B2/2004/2590    
B2/2004/2590(A) 
Neutral Citation Number: [2005] EWCA Civ 1544
IN THE SUPREME COURT OF JUDICATURE 
IN THE COURT OF APPEAL (CIVIL DIVISION) 
ON APPEAL FROM THE EPSOM COUNTY COURT
(HIS HONOUR JUDGE HULL QC)
Royal Courts of Justice 
Strand 
London, WC2 

Tuesday, 22nd November 2005
 
B E F O R E:

LORD JUSTICE JONATHAN PARKER 

LORD JUSTICE CARNWATH 
 
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GOLDSTAR FINANCE LIMITED
Claimant/Applicant
-v-
 
(1) BALWANT SINGH
(2) PRITAM KAUR
(3) KIRAN PAUL SINGH DADE
(4) GUR PARTAP SINGH 
Defendants/Respondents 
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(Computer-Aided Transcript of the Palantype Notes of
Smith Bernal Wordwave Limited
190 Fleet Street, London EC4A 2AG
Tel No:  020 7404 1400  Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
 - - - - - - -
MR THOMAS GRAHAM (instructed by Messrs BP Collins, Gerrards Cross SL9 8EL) appeared on behalf of the Applicant
MR GRANT ARMSTRONG (instructed by Messrs ASB Law, Crawley RH10 1AS) appeared on behalf of the Respondents
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J U D G M E N T 
1.	LORD JUSTICE JONATHAN PARKER:  This is an application for permission to appeal by Goldstar Finance Plc ("Goldstar"), with the substantive appeal to follow if permission is granted.  Goldstar seeks to appeal against an order made by His Honour Judge Hull in the Epsom County Court on 24 November 2004 in a possession action brought by Goldstar as mortgagee against Dr Balwant Singh ("Dr Singh"), his wife and their two sons as defendants (together "the defendants").  By his order, the judge entered judgment for Goldstar against the defendants in the sum of £122,109 including interest from August 1999 to the date of the order at the rate of 8 per cent per annum, and he made an order for possession of the mortgaged property, 721 Bath Road, Taplow, Buckinghamshire.  The issues raised on this appeal relate only to the quantum of the money judgment.  Goldstar contends that the amount of the judgment should be increased to £250,403.
2.	The application for permission to appeal was considered on the papers by Jacob LJ on 19 January 2005.  He directed that it be adjourned into court on notice to the defendants, with the substantive appeal to follow should permission be granted.
3.	The defendants seek permission to cross-appeal, contending that the amount of the judgment should be reduced to £64,102.  Their Respondent's Notice is substantially out of time, so they need permission to cross-appeal out of time.
4.	The action arises out of an agreement made between Goldstar and the defendants for a loan of £125,000 by Goldstar to the defendants, secured by a deposit of £100,000 and by a second charge on a residential property at 721 Bath Road owned by the defendants jointly.  The agreement (which was partly in writing and partly oral) was made as long ago as August 1991.  The loan was repayable over a period of eight years by 96 monthly instalments of £2,343.75, making a total of £225,000.  So over the eight-year period of the loan £100,000 of the £225,000 was attributable to interest, representing an annual percentage rate ("APR") of 17.7.
5.	The terms and conditions of the loan (which were in writing) included a provision for early repayment of the loan on payment of a 0.5 per cent 'Discharge Fee', coupled with a provision for rebate of interest calculated in accordance with Rule 78 in the Consumer Credit Act 1974.
6.	The agreement in so far as it related to the deposit was made orally.  The judge found (and there is no appeal from this finding) that as at the date it was made Mr Tarsem Arora (who owns and controls Goldstar) believed that the deposit was made with moneys belonging to a third party, a Mr Ghai (a nephew of Dr Singh).
7.	In contrast to the interest payable on the loan (17.7 APR), the deposit carried interest (as the judge found) at a flat rate of 10 per cent.
8.	The loan was drawn down, and the deposit made, on 21 August 1991.  Separate accounts were opened by Goldstar with Bank of Baroda (its bankers) recording the making of the loan and the receipt of the deposit.
9.	The defendants duly paid the monthly instalments until September 1992.  Thereafter the repayments became erratic, and in June 1994 they ceased altogether.  By that time some 20 monthly repayments had been made.
10.	On 30 September 1996 Goldstar commenced the present action, in which it also sought a money judgment in the sum of £213,816.71, representing the amount then due on loan account, including accrued interest.
11.	By their Defence and Counterclaim, which was served in October 1996 (and which was later amended), the defendants denied that they were indebted to Goldstar in any sum, contending that as at June 1994 (the last date on which a payment had been made) Goldstar had elected to set off the two accounts.  In the alternative, they claimed (by paragraph 13 of the Defence and Counterclaim) "that an account be ordered in respect of moneys due and owing on the back to back loans".
12.	The Defence and Counterclaim was later amended to plead that the agreement, in so far as it related to the loan, was illegal and/or unenforceable on various grounds.
13.	By an open letter dated 30 June 1999 Kidd Rapinet, Goldstar's solicitors, wrote to Mr Paul Hampton, the defendants' solicitor, seeking to clarify Goldstar's position with regard to the involvement of Mr Ghai (it will recalled that it was Mr Arora's belief at the time of the agreement that the deposit was made with moneys belonging to Mr Ghai).  The second and third paragraphs of that letter read as follows:
"Our client's case as pleaded is that the £100,000 deposited with them belonged to Mr Ghai.  This pleading was based upon information supplied to our clients at the time of the deposit by Mr Balwant Singh.  In other words Mr Singh informed our clients that the money was in fact Mr Ghai's which he was happy to provide as security.  It was of course for this reason that the money was placed in a non-resident deposit account.  Clearly had our clients been told that the money belonged to Mr Balwant Singh it could not have been placed in a non-resident deposit account because of course Mr Balwant Singh is not a non-resident.
Our clients were aware that Mr Singh had been granted the use of this money and he could remove from the account some of the interest which had been earned.  Irrespective of whether the money does in fact belong to Mr Ghai or was Mr Singh's it is accepted by our client that the £100,000 deposit together with any interest which may have accrued upon that sum can be set off against the amount of the loan due and owing to our clients from Mr Singh and the others.  It is our client's position that the default on the loan by Mr Singh entitles our clients to utilise the security provided by the £100,000 to reduce the monies due to them from Mr Singh and it is also the case that had Mr Singh paid the amount required under the loan in full the £100,000 and any other interest outstanding would have been passed to him under the authority for Mr Singh to have use of this money which our clients were told existed."

14.	In 1999 the Financial Services Authority ("the FSA") brought an action against Goldstar and Mr Arora alleging unauthorised acceptance of deposits.  The action led to a consent order dated 6 December 1999 whereby Goldstar undertook to pay £475,000 into a joint account with the FSA's solicitors for the purpose of repaying depositors with interest at 8 per cent, and further undertook not to accept any deposits in contravention of statute.  Nineteen depositors, including Dr Singh and (as I understand it) Mr Ghai, were named in the order.  The sums alleged to be payable to Dr Singh and Mr Ghai were, under the terms of the consent order, to be held in the joint account pending the outcome of the present proceedings.
15.	On 16 August 2002, following a 17-day trial on liability, the judge delivered judgment ("the first judgment").
16.	In the first judgment the judge found both protagonists - that is to say Mr Arora and Dr Singh - to be (to put it no higher) wholly unsatisfactory witnesses.  He described Mr Arora as:
"... an utterly unreliable witness on whose evidence I could not rely for any purpose unless of course it was corroborated to the hilt by reliable evidence."
17.	He also found Dr Singh's evidence to be "thoroughly unsatisfactory".  He continued:
"His evasiveness, and on occasion his categorical refusal to answer questions to which he plainly knew the answer, were extraordinary."
18.	As to the agreement itself, the judge was concerned that he had not been given the full picture and that in some respects the agreement might be tainted by dishonesty.  He was accordingly concerned as to whether in those circumstances it was appropriate for him to proceed to adjudicate on the terms and the legal effect of the agreement.  However, he concluded, with understandable misgivings, that it was nevertheless appropriate for him to do so.
19.	In the result, he held that the agreement was not illegal or unenforceable on any of the grounds advanced by the defendants.  He made no finding that the transaction consisted of back-to-back loans: rather, he found that it consisted of a loan of £125,000 by Goldstar to the defendants, secured by a cash deposit of £100,000 and a charge over the real property.
20.	By an order dated 5 September 2003 the judge ordered that an account be taken, and gave directions as to the taking of the account (including directions for further pleadings).
21.	Further pleadings were duly delivered.  By its Points of Claim relating to the account Goldstar relied on the terms of the agreement, as found by the judge, and contended that Goldstar was entitled to apply interest accruing on the deposit account against the debit balance on the loan account, provided that the credit balance on the deposit account did not fall below £100,000.  In the event, there is no dispute as to that entitlement.
22.	By their Points of Defence relating to the account the defendants contended that the account should be drawn on the basis that on a specific date the sum standing to the credit of the deposit account should be set off against the sum standing to the debit of the loan account.  Six alternative dates were listed as being the date at which this 'netting off' process (as it was called) should occur.  The earliest date in the list was June 1992, when the defendants first ceased to make payments of monthly instalments.  The latest date was August 1999 (which was the end of the eight-year period stipulated for repayment of the loan).  That date was described in the Points of Defence as "the date of expiry of the Loan (and/or the Deposit)".  The list included September 1996 (when the action was commenced).
23.	It was common ground between the parties that 'netting off' as at September 1996 would lead to a judgment in the sum of £64,102, and that 'netting off' as at August 1999 would lead to a judgment in the sum of £122,109 (the sum specified in the judge's order).
24.	The defendants' contention as to 'netting off' was pleaded in two alternative ways.  First, it was contended that a term was to be implied into the agreement (and I quote from paragraph 5.2 of the Points of Defence):
"... that both interest accruing on the security deposit from day to day and the capital amount of the security deposit were available to be (and would be) used as necessary to pay all due instalments that were otherwise unpaid and/or to reduce (or extinguish) the Defendants' liability under the loan;”  (My italics)
25.	The defendants admitted that they could not voluntarily reduce the credit balance on the deposit account below £100,000, but they contended that by virtue of the above implied term Goldstar was obliged to 'net off' the balances as at the appropriate date.
26.	In the alternative, the defendants contended that Goldstar was obliged to do so "as a matter of reasonable banking practice".  In support of this contention, the defendants relied on the expert evidence of a banker, Mr Rapazzini.
27.	By its Points of Reply Goldstar denied that any such term should be implied.  Goldstar's contention is that no 'netting off' should be effected at any date prior to judgment (it being common ground that 'netting off' as at the date of judgment - which Goldstar is content should happen - would result in a judgment in the sum of £250,403).  As to banking practice, Goldstar relied for its part on the expert evidence of a Mr Bloomfield.
28.	Other issues were raised in the further pleadings which are not material for present purposes.
29.	A further four-day hearing took place in November 2004 (making 21 days in all, as compared with a pre-trial time estimate of three days for the resolution of all issues relating to liability and to quantum).  Following that hearing, the judge delivered a further judgment ("the second judgment").
30.	In the second judgment the judge rejected the defendants' contentions based on an implied term, and on "reasonable banking practice".  He declined to imply any term into the agreement, on the basis, essentially, that he was not satisfied that the parties had provided him with the full picture in relation to the agreement; and he found no assistance in the expert evidence as to banking practice, given that, in contrast (as he found) to the instant case, such evidence related to "genuine transactions by honest men".
31.	However, he nevertheless went on to find that in drawing the account the balance on the deposit account should be 'netted off' against the balance on the loan account as at August 1999.  As to the rate of interest applicable thereafter to the outstanding balance on the loan account he held that "the arrangement, whatever it was, had come to an end", and that the appropriate rate thereafter was not the contractual rate of 17.7 APR but a rate of 8 per cent per annum.
32.	Goldstar seeks to appeal against the judge's findings (a) that in drawing the account there should be a 'netting off' as at August 1999 and (b) that the interest rate thereafter on the reduced balance on the loan account should be 8 per cent per annum.  It contends that the agreement did not require Goldstar at any stage to 'net off' by combining the accounts, and that no such 'netting off' should take place at any time prior to judgment.  (As I have already indicated, Goldstar is content for a 'netting off' to take place as at the date of judgment.)  As to interest, Goldstar contends that in any event, the rate of interest applicable to the outstanding balance of the loan, whatever that be, should be the contractual rate.
33.	By their Respondent's Notice the defendants seek to cross-appeal out of time against finding (a) on the ground that the appropriate date for 'netting off' was September 1996, when the action was commenced.  In argument, however, Mr Grant Armstrong (for the defendants: he did not appear below) has espoused a different date, which did not appear in the pleaded list, viz. October 1996, when the Defence and Counterclaim in the action was originally served.
34.	The appeal and cross-appeal (and the respective applications for permission) are accordingly concerned solely with the findings made by the judge in the second judgment.
35.	I can now return to that judgment in greater detail.
36.	In paragraph 18 of his second judgment the judge turned to the expert evidence as to banking practice, saying this:
"18.  Dealing first with the expert evidence of Mr Bloomfield and Mr Rapazzini, this raised an inherent difficulty.  They were dealing with the practice of banks.  The claimant is not a bank.  Mr Bloomfield's and Mr Rapazzini's experience is, I am sure, gained from genuine transactions by honest men.  Neither claimant, nor Dr Singh, nor the transactions with which I am dealing, answered these descriptions.  I asked Mr Rapazzini whether he had ever had experience of a case in which a banker kept no records except handwritten ledger sheets, with up to six duplicate sheets, all differing from each other, never sending statements to customers and omitting all proper accounting and auditing procedures, and he said 'not in the United Kingdom'.   He did tell me that such behaviour was not unknown in Italy.  In addition to the matters I have mentioned, the claimant was, it appears, taking deposits for which it was unlicensed and actively engaged in frustrating the Indian foreign currency regulations, as well as deceiving the Bank of Baroda, or endeavouring to do so."
37.	In paragraph 19 he observed that there probably were all sorts of understandings between Mr Arora and Dr Singh relating to what he described as "the apparently pointless and rather one-sided nature of the ostensible transaction" about which he knew nothing.
38.	The judge then turned to the defendants' contention as to an implied term, saying this (in paragraphs 20 to 23 of the second judgment):
"20.  I was repeatedly asked by Mr Davies QC, for the defendants, to imply terms, in the interests of commonsense and fairness, into the transactions between the parties.  Mr Davies said that I should hold, in particular, that Dr Singh was implicitly entitled at any stage to call on the claimant to set off the amount due under the loan account, i.e. the £125,000 and interest accruing on it, against the deposit account, i.e. the £100,000 and interest accruing on it, and thus bring the entire bilateral arrangement to and end; of course, with all interest and charges properly accounted for.  But I ask, rhetorically, how is the court to imply terms into an agreement, or agreements, when all the express terms are not known, and, indeed, some have been suppressed, and where there is clear suspicion of various sorts of illegality; and what possible analogy is to be drawn between an extraordinary transaction with a moneylender and the ordinary transactions between honest commercial men and their bankers?  It is axiomatic that a court must not imply, in any contract, terms inconsistent with express terms.  If the express terms are not all know, any implication must be not merely illogical but wholly improper.  Mr Davies sought to escape this conclusion by reminding me that I had come to the conclusion (and I quote my own judgment) 'with some misgivings', that I should not refuse to enforce the parties' rights, on the ground that the motive for, and possibly the object of, the transactions was unlawful (see the transcript of my first judgment at page 29B and C).  It followed, he said, that I should ignore the fact that the object of, and motives for, the transaction, and even perhaps some of its express terms, were unknown to me.  I am afraid, with respect, I found this a complete non sequitur.
21.  It appears to me, having rejected the submissions that I should imply terms into this transaction, and being unable to accept the evidence of either of the principal parties, unless it is corroborated, that I must look at such unquestioned evidence as I have received, and such findings of fact as I have felt able to make, and apply my commonsense to them.  I can do no other.

22.  The terms of the loan for £125,000 are, of course, evidenced by the application form of 2nd August 1991, as I have found, the credit agreement of 9th August and the charge.  The terms of the £100,000 deposit are not evidenced in writing except by Mr Ghai's application of 2nd August 1991 (at page 42(1) of volume 1).  I have already held that it was intended that this £100,000 should be part of the security for repayment of the £125,000 loan with interest; that interest on it was to be 10 per cent credited annually, not 8 per cent as alleged by Mr Arora, and that since the deposit was a security for the defendants' obligations under the loan, it was entirely legitimate to credit the loan account (that is the £125,000) with sums on account of interest credited to the deposit account, thus transferring money between the two accounts.  I did not say that Mr Arora was bound to credit the loan account in this way but the accountants, in my view very fairly, credited the interest annually in drawing up their calculations.

23.  For the reasons I have stated, I must put in one side the conflicting expert evidence of Rapazzini and Mr Bloomfield about the practice of bankers with regard to loans and securities.  I entirely accept that a banker whose customer has two or more accounts with the bank is in general entitled to combine the accounts and thus, in effect, set off indebtedness on one account against the credit balance in the other (see Paget's Law of Banking, 12th edition, page 602 onwards).  I also accept that the customer has a corresponding right in general to call on the bank to combine his accounts (see Mutton v Peat [1900] 2 Ch. 79 by Lindley MR at page 86)." 

39.	The judge then turned to the rival spreadsheets produced by Mr Rapazzini (for the defendants) and Mr Newman FCA (an accountancy expert called by Goldstar).
40.	After referring to the terms of the loan (including the provisions for early redemption and rebate of interest), the judge addressed the issue as to 'netting off', saying this (in paragraphs 32 to 35 of his judgment):
"32.  I do not think it would be useful for me to investigate these interesting spreadsheets any more, or make any further quotations from their calculations.  Their ramifications, no doubt occasioning the parties considerable expense in professional fees, partly arise because I was not invited to decide the relevant issues earlier.  I must now decide the few points that remain.  As I have said, I am determined not to imply any terms in the agreement between the parties.  This was a moneylenders' contract for purposes and with motives which I have not been able fully to discern entered into by two gentlemen who were prepared to act dishonestly, to perjure themselves and adduce perjured evidence as suited them.  As I have said, it appears to me perfectly absurd to equate it in any way with dealings between an honest bank and an honest customer with more than one account.  This was a contract with repayments over an eight-year period.  Methods by which the transaction could be terminated were expressed in the loan account.  These were not invoked.  I can see no justification whatever for implying a right to demand a combination of accounts and a setting-off.  This was, on its face, highly advantageous agreement to the claimant and the idea that Mr Arora might have agreed at the outset to its premature termination in terms other than those expressly provided for is fanciful.  Why should he sacrifice a very large loan, very well secured, at a high rate of interest, at a time when interest rates were falling?  Why should he resort to the security of money deposited by, as he believed, Mr Ghai, as beneficial owner, in the interest of a defaulting borrower when it was eminently in Mr Arora's interest simply to await the end of the agreement.
33.  By what, I hope, is parity of reasoning, I can see no reasons why the loan and its security should continue beyond the eight years expressly agreed.  In my judgment, it is obvious that the loan and the deposit should be set-off and the appropriate account drawn as at August 1999.

34.  With regard to the question whether Dr Singh paid in January 1994 an instalment of £2,344, as he alleges, and as Mr Arora denies, the burden is, of course, upon Dr Singh to establish this payment.  The claimant's ledger (page 8 of volume 2) shows no such payment.  Dr Singh was unable to produce any record of payment from his bank or otherwise.  As I have said before, I am unable to accept any evidence which he has given which is not thoroughly corroborated.  I therefore hold that no payment of an instalment, whether of £2,344 or any other sum, was made in January 1994, and the total number of payments was, therefore, 20 and not 21.

35.  I can see no reason at all, after setting off the loan and deposit accounts in August 1999, why interest should continue to be paid on the balance at the very high rate of 17.7 per cent.  The arrangement, whatever it was, had come to its conclusion, and I agree with the defendants' case that an appropriate rate of interest thereafter was 8 per cent.  Mr Newman has carried out the necessary calculations at pages 18 to 21 of the documents received by me on 18th November.  In August 1999, £100,000 in the deposit account is set against the accrued balance of £181,445 in the loan account, leaving a net debt owing to the claimant of £81,445 (see pages 18 and 20).  Interest to date 8 per cent amounts to £40,664.  The total is £122,109.  That figure also appears with Mr Newman's explanation in the table on page 10, paragraph 4.22." 

41.	The judge accordingly gave judgment for Goldstar in the sum of £122,109.
42.	For Goldstar, Mr Thomas Graham (who also appeared before the judge) submits firstly, relying on English v Emery Reimbold & Strick Ltd [2002] 1 WLR 2409, that the judge failed in his duty to give adequate reasons for the findings which are the subject of the proposed appeal.  On that basis, he invites this court to substitute its own findings.
43.	He submits that in relation to 'netting off' it is not possible to discern the judge's reasoning in paragraph 32 of the second judgment, given that the judge had earlier rejected the submission of Mr John Davies QC (then appearing for the defendants) that Goldstar was obliged to net off the two accounts as at one or other of the six pleaded dates.  As to interest, Mr Graham submits once again that the judge failed to give any reason for not applying the contractual rate of interest to the outstanding balance on loan account.  He also points out that there was in any event an issue between the experts as to the appropriate rate of interest, should the judge conclude that the contractual rate should not apply.  The view of Mr Bloomfield (Goldstar's expert) was that 17.7 APR was in any event a reasonable rate to apply, whereas Mr Rapazzini (the defendants' expert) had simply taken the judgment rate of 8 per cent because he was asked by the defendants' solicitors so to do.  Mr Graham submits that the judge ought at least to have addressed that issue expressly in the course of the second judgment.
44.	As to the implication of the term contended for by the defendants in their Points of Defence, Mr Graham submits (relying on well-established principles) that there is no basis for any such implication.  He points to the fact that the defendants were constrained to plead no less than six alternative dates for the suggested 'netting off'; and that Mr Armstrong has added another.  In the circumstances, he submits, it cannot be said that the implied term is obvious, or that business efficacy requires such an implication.  He submits that there is no ground for depriving Goldstar of the commercial advantage it obtained by reason of the disparity between the interest rate chargeable on the loan and the interest rate payable on the deposit.
45.	He points out that at no stage did Dr Singh or anyone else on behalf of the defendants call on Goldstar to 'net off' the two accounts, nor did Goldstar at any stage agree to do so.  He submits that in the letter of 30 June 1999 (to which I referred earlier) Goldstar's solicitors were doing no more than confirming that Goldstar was entitled to have recourse to the deposit as security, and that the letter does not indicate any change of position on Goldstar's part.  He submits that the fact that a bank may be entitled to combine accounts is nothing to the point in the instant case, since the defendants' contention is that Goldstar was in some way obliged to do so.
46.	As to the defendants' reliance on reasonable banking practice, he submits that the judge was right to regard the expert evidence as of no assistance in the instant case, for the reasons he gave in paragraph 32 of the second judgment.
47.	Thus, he submits, there was no discernible basis for the judge's finding that 'netting off' should take place at any date prior to judgment.  In any event, he submits, August 1999 did not mark the end of the contractual relationship created by the agreement: it was no more than the date by which the loan should have been repaid.  He submits that, the loan not having been repaid in full by that date, the contractual relationship continued in that the defendants remained liable to repay the outstanding balance on loan account. 
48.	It follows, he submits, that the contractual interest rate continued to apply to that outstanding balance.  As to the rate of 8 per cent taken by the judge, he submits (as I indicated earlier) that this was merely the rate which Mr Rapazzini was instructed to take, on the footing that it was equivalent to the rate commonly taken by County Courts when awarding interest on judgments pursuant to statute.
49.	For the defendants, Mr Armstrong did not press the pleaded argument for 'netting off' based on an implied term.  Rather (as I indicated earlier) he sought to advance a new case for 'netting off', not argued below, to the effect that the appropriate date for 'netting off' is October 1996, when the Defence and Counterclaim in its original form was served.  (October 1996 was not included in the pleaded list of possible dates for 'netting off'.)  He submits that by paragraph 13 of that pleading (in which, it will be recalled, the defendants claim in the alternative that an account be ordered "in respect of monies due and owing on the back-to-back loans") the defendants were calling on Goldstar to 'net off': a course which the defendants were fully entitled to take.
50.	He relies on the letter dated 30 June 1999 from Goldstar's solicitors (a letter which was before the judge) as clearing the way for a 'netting off' to take place by removing Mr Ghai from the picture.
51.	Mr Armstrong referred us to authorities as to a banker's general right to combine accounts, including Mutton v Peat [1900] 2 Ch 79, which is described in Paget's Law of Banking, 12th edn, at para. 29.16 as authority for the proposition that where securities are held to secure a general balance between two or more accounts the amount so secured is the net amount owing after combination of the accounts: in other words, the banker is obliged to combine the accounts before having recourse to the securities.  Mr Armstrong also cited a passage from the judgment of Lord Denning MR in Halesowen Presswork v Westminster Bank [1971] 1 QB 1 at 34C where Lord Denning relies on Mutton v Peat for the wider proposition that "the customer has a right to call on the banker to combine the two accounts, and to set off one against the other unless there is some agreement, express or implied, to the contrary". 
52.	As to August 1999 as the date for 'netting off', Mr Armstrong submits (as Mr Davies submitted to the judge) that all banking logic would dictate 'netting off' at the term date.  In this respect he relies on Mr Rapazzini's view in paragraph 3.4 of his report (a view not shared by Mr Bloomfield) that "it would be common banking practice to offset the balances of the loan and the deposit accounts at the very latest at the maturity date of the loan". 
53.	Mr Armstrong points out that the effect of Goldstar's contention as to 'netting off' is that the longer the case took to reach judgment the greater the sum due to Goldstar under what the judge described as a "one-sided" transaction.  He submits that, by contrast, if October 1996 is taken as the date for 'netting off' it gives Goldstar the benefit of the transaction up to the time when (as he would have it) the defendants called on Goldstar to combine the accounts (see paragraph 13 of the Defence and Counterclaim), but not thereafter.
54.	Accordingly, Mr Armstrong contends primarily for October 1996 as the 'netting off' date, but in the alternative he supports the judge's finding that August 1999 was the appropriate date on the footing that it was, as the judge described it, "the end of the transaction".
55.	As to the rate of interest, Mr Armstrong submits that, the judge having rightly concluded that the agreement had come to an end in August 1999, it was a matter for his discretion what rate of interest should thenceforth apply to the outstanding balance on loan account; and that he cannot be criticised for having taken the judgment rate.
56.	Mr Armstrong accordingly invites us to dismiss the appeal, to grant permission for the cross-appeal and to allow the cross-appeal.
57.	I must say straightaway that I have nothing but sympathy with the judge in this case.  He was faced with a transaction which the parties were either unable or (more probably) unwilling fully to explain to him, coupled with wholly unreliable, and to a material extent dishonest, oral evidence.  He also had to cope with the fact that, due primarily to a hopelessly inaccurate time estimate provided by the parties, the hearing became fragmented and was not concluded until some three and a half years after it started.  By the time he came to determine the issues which form the subject of the appeal and cross-appeal he could have been excused for feeling (if indeed he did feel, as to which I know not) that the amount of time and effort which had been expended by all concerned - and not least himself - in establishing the respective rights and obligations of two thoroughly unreliable protagonists, to say nothing of the costs involved, had become wholly disproportionate and unjustified.
58.	That said, I turn first to the application for permission to cross-appeal.
59.	In my judgment, permission to cross-appeal should be refused, for essentially three reasons.  First, the Respondent's Notice is substantially out of time, and (so far as I can see) for no good reason.  Secondly, the substantive case which is now sought to be advanced (that is to say the contention that the appropriate 'netting off' date is October 1996, based on paragraph 13 of the Defence and Counterclaim) was not advanced to the judge.  Nor can it be said that Mr Davies limited his options below, given that the pleading lists no less than six alternative dates and that in argument he appears not to have plumped for any particular one, but rather to have left it to the judge to do that.  Mr Armstrong has in effect sought to add a seventh date to the list.  Third, in any event, I can see no substance in the new case.  Paragraph 13 of the Defence and Counterclaim seems to me to be miles away from a request by the defendants that Goldstar forthwith combine the two accounts, particularly as it is made in a pleading in which it is also alleged that the defendants are under no liability to repay the loan due to a prior alleged election to net off.
60.	I turn, then, to the application for permission to appeal.  I would grant such permission, on the ground that the appeal raises points which are clearly arguable.
61.	I turn, then, to the substance of the appeal, and first to the reasons challenge.  In my judgment the reasons challenge fails in relation to the 'netting off' issue.  In paragraph 32 of the second judgment the judge expresses himself as reaching the conclusion that 'netting off' should occur as at August 1999 "by parity of reasoning".  This takes one back to paragraph 31, where he refers to Mr Arora awaiting "the end of the agreement".  The judge effectively makes the same point in paragraph 35, where he refers to the agreement "whatever it was" as having "come to its conclusion".  So the reasons challenge does not succeed in this respect, in my judgment.
62.	On that basis, I turn to the substantive question whether the judge was wrong to take August 1999 as the 'netting off' date.  In the particular circumstances of the instant case, which are on any view highly unusual and in many respects highly unsatisfactory, I am not prepared to say that he was wrong to do so.  After all, the position as at August 1999 was that Goldstar had the deposit account under its full control, any possibility of Mr Ghai having an interest in it having been cleared off in June 1999; and Mr Arora must have been fully aware that it was available to be set off at any time against the outstanding balance of the loan.  In those circumstances the judge was in my judgment entitled to conclude that, rather than deferring the 'netting off' process until judgment, it should take place as at the end of the repayment term (which he described, albeit not strictly accurately, as the end of the agreement).
63.	So I would dismiss the appeal against the judge's decision that 'netting off' should occur as at August 1999.
64.	I turn, then, to the appeal in respect of the interest rate.  In this respect there is, I think, some force in the reasons challenge, in that the judge does not expressly address the expert evidence relating to the appropriate rate of interest.  However, it is unnecessary to consider the reasons challenge further, since I cannot in any event see any legal basis for not applying the contractual rate of 17.7 APR to the outstanding balance of the loan after 'netting off' as at August 1999.  The contractual obligation to repay the outstanding balance of the loan continued after the end of the repayment term, and that obligation included an obligation to pay interest at the contractual rate.
65.	For the reasons I have given, therefore, I would dismiss the appeal on the 'netting off' issue, but allow it on the issue as to the rate of interest.  I would also dismiss the application for permission to cross-appeal. 
66.	LORD JUSTICE CARNWATH:  I agree that the application for permission to cross-appeal should be dismissed for the reasons given by my Lord.
67.	I also agree that the appeal in respect of the interest rate should be allowed.  There seems to have been no evidentiary support for the rate of 8 per cent taken by the judge.  Although the judge commented that the contractual rate was "very high", he did not comment on the experts' evidence on this.  The note of the meeting of experts records Mr Bloomfield, the claimant's expert, saying:
"... I believe the interest rate of the loan contract was fair and was in line with industry practice and in my view this is the rate that has to be applied."
Mr Rapazzini, the defendants' expert, is noted as having commented simply that the rate of 8 per cent had been taken as the rate provided by instructing solicitors. 
68.	On the 'netting off' issue, I have found some difficulty in making a precise analysis of the judge's conclusion.  We have been referred to extracts from Paget's Law of Banking, 12th edition, paragraph 29.6, dealing with the respective rights of the parties in relation to combining accounts.  However, I am not convinced that we have plumbed the depths of that subject, even in relation to banking law generally.  However, like the judge, I doubt if the ordinary rules are of much help in this extraordinary context. 
69.	I understand the judge to have taken the view that this "apparently pointless and rather one-sided ... transaction", as he described it, must have been intended to have some finite limit, and that the obvious date to take, at least since Mr Ghai was clearly out of the picture, was the end of the eight-year period as originally fixed.  Like my Lord, in the bizarre and I hope unique circumstances of this case, I am not prepared to hold that the judge was wrong. 
(Submissions as to costs) 
70.	LORD JUSTICE JONATHAN PARKER:  So far as costs are concerned, we take the view that justice will best be served in the circumstances of this appeal and proposed cross-appeal by taking a global approach and making a percentage order.  The appellant has partially succeeded, in that it has succeeded on the rate of interest issue and it has successfully resisted the application for permission to cross-appeal, an application which was made on notice pursuant to the directions given by Jacob LJ.
71.	In all the circumstances, taking account of all the issues that have been argued and the conclusions to which we have come in relation to those issues, we consider that an appropriate costs order is that the appellant should have 60 per cent of its costs of this hearing.
(Further submissions as to the quantum of costs) 
72.	LORD JUSTICE JONATHAN PARKER:  We consider that it is appropriate to embark upon a summary assessment in this case, and we conclude that the appellants' costs should be assessed in the sum of £13,000 plus VAT.
ORDER:  Application for permission to appeal granted; appeal allowed in part as to the rate of interest; application to cross-appeal refused; the respondent to pay 60% of the appellants' costs of this hearing, which are summarily assessed in the sum of £13,000 plus VAT; counsel to lodge a draft minute of order. 
(Order not part of approved judgment)
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