England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		08/05/2012

Mr Justice Warren :

Introduction

1. This is a winding-up petition ("the Petition") presented by the Claimants, Francis Charles Workman and his wife Elena ("Mr and Mrs Workman") to which TAG Capital Ventures Ltd ("the Company") is the Respondent. The Petition is based on an alleged debt, arising in the circumstances which I will come to. The debt is disputed. The central issue is whether the debt is disputed on bona fide grounds.
2. The leading light in the Company was, at all material times, a Mr Gary Potter ("Mr Potter"). It is he who is instrumental in the defence by the Company of the Petition. The Petition was presented on 25 July 2011. On the same day, Mr and Mrs Workman made an application without notice for the appointment of provisional liquidators. That application was heard by Mr Edward Bartley-Jones QC sitting as a deputy judge of this Division. He granted the application, appointing Mr Finbarr O'Connell and Mr Nimish Patel ("the JPLs") as joint provisional liquidators. Following their appointment, they immediately applied, again without notice, for a freezing order against Mr Potter, and the Judge granted an order. Both orders were continued by Sales J on the return date, 29 July 2011. Mr Potter had been given notice of that hearing date but he did not appear and was not represented. So far as I am aware, he has not subsequently sought any variation of the freezing order.
3. Mr and Mrs Workman's claim is for the return of a number of payments which they had made to the Company with a view to investing in it. It was anticipated, by the Company and Mr Potter at least, that there would be an initial public offering ("IPO") in relation to the Company or a related company and that the intended investment would take place as part of that IPO. The shares issued pursuant to the IPO were to be quoted on a market in Germany. I am not clear whether it was to be on the Frankfurt Bourse (which was where shares in another company, M1 Lux, to which I will come in a moment, were listed) or in Berlin (which Mr Potter is reported to have said to Mr Finbarr in a phone conversation on 27 July 2011 to have been the intention). In the events which have happened, it is now apparent that the IPO will not take place: Mr and Mrs Workman want their money back. In his affidavit sworn on 26 July 2011, Mr Workman says that the advances made were solicited for the purpose of purchasing shares in the Company as part of the IPO. His counsel, Mr Comiskey, suggested, on the basis of the documents, that Mr Workman really did not understand properly what was happening at all and thought that he became a shareholder in respect of each payment as and when it was made.
4. Mr Potter's position is that there was more than an intention on the part of Mr and Mrs Workman to invest and that they had actually agreed to take shares in return for the payments which they had made, and that they had no right to a return of their money unless and until it became clear that the IPO would not take place. It is said that, by the date of the Petition, the IPO was still on the cards so that, at that time, there could not be said to have been any debt owed by the Company to Mr and Mrs Workman and, indeed, that it was not then insolvent. The reason why the IPO will not now take place, it is suggested, is because the appointment of the JPLs resulted in the destruction of the business of the Company. It is no mere technical point, therefore, that there may now be a debt owing and that the Company is insolvent since, it is alleged, (i) at the time of the Petition there was no debt owing and (ii) if the Petition had not been presented and the JPLs had not been appointed, the Company might well have been able to achieve the intended IPO.
5. Mr and Mrs Workman's response to this is that there was no binding agreement to invest. It had been their intention to invest and in a spirit of trust (which can now be seen to have been entirely misplaced) in a Mr John Ward ("Mr Ward" – of whom more later) they parted with their money. In the absence of any agreement, they were entitled at any time to seek repayment and had done so prior to the date of the Petition.
6. If that is wrong, they say that the extraction of money from them was a fraud. Mr Comiskey, who appears for them, said that this was a classic "boiler room" scam with all the hallmarks of such a scam. I do not consider that I can take judicial notice of such hallmarks and take no account of the pejorative nature of the term which he uses.

The facts

7. There is no dispute that substantial payments were made by Mr and Mrs Workman. The figures are set out in Mr Workman's affidavit sworn on 26 July 2011. Between 1 July 2010 and 23 September 2010, they advanced €439,819 to a subsidiary of the Company, TAG Capital AG ("TAG AG") and during February 2011, they advanced a further €39,992 to the Company. It is accepted on behalf of Mr Potter and the Company that, for the purposes of the Petition, all of the sums can be treated as advanced to the Company.
8. Mr Workman's evidence in the affidavit which I have mentioned is to the following effect:

i) Preceding the making of the payments which I have mentioned, he invested in a Swiss company called M1 Lux AG. He had been introduced to this investment by Mr Ward.

ii) He had known Mr Ward since late 2003 or early 2004 when he was recommended by a mutual acquaintance (a Mr Howard Stalker) when he, Mr Ward, was working for a company called Sumner Holdings Ltd, a Cyprus registered company run by a Mr Steven Sumner.

iii) Mr Ward had recommended various investments to Mr and Mrs Workman beginning in 2004, although they did not actually meet until 2009.

iv) The investment in M1 Lux AG came about as a result of an email from a Mr Clegg, who worked with Steven Sumner, recommending that Mr Workman should consider taking up shares in that company. Following receipt of that email, he contacted Mr Ward. He was told by Mr Ward that his own employer, Sumner Holdings, was going to become a subsidiary of M1 Lux and suggested that Mr Workman acquire shares in M1 Lux before an intended IPO. Mr Ward recommended the investment strongly. He told Mr Workman that M1 Lux was to be an umbrella holding company for a group of financial services companies in many countries.

v) Mr and Mrs Workman subsequently acquired shares in M1 Lux over the period August 2009 to August 2010 at a total cost of €1,120,393.

vi) In or around May or June 2010, Mr Ward started to talk to Mr Workman about a company called TAG. At this time, Mr Workman was still putting more money into MI Lux. Mr Ward told Mr Workman that he could acquire shares in TAG AG at a heavily discounted price prior to the IPO which he was told would take place on the Frankfurt Bourse. He was led to believe that TAG AG was going to produce better returns than M1 Lux and that the subscription would be oversubscribed. He was told that the people involved in TAG AG were the same as those involved in M1 Lux.

vii) He was told by Mr Ward that he would be offered considerable discounts on his share purchases for example he was told that his shares would be purchased at a 30% discount. He was also told that he would receive further discounts to compensate him against the losses (by way of penalties imposed on realisation) he would incur when selling existing investments to subscribe for shares in TAG AG. He was told that he would receive, on the last €40,000 of his investment, a "staff discount" of one free share for every share purchased.

viii) The investment was to involve the purchase of shares with an initial value of about €480,000. Arrangements were to be made to borrow the necessary funds from Generali International in Guernsey.

ix) In September 2010, Mr Workman was told that the company in which he would be investing would be the Company and not TAG AG.

x) By July 2011, the IPO had not materialised. The value of the shares in M1 Lux had fallen sharply.

xi) Mr and Mrs Workman's position now is that they realised they had been victims of a fraud in that they had been induced to pay over money in anticipation of a non-existent IPO and, in the case of M1 Lux, in anticipation of a listing on an unregulated exchange. I do not propose to say any more about those suggestions at this stage.

xii) A demand for payment was made on 3 June 2011.

xiii) Mr Bechelet, a solicitor and partner in Bivonas LLP, by then acting for the Company, wrote to Mr and Mrs Workman on 15 June 2011. I will return to that letter later but it was stated that "TAG is not presently in a position to repay you but remains ready, willing and able to allot shares to you on the founder member basis….".

9. At this stage, I wish to say a little about Mr Ward. There is a dispute about the status of Mr Ward in relation to the payments to TAG AG and the Company. Mr Comiskey submits on behalf of Mr and Mrs Workman that Mr Ward was a fundraiser for those companies. Mr Potter appears to suggest that, far from acting on behalf of the Company, Mr Ward was in fact the financial adviser to Mr and Mrs Workman and if he was anybody's agent, he was their agent and not that of the Company. It is certainly the case that there appears to have been a fairly close working relationship between Mr Ward and Mr Workman in relation to the latter's investments and the raising of funds to acquire shares in the Company. This dispute is more relevant to the question of alleged fraud on the part of Mr Potter. Its relevance in relation to the central issue of the terms on which Mr and Mrs Workman provided funds to the Company is less clear. Neither side has produced any evidence from Mr Ward about his involvement in the transfer of funds by Mr and Mrs Workman to TAG AG and the Company.

These proceedings

10. Following the hearing before Sales J which I have mentioned, the evidence was completed. The relevant evidence now comprises:

i) The affidavit sworn by Mr Workman on 25 July 2011.

ii) The first witness statement of Mr O'Connell dated 29 July 2011.

iii) The first witness statement of Mr Bechelet dated 10 October 2011.

iv) The second witness statement of Mr Workman dated 16 November 2011.

v) The second witness statement of Mr O'Connell dated 16 November 2011.

vi) The second witness statement of Mr Bechelet dated 9 December 2011.

vii) The third witness statement of Mr Bechelet dated 20 December 2011.

viii) The first witness statement of Mr Potter dated 29 February 2012.

Much of the evidence contained in the affidavit and witness statements is of no relevance to the question whether there was a contract between Mr and Mrs Workman and the Company although it is highly relevant to whether Mr and Mrs Workman have been the victims of a fraud perpetrated on them by those behind the Company.

11. As to Mr O'Connell's second witness statement, Mr Potter made an application for this to be excluded. That application was heard by David Richards J on 8 February 2012. The application was refused but Mr Potter was given permission to file further evidence provided that it was in his own name, all the previous evidence on his behalf having come from Mr Bechelet. That resulted in Mr Potter's first and only witness statement.
12. The parties have had every opportunity to put before the Court all the evidence on which they rely. They have had plenty of time to prepare for the hearing (held on 19 April 2012). It was, or should have been, apparent to everyone that the central issue was the existence or otherwise of a binding agreement between Mr and Mrs Workman on the one hand and TAG AG or the Company, on the other hand concerning the terms on which the substantial funds advanced by Mr and Mrs Workman were to be held by the Company. In particular, it was incumbent on Mr Potter either to produce such evidence as is available to demonstrate the existence and terms of such an agreement or, at the very least, to indicate what that evidence would be at trial. It was incumbent on him to do so because his task is to satisfy the court that the dispute about whether Mr and Mrs Workman were entitled to the return of their money at the date of the Petition was a bona fide dispute rather than the mere allegation of a dispute with no substance and designed to resist the Petition.

Evidence of a contract

13. I turn then to the evidence which might have any bearing on that central issue remarking at the outset that it is sparse and inadequate.
14. From what I have said so far, it will be apparent that Mr and Mrs Workman's contact with the Company up until a time after they had made all of the payments to TAG AG and the Company itself was through Mr Ward. Clearly Mr and Mrs Workman believed that Mr Ward was somehow associated with those who were involved with the Company and it will become apparent when looking at the correspondence and other documents why they would have formed that belief. Thus Mr Workman says that he was concerned when, in March 2011, Mr Ward told him that he was leaving the Company. At this stage, Mr Workman became highly concerned and started raising questions directly of Mr Potter. His concerns were not allayed and so, on 3 June 2011, he made the demand for repayment which I have mentioned.
15. Mr and Mrs Workman's position is that there never was any concluded contract to subscribe for shares in the Company. Mr Potter's position is that there was such a contract; the payments received by TAG AG and the Company were received pursuant to a contract that when the IPO took place, Mr and Mrs Workman would receive shares. Although it was initially anticipated that the shares would be in TAG AG, this was changed to shares in the Company. There was no right, according to Mr Potter, for Mr and Mrs Workman to withdraw and thus no debt was owing to them on the date of the Petition, being a date when, according to Mr Potter, it was still expected that the IPO would take place.
16. I have set out what Mr Workman says about the existence, or non-existence on his case, of a contract. He exhibited to his affidavit in support of the appointment of the JPLs a number of documents, including emails. One of these documents was a "business overview" document ("the Overview") relating to the Company. It was sent to him by Mr Ward on 30 November 2010, after he had made the payments to TAG AG but before he had made the payments to the Company. It shows profit for the period ending 31 December 2010 of €4,914,299. Of course, having been prepared well in advance of the year-end, the figure could not possibly be an actual figure for profit. Perhaps it was only a projection, as Mr Thompson who appears for Mr Potter suggests. On the evidence I have seen, it looks more like wishful thinking than projection. It projects an estimated cumulative trading profit to 31 December 2013 of over €46 million.
17. In mid-March 2011 Mr Workman began asking Mr Potter, Mr Peter Steiner ( the Company's company secretary) and other Company representatives what he describes as searching questions. He exhibits many pages of email correspondence to demonstrate the search, a review of some of which may be necessary in the context of the fraud allegation. But in relation to the existence or otherwise of a contract, I mention only a few at this stage:

i) On 14 March 2011, Mr Potter claimed that the IPO was always intended to take place in the first quarter of 2011 and was running a couple of weeks late. However, by the end of May the IPO had still not taken place and no satisfactory explanation was given for the continuing delays.

ii) Mr Workman persistently asked for details of the discounts that would be applied to the Company shares when the strike price on the IPO was announced and stock allocated. Responses on this were evasive. This, to my mind, is very important because it shows that what Mr and Mrs Workman were to get for their money was entirely uncertain, an aspect to which I will come in more detail later. Even though he had been told at an early stage by Mr Ward that one of the incentives to invest was a discount of 30%, there was a reluctance on the part of the Company ever to confirm or deny that there was such an arrangement, let alone to acknowledge the other discounts which I have mentioned.

iii) On some date on or shortly before 14 December 2010, Mr Workman compiled a list of questions in relation to his acquisition of shares in the Company which he sent to Mr Ward. That list was provided by Mr Ward to Mr Potter. Responses were provided to Mr Ward by Mr Potter who, on 14 December 2010, conveyed them to Mr Workman, adding one response of his own. The email to Mr Workman was copied to Mr Potter. There is nothing to suggest that the responses given by Mr Ward and Mr Potter are now said to be inaccurate. I deal with this response in more detail in paragraph 18 below.

iv) In early March, Mr Workman had raised a number of further queries. I think that these were initially raised with Mr Ward but that does not matter because those queries were passed on to Mr Moore, the chief executive of the Company. I say chief executive because that is how he is described by Mr Ward in an email dated 11 March 2011 from Mr Ward to Mr Moore in which he forwarded Mr Workman's further enquiries. In that email he says this: "As you are aware I have relinquished all connections to [M1 Lux and the Company] and now revert to assisting Mr Workman when required as Independent Contractor". On 14 March 2011, Mr Potter sent an email to Mr Workman to answer questions which Mr Workman had raised with Mr Moore. I deal with this response in more detail in paragraph 19 below.

18. Mr Workman's list dealt with in the email dated 14 December 2010 included the following:

i) He sought written confirmation to substantiate what Mr Ward had told him namely that stock in the Company at an initial value of £60,000 had been "assigned to me FOC". This was to cover what he regarded as a loss resulting from the fact that he had originally intended to acquire shares for €300,000 but had only been able to release funds of €240,000. Mr Ward replied that he had originally stated that the firm (by which I understand him to mean the Company) would cover some 50% of the charges directly and that he had stated that "every endeavour would be made to mitigate the external charges further and where possible (notwithstanding the substantive discounts already obtained inbound) and here answer 2 takes this into consideration".

ii) Answer 2 was given by Mr Potter in relation to Mr Workman's request for confirmation of "the additional free TAG shares being allocated to me in lieu of the high surrender values impose on me by Skandia". This was a reference to the fees charged by Skandia to release funds to him, funds which he needed to make the payments to TAG AG and the Company. Mr Potter's response was that the Company would be issuing shares at discount on day 1 so he will be receiving more than enough to cover the Skandia values, adding "This was arranged" whatever that may mean.

iii) Mr Workman requested the latest forecast date for the Company to trade openly on the market. Clearly this question is based on the footing that the IPO would result in the shares being listed on an exchange of some sort. There is no evidence before me to suggest that the intended IPO would result in anything other than a listing. Mr Potter's response was that the target date was the first week of February "subject to final administration".

iv) Mr Workman sought confirmation of the number of Company shares allocated to him. Mr Potter responded in this way: "Decided at float price, share value and issue. (Further information regarding this for client)". One might be forgiven for thinking that that was a pretty unsatisfactory reply in the context of what Mr Potter now says is a binding contract rather than in the context of a proposal to invest following completion of application forms leading to a formal contract setting out all necessary details to enable an investor to know precisely what he is getting. It told Mr Workman nothing about the discount he would be obtaining nor about how that discount would reflect the compensation which he understood he would receive in relation to the realisation of assets.

19. In the email dated 14 March 2011, Mr Potter answered Mr Workman's queries as follows:

i) He told Mr Workman that Mr Moore was General Manager and currently engaged in the Private Equity side of the business. The IPO side was really his, Mr Potter's, area of expertise.

ii) In relation to the latest forecast date for the Company to trade openly on the market. Mr Potter referred to "the Company's Corporate Overview". There can be no doubt that this was a reference to the Overview. Mr Potter noted that it had been provided to Mr Workman in hard copy. He did not suggest that the Overview was in any sense inaccurate or that it had been mistakenly released. Quite the reverse: he was clearly relying on it and commending it to Mr Workman. By reference to the Overview, Mr Potter stated that the original intention was to obtain a full clearance for listing with TAG AG by the end of January 2011. After that, he would normally have expected to receive a date to complete the IPO but

"sometimes this can take up to 3 weeks depending on how many Companies are in front of us in the que [sic]. So in real terms we are at about that stage now."

iii) In relation to Mr Workman's next query about the reasons for delay in the IPO, Mr Potter said that the IPO had never been put back and gave a lengthy explanation about why the Company had been substituted for TAG AG as the IPO vehicle an explanation which would need to be examined closely in the context of the allegations of fraud against Mr Potter.

iv) Mr Workman sought details of the shares allocated to him. Mr Potter's response was this:

"Once we have closed off the books and submit the papers to the registrar I will have a better idea of what your total allotment will be. But be rest assured you will be well compensated and I have made note of the loss you took on the Royal Skandia plan. All to be factored in. It will be a significant holding I can assure you. JW has struck you a good deal."

v) As to the strike price, Mr Potter said "Hard to say exactly at this stage but I'm aiming for a strike price of between 70 cent to 1 euro. With good PR in place we can slowly build the Company in the public eye attracting both investment for growth as well as a healthy asset base."

vi) On 30 March 2011, an employee of the Company emailed Mr Workman. She noted that Mr Potter was dealing with investments made by Mr Workman in 2010. However, "we still require paperwork for the investment made in 2011 for 40,000.00". She asked Mr Workman to provide a number of documents including an application form and a self-certified sophisticated investor declaration.

vii) Mr Workman did not return the paperwork and, indeed, has never done so. On 26 April 2011, Mr Potter chased Mr Workman for the documentation not only in relation to the 2011 payments but also in relation to the 2010 payments. He enclosed two application forms for completion in respect of the 2010 and the 2011 payments and a self certification form as before.

viii) I think it is common ground that provision of the self-certification form was a regulatory requirement without which the Company should not have agreed to allot shares to Mr and Mrs Workman. Mr Workman has never provided such a certification. Mr Comiskey says that Mr Workman could not properly have completed the self-certification since he does not fulfil any of the criteria necessary to be able to do so. That may be so, but it is not apparent from the evidence. But I do not think anything turns on it for present purposes.

20. As to the application form sent in March 2011, it is curious that it relates to shares in an entity described as "the Company". That is a term which is nowhere defined. But what the applicant is told is that the form must be sent to the Administrative Managers at "Tag Capital AG", that is to say the company which I have referred to as TAG AG and the company to which Mr Workman had made the 2010, and not the 2011, payments. That was the only company identified in the form. The form is worded as an offer to invest; a contract could arise as the result of this application form only if (a) it was submitted and (b) the offer was accepted. It was in fact never submitted. But if it had been it would, on its face at least, have given rise to a contract to purchase shares in TAG AG.
21. As to the application forms provided by Mr Potter in April 2011, the same point can be made about the use of the words "the Company". The companies identified (one each form) are the Company and TAG AG again. So at this stage, it appears that Mr Workman was being asked to apply for shares in TAG AG in relation to his 2010 payments, and not shares in the Company.
22. It is convenient at this stage to say a little more about the Overview. Firstly, it refers to Mr Ward and identifies him as "Business Development Manager – France", setting out a career history in glowing terms. A reader of his title and description would be left in no doubt that Mr Ward was an officer of the Company and able to make representations on its behalf. The Overview also sets out the "Purchase Process" at section 9.3:

"Investor verbally agrees with adviser. TAG Capital Ventures allocates this amount to the Investor.

Investor received call for TAG Capital Ventures Compliance Department to gather relevant investor details, confirm allocation and obtain payment details, including ordering bank and date of payment.

Investor completes Application Form and sends copy to TAG Capital Ventures by fax or email – details on form

Investor transfers funds and send confirmation of payment by fax or email

Investor posts hard copy of Application Form, copy of transfer receipt and copy of payment to TAG Capital Ventures office

Within 10 working days of receipt of funds, the Investor will receive their Convertible Loan Agreement.

TAG Capital Ventures' Consultant maintains regular contract with the Investor until listing of the Company."

23. Section 9.4 explains the conversion process. I do not need to go into the detail save to say that once the listing date has been set by the Bourse, the Company would begin the process of converting "each loan note into stock at the market price less the discount". A sample of the Convertible Loan Agreement was to be found in Appendix 1 to the Overview (a sample because the details would no doubt need to be tailored to individual circumstances especially in relation to the rate of discount). It provided as follows:

i) Security: (Investment Amount) in the form of a convertible bridge loan (the Convertible Loan)

ii) Coupon: 7% annual rate

iii) Term: 12 months from date of issue

iv) Security: senior security interest in assets of the Company

v) Anticipated closing date: February 2011

vi) Conversion Terms: The Convertible Loan is convertible into common stock in the Company at 30% discount on the strike price at the point of the company being listed.

vii) Use and Application: Working capital for realization of the TAG Capital Ventures Business Plan.

24. Those promoting the Company clearly knew how a responsible investment into the Company should be conducted. It is a great pity that the procedure set out in section 9.3 was not adopted since, if that had been done, Mr and Mrs Workman would have parted with their money only after completing an application form. What actually happened is surprising (to use an understated description) in the context of an honest transaction from any point of view. It is surprising from their point of view that Mr and Mrs Workman parted with substantial sums of money simply on the say-so of Mr Ward without, apparently, any understanding of the financial position of TAG AG or the Company, and without knowing what precisely it was that they would acquire. It is equally surprising from its point of view that the Company received payment of these substantial sums apparently without any documentation at all to record a contract and without any sort of attempt to comply with regulatory requirements.
25. Following the appointment of the JPLs, Mr O'Connell had a phone conversation with Mr Potter on 27 July 2011. His evidence, which is not challenged by Mr Potter, is this:

i) Mr Potter confirmed that TAG would not be listed on the Berlin Open Market but rather that they would use a "platform" there to allow the shares in the Company to be traded between people who were shareholders in a private UK company. This was very similar to the position with M1 Lux AG which has a platform for its bearer shares on the Frankfurt Open Market.

ii) Mr Potter indicated that the only way in which he could see the Workmans being repaid would be for them to take their allocation of 1 million shares in the Company and for Mr Potter to launch a PR campaign to find people to purchase the shares off them. He confirmed that the Workmans were the main external investors or potential investors in the Company, as they had been in M1 Lux. So far as I can see, this is the first (and possible only) mention of 1 million shares.

iii) Mr Potter confirmed that the Company, just like M1 Lux, was not trading. It had no employees and no revenues as yet. They had a number of contacts who would generate income if the right opportunities came along. He said that a recent Company overview which showed €4.9 million of income for the last few months of 2010, had been produced by a "Swiss-German guy called Simon Kholser" who had got the whole thing wrong.

iv) Even though the Workmans were the major investors, they would only receive 10% of the shares for their €480,000 if they did decide to take shares. Mr Potter indicated that TAG AG would be a 30% shareholder but it was not clear what consideration it had given for this holding. Mr Potter indicated that shares would be issued to other people who had helped him or the Company out.

v) Mr Potter said that of the payments made by Mr and Mrs Workman, Mr Ward had received a 20% commission, which had been paid immediately upon receipt of each payment.

vi) Mr Potter indicated that if Mr and Mrs Workman did not take shares in the Company, Mr Ward would need to return the commission and that the Company would need to repay the amount of €480,000 to Mr and Mrs Workman.

26. Mr Bechelet's first witness statement sets out Mr Potter's case that there was a binding contract for Mr and Mrs Workman to invest in the Company. He notes that reliance was not being placed in presenting the Petition on three statutory demands which had been served. This was because, as presented to Mr Bartley-Jones and to Sales J, reliance could be placed on an alleged admission that a debt was due, an admission to be found in letters dated 15 June and 15 July 2011 from Mr Bechelet himself to Mr Workman. This matter was debated before Sales J who was clearly of the view that the letters did not give rise to any admission. That was effectively accepted by counsel before Sales J and it is not suggested before me that they do constitute an admission. That is not an end of the story however, because if there was no contract such as Mr Potter alleges then there was a debt due at the date of the Petition, following the demand made on 3 June 2011 for payment. Mr and Mrs Workman should be entitled to rely on that debt on the Petition unless it is established that there is a bona fide dispute about the subsistence of the debt.
27. The letters which I have just referred to are not, however, totally irrelevant. Thus, Mr Bechelet refers in the 15 June letter to the amounts paid as being ostensibly to invest in TAG (by which he meant the Company). That, on any footing is incorrect because the sums paid over in 2010 were transferred with a view to investment in TAG AG and not the Company. Mr Bechelet wrote to this effect in paragraphs 6 and 7 of his letter:

"6. Our instructions are that the obligation to repay or issue shares now rests with TAG [ie the Company] which is the vehicle to be listed within the next few weeks on the German Stock Exchange, it until recently having been the intention to list TAG Capital AG. It is denied that Mr Potter has any personal liability to you.

7. TAG is not presently in a position to repay you but remains ready, willing and able to allot shares to you on the founder member basis or is willing to agree with you a schedule of repayment proposals which it will honour as soon as it is in a position to do so."

28. In the letter dated 15 July, Mr Bechelet included the following:

"Our instructions are that when TAG is listed, it remains ready, willing and able to allot shares to your clients on a founder member basis, or if your clients requires [sic] the return of their money, TAG is prepared to enter into a repayment agreement over 36 months so that your client money is paid back by equal monthly instalments together with interest at 2% above the base rate of HSBC on the balance outstanding. Such payment to be charged on Mr Potter's shareholding in TAG."

29. No mention is made in those letters of a binding contract albeit that there is no admission that there was no such contract. There being no such mention, there is of course no detail given of its terms or of when and where it was made or between whom it was made. No explanation is given there, or anywhere else in the evidence, so far as I am aware, of what is meant by the "founder member basis".
30. In paragraph 25 of his first witness statement Mr Bechelet notes that Mr Potter has not suggested that there was voluminous paperwork relating to the payments, but he was seeking to regularise the paperwork right up to the time of the Petition. He goes on:

"It is clear from that correspondence that there was an agreement to subscribe for shares in TAG or more particularly that, in exchange for paying the money to TAG, the Workmans would be entitled to shares in TAG upon its Public Offering."

31. Mr Workman, in responsive evidence found in his witness statement dated 16 November 2011, denies that there was any such agreement and notes that Mr Bechelet does not specify what correspondence he is referring to in support of his assertion of an agreement to subscribe for shares in the Company. That witness statement goes into considerable detail. It deals in paragraphs 15 to 19 with the background of the investment in M1 Lux and in paragraphs 20 to 33 with the payments to TAG AG and the Company.
32. As to the background to be derived from the investment in M1 Lux, the only points I wish to record are (i) that the shares acquired were already issued and were listed on the Frankfurt Bourse (an unregulated platform for buying and selling shares) and (ii) that on each occasion of investment, Mr and Mrs Workman would receive a contract note setting out the bargain date and settlement date for the purchase.
33. As to the payments to TAG AG and the Company, Mr Workman explains that his dealings were with Mr Ward. He says – and I do not think that this at least is disputed and do not think that it sensibly could be disputed – that following a recommendation from Mr Ward, he decided to invest the maximum available, €240,000, in TAG AG. He left it to Mr Ward to communicate his requirements to TAG AG and understood that Mr Ward would deal with the formal requirements including contractual documents. He was told by Mr Ward on 21 June 2010 that he, Mr Ward, had reserved that maximum amount which would be acquired "at base, minus entry discount", by which Mr Workman understood at a substantial discount below that at which the shares would be priced on their listing on the Frankfurt Bourse.
34. However, Mr Workman's evidence is that he was not told how many shares had been allotted, what the price of the shares would be or the discount. He says he was clearly under the impression, engendered by Mr Ward, that the shares would be issued imminently. I do not think much turns on that in relation to the question whether there was a contract, although it would be relevant to the issue of fraud. Mr Workman evidently thought that the share allocation had been dealt with since, in July 2010, he sought confirmation from Mr Ward about the issue of shares in TAG AG asking "have the existing holdings of M1 Lux and TAG been transferred into a Bond or Bonds yet" and "what is the share price for TAG (tranche 1 and 2)?". Mr Workman says that he assumed, from what he had been told by Mr Ward, that he was purchasing issued shares and not simply paying money over to be held pending the issue of shares.
35. Mr Workman was told by Mr Ward on 6 July 2010 that he would able to invest in the second tranche of shares being made available, an investment which Mr Ward enthusiastically recommended according to Mr Workman. Following that, Mr Workman sought to raise finance from Generali against the security of his shares in M1 Lux. The only written update he received in the next couple of months from Mr Ward was by a Skype communication on 20 September 2010 when Mr Ward advised him that "Tag is setting at 80c a share" which he understood to mean that TAG AG have a listing price of 80c but that he would be purchasing at a discount. The level of the discount was not, he says, discussed and he was not told how many shares he was being offered. As to this second tranche, Mr Workman transferred €199,946.50 to TAG AG. He received nothing in writing about the second tranche only having Mr Ward's word that he would be able to subscribe.
36. The next witness statement to which I need to refer is Mr Bechelet's second witness statement. He informs the Court that Mr Potter intends to rely on his Defence (verified by a statement of truth) in the proceedings which have been brought against him by the JPLs. He reiterates that Mr Potter has consistently and unequivocally denied that Mr Ward had any authority to speak for or bind the Company; Mr Ward was simply an independent financial adviser who acted for Mr and Mrs Workman. In that respect he refers to paragraph 5 of the Defence. I am not sure what Mr Potter says follows from that paragraph, since it is pleaded that Mr Ward was not the agent of the Defendant, ie Mr Potter. It is not pleaded that Mr Ward was not the agent of the Company –unsurprisingly since there is no allegation in the Particulars of Claim that he was. As to agency for the Company, the fact is that Mr Ward was shown in the Overview to be a Business Development Manager; and from what little other evidence there is, it is apparent that Mr Ward himself considered that he had a relationship with the company which he had relinquished: see paragraph 17.iv above. Indeed, in his own witness statement, Mr Potter states that Mr Ward was an introducer of business to the Company although not, it is asserted, an agent of the Company
37. Next I come to the witness statement of Mr Potter. Just by way of background, he says that he has never met Mr and Mrs Workman. He says in paragraph 4 that they "intended to, and did in fact, subscribe for shares in an initial public offering ("IPO") of shares in the Company which would have taken place had it not been frustrated by the presentation of the petition". I take this to mean that Mr and Mrs Workman intended to contract, and did in fact contract, to acquire shares in an anticipated IPO.
38. Mr Potter does not anywhere suggest that he had direct dealings with Mr or Mrs Workman, at least until after they had made all of the payments and at a time when Mr Workman was seeking answers to his concerns direct from Mr Potter. Mr Potter says they never met, and Mr and Mrs Workman do not suggest otherwise. Nobody suggests that there were any phone conversations. And no-one suggests that there was correspondence, email or otherwise, other than that post-dating the time when Mr Workman first expressed his concerns.
39. It follows from that absence of direct contact that it is through Mr Ward alone that any contract with the Company must have been made. And since, on Mr Potter's case, Mr Ward was not the Company's agent, the human mind contracting on behalf of the Company must have been someone other than Mr Ward.
40. So, what does Mr Potter himself say about the contract? He in fact says very little. Apart from the passage which I have quoted from paragraph 4, the only other material in his witness statement, running to some 43 paragraphs, is to be found in paragraph 23 where he says that the agreement between the Company and Mr and Mrs Workman "was always very clear in that when the IPO took place [they] would receive shares in the IPO at 30% discount of the striking price, so that they would receive as many shares as might be available at that price for the sum they had subscribed". He relies on exchanges between Mr Workman and Mr Ward to demonstrate his, Mr Workman's, acceptance that the money was paid for shares in the Company.
41. There can be no doubt, and it is not contested by Mr and Mrs Workman that they did indeed intend to acquire shares, first in TAG AG and later in the Company. No point is taken on their behalf that, even if there was a contract concerning the TAG AG shares, it was not transformed into one to the effect that the same money should be used to acquire shares in the Company instead. But what is said is that there was never a contract. Accordingly, they do not dispute the proposition put forward by Mr Potter when he says in paragraph 23 that the money was paid in respect of the Company's shares. Manifestly it was. But that does not answer the question whether there was a contract that they would take the shares.

Conclusion and discussion

42. In my judgment, Mr Potter has failed, on the evidence before the Court, to show that there was a binding contract between the Company and Mr and Mrs Workman that they would purchase shares in the Company. This is for a number or reasons some of which taken alone would be sufficient to negate any contract. I shall list those reasons in a moment. But before I do so, I must say that it is not enough for Mr Potter simply to assert that there was a contract and that it was always clear that Mr and Mrs Workman would take shares in the IPO. The onus is on Mr Potter to show that there is a bona fide dispute on substantial grounds. To fulfil that requirement, he needs to identify the terms of the contract relied on and he needs to explain where and when and between whom it was made. I do not say that he has to produce, when seeking to show a bona fide dispute, all of the evidence which he would produce at a trial of a bona fide dispute. But he does at the very least have to explain the matters I have just referred to.
43. But he has done none of that. At the end of the hearing, I still had no idea of how the alleged contract is said to have come about or what its detailed terms were other than a vague statement that Mr and Mrs Workman were obliged to take the shares in the event of an IPO, an IPO which was imminent but destroyed by the Petition.
44. Turning to my reasons for saying that there is no bona fide dispute, the evidence reveals that Mr and Mrs Workman paid large sums of money to TAG AG and the Company. That of itself, and viewed in isolation, cannot possibly give rise to a contract. Of course, the payment was not made out of the blue. It was made by Mr and Mrs Workman because they were encouraged by Mr Ward to do so. Mr Workman has given evidence about this and about why he and his wife made the payments. But he did not know how many shares he was going to receive; further, there was uncertainty about the level of discount he would receive, with Mr Potter failing to answer clearly Mr Workman's request for clarification both in relation to the main discount and in relation to the level of the discount he would be entitled to in respect of the loss suffered in relation to the Skandia realisations, for instance, to be factored in as he clearly always intended it would be. I give that as an instance because there were other realisations of funds which Mr Workman had to effect in order to have sufficient cash to make some of the payments to TAG AG and/or the Company. Nothing at all was said about the "staff discount" which he had been promised by Mr Ward.
45. As to the uncertainties I have mentioned, it is said that there was no need for him to know the actual number of shares. That is not the way things would work. Instead, there would be an allocation of a certain number of shares at the strike price of the IPO. If that were the only point, there might be an arguable point and thus a bona fide dispute to that extent. But it is not the only point because there is (a) the level of the discount and (b) the adjustment for the Skandia realisations. I have already made some observations about those and the replies given by Mr Potter. The unsatisfactory nature of the replies is best illustrated by the parts of the emails dated 14 December 2010 and 14 March 2011 set out at paragraphs 18.ii and 19.iv above. Those responses are very difficult to reconcile with the proposition that there was a clear agreement such as Mr Potter now suggests was made; it seems to me that those responses are far more consistent with the proposition that everything was still to be decided.
46. The level of the discount is obviously an important term of any contract: once it is accepted, as it must be, that there was going to be a discount, its level was essential. I say that it has to be accepted because, so far as Mr and Mrs Workman are concerned, it is clear that they intended that there should be a discount. And so far as Mr Potter is concerned, his case is that it was clear that Mr and Mrs Workman would subscribe but with a 30% discount. As to the additional Skandia discount, as I might describe it, the evidence is again clear that Mr and Mrs Workman were expecting an adjustment to the number of shares which they would receive. Mr Potter has never disputed that principle and, indeed, to do so would be inconsistent with his response to Mr Workman's concerns as contained in the email dated 14 March 2011: see paragraph 19.iv above. Accordingly, on a basic contract law point, I do not consider that was a sufficient meeting of minds to have resulted in a binding contract. Matters were too uncertain. As to the "staff discount" or the 50% discount promised on the last €40,000 investment, Mr Potter's case is inconsistent with there being such a discount. But it is not arguable that Mr Workman intended to proceed with the 2011 payments other than on the basis of that discount.
47. The next point is that there does need to be a meeting of minds. I say that, having rejected the proposition that the mere payment of money would give rise to a contract and thus rejecting the proposition that, objectively speaking, a contract could be said to exist even in the absence of express discussion and actual meeting of minds. Where, I ask myself is that meeting of minds to be found? Mr Potter says that Mr Ward was not the agent of the Company. If that is correct, then he, Mr Ward, was not able to bring about a contract between the Company and Mr and Mrs Workman. Mr Potter therefore needs to identify what was said by Mr Ward to the Company (presumably, but not necessarily in the human form of Mr Potter) to establish the necessary meeting of minds to give rise to a contract. He has not done so. He in fact says absolutely nothing in his evidence (and nor does Mr Bechelet) about anything said by Mr Ward to the Company. All that can be derived from the evidence is that money was paid by Mr and Mrs Workman in anticipation of an IPO with an intention of acquiring shares in the Company. That is simply insufficient to give rise to a contract let alone one to acquire shares at the strike price less a 30% discount.
48. If, in contrast, Mr Ward was the conduit between the Company and Mr and Mrs Workman, in fact authorised on behalf of the Company to procure an investment from them, then the Company cannot be heard to say that Mr and Mrs Workman contracted, assuming that they intended to contract at all, other than on the basis of the discussions between them and Mr Ward. It is clear from the evidence as it stands that there is insufficient to raise any argument that Mr and Mrs Workman intended to contract on the basis that Mr Potter now alleges. And since Mr Potter has not given any evidence about what transpired between Mr Ward and himself or other representatives of the Company, it is not possible even to be sure that the Company ever intended to contract or, if it did, to contract on the terms which Mr Potter now alleges.
49. That is enough to dispose of the issue. In my judgment, it is clear that there was no contract and that the alleged dispute is not bona fide in the sense that the argument put by Mr Potter has no merit. Other factors, do however point towards there being no contract. I do not need to rely on them but were it to be said that I have incorrectly placed reliance on the matters already dealt with, or have placed too much weight on them, these further factors would still lead me to the conclusion that there was no contract.
50. The first of those factors is the contents of the Overview. Although post-dating the 2010 payments, it does not post-date the 2011 payments. Mr and Mrs Workman received the Overview before making the 2011 payment. Whilst they clearly cannot have believed that the process set out in section 9.3 would apply to them (assuming that they had read it and understood it) it is consistent with the Company's intentions as expressed in that document that there would be no contract until various formalities had been gone through including the submission of an application form and compliance with regulatory requirements. In addition, the terms of the Convertible Loan in the draft in Appendix 1 which I have referred to refers to a coupon of 7%. Mr Potter makes no reference to there being a right to any sort of coupon at all as part of the contract which he alleges. One might have thought, in the light of the Overview, that such a term would form part of any contract. If there was a contract, it is surprising that it is entirely silent about what would happen if the IPO did not take place. Indeed, in an email to Mr Workman dated 31 March 2011, Mr Potter states that he is awaiting the paperwork and that, once received, a term sheet would be issued carrying a 5% annual coupon. This all seems to me to be far more consistent with there being no contract at all until the necessary paperwork had been completed than with a contract making no provision for how the monies are to be regarded pending the IPO.
51. The first factor is closely connected with the second factor which was the provision to Mr Workman of the application forms and the draft self-certification form. It is possible, of course, that the parties could have contracted before complying with formalities; and not impossible that they would have done so in the light of the arrangements in respect of M1 Lux where clearly no regulatory requirements were fulfilled. However, the recognition by the Company that such formalities needed to be complied with makes it all the more important that any allegation of a contract be clearly particularised and articulated.
52. The third factor, although I have to accept that it cuts both ways, is the one which I have already mentioned, namely the fact that matters were dealt with in the way which they were in fact dealt with at all. It is, to repeat, surprising the Company should have been as lax as it was about documentation if it really intended to contract. The response to that is that it is equally surprising that Mr and Mrs Workman were willing to part with their money without proper documentation. It is difficult not to agree with that and as Mr Comiskey remarked in relation to his own clients, they appear to have been naïve (duped, as he would add by a fraudster but that is a different issue entirely and is hotly denied by Mr Potter) and obviously not sophisticated investors. That response, however, is not an answer to the point. Mr and Mrs Workman's conduct is surprising whether or not there was intended to be a contract; the surprise is that they parted with their money without any documentary record of the terms on which they did so. But the Company's conduct is much more surprising if it considered there to be a contract than if it were merely receiving money with the intention and in the expectation that Mr and Mrs Workman would acquire shares without their being under an obligation to do so.
53. The fourth factor is what Mr Potter told Mr O'Connell about the level of Mr and Mrs Workman's entitlement, as to which see paragraph 25 iv) above. It is not easy to see how a 10% shareholding can be said to represent a strike price less 30% discount when the value of the Company was not, at best from Mr Potter's point of view unknown, and more likely substantially less than €4.8 million (the figure necessary if Mr and Mrs Workman were to get value for their money ignoring discounts altogether). Mr Potter's whole approach in his conversation with Mr O'Connell is inconsistent with a contract on the terms he alleges.
54. It follows, in my judgment, from all that I have said that it is clear that there was no contract such as that alleged by Mr Potter on behalf of the Company. And from that conclusion it follows (a) that Mr and Mrs Workman were entitled to demand repayment on 3 June 2012 and (b) that they were creditors with locus to present the Petition. There is no dispute that the Company is now insolvent and, indeed, it is reasonably clear that it was insolvent once the demand had been made. There is accordingly no bona fide dispute which should preclude me from making a winding-up order.
55. Even if there was an arguable case that there was sufficient certainty that a deal had been struck at a 30% discount in relation to the 2010 payments to TAG AG, it is unarguable that that was the case concerning the 2011 payments in relation to the Company with regards to which the "staff discount" or 50% discount was the understanding on which Mr and Mrs Workman proceeded. They therefore had a cast-iron claim to recover about €40,000 at the date of the Petition, whatever may have been the case in reflection to the 2010 payments. That is enough to support a winding-up order.
56. In the light of this conclusion, there is no need for me to consider the alternative allegation that any contract would be voidable by reason of the fraud of Mr Potter. I do not therefore propose to consider any of the substantial evidence which goes to that issue.

Disposition

57. In my judgment, Mr and Mrs Workman succeed on the Petition. I will make a winding-up order accordingly, but for reasons which I need not go into the matter will now be adjourned to the Registrar.

Postscript

58. For the avoidance of doubt, I should add that nothing I have said in this judgment should be taken as precluding Mr Potter (or indeed the Company) from taking whatever steps he (or it) considers appropriate in relation to alleged material non-disclosure by Mr and Mrs Workman in obtaining the appointment of the JPLs and the Company, through the JPLs, then obtaining a freezing order against Mr Potter. However, even if there was such material non-disclosure, that ought not to disentitle Mr and Mrs Workman from their right to petition for winding-up as creditors of an insolvent company.