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England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Wollenberg v Casinos Austria International Holding GmbH [2011] EWHC 103 (Ch) (03 February 2011)
URL: http://www.bailii.org/ew/cases/EWHC/Ch/2011/103.html
Cite as: [2011] EWHC 103 (Ch)
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CHANCERY DIVISION
Strand, London, WC2A 2LL |
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B e f o r e :
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| Anthony Stephen Wollenberg |
Claimant |
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| - and - |
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| Casinos Austria International Holding GMBH |
Defendant |
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David Matthias QC and Chris Boardman (instructed by Davonport Lyons) for the Defendant
Hearing dates: 6th - 16th December 2010
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Crown Copyright ©
- Mr Tony Wollenberg is a solicitor and expert on the gaming and betting industries. He is head of betting and gaming at the law firm Salans. He was retained as a consultant by Casinos Austria International Holding GmbH ("CAI") under the terms of an agreement contained in a letter dated 21 November 2005. That agreement was subsequently extended by a further agreement contained in a letter dated 27 June 2008. Each of the two letters set out the duties that Mr Wollenberg was to perform and the remuneration that he was to receive. In addition to an annual retainer, he was to be entitled to a success fee in certain events. The main issue in this trial is whether those events have happened; with the consequence that Mr Wollenberg is entitled to the success fee under each of the two agreements.
- The two main representatives of CAI are Hr Paul Herzfeld and Hr Reinhard Bernkop-Schnürch, both of whom gave evidence at trial. Both are native German speakers, and, although they made witness statements in English, each of them gave evidence through an interpreter. All the dealings between them and Mr Wollenberg were conducted in English; and even some internal communications within CAI were in English. There is no doubt that both are extremely fluent in English.
- CAI entered into a joint venture agreement in the UK. Under that agreement it participated in a company called Apollo Casino Resorts Ltd ("Apollo"), of which it has since become the sole owner. Since August 2010 Apollo has been operating a casino in Glasgow. Mr Wollenberg claims to be entitled to 4% of CAI's equity in Apollo.
- In Italy a wholly owned subsidiary of CAI has entered into a joint venture agreement with Cogetech SpA ("Cogetech"). Under that agreement it participates in a start up company called Azzurro. Mr Wollenberg claims to be entitled to 4 per cent of CAI's equity in Azzurro.
- On 9 February 2010 CAI's solicitors sent Mr Wollenberg a letter terminating both agreements. Mr Wollenberg says that the termination was unlawful. CAI for their part say that the termination was an acceptance of a repudiatory breach of both agreements by Mr Wollenberg. Mr Wollenberg responds that even if that were so CAI affirmed the contract.
- Mr Jonathan Crow QC and Mr Richard Perkoff presented Mr Wollenberg's case. Mr David Matthias QC and Mr Christopher Boardman presented CAI's.
- The first of the two agreements is contained in a letter dated 21 November 2005. It is addressed to Mr Wollenberg at his home address. Its relevant terms are as follows:
- The second agreement is contained in another letter, dated 27 June 2008. Again it is addressed to Mr Wollenberg; but this time at his professional address. Its relevant terms are as follows:
- Mr Wollenberg has practised as a solicitor since 1977; and since the early 1980's has specialised in the field of betting and gaming. His experience includes not only practice as a solicitor but also active participation in corporate governance of companies in the field. This experience includes the chairmanship of City Index Ltd and also the chairmanship of Zetters plc. By 2002 the majority of Mr Wollenberg's income came from his commercial activities rather than his practice as a solicitor. Nevertheless he was still a consultant to the law firm Salans, where he was head of the betting and gaming department. During the 1990's Mr Wollenberg had sporadic contact with representatives of CAI. CAI is part of the Casinos Austria Group which owns or operates about seventy casinos around the world; and also owns the Austrian State Lottery. These sporadic contacts did not include the giving of legal advice. Hr Bernkop-Schnürch explained that his own contact with Mr Wollenberg consisted of meeting him for dinner in London occasionally and discussing "the gaming industry in the UK generally". In his witness statement Hr Bernkop-Schnürch had said that CAI "continued" to instruct Mr Wollenberg as their UK solicitor after 2002. But it is plain that Mr Wollenberg had not been instructed by CAI before 2002; so this part of Hr Bernkop-Schnürch's evidence was untrue.
- In 2002 Mr Wollenberg had undertaken some work for Las Vegas Sands, which is a large American gaming group. They were interested in coming to the UK, and asked Mr Wollenberg to recommend entry mechanisms. Eventually they alighted on the idea of building casinos and entertainment centres adjacent to Premiership football grounds, which offered the chance to regenerate deprived areas.
- By 2004 CAI were interested in entering the casino market in the UK, not least because of the proposed shake-up in the regulatory regime. This shake-up had the potential to introduce a number of new casinos into the UK, classified as "small", "large" and regional or "super-casinos". Local authorities would have to put themselves forward in order for central government to select the areas within which new licences would be granted. About 66 local authorities put themselves forward for selection. Part of the government's policy in selecting the areas in which new licences would be granted was to encourage regeneration of deprived areas. Thus any casino project would have to deliver regeneration as well as simply a casino. There were to be sixteen new licences: eight for large casinos and eight for small ones. The proposal for a super-casino was eventually abandoned after some political controversy.
- The first formal retainer was contained in a letter dated 9 March 2004 from Mr Wollenberg to Mr McFadden of Casinos Austria, which was returned countersigned on 23 April 2004. The subject matter of the retainer was described as follows:
- It is plain that this was a retainer of Salans as solicitors. Not only was this stated in the quoted passage, but also:
- However, although the retainer was expressed in general terms, in fact it related to a specific site at Beckton. On 8 June 2004 Mr Wollenberg wrote to Casinos Austria to confirm "your instructions to us to undertake a due diligence exercise in relation to the Beckton real estate opportunity." The letter continued:
- Again it seems to me to be plain that this was a retainer of Salans as solicitors. In his oral evidence Mr Wollenberg accepted that this was so. In the course of the retainer Mr Wollenberg did give CAI legal advice. Mr Wollenberg described this as an isolated incident (together with one other) in the course of his relationship with CAI; and I think that he is right. The work covered by this retainer was completed by November 2004.
- In December 2004 Mr Wollenberg telephoned Hr Bernkop-Schnürch to tell him about a potential opportunity to co-operate with Andrew Lloyd-Webber's Really Useful Theatre Group in setting up casino facilities in two London theatres. Hr Bernkop-Schnürch confirmed CAI's interest in further exploring the possibility. Mr Wollenberg sent them plans of the New London Theatre, which was one of the possibilities; and he set up a meeting between CAI and the Really Useful Theatre Group for January 2005. Hr Bernkop-Schnürch and Dr Lehrner of CAI attended the meeting on 25 January; and inspected the theatre. They were sufficiently interested to take it further.
- In February 2005 Dr Lehrner asked Mr Wollenberg to investigate potential casino sites in Guildford and Ipswich. What he was asked for was "a first assessment from your side". Dr Lehrner commented in his e-mail that this was the third project in England; and that they were looking forward to "a noble and bounteous discount on your fee note". However, Mr Wollenberg said, and I accept, that the assessment for which Dr Lehrner was looking was a business assessment rather than any legal advice. In fact Mr Wollenberg did not charge for his services in this respect.
- Through the spring CAI continued to show interest in the New London Theatre project; and asked Mr Wollenberg to help them get better plans of the theatre. They made a number of further visits, including visits with their architects. Dr Lehrner was due to come to London in July; and Mr Wollenberg arranged to meet him. In his e-mail of 15 July Mr Wollenberg said:
- Mr Wollenberg continued to work intermittently on the New London Theatre for about a year, but the project ultimately came to nothing because the London Borough of Camden did not ask to be selected as a site for one of the new casinos. His work on the New London Theatre was not legal work. CAI had instructed another firm of solicitors to advise them about that property, because Salans had a conflict of interest. Nor did Mr Wollenberg charge CAI for his work on the New London Theatre.
- Dr Lehrner duly came to London in July 2005. He and Mr Wollenberg met. Mr Wollenberg took him to see West Ham's stadium which was one of the possible sites for a casino that Mr Wollenberg had in mind. They discussed the possibility that Mr Wollenberg would be appointed as CAI's representative in the UK. Mr Wollenberg proposed a formal consultancy. Dr Lehrner asked whether there might be any conflict with Mr Wollenberg's work for Las Vegas Sands. Mr Wollenberg explained that there would not be: partly because that work had virtually petered out; and partly because Las Vegas Sands had been interested in regional casinos, whereas CAI were interested in large and small casinos. Mr Wollenberg also explained that his work with Las Vegas Sands had involved engaging "a raft of different specialists"; and that this template was likely to be replicated, although at lower cost. However I find that he did not go into any detail. Dr Lehrner agreed to discuss the question with the board of CAI. On 10 August he e-mailed Mr Wollenberg saying that the suggestion had been positively received. Dr Lehrner followed this up on 22 August. His e-mail said:
- The reference to a "destination operator" was a reference to Las Vegas Sands which, as mentioned, was only interested in regional casinos. This reference thus corroborates Mr Wollenberg's evidence that he had told Dr Lehrner about his involvement on behalf of Las Vegas Sands. It is also significant that Dr Lehrner's understanding was that Mr Wollenberg's relationship with Las Vegas Sands was one of "business contact" and that he had represented that company. In his witness statement Hr Bernkop-Schnürch said that CAI did not know of Mr Wollenberg's previous work for Las Vegas Sands; but in the light of this e-mail I reject that evidence. However, Mr Wollenberg did not suggest that he told Dr Lehrner anything about his remuneration package for Las Vegas Sands; and indeed he gave no evidence about it. It is also clear from the e-mail that Dr Lehrner only had a hazy idea of what it was that Mr Wollenberg had done for Las Vegas Sands. I do not therefore accept (if it be suggested) that Dr Lehrner was told that the engagement of Mr Wollenberg would carry with it the probability that CAI would have to engage additional consultants at its own expense simply in order to identify suitable potential projects. After all, Mr Wollenberg had already identified at least two potential sites without the need to engage anyone else. Mr Wollenberg replied on the same day. He said that he envisaged committing himself exclusively to CAI for the purpose of establishing a significant presence in the UK in large casinos. That would involve:
- This, too, does not suggest that Mr Wollenberg envisaged that CAI would itself engage a team of consultants to identify sites: that was something that Mr Wollenberg had offered to do using his own contacts. Both Mr Wollenberg and Dr Lehrner were due to attend a conference in Las Vegas; and Mr Wollenberg expressed the hope that they would meet there. The two men duly met in Las Vegas in September. Dr Lehrner had brought with him a single sheet on which the bullet points of an agreement were set out; and this formed the basis of the discussion. I need not quote it all. To a large extent it replicated Mr Wollenberg's description of the services he was offering; and it then set out CAI's side of the bargain. So far as relevant this was:
- Mr Wollenberg described the discussions as a negotiation. In the course of the discussion, the annual retainer was increased, and the expense allowance reduced. As against the 3 per cent of equity offered, Mr Wollenberg proposed 5 per cent. Following the discussion Mr Wollenberg prepared a draft agreement. The draft referred to the right to acquire 5 per cent of equity. That was the only point of substance on which CAI commented. In an e-mail of 25 October Hr Bernkop-Schnürch proposed 4 per cent equity, pre-financed by CAI; adding that that was between the 3 per cent "which is what we usually grant" and the 5 per cent that Mr Wollenberg had proposed. Mr Wollenberg accepted this compromise. Hr Bernkop-Schnürch said that he would prepare the paper and send it to Mr Wollenberg. Thus it came about that the first agreement was made.
- Mr Wollenberg did not tell Dr Lehrner that he was no longer acting as CAI's solicitor. But his evidence was that his transition from solicitor to business consultant happened over a period of time by a process of osmosis; and that Dr Lehrner knew that he was no longer acting as CAI's solicitor by the time that the 2005 agreement was made. In substance I accept this evidence. It is plain from Dr Lehrner's e-mail of 22 August that what CAI had in mind was the appointment of a "representative"; not a solicitor. The services that Mr Wollenberg offered to provide were not legal services. I accept that there is no bright line between purely commercial advice and advice that has some legal aspects to it, since law and commerce can shade into each other. I accept also that the fact that Mr Wollenberg was a solicitor with a specialised practice in gaming was part of his attractiveness to CAI. But that was not his primary role under the 2005 agreement. In words used by CAI themselves, he was a "representative", a "consultant" or CAI's "anchorman in the United Kingdom". I reject the suggestion that CAI or any of its representatives thought that they were engaging Mr Wollenberg as their lawyer. By the time that the 2005 agreement was made Mr Wollenberg had known CAI for some fifteen years. They had mutual trust and confidence in each other. But this was the kind of trust and confidence that businessmen have in each other to carry out their bargains, rather than the sort of trust and confidence that a private individual has in the family solicitor. I do not accept that in negotiating the 2005 agreement CAI were under any illusions about Mr Wollenberg's position. He was out to look after his own interests; and to do the best deal for himself that he could. CAI knew that. I accept that CAI knew that Mr Wollenberg would use his contacts to identify suitable sites, not least because that is what he had told Dr Lehrner in his e-mail of 23 August. But that, in my judgment, would have been understood as referring to the kind of contacts that Mr Wollenberg had already used in order to show CAI the potential of the New London Theatre and West Ham. This did not involve the engagement of a team of other consultants at CAI's expense.
- The essence of Mr Wollenberg's case is that he was to be the leader of a team of experts, and was not expected to deliver all the services referred to in the agreements personally. As he put it in his witness statement (§ 31):
- He continued (§32):
- This theme recurs throughout his evidence. I quote some examples:
- In the course of his cross-examination he put it thus:
- Hr Bernkop-Schnürch said in his evidence that CAI appointed Mr Wollenberg first as a contact point within England; second as a lawyer who could advise CAI; and third as a person who would be able to put CAI in contact with possible projects. Mr Crow submitted that both Hr Bernkop-Schnürch and Hr Herzfeld belittled Mr Wollenberg's role and exaggerated his role as lawyer. I think there is force in this point. Hr Bernkop-Schnürch accepted in cross-examination that one of Mr Wollenberg's roles was to co-ordinate all the different efforts that CAI was making in order to break into the UK casino market. He also said in his witness statement that Mr Wollenberg's colleagues at Salans (Mr Polin in particular) provided "basic legal advice"; and Mr Wollenberg dealt with "the more complex issues". In fact it was the other way round. All the detailed legal advice came from Mr Polin. On the other hand, I also think that Mr Wollenberg exaggerated his role; and in particular the extent both of his activity and leadership. As is so often the case, the true picture comes from the contemporaneous documents. I shall consider first the recruitment of the team, even though it is not strictly chronological. I shall next provide an overview of what the various people involved did, and then consider some of the individual sites.
- In January 2006 Hr Bernkop-Schnürch and Mr Wollenberg met in London. They visited some potential casino sites. These included a further visit to the New London Theatre; and also a visit to Queensway Ice Rink which Mr Wollenberg had suggested as a possible location. A follow up meeting was arranged for March. In the meantime there was some correspondence between Mr Wollenberg and Mr Lorenz of Dunlop Haywards who was acting for the owners of the Queensway Ice Rink. In March Mr Wollenberg met the owner of the Hammersmith Palais to discuss its potential as a casino. In the following month he was in touch with Blackburn Rovers with a view to investigating the possibility of a casino at their stadium.
- Towards the end of May Mr Wollenberg proposed recruiting Mr Fisher. His e-mail to Hr Bernkop-Schnürch said:
- He proposed a strategy meeting to take place either in London or in Vienna. CAI do not appear to have replied to this e-mail, but Mr Fisher was nevertheless recruited. Mr Matthias argued that this rather tentative request for permission to "enlist the support" of Mr Fisher was not consistent with a mutual expectation that Mr Wollenberg would recruit a team. The fact that the proposal was that the support would be at Mr Wollenberg's expense rather than at CAI's was also not consistent with Mr Wollenberg's overall case about the mutual expectation that Mr Wollenberg would simply lead a team of consultants all paid by CAI. I think that there is considerable force in both points.
- In fact Mr Fisher did not make any charge to Mr Wollenberg for his services, and CAI paid his expenses. A few days later Mr Wollenberg reported that he had some properties to view, including one in Bournemouth. Mr Fisher prepared a list of local authorities to be pursued in the light of recommendations for the location of new casinos. Hr Bernkop-Schnürch arrived in the UK in June. Mr Wollenberg e-mailed him the proposed itinerary. It was to include a visit to two or three sites in Bournemouth; and dinner with Mr Lorenz, an estate agent, and a meeting with Mr Trevor Shelley "another estate agent specialising in the entertainment area". These meetings duly took place. Both Mr Lorenz and Mr Shelley wrote follow up letters pitching for the business. Mr Fisher supported the proposal to appoint commercial agents for a number of reasons. There was the "sheer volume of work" which required "more hands than we have got between us"; the agents' national knowledge of market rents and terms; and the perception that "their network of contacts will inevitably be wider than ours". Mr Wollenberg said in evidence that Mr Fisher was telling him what he already knew. However, Mr Wollenberg also said in the same part of his evidence that in May the Casino Advisory Panel had published the list of preferred locations of which there were 66. That, according to Mr Wollenberg's oral evidence, was "not something we could have predicted". He added a few moments later that "What was new was the scale of the job. It was huge". This evidence was also telling. It was the realisation, after the event, that the job was "huge", and that more hands were needed, that prompted the recruitment of the agents, rather than any preconceived plan. As Mr Wollenberg put it in a later part of his cross-examination:
- Discussions ensued about the terms of the retainer. Mr Fisher raised with Mr Lorenz the question of fees in the case of "introductions of sites from Tony W or me" where Mr Lorenz then took over the negotiation of terms; to which Mr Lorenz proposed charging a half fee. Mr Fisher passed this on to Mr Wollenberg who agreed. Mr Fisher followed this up with an e-mail to Mr Wollenberg on 29 July in which he asked Mr Wollenberg to e-mail the terms to CAI "plus this point regarding situations we introduce" and to get them to approve. Mr Fisher added a detailed action plan. After discussions between Mr Lorenz and Mr Shelley the revised proposal was that both their firms would be appointed as joint sole agents. The retainer was formalised in a letter dated 21 September 2006 from Mr Lorenz to Dr Lehrner, and counter-signed by Hr Bernkop-Schnürch on 20 October. The two firms were instructed as joint sole retained agents "to uncover sites, existing buildings and development opportunities which will meet your requirements." Their remuneration was as follows:
- The contractual arrangement was thus a direct one between the agents and CAI. The reference to CAI's "consultants" is a reference to Mr Wollenberg. What, therefore, is also significant is that the terms of the retainer contemplate that Mr Wollenberg might introduce sites himself.
- On 5 June 2006 Mr Wollenberg met Mr Paul Gregg. Mr Gregg was a business acquaintance of his who had been a very successful businessman and who was a shareholder in Everton FC. Mr Wollenberg had encountered him before, when he had been working on behalf of Las Vegas Sands. Mr Gregg had heard that Mr Wollenberg was involved in a new initiative with CAI and was interested in it. They discussed the possibility of a joint venture with CAI for forming a new company to apply for licences in the UK. Mr Gregg followed up the meeting with an e-mail on 13 June. He confirmed his interest in the proposed joint venture. He suggested that they should form a new company which, in the result, became Apollo. He suggested that CAI should own 52 per cent of the equity and Apollo shareholders the remaining 48 per cent. He suggested that Apollo shareholders should "source the opportunities in each area that we agree to be responsible for". He suggested the appointment of a leisure architect; Collier CRE as property consultants; a local PR company, and an advertising agency. Mr Wollenberg made some suggestions for changes to this proposal, but said that with those changes he would recommend it. Mr Gregg then met representatives of CAI and Mr Wollenberg. Following that meeting he e-mailed again on 16 June. He confirmed his interest in forming a new joint venture company to apply for a licence to operate in each of the successful local authorities. He again proposed the name Apollo. As regards share ownership his revised proposal was:
- Mr Wollenberg sent on this proposal to CAI and said that it should be discussed.
- On 1 November 2006 Mr Wollenberg reported to CAI that he was "still trying to close with Paul Gregg so as to move his opportunities along quickly". The joint venture agreement was signed on 27 November 2006. The copy in the case papers is an unsigned version. The agreement is made between CAI and Pointfront Ltd (a company owned or controlled by Mr Gregg). It recites that the parties had agreed to incorporate a new company for the purpose of exploiting the new gaming regime in the UK. The main objective of the new company would be to apply for and obtain licences from local authorities to enable it to operate large or small casinos in relevant areas. Clause 2.1 of the agreement envisaged that the parties would fund the new company in agreed proportions. The initial capital of £100,000 would be provided by the parties in proportion to their shareholdings. By clause 2.3 the shareholding was to be divided between CAI (60 per cent) and Pointfront (40 per cent). Each of the parties was to use all reasonable endeavours to identify opportunities for applications for licences. By clause 10.1 the parties agreed that:
- A meeting took place on 7 December 2006 attended by Mr Wollenberg, Mr Gregg and Mr Fisher. According to the agenda, the topics discussed were a review of existing sites; a review of prospective sites; a corporate brochure, a road show and agents. All the prospective sites were to be investigated by Mr Gregg. Mr Wollenberg's evidence is that by 2007 Mr Gregg "had assumed a pivotal role in the assembly and negotiation of potential casino opportunities and he regularly produced progress reports for me, some of which were also sent to CAI". On 22 February 2007 Mr Gregg produced a strategic overview. He set out his overall view that they should present themselves as the group that had a wider view on what could be achieved in each town beyond the supply of a casino. He recommended the production of a glossy brochure. He then commented individually on eleven potential locations.
- Mr Wollenberg said in his witness statement (§ 50):
- In my judgment this is an exaggerated view of the position. Mr Gregg was not "recruited" by Mr Wollenberg as a team member. He was introduced as a principal who agreed, through his company, to enter into a joint venture with CAI as principal. He was not part of CAI's team. He and CAI were together advancing the interests of Apollo in which they each had an interest. Thus it is also an exaggeration to say that Mr Gregg was part of Mr Wollenberg's "equipment". Nor, as it seems to me, as the story unfolded, did Mr Gregg accept direction from Mr Wollenberg. If anything, it was the other way round. Even Mr Wollenberg accepted that Mr Gregg was "taking a very prominent role … he was extremely active, very proactive …" Mr Fisher also agreed in his evidence that Mr Gregg was not going to be led by anybody. He would treat Mr Wollenberg as an equal. He would defer to him if it was important, but he was his own man and a strong personality. He described Mr Gregg as having assumed a "sort of managing director role" with Mr Wollenberg as chairman. His final word on the subject was that Mr Wollenberg was "very much in the loop, he very much kept things stable and progressing".
- In February 2007 Mr Shelley sent Mr Fisher a pitch from a PR company called Tamesis. He passed it on to Mr Wollenberg. On 5 March Mr Wollenberg, Mr Fisher and Mr Gregg interviewed Mr Hanley from Tamesis for nearly two hours. Mr Wollenberg reported to Hr Bernkop-Schnürch that he was satisfied that Tamesis had the necessary skills; and agreed that they should start work immediately. Mr Fisher was to give them the full briefing on a site by site basis.
- On 20 March 2007 Mr Gregg e-mailed Hr Bernkop-Schnürch with the suggestion to bring in a design firm, Purple Fish, to deal with the corporate image; and to review marketing. He and Carol Parry of Purple Fish met CAI in Austria later that month. Mr Gregg also brought in a firm of architects called Carey Jones. They did much of the design work supporting presentations to site owners and local authorities.
- On 22 March 2007 Mr Fisher entered into a formal consultancy agreement with CAI. CAI were described as "the client". Mr Fisher agreed to advise the client in securing casinos in the UK on behalf of Apollo as joint venture company. The consultancy was to last for four months in the first instance; and Mr Fisher was to be paid £3,000 per month. In the event the consultancy lasted until the autumn of 2010.
- Mr Cullimore had been employed by CAI as the manager of its Brussels casino. By an agreement dated 1 September 2007 (but not signed until 15 October) he entered into a consultancy agreement with CAI. Under that agreement his duties were "to assist and advise [CAI] in securing casinos in the United Kingdom". Hr Bernkop-Schnürch said that Mr Cullimore was CAI's representative in the UK.
- Mr Nuttall was recruited in May 2008. He was working for Ladbrokes, but as Ladbrokes were disengaging from the casino market, he was looking for other opportunities. He was introduced by Mr Gregg and Mr Shelley whom he met in mid-May. He had obtained Mr Gregg's contact details from Mr Cullimore, whom he had met previously when Mr Cullimore had inspected a Ladbrokes casino in Paddington. He had also previously met Mr Gregg at MIPIM. In his e-mail to Messrs Gregg and Shelley of 14 May he set out his perception of his role as follows:
- Mr Gregg passed this on to Mr Wollenberg, commenting that he and Mr Shelley were convinced he would be a big asset. Mr Wollenberg said that it looked interesting and that he would like to meet Mr Nuttall "when you judge the time to be right". One of Mr Nuttall's advantages was that he already knew the casino market and had many contacts and opportunities. On 7 June Mr Gregg reported to CAI that:
- He said that Mr Nuttall had "embarked on an old licence opportunity in Glasgow" which Mr Gregg and Mr Shelley were going to look at. It seems from Mr Wollenberg's response that he had not yet met Mr Nuttall; and said that a meeting should be arranged with CAI and himself before the terms being formalised. He repeated this to Hr Bernkop-Schnürch in his e-mail of 7 June. I have not seen any formal retainer of Mr Nuttall at this time, and it appears that Mr Gregg paid his fees. However, in December 2008 a fee backdated to 1 August 2008 was paid by CAI as part of an overall settlement with Mr Gregg, which I will deal with in due course. Hr Bernkop-Schnürch suggested in his evidence that he already knew Mr Nuttall. But the tenor of the e-mail traffic is that he wanted to see Mr Nuttall before agreeing to his recruitment. I reject Hr Bernkop-Schnürch's evidence on this point, which is contradicted by the contemporaneous documents.
- Even before the joint venture agreement was signed, Mr Gregg was undertaking a considerable amount of activity to advance the joint venture. He visited many potential sites; made presentations to developers, site owners or their agents, and commissioned design work. By the spring of 2007 he was already complaining that he had spent a lot of money for which he wanted reimbursement from the joint venture company. In an e-mail of 18 April he said that he had spent £35,000 in printing etc. and £7,500 in travel costs. He was pressing for a budget to be in place with effect from 1 June.
- On 25 May Mr Wollenberg e-mailed Hr Bernkop-Schnürch. He referred to positive news on Milton Keynes and the NEC in Birmingham. He said that "you might consider that it is worth incurring the expense in now applying for an operator's licence." He added that he understood that Mr Cullimore may be recommending that "but I had wanted to spare you the expense whilst such major uncertainties remain. Perhaps we should meet to discuss." Mr Gregg's view was not so tentative. He e-mailed Mr Cullimore a few days later:
- In response to this Hr Bernkop-Schnürch said that he agreed with Mr Gregg; and Mr Wollenberg said that he would "start the process immediately". This is not the response of the team leader. Following a meeting with Mr Wollenberg Mr Shelley wrote to Mr Gregg on 11 June setting out the status of all the 16 locations under consideration. Mr Gregg, Mr Shelley and Hr Bernkop-Schnürch were having detailed discussions about a potential site in Scarborough. Mr Wollenberg was kept informed; but his activities at this time were directed towards obtaining the operator's licence. In so far as those discussions required legal work on documentation Mr Wollenberg passed it on to Mr Polin.
- On 14 July Mr Gregg circulated an e-mail. He and others were due to make a presentation to the developers of the Scarborough site. He reminded Mr Wollenberg that he was to let them have wording for the agreement for lease. He continued by saying that "I think Tony's next job is to sort out the operator's licence" and then set out a number of points for Mr Cullimore to address. Mr Wollenberg replied on the subject of the wording for the agreement for lease. Towards the end of the month Mr Gregg made a presentation to the NEC. He sent a copy to Mr Wollenberg on 26 July and added that "we really need a budget from Tim and Reinhard to support this bid". On the same day there was a meeting between Mr Gregg, Mr Shelley and Mr Fisher "to review and decide on how to progress the various sites under consideration by Apollo Casino Resorts". Mr Fisher's notes of the meeting were circulated.
- On 1 August 2007 Mr Hanley of Tamesis sent Mr Wollenberg a three page letter suggesting an approach to the public affairs and public relations strategy. In his covering e-mail he invited Mr Wollenberg's comments. Mr Wollenberg passed them on to CAI with a recommendation to accept them. He replied to Mr Hanley:
- Following a meeting on 3 August (which Mr Wollenberg and others attended) Mr Hanley issued a status report. The primary sites were confirmed as Birmingham, Scarborough, Wolverhampton and Milton Keynes. Mr Wollenberg commented to Hr Bernkop-Schnürch that action lists were easier to produce than to deliver on; but that Tamesis had justified their fee.
- On 11 August Mr Gregg was pressing for completion of the joint venture agreement. He pointed out that the original agreement had expired, and that there was no formal agreement in place. He set out the position on the various locations. He said that Mr Shelley was doing all the work and that Mr Lorenz was no longer required. He estimated that the total amount of money spent to date was close to £200,000. He wanted to make progress on funding the investment company. He concluded:
- Towards the end of August Mr Cullimore circulated an e-mail about the forthcoming NEC presentation. He asked a number of questions about the logistics; and about meetings with interested parties. He also suggested that Mr Fisher liaise with the developers; and that he himself should be the principal intermediary with the architects. Although Mr Wollenberg was on the distribution list, it was Mr Gregg who replied. The work on the NEC project was being carried out by him and Mr Shelley. Mr Shelley also replied. In effect his message to Mr Cullimore was that he and Mr Gregg had spent an enormous amount of time and effort discussing schemes; and that Mr Cullimore should back off.
- Mr Gregg was simultaneously complaining to CAI about financial matters. He was unhappy that there was a budget for fees going forward, but that he had not recouped any of his own expenditure. He and Hr Bernkop-Schnürch met on 30 August 2007. Mr Wollenberg and Hr Bernkop-Schnürch may have spoken about Mr Gregg's complaints in advance of the meeting. Hr Bernkop-Schnürch summarised the outcome of the meeting in his e-mail of the following day. Among the points were that he and Mr Gregg had agreed the business model for Apollo; that agreement on the terms of the joint venture agreement was close; that each party would provide a list of costs incurred to date; and that CAI would bear the cost of the operator's licence and the assignment of Mr Cullimore to the project, in return for which Mr Gregg would not charge for his own time. Mr Wollenberg was not party to this meeting, which was plainly an important strategic business meeting both for CAI and Mr Gregg.
- In November it was learned that the pitch for the casino at the NEC had failed. Mr Gregg said that:
- He then discussed the presentation that was in prospect for a casino at Great Yarmouth. He concluded by setting out his priorities and allocating tasks among the team members. On 8 November Mr Gregg circulated an e-mail referring to an agreement in principle to build a casino in Hull. On 16 November he reported to Hr Bernkop-Schnürch that he had been offered a new casino in Nottingham; and two days later he gave a summary of the then current position on fifteen different locations. On 22 November Mr Gregg circulated an e-mail in which, among other things, he complained about Mr Cullimore. He said that he had asked Mr Cullimore to respect "the fact that I am your partner in the UK." He said that he took the view that Mr Cullimore was there "to support me when required with figures, maintaining a relationship with the gaming board and associate issues." He continued:
- I infer from this that Mr Gregg regarded himself as team leader; or, at least, that he was not part of Mr Wollenberg's team. Although Mr Wollenberg was on the distribution list for all these communications, he did not comment on any of them. Between August and the end of the year his input was limited to dealing with the application for the operator's licence. He accepted in evidence that this was legal work carried out "under the banner" of Salans; and for which Salans charged a separate fee.
- Mr Wollenberg, Mr Gregg, Hr Bernkop-Schnürch and Dr Lehrner met in Vienna on 4 January 2008. The main topic on the agenda was finance. Mr Gregg was still concerned about recouping his expenditure; and about funding going forward. However, immediately after Mr Gregg had left, Hr Bernkop-Schnürch and Mr Wollenberg had a separate meeting. That dealt with international aspects of CAI's business. Those international aspects form a different strand to this litigation, so I will postpone discussion until later.
- In January 2008 Mr Gregg and Mr Shelley made a presentation to the Torbay council about a potential site. Mr Wollenberg thanked them for their hard work. Mr Gregg was still pressing to complete the joint venture agreement. He was becoming increasingly irritated with Mr Cullimore whom he did not hold in high regard.
- In the following month Mr Wollenberg asked Hr Bernkop-Schnürch for some information about video lottery terminals (VLTs) so that he could help with VLTs in the UK. Hr Bernkop-Schnürch duly supplied it. On 11 February Mr Gregg provided another update on all the locations under consideration. On 14 February Mr Cullimore reported to Mr Gregg that he had spoken to the owner or developer of a site in Milton Keynes called the MK Bowl. Mr Gregg replied that he and Mr Shelley did not like that site as it was away from the town centre. Mr Wollenberg was not copied into this exchange. On 20 February Mr Gregg reported on an excellent meeting at Middlesborough. His e-mail was addressed to Mr Wollenberg. He also said:
- Mr Wollenberg offered to "touch base" the following day. There is no paper record of any "input … on the process" given by Mr Wollenberg; and his witness statement gave no details apart from the bare assertion, made in very general terms, that Mr Gregg looked to Mr Wollenberg for advice. What was lacking was any indication of the advice (if any) that he in fact offered. Mr Wollenberg was out of action for much of the rest of the month as a result of surgery. On 5 March Mr Gregg sent him an update. He said that:
- Mr Wollenberg thanked him for that; and asked for "a strategy chat by phone" that day. There is no evidence that the "strategy chat" took place. Negotiations about a site in Leeds had reached the stage at which a confidentiality agreement was at an advanced stage. Mr Cullimore asked Mr Gregg and Mr Wollenberg to study it. They both agreed that this task should be passed to Mr Polin. Mr Fisher raised the question who should be parties to the agreement: he suggested that both CAI and Apollo should enter into it. Mr Wollenberg replied on 8 March:
- The lack of a clear chain of command does not support Mr Wollenberg's case that he was team leader. Mr Fisher's response was to suggest a round table meeting which would (among other things) allocate individuals' roles within a future campaign. At about this time, according to Mr Fisher whose evidence I accept on this point, Mr Gregg was working very much in liaison with Mr Shelley. He carried forward doing what he saw as the priorities in identifying sites, and pushing forward sites that had already been identified. As Mr Fisher put it in his oral evidence: "Never mind what anyone else was doing, he always did that." On 30 March Mr Gregg circulated another e-mail. This proposed a wide-ranging list of agenda items. They included confirmation and appointment of personnel (solicitors, agents, PR company, design team etc); prioritising sites and agreement of budgets. The last item was:
- A meeting was arranged for mid-April. On 16 April Mr Gregg reported that they were down to heads of terms on sites at Hull, Wolverhampton, Scarborough and Torbay. The draft heads of terms were circulated for comment. Mr Wollenberg, among others, provided comments. Salans were instructed to do the legal work. Mr Gregg and Hr Bernkop-Schnürch signed the retainer letter.
- Mr Gregg and Mr Shelley continued to work on the potential site at Hull, including the preparation of a brochure. Mr Gregg informed Mr Wollenberg on 12 May. Mr Wollenberg replied that he had not realised that they were making progress on this; and asked him to let him know if he could help.
- Mr Gregg was now becoming more disgruntled about what he perceived as activities by CAI that bypassed him. He was also very dismissive of Mr Cullimore's ability. He sent an angry e-mail to Mr Wollenberg on this subject on 20 May 2008, ending by asking Mr Wollenberg to call him. He followed it up with another angry e-mail to Hr Bernkop-Schnürch on 28 May, complaining that invoices from the architects had not been paid, and complaining again about Mr Cullimore. Hr Bernkop-Schnürch prepared a draft reply which he sent to Mr Wollenberg for comment. Mr Wollenberg's advice was to deal with the situation by telephone rather than by e-mail. He offered to speak to Mr Gregg himself. Mr Wollenberg reported on the following day that he had spoken to Mr Gregg "and calmed him down". He suggested that a fresh breakdown of financial outlays be prepared and presented to the next board meeting of Apollo. Hr Bernkop-Schnürch e-mailed to thank Mr Wollenberg for his mediation. Mr Cullimore in fact left at the end of May 2008, to take up a new position with Ritz Casinos. However, Mr Gregg was soon aggrieved again, this time by CAI's decision to open a new bank account without consulting him. On 7 June Mr Gregg circulated another e-mail giving a progress report on all the locations under consideration. He also said that he had agreed that Mr Nuttall would join the team at the end of July; and that Mr Nuttall was embarking on an opportunity in Glasgow. I will deal with Glasgow separately, since it is the only project in the UK that has (so far) come to fruition.
- On 8 August Mr Wollenberg reported that a Personal Management Licence had been granted to him; and that the way was now clear for the grant of an Operator's Licence to CAI, which he expected in September. On 13 August 2008 there was a meeting in London. In an e-mail of the following day Mr Gregg described it as "a difficult meeting". Mr Gregg clearly thought that his contribution to the joint venture was undervalued by CAI. He proposed a new way of dealing with costs and expenses, which included an allowance for his own costs and expenses. He also proposed that "we" will invoice "you" for "your" share of Mr Nuttall's consultancy, and Mr Wollenberg's remuneration. He said that he did not require Mr Fisher's services. He added:
- He reiterated the value of Mr Nuttall and his connections, and the value of a result in Glasgow. On 27 August Mr Gregg proposed a visit to the UK for Hr Bernkop-Schnürch to include site inspections at both Glasgow and Bournemouth. He also wanted to reach agreement on the terms of Mr Nuttall's consultancy.
- In early September 2008 Mr Shelley raised with Mr Wollenberg the question of his own fees. His fee proposal had originally dealt only with "new" licences and had not covered "old" licences. He proposed that the same fee structure should apply to both. Mr Wollenberg replied that the JV should be got onto an even keel before addressing the fees issue. However, he added that he was supportive of Mr Shelley's position and the need to review and update his fees. Mr Wollenberg called a meeting with Mr Gregg and Mr Shelley which took place on 5 September 2008. He reported to CAI that they had made constructive progress. Mr Gregg had agreed there was a 60:40 relationship along the lines of the JV and that he would be responsible for 40 per cent of costs going forward. However, he was unwilling to accept financial responsibility for the PR company, which he thought was unnecessary. He wanted every deal to be "pumped into the JV". He accepted that Apollo had already hired Mr Nuttall on a deal which approximated to Mr Nuttalls' request to CAI. Mr Wollenberg thought that Mr Nuttall's package should be more slanted towards success. He made other points as well.
- On 12 September Mr Wollenberg e-mailed Hr Herzfeld saying:
- Hr Herzfeld replied:
- The Operator's Licence came through on 19 September. Mr Wollenberg sent CAI a copy on 23 September. CAI were delighted; and Hr Herzfeld thanked Mr Wollenberg for his "continuous efforts and support".
- The situation as regards Mr Gregg was still causing problems. A legal analysis was carried out by Mr Polin. On 3 October Mr Wollenberg advised that in his view the necessary level of mutual trust and confidence to sustain a joint venture was lacking. His advice was that CAI should attempt to achieve a negotiated settlement with Mr Gregg which had the effect of changing his status to one of consultant, rewarded on each successful licence application. He advised that a similar agreement should be made with Mr Nuttall, although in his case with a retainer element as well. Mr Gregg was not opposed to changing the arrangement; although he still wanted to recover his expenses to date. A meeting took place in October at which the main terms of a revised deal were agreed. Mr Wollenberg learned of the proposed terms, and commented on them in his e-mail of 20 October to Hr Herzfeld. Mr Polin drafted a proposed settlement agreement on which Mr Wollenberg made detailed comments. Mr Polin produced a revised draft on which Mr Wollenberg again made comments. Mr Polin then sent them to Mr Gregg and Mr Nuttall in mid-November.
- The settlement agreement with Mr Gregg was signed on 17 December 2008. Mr Gregg in effect sold his shareholding in Apollo to CAI for £1 and the reimbursement of his time and expenses in the sum of £200,000. At the same time Apollo appointed Mr Gregg and Mr Nuttall as consultants. Their remuneration under the agreement was to consist of a fixed fee and a bonus fee for each casino opened in the UK. The fee was £20,000 per month (between them); and it was backdated to 1 August 2008. In addition they were to be entitled to a 5 per cent share of the profits of each casino for a period of ten years in the case of casinos operated or owned by CAI "as a result of an introduction and material involvement of" Messrs Gregg and Nuttall. The bonus did not apply to the Glasgow project. The consultancy was to last until 30 October 2009.
- Mr Wollenberg was concerned to ensure a smooth handover. He had e-mailed Hr Herzfeld on 17 November 2008. In that e-mail he said that he had been keeping in close touch with Mr Shelley so as to ensure that he remained fully motivated. He noted that Mr Shelley had been largely responsible for identifying the various opportunities which CAI were pursuing and Mr Wollenberg would be "looking to him to advise us as to the best terms on which these can be pursued". He recommended that Mr Shelley's fees be increased. In that same e-mail he also asked for clarification of his own contract. He said that paragraph c) of the agreement should be "clarified" so that it would "apply to any casino project (old or new licence) undertaken in the UK by [CAI] irrespective of the direct source of the deal introduction." He added:
- Hr Herzfeld was not entirely receptive to the proposal to increase Mr Shelley's fees; and he did not at first answer Mr Wollenberg's request for "clarification" of his own contract. The "clarification" came at the end of January 2009. By this time Mr Shelley had unexpectedly died. The email sequence is important, so I must quote it at length. It begins with an e-mail from Mr Wollenberg to Hr Herzfeld of 30 January. He referred to his e-mail of 17 November and continued:
- Hr Herzfeld's first reply, on the following day, was:
- Mr Wollenberg responded:
- The final e-mail in this chain from Hr Herzfeld was:
- In the meantime Hr Bernkop-Schnürch had spent a few days in the UK with Mr Nuttall visiting a number of potential locations. Mr Nuttall also presented him with budget figures for expenditure over the next six months from February 2009. Mr Nuttall also enquired of Mr Wollenberg whether Mr Fisher was still employed by CAI and was told that he was.
- In March 2009 Mr Gregg reported on the general state of progress. The council were positive in Hull and they were also making progress in Bath. Hr Bernkop-Schnürch was due to visit Milton Keynes. However, Mr Gregg was privately still expressing frustration with CAI. He thought that they had no budgets, had given no thought to concept content or layouts, and had no technical schedule of support. He asked Mr Wollenberg for a meeting. A meeting did take place principally in connection with Milton Keynes. On 21 April Mr Polin circulated a progress report on legal documentation on all the sites under consideration. Five sets of heads of terms were under negotiation; and in one case (Milton Keynes) had been agreed but not yet executed by CAI.
- In mid-April Hr Bernkop-Schnürch informed Mr Nuttall that CAI had decided to abandon many of the projects that were under consideration. The casualties were Middlesborough, Hull and Wolverhampton. They were, however, still interested in Milton Keynes and Bath; and had also confirmed the deal at Glasgow. Mr Gregg protested and called for an urgent meeting. On 18 May Hr Herzfeld e-mailed Mr Gregg and Mr Nuttall (copied to Mr Wollenberg) to tell them that CAI wanted to concentrate on Milton Keynes, Bath and Newham. They were also interested in pursuing Glasgow.
- On 14 June Mr Nuttall reported that he was making good progress with securing a position at Milton Keynes and Bath. He also enquired about his own position under his and Mr Gregg's agreement with CAI. Mr Wollenberg said that although he would support a request for more remuneration "it would be ill-judged to make the request at this time". He said that the sites at Milton Keynes and Bath should be secured first. But he acknowledged that Mr Nuttall had been "a huge asset to the CA's UK plans". Mr Wollenberg then reported to Hr Bernkop-Schnürch that he had told Mr Nuttall not to consider requesting an extension of his contract and increased remuneration "until we had successfully concluded the Bath and MK deals on our terms".
- A further iteration of the head of terms for Milton Keynes was sent by Hr Bernkop-Schnürch to Mr Fisher on 8 September 2009. Mr Fisher sent it on to Mr Wollenberg on 30 September. At the beginning of October Mr Nuttall pressed his request for reconsideration of the agreement between CAI and him and Mr Gregg. Mr Wollenberg e-mailed CAI about that on 6 October. He hedged his bets on whether the agreement should be renewed; but added:
- On 13 October Mr Wollenberg attended a meeting at which heads of terms for Milton Keynes were signed. He reported on this to Hr Herzfeld and said that he was chasing the Bath documents. Having thought further about "the Gregg/Nuttall situation" he had come to the view that their contract should be extended for six months "so as to enable a smoother transition for Bill and I". He added that during that six month period "Bill and I will ensure that we are involved in all material developments." Hr Herzfeld e-mailed him on 14 October. He had lost trust and confidence in Mr Nuttall whom he regarded as a "loose cannon". Mr Wollenberg replied that he and Mr Fisher would "leave no stone unturned in advancing these valuable projects" for CAI. His more exasperated comment to Mr Fisher was "Oyvey". On the following day he urged CAI to be fully co-ordinated about the decision not to renew the contract. He also reported threats by Mr Nuttall that projects might "go elsewhere" if there were no renewal. He said that it was important that he personally should now deal with the principals at Glasgow, Milton Keynes and Bath and that there should be no time gap. He suggested that he and CAI should talk, to which Hr Herzfeld agreed. By 21 October Hr Herzfeld had drafted a letter informing Mr Gregg and Mr Nuttall that their consultancy would end. Mr Wollenberg passed the draft to Mr Polin for comment. Mr Polin proposed some changes to the draft, which CAI accepted. The letter was eventually dated 21 October 2009.
- On receipt of the letter Mr Gregg telephoned Mr Wollenberg. He confirmed that he would do nothing to disrupt the three UK projects and agreed to send Mr Wollenberg all the relevant papers. Mr Wollenberg reported this conversation to CAI. He also contacted Mr King and told him that Messrs Gregg and Nuttall would no longer be involved. There then followed a series of e-mail exchanges dealing with which projects would be "reserved" to CAI and which Mr Gregg would be free to pursue on his own behalf.
- One part of the strategy for the identification of suitable sites for casinos was to look at the stadia of leading football clubs. At the beginning of July 2006 Dr Lehrner visited West Ham's stadium at Upton Park which was another potential casino site. On 14 August Mr Wollenberg and Mr Fisher had a meeting with Mr Arthur of BNB which owned the Bournemouth site. Mr Wollenberg reported the upshot of his meeting to CAI on 17 August 2006.
- Through August and early September work was going on on the preparation of an advertisement for insertion into the Estates Gazette and other trade journals. The co-ordinator of this work was Mr Fisher, although Mr Wollenberg was kept in the loop. A draft press release was sent to him for approval. His reply was "OK by me". Both Mr Shelley and Mr Lorenz put forward a number of potential sites which were reviewed in the first instance by Mr Fisher; and it was Mr Fisher who went on inspection visits. Again Mr Wollenberg was kept in the loop.
- In his witness statement Mr Wollenberg says that he met "everyone as regularly as possible". Between August and December 2006 he refers to four meetings: less than one a month. Three of them were with Mr Fisher and one or other of Messrs Lorenz and Shelley; and the fourth one was with Mr Gregg. He refers also to major project management meetings with the whole team on 20 October and 14 November 2006. The former meeting was designed to "take stock and prioritize activities for the next few weeks." This meeting was written up by Mr Fisher on 31 October. He records that at the meeting "it was decided to focus on the most promising of the various sites submitted by land owners or their agents." Nine sites were listed; and in addition Milton Keynes and two other locations were under consideration.
- Mr Wollenberg says in his witness statement (§ 55):
- I accept that Mr Wollenberg was kept fully informed because he was on the distribution list of almost all e-mails; but it is striking that he did not often comment on them in any detail. It is convenient to consider each individual site separately rather than deal with all of them together, as, indeed, Mr Wollenberg did in his witness statement.
- Mr Wollenberg had three meetings about potential sites in Bournemouth. It was on 12 June 2006 when he and Hr Bernkop-Schnürch met Mr Arthur of BNB Developments, the site owners. Mr Wollenberg and Mr Fisher visited again in July. On 24 July he received subject to contract proposals from one of the site owners for a lockout agreement potentially leading to heads of terms with CAI. Mr Wollenberg forwarded the proposals to Mr Fisher who commented on them at length in his e-mail of 29 July. It was Mr Fisher who replied to Mr Arthur by e-mail commenting on his proposals. Mr Fisher reported to CAI on the state of the negotiations on 10 August. His view was that BNB's proposals were too high from CAI's point of view; and asked for a "bottom line" before he started talking to BNB. Mr Wollenberg was copied in on the e-mails. Mr Wollenberg's final meeting was with Mr Arthur in London in August. Mr Fisher attended that meeting, and it was he who wrote it up. The meeting discussed the details of proposed payments to BNB. Mr Wollenberg sent the note on to CAI, commenting:
- On 4 September 2006 Mr Wollenberg e-mailed Hr Bernkop-Schnürch. He said that Mr Arthur needed to know whether there was a deal and asked what counter-proposal if any he could make to him. There the paper trail goes cold. Nothing came of the Bournemouth site. It is not apparent from the paper trail that Mr Wollenberg assessed whether the site was viable; negotiated with the developers, or project managed its pursuit. It is true that he was kept informed; and passed information on to CAI.
- In his witness statement Mr Wollenberg says that he asked Mr Fisher to pursue an opportunity at Milton Keynes as early as June 2006. He said that Mr Fisher prepared a report on 29 July 2006 following a site visit. However, the document to which he referred is in fact dated 29 July 2007 (rather than 2006); and on 5 June 2006 Mr Fisher had prepared a list of local authorities in two columns: one to be pursued and the other not to be pursued. He sent this to Mr Wollenberg on the same day and Mr Wollenberg described it as "perfect". Milton Keynes was in the "not to be pursued" column. In fact nothing seems to have been done as regards Milton Keynes during 2006, except that Mr Fisher made a visit to Milton Keynes and Luton late in the year. Mr Wollenberg's evidence on this point is incorrect.
- Mr Fisher did prepare a report on Milton Keynes on 11 February 2007. He commented on four sites that had been offered to Apollo Casinos International. They were:
- Mr Shelley was in contact with Jones Lang Lasalle about the Theatre District site. They sent him a questionnaire about CAI, which Mr Shelley passed to Mr Fisher. Mr Fisher circulated it for comment. Although Mr Wollenberg was on the circulation list, he does not appear to have offered any comments. Mr Gregg reported to Hr Bernkop-Schnürch on Milton Keynes on 22 February. Some ten days later Mr Gregg and Mr Shelley made a presentation to Jones Lang Lasalle, which they both thought went well. Mr Wollenberg does not appear to have accompanied them, although as always he was copied in to the e-mail traffic. In early May 2007 Mr Fisher Mr Gregg and Mr Shelley accompanied representatives of the developer at Milton Keynes on a visit to one of CAI's casinos on the continent. At about that time Mr Fisher circulated a design concept prepared by architects. In the second week in May a tender document was prepared, upon which Mr Fisher commented in his e-mail of 8 May. The e-mail was circulated. Mr Wollenberg was on the circulation list. However, the Theatre District site was lost to a competitor shortly afterwards. It was Mr Gregg's view (expressed in his e-mail of 31 May) that the fact that CAI did not have an operator's licence had not helped.
- On 3 May 2007 a meeting took place in Brussels with representatives of the developers of the Leisure Plaza site. Mr Wollenberg did not attend. In early June Mr Cullimore (an employee of CAI) visited a number of sites, including the Leisure Plaza site at Milton Keynes. Mr Fisher, Mr Gregg and Mr Shelley met on 26 July 2007 to discuss a number of sites, including Milton Keynes Leisure Plaza. He was to speak to the developer and to architects in order to progress matters. Three days later he prepared a report on the site. In the following month architects' plans were prepared. However, this site was taken no further.
- The third site in Milton Keynes was the stadium site. In October 2007 Mr Gregg sent an e-mail about Milton Keynes. He thought that in order to succeed they would need English Partnerships and the council to be supportive. He asked Mr Fisher to help. Mr Fisher duly met representatives of English Partnerships on 5 November 2007.
- Attention at Milton Keynes then focussed on a site by the MK Dons stadium. In an e-mail of 25 October 2008 Mr Gregg reported to Hr Bernkop-Schnürch that he had had a positive meeting with the owners of the stadium, the council and MPs. Mr Wollenberg says in his witness statement that his team continued to progress live projects during 2009 which included Milton Keynes. He says that he visited Milton Keynes in early March 2009; and that on 27 March he met Hr Bernkop-Schnürch and Mr Nuttall to discuss, among other things, Milton Keynes. Heads of terms were agreed and then passed to the lawyers to deal with. By 21 April 2009 the form of the heads of terms had been agreed, and executed by the site owners. CAI had not yet executed them. The agreement was made between Apollo and the stadium owner. Under the heads of terms Apollo agreed, among other things, to obtain planning permission for casino and associated uses. The transaction ultimately envisaged was a 25 year lease. The heads of terms were finally signed at a meeting on 13 October 2009, attended by Mr Wollenberg. They were still, however, subject to contract heads of terms.
- Dr Lehrner and Mr Wollenberg had visited West Ham's stadium in July 2005. Mr Wollenberg, Mr Fisher and Dr Lehrner visited the site again on 30 June 2006. Dr Lehrner was enthusiastic about the visit. He had made a presentation to the board about a possible joint venture between CAI and West Ham United which had been positively received. Mr Wollenberg followed up that meeting with an e-mail to Hr Bernkop-Schnürch on 3 July. He said that it was important to maintain momentum; and that he had asked Mr Fisher to prepare a note (which he attached to his e-mail) on various types of mechanism that could apply to the deal. This e-mail was put forward as an example of Mr Wollenberg evaluating a site and as demonstrating his team leadership. In fact such evaluation as there was was carried out by Mr Fisher; and apart from the wish to maintain momentum, there is very little leadership demonstrated. Mr Wollenberg, Mr Fisher and a representative of CAI had a meeting with West Ham on 5 September 2006. Following discussions with Mr Fisher Mr Shelley drafted a letter to be sent to West Ham submitting a proposal to acquire casino premises at the ground. The proposal was for a 25 year lease on terms that Mr Shelley set out in his letter. He sent it to Mr Wollenberg and said that he would "welcome your views with regard to this proposal, in the hope that I can send this off straight away". Mr Wollenberg replied "Go for it pse". In his witness statement Mr Wollenberg says that he "authorised Mr Shelley to submit a formal proposal". In my judgment this overstates the formality of what happened. In his witness statement Mr Wollenberg said that he was "constantly emailing Mr Aldridge, the West Ham CEO, in order to further CAI's interests. I eventually succeeded in securing a meeting on 10 January 2007". The case papers contain no record of any e-mail sent by Mr Wollenberg to Mr Aldridge during this period. An e-mail from him to Hr Bernkop-Schnürch dated 5 December refers to a forthcoming meeting with West Ham "organised by Gregg"; and a further e-mail reports that a meeting had been arranged for 10 January. Hr Bernkop-Schnürch congratulated him on the meeting. The meeting took place as arranged. Hr Bernkop-Schnürch, Dr Lehrner and Mr Wollenberg attended. Mr Wollenberg, with the aid of Mr Fisher, arranged a further meeting for March 2007. That meeting was attended by Mr Wollenberg, Mr Fisher, Mr Gregg and Mr Shelley. In his witness statement Mr Wollenberg said that at that meeting "Mr Gregg and I made a further presentation to the West Ham executives". However, an e-mail from Mr Fisher of 13 March says:
- This e-mail did not allocate a role in the presentation to Mr Wollenberg. Mr Fisher confirmed in his oral evidence that the presentation was made by Mr Gregg and Mr Shelley. This was another example of Mr Wollenberg exaggerating his own role.
- On 29 April 2008 Mr Fisher wrote to Newham LBC registering interest for a large casino in Newham. In October 2008 Mr Gregg reported that he had further discussions with West Ham and with Newham BC. But this West Ham proposal seems to have gone no further.
- Mr Wollenberg was in touch with West Ham again in January 2010. He put a proposal to Karren Brady. There was a short exchange of e-mails, but she was not interested in what Mr Wollenberg had to offer. This was drawn to my attention as an example of Mr Wollenberg giving commercial advice to CAI. I do not think it was; not least because CAI were not copied into the e-mail exchange or, as far as I can see, told about it. To my mind what this e-mail exchange demonstrates is Mr Wollenberg using his own contacts (since he had encountered Ms Brady when she was at Birmingham and he was representing Las Vegas Sands) to try to find a project in a way that did not involve other consultants.
- Mr Shelley heard about the possibility of development in Luton in October 2006; and got in touch with Mr Chick at Luton Borough Council who were the potential developers. He was given some more contact details of council officers. Mr Fisher went to Luton on 17 November to find out more. He reported the outcome of his meeting to Mr Wollenberg on the same day. He said it was the "best site I have seen for this kind of casino development". Mr Fisher wondered why the council had not identified a casino operator; and thought that they were waiting to see whether Luton would be given a casino licence. He thought that CAI would not stand a good chance against existing UK operators and said that "we need to think laterally to have something extra to offer". He asked Mr Wollenberg to be aware of the situation and to "put your thinking cap on as well to come up with alternative solutions". Mr Wollenberg does not appear to have replied to this e-mail. Mr Fisher circulated his report more widely on 6 December 2006 together with some further thoughts that he had had. He said that there was to be a meeting on the following day with Mr Wollenberg Mr Gregg and himself "to review matters including Luton"; and asked for comments. Mr Wollenberg says in his witness statement that after considering Mr Fisher's report of 6 December and "after speaking with the team, I thought the opportunity was a good one, which merited being pursued. As usual, I managed and co-ordinated the approach on behalf of CAI." In my judgment this assertion is not borne out by the facts.
- Mr Fisher attended further meetings about the site. Hr Bernkop-Schnürch himself visited on 13 December following a meeting he had with Mr Wollenberg. He was pleased with what he saw and expressed CAI's interest. He concluded by saying that Mr Fisher would stay in touch. Hr Bernkop-Schnürch visited Luton again in January 2007 where, together with Mr Fisher, he met council officers. In the following month it was announced that Luton had been successful in its application for a small casino licence. The council sent out a questionnaire for potential operators. The council also invited Hr Bernkop-Schnürch to join them for dinner during the annual property fair at MIPIM in Cannes in March. He and Mr Gregg duly went. On 5 March Hr Bernkop-Schnürch prepared a first draft of the response to Luton's questionnaire. He circulated it for comment. Mr Wollenberg made what he described as a "few very minor suggestions". In the following week Mr Fisher prepared a report on all sites under consideration. So far as the site at Luton was concerned all the action points were down to Mr Fisher.
- Political turbulence in Parliament cast some doubt on whether Luton would in fact obtain the casino licence; but on 2 April 2007 Mr Fisher wrote to Mr Wellens (the potential developer) to reaffirm the commitment of the two partners to the joint venture. Mr Fisher, Mr Gregg and Mr Shelley met Mr Wellens on 21 May to discuss the layout of the casino; and on 9 October Mr Fisher met both the developer and Mr Chick of the council. At about this time architects prepared sketch plans of a proposed layout. Thereafter the project seems to have stalled.
- According to the case papers Mr Wollenberg's input into this site was limited to his "few very minor suggestions" about the response to the questionnaire. There is no paper record of his having "managed" or "co-ordinated" the approach on behalf of CAI.
- In February 2007 Mr Shelley came across a potential site in Bath. He left a message about it for Mr Fisher. On 12 February Mr Fisher sent an e-mail to Mr Wollenberg and Mr Gregg. The part of that e-mail about Bath reads:
- This e-mail envisages that it would be Mr Gregg, rather than Mr Wollenberg, who would evaluate Bath. On 23 February 2007 Mr Gregg circulated an e-mail referring to a number of different locations. It included:
- Mr Wollenberg did not comment. On 2 March Mr Shelley e-mailed Mr Gregg promising to forward a note on Bath. Mr Gregg forwarded that e-mail to Mr Wollenberg. He visited Bath on 20 March and said in his e-mail that he had had "a very good day". Mr Shelley was in touch with the developers in June. On 20 June 2007 Mr Fisher and Mr Cullimore visited the site. Mr Gregg, Mr Shelley and Mr Fisher met on 26 July 2007. Bath was one of the topics discussed. The developers were being held up by an archaeological dig; and Mr Shelley was to chase them. Mr Gregg reported by e-mail on 30 October that they were awaiting comment from the developer who had expressed continued interest. He said that the budget was critical on that site and suggested that they might have to pay £25 per square foot to win it. Mr Wollenberg was on the distribution list, but did not offer any comment either at the time or in his witness statement. Mr Gregg and Mr Shelley went to Bath on 18 November to meet the developer. He reported on 23 November that "we have had a positive response from the agent to our proposals". On 4 December he reported that "we believe that we are the developers preferred partners on the scheme"; and added that:
- Heads of Terms in relation to Bath were signed off on 6 November 2009.
- On 7 June 2008 Mr Gregg circulated the e-mail in which he said that he had agreed that Mr Nuttall would join the team at the end of July. He also reported that:
- Mr Wollenberg replied that he had understood that a meeting was to be arranged with him and CAI so that they could get to know Mr Nuttall; but added that it was "most encouraging that Mike has introduced fresh initiatives". He repeated to CAI his advice that they should meet Mr Nuttall. Mr Gregg was in agreement with this; and proposed a meeting in Vienna in late July. In the event it seems that the meeting took place in August. Immediately following that meeting Mr Gregg sent an e-mail to CAI. He reiterated the potential value of the Glasgow project and said that he was keen to move that opportunity along quickly. He offered to arrange a visit to meet the owners of the property in Glasgow. It was called the Corinthian. The owners were a company called G1 and the man in charge was Mr King. Hr Bernkop-Schnürch replied proposing a visit in September. The visit took place on 11 September and was a success. In his e-mail of the following day Mr Wollenberg said:
- Mr Gregg followed up the Glasgow meeting by pressing Hr Herzfeld for an answer. Mr Herzfeld paid a visit to Glasgow in October, where he had a meeting with Mr King. In his follow up e-mail he said to Mr King that CAI were looking forward to developing the project with G1.
- In early November CAI instructed Salans to carry out the legal work in drafting, negotiating and completing joint venture documentation for the establishment of an entertainment venue in Glasgow involving a casino and a restaurant. Mr Polin was the partner in charge. Just before Christmas Hr Bernkop-Schnürch e-mailed Mr King outlining the proposed deal.
- In February 2009 CAI worked through financial projections for the Glasgow project. Hr Bernkop-Schnürch circulated them on 10 February to Messrs Wollenberg, Gregg and Nuttall. Mr Wollenberg does not appear to have commented on them. On 9 April Mr Gregg pressed CAI for feedback on a space plan that Mr King had prepared for CAI. CAI replied that they would address matters shortly. Mr Gregg thought that the layout was "great", but did not "spark" CAI in any real way. His view was that they had not done enough homework on the city and had no confidence in the site. He concluded:
- Mr Wollenberg did not agree with this assessment. He told Mr Gregg that CAI had carried out a demographic analysis and had received "most favourable feedback". He said that it was "incumbent on us together with Stefan King to come up with a different [financial] model." On 13 April Mr Gregg and Mr Wollenberg exchanged e-mails on the structure of the deal at Glasgow. Mr Nuttall agreed to speak to Mr King. On the following day Mr King complained to Mr Wollenberg that no one from CAI had looked at the layouts. He pressed for confirmation of CAI's interest in Glasgow. CAI remained interested in Glasgow, despite a severe cull of other projects in the spring of 2009. In the summer of 2009 work started on the drafting of the legal documentation.
- Mr Gregg and Mr Nuttall ceased to be engaged by CAI at the end of October 2009. Mr Wollenberg contacted Mr King to tell him that he would be taking "a more proactive role" which Mr King said that he welcomed. By the middle of December the legal documentation was far advanced. However, contrary to Mr King's hope the documents had not been finalised by the end of the year. Mr Wollenberg pressed CAI about this on 12 January 2010, pointing out that Mr King now had 60 workmen on site carrying out building works. CAI replied on 18 January saying that the documents had now been checked by their in house legal team without any major comments. However before they could sign they still needed to agree the design brief and cost estimates with Mr King.
- At the beginning of 2008 Mr Wollenberg and Mr Gregg travelled to Vienna to meet Hr Bernkop-Schnürch and Dr Lehrner. The purpose of the meeting was to provide them with an update on progress in the UK, and in particular to deal with a number of Mr Gregg's concerns. Following that meeting Hr Bernkop-Schnürch told Mr Wollenberg that as a result of a corporate restructuring CAI would be assuming responsibility for the online gaming activities of the Casino Austria Group. Mr Wollenberg said that he had had experience in those fields and had been a business consultant to operators in those fields. Hr Bernkop-Schnürch told Mr Wollenberg that he thought that Italy would offer great potential for expansion, especially in the field of video lottery terminals (VLTs). Mr Wollenberg had had dealings with a lawyer in Rome called Quirino Mancini with whom he had a close relationship. Avv Mancini had an excellent knowledge of the Italian gaming market. Mr Wollenberg thought that Avv Mancini could be extremely valuable in analysing the potential in Italy and in proposing appropriate business opportunities there. He did not disclose this to CAI at the time. Mr Wollenberg and Hr Bernkop-Schnürch informally agreed that Mr Wollenberg's activities would be expanded; his retainer would be increased, and he would also be entitled to a 4 per cent success fee along the lines of the 2005 agreement. Hr Bernkop-Schnürch's witness statement said that in January 2008 Mr Wollenberg approached him and suggested that he could help CAI in international expansion. In so far as this suggested that the initiative came from Mr Wollenberg, I reject the suggestion. I accept Mr Wollenberg's evidence that the question of expansion into online gaming and the potential for expansion into Italy were raised by CAI; and that it was in that context that Mr Wollenberg suggested that he could help.
- There followed a series of e-mails. Mr Wollenberg's e-mail of 8 January said that he was content to wait until March for the formalisation of the extension of his sphere of activities but said that it was sensible to record that "my existing 4% arrangement will apply to any such initiatives which I take on your behalf". However, he also said that he was immediately effecting an introduction of CAI to Orglot, the Russian lottery, where he thought there was a business opportunity. By his e-mail of 14 January he said that he had looked at Win2day and was confident that he could some up with "constructive proposals in short order". He followed this up with an e-mail of 17 January in which he also enquired about payment of his increased retainer. In the same e-mail he said that he had spoken to "my Rome lawyer" who recommended obtaining the appropriate licences in Italy for VLT and sport betting businesses. Hr Bernkop-Schnürch replied on the following day saying that they had "touched on the matter internally" and were "very glad to have you on board also regarding lotteries and related products." Mr Wollenberg replied that he "couldn't be more enthused", and suggested that he draft a short amendment to the contract.
- On 24 January Mr Wollenberg e-mailed Avv Mancini to say that it looked like "I've got you a new client". Avv Mancini replied thanking him for the referral. On 29 January Mr Wollenberg sent CAI a draft of the new agreement. On the following day he asked Avv Mancini some questions about licensing in Italy. Avv Mancini replied on 1 February; and Mr Wollenberg passed on his advice verbatim to CAI (although without revealing his source). He also said that he had requested the lawyer to proceed with the remote gaming licence application. In the next few days Mr Wollenberg revealed the identity of his Italian contact; and sent CAI Avv Mancini's draft retainer letter. The retainer was in two parts. The first was legal and regulatory advice, for which the charge would be made at an hourly rate. The second was described as:
- The fee for this service was to be a one-off finder's fee of € 25,000. There is no doubt that the introduction of Avv Mancini was Mr Wollenberg's idea; and that CAI were introduced to him to advance their business interests in Italy rather than because of any specific need for Italian legal advice. The "match-making" service was plainly of cardinal importance. Hr Bernkop-Schnürch accepted as much in cross-examination. But Avv Mancini's legal advice was also useful.
- Hr Bernkop-Schnürch enquired of Mr Wollenberg whether "these guys [were] fee producers or real assets". He added:
- Mr Wollenberg replied that CAI would be in excellent hands with Avv Mancini; and that anyway "he will report to me and I will monitor closely". Mr Crow suggested that the reference to "results" was a reference to business results rather than legal work. I do not think that it was. First, the "scheme" which was not yet in place was the scheme for VTLs; and what Mr Wollenberg had asked Mr Mancini to do was to apply for a licence, even though the scheme was not yet in place. Second, in so far as Avv Mancini was going to charge for business results, his retainer letter stipulated a one off fee of €25,000. That fee was not therefore dependent on time spent or hourly rates. On 22 February Mr Wollenberg chased Hr Bernkop-Schnürch about Avv Mancini's retainer letter.
- In early March Mr Wollenberg was trying to set up meetings between CAI and various people. One was Mr Holley, the former CEO of Camelot, and now the CEO of Valmer Leisure Ltd; another was with an Israeli company and the third was with Avv Mancini. A meeting was arranged for 18 March, and in the run up to that meeting Mr Wollenberg chased again. On 18 March Avv Mancini made a presentation to CAI on the Italian gaming market. He gave an overview of sports betting, bingo, lotteries, slots and table gambling. Mr Fisher was present and made a full note. Mr Wollenberg was unable to be there because he had recently undergone surgery. At the end of the meeting Avv Mancini was asked to obtain a licence for CAI. Mr Holley also gave a presentation on that day. He followed this up with an e-mail exchange with Hr Herzfeld in April. On 23 April Mr Wollenberg reminded Hr Herzfeld of the need to respond to Mr Holley.
- Through April Mr Wollenberg chased CAI for the formalisation of his own agreement. On 10 April Avv Mancini e-mailed Mr Wollenberg complaining that he had had no follow up since the meeting in Vienna on 18 March. Mr Wollenberg replied to say that CAI definitely wanted to engage him. On 14 April Hr Bernkop-Schnürch e-mailed Avv Mancini direct to ask for his opinion about a possible engagement with an Italian company with a sports betting licence in Italy. Avv Mancini was on holiday at the time; but he replied at length on 21 April on his return. However by early May Avv Mancini's retainer had still not been settled; and he prepared to submit a bill for the advice he had given thus far. It was not until June that the retainer letter was signed.
- On 11 June Avv Mancini sent Mr Wollenberg a summary of recent developments in the Italian gaming market. He explained that:
- Towards the end of June further e-mails were exchanged between CAI and Mr Wollenberg about his own agreement. Some changes to the drafting were proposed by CAI and accepted by Mr Wollenberg. The agreement was eventually signed on 27 June 2008. I have already quoted its terms. Mr Matthias suggested that CAI were dealing with Mr Wollenberg as their lawyer. I disagree. It was plain to CAI that they were engaging Mr Wollenberg (or extending his activities) as their business consultant. He had performed that role under the 2005 agreement for some years. Moreover, since the purpose of the 2008 agreement was international expansion, and Mr Wollenberg's legal qualification was parochially English, CAI could have had no real belief that it was his legal skills that were the content of the 2008 agreement. In addition, Mr Wollenberg had already introduced CAI to Avv Mancini as the Italian lawyer. It was clear, therefore, that the legal services, at least in Italy, were going to be performed by Avv Mancini, rather than by Mr Wollenberg.
- In the following week Avv Mancini passed on to Mr Wollenberg advice that he had given CAI; and Mr Wollenberg made some comments on it to CAI. He also discussed it with Hr Bernkop-Schnürch at one or two meetings in July. This all related to a proposed deal with a company called Isibet, which came to nothing. However, during the course of the investigations Avv Mancini carried out detailed analyses, including financial analyses.
- On October 2008 Avv Mancini was contacted by Sig Schiavolin, the CEO of an Italian company called Cogetech. He reported this to Hr Bernkop-Schnürch on 24 October 2008. He described Cogetech as "one of the two largest and most successful Italian providers." Sig Schiavolin was looking for an introduction to an Austrian company; and Avv Mancini thought that it would be worth introducing him to CAI. He envisaged "an introductory discussion which … may lead to an even more ambitious and strategic partnership/cooperation between the Italian and the two Austrian companies." He suggested arranging a meeting in November. Hr Bernkop-Schnürch replied on 29 October, saying that CAI were interested in meeting Cogetech. Mr Wollenberg was not copied in to this correspondence. In early November 2008 Mr Wollenberg and Avv Mancini spoke on the telephone. Avv Mancini wanted to update Mr Wollenberg on his "most recent dealings" with CAI. The planned meeting between CAI and Cogetech took place in Milan on 13 November 2008. Mr Wollenberg was not there; but he e-mailed Avv Mancini on the following day to find out what had happened. Avv Mancini replied that there had been "an introductory meeting with no set agenda"; but that he had the feeling that both companies liked each other. It was likely that there would be a follow up meeting in Vienna. On 17 November Hr Bernkop-Schnürch e-mailed Sig Schiavolin thanking him for his presentation which was "most interesting".
- On 28 November Hr Bernkop-Schnürch emailed Avv Mancini. He said that they found the meeting in Milan useful. After consideration CAI had decided that co-operation with Cogetech in the field of horse betting licences should be explored further. Online gaming was a further possibility for co-operation. Hr Bernkop-Schnürch asked Avv Mancini to discuss this further with Sig Schiavolin and "get back with a feedback". Avv Mancini met Sig Schiavolin on 3 December. He passed on a number of Sig Schiavolin's suggestions about possible areas for co-operation between the two companies. Hr Bernkop-Schnürch suggested another meeting early in the new year. The meeting was arranged to take place in Vienna on 20 January 2009. Mr Wollenberg was not copied in on any of this e-mail traffic. Avv Mancini injured himself playing football and was unable to go; but the meeting took place nevertheless. Hr Bernkop-Schnürch reported that "we had a fruitful meeting with Fabio yesterday and discussed a possible cooperation in the upcoming tender for scratch lotteries … as well as a possible cooperation to establish and operate mini casinos." They were due to meet again in London the following week. In mid February they planned a follow up meeting in Rome.
- Avv Mancini was concerned that he was not being kept fully informed about CAI's dealings with Cogetech. He and Mr Wollenberg exchanged e-mails on the topic on 13 February 2009. He also asked Hr Bernkop-Schnürch to make sure to copy him in on all correspondence so that he would be "fully kept in the loop".
- The meeting took place in Rome in mid-March. Avv Mancini was there; but Mr Wollenberg was not. Avv Mancini reported to Mr Wollenberg on 6 April, apologising for the delay. CAI were given a tour of a number of possible locations. They were very interested and pleased. Cogetech undertook to draw up a letter of intent encompassing the proposed deal terms; but Avv Mancini said that they had not yet followed up on it. He said he would keep Mr Wollenberg posted. A draft confidentiality contract with a few additional terms (described as a Memorandum of Understanding) was in fact produced towards the end of April 2009. Avv Mancini sent a copy of it to Mr Wollenberg. The purpose of the MOU was described as follows:
- Shortly beforehand the Abruzzo region of Italy had been hit by a large earthquake. The Italian government needed to raise funds quickly to cope with the disaster. One way was to liberalise the online gaming rules in return for a tax on the profits of that activity. This had the potential for greater profitable activity in Italy. Avv Mancini relayed this news to Hr Bernkop-Schnürch on 24 April. He followed it up with more details on 4 May. The liberalisation would open up new online games on the basis of a new taxation regime. Early in the following month Mr Wollenberg asked Avv Mancini for an update. He replied that he was flying to Vienna with Sig Schiavolin to begin more detailed discussions between CAI and Cogetech. Following that meeting, on 8 June Avv Mancini told Mr Wollenberg that things were progressing in the right direction and the parties were working on a specific joint Italian business agenda in connection with the imminent regulation of the VLT domestic market. A further meeting was planned for the following month. Mr Wollenberg replied that that sounded positive. In late June the Italian government also announced a plan to introduce scratch cards into Italy. In July a meeting took place in London. Sig Romano of Cogetech produced a draft business model which Hr Bernkop-Schnürch said CAI would analyse and assess. In mid July Avv Mancini informed CAI that he would be able to have confidential access to the draft VLT technical regulations. CAI thought that it would be very helpful in their strategic planning. Towards the end of the month he sent CAI an English translation of relevant extracts.
- Not much happened during the holiday season, but matters were taken up again in September. There was an exchange of e-mails between CAI and Cogetech about the business model; and both parties envisaged more detailed discussions between a team from each side. A meeting was due to take place in Milan in October. Mr Wollenberg was told by Avv Mancini that the meeting was due to take place. On 15 October, after the meeting, Avv Mancini told Mr Wollenberg that the meeting had been profitable and that they were "fine tuning the MOU" which would be signed the following week.
- The MOU was signed shortly afterwards. Avv Mancini gave a copy to Mr Wollenberg when they met for dinner in London. On 9 November Mr Wollenberg travelled to Vienna where he met Hr Bernkop-Schnürch and Hr Herzfeld. He asserted his entitlement to a share of the project constituted by the MOU. I will deal with that meeting later.
- In his witness statement Mr Wollenberg gave examples of international initiatives that he had taken on CAI's behalf. They were:
- Although none of these initiatives came to anything, it is striking that they all involved introductions (or potential introductions) to principals rather than to intermediaries.
- On Friday 6 November Mr Wollenberg e-mailed Hr Herzfeld asking for an urgent meeting on the following Monday in Vienna. He did not say what the meeting would be about. The meeting took place, attended by Mr Wollenberg, Hr Herzfeld and Hr Bernkop-Schnürch. Unknown to the CAI representatives, Mr Wollenberg secretly recorded the meeting. Accordingly a transcript is available. In fact the purpose of the meeting was for Mr Wollenberg to assert his entitlement to a 4 per cent share in Apollo under the 2005 agreement; an entitlement to a 4 per cent share in the Cogetech arrangement under the 2008 agreement; and to seek to obtain an agreement or acknowledgement of his entitlement from CAI. Neither Hr Herzfeld nor Hr Bernkop-Schnürch had read either agreement since the 2008 agreement was concluded; and neither had a copy of either agreement to hand. But Mr Wollenberg did. The relevant part of the transcript is as follows:
- The meeting then turned to the question of Mr Wollenberg's claim to a share in the Italian joint venture which both Hr Herzfeld and Hr Bernkop-Schnürch did not accept. But Mr Wollenberg left the meeting believing that CAI had accepted his claim to an accrued entitlement to 4 per cent of Apollo. This is shown by his e-mail to Mr Polin immediately after the meeting in which he said that CAI "have … agreed that, pursuant to the terms of my consultancy agreements with CAI, I am entitled to, and should now, subscribe for 4 p ct of the share capital in ACR at par." He followed this with an e-mail to CAI on 11 November. That e-mail recorded Mr Wollenberg's understanding that :
- He also recorded that he had informed CAI of his wish to subscribe for 4 per cent of the new JV company that had been formed to deal with the Cogetech joint venture. He continued:
- He said that he agreed to consider an alternative provided that any variation would be effected no later than 30 November 2009. CAI did not immediately dissent from what Mr Wollenberg said. But Hr Herzfeld spoke to him on the telephone on 20 November, disputing his entitlement to participate in the Italian joint venture. Mr Wollenberg replied in writing on 21 November, reasserting that claimed entitlement. His position was that:
- On 7 December 2009 Mr Wollenberg followed up with a long and detailed pre-action letter. The letter was entirely concerned with his entitlement to participate in the Italian joint venture. It did not mention Apollo at all. Mr Herzfeld e-mailed to say that he would come back with an answer in the following week. On 14 December Mr Wollenberg pressed Hr Bernkop-Schnürch for confirmation of the agreement reached at the meeting on 9 November that Apollo would issue 4 per cent of its share capital to him. Hr Bernkop-Schnürch replied that he needed final confirmation from Hr Herzfeld.
- On 18 December 2009 Mr Wollenberg issued a claim form claiming a 4 per cent share in Azurro; and also seeking an injunction restraining CAI from dealing with the shares. A without notice injunction was granted that day, although it was later discharged on undertakings. In his witness statement supporting the application for the injunction Mr Wollenberg revealed that he had secretly recorded the meeting of 9 November. He also exhibited a copy of the MOU between CAI and Cogetech to his statement. Mr Wollenberg made a later statement on 21 December 2009 to which he exhibited a transcript of the meeting of 9 November. I am not sure when the proceedings were served on CAI but it was before 23 December when Hr Herzfeld made a witness statement in response.
- On 8 January 2010 Mr Wollenberg had an exchange of e-mails with Mr King about the Corinthian in Glasgow. He reported a conversation to Hr Bernkop-Schnürch on 12 January. Hr Bernkop-Schnürch responded "We will do our best to keep with timelines." On the following day Mr Wollenberg e-mailed Hr Bernkop-Schnürch to remind him that he would be meeting councillors in Bath on 14 January. Hr Bernkop-Schnürch replied: "Thanks". On 15 January Mr Wollenberg reported that he had had a successful meeting in Bath. Hr Bernkop-Schnürch thanked him for the good news. On the same day a formal letter from Mr Wollenberg's solicitors followed asserting a claim to 4 per cent of Apollo. On 18 January 2010 Hr Bernkop-Schnürch e-mailed Mr Wollenberg about the Corinthian. He said that CAI's legal department had checked the documentation without any major comments. He also told Mr Wollenberg that before they could sign up they still needed to agree the design brief and cost estimates with Mr King. Hr Bernkop-Schnürch said that he had asked Ms McGuire (an employee of CAI) to address that matter; and was simply keeping Mr Wollenberg informed.
- On 21 January Mr Wollenberg e-mailed Dr Stoss asking if he wanted to meet "the Playtech boss". Dr Stoss replied that he would check it with his colleagues. On 26 January Mr Wollenberg asked Hr Bernkop-Schnürch for information about CAI's parking requirements. It was supplied that day. On 30 January Mr Wollenberg sent Hr Bernkop-Schnürch an e-mail updating him on activities, and asking for a board meeting. He followed this up with another e-mail on 6 February.
- The 2008 agreement (and by incorporation the 2005 agreement) were for a fixed term of three years from 1 January 2008. They would not therefore expire by effluxion of time until the end of 2011. However, on 9 February 2010 CAI's solicitors sent Mr Wollenberg's solicitors a letter terminating both agreements. That letter gave grounds for the termination in the following terms:
- In the same letter they also asked for an explanation of the circumstances in which Mr Wollenberg came to have a copy of the MOU between CAI and Cogetech. Mr Wollenberg contends that the termination was unlawful; and in the alternative that CAI affirmed the agreements after having become aware of the recording of the 9 November meeting. In his witness statement Hr Bernkop-Schnürch suggested that no decision to terminate the agreements could have been taken by CAI without a formal board meeting. But this was not true. As Hr Herzfeld said the decision to terminate the agreements was taken by him and a colleague following an informal discussion between them.
- Mr Wollenberg was also paid his retainer for the month of January.
- To interpret a contract is to decide what it means. What it means is what a reasonable person with all the relevant background knowledge of the parties at the time when the contract was made would have understood them to mean by the language of the contract: Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101 (§ 14). The tools of interpretation also include a consideration of the commercial effect of rival interpretations. In the case of the 2005 agreement the critical phrase in dispute is "each UK project introduced by you". Does the Glasgow project fall within this description? Mr Matthias says that it does not because it was not a project introduced by Mr Wollenberg; and accuses Mr Crow of trying to write in words so as to make the contract apply to UK projects "introduced by you or anyone to whom you introduce us". Mr Crow says that it does; and accuses Mr Matthias of trying to write in words so as to make the contract apply only to projects "directly introduced by you".
- Mr Crow submits that in deciding what this disputed phrase means I can and should take into account what Hr Herzfeld and Mr Wollenberg wrote to each other in the e-mail exchange at the end of January 2009. I have already quoted that exchange. He also submitted (though I think with less force) that I can and should take into account what was said at the meeting on 9 November 2009. Mr Matthias, on the other hand, said that this material was inadmissible for the purpose of interpreting the contract. He referred to the well known statement of Lord Reid in James Miller & Partners Ltd v Whitworth Estates Ltd [1970] AC 583, 603:
- The fallacy in the rationale for the rule was exposed by Tipping J in Wholesale Distributors v Gibbons [2007] NZSC 37 (§ 59):
- Nevertheless Lord Reid's statement was applied by the Court of Appeal in Amalgamated Investment & Property Co Ltd v Texas Commerce International Bank Ltd [1982] QB 84, 120 in which Lord Denning quoted Lord Reid's statement and said:
- In addition in Rembrandt Group Ltd v Philip Morris International Inc (25 February 1999) Morritt LJ (with whom Butler-Sloss and Sedley LJJ agreed) said of certain post-contractual statements:
- Chartbrook was concerned with the admissibility of pre-contractual negotiations rather than post-contractual statements or conduct. Nevertheless Lord Hoffmann discussed the availability of estoppel as a safety valve, and in so doing expressly approved Amalgamated Investment & Property Company Ltd v Texas Commerce International Bank Ltd. In the course of his speech Lord Hoffmann disagreed with many of the arguments put forward by the proponents of the admissibility of pre-contractual negotiations, which are, for the most part, the same arguments as those put forward by the proponents of the admissibility of post-contractual conduct or statements.
- Evidence of post-contractual conduct is admissible in deciding what terms the parties agreed (as opposed to interpreting the meaning of the terms that they did agree) at all events where the contract is not contained wholly in writing: Carmichael v National Power plc [1999] 1 WLR 2042; Maggs v Marsh [2006] BLR 395. But in the present case it is, as I understand it, common ground that the sole source of the contract is the letter itself. In those circumstances the rule, at least at this level of the judicial hierarchy, is that post-contractual conduct and declarations are inadmissible as aids to interpretation of a written agreement. Mr Crow said that he relied on the e-mail exchange as shedding light on the factual matrix within which the contract was made. But in my judgment it does not reveal any objective fact known to or reasonably available to the parties many years earlier. It is, at best, evidence of subsequent subjective intention. Second, Mr Crow said that he relied on the exchange as negativing an implied term. However, I do not consider that the implication of terms is in play. What is in play is the meaning of the express terms. Third he said that he relied on the exchange as amounting to an estoppel. I will deal with that contention under a separate head.
- I return, then, to the disputed phrase: "project … introduced by you". What Mr Wollenberg must do, in order to earn the success fee, is to "introduce" a "project". The introduction of a project is not, to my mind, the same thing as introducing a person who knows about a project; still less introducing a person who knows another person who knows about a project. There is also the word "introduced". Nahum v Royal Holloway and Bedford New College [1999] EMLR 252 concerned an art dealer engaged to sell three valuable paintings, including a Constable. The contract entitled him to commission if he "introduced" a purchaser. There was some discussion of the question whether the contract contained an implied term that he had to be "the" or "an" "effective cause" of the sale. But Waller LJ said, rightly in my respectful opinion, that this was really a question of interpretation of the word "introduced". As to that Waller LJ said:
- The Court of Appeal adopted a similar approach in Foxtons Ltd v Bicknell [2008] EGLR 23. The contract in that case entitled Foxtons to commission if at any time contracts were exchanged "with a purchaser introduced by us". Nahum was not apparently cited, although Waller LJ was part of the constitution of the court. Lord Neuberger said that there were two rival interpretations of the disputed phrase: (i) a person who at some time in the future becomes a purchaser and (ii) a person who becomes a purchaser as a result of our introduction. For a number of detailed reasons Lord Neuberger (with whom Waller and Rix LJJ agreed) preferred the second. In other words, just as in Nahum the Court of Appeal held that the express terms of the contract required the introduction to have a causative effect. There was, therefore, no question of implying a term.
- In the context of the letter, which is addressed to Mr Wollenberg, "you" plainly means Mr Wollenberg. The question under this head is whether it extends beyond Mr Wollenberg personally. Mr Matthias accepts that it was not expected that Mr Wollenberg would personally know without assistance what potential projects there were all over the UK. That much is plain from the fact that it was expected that he would use his contacts to find them. Mr Matthias thus accepted that it was a matter of indifference to CAI who Mr Wollenberg employed to help him find sites. But the point was that these would be people employed by Mr Wollenberg (and whom he would pay or with whom he would share his success fee). Once an introduction was made by another consultant employed by CAI, an introduction of a project by such a person could not count as an introduction by Mr Wollenberg; even though it might have been Mr Wollenberg who introduced the consultant who introduced the project. I accept this submission.
- Accordingly, in my judgment, the natural reading of the contract is that the success fee in the present case becomes payable if Mr Wollenberg (not anybody else) introduces a project (not a person who knows about a project); and Mr Wollenberg was the (or an) effective cause of the introduction of the project in question.
- Mr Crow argued that this conclusion could not stand against an examination of the background facts. First, he pointed out that this was not simply a fee payable on the introduction of a site: a "project" was much more complex. The development of a project was a multi-skilled task which might require estate agents, architects, licensing lawyers, PR consultants and others. It was obvious that Mr Wollenberg himself did not have the complete skill-set and would have to make use of the services of others. Second, he said that in the run up to the regulatory shake-up there were potentially 66 different local authority areas that would have to be investigated, and within each area there might be multiple potential locations for a casino. It would have been quite impracticable for Mr Wollenberg to have undertaken investigations on this scale single-handed. Third, he said that CAI knew before the contract was made that Mr Wollenberg had worked for Las Vegas Sands in locating potential casino sites in the UK and had used a team for that purpose. Accordingly, CAI must have expected him to use the same methods on their behalf. Fourth, he said that the reason why CAI chose Mr Wollenberg was precisely because he knew people: not because he knew places. He was to be CAI's team leader in the UK and was to co-ordinate the team's efforts. Fifth, he said that it was a matter of indifference to CAI whether they learned of a project from Mr Wollenberg directly or from one of the team members. These considerations should, cumulatively, lead me to conclude that Mr Wollenberg was entitled to his success fee if any team member introduced a project to CAI.
- Attractively though this argument was presented, I do not accept it. First, the success fee was payable on the introduction of a project, not on its development. The complete skill set was not needed to make the introduction. Before the contract was concluded Mr Wollenberg had introduced CAI to a number of projects, including the New London Theatre and West Ham. No team was needed to enable him to do that. Second, although it would not have been expected that Mr Wollenberg would personally inspect potential locations in all 66 local authority areas, the basis on which the contract envisaged that he would identify appropriate sites was by means of his contacts, as he himself had told CAI. What CAI were paying for was for Mr Wollenberg to use his contacts; not for an introduction to those contacts so that CAI could pay them themselves. It would be a matter between Mr Wollenberg and his contacts how the success fee should be split (if at all); or what remuneration (if any) Mr Wollenberg would pay his contacts. Third, although CAI knew before the contract was made that Mr Wollenberg had worked for Las Vegas Sands, there is no suggestion that CAI were told what remuneration package Mr Wollenberg had agreed with them. Fourth, if it had been in contemplation from the outset that Mr Wollenberg would build a team to be paid by CAI then his request to enlist the support of Mr Fisher at his own expense, rather than announcing the recruitment of the first member of the team is difficult to explain. Fifth, it was not a matter of indifference to CAI whether they learned of a project from Mr Wollenberg on the one hand or a team member on the other. Some team members were themselves entitled to a success fee; and it would not have been a matter of indifference to CAI to have to pay two success fees rather than one, even if Mr Wollenberg's success fee was the greater of the two. I add to this that what caused Mr Wollenberg to recommend to CAI to engage the team was that after the contract had been concluded he realised (with Mr Fisher's help) that the task was huge in a way that could not have been predicted beforehand.
- In addition I am unable to accept the factual assertion that Mr Gregg was a member of Mr Wollenberg's team. Indeed I am very doubtful whether it is correct even to describe him as part of CAI's team. He was, as he himself pointed out, CAI's equal partner: not their consultant. It was he who introduced Mr Nuttall; and Mr Nuttall came with the Glasgow project already within his ken.
- This makes it necessary to consider the question of estoppel by convention. The estoppel is based on the exchange of e-mails between Mr Wollenberg and Hr Herzfeld on 2 February 2009 which I have already quoted. The Amended Reply pleads the estoppel as follows:
- The principle on which Mr Wollenberg relies is that described in Amalgamated Investment & Property Co Ltd v Texas Commerce International Bank Ltd [1982] QB 84. Lord Denning MR described it thus (p. 121):
- However, the breadth of the principle thus expressed has been tempered by later cases. In Hamel-Smith v Pycroft & Jetsave Ltd (unreported) 5 February 1987 Peter Gibson J said:
- This statement was approved by the Court of Appeal in The Vistafjord [1988] 2 Lloyds Rep 343. In PW & Co v Milton Gate Investments Ltd [2004] Ch 142 Neuberger J said that the question was whether it would be unconscionable for the party alleged to be estopped to assert his strict legal rights. He continued (§ 222):
- In HMRC v Benchdollar Ltd [2010] 1 All ER 174 after a comprehensive review of the authorities Briggs J concluded (§ 52):
- The convention said to be established by the exchange of e-mails arose, at the earliest, on 2 February 2009. By then the Glasgow project had already been introduced by Mr Nuttall. So also had the projects at Milton Keynes and Bath. No further project has since been introduced; so that the introduction of projects (which forms the basis of Mr Wollenberg's claim) cannot be referable to the convention.
- The pleaded case is a bare assertion of reliance, with no further details. What Mr Wollenberg says in his witness statement about the exchange of emails is very sparse. In paragraph 219 he says:
- The only other reference to this in his witness statement is in paragraph 293. In that paragraph he explained that he was relieved at the outcome of the meeting on 9 November 2009. He continued:
- Thus the only evidence of reliance on the convention is that Mr Wollenberg did not raise the question of his entitlement between February and November 2009. In so far as he continued to negotiate terms of occupation, liaise with regulatory authorities or offer strategic and commercial advice after February 2009 he was paid his annual retainer. There is no evidence that he would have performed his contractual obligations in any different way but for the convention. In those circumstances I find it impossible to say that Mr Wollenberg has suffered or will suffer real prejudice as a result of his reliance on the convention. In short, the convention had no causative effect.
- I conclude, therefore, that the estoppel by convention has not been established.
- The third way in which Mr Wollenberg puts his claim to 4 per cent of Apollo is on the basis that at the meeting on 9 November 2009 CAI (through Hr Herzfeld and Hr Bernkop-Schnürch) agreed to allot him the shares. This agreement is said to amount to an independent contract. I have already quoted the relevant part of the transcript.
- In my judgment the conversation that took place at that meeting did not amount to an independent contract for the following reasons. Hr Herzfeld's language was tentative. His immediate response to Mr Wollenberg was:
- He was unsure what the 2005 agreement actually said:
- Even after Mr Wollenberg read him part of the agreement he was still not definite:
- The way the discussion was left was that Mr Wollenberg would draw up formalities:
- This does not suggest a concluded agreement. Rather it suggests that there was to be a formal agreement after CAI's "people" had taken a look at Mr Wollenberg's draft. Even then there was some confusion between Mr Wollenberg and Hr Bernkop-Schnürch about whether the subject under discussion was an amendment to the 2005 agreement or an implementation of it. In Harvela Investments Ltd v Royal Trust Company of Canada (CI) Ltd [1986] AC 207 the House of Lords held that a new contract did not come into existence where parties believed that they were giving effect to existing contractual obligations.
- Hr Bernkop-Schnürch's final word was:
- Both the tentative language and the contemplation that something would happen in the future also point away from the conclusion that a contract was made at the meeting.
- I conclude that Mr Wollenberg's claim to a 4 per cent share of Apollo fails.
- The critical disputed phrase in the 2008 agreement is "any new businesses acquired or operated by us, pursuant to your initiatives referred to above". The initiatives "referred to above" are, in my judgment:
- Thus Mr Wollenberg was entitled to 4 per cent of CAI's interest in any new businesses acquired or operated by CAI pursuant to Mr Wollenberg's initiatives for international expansion of the lottery or online businesses.
- Mr Crow said that "initiatives" was a deliberately loose and elastic word and was not confined to direct introductions of CAI by Mr Wollenberg to principals in the lottery or online gaming world. An "initiative" could include an introduction such as Mr Wollenberg's introduction of Avv Mancini; and the introduction by Avv Mancini of Cogetech followed by entry into the joint venture agreement counted as a new business acquired by CAI "pursuant to" Mr Wollenberg's initiative.
- The first meaning given to "initiative" in the Oxford English Dictionary is:
- The overall enterprise under the 2008 agreement was the international expansion of CAI into lottery and on-line gaming businesses. In introducing CAI to Avv Mancini with a view to his providing further introductions through his "match making" service, it can, in my judgment, fairly be said that Mr Wollenberg took the first step in the overall process. I do not regard the fact that the introduction of Avv Mancini pre-dated the signing of the 2008 agreement as displacing this conclusion. As Mr Crow pointed out the agreement was expressly said to have had effect from 1 January 2008, which pre-dated that introduction. It must therefore have been intended (as Mr Crow put it) to "capture initiatives" that had taken place since then. The introduction of Avv Mancini took place in February 2008.
- Mr Matthias said that the "initiatives" had to be initiatives in respect of a particular business that CAI acquired or operated. However, the agreement speaks of initiatives with regard to "opportunities for international expansion" in the particular businesses, rather than the businesses themselves. In other words, in my judgment, the initiatives are tied to opportunities for expansion rather than the particular businesses ultimately acquired.
- Mr Matthias submitted that the introduction of Avv Mancini was covered by the obligation to give "strategic advice" which did not attract the success fee. He pointed to the fact that when Mr Wollenberg listed the initiatives he had taken on CAI's behalf they were all introductions (or potential introductions) to principals rather than intermediaries, apart from the introduction of Avv Mancini. Thus he argued that it would have been possible for Mr Wollenberg to have made direct introductions to principals in the way contemplated by the 2005 agreement of which the 2008 agreement was said to be an "extension". On the other hand before the 2008 agreement had actually been signed Mr Wollenberg had arranged for presentations to be given to CAI on the same day by Mr Holley (a principal) and Avv Mancini (an intermediary). It seems unlikely that the parties would have intended to treat those two presentations radically differently. In addition it might be more readily supposed that Mr Wollenberg had access to principals in his home territory rather than world wide.
- Mr Matthias also said that an introduction by Avv Mancini did not count as an initiative by Mr Wollenberg because Avv Mancini was directly retained by CAI. He said that if someone was engaged directly by CAI on Mr Wollenberg's advice; and that person subsequently introduced a business opportunity, that was an introduction pursuant to the initiative of the person engaged, rather than pursuant to an initiative of Mr Wollenberg. This point has troubled me, because of the consequence that it would render CAI liable to double commission. That, after all, is one of the reasons why the courts have taken the view that they have in relation to the requirement that in "introduction" cases the agent must be the effective cause of the resulting transaction. In the end, however, I have not been persuaded by this point. First, the parties did not choose the language of "introduction" for this contract. As has been seen, in the context of commission agreements with agents the requirement of "effective cause" is an aspect of the interpretation of the word "introduce" or "introduction". Where, as here, the parties have chosen a more elastic term I do not consider that the choice of that term carries the baggage that accompanies the use of the word "introduce" or "introduction". Underlying Mr Matthias' point is an assumption that only one person can take initiatives in relation to any one business opportunity. However, I do not consider that this assumption is justified. One can see how it makes sense in the case of an "introduction". As a matter of ordinary language one can only be introduced to someone once. But there may be all sorts of initiatives needed by all sorts of people to bring an opportunity to fruition. Second, Avv Mancini's fee was a fixed fee known to CAI before it signed the contract with Mr Wollenberg. In the scale of things it was likely to be modest. As Mr Crow submitted, it would have been open to CAI to have excluded from the scope of the 2008 agreement any initiative taken by Avv Mancini whose terms of business were known to CAI before the contract was signed.
- Thus I agree with Mr Crow that Mr Wollenberg's introduction of Avv Mancini was a relevant "initiative" within the meaning of the 2008 agreement.
- Mr Crow submitted that "pursuant to" meant "resulting from" or "consequent upon"; and I did not understand Mr Matthias to dissent from that; subject to the qualification that, properly interpreted, the phrase "pursuant to" meant that Mr Wollenberg had to be the effective cause of the acquisition of the business in which he claimed a share. But for the reasons I have given I do not consider that the requirement of "effective cause" applies to the contract in this case.
- In my judgment, therefore, if the culmination of a process started by Mr Wollenberg is the acquisition by CAI of a stake in a lottery or on-line business, Mr Wollenberg is entitled to his share. That is what happened in this case.
- I conclude, therefore, that under the terms of the 2008 agreement Mr Wollenberg is entitled to a 4 per cent share of CAI's interest in Azurro.
- This part of the case was pleaded as a case of undue influence. Mr Matthias relied on the special disabilities that applied to a solicitor entering into commercial transactions with a client or former client. The general principle is stated in Halsbury's Laws of England vol 65 para 799:
- The principle may apply not only to a transaction between a solicitor and a current client but also to a transaction between a solicitor and a former client. In Demerara Bauxite Co Ltd v Hubbard [1923] AC 673 Lord Parmoor, giving the advice of the Privy Council, said:
- The Court of Appeal applied this principle in Longstaff v Birtles [2002] 1 WLR 470. Mr Longstaff, a retired civil servant, found a pub that he wanted to buy. He consulted Mr Birtles as his solicitor. Eventually Mr Longstaff decided not to proceed. Mr Birtles then told Mr Longstaff about a hotel, which was owned by a partnership in which Mr Birtles was himself a partner. Mr Birtles drafted a partnership deed; and Mr Longstaff bought a share in it. Mr Birtles did not insist that Mr Longstaff should obtain independent advice. The judge found that Mr Birtles did not act as Mr Longstaff's solicitor in relation to the purchase of the share in the hotel partnership. Mummery LJ said:
- On the other hand in Hanson v Lorenz Jones [1987] 1 FTLR 23 the Court of Appeal held that whether a fiduciary had fulfilled his duties was very fact-specific. Mr Hanson had entered into a joint venture with a company controlled by his solicitor. The solicitors did not advise him to obtain independent advice. Having referred to Demerara Bauxite the Court of Appeal held that it was no part of the solicitors' duty to advise Mr Hanson about the business or financial prudence of the proposed venture. As May LJ put it:
- He then referred to the trial judge's finding that Mr Hanson was fully aware of the nature and effect of the joint venture and the relevant documents and that the proposed transaction was objectively fair to him. He concluded that in those circumstances any obligations that the solicitors owed to Mr Hanson arising out of the fiduciary relationship were fulfilled.
- Hanson v Lorenz Jones was distinguished by the Divisional Court in Richards v Law Society [2009] EWHC 2087 (Admin) on the ground that it concerned "an experienced businessman operating in his own field".
- I was also referred to the illuminating decision of the Full Court of the Supreme Court of Victoria in Westmelton (Vic) Pty Ltd v Archer [1982] VR 305. After reviewing a number of authorities their Honours (Starke Kaye and Fullagar JJ) said (p 312):
- I was also referred to the decision of the Privy Council in New Zealand Netherlands Society "oranje" Inc v Kuys [1973] 1 WLR 1126. Lord Wilberforce, giving the advice of the Board, approved the observation of Lord Upjohn in Phipps v. Boardman [1967] 2 AC 46, 123:
- Lord Wilberforce himself observed that:
- I also accept Mr Crow's submission that even where a presumption of influence is raised, that influence does not necessarily turn into undue influence merely because the person with the influence does not advise his counter-party to take independent legal advice. In Attorney-General v R [2003] UKPC 22 Lord Hoffmann said:
- In the present case, I think that the main considerations are the following:
- In the particular circumstances of this case, I do not consider that Mr Wollenberg owed any special duties to CAI. Looking at the evidence in the round, I am satisfied that this was a transaction into which CAI entered with a full understanding of the transaction; and of its own free will. If there was any evidential presumption of influence (or undue influence) I consider that it has been rebutted. I conclude that Mr Wollenberg is entitled to rely on the 2008 agreement.
- I conclude that Mr Wollenberg is entitled to a 4 per cent share of CAI's interest in Azurro.
- CAI's pleaded case is that:
- It was not in dispute, as I understood it, that a term of the agreement between Mr Wollenberg and CAI was a mutual obligation not without reasonable or proper cause to destroy or seriously damage the relation of trust and confidence between them. I was not referred to any authority on what would amount to a breach of this term sufficient to justify termination of the agreements. In the course of his cross-examination Mr Wollenberg accepted that CAI's trust and confidence in him "would have been seriously damaged to put it at its lowest" on discovering that he had secretly taped the November meeting. That was a realistic acceptance on his part. Mr Wollenberg's justification for secretly recording the meeting was his distrust of Hr Herzfeld. However, the meeting was also attended by Hr Bernkop-Schnürch and Mr Wollenberg did not, at the time, distrust him. Moreover, if Mr Wollenberg had said openly that he wished to record the meeting, Hr Herzfeld and Hr Bernkop-Schnürch might well have agreed. In my judgment the secret recording of the meeting was a breach by Mr Wollenberg of a fundamental term of the agreement, such as to justify its summary determination.
- I do not, however, consider that the "deployment" of the MOU would have entitled CAI to terminate the agreements. First, the MOU was supplied to Mr Wollenberg by Avv Mancini who, to CAI's knowledge, was to report to Mr Wollenberg. Second, use of the MOU was necessary to support Mr Wollenberg's claim to his entitlement to a share of Azzurro. Third, as part of his duty of full and frank disclosure, Mr Wollenberg would have had to disclose his possession of a copy of the MOU when applying for the injunction without notice. Fourth, the pleaded complaint about deployment of the MOU was that it was referred to in the Particulars of Claim. But that assertion was part of Mr Wollenberg's claim; and once it had been pleaded, CAI would have been obliged to disclose the MOU during the course of the litigation. Confidentiality has never been a reason for refusing to disclose a document pursuant to disclosure (or discovery) obligations in English litigation.
- Mr Wollenberg argues that even if CAI were entitled to terminate the agreements on learning that the meeting had been secretly recorded, they nevertheless affirmed the agreements. The principle is that a party to a contract has a choice when the other party commits a repudiatory breach. He may either accept the repudiation and terminate the contract; or he may choose to affirm the contract and keep it in being. The underlying doctrine is that of election. Under this doctrine where a person is faced with a choice between two inconsistent rights, and knows he has the choice, an unequivocal act consistent with one only of those rights is taken as a final choice to pursue that right and to abandon the other.
- This requires an examination of what happened between 23 December and 9 February. Mr Crow pointed to the fact that Mr Wollenberg continued to perform his obligations under the contract during that period. He attended meetings in Bath and reported the outcome of those meetings to CAI. He passed on inquiries about CAI's parking requirements. He called for a board meeting. All that is true, but in my judgment irrelevant. What is in issue is not what Mr Wollenberg (as the party in breach) did; but whether CAI (as the party with the choice to terminate or affirm) unequivocally manifested a choice to affirm. Mr Matthias submitted that no new instructions were given by CAI. I agree. But on the other hand CAI were not in the habit of giving Mr Wollenberg instructions. The terse responses that CAI made to Mr Wollenberg's e-mails were, in my judgment, equivocal. But what I think potentially tips the balance is the fact that CAI paid Mr Wollenberg's retainer for the month of January. The retainer was payable monthly in arrears. Thus the payment that CAI made was consistent only with the continuation of the agreements through the month of January.
- I have said that in order for conduct to amount to an election, the person faced with the choice must know that he has a choice to make. This was the ground of the decision of the Court of Appeal in Peyman v Lanjani [1985] Ch 457. In that case Slade LJ also said (pp 500-501):
- No such allegation was pleaded in the present case. As far as the evidence went Hr Herzfeld said that he had been in London for an exhibition at the end of January 2010. At that time he had an appointment with CAI's lawyers and they discussed the whole matter against the background of English law and English jurisdiction. The conclusion was that the trust that had existed between CAI and Mr Wollenberg was no longer present. It was in the light of that discussion that the decision to terminate was made when Hr Herzfeld got back to Vienna. I accept this evidence.
- In the light of that evidence I do not consider that I would be justified in finding that CAI knew of its right to terminate the agreements earlier than the end of January 2010. In those circumstances I do not consider that Mr Wollenberg has established that CAI affirmed the agreements.
- For the reasons I have given I conclude that:
Mr Justice Lewison:
| Introduction | 1 |
| The agreements | 7 |
| Early background | 9 |
| Events leading up to the first agreement | 20 |
| Mr Wollenberg's case | 25 |
| The first recruits | 30 |
| Mr Gregg and the joint venture | 36 |
| Additions to the team | 42 |
| Mr Gregg's changing role | 49 |
| Sites in the UK | 90 |
| Bournemouth | 95 |
| Milton Keynes | 97 |
| West Ham | 103 |
| Luton | 107 |
| Bath | 111 |
| The Glasgow project | 115 |
| Events in Italy | 122 |
| The meeting of 9 November 2009 and its aftermath | 142 |
| Interpretation of the 2005 agreement | 153 |
| Estoppel by convention | 167 |
| An independent agreement? | 177 |
| Conclusion on Apollo | 185 |
| Interpretation of the 2008 agreement | 186 |
| Can Mr Wollenberg rely on the 2008 agreement? | 198 |
| Conclusion on Azurro | 210 |
| Termination of the agreements | 211 |
| Result | 219 |
Introduction
The agreements
"You will serve as a consultant to the Company for a period of three (3) years from the 1st November 2005. Thereafter the term will continue on a yearly basis unless terminated by either party in accordance with this agreement.
Your tasks will include:
a) identifying appropriate sites for the operation of large and small casinos by the Company;
b) negotiating the best possible terms for the occupation of those sites by the Company;
c) liaising with relevant regulatory authorities to ensure smooth and effective implementation of the Company's business plans in the UK;
d) offering strategic and commercial advice in furtherance of c) above; and
e) when appropriate, serving on the Company's UK board of directors.
The above services will be exclusive to the Company in relation to large and small casinos in the UK.
In consideration of the above you will be entitled to receive from the Company:
a) A yearly retainer of $140,000 payable monthly in arrears;
b) Reimbursement of vouched expenses up to an annual limit of $15,000;
c) The right to acquire 4% of the equity held by Casinos Austria International Holding GmbH or any affiliate of the Casinos Austria Group of Companies of each UK project introduced by you. Each such project will be valued for purposes of your contribution on the basis of capital introduced by us and we will finance your contribution provided you apply 50% of all dividends towards repayment of such financing. No other obligation to repay will arise.
d) The right for a period of one year as of the opening of the respective casino to put each such 4% interest on the company at a valuation to be agreed or fixed by an independent valuer to be agreed between us. Casinos Austria International Holding GmbH shall have a call option for a period of one year as of the opening of the respective casino to buy such 4% interest on the company at a valuation as mentioned above and thereafter shall have a right of First Refusal for an indefinite period to buy such 4% interest at valuation as above mentioned.
This agreement will be governed by English law and the parties submit to the jurisdiction of English courts."
"This letter, countersigned by you will serve to extend the agreement between us dated 21 November 2005.
With effect from 1 January 2008, your tasks will be expanded to taking appropriate initiatives on our behalf and offering strategic advice to us with regard to the opportunities for international expansion (whether organically or otherwise) of the lottery and online businesses, which from time to time are owned or controlled, whether directly or indirectly, by the Casinos Austria Group.
Where requested by us, you will assist in consummating such opportunities and for so long as we consider necessary, you will monitor and supervise the integration of such acquired or expanded businesses into our Group portfolio.
The above services will be exclusive to us in relation to the businesses referred to above.
In consideration of the above, you will be entitled to:
a) an increased yearly retainer of USD 225,000 with effect from 1 January 2008, payable monthly in arrears;
b) expenses as per paragraph b) of our Agreement dated 21 November 2005;
c) either
i) the right to acquire 4% of the equity attributable directly or indirectly to the Casinos Austria Group of any new businesses acquired or operated by us, pursuant to your initiatives referred to above (valuation, financing and exit rights to be governed by the same principles as set out in paragraphs c) and d) of our letter of 21 November 2005); OR
ii) the right to receive 2% of duly certified annual net profits directly or indirectly attributable to Casinos Austria Group of any such acquired businesses (as the case may be) as referred to in c) i) above. Such payment to be made within 28 days of said certification.
Determination as to whether to apply c) i) or ii) above, to any particular instance shall be by agreement between us in advance of the completion of each respective transaction.
Unless otherwise stated herein, the terms of our agreement of 21 November 2005 shall continue, save that the commencement date of 1 November 2005 shall be replaced by a commencement date of 1 January 2008."
Early background
"Salans will assist you initially in respect of due diligence issues relating to real estate opportunities and potential JVs in the UK. We will subsequently advise and assist with such other issues as you may request including strategic and commercial matters."
i) The letter included Salans' standard terms of engagement;
ii) Mr Wollenberg gave details of his "standard charge out rate";
iii) The letter said that in addition to "our betting & gaming team" Casinos Austria would be supported by "Salans' other specialist teams in areas such as litigation, real estate and corporate/commercial";
iv) It was necessary for Casinos Austria to provide information needed to satisfy anti-money laundering requirements for "prospective clients"; and
v) The letter also dealt with possible conflicts of interest as a result of Salans' representation of other clients.
"You have asked Salans to undertake due diligence both in relation to the real estate itself and also into the potential partner….
I will put together a small team from Salans, including real estate lawyers, to undertake these tasks and will formulate an action plan and revert to you shortly."
"… I was proposing to attend for at least part of the meeting with the lawyers on the New London Theatre. I may have another property to show you as well. I am working on it."
Events leading up to the first agreement
"as indicated in my last email I would like to inform you that our board is basically embracing the idea of you being the representative of CAI in Great Britain. Therefore we kindly ask you to indicate your perception of an agreement with us.
In our opinion it should contain – beside retainer and success fee, on which I could report after you mentioned these items to me during our last meeting in London – the services you are going to provide as well as an exclusivity guarantee in the segment of "large casinos". I understood that you are already in business contact regarding the representation of a "destination" operator, which does not constitute a reason to be an obstacle for an agreement with us."
"1. using my large database of relevant contacts to identify appropriate sites (I already have some in mind which would work quite well);
2. taking a leading role in negotiation of the appropriate real estate agreements on your behalf;
3. liaising with all the necessary regulatory authorities to include the licensing authorities and the planning authorities, to ensure the smooth implementation of your business plan; and
4. at all times offering such commercial and strategic advice as is required by you to achieve the objective outlined in my first paragraph above…."
"Yearly retainer U$ 120.000
Reimbursement of out of pocket expenses and entertainment up to an amount of U$ 30.000 per year as against presentation of receipts
As success fee we offer a prefinancing of 3% of the equity held by CAI in the respective project, 50% of TW's dividends have to be used as repayment of the prefinanced amount
3% of CAI's equity only for projects which have been introduced by TW
CAI is free in regard of projects offered and introduced by third parties."
Mr Wollenberg's case
"It was obvious that I, alone, would not be able to investigate the hundreds of potential sites throughout the United Kingdom and, once a site had been identified, investigate and progress the opportunity single handedly. Further, it was never suggested that I should; it would be too large a task for any one individual."
"I was specifically requested by CAI to play a central role in the negotiation and consummation of the commercial agreements with all those parties whom I had recommended adding to the team from time to time."
"We worked closely together as a team and I ensured that the team was efficient and well led." (§ 51)
"Once a potentially suitable site had been identified, I then assessed whether it was viable and, if so, thereafter project managed its pursuit with my team. This often involved extensive negotiations with site owners and developers and, of course, continuous liaison with CAI. I was kept fully informed by my team of all material developments at all times and I considered myself responsible for all decisions taken in the United Kingdom. If the decision required CAI's approval, I would approach CAI with my opinion and CAI would take a fully informed decision." (§ 55)
"Casinos Austria came to me, my Lord, to build up an infrastructure, initially a presence which would have to be supported by an infrastructure, for the reasons I explained yesterday. They did not have the connection, the expertise, the desire. They considered that I had those qualities, and whether the team once engaged is referred to as my team or their team to some extent I think is semantics. The fact is that each member of that team as I expanded it and recruited it reported directly to me on all material matters. I attended all material meetings. I did not trouble Mr Bernkop-Schnürch unnecessarily, only when projects and initiatives had reached the stage where I thought that his involvement was necessary. My job was to head the team, deal with issues arising and report to Mr Bernkop-Schnürch as I did, and as necessary when matters required. So whether that is described as the defendants now do, as their team or my team, yes, of course they were paying the bills, but I recruited the team. I did not directly recruit the architects, they came through Mr Gregg, but I was responsible for setting it up and responsible for generating the business which ensued. That was my responsibility, to create projects capable of being pursued, and there were 10 in 2006 and 17 in 2007 from a standing start."
The first recruits
"With your permission, as regards to confidentiality, I have decided to enlist the support of an old and trusted friend of mine who is a real estate expert, having spent the entirety of his career in this field. He will assist the search for suitable locations and any ensuing negotiations, obviously all at my own expense, with the exception of [travel] expenses, as to which see below."
"I certainly had envisaged introducing projects myself and I did but as matters evolved we obtained [an] expanded infrastructure through which others introduced opportunities."
"Rental Acquisition Fee – 15% of one years rent
Purchase Fee – 2.75%
In the event of Casinos Austria or their consultants introducing sites or third parties with sites to the joint sole agents, 50% of the above fees will be payable.
The retainer fee … will stay in situ, namely £7,500 plus VAT per quarter, payable in advance."
Mr Gregg and the joint venture
"Ownership should be split 51% Casinos Austria and 40% to my company with the ability to increase that to a maximum holding of 49% by way of a success bonus on each confirmed licence (i.e. 3% per site). The new company would be capitalised to pay the costs of an agreed budget for the application process, by each party pro rata to their shareholding."
"… with the exception of proposed developments being pursued by Casinos Austria at sites in Bournemouth, Leicester and West Ham (which the parties may agree in writing to include as part of the Joint Venture in the future) both parties together with any related party or associate of such party … will offer to the JV Company any proposed developments which fall within the remit of the Proposed Joint Venture …"
"With the recruitment of Paul Gregg, I was now equipped with a core team with which to progress CAI's interest in finding large and small casino opportunities in the United Kingdom."
Additions to the team
"Lead, front and manage the bids with your support and guidance backed up by "ambassadorial roles" for both of you.
To be let to deliver our agreed strategies with empowerment, sufficient scope, responsibility and accountability for my performance."
"The most important news is that I have agreed for Mike Nuttall to join our team at the end of July. Mike was the Development Director for Ladbrokes with special responsibility for new Casino Licence applications and he had approached most of the sixteen local authorities and developers and in truth had become one of our biggest opposition operators."
Mr Gregg's changing role
"I must ask you to make the gaming board licence application your No 1 priority. I think the lack of an operator's licence did not help us at Milton Keynes."
"I am reviewing with Reinhard but in principle this looks along the lines which I had in mind."
"I would now appreciate to know what your decisions are going to be so that we have clear direction on funding going forward. I think the team here just want to go forward with clear direction and funded on a proper basis."
"Our failure was not having a full and detailed budget until the last minute, or a creative financial discussion to ensure we were giving full value to the NEC. … Please remember I do not have casino experience, but I do understand how to be creative when I understand the end value."
"At this point I do not need his help in meeting developers or local authorities unless he is part of my team and even then he is not ideal."
"We need an input from you on the process and what we will need to do to secure Apollo casinos position."
"We are still making good progress with our discussions with various sties and we have now added KPMG regeneration team to advise us on developments, and they have specialists we have appointed to the casino team to review our figures and give us observations based on their knowledge of the UK gaming market, to hopefully confirm Tim's budgets and forecasts."
"Jonathan Polin has been steering this so it would be wise to run each proposed structure past him to ensure consistency.
Paul has already said today (wisely) that he intends to run the confidentiality agrmt past Jonathan. I would suggest that you do likewise with your idea.
I'm concerned – as usual – that we have too many cooks – don't mean you – and no clear chain of command. … I can see us getting into a terrible muddle."
"Confirm our overall team approach to progressing each site as we are not yet united in our actions and roles."
"Going forward I want to reiterate and agree in writing before we proceed that all new licences under the 2005 Act are part of the JV company. In addition any licences under the 1968 act that we acquire, for example Glasgow, will also be part of [Apollo]."
"I understand that you are planning another meeting in London with Paul Gregg which you wish me to attend. Of course I shall be pleased to do so and to meet with you beforehand to discuss strategy."
"I am glad that you would be ready to joint such a meeting because not only do I appreciate tremendously how you help us with our efforts in the UK (and elsewhere) but I would also assume that your presence will facilitate a more focussed discussion with a hopefully clear common understanding either way in the end."
"I believe that this accords with the spirit of our arrangement anyway but, as matters have evolved, it is always good to be clear."
"In that e-mail I also requested you to kindly confirm, for clarification purposes, that Paragraph c) (the 4 per cent arrangement) of our agreement of November 17th 2005 will apply to any deals concluded in the UK. I believe that this is the correct interpretation in any event and of course all our current projects have originated through firms and individuals introduced by me, but nonetheless I think it would be in our mutual interests, as we now move to secure the deals, to put this beyond any possible doubt."
"With regard to our agreement I can confirm that it is meant for any casino project that is brought to CAI by yourself or via you. I think at least for arguments sake there could be a project that comes to the attention of CAI completely unrelated with you in which case I would think it would not fall under our arrangement."
"Of course I accept that if a UK project comes up through your own connections and not as a result of a direct or indirect introduction from me, that would not be caught by our arrangement. If any such opportunity should arise in the future it would probably make sense for it to be specifically excluded in writing but we can cross that bridge if and when we come to it."
"Thanks, Tony, so this is clarified, good!"
"I would like you to know that – should you decide against a renewal – I stand ready to take our 3 UK projects over to every extent necessary to ensure their success. … Bill Fisher would, I am confident, provide me with able technical support.
My main issues with an extension of their contract are the continuing concerns which I have relating their potential conflicts of interest (and potential exclusion of Bill and myself a la Cullimore) …"
Sites in the UK
"Once a potentially suitable site had been identified, I then assessed whether it was viable and, if so, thereafter project managed its pursuit with my team. This often involved extensive negotiations with site owners and developers and, of course, continuous liaison with CAI. I was kept fully informed by my team of all material developments at all times and I considered myself to be responsible for all the decisions taken in the United Kingdom. If the decision required CAI's approval, I would approach CAI with my opinion and CAI would take a fully informed decision."
Bournemouth
"I obviously need to discuss the figures with you and to explain my thinking behind it."
Milton Keynes
i) The Odeon cinema. Mr Gregg knew the "Odeon people" and it was a question of his approaching them to see if a deal could be struck and planning consent applied for.
ii) Phase 3, Theatre district. This was a location in the central core of Milton Keynes. Mr Fisher's suggestion was that Mr Shelley should find out the details of the proposals for phase 3.
iii) Leisure Plaza. This was an existing building near the railway station. The site had been offered both to Mr Lorenz and to Mr Shelley, which raised the possibility of having to decide from whom to accept the introduction.
iv) Milton Keynes stadium. Since there were two stadia in Milton Keynes, Mr Fisher was not sure which one was on offer. He said that Mr Lorenz needed to ascertain from the agent who introduced it to him which of the two was the correct one.
West Ham
"On presentation, I presume Paul will lead on our plans for a mixed use leisure development … with Trevor coming in on the food and booze and I will pick up on CAI covenant, track record etc. as best I can…"
Luton
Bath
"On another subject, Paul, please see TS note below, mentioning a possible casino/hotel site in Bath. Trevor said he would pursue this on his return [from] holiday next week."
"BATH
I feel we could do well in this town if Trevor can find us the right site."
"This is one of our priority sites."
The Glasgow project
"Mike has embarked on an old licence opportunity in Glasgow which Trevor [Shelley] and I are going to look at, it would be a JV with a Scottish partner, and it would be part of a very busy operation in Glasgow and a new operation."
"I understand that yesterday's Glasgow visit was most positive and I look forward, as always, to assisting you in bringing that opportunity to a successful conclusion."
"In my opinion we are just spending time and effort pushing them into a deal and if it does not work, they will say to us we told you so.
I think we should stop now, because they do not want it."
Events in Italy
"… a dedicated match-making service available upon request which entails introducing [CAI] to the most established and skilled operators in the domestic market with a view to finding suitable partners and clinching strategic alliances in Italy and possibly elsewhere in the world.
In addition to the above introductions and depending on [CAI's] actual needs and development plans I am in a position to suggest and/or procure meetings with any Italian key companies it may from time to time wish to target."
"since the scheme is not yet in place I wonder whether we would spend a lot without any results for a considerable period of time."
"Before sending this summary to the clients I thought it appropriate to share its contents with you to make sure that [they] are fully aligned on the best and commercially wisest course of action that under the present circumstances is to be recommended to [CAI]."
"[CAI] and Cogetech shall explore business opportunities of mutual interest concerning each Party's business, operations, products and/or proprietary technology including but not limited to the possibility to jointly develop a model of [CAI]-branded gaming arcades throughout the Italian territory and to team up for the purposes of filing a joint bid in the upcoming tender that AAMS is expected to call for the award of multi-provider lottery licences."
i) The introduction of CAI to Orglot, the Russian lottery, in early January 2008;
ii) An Israeli gaming software business idea called Vertical Traffic. Mr Wollenberg appears to have arranged a meeting between this company and CAI in March 2008. However in mid-May Hr Herzfeld told him that although this might be of interest it would have to wait until CAI's new organisation was clear, which would not be until July;
iii) An online lottery initiative called Valmer which Mr Holley had introduced to him. Mr Holley was in e-mail contact with CAI about this project in June 2008. He proposed a meeting between CAI and Valmer, to which CAI were receptive, although they said that they were not contemplating a direct investment in Valmer;
iv) A white label initiative called St Minver. This was a Gibraltar company of which Mr Wollenberg had been chairman. Mr Wollenberg sent Hr Herzfeld a white label proposal from St Minver attached to his e-mail of 23 April 2008. Hr Herzfeld told him in mid May that he was not interested in this proposal.
v) An Israeli online retail foreign exchange business called Etoro which Mr Wollenberg visited in late January 2008;
vi) 888. This was an online gaming company. In September 2008 Mr Wollenberg had heard that CAI had been talking to 888. They had come to Vienna to visit CAI and had proposed some sort of co-operation in an online business. He had connections with that company at a senior level and offered to help the discussions;
vii) Party Gaming. This is the world's largest online gaming company. In September 2009 at a gaming conference in Copenhagen Mr Wollenberg introduced Hr Herzfeld to Mr Jim Ryan, the CEO of Party Gaming. Party Gaming were keen to strike a marketing alliance with CAI, but nothing came of it. Mr Wollenberg reminded Dr Stoss in January 2010 that Party Gaming remained interested in a deal.
viii) Playtech. This is the world's largest gaming software company. In January 2010 Mr Wollenberg told Dr Stoss that he had recently met the chairman and founder of Playtech.
The meeting of 9 November 2009 and its aftermath
"Mr Wollenberg: My deal on the UK which we signed in November 2005 envisaged a 4% participation in the projects.
Hr Herzfeld: Yeah
Mr Wollenberg: The way matters have developed, it's not being done corporately on a project by project basis, its all being done under the umbrella of ACR. So I wanted to talk to you about simplifying that and putting it into effect so that we all knew where we are going forward because not least its important that the licensing authorities now, who I am going to be meeting regularly, know the structure. I mean right now ACR is your company. You bought Gregg's share out last year and it seems to me under the terms of our deal is that if the simplest and the most consistent deal going forward on that is to allocate under the terms of financing which we laid out in our agreement, 4% of that to me. If you agreed? I can't think of a different way, otherwise having a 4% interest in each individual casino I think is messy and doesn't really work because it's not corporate.
Hr Herzfeld: Ah huh.
Mr Wollenberg: Yes I could have as an alternative a 4% profit share in each casino, if for some reason you didn't want me to be an equity holder but that's not what the UK agreement says and so I really wanted to hear your thoughts on that and see whether you would be comfortable with it?
Hr Herzfeld: Yeah.
Mr Wollenberg: I am a director of the company after all.
Hr Herzfeld: Sure, sure, sure. I think that could also work I guess. Let me just think it. I don't see at the moment why this should not work.
Mr Wollenberg: That's the simplest I think, otherwise everything else is difficult to calculate. You have to work out the profits of each casino and anyway, it's not what we have written for the UK.
Hr Herzfeld: Yeah. Ah huh, OK. And if our agreement says every casino project in the UK, does it [unintelligible]?
Mr Wollenberg: What it says … the right to acquire 4% of the equity held by CAIH or any the affiliate of each UK project introduced by you. So effectively, I mean I brought … [unintelligible] to say who brought them, but one way or another I've brought the deals to you whether it's through Trevor Shelley or … mostly it was actually.
Hr Herzfeld: Yeah, ah huh.
Mr Wollenberg: Are you happy with that?
Hr Herzfeld: Yeah, I think it should work, yes.
Mr Wollenberg: Thank you. I'll draw up some formalities and shall I send them to you to take a look at with your people? Reinhard
Hr Bernkop-Schnürch: Yes please
Mr Wollenberg: Fine. Thank you.
Hr Bernkop-Schnürch: It would be an amendment with this?
Mr Wollenberg: Well, not really, it would just be an implementation because …
Hr Bernkop-Schnürch: What I really suggest is that we confirm …
Mr Wollenberg: Thank you. Thank you very much."
"We agreed … that I had become entitled to subscribe for 4 p ct of the issued share capital in Apollo Casino Resorts Ltd."
"Whilst you accepted my choice of that route, you wished to have a short while to consider whether an alternative solution might suit you better."
"The Cogetech transaction which resulted from my initiative in introducing CAI to [Avv Mancini] is clearly sufficient to trigger my entitlement under the 28 June 2008 extension agreement."
"The agreement of 27 June 2008 which now governs the relationship between our respective clients is a contract for personal services and is therefore more dependent upon a relationship of trust and confidence than a standard commercial contract. In our client's opinion, your client's conduct has amounted to a gross breach of that relationship. We refer in particular to the fact that your client secretly tape recorded the meeting with our client on 9 November 2009 and has sought to use it in the proceedings issued in the High Court…
In such circumstances, our client considers your client's conduct to be repudiatory and … they accept such conduct as bringing the contract to an end with immediate effect."
Interpretation of the 2005 agreement
"I must say that I had thought that it is now well settled that it is not legitimate to use as an aid in the construction of the contract anything which the parties said or did after it was made. Otherwise one might have the result that a contract meant one thing the day it was signed, but by reason of subsequent events meant something different a month or a year later."
"Evidence of subsequent conduct does not invite a subsequent meaning. It is directed to the original meaning; that is, the meaning of the contract when it was signed. It is a distraction to suggest that post-contract evidence is capable of changing the contract date meaning, when its sole purpose is to elucidate that meaning."
"I can understand the logic of it when the construction is clear: but not when it is unclear. Still, we must accept it."
"Each of the events amounts to the description by one party in the presence or to the knowledge of the other of the legal effect of the contract or contracts already concluded. Such views cannot be relevant to or of assistance in the determination by the court of the point of law on which the party is expressing its opinion. Nor, without more, can it be of any assistance in the determination, for the purposes of the Novation Agreement, what obligations had been previously undertaken by PMI. I can understand that the views and opinions so expressed might give rise to some estoppel by convention for the future or to some further or collateral contract to the effect represented in the statement; cf Amalgamated Investment & Property Company Ltd v Texas Commerce International Bank Ltd [1982] 1 QB 84,. But in the absence of such an estoppel or contract, and none was suggested, I do not see how the statements relied on can have any effect on the issues we have to determine."
"I would seek to summarise the position as follows. First, subject to there being no express words of a contract requiring a different interpretation, the word introduction of a buyer carries with it a causative element, indeed an effective causative element, in the words of Nourse L.J., in the "bringing in of the purchaser to that transaction"; I do not think that is any different from the test of Jacobs J. of establishing "whether the actions of the agent really brought about the relation of buyer and seller". Second, I have used the indefinite article above. I doubt whether it makes any difference whether it is "an" or "the" effective cause except possibly where there are two agents with agreements that they are entitled to commission if they introduce a purchaser. Third, thus what Mr Nahum was obliged to establish in relation to the Constable was that it was his actions that really brought about the relation of buyer and seller between the College and the buyer."
Estoppel by convention
"Further, by reason of the contents of the said emails upon which the Claimant relied, as is apparent from the emails themselves, the Defendant is estopped from maintaining that … the Claimant is not entitled to acquire 4% of the equity held by the Defendant or any affiliate of each UK project directly introduced by him or via his contacts."
"If parties to a contract, by their course of dealing, put a particular interpretation on the terms of it - on the faith of which each of them - to the knowledge of the other - acts and conducts their mutual affairs - they are bound by that interpretation just as much as if they had written it down as being a variation of the contract. There is no need to inquire whether their particular interpretation is correct or not - or whether they were mistaken or not - or whether they had in mind the original terms or not. Suffice it that they have, by the course of dealing, put their own interpretation on their contract, and cannot be allowed to go back on it. …
When the parties to a contract are both under a common mistake as to the meaning or effect of it - and thereafter embark on a course of dealing on the footing of that mistake - thereby replacing the original terms of the contract by a conventional basis on which they both conduct their affairs, then the original contract is replaced by the conventional basis. The parties are bound by the conventional basis. Either party can sue or be sued upon it just as if it had been expressly agreed between them."
"Thus the court is not so rigid and inflexible as to insist on the parties being held to an assumed and incorrect state of fact or law when there is no injustice in allowing a party to resile therefrom (see, for example, Multon v Cordell (1988) 277 Estates Gazette 198). Further, if the estoppel applies it will do so only "for the period of time and to the extent required by the equity which the estoppel has raised" (per Ralph Gibson LJ in Troop v Gibson at p 1144). Thus, once a common assumption is revealed to be erroneous the estoppel would not apply to future dealings between the parties (per Purchas LJ in the same case at p.1144)."
"In almost all cases, such unconscionability must be based on the prejudice which would be caused to the claimant if the strict legal position applied. As I see it, the claimant must also establish that that prejudice arises from its reliance upon the convention. In other words, the court generally must be satisfied that (a) the claimant will suffer real prejudice, and (b) the prejudice arises from its reliance [on] the convention. It should be emphasised that, even if the claimant satisfies these criteria, there may be no estoppel, because there may be other, more powerful, factors pointing the other way."
"i) It is not enough that the common assumption upon which the estoppel is based is merely understood by the parties in the same way. It must be expressly shared between them.
ii) The expression of the common assumption by the party alleged to be estopped must be such that he may properly be said to have assumed some element of responsibility for it, in the sense of conveying to the other party an understanding that he expected the other party to rely upon it.
iii) The person alleging the estoppel must in fact have relied upon the common assumption, to a sufficient extent, rather than merely upon his own independent view of the matter.
iv) That reliance must have occurred in connection with some subsequent mutual dealing between the parties.
v) Some detriment must thereby have been suffered by the person alleging the estoppel, or benefit thereby have been conferred upon the person alleged to be estopped, sufficient to make it unjust or unconscionable for the latter to assert the true legal (or factual) position."
"Given my growing misgivings about the integrity of certain officers at CAI … I thought it prudent to obtain Mr Herzfeld's confirmation that my entitlement to my reward in relation to the UK would arise, whichever one of my team, or myself, had technically introduced a project. I emailed him on 17 November 2008 [quoting the e-mail]. I followed this up with a second e-mail on 2 February which stated [quoting the e-mail]."
"Had things been going smoothly, I would not have felt concerned and probably would not have raised this question until later, having already received the assurances I have referred to in paragraph 219 above. However, there was no question in my mind that my entitlement had arisen …"
An independent agreement?
"I think that could also work I guess. Let me just think it, I don't see at the moment why this should not work." (Emphasis added)
"And if our agreement says every casino project in the UK does it?" (Emphasis added)
"… I think that should work, yes."
"… and shall I send them to you to take a look at with your people?" (Emphasis added)
"What I really suggest is that we confirm…"
Conclusion on Apollo
Interpretation of the 2008 agreement
"taking appropriate initiatives on our behalf … for international expansion … of the lottery and online businesses"
"That which initiates, begins, or originates; the first step in some process or enterprise; hence the act, or action, of initiating or taking the first step or lead; beginning, commencement, origination."
Can Mr Wollenberg rely on the 2008 agreement?
"A solicitor who enters into a transaction with a client, or on whom a client confers a substantial benefit other than the solicitor's proper remuneration, by disposition inter vivos, will not be able to uphold the transaction or will not be permitted to retain the benefit, if the transaction is called in question by the client, unless the solicitor can prove to the satisfaction of the court that he disclosed all material facts within his knowledge to the client, and that the transaction was effected by the client in the free exercise of his will and unaffected by any influence which the solicitor either in fact possessed or in law was deemed to possess."
"In both Courts reference is made to the judgment of Parker J in Allison v. Clayhills. In that case Parker J said that although the relationship of solicitor and client in a strict sense has been discontinued, the same principle applies so long as the confidence, naturally arising from such a relationship, is proved or may be presumed to continue, and that even if the solicitor is no longer retained or acting, his duty, in the contemplation in a Court of equity, may still be such as to throw upon him the onus of upholding the validity of a purchase or lease from his clients, and that in considering whether this onus lies upon him the test appears to be the proper answer to the question, whether in the particular transaction he owes his former client any duty in the contemplation of a Court of equity. Whether in any particular transaction any duty exists which makes the relationship between the parties that of solicitor and client, will depend upon all the circumstances of the particular case."
"This case can and, in my judgment, should be decided on the simple ground that there was a relationship of trust and confidence between the Longstaffs and the solicitors; that that relationship did not cease on the termination of the retainer in respect of the intended purchase of the Moorcock Inn; that during the course of that relationship a personal business opportunity presented itself to the solicitors; that the solicitors took advantage of that opportunity to propose that the Longstaffs buy into the partnership of the Castle Hotel at Brough; that in the context of the relationship the proposal gave rise to a situation in which the duty of the solicitors might conflict with their interest; and that they acted in breach of fiduciary duty in continuing to deal with the Longstaffs, in a situation of a conflict of duty and interest, without insisting that they obtain independent advice."
"Provided that Mr Hanson, as the client, knew and understood the terms of the proposed joint venture and their implication, whether the proposed joint venture was prudent or not was a matter for him."
"In some cases of confidential relationship, and the relationship of solicitor and client is one of them, where the person (whom we shall call the confidant) in whom the confidence is reposed by the other person has dealings with that other person, the court views the transactions with suspicion, and applies a presumption that the other's will was unduly overborne by the confidence he placed in the confidant, and the court imposes a burden on the confidant to prove that in all the circumstances the dealings were at arms' length and that the other's will was in no way overborne by the relationship of confidence. Other rules that have been formulated are for the most part sub-rules of this rule as applicable to particular circumstances. The extent and weight of the burden cast upon he person in whom the confidence was reposed and the matters (where the presumption applies) of which the court will require to be satisfied before it will regard the presumption as having been negatived, must vary enormously with all the circumstances of the case, and it is pointless as well as unjustified in law to attempt to lay down any particular requirements for all cases, or indeed for any classes of case, because the circumstances and the requirements will vary infinitely with the infinite variety of human affairs. The general rule above stated is applicable to all cases of solicitors dealing with clients."
"Rules of equity have to be applied to such a great diversity of circumstances that they can be stated only in the most general terms and applied with particular attention to the exact circumstances of each case."
"The present case is concerned with an officer of an incorporated, non-profit-making society. Kuys was not paid for his services but he was a trusted employee; and he was ready to agree that he had duties of trust and confidence placed in him. On the other hand the scope of his responsibility and the dividing line between that and his own personal interests were loosely defined. It appears from the evidence that he was able to run a small insurance business of his own: also it appears that he was permitted a personal interest in the group travel service which he managed for the society. A person in his position may be in a fiduciary position quoad a part of his activities and not quoad other parts: each transaction, or group of transactions, must be looked at."
"The absence of independent legal advice may or may not be a relevant matter according to the circumstances. It is not necessarily an unfair exploitation of a relationship for one party to enter into a transaction with the other without ensuring that he has obtained independent legal advice. On the other hand, the transaction may be such as to give rise to an inference of undue influence even if the induced party was advised by an independent lawyer and understood the legal implications of what he was doing."
i) Between June and September 2008 Mr Wollenberg was acting as CAI's solicitor; but only for the limited purpose of obtaining the Operator's Licence. Other legal work was carried out by Salans, but Mr Polin was the partner in charge. Apart from the obtaining of the licence, Mr Wollenberg had not been acting as CAI's solicitor since 2004, some four years earlier.
ii) On the other hand, Mr Wollenberg had been acting as CAI's consultant (or "representative" or "anchorman") in the UK since the conclusion of the 2005 agreement. The principal relationship between him and CAI was a business relationship rather than a solicitor/client relationship.
iii) CAI were clearly satisfied with Mr Wollenberg's performance of his obligations under the 2005 agreement otherwise they would not have been willing to enter into the 2008 agreement.
iv) CAI was a large, sophisticated and commercial undertaking, operating internationally. The relevant personnel were all experienced businessmen operating in their own field.
v) CAI conducted all its business dealings with Mr Wollenberg in English. Many of its own internal communications were in English; and it was used to making international contracts in English. The retainer of Avv Mancini was one such contract. The relevant personnel were fluent in English.
vi) The essence of a fiduciary relationship is that the fiduciary subordinates his own interests to his principal's. In this case, what was under negotiation was Mr Wollenberg's remuneration. It must have been (and was) obvious to CAI that he would be acting in his own interest in negotiating his own remuneration.
vii) Mr Wollenberg's services had no intrinsic market value (unlike a piece of property or a share in a partnership). They were worth whatever someone like CAI was prepared to pay; and CAI would have known better than Mr Wollenberg what his services were worth to them.
Conclusion on Azzurro
Termination of the agreements
i) It was a gross breach of Mr Wollenberg's duties of loyalty and good faith to CAI to have secretly recorded the meeting of 9 November 2009 and
ii) It was a breach of those duties for him to have obtained a copy of the MOU and to have deployed it in support of the legal proceedings against CAI begun in 2009.
"If A wishes to allege that B, having had a right of rescission, has elected to affirm a contract, he should in his pleadings, so it seems to me, expressly allege B's knowledge of the relevant right to rescind, since such knowledge will be an essential fact upon which he relies."
Result
i) Mr Wollenberg is not entitled to a 4 per cent share in Apollo;
ii) Mr Wollenberg is entitled to a 4 per cent share of CAI's interest in Azurro;
iii) Mr Wollenberg is not entitled to damages for wrongful termination of the agreements.