Well I've got my car back with new master cylinder/reservoir and new Audi OEM front pads and the brakes are working well.
Had a "discussion" with the MD by phone, who was actually away on a day off. Will continue on Monday when he's back in the office and hopefully reach a satisfactory conclusion.
Whatever the conclusion is, you'll get to know!
Long discussion with the technicians who did the work while looking over the car and I am now convinced that the master cylinder was leaking, in fact the missing brake pad material just highlighted it.
Turns out it was the lower outer pads on both offside & nearside that had lost the material. As there are 2 pistons but they are on the inside, and the upper outer pad was all there I was effectively getting only half braking, but equally on both front wheels, but the "depleted" pads were not being pressed onto the disc so no strange noises.
As a result I was pressing harder on the pedal which exaggerated the symptoms of the leak.
So my remaining "issue" is the pads they fitted about 10,000 miles ago that literally separated, with the backing plate staying in place and the friction material falling off entirely. The undamaged pads show that wear has been minimal since they were fitted. So I'm expecting appropriate compensation for that.
A subsidiary question, given that 2 pads failed in the same way at the same time (reasonably close anyway, it was serviced & MOT'ed just over 3 months ago and would have failed the MOT brake test as it was last week) is whether these were "genuine" non-OEM pads that failed or counterfeit?
I've asked the MD to have that investigated.
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2003 D2 FL S8. Irish Green Pearl/Beige. Solar sunroof, auto-dim mirrors, electric rear seat functions and extended leather. Ski hatch retrofit. Aftermarket reversing camera. DVB-T and XCarlink now removed as redundant.
2016 Volvo V40 T5 Cross Country (4WD) with ALL the toys including adaptive cruise etc. etc. Osmium Grey with Blonde/Charcoal leather interior. Polestar performance "optimisation".  (Even rarer than a D2 S8!) Oh, and a brand new engine at just under 30,000 miles on the factory one! 
Finally: gone, but not forgotten.....
1998 D2 PF S8. Agate Grey/Platinum. Every option (I think) except electric rear seats, Tiptronic steering wheel, ski hatch, towbar & dimming door mirrors.
e.g. Cruise control, NavPlus/TV, Bose, GSM, Xenons, Solar roof, Parking sensors, Alcantara/leather everywhere of course.  (internal dimming mirror added later)
1998 (very early) Ford Focus 1.8 Zetec; ABS/TCS, Heated screen/mirrors, Aircon. Added Auto-dim mirror, Leather seats, Trip computer, Cruise control, OEM Ford SatNav with CD changer.
And before that a lot of Rover 800s, a few oddities, a lovely Triumph Dolomite 1850HL with Overdrive and way back in my schooldays an Austin Seven aka Mini 850!
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