ON APPEAL FROM THE PLYMOUTH COUNTY COURT
His Honour Judge Leeming Q.C.
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE ETHERTON
LORD JUSTICE ELIAS
| Paul Chapman
|- and -
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Joseph Louei represented himself and did not appear
Hearing dates : 9th February 2011
Crown Copyright ©
Lord Justice Etherton :
"Joseph Louie agrees to lift the personal charge that he has registered against the property known as The Borringdon Hall Hotel subject only to the satisfactory repayment of £215,000 acknowledged to be paid to him by Paul Chapman consequent to the partition of The Astor Hotel business from Legendary Limited to Joseph Louie and Sons Limited together with the satisfactory resolution of all other outstanding personal borrowings between Joseph Louie and Paul Chapman."
"The Claimant was now insistent that he was only paying £1,260,000. I refer the court to the email dated 3rd December 2007 from MR O Grady …. I agreed to this. At page 132 is a meeting note prepared by my Solicitor. This meeting note indicates that I agreed to this reduction in consideration. In effect the Claimant no longer had to pay the sum of £215,000 in cash. The meeting note also indicates that both I and the claimant had separate claims against each other which would be resolved amicably."
"9A Further, or in the alternative, the Defendant is not indebted. The meeting of the Claimant and Defendant on 5th April 2007 with Mr Gordon Fox and the documents signed by the parties on or about that date formed part of the demerger (referred to and outlined in Paragraph 6 of the Amended Reply and Defence to Counterclaim) to separate the Claimant's and the Defendant's business interests. The demerger was not completed until on or about 3 December 2007.
9B In the circumstances the Declaration was an agreement to agree and/or a step in the negotiations which was superseded by the eventual terms of the demerger completed and or concluded on 3rd December 2007. In particular whereas it was agreed on 5th April 2007 that the Claimant (through a corporate vehicle promoted and/or acquired for the purpose) would pay £1,475,000 to Legendary Limited in respect of the proposed Intra Group Transfer (in respect of inter alia the transfer of the Astor Hotel to the Claimant's new company) by on or about 3 December 2007 the sum of £215,000 (acknowledged in the Declaration) was agreed and/or understood to be accounted for and/or was accounted for by a reduction in the consideration for the Intra Group Transfer by £215,000 from £1,475,000 to the sum of £1,260,000."
"The learned judge erred in law and/or in his findings of fact in treating the advance of £209,343.33 on 29 June 2007 as a distinct agreement, when the parties dealings with regard to the mortgage over 12 Elliott Street constituted a mere step in negotiations concerning the separation of the parties' business interests, which were ultimately concluded on 3 December 2007 when the sum of £215,000 was accounted for by the Defendant to Claimant in the context of the overall demerger of the parties' interests by a reduction of the consideration payable by the Claimant for his share of the hotel business."
"28. The defendant contends further that any agreement to reimburse the claimant for the mortgage redemption monies was merely provisional and indicated something that had to be dealt with or discussed when the full merger went through. He contends that since the merger went through in terms that were varied in important respects, the agreement never became binding, or it was replaced. I read the amendment to the defence as it was put in the course of trial as formulated in this way, since I insisted what the defendant's case was on this be pleaded with some precision, and this is what the amendment says: [the Judge then set out paragraph 9B of the re-amended defence and counterclaim].
29. As I have indicated, I take the view that the parties had agreed as a separate agreement at the meeting that the claimant was to get No. 12, pay off the mortgage, and be reimbursed. His right to reimbursement crystallised then at the latest, because he must have paid the redemption monies on the basis that he was indeed to be reimbursed, not upon some mere hope or speculative chance he might be reimbursed or could seek it in further negotiations. That is my finding on the facts, and my interpretation of events.
30. The further question is a more difficult one: was there a reduction of the sum payable under the later de-merger in the amount that I have mentioned in some way that extinguished or rescinded the reimbursement obligation? This contention, it appears, was only raised by the defendant when his witness statement was served. The claimant protested in his argument and in the course of his evidence that it was never intended that part of the consideration passing in the de-merger as the intra-group transfer figure was to be the higher figure. He insisted that it was the lower figure that was agreed on 5th April, being the sum of £1,260,000. He said that was all he would agree to, because his bankers at that stage had indicated to him that was all, in effect, they would allow him to pay.
31. I have heard clear evidence from Mr. Fox, however, that what was agreed at the meeting was the higher figure. His file note confirms this. I accept Mr. Fox's evidence on this point. I believe that the claimant is mistaken about it. Whether he is mistaken or not, in any event I do not accept his evidence on this point.
32. Mr. Fox was not able to say, when I asked him about the matter, that the reduction to the lower figure in the intra-group transfer inserted in the de-merger agreement and paid under it was intended to replace the reimbursement obligation, or indeed that it could reasonably be regarded as a substitution for it. He explained, and it is clear, that the mechanics and detailed effect of the de-merger agreement are difficult to ascertain. One cannot simply pluck from it the intra-group transfer figure and treat it as though it is a simple amount of cash to be paid over in return for assets. As I have indicated, the de-merger was complicated and delayed partly because of a lack of sufficient distributable reserves.
33. The stance of the claimant in securing the reduction, as I have found it, was on my view of the evidence that he was neither willing nor able to pay any more, and his bankers would not let him. It was certainly never expressly agreed that the reduction in the intra-group transfer figure would cancel out or remove the reimbursement obligation. There is no indication in the evidence that such a suggestion was ever made, or that the topic arose explicitly in any way. The claimant says in evidence that he never thought for a moment that what he paid under the de-merger in any way was intended to affect the reimbursement obligation. I accept his evidence on this, although it is only what he thought, but again it is clear to me on the evidence that the defendant himself did not believe at the time that the reduction was intended to affect any obligation to reimburse. The admission in his defence, which is strictly classed as a non-denial, indicates this, despite his protestations to the contrary. It was open to the defendant when he agreed the reduced figure in the de-merger, to attempt to renegotiate his obligation to reimburse, but he did not do that.
34. Again, on what I gather of the claimant and his attitudes, and the circumstances prevailing at the time, he would not have been willing to allow the reimbursement obligation to be removed or reduced as some sort of quid pro quo for the reduced transfer figure, if he had been asked. The court has no power to re-order the various obligations of the parties under a vague jurisdiction to impose whatever it might regard as some sort of "more fair" result. I reject the case that the reduction of the amount paid under the de-merger destroyed or reduced the obligation to reimburse that I have found arose. In my judgment, that obligation remained extant, and the claimant is entitled to enforce it, subject to setting off any cross-claims that succeed."
"Paul Chapman confirms that he is content in all respects for the intra group agreement to be amended to show a consideration of £1,260,000 in substitution for the earlier figure of of £1,475,000 and for the deletion of the cash consideration element…. It is also acknowledged that John Chapman and Joseph Louei have separate claims against each other and that these will be resolved between them amicably."
"This meeting note indicates that I agreed to this reduction in consideration. In effect the Claimant no longer had to pay the sum of £215,000 in cash."
Lord Justice Elias
Lord Justice Mummery