QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Rolls Building Fetter Lane, London, EC4A 1NL |
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B e f o r e :
Sitting as a Judge of the High Court
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MAD Atelier International BV |
Claimant |
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Mr Axel Manes |
Defendant |
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Richard Hill QC, Gregory Denton-Cox and Emma Horner (instructed by Macfarlanes LLP) for the Defendant
Hearing dates: October 2021, 11- 14, 19- 22, 25 - 26, 28 - 29 and November 2021, 1 – 2,
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Crown Copyright ©
Sir Michael Burton GBE :
The Defendant's case
i) The Claimant's case depends upon persuading the Court that Mr Padberg, 40 years a businessman, would have signed a considerable number of papers without reading or understanding them, at least sufficiently to comprehend that what he was signing was a transfer of shares. Although the Defendant accepts that Mr Padberg is not a French speaker or a reader of French, he does not accept that he speaks only a few words of French and does not understand any written French. In any event he will have known the difference between accounting documents and documents that were apparently contractual. He is bound to have noticed that some of them were similar to those which he had seen a year before when he signed documents on the purchase of the shares by the Claimant. One particular document given to him to sign, and signed, headed Cession de Droits Sociaux, was a distinctive blue colour and he must have recognised it. He is an intelligent man and, in French or not, he must have known what he was signing.
ii) In any event the Defendant cannot have contrived such a scheme to induce Mr Padberg to travel to Paris expecting that he would be successful in inducing Mr Padberg to sign documents without reading or understanding them. The Defendant cannot have expected that he would get away with such a scheme.
iii) Even if successful in inducing Mr Padberg to sign, it was always bound to be revealed and the whole exercise would have been for no purpose.
i) Insofar as the Claimant suggests that Mr Padberg could not have taken it upon himself to transfer the shares, (a) the Defendant asserts that Mr Padberg was sufficiently senior, the only director resident in the Netherlands, and certainly not a nominee director, as the Claimant suggests, because that would have put the Defendant in breach of Dutch tax law (b) in any event the Defendant gave evidence of having the meeting on 19 July with Mr Akdag, who agreed to the transfer and left him to deal with Mr Padberg, with whom he had subsequent telephone conversations (c) Mr Hill put to Mr Akdag (but not to Mr Sahenk, who was accepted by the Defendant to have the ultimate say) that he must have discussed this with Mr Sahenk. Mr Hill points to a WhatsApp message dated 7 August 2016 which (as translated) records Mr Akdag as saying to the Defendant "I emailed Richard last night. I answered him. Mr Sahenk knows everything….I was with Mr Sahenk in Istanbul. I discussed all the points with him", and relies on this for the suggestion that the agreement to sell the shares (which by now had gone through, in Paris on 3 August) was raised with Mr Sahenk.
ii) If there was a scheme to dupe Mr Padberg, Mr Hill submits that it would be too risky for the Defendant to have involved Mr Akdag and Mr Beylik in knowledge of the proposed trip to Paris.
iii) The reason why the Claimant, as Mr Hill asserts, agreed to this transfer was because Mr Akdag knew that the Defendant had a number of justified grievances:
a) He had been unhappy about the purchase of the ADJR in London, by buying the company which ran it, Bahia (UK) Ltd, and complained about its subsequent performance, which was costing money, most of which was being drawn down by way of dividends from the Paris Restaurant.
b) He was concerned at the amount of dividends which were being drawn down from MAD Atelier.
c) He felt he was being sidelined and possibly excluded from the negotiations which were being carried on by Dogus with SIFHR, which owns the intellectual property rights in respect of the ADJRs.
It was his raising of these complaints with Mr Akdag which led to Mr Akdag agreeing to the transfer which Mr Padberg was to effect. This and the fact that Mr Padberg told the Defendant that, as a result of a recent coup in Turkey, Dogus was in "dire straits" and consequently in need of money.
iv) In order to support the Claimant's case as to the reason why Mr Padberg had been asked to attend the meeting in Paris, namely to have the 2015 accounts signed in the presence of the company's auditor, Mr Padberg, as Mr Hill alleged, has invented the presence of a third man, shabbily dressed, at the meeting at the Paris Restaurant, who handed him the documents to sign and showed him where to sign, and left, saying he had a train to catch for Marseilles, putting on (in August) a raincoat over his jacket as he left. This, Mr Hill submits, is a wholly incredible account, as is the reference to there having been a doorman. In any event, as to the alleged explanation that the accounts had to be signed again, this was not in fact required by French law, as Mr Padberg suggests he was told by the Defendant, and would have been a wholly unnecessary exercise, given that the accounts had been approved by a resolution at the AGM of MAD Atelier, which the Defendant had held on 30th June.
v) Mr Hill relies upon a number of alleged inconsistencies in the evidence of the Claimant's witnesses, as to Mr Padberg's account of his approval of the minutes of the 30 June AGM, of the discussion between Mr Akdag and Mr Padberg as to whether Mr Padberg should go to Paris, and whether the in-house legal counsel of Dogus, Ozlem Kavasoglu, had, whether after discussion with Mr Beylik or otherwise, known that Mr Padberg was going to Paris, and as to precisely what documents he thought he was signing in Paris.
"According to the share transfer agreement, I have transferred today the amount of 4,963,572€.
This amount represents 3,086,698€ for the share price, 1,989,674€ for the payback of Mad International BV dividends not yet paid less 112,800€ as expenses incurred."
Separately at the same time an email was sent by the Defendant to Mr Akdag, not copied to, nor at that stage seen by, Mr Padberg, ("the second 29 September email"), which made a number of complaints about the Joint Venture, relating primarily to Bahia and the SIFHR negotiations, which included "Finally, we found a solution to save Paris at the cost of a very significant financial effort and entrepreneurial risk on my part" and concluded "In summary, you are not fulfilling any of your obligations and you have caused me considerable harm. We cannot continue a partnership under these conditions and I am waiting for concrete proposals from you."
Mr Padberg was about to leave for a holiday in the USA. On the Friday he called Mr Schmidt, the Controller of the Dogus Group, and they agreed that he should ask the Dutch lawyer acting for Dogus for his assistance, which he did on the Monday, emailing "I received this email [the first 29 September email] from [the Defendant] last week, but I can't figure out how to interpret it. Can you help me?". On the Tuesday, Mr Padberg emailed Mr Schmidt copying to him the email he had sent to the lawyers, asking him to call their attention to the matter again, and on the Wednesday, Mr Schmidt responded to Mr Padberg by saying that he had checked the documents evidencing the receipt of the money but did not have the complete documents or the share transfer agreement referred to, and suggested that the quickest way was to ask the Defendant. This he did, shortly afterwards, asking the Defendant to provide him with a breakdown or calculation of the sums. Mr Padberg flew off to the US on that day. He recalls having a conversation at the airport with Mr Umar, which Mr Umur did not recall. Mr Hill submits that this reaction does not suggest the kind of surprise that on the Claimant's case would have been likely on the receipt of the first 29 September email if they had not known what it related to. The correspondence which then followed, before and after a Dogus meeting attended by Mr Padberg in Antalya, was described by Mr Hill as a "paper trail", designed to support a case that the transfer never occurred.
The Claimant's case
i) The Joint Venture had only been going for a year and, so far as the Claimant was concerned, was going well, and with what was a good relationship with the Defendant, particularly between the Defendant and Mr Akdag, whose friendship is apparent from the Claimant's WhatsApp records of the conversations between them. In that fruitful year they had invested some €20 million into the Joint Venture. They were in the process of negotiations with SIFHR to buy the rights for the ADJR brand, and, as Mr Sahenk said in evidence, the Defendant was "the centre reason for us to go into this brand". There was nothing in the Defendant's complaints, insofar as articulated, which, even if justified in the Defendant's eyes, would have caused the Claimant to want to break up, and, as Mr Akdag said in a WhatsApp message to the Defendant (as translated) on 12 September 2016 "the future is brilliant with you". On the Claimant's evidence, the Defendant was certainly not being excluded from the SIFHR negotiations and the Defendant was being kept in touch (as again appears from the WhatsApp records) even though, as the Defendant himself accepted (paragraph 26 of his third witness statement) there were sensitivities because M. Robuchon may not have been comfortable with the Defendant's being involved in the negotiations since "he might not want to think of me as replacing him or being in charge of him". On the Claimant's case, supported by emails, it was the Defendant who was pressing for the making of dividends by MAD Atelier, for French tax reasons which he mentioned, which were declared at the 30 June AGM of the company presided over by him, and, if anything, Mr Padberg was discouraging that course. In any event there is no sign that the Defendant was unhappy, but rather "full of happiness" (1 July WhatsApp). In the WhatsApp records leading up to the meeting between him and Mr Akdag of 19 July, when the Defendant says that he was angry, and that this led to the agreement that he could buy back the shares, there is no sign of this, nor in the numerous WhatsApp records between the Defendant and Mr Akdag of 18-20 July , but rather the discussion is "to take stock of the London restaurant's activity", and there is no sign of anger or unhappiness, but only of ongoing plans for the Joint Venture. On 1 September Mr Akdag in an email to Mr Patel is expressing his wish for the Defendant to be a director of Bahia. There was no reason for the Claimant to agree to terminate the Joint Venture or allow the Defendant to buy back the shares of the Paris Restaurant. There was no question of the Claimant's being in "dire straits", or short of money, and they have exhibited very substantial and profitable accounts for the relevant period.
ii) The Defendant however may have had a motive for wishing to be out of the Joint Venture, but this would not have been shared by the Claimant, given that, as Mr Sahenk said in evidence, it was "most important for us that [the Defendant] was involved". He might well have wanted to take back the Paris Restaurant and set up other ADJRs on his own, as he shortly afterwards did in Dubai, one of the places where the Joint Venture had already been trying to find a site. As referred to below, there has been no disclosure given by the Defendant in respect of this period, and the Claimant suggests that there may well have been communications by him at the time with M. Job, the representative of SIFHR, close to M. Robuchon, who was indeed listed as a proposed witness for the Defendant but did not in the event give any evidence, or even M. Robuchon himself. The Claimant alleges that the Defendant, to whom in September they gave a power of attorney to act for the Joint Venture in relation to the agreement with SIFHR for the hoped-for new ADJR in London, signed an agreement on the Joint Venture's behalf which excluded Mayfair, which he well knew was where the Joint Venture wanted to open. Further the Claimant obtained a copy of a mandate given by the Defendant in November 2016, of which the Defendant gave no discovery, to a M. Lucien Cohen, to market the Paris Restaurant (including the hotel) for a sum of more than 10 times the amount the Defendant had paid in the impugned share transfer in August 2016, and he admitted in cross-examination that he had been so marketing the Paris Restaurant for such or similar sums. In the circumstances the Claimant submits that it had no possible motive for the transfer of the shares in the Paris Restaurant back to the Defendant, but the Defendant did.
i) The Claimant had teams of professionals, who had been involved in the purchase the year before and would again have been involved in negotiations for a sale. Mr Dhillon submits it to be inconceivable that the sale would have taken place through the agency of Mr Padberg, on the basis that the shares would be sold on the same basis as in 2015 and that there was no need for the Defendant to supply a copy of either the valuation or the contractual documentation in advance. The "Note sur la valorisation" (Note on the valuation), which was produced for the Defendant by M. Rolot, in 2–4 hours and not separately charged for, as M. Rolot explained in evidence, was clearly not a valuation but, as he described it three times in evidence, a "basis for discussion". It made assumptions as to the 2015 purchase that there had been a valuation (when there had not), and as to "Projected EBITDA", which he used, the Note recorded that "an adjustment to the valuation may be envisaged based on the actual EBITDA 2016". As to the contract, put together according to the Defendant by another lawyer, Pascal Wilhelm, not the lawyer, M. Kassimy, whom the Defendant had used for the 2015 transaction, this did not contain an English law or English jurisdiction clause, as the JVA had, and which on the Claimant's evidence is used in all Dogus transactions. The Defendant allegedly told Mr Padberg in their July conversation that the transfer should be on the basis of "credit vendeur", but he does not suggest that this French expression was explained by him to Mr Padberg, and it became (in French) Article 4 of the transfer, providing for the transfer to take effect only on date of payment, with three months to pay (notwithstanding the alleged "dire straits"). The Defendant's case is that, although the contractual documentation and the valuation were not supplied in advance, they were given to Mr Padberg to read after their lunch, prior to their meeting up at 5 pm. Leaving aside what use such opportunity would have been to Mr Padberg, given that they were all in French, in any event this is denied by Mr Padberg.
ii) Mr Dhillon submits that, if there had been such an agreement to sell back the shares, it would be bound to have been discussed at senior management level, and there is no way in which it could have been left to Mr Padberg, whether or not Mr Akdag had given prior support to a sale back on the same basis as the 2015 purchase, as is alleged by the Defendant at the meeting on July 19. Such discussions would have been evidenced by emails, WhatsApps, texts or minutes of meetings, and none such have been disclosed: there has been no suggestion by the Defendant that the Claimant, who disclosed more than 9000 documents, has failed in its disclosure obligation. Had there been such discussions, Mr Sahenk, as the Defendant himself accepted in an email he sent to him in December 2015, and again in evidence, was the "critical figure and no significant transaction … could be approved unless Mr Sahenk approved". Mr Sahenk's evidence is clear that he would not have approved. The Defendant's suggested explanation of the passage in the WhatsApp message of 7 August 2016 (referred to in paragraph 9(i) above) is completely wide of the mark, as he knows. It was, as Mr Akdag explained, a reference to an email to Richard (Doboin) dated 6 August, relating to a hiccup in the SIFHR negotiations, on which the Defendant was fully informed, and in relation to which he was being brought up to date, and in which email Mr Akdag had told M. Doboin that "we have discussed the below content with Mr Sahenk". Mr Padberg is indeed, the Claimant submits, a nominee director, in the sense that, as he himself explained in evidence, for Dogus, as with all his Dutch holding companies, approval for any large transaction had to be referred to his superiors in Turkey, i.e., as the Defendant has accepted, to Mr Sahenk; and his responsibility was "to safeguard the Dutch legal and fiscal requirements."
iii) Had there been such an agreement as alleged, it would not have left everything so uncertain. The Defendant says that there was an oral agreement that he would be left with the Paris Restaurant and the Claimant with London, but that is not what happened, as the Defendant continued to be involved in the negotiations for the new London restaurant right up to the end of September, when he signed the agreement on behalf of the Joint Venture (excluding Mayfair), and in the second 29 September email he was treating the Joint Venture as still continuing and (as appears in paragraph 10 above) requiring concrete proposals to resolve it. Any agreement if made would have sorted out the effect on the Joint Venture.
iv) Finally had there been an agreement it would not have been effected by sending Mr Padberg to Paris (without prior sight of any documents). The 2015 purchase agreement had been signed by email (and after exchange of drafts). Although Mr Wilhelm had put together the draft resolution contained in the 3 August papers including a reference to Article 12.3 of MAD Atelier's Articles, such Article did not require such a purported transfer of shares to be resolved at a general meeting. The trip to Paris by Mr Padberg (with his wife) was however of much less importance if it was indeed required, as the Defendant told him, simply to have the signing of the MAD Atelier accounts carried out in the presence of the auditor. Mr Padberg explained that he had previously signed 6 copies of the accounts when they were sent to him, after the Defendant had held the 30 June AGM, and he now understood from the Defendant that he had to sign them at a meeting in the presence of the auditor. At the AGM, which Mr Padberghad not attended, there had simply been a resolution approving the accounts. Although the Defendant said in his witness statement that he had held the AGM "on my own", he now said in evidence that Mr Padberg had attended it, by telephone, but this was not put to Mr Padberg.
i) It is plain that Mr Padberg expected an accountant to be present at the meeting: "Please let me know where I have to meet you and the accountant" he says in his email to the Defendant of 21 July. Mr Dhillon submits that it is much more likely that that would be for the purpose expected by Mr Padberg, namely the signature of the accounts in front of an auditor, which he understood from the Defendant was required by French law, rather than, as suggested by the Defendant, that the accountant would be the person who had prepared the valuation (as to whose presence it is not suggested by the Defendant that there had been any discussions, and as to whom the Defendant says he made a subsequent call to say that he could not attend after all). In the Defendant's email of 21 July, he stated that Mr Padberg was "coming for MAD Atelier Paris". This was understood by Mr Padberg to refer to the company whose accounts were to be signed. The purpose according to the Defendant was to sign the share transfer on behalf of the Claimant, which was on any basis the significant fact from his point of view, but Mr Hill submits that the reference is to the fact that there was to be (again not discussed) an EGM of MAD Atelier (which was not in fact required, as set out in paragraph 13(iv) above).
ii) Mr Padberg says that he brought with him a copy of the MAD Atelier accounts to remind himself, and as appropriate to ask questions about, and he made some scribbles on those accounts on his journey (disclosed, and not challenged by the Defendant) and he says he raised the questions with the Defendant, one of which related to a drop in takeaway sales, which the Defendant explained to him referred to a Venezuelan customer, which was indeed the case, although not, as Mr Padberg recalled being mentioned, necessarily in respect of foie gras or similar products. This conversation is denied by the Defendant, but the significant fact is that Mr Padberg expected to sign accounts, and, of the papers he signed, a considerable number were those very accounts, which had been pre-signed by the Defendant "Certifié Conforme", with the date, and which Mr Padberg (as he says, at the instance of the third man) also signed and dated in such form. The Defendant explains these accounts as being part of the papers signed because they were an annex to the Note of valuation. However there is no reference to an annex anywhere in the bundle of papers and no reference to the accounts in the Note of valuation. On the Claimant's case, much the most likely explanation for the inclusion of pages of accounts in the bundle of documents which Mr Padberg was being asked to sign, each page to be separately signed, is that it was leading Mr Padberg to believe that he was indeed signing those accounts, and this was intended to divert his attention from the rest of the documents (in French). It is obviously not possible now to know in which order the documents were produced for signature, but it is possible that the accounts or some of them were produced first. What is however clear is that this was not an ordinary exchange of signatures (as might be expected with a contract of sale), with each party sitting down and each signing together each page, because the Defendant had pre-signed all the documents, and Mr Padberg was now being asked to do so also.
iii) The Defendant says he handed Mr Padberg copies of all the documents afterwards, and that he took them with him. Mr Padberg says that he was told that they would be supplied later, which was not a problem, as he already had copies of the accounts. The Claimant's case is that the copies were not supplied. They have not disclosed any, as they say they never had them. When the 29 September emails were received, they had no documents to enlighten them. Despite requests for the documents by the Claimant in the correspondence which ensued through October and November, the Defendant did not provide, and indeed his solicitors by letter of 24 November refused to provide, them and it was only on 12 December that the response was given, when he finally supplied the documents, that the Claimant already had "the originals".
i) As for the Defendant, he said nothing at all about the share transfer from 3 August until the 29 September emails. This is consistent with his case on Article 4 - credit vendeur - in that by virtue of that Article he was entitled to wait until he had the money (which he was borrowing) to treat the deal as complete. However if there was no secret about it, one would have expected communications between the parties, as to whether and when the money was to be obtained and what arrangements were to be made, in the light of the contract for the sale back of the Paris Restaurant, so far as concerned the split of London from Paris and the breaking up the Joint Venture. There was none of this. The Defendant allowed all to continue as before. Then he said in his email to Mr Akdag of October 4 (and despite complying with requests for daily reports of the Paris restaurant in September (see (ii) below)): "Since the transfer agreements signed last August your reporting requests are not applicable" and then adding the words "a fortiori since the price was paid".
ii) On the other hand, the Claimant acted as if they knew nothing of the transfer (as is their case). There was a number of communications from Mr Akdag, fixing up a business review meeting for London (30 August: "September 5 is perfect for me" responded the Defendant), wanting to make the Defendant a director of Bahia (1 September), asking for daily reports for the Paris restaurant (7 September: such being provided by the Defendant on 9 September: approved by Mr Akdag on 11 September: chased up by Mr Akdag, with copy to the Defendant, 30 September): and there was the continued exercise of giving the Defendant a Power of Attorney to sign the agreement with SIFHR for a new ADJR in London, culminating in the Defendant signing (with a map which excluded Mayfair) on or about 27 September 2016. It seems clear that at any rate Mr Akdag was acting as if the alleged transfer of 3 August did not exist, until after the two emails of 29 September 2016, and even then all that was said by the Defendant in his long second September 29 email was, as set out in paragraph 10 above, "finally we found a solution to save Paris at the cost of a very significant financial effort and entrepreneurial risk on my part", which are fairly strange and unclear words. As for the WhatsApp, in which Mr Akdag and the Defendant continue to communicate throughout September, Mr Akdag wrote on 12 September, as set out in paragraph 12(i) above, "the future is brilliant with you", and communications continued about Paris and the new London agreement, and then from 26 September there was failure by the Defendant to take calls. Even after the 29 September emails Mr Akdag wrote on 11 October that:
"We would like to mention that, as the majority shareholder holding 60% of the shares in the St Germain and London operations, we believe in the potential growth of the partnership under your supervision and have solid faith in the business."
The Claimant's case is that the Defendant was keeping quiet about the share transfer (and acting as if it did not exist and as if all his obligations under the JVA were still in force, including reporting as to Paris and playing a full role in London), for as long as he could, knowing that the Claimant did not know about it, to make it more likely that he could get away with it.
Responses
i) Mr Padberg and Mr Akdag agreed to sell the shares back because they knew that the Defendant had justified grievances and one way or the other would not pursue the Joint Venture.
ii) The Claimant changed its mind.
iii) The destruction and loss of documents on the Defendant's side was unfortunate but not dishonest and in any event does not affect the evidence.
i) As to Mr Padberg , the Defendant knew his man. Mr Padberg was obviously not on top of his game, as the Defendant knew from the fact that in an email exchange in June 2016 about whether dividends could be paid out by MAD Atelier he had shown that he was "confused" about the company structure. He knew that he would be able to dupe Mr Padberg. As Mr Hill submitted, calling it inconsistency, he was easily muddled about which documents he had signed in June 2015, and he went to Paris thinking that he was going to sign accounts and that was what he was prepared to do, not knowing French (certainly legal and commercial French, as is apparent from an unconnected email he sent on 26 August 2016) and completely trusting his colleague. There was a third man present, but in any event he was handed each document, pre-signed by the Defendant, and signed them. Mr Akdag also trusted the Defendant when he said that Mr Padberg needed to come to Paris and sign the accounts. If Mr Padberg was not duped, it was extraordinary that he did not question what he signed, the valueless Rolot Note of valuation, which Mr Umur described as being, when he first saw it, a "bad joke", and the contract without the usual provisions for English law and jurisdiction etc.
ii) The Defendant very nearly did succeed in 'getting away' with it, because the French courts, after proceedings in which there was no or limited disclosure and no or limited oral evidence and no cross-examination, did not take any action, and it was only the fortuitous fact of the English jurisdiction clause in the JVA which allowed a second look, after the heavily contested hearing before Bryan J. A significant factor in the French court appears to have been the apparent delay or at any rate passage of time before the Claimant challenged the 3 August contract, which was facilitated by the period which the Defendant left before sending the 29 September emails, referred to in paragraph 16 above.
Conclusion on liability
"I saved "Atelier Robuchon" in Paris by preventing you from continuing to abusively increase its liquid assets in order to prevent Joel Robuchon from criticizing our management of the restaurant, I had to acquire it again under better financial conditions considering evolution of the high end restaurant business in Paris within the international climate that we know".
There is no reference here to the Claimant having agreed to transfer the shares. It is clear to me that the Defendant took unilateral action, in order, as he saw it, to get ADJR back. My conclusion as to what happened is that the Defendant, with or without the involvement and advice of third parties, as to whose role if any the Court is left in ignorance because of the absence of any disclosed documents by the Defendant, decided that he wanted to go back on his own with Paris (and perhaps consider selling it on at a profit, via M. Cohen or otherwise), and very shortly afterwards Dubai, and he knew that the Claimant, particularly Mr Akdag and Mr Sahenk, would never agree to let him go, so that he needed to take unilateral action without reference to them. The Claimant did not agree that the Defendant could buy back his shares, whether on the basis alleged or at all, and was not, as he falsely alleged, in "dire straits". I am satisfied that the Defendant did set up this scheme, with the help of his lawyer, of persuading Mr Padberg to come to Paris to sign accounts, and then producing a large bundle of documents, most of which were accounts, in French, which he knew that Mr Padberg would have great difficulty in understanding. He cannot have believed in the Rolot Note of Valuation, which he well knew had been obtained as a basis for discussion. I am quite satisfied that Mr Padberg to his knowledge had poor or no French and had he known and understood what was being put in front of him, and in particular the content of the Rolot Note of valuation, he would never have signed them. Mr Padberg trusted the Defendant, and the Defendant knew that. I note that in the course of his evidence Mr Padberg used the word 'trust' as to how he regarded his colleagues such as the Defendant, 20 times. There may well have been a third man present who handed the documents, pre-signed by the Defendant, for Mr Padberg to sign, but in any event he had no time or ability to understand what he was signing, nor did he feel the need to do so, because of his trust in the Defendant. The signature of the contract was disguised by Mr Padberg's having to sign every page of a long set of accounts, which is what he had been expecting. The Defendant then kept quiet after 3 August for as long as he could, in the hope or expectation that he would be able to have it treated as a fait accompli. The reaction of Mr Padberg and Mr Akdag to the emails of 29 September was exactly one of bewilderment, as one would expect. There was no change of mind by the Claimant, and no paper trail to create. Whether there was an undervalue is now for my consideration, but I am quite satisfied that (irrespective of whether there was an undervalue) the Claimant did not know about the share transfer, and did not agree to it and would not have agreed to it and is entitled to be compensated for the loss caused to it by the deceit which induced Mr Padberg to sign documents he did not appreciate and the Claimant to enter into a contract to which it did not agree.
i) They bought the London ADJR by acquiring Bahia, which was a bad purchase, and without giving him an adequate opportunity to consider or criticise it. The WhatsApp reports do not support any question of the Defendant's being sidelined – he expressed the view on 5 October 2015 that "The ideal price would be £4 million", which was in fact the price subsequently paid, and on 27 November 2015 he said to Mr Akdag "You're the best!!! The price you negotiated is great!!! You're incredible". But he was not given any detailed documentation until 23 January 2016, only four days before completion, and these disclosed that Bahia had been loss-making. The complaint that the Defendant made in his second 29th September email was "You bought the London L'Atelier by negotiating the price on your own directly. The price seems a lot too high and the location is not suitable. I informed you of this as soon as I learned about the acquisition plan. You never consulted me and presented me with a "fait accompli". There were problems with the new London ADJR which the Defendant set out in his email of 14 July to Mr Akdag, Mr Patel and others, but the Claimant and Mr Patel and the Defendant were working through them, and the meeting of 19 July was, according to the Defendant's WhatsApp message, to "take stock of the London restaurant activity".
ii) The Defendant says he was not happy at the declaration of dividends by MAD Atelier, as set out in paragraph 9(iii)(b)) above, but he himself said that there were good French tax reasons for increasing the dividend to "the highest amount possible" in his email of 24 February 2016. He was enthusiastic to proceed with the dividend, notwithstanding Mr Padberg's confusion and consequent discouragement in the email exchange of 22 June 2016 referred to in paragraph 19 (i) above, and he presented and passed the resolution for the dividend at the AGM of 30 June.
iii) He complained in the second September 29 email that "you negotiated alone without keeping me informed. You sent official purchase proposals by Dogus directly on which I have not been consulted or even copied in your emails.… You deliberately violated your commitments to cooperate by forgetting that I was a partner and shareholder and by violating all contractual provisions as in London". This is effectively an allegation of breach of the non-circumvent provision in clause 17 of the JVA. This allegation is denied by the Claimant, who referred to emails and the WhatsApp messages, in particular to a discussion between Mr Akdag and the Defendant recorded on 10 February 2016. They have disclosed a report of a meeting contained in an email of 30 June by Mr Akdag to Mr Umur and Mr Sahenk, in which it appears as though they were proposing to seek to reduce the Defendant's share in the rights from the 40% provided by the JVA to 10%, but this inference is denied by the Claimant, and was not in any event known to the Claimant at the time. On any basis it required further discussion, and Mr Sahenk made quite clear in evidence that such was the importance which he placed upon the continued involvement of the Defendant that any dispute would have been resolved.
Quantum
i) The first head (Head 1) is the calculation of the difference (if any) in value of the shares as between the amount paid pursuant to the 3 August share transfer and the estimated value at that time. There is agreement between the two experts, Mr Ilett for the Claimant and Mr Caldwell for the Defendant, that there are two methods of calculating the value of 100% of the shares in a trading company. The first is the market approach, which is to apply a multiple, drawn from the best and most reliable comparables, to the company's EBITDA. The second is the income approach. I shall return to this below.
ii) The second head (Head 2) is the calculation of the loss (if any) suffered by the Claimant by virtue of the loss to the Joint Venture due to its unlawful termination on 3 August, ignoring, to avoid double recovery, the impact of the loss of the Paris Restaurant (which would have been recovered under Head 1), i.e. the loss of the future prospects of the Joint Venture from London (the ADJR owned by Bahia in Covent Garden and a new restaurant in Mayfair) and Dubai.
i) The Claimant is entitled to recover all losses flowing directly from the transaction induced by the wrongdoer: Smith New Court Securities Ltd v Citibank N.A. [1997] AC 254 esp per Lord Steyn at 279F-280C: "..it is a rational and defensible strategy to impose wider liability on an intentional wrongdoer… Such a policy of imposing more stringent remedies on an intentional wrongdoer serves two purposes. First it serves a deterrent purpose in discouraging fraud… Secondly as between the fraudster and the innocent party, moral considerations militate in favour of requiring the fraudster to bear the risk of misfortunes directly caused by his fraud." See also Rookes v Barnard [1964] AC 1129 at 1221 per Lord Devlin: "the award is not limited to the pecuniary loss that can be specifically proved".
ii) The fact that damages cannot be assessed with certainty does not relieve the wrongdoer of the necessity of paying damages, so that "I think that in such a situation the court is bound to do the best that it can" per Devlin J in Biggin & Co Ltd v Permanite Ltd [1951] 1 KB 422 at 438. The assessment of damages often involves what Lord Reed in One Step (Support) Ltd v Morris-Garner [2019] AC 649 at [36-37] described: "Once the loss has been identified, the court then has to quantify it in monetary terms...There are cases in which its precise measurement is inherently impossible" and such circumstances he quotes from Lord Shaw in the Watson, Laidlaw case 1914 SC (HL) 18, 29–30 as requiring "the exercise of a sound imagination and the practice of the broad axe".
iii) Toulson LJ in Parabola Investments Ltd v Browallia Cal Ltd [2011] QB 477 at [22-23] addressed in particular the hypothetical or counterfactual situation: "Some claims for consequential loss are capable of being established with precision (for example, expenses incurred prior to the date of trial). Other forms of consequential loss are not capable of similarly precise calculation because they involve the attempted measurement of things which would or might have happened (or might not have happened) but for the defendant's wrongful conduct, as distinct from things which have happened. In such a situation the law does not require a claimant to perform the impossible, nor does it apply the balance of probability test to the measurement of the loss… Where that involves a hypothetical exercise, the court does not apply the same balance of probability approach as it would to the proof of past facts. Rather, it estimates the loss by making the best attempt it can to evaluate the chances, great or small (unless those chances amount to no more than remote speculation) taking all significant factors into account."
iv) Leggatt J addressed what is called the "fair wind" principle in Yam Seng PTE Ltd v International Trade Corporation Ltd [2013) I Lloyd's Rep 526 at [188] "Accordingly the court will attempt so far is it reasonably can to assess the Claimant's loss even where precise calculation is impossible. The court is aided in this task by what may be called the principle of reasonable assumptions – namely. that it is fair to resolve uncertainties about what would have happened but for the defendant's wrongdoing by making reasonable assumptions which err if anything on the side of generosity to the claimant where it is the defendant's wrongdoing which has created those uncertainties."
Clearly it is important in the interests of a defendant to emphasise that it is not the existence of a loss which is to be assumed, but, in the case of a loss whose existence has been proved, the Court will err on the side of generosity in the calculation of it if its exact calculation is difficult if not impossible to arrive at.
i) The Rolot Note of valuation (see paragraph 13(i) above). Mr Caldwell, the Defendant's expert, placed some reliance upon this. I regard the 2–4 hour exercise, without any research and without access to documents, in particular to the documents relating to the 2015 transaction which M. Rolot was supposed to be addressing, as valueless.
ii) Mr Hill has relied upon the fact that in the French criminal and civil proceedings the Claimant assessed the claim by valuing the shares as €7.5 million (hence net of receipts €3.1 million) by reference to a then expert's report, which has not been the subject of consideration before me, and began the proceedings in this Court by particularising the loss as at least that sum. That is obviously an attractive advocate's point and could have been the subject of useful cross-examination if the Defendant was seeking to rely on that expert report, but neither party before me has relied on it in any detail or on that figure. I must now decide the value by reference to the two expert's reports before me.
iii) Neither party's expert has sought to rely on the €30 million or more for which the Defendant was marketing the shares through M. Cohen in November, three months after the share transfer.
Head 1
Transaction 1: in December 2011, MAD Atelier purchased the business of the Paris Restaurant from M. Robuchon's company CFR for €4.5 million. At the time of the transaction MAD Atelier was owned as to 50.1% by the Defendant (via MADV), 10% by CFR and 39.9% by JC Darmon Conseil ( "Darmon").
Transaction 2: in summer 2012 Darmon purchased CFR's 10% shareholding in MAD Atelier in accordance with a shareholders agreement and sold its 39.9% shareholding to Food Five (another of M. Darmon's companies).
Transaction 3: in September 2013, Mr Alcan purchased 44.44% of the shares in MADV for €2 million through a capital increase, implying an equity value of €5 million for MAD Atelier and an EV of €8.8–9.0 million.
Transaction 4: in October 2014 MADV purchased 49.9% of the share capital of MAD Atelier from Darmon and Food Five for €3.75 million, implying an equity value of €7.5 million and an EV of €9.7–10 .8 million.
Transaction 5: in June 2015, MADV bought back Mr Alcan's shares through a capital reduction.
Transaction 6: on 1 July 2015 MADV sold 100% of the share capital of MAD Atelier to the Claimant for €7.5 million, implying an EV for MAD Atelier of €11.1 million.
Transaction 7: on 4 July 2015, Mr Alcan purchased 100% of the shares in Ragnar from the Defendant for €1,200.
Transaction 8: on 6 July 2015, Dream purchased a 60% shareholding in the Claimant from Ragnar for €9.8 million. Dream and Ragnar subscribed for additional shares in the Claimant for a combined total of €7.5 million, giving the Claimant a total equity value of €23.9 million, based on an implied EV of €27 million.
i) Transactions 1 and 2 were more than two years earlier, and hence not normally considered comparables. The Claimant suggests that there is ground to doubt that they were at market value where (i) the Defendant was buying from his patron M. Robuchon and (ii) M. Darmon was, on the Defendant's evidence, an acquaintance who has "always said he would help me financially if I wanted to open my own restaurant", though the Defendant was not cross-examined about this: although there was a provision for the exercise of an option to buy 10% of the shares back from Darmon at a price to be fixed by expert appraisal, it does not appear that this option was ever exercised.
ii) Transactions 3, 5 and 7 were all wholly affected by the role of Mr Alcan, to whom I have referred in paragraph 17 and 27 above. Transaction 7 was plainly a charade, but its existence, and the continuing and unexplained relationship with Mr Alcan, casts doubt on the other transactions and indeed on the Defendant's role.
iii) Transaction 4 is not supported by an independent valuation and it involves M. Darmon, whose help to acquire the restaurant the Defendant has recognised: although the Defendant was not cross-examined on this basis.
iv) Transaction 6 is the transaction which was said by the Defendant to form the template for the 3 August 2016 share transfer. It was not supported by any valuation and was to be followed by Transaction 8 (and indeed in the event the questionable Transaction 7). The Claimant played no part in the calculation, and there was evidence from Mr Umur that it was the Defendant who decided the price (though again this was not put to the Defendant). This may have been arrived at by reference to Transaction 4, and the Claimant relies upon evidence, which Mr Caldwell did not appear to have considered, as to how the figure of €7.5 million was arrived at. There was evidence from Mr Umur as to his belief that the figure was arrived at by the Defendant for his (French capital gains) tax purposes, on which he was cross examined by Mr Hill: but there was also some contemporaneous documentation which supported this contention, in an email dated 19 February 2015 from the Claimant's lawyer Mr Bresnick to Mr Akdag and in the February 2015 term sheet (though this was not put in cross-examination to the Defendant). The parties to the transaction were plainly related, the Claimant at that stage being wholly owned by Ragnar (prior to its purported transfer to Mr Alcan). This is the transaction on which Mr Caldwell primarily relies.
v) Transaction 8. This transaction was the only one which was supported by due diligence and involved a wholly independent purchaser, and it is the only transaction to which Mr Ilett attaches any weight. It is common ground that it was based on a multiple of 9 X EBITDA, the latter being €3 million drawn from the Paris Restaurant. However, the company in question was not MAD Atelier but the Claimant; and the Claimant was effectively the Joint Venture, in which there was vested all the possibility of expansion from Paris to London (two new restaurants, in due course Bahia and hopefully Mayfair, in London, Dubai and possibly others). MAD Atelier itself had no prospect of expansion: it was simply the Paris Restaurant. It appears therefore inevitable, as Mr Caldwell believes, that it would be of a greater value than MAD Atelier. On the other hand, Mr Ilett disagrees, and there is contemporary correspondence from the Defendant and his lawyer M. Kassimy appearing to apply the whole EV of €27m to MAD Atelier.
" a) The subject asset has recently been sold in a transaction appropriate for consideration under the basis of value,
b) the subject asset or substantially similar assets are actively publicly traded, and or
c) there are frequent and/or recent observable transactions in substantially similar assets".
The income approach, according to IVS, "should be applied and afforded significant weight when:
a) the income-producing ability of the asset is the critical element affecting value from a participant perspective, and or
b) reasonable projections of the amount and timing of future income are available for the subject asset, but there are few, if any, relevant market comparables".
Neither expert used the income approach as his primary valuation method, but Mr Ilett said at paragraphs 3.4.10 and 6.1.1 of his first report that "the income approach is generally considered the most conceptually correct method of valuing a well-established and profitable business which has reliable forecasts". It was agreed in the Joint Statement that: "A market approach and an income approach should be used". Mr Caldwell calls the income approach a "cross-check", but he does not address it as such, though he said that he felt that he did not have reliable enough information to do so.
Head 2
i) The Defendant submits that the Joint Venture would not in any event have continued. Mr Hill contends that the Defendant was unhappy (for the reasons set out in paragraph 9(iii) above) and that one way or another the venture would not have continued. He points to evidence given by Mr Sahenk that a partnership is like a marriage and that a divorce may follow. On the other hand, as set out in paragraphs 12(i) and (ii) and 24(iii) above, it is quite clear that Mr Sahenk and the Claimant valued the Defendant greatly and regarded his involvement in the Joint Venture as central, and Mr Sahenk was satisfied that any dispute would have been resolved, indeed that they would have done anything necessary to keep him onside; and that the substantial profit which the Defendant had foreseen when he joined in the Joint Venture, as it fructified, would have resolved any concerns he had. It is clear from the authorities and from common sense that, in a case where a party has by deceit unlawfully terminated a contract, I should not easily conclude in his favour that he would have extricated himself from the contract, which he had unlawfully terminated, in some other way, such that his deceit would have worked or no loss would have been caused by it.
ii) The licence. The negotiations with SIFHR for the brand rights appear to have stalled, and Mr Hill submits that there is no reason to conclude that in the 'counterfactual' they would have been any more successful, not least because it is clear that the Defendant's involvement in the Joint Venture of itself may not have helped, because of M. Robuchon's sensibilities referred to in paragraph 12(i) above. But there was no need for the Joint Venture to have acquired the rights in order to obtain the licences from SIFHR, and Mr Dhillon submits that SIFHR would have had no reason to refuse to grant a profitable licence. So far as Dubai is concerned, this was, as stated above, to expire in January 2017. Mr Caldwell himself is of the opinion that it is reasonable to assume that it would have been renewed, and it is significant that the Defendant has been able to open in Dubai on his own, obviously with the benefit of a licence from SIFHR. So far as concerns the Mayfair Restaurant, that is more complex. The Claimant believes that the fact that the agreement for a renewal of the Bahia licence (referred to in paragraph 16(ii) above) was seemingly signed by the Defendant with a map attached which excluded Mayfair was in some way the fault of the Defendant, although Mr Hill points out that Mr Dhillon's cross-examination of the Defendant was on the basis that there was some sharp practice by SIFHR. The Claimant points to emails leading up to the signing of the agreement which suggest that SIFHR had agreed in general terms to grant a licence without any reservation about where the restaurant should be, but the fact remains that in the event Mayfair was not included. The new agreement did include a provision for a possible further licence, and the Claimant contends that there would have needed to be negotiations for a new restaurant in Mayfair and there was no reason for SIFHR in its own interest not to have granted one if the Defendant had still been part of the Joint Venture. Mr Hill submits that the acrimony from the alleged sharp practice might well have prevented such agreement.
iii) A site. Setting up in both Dubai and Mayfair would have depended upon finding a site. This should not have been a problem in Dubai, as the Defendant was able to find a site, albeit not until 2020. However, Mr Caldwell accepted that it is a reasonable assumption that the Claimant would have been able to open a Dubai restaurant by June 2019.
iv) Funding. This would have been required, and Mr Hill points out that the likelihood is that the amount provided for in the JVA would have been exceeded, and it is common ground that Bahia Covent Garden would not have been making any profit, at any rate sufficient to justify the payment of dividends. The Claimant however contends that the Joint Venture would have continued to be successful, particularly the Paris Restaurant, and there would have been no problem with funding Dubai and a Mayfair Restaurant.
v) Profitability. This obviously depends upon the future, and Mr Ilett carried out some detailed calculations, to which I shall refer and upon which he was cross-examined, although Mr Caldwell did not, restricting himself to running issues of mitigation and causation, which were not in the event pursued, by virtue of the Defendant's abandonment of the former and my refusal by my Ruling of 20 October of amendment in respect of the latter.
vi) Timescale. At least in respect of the Mayfair Restaurant, there was inevitably dispute in the hypothetical exercise of deciding when it was likely to open. This was addressed by the Claimant by the way in which, as will be seen, it arrived at its claim by the end of the hearing: Mr Dhillon conceded that, particularly once the Claimant's claim was limited to recovery of dividends, and dividends only after the repayment of the shareholder loan, as provided for in clause 11 of the JVA, there would, in respect of both such restaurants, have been no recovery until a date which Mr Ilett settled on of April 2021.
i) This calculation is of the value of a business, not a loss of profit calculation. EBITDA is inappropriate to use, and the multiple is a commercial view, normal in the valuation of a business but of no particular value in estimating forward a loss. The nearest analogy would seem to me to be a claim for personal injury, where a number of years' purchase may be estimated, but this was not the exercise he carried out.
ii) EBITDA is not a calculation of net profits, by definition, and is in any event not apt in this case because it is dividends that must be calculated.
iii) The valuation as at April 2021 is inappropriate. It is of course a purely fortuitous date, except that Mr Ilett estimates that by then the Claimant would have been be able to declare dividends, but to take a five year period as fallow and then claim loss at 100% ignores all the risks and imponderables that I have set out above.
The right way to value the loss is to assess it as at the date of breach i.e. the unlawful termination of the Joint Venture, and then to assess the loss of a chance at that date, allowing for the imponderables so far as possible.
Conclusion