing customers. The Defendants' representatives continued to provide assurances as to the imminent resolution of the problems . On 30 April 1986 First1 Plaintiffs wrote to the Defendants complaining further about the continuing problems.

In or about mid 1986 in a brochure Publication No 9024-1 the Defendants made the following claims for the Visula System:

A lease with Concord Leasing for System 1 was in fact signed by the First1 Plaintiffs on or about 30 June 1986 dated as if effective from 31 October 1985. Paragraph 43A is repeated in respect thereof.2

A lease with Black Arrow leasing for System 2 was signed by Mr Basten and dated 15 July 1986.

(a) that the said System 2 would be of merchantable quality; and2

(b) that the said System 2 would be fit for the purposes for which it was supplied, that is to say, for onward supply to the First Plaintiff s3 in order to meet the needs of the First Plaintiff s . 3 2

B . C3 Further the economic duress pleaded in paragraphs 43A and 52A hereof procured the supply of the said System 2, and the Plaintiffs complain of the Plaintiff's Defendants'3 intimidation as leading to the First Plaintiff s3 entering into this contract and incurring the sums paid for a consideration which wholly failed.2

A maintenance agreement with the Defendants was signed by Mr Basten for the First1 Plaintiffs dated 17 July 1986. Paragraph 47 B C3 hereof is repeated mutatis mutandis.2

On or about 22 July 1986 Mr Basten visited Mr Andrews and Mr Youd -

Mr Basten complained that the continual breakdowns and crashes meant that the First1 Plaintiffs were fast losing money. Mr Andrews told Mr Basten that the problems were specifically the DN660 and that these problems would be removed once the DN660 hardware had been replaced by the new DN3000 .

In or about mid 1986 in a brochure Publication No 9025-1 20K 8/86 the Defendants made the following claims for the Visula System:

The problems continued and during the months of August and September 1986 Mr Youd, Mr Andrews and Dave Hiscock for the Defendants carried out investigations and advised that the First1 Plaintiffs' problems were due to lack of air conditioning, lack of trained staff and that there was a need for networking and a mass storage device. Mr Youd and Mr Andrews said that the First1 Plaintiffs were trying to do too much on their system but that if they implemented the suggested changes the First 1 Plaintiffs would have no further problems.

In order to implement these changes the Defendants required the First1 Plaintiffs to enter into a written agreement in respect of System 2 and agreed that they would then train another member of the First1 Plaintiffs' staff and totally refurbish again the System 1 DN660 machine. The Defendants further agreed to change the other 2 DN660 machines (replacement System 1 and System 2) for DN3000 machines.

In a Visula user group meeting on 1 October 1986 a representative of the Defendants stated that when running the multi-pass facility on the Visula System a failure after the first pass usually means that the system was running at too high an effort, that the introduction of anti-track bias had increased the percentage of successful passes considerably, that the Defendants' aim was to speed up the router and that it was best run as a single process. A further update of the software was promised (update 4).

In October/November 1986 the First1 Plaintiffs' problems persisted and they agreed to implement the changes proposed by the Defendants in August/September 1986 as set out above and in January/February 1987 did so.

Air conditioning was introduced, the equipment was moved to a different location, some of the equipment was refurbished and then used as a file server, staff was trained or further trained, a mass storage device was introduced, all in accordance with the Defendants' suggestions and recommendations.

Within a short time, notwithstanding the improvements the problems all recurred. A letter from the First1 Plaintiffs dated 5th February complained of the problems.

By letter of 20 February 1987 the Defendants by implication said that many of the problems which the First 1 Plaintiffs had been encountering would not be resolved.

The Defendants required the First1 Plaintiffs to enter into a software licence agreement and they did so on 22 February 1987. Paragraph 47 B C3 hereof is repeated mutatis mutandis.2

The Defendants required the First1 Plaintiffs to enter a written lease agreement with them for the machinery then installed at the First1 Plaintiffs' premises (save for the System 1 held under the Concord lease and the System 2 held under the Black Arrow lease) and they did so on 5 March 1987. To the extent that this equipment had replaced the equipment provided under the Concord lease this agreement also replaced that lease.

By mid March 1987 the First1 Plaintiffs were suffering further similar problems with the Visula Systems and these were even worse than hitherto. Now that the refurbished DN660 was acting as a file server all systems often shut down if there was a failure thus multiplying the effect of failure.

Mr Basten visited Mr Youd on or about 25 March 1987 and explained that the problems were persisting. Mr Youd replied that release 4 of the software would be available "any day now" and this would be an extensive upgrade in terms of speed, reliability and function and would put the First 1 Plaintiffs back in a profitable position.

A further maintenance agreement between the First1 Plaintiffs and the Defendants was signed and dated 30 March 1987. Paragraph 47 B C3 hereof is repeated mutatis mutandis.2

On or about the 23 April 1987 the First1 Plaintiffs sought the release 4 software from the Defendants but were refused the same by one Wynn Hughes for non-payment of maintenance charges.

On or about 24 April 1987 Mr Basten visited Mr Youd and again explained all the problems the First1 Plaintiffs were having with the systems and this was followed by a letter from the First1 Plaintiffs dated 11 May 1987 insisting that the DN660 be replaced by a more reliable machine. Negotiations to resolve the dispute then commenced. The Defendants persisted in representing that the Visula System would do all they had previously claimed.

In about June 1987 Black Arrow agreed to change the lease of the DN660 machine under their lease for a DN3000 machine and this was done. Paragraphs 47A and 47 B C3 hereof are repeated mutatis mutandis.2

The Defendants by Mr Andrews required the First1 Plaintiffs to enter into another lease of System 1 (as twice refurbished) to replace the Concord lease. Mr Basten declined to enter any more agreements until the problems with the systems were resolved. Mr Andrews told him that the Defendants would install a new file server to alleviate the problems with the DN660 but would give no support if the lease was not signed. By on or about 17 July 1987 the Concord lease was terminated and a replacement agreement was entered into between the First1 Plaintiffs and the Defendants. Paragraph 59A hereof is repeated mutatis mutandis.2

In or about July/August 1987 the new file server was installed but similar problems to those suffered hitherto continued.

Thereafter the Defendants promised the First1 Plaintiffs a DN4000 in part exchange for an old Maxi machine. In fact they provided another DN3000. When loaded with the new software the software was found to have numerous bugs and inter alia the schematic capture would not work.

The said problems have not been resolved.

By an assignment in writing dated the 12th April 1990 the First Plaintiffs assigned to the Second Plaintiff the benefits and burden of the agreements herein referred to the First Plaintiff 's s'3 rights in respect thereof and in particular the causes of action the subject of this action. The Plaintiffs will refer to this assignment for its full terms and effect. 1

The Second Plaintiff adopts as against the Defendants this Statement of Claim1 in respect of such causes of action. 3

The Second Plaintiff guaranteed the performance of the First Plaintiffs' obligations under the Black Arrow lease, as was known to the Defendant s3 or ought to have been known to the Plaintiff by reason of the standard practice of finance companies when entering into leasing agreements for the provision of expensive computer systems to small companies. In the premises, the Defendant s was were3 under a duty of care owed to the Second Plaintiff to supply or repair the Visula System so as to operate satisfactorily. As hereinbefore pleaded, the Defendant s3 failed so to do, whereby the Second Plaintiff has suffered damage.2

On 31st January 1992, Black Arrow obtained Judgement against Mr Basten in respect of sums unpaid by the First Plaintiff s3 in respect of hardware and software supplied by the Plaintiff. Defendants.3 Such judgement was in the sum of £277,216.12 plus costs to be taxed if not agreed.2

In the alternative, by reason of the matters hereinbefore complained of, the First Plaintiff s was were3 liable to Black Arrow in such sum, and by reason of the judgement against the Second Plaintiff are liable to the Second Plaintiff in such sum, such liability being caused by the matters hereinbefore pleaded.2

Although the Second Plaintiff is liable to Black Arrow in such sum, such judgement remains unsatisfied and can only be satisfied out of such sums (if any) as are recovered by the Plaintiffs in this Action.2

Further, by reason of the matters hereinbefore pleaded, the Defendant s is are3 in breach of the contractual terms pleaded in paragraph 47A, whereby Black Arrow has suffered damage.2

By an assignment in writing made on the 27th day of January 1993, Black Arrow assigned to the Second Plaintiff any rights and causes of action it may have against the Defendant s3 in respect of the hardware and software leased from Black Arrow and complained of in this Action.2

Further or in the alternative, by reason of their dealings with the Plaintiffs during and prior to the matters complained of herein, the Defendants were aware that the First Plaintiff company was owned substantially by the Second Plaintiff, and accordingly that any harm occasioned to the First Plaintiff, and in particular any harm leading to the destruction of the business of the First Plaintiff would cause damage to the Second Plaintiff. At all material times, 98 percent or more of the equity in the First Plaintiff company was owned by the Second Plaintiff (the remainder being owned by his wife). By reason of the premises, the Defendants owed to the Second Plaintiff as well as to the First Plaintiff those duties of care pleaded in paragraph 9A. The First Plaintiff relies upon the matters pleaded herein as constituting breaches of such duty causing damage to the First Plaintiff by destroying and preventing the increase in the value of his shareholding. 2 , 3

77 3 . For the avoidance of doubt, the misrepresentations relied upon are relied upon as continuing misrepresentations, and when and insofar as the falsity of such misrepresentations became known to the Plaintiffs, the Plaintiffs rely upon the Defendants' repeated and divers representations that the defects in the Visula System would be overcome.2

The Second Plaintiff is entitled to and claims interest upon all damages awarded to him pursuant to section 35A of the Supreme Court Act 1981 or the inherent or equitable jurisdiction of this Honourable Court.3

Served this 13th day of May 1988 by ROWBERRY MORRIS & Co for and on behalf of the Plaintiffs.

Re-Served this 24th day of April 1990 by HUMPHREYS & Co of 14 King Street, Bristol BS1 4EF (Ref: B/687/1), Solicitors for the Plaintiffs.1

Re-Re-Served this 19th day of November 1993 by HUMPHREYS & Co of 14 King Street, Bristol BS1 4EF (Ref: B/687/1), Solicitors for the Plaintiffs.2