Sabine v Ferrari

Neutral Citation Number: [2010] EWHC 389 (QB) IN THE HIGH COURT OF JUSTICE QUEEN'S BENCH DIVISION Case No: HQ09X01477 Royal Courts of Justice Strand, London, WC2A 2LL Date: 11/03/2010 Before : HIS HONOUR JUDGE RICHARD SEYMOUR Q. C. (sitting as a Judge of the High Court) - - - - - - - - - - - - - - - - - - - - - Between : GILLIAN ANN SABINE - and - FULVIO ANTONIO FERRARI - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Colin Challenger (instructed by Thomas Cooper) for the claimant Nicholas Berry (instructed by Landau Zeffertt Weir) for the defendant Claimant Defendant Hearing dates: 25, 26, 27, 28 January, 1, 2, 3, 5, and 9 February 2010 - - - - - - - - - - - - - - - - - - - - - Judgment His Honour Judge Richard Seymour Q. C. : Introduction 1. 2. 3. Mr. Fulvio Antonio Ferrari, the defendant in this action, is the holder of 47.5% of the issued share capital of an Italian company, Biotec Italia S.r.l. (“Italia”). Mr. Francesco Piovan also holds 47.5% of the issued shares in Italia. The remaining 5% of the issued shares in Italia is held by another individual who did not feature in the events relevant to this action. Mr. Ferrari seems, especially in England, to be called by his second name, Antonio, although his first name is also sometimes used, for example by Mr. Piovan. It appears that Italia was established in Dueville, Vicenza, Italy in about 1994. The business of the company is the manufacture and sale of what was described by Mr. Ferrari at paragraph 2 of his first witness statement prepared for the purposes of this action as beauty equipment and cosmetic products. The cosmetics seem to be focused on skin care. The beauty equipment, as I understand it, comprises a number of items of electronic machinery with a variety of different functions. It is convenient to refer, in this judgment, to the products manufactured and sold by Italia collectively as “the Products” and to the beauty equipment element of the Products collectively as “the Equipment”. 4. Notwithstanding his interest in Italia, Mr. Ferrari has, for a number of years, spent a considerable amount of time in England. One of the reasons for that is that he used, through a company, to act as distributor in England of the Products. The company in question was incorporated under the name Biofarm International Ltd., with the registered number 3712392, on 11 February 1999. The company changed its name to Biofarm Technologies Ltd. and a certificate of incorporation on change of name to that name was issued on 17 May 2004. As another company, with the registered number 5133320, was incorporated with the name Biofarm International Ltd. on 20 May 2004, it is convenient to refer in this judgment to the company with the registered number 3712392 as “Technologies”. Mr. Ferrari was the sole director of Technologies from its formation until it went into liquidation on 27 February 2008. At that time the company secretary was Mr. Piovan. It is convenient to refer in this judgment to the company with the registered number 5133320 as “Biotec UK”, because that company changed its name on 16 August 2004 to Biotec UK Ltd. It was formed on behalf of Mr. Ferrari, but it was dormant until July 2008. Another company which featured in this action was incorporated on 6 June 2006 under the name La Pelle (UK) Ltd. and with the registration number 5837658. It is convenient to refer to that company in this judgment as “Biofarm”, because it changed its name to Biofarm Ltd., and a certificate of registration on change of name was issued in that name on 20 February 2008. The original sole director of Biofarm was Miss Juliana Steuernagel. She resigned on 7 May 2008. She was replaced as sole director by Claudnei Zuccolotto. He resigned on 4 December 2008. The day before that resignation a certificate of incorporation on change of name was issued in respect of Biofarm, which had changed its name to Bioesthetic UK Ltd. Mr. Zuccolotto was replaced as sole director of Biofarm by Eleana Papasavva, who is now married to Mr. Ferrari. A further company which it is necessary to mention in this judgment is the company incorporated on 17 May 2004 as Jones & Beauty Ltd., with the registration number 5129234. It is convenient to refer to that company in this judgment as “Company A”. Company A changed its name to La Pelle (UK) Ltd., and a certificate of incorporation on change of name to that name was issued on 13 June 2008. Company A was incorporated at the instance of Mr. Ferrari. He was, at all times after incorporation, and is, the company secretary. Juliana Steuernagel and Eleana Papasavva have been directors of Company A. The claimant, Mrs. Gill Sabine, is a businesswoman. Historically her business interests have lain in two rather different areas. For many years she has been involved in what may be termed the beauty industry in the United Kingdom. She has for some time carried on the business of a beauty clinic at premises at 62, Church Road, Barnes under the style or title “The Peach Tree Beauty Clinic”. It is convenient to refer to that business in this judgment as “the Sabine Clinic Business”. The other businesses of Mrs. Sabine are in a completely different area, domestic and commercial cleaning. In the course of pursuing the Sabine Clinic Business Mrs. Sabine became acquainted with the Products. Over time she purchased a number of items of the Equipment. She also purchased spares for the items of the Equipment which she had bought, and items of the Products adapted for use on the items of the Equipment which she had acquired. At least until Technologies went into liquidation on 27 February 2008 Mrs. Sabine acquired those items of the Products which she bought from Technologies. 5. 6. 7. 8. 9. 10. It appears that Mrs. Sabine considered that there were useful commercial opportunities in selling, or organising the sale of, items of the Equipment. On 11 March 2005 she and a collaborator, Mr. Philip Connell, caused to be incorporated a company called Biotec Sales Ltd. (“Sales”). The purpose behind the incorporation of Sales was to create a vehicle which could be used, pursuant to an agreement with Mr. Ferrari, acting by Technologies, to solicit, as a sub-agent of Technologies, sales of items of the Equipment in the area of the United Kingdom outside the M25, in consideration of payment of a commission on each sale obtained. The business of Sales did not prosper, for reasons which are not material to any issue in this action. The relevance of the involvement of Mrs. Sabine in Sales was simply that it indicated her interest in the selling of items of the Equipment. That interest survived the lack of success of Sales. This action arises out of a subsequent involvement of Mrs. Sabine in attempts to sell the Products in the United Kingdom. There were fairly dramatic differences between Mrs. Sabine and Mr. Ferrari as to the circumstances in which that subsequent involvement commenced and what precisely led up to the making of an agreement (“the Agreement”) in writing dated 2 July 2008 made between Mrs. Sabine and Mr. Ferrari. As a result of her view of what had been said to her by Mr. Ferrari prior to the making of the Agreement, and what she said she had subsequently discovered the true situation to be, Mrs. Sabine claimed in this action damages for alleged misrepresentation on the part of Mr. Ferrari in inducing her to enter into the Agreement. Although not pleaded in terms, Mr. Colin Challenger, who appeared on her behalf at trial, made plain in opening the case of Mrs. Sabine that she also sought to have the Agreement set aside. Moreover, whilst the pleaded case of Mrs. Sabine appeared, to a degree, to include claims for damages for various alleged breaches of the Agreement, and for various other sums by way of damages, Mr. Challenger explained that in fact Mrs. Sabine sought only to complain of the alleged misrepresentations and to seek relief appropriate to such complaints, in the event that they were found proved. It was a feature of the trial, on both sides, that considerable time and resources were devoted to investigating, as possibly relevant to the credibility of the various witnesses, events following the making of the Agreement. Notwithstanding the effort devoted to those investigations, it was not necessary for me to reach any conclusions about the dealings of Mrs. Sabine and Mr. Ferrari other than those directly bearing on the claims pursued on behalf of Mrs. Sabine. Thus it was not necessary, for example, for me to consider in any detail the contention of Mr. Ferrari that he was excluded from participating in the joint venture contemplated at the date of the Agreement. The Agreement itself was a curious document. It was apparently drafted by a solicitor, either called, or employed by someone called, Malcolm Williamson. Malcolm Williamson was apparently instructed by Mr. Malcolm Traviss, an accountant practising as Traviss & Co. at Liphook, Hampshire. Mr. Traviss was initially instructed by Mrs. Sabine to assist her in relation to a contemplated association with Mr. Ferrari, which in due course materialised as the Agreement. Mrs. Sabine considered, she told me in cross-examination, that the solicitor instructed by Mr. Traviss had been instructed jointly on behalf of both herself and Mr. Ferrari to prepare an appropriate document. Mr. Ferrari, however, contended that the solicitor had been instructed solely on behalf of Mrs. Sabine, and that the resultant Agreement was biased in favour of Mrs. Sabine. In fact the Agreement was poorly drafted, as it seemed to me. It was difficult to discern in it any intelligible obligations either on the part of Mrs. Sabine or on the part of Mr. Ferrari. The focus of the Agreement appeared to be to facilitate the making of alterations to the articles of association of Biotec UK so that both Mrs. Sabine and Mr. Ferrari could hold shares in Biotec UK and that company could be used as the vehicle for a joint venture between them. However, although, in clause 2, provision 11. 12. 13. 14. was made for Mrs. Sabine and Mr. Ferrari to procure the alteration of the articles of association of Biotec UK so that they were in agreed terms, there was never, it seems, any attempt to prepare revised articles of association for agreement. 15. In the Agreement Mrs. Sabine was called the “Participator” and Mr. Ferrari was called the “Owner”. The flavour of the Agreement is, perhaps, conveyed by these provisions included in it:- “1. In this agreement the following terms shall have the following meanings. ‘Business’ means the business carried on by the Owner directly or indirectly of the manufacture and supply of beauty equipment and products under the name of biofarminternational. The price agreed is £150,000 excluding VAT with at least £70,000 of stock and assets free of any debt. ‘Company’ Means Biotec UK Ltd. (Co No 5133320 incorporated in England and having its registered office at Newtown House 38 Newtown Road Liphook Hampshire GU30 7DX [the offices of Traviss & Co.] formed to acquire the Business as a going concern. … ‘in agreed terms’ in relation to any document means in the form agreed in writing between the parties prior to the date of this agreement or as determined by arbitration if there is no such agreement. … 2. The Participator and the Owner shall procure the Company’s articles of association shall be in the agreed terms and shall be subscribed by the parties or their respective nominees each of whom shall agree in the memorandum to take one hundred ordinary shares of £1 in the Company’s capital at a premium of £1,499 per share. The memorandum and articles shall be amended to enable the issue of 300 additional shares being 100 ordinary £1 shares and 100 each A and B shares each of £1 non voting non participating redeemable at par. The A and b [sic] shares can be redeemed in whole or in part but shall only take place with equality or redemption of A and B shares. 3. Each of the parties shall procure that: a. The Participator and if the Owner desires the owner’s [sic] nominee are to be the only directors of the Company and the Owner continues as Company Secretary. The Owner’s nominee may be changed at the Owner’s instigation if he so desires provided no nominee shall be appointed to who [sic], the Participator has reasonable objection: b. while either of the Participator or the Owner is a member of the Company neither the Participator nor the Owner’s nominee shall [be] removed from office as director of the Company other than by mutual agreement: c. the secretary shall not be changed without the consent of both parties: d. The Participator shall chair meetings of the directors and of the company [sic] so long as a director of the Company: e. so long as either of the parties is entitled to remain a director of the Company in accordance with this clause the maximum number of directors of the Company shall not exceed two: f. there will be paid to the Participator to be paid either directly or through any other company in which she is a participator fair and reasonable management charge: g. the A shares shall be allotted to the Participator with cash paid at par and the B shares shall be allotted to the Owner at par in return for the assets to be transferred by the Owner or at the Owner’s direction free of charge to the Company. … 6. As soon as is reasonably practicable after incorporation of the Company the parties shall procure that the Company offers to the Participator executive directorship of the Company and the Owner a service agreement under which each will devote the time reasonably and necessarily required to the running of the company [sic] and the promotion of its interest bearing in mind that neither is intended to devote their whole time and attention to the company [sic]. The Participator shall be entitled to charge a reasonable management fee to be agreed between the parties or if agreement cannot be reached then arbitrated. Each acknowledged the other has other business interest to which time must be devoted but reasonable and non subsidiary priority must be devoted to the interest of the Company. Any dispute on the terms of the service agreement or the time to be devoted will be decided by the arbitrator. The Participator may provide services directly or via a company under her control.” 16. The Agreement did not contain an express arbitration clause. 17. What happened following the execution of the Agreement was that Mrs. Sabine paid an amount of £150,000 to the credit of Biotec UK and she became the sole director of that company. The misrepresentations alleged 18. The alleged misrepresentations pleaded originally in the Particulars of Claim were these:- “4. On 10th December 2007 at a meeting over dinner the defendant represented to the claimant as follows: (1) He was the owner of the sole concession for distribution of Biotec equipment and products throughout the UK through his business (ie through Biofarminternational); (2) He owned a 50% interest in the Italian manufacturer, Biotec Italia, and was both able and willing to arrange continuity of supply from Italy to the UK of Biotec machines and products on advantageous terms; (3) He was desirous of greatly expanding sales of the Italian machines and products in the UK where there was considerable demand for them; (4) His time was spread between his numerous business interests with insufficient to devote to his UK sole concession for the supply of Biotec Italia machines and products and he required a partner to assist in the expansion of that business; (5) There were significant profits to be made both from the sale of Biotec machines in the UK, from their subsequent maintenance and repair and from sales of consumable products dedicated to such machines all of which items were manufactured by his Italian company, Biotec Italia. 5. The claimant was induced by those representations to consider entering into a joint business venture with the defendant to market Biotec Italia machines and products in the UK through a sole distributorship. There were further meetings during which the defendant repeated those representations. This included a meeting between claimant, defendant and claimant’s accountant on 4th April 2008. 6. At that meeting the defendant repeated the above representations and stated: (1) That he was owner of the sole concession for supply and maintenance of Biotec machines within the UK and for supply of all dedicated products consumed during the operation of those machines; (2) That the concession referred to at (1) was operated by him through his company, Biofarm Limited trading under the name Biofarminternational or Biofarm from premises of his at Highgate Road in North London with warehouse premises elsewhere; (3) That indirectly he carried on the business of manufacture of the machines, their spare parts and the dedicated products consumed during their use by virtue of his 50% interest in the Italian manufacturer, Biotec Italia; (4) That he was owner of a dormant company styled Biotec UK Limited [“BUL”] which he was ready and willing to restructure with himself and the claimant equal shareholders such that BUL would take over the whole of the business described at (1); (5) That the level of business which had been transacted by his concession Biofarminternational showed that he and the claimant would each be able to draw £60,000 pa from BUL in its first year of trading and that he would prefer a structure whereby his share was taken in dividends whilst the claimant’s share could be taken by management charges; (6) The value of the business which he proposed to transfer from Biofarminternational to BUL was £300,000 and accordingly (for a half share) he would expect the claimant to pay £150,000 thus equalizing (or broadly equalizing) their respective investments in the UK concession; (7) If after preparation of budget for the venture or after it had begun trading additional capital was required the defendant would prefer to find this from his own resources rather than resort to bank borrowing. 7. On 16th April 2008 the defendant presented to the claimant purported Sage accounts of his business. This so he had said had been put into voluntary liquidation following an unfortunate experience with alleged Indian partners in that business. Those accounts showed purported t/o from July to December 2007 of £820,000 odd at a net profit of £120,000 odd … 8. The defendant represented to the claimant that his concession enabled him to purchase Biotec Italia machines and products at competitive prices with the sole distributorship for those machines and products in the UK which benefits he was in a position to assign or transfer to BUL. He thus represented that BUL would enjoy both a sole UK concession and similar competitive rates. … 11. The representations made by the defendant referred to at paragraphs 4, 6, 7 and 8 above … were false and were made negligently. Particulars of falsity (1) Defendant was not owner of a sole or any concession for supply and maintenance of Biotec machines and products or their distribution in the UK. Claimant now understands from the defendant that a concession (whether sole or otherwise being unknown to the claimant) had been granted by Biotec Italia to a company styled Biofarm Technologies Limited [“BUT”] which traded as Biofarm International. BUT was put into creditor’s liquidation on 27th February 2008. A liquidator was appointed on 4th March 2008. The deficiency in the liquidation was £91,116.42. Accordingly if, as the defendant now contends, a Biotec Italia concession was formerly owned by BUT t/a Biofarm International all rights and any value in that concession had devolved to the liquidator of BUT by March 2008. (2) No agreement indicating entitlement to a sole UK distributorship of Biotec Italia machines/products has been transferred either by the defendant or by any other person to BUL. In particular claimant will refer to recent correspondence from Biotec Italia which suggests that the concession for Biotec Italia machines/products in the UK has recently been awarded (or re-awarded) to a company controlled by the defendant or his nominee. (3) To the best of claimant’s knowledge and belief defendant does not have a 50% interest in Biotec Italia. He is a shareholder with a 46.98% holding in the Italian company. (4) The defendant was neither desirous of nor in a position to expand sales of the Italian machines and/or products in the UK through BUL. The existing business of BUT was in the process of liquidation during the parties’ initial discussions. This was not disclosed to the claimant until their meeting on 4th April 2008. Both then and thereafter the liquidation was misdescribed by the defendant in the terms described at paragraph 7 above. The liquidation which in truth was an insolvent liquidation was completed in March 2008. The court will be invited to infer that defendant was desirous only of procuring funds from the claimant for his own benefit following that liquidation and its deficiency of £90,000 odd. (5) The defendant was neither desirous of engaging a partner to expand the business of any concession nor was there (post liquidation) any business to expand. (6) Defendant’s assertion that the Biofarminternational level of business was suggestive that combined drawings of £120,000 pa from BUL could be expected was false. The claimant will rely in particular upon the liquidation of defendant’s former concession and its deficit, the sale price of the BUT assets in the liquidation which is referred to further below and the inability alternatively refusal of the defendant to fund the business of BUL either upon its formation in July 2008 or at all. (7) Following the liquidation of BUT defendant’s assertion that Biofarminternational or any continuing concession granted by Biotec Italia in which the defendant held assets which he was able and willing to transfer to BUL was operated (or operated lawfully) within the UK was false. The organization which had held or which the claimant purported had held that concession, namely BUT, had been liquidated in a state of hopeless insolvency. (8) The defendant did not carry on the business of manufacture of the Biotec machines their spare parts or the dedicated products consumed during their use either directly or indirectly whether through Biotec Italia or otherwise. (9) Whilst defendant was owner of a company styled Biotec UK Limited, reg no 4133320, this company had been incorporated 20th May 2004 as Biofarm International Limited. Its 100 shares were allotted to the defendant as sole shareholder at par of £1 each on1st June 2004. The company name was changed to Biotec UK Limited by special resolution of its sole member, the defendant, on 12th August 2004. There being no sole concession for BUL or any company to “take over” after March 2008, the representation that the defendant intended to restructure BUL for this purpose was false. (10) In the premises defendant’s representation that there were significant (or any) profits to be made by restructuring the business of the alleged sole concession as BUL was false; (11) Defendant’s assertion that the value of the business which he proposed to transfer was £300,000 was false. The claimant will refer to the liquidation of BUT and its deficit of over £90,000. The assets of BUT upon liquidation were stated by the defendant (then its director) to comprise book debts, total £8,182.50 none of which was either offered to or transferred to BUL. Such assets as were provided by the defendant to BUL are particularized further below. (12) Defendant’s assertion that he would prefer to find capital required for the BUL venture from his own resources was false. The court will be invited to infer from the events which happened either that the defendant was without any resources to invest in BUL or (if he did have resources) he was unwilling to invest them in it. (13) Defendant’s assertion that BUT had been put into voluntary liquidation and/or that any concession within the UK (sole or otherwise) held or formerly held by BUT was his to transfer was false. (14) The copy accounts shown in attachment 1 were false. The claimant will rely upon the statement of affairs produced in the liquidation of BUT as evidence of their falsity. (15) Defendant’s assertion that he owned a sole concession, whether Biofarm, Biofarminternational or otherwise, which was entitled to continuing supply from Biotec Italia at competitive prices was false. (16) …” 19. In the light of the course of the evidence during the trial, in his closing submissions Mr. Challenger sought, and obtained, permission to amend the allegations in paragraph 11 of the Particulars of Claim to add, as an alternative, the contention that the various misrepresentations alleged were made fraudulently. The pleaded case of Mr. Ferrari 20. The pleaded response on behalf of Mr. Ferrari to the allegations which I have quoted from the Particulars of Claim was set out in the Defence:- “6. As to paragraph 4, the Defendant admits that he had dinner with the Claimant on or around 10 December 2007, but cannot now confirm the exact date. The Defendant pleads to each alleged representation as follows: 6.1 Paragraph 4(1) is denied as pleaded, but admitted insofar as the ‘concession’ was held by BUT trading as ‘Biofarm International’ (as the Claimant knew). The representation so made was true. The Defendant further stated that Biotec Italia required replacement for BUT as exclusive distributor of Biotec Products in the UK. 6.2 Paragraph 4(2) is denied. The Defendant did not say that he owned 50% of the shares in Biotec Italia. Even if he did, since the Defendant owns 47.5% of Biotec Italia not 50%, it is averred that this error is wholly immaterial. It is admitted that the Defendant said that he would probably be able to arrange for continuity of supply of Biotec Products. 6.3 Paragraph 4(3) is denied. It was the Claimant that had previously remarked to the Defendant that there was amazing potential for expanding the business of distribution of Biotec Products in the UK. The Defendant however was merely interested in ensuring that Biotec Italia continued to have a distributor in the UK. In any event, this is neither a representation of fact nor of law. 6.4 As to paragraph 4(4): 6.4.1 It is admitted that the Defendant said that he wished to spend more time in Italy. These are the reasons why it was subsequently agreed that the Claimant should be the executive director of the joint venture company BUL. 6.4.2 It is however denied that the Defendant made any representation that he required a partner to expand the distribution of Biotec Products in the UK. Rather, he stated that Biotec Italia required a new exclusive distributor for Biotec Products in the UK. 6.5 As to paragraph 4(5), it is denied that the Defendant made any representation as to the scale of profits that could be made, although both Claimant and Defendant believed that there were profits to be made. Paragraph 6.3 above is repeated. If however the Defendant had made any such representation, it would have been a representation of belief, not of fact of [sic] law, and would have been true. 6.6 There was no express discussion at this dinner of a joint venture between the Claimant and the Defendant. Rather, the Claimant proposed the possibility of her buying BUT, or buying the Rights from BUT. The Claimant asked about the prices that Biotec Italia would charge a distributor, and the Defendant told her that the machine she had bought last year for about £15,000 would have cost the distributor about €6,000 plus associated costs. The Defendant also informed her that distributors could buy skin care products at more favourable prices, provided they contributed to the testing and research costs. 7. As to paragraph 5: 7.1 It is noted that it is alleged only that the Claimant was induced ‘to consider entering into a joint business venture’ by the alleged representations set out in paragraph 4, not that she was actually induced to enter into the July 2008 agreement or any other agreement. 7.2 In any event, it is denied that the Claimant relied upon the alleged representations or was induced to act or refrain from acting in any way as alleged or at all. The Claimant well knew the material facts, and would not have been induced to enter into the Contract by anything the Defendant said at the dinner. 7.3 Save for the conversation set out below, it is not admitted that there were any further meetings between the Claimant and the Defendant until a further meeting in Italy on 10 April 2008 (not 4 April 2008) referred to below. The Defendant does not now recall whether he met the Claimant’s accountant before or after the meeting on 10 April 2008. 8. Following the meeting on 10 December 2007: 8.1 The Defendant made no efforts to contact the Claimant or to progress her proposal to buy the Rights from BUT, since he did not at this stage have confidence in her ability to manage a distributorship, given his experience of BSL’s sub- distributorship. 8.2 Rather, the Defendant consulted Carter Clark, insolvency practitioners regarding BUT’s winding up. Carter Clark engaged AgentCite to sell BUT’s assets. 8.3 In that connection, the Defendant succeeded in persuading the other director of Biotec Italia to consent to the grant of the Rights to BL [Biofarm]. For his services in that regard, BL agreed to pay the Defendant BL [sic] £150,000, and the Defendant invoiced BL accordingly on 2 March 2008. Payment under the invoice was due 90 days form the date of the invoice (i.e. 30 May 2008). … 8.4 Accordingly, the assets of BUT, were sold to BL (then called La Pelle (UK) Ltd) on 22 January 2008, … (although a fresh distribution agreement was not in fact drawn up until 20 May 2008). The assets sold did not include the Rights, which had terminated on BUT’s insolvency. Biotec Italia then granted the Rights to BL. 8.5 Alan John Clark of Carter Clark was appointed as liquidator of BUT on 27 February 2008. 8.6 The Claimant contacted the Defendant again in or about late February or early March 2008 by telephone about acquiring the Rights, when the Defendant told the Claimant: 8.6.1 About BUT’s liquidation; 8.6.2 About the sale of BUT’s assets to BL; 8.6.3 That she could ask the owner of BL to sell the Rights to her; 8.6.4 But that she may wish to consider approaching Biotec Italia with regard to obtaining the Rights, as its consent to any assignment had to be obtained. 8.7 Further, the Claimant actually purchased Biotec Products from BL prior to April 2008. 8.8 Accordingly, the Claimant was well aware that neither the Defendant nor BUT was the owner of the Rights, and that only Biotec Italia could grant or authorise the assignment of the Rights. 8.9 The Defendant told BL about the Claimant’s interest in acquiring its business. BL mentioned a price of £300,000 for its stock, goodwill and the Rights. 9. As to paragraph 6: 9.1 The Defendant does not recall whether the meeting between him, the Claimant and her accountant was on 4 April 2008, and so that allegation is not admitted. 9.2 As referred to above, there was a meeting in Italy on 10 April 2008 between the Claimant, the Defendant, and the other 47.5% shareholder in Biotec Italia, Sr. Piovan, at which the possibility of a joint venture was proposed by the Claimant, and discussed. It is noted that the Claimant omits to refer to this meeting at all. 9.3 As to the alleged repetition of the representations in paragraph 4 whether at that meeting or at any other time, paragraph 7 above is repeated, save that the facts outlined above were provided, such that the Defendant did not represent that BUT held the Rights. 9.4 Paragraph 6(1) is denied. The Defendant stated that BL owned the Rights. 9.5 As to paragraph 6(2) it is denied that the Defendant stated that BL was ‘his company’. It was not, as the Claimant well knew. 9.6 As to paragraph 6(3), paragraph 6.2 above is repeated. 9.7 As to paragraph 6(4), it is admitted that the Defendant referred to BUL; and that he said that he owned BUL, that it was dormant, and that it could be used to facilitate the joint venture. Those representations were true. Further, Mr. Piovan confirmed that if terms could be agreed between the Claimant, the Defendant and BL for the assignment of the Rights to the joint venture vehicle (whether BUL or not), or for their release by BL and grant to the joint venture vehicle, then he would allow that transfer or grant to take place. However, it is denied that the Defendant at that time committed either himself or BUL to taking over the Rights, to any particular restructuring, or at all. 9.8 Paragraph 6(5) is denied in its entirety, for the following reasons: 9.8.1 On 10 April 2008 the Claimant requested information as to BUT’s turnover and profits, but the Defendant did not then have such information available. 9.8.2 It is denied, if it be alleged, that the Defendant made any representations as to BUT’s sales or profitability. 9.8.3 It is denied that the Defendant made any projections as to any joint venture’s sales or profitability. 9.8.4 If such a representation had been made, the Claimant would have asked for it to be recorded such [sic] in writing. 9.8.5 Further, any such representation would be a representation of opinion, not of fact or law. 9.8.6 Indeed, the projected drawings of £60,000 each appear to have been based on the Claimant’s own accountant’s projections as subsequently emailed to the Claimant and the Defendant on 30 April 2008, as to which the Defendant pleads further below. 9.8.7 It is denied that the Defendant proposed that he should receive dividends and that the Claimant should receive a management charge. Such an arrangement was in fact proposed subsequently by the Claimant’s own accountants, but not agreed to by the Defendant. The Claimant [sic – presumably Defendant was meant] will refer to Mr. Traviss’ emails dated 19 and 27 June 2008 in this regard … 9.9 As to paragraph 6(6): 9.9.1 As set out above, it was never proposed to transfer any business from ‘biofarminternational’ (if that means BUT) to BUL, and no representation to this effect was made. Rather, the proposal under discussion was for the transfer of assets, goodwill and the Rights from BL to BUL, or the release by BL and grant to BUL of the Rights. 9.9.2 It is admitted that, since BL had quoted a price of £300,000 for a transfer of its assets, including the release or transfer of the Rights, that was the total value the Defendant put on them. Indeed, another potential buyer had offered somewhat higher sums for BL’s business. In the premises, the representation was true. 9.9.3 In any event, this was a representation of opinion, not of fact or law. 9.9.4 In fact, the Claimant’s own accountant subsequently advised her to carry out a stock take of BL’s business, and this was done on or around 15 June 2008. In the premises, the Claimant did not rely upon this representation. 9.9.5 It is admitted that it was agreed that the Claimant and the Defendant would contribute equally to the joint venture vehicle, and that the Claimant would make her contribution in the form of cash. 9.9.6 The Defendant’s intention was that his contribution to BUL would be made by him agreeing to release BL from its outstanding liability to him of £150,000 (which sum was yet to be paid), in return for BL agreeing to release its right to distribute Biotec Products in the UK for £150,000, rather than the £300,000 quoted. Further, the Defendant would not make any further charge for the value of his procuring that Biotec Italia authorise the transfer of the Rights from BL to BUL, or their release by BL and grant to BUL. In that way, the Defendant personally transferred at least £150,000 of value into BUL. 9.10 As to paragraph 6(7), the relevance of this alleged representation is not understood, nor is it in any event a representation of existing fact or law, but a representation as to possible future preference. It is in any event denied. 9.11 Further, at that meeting on 10 April 2008 the Claimant was given a copy of the Distribution Agreement between Biotec Italia and BUT dated 1 February 2005, which included the price list updated to January 2007 at Annex 1 thereto. The Claimant was told that some of the prices on that list applied to machines that were no longer current, and that new machines were now available. She was given the prices for the new machines, save for two which were not yet available. 9.12 Further, the Claimant was also informed on 10 April 2008 that the distribution agreement would entitle the distributor to obtain skin products from Biotec Italia at favourable prices, in return for a contribution to the testing and research costs. 10. As to paragraph 7: 10.1 The first sentence is admitted: 10.1.1 The Defendant sent the said accounts, which were not audited accounts, but merely estimated accounts, under cover of an email dated 16 April 2008 … did so subject to the express disclaimer that they “may not be 100% accurate”. Indeed, it was clear from the face of the said accounts that they were not complete or accurate. 10.1.2 Filed accounts were at all times available for the Claimant to see at Companies House. 10.2 As to the second sentence: 10.2.1 It is admitted that BUT had been put into creditors’ voluntary liquidation as set out above. 10.2.2 But it is denied that this followed an ‘unfortunate experience with Indian partners’. The liquidation was however at least partly prompted with the termination of BUT’s lease of premises in Stratford which were to be redeveloped, and which were owned by landlords of Indian origin. 10.2.3 The Claimant was well aware of that fact. 10.3 As to the third sentence: 10.3.1 It was unclear from the face of the accounts which periods the figures related to. 10.3.2 It is denied, if it be alleged, that the Claimant relied on these accounts. They were intended by the Defendant and treated by the Claimant merely as guidelines, and were in any event subsequently overtaken by the Claimant’s own accountant’s more detailed projections, which were in turn partly based on the Claimant’s proposed retail prices and marketing budget (as set out in and attached to her email dated 22 April 2008 …) and partly on the Defendant’s estimates as to overheads. 11. Paragraph 8 is denied. 11.1 As set out above, the Defendant does not have a concession, but rather in turn BUT, BL and BUL did, in that they held the Rights. The prices charged were ‘competitive’. … 11.2.3 Further, on or shortly after 20 May 2008 the Claimant was sent a copy of the formalised Distribution Agreement between Biotec Italia and BL, which included a price list at Annex 1 thereto … 14. Paragraph 11 is denied. Insofar as the representations were made, they were true. Insofar as the alleged representations were false, they were not made. The allegation of negligence is not particularised and is denied. In particular: 14.1 As to paragraph 11(1), as set out above the Claimant had known the facts set out in the first two sentences since at least early March 2008, and possibly from 2002 when she began trading with BUT. It is accordingly denied that she only now ‘understands’ the true position. The third sentence is not admitted. The last sentence is denied, because the assets of BUT including the Rights were transferred to BL prior to its liquidation as set out in paragraph 8.4 above. 14.2 As to paragraph 11(2), it is not understood which representation referred to in paragraphs 4, 6, 7, 8 or 10 this fact is said to falsify. The Claimant has not alleged that the Defendant represented that he had transferred or procured the transfer of the Rights to BUL. Such an allegation would be denied if made. If it were to be alleged that the Defendant had given a contractually enforceable promise to transfer or procure the transfer of the Rights to BUL, and had not done so, that would be a breach of contract, and not a misrepresentation. In any event, BUL was granted the Rights by Biotec Italia, as shown by the fact that BUL was able to and did buy Biotec Products direct from Biotec Italia at favourable prices (as the Claimant admits). 14.3 Paragraph 11(3) is denied. The Defendant believes the true proportions (47.5: 47.5: 5) as set out above, were known to the Claimant. It is in any event denied that this is material. 14.4 As to paragraph 11(4) 14.4.1 The first sentence is admitted, in that the Defendant was desirous only of ensuring the continued distribution of Biotec Products in the UK. It is probably true that the business of selling Biotec Products in the UK could have been expanded, although as set out above it is denied that the Defendant made any representation to that effect. 14.4.2 The second sentence is admitted, in that BUT was in liquidation, but denied in that the “business” in question, that of distributing Biotec Products in the UK, had been transferred to BL as set out above. 14.4.3 The third sentence is denied. Those facts had been disclosed to the Claimant in early March as set out above. 14.4.4 The fourth sentence is denied. The description of BUT’s liquidation as voluntary liquidation was true. It was in creditors’ voluntary liquidation, as set out above. In any event, its liquidation was a matter of public record. 14.4.5 As to the fifth sentence, it is admitted that the liquidation of BUT was an insolvent liquidation as set out above, but denied that it was completed in March 2008. BUT has yet to be dissolved. 14.4.6 It is denied that the Defendant was desirous of procuring funds, that BUT’s liquidation is in any way relevant to the Defendant’s motivation, or that any such inference may be made from the facts there set out. 14.5 As to paragraph 11(5), as at 10 December 2007 the Defendant had been desirous of finding a new distributor for Biotec Products (not a partner), but following the transfer of the Rights to BL had no further need to expand further. It was the Claimant who desired to be the Defendant’s partner. 14.6 As to paragraph 11(6): 14.6.1 It is denied that the Defendant made any such assertion, for the reasons set out above. 14.6.2 The Defendant chose to put BUT into liquidation. Because the Rights in BUT’s hands were almost worthless without Biotec Italia’s consent to transfer them, BUT was treated as being insolvent and was shown to have a deficit. 14.6.3 The Defendant never put any cash into BUL, because he had never agreed to do so, as the Claimant knew and accepted. 14.7 Paragraph 11(7) is denied. As the Claimant well knew, the Rights were held and operated actively by BL from February to June 2008 inclusive, not by BUT, as set out above. 14.8 As to paragraph 11(8), the reasons for this assertion are not understood, which assertion appears to contradict the gist of the Particulars of Claim. As set out above, the Defendant is a shareholder in Biotec Italia, which manufactures and supplies Biotec Products. 14.9 As to paragraph 11(9): 14.9.1 The facts stated in the first three sentences are true (save that BUL’s name was changed from Biofarm International Limited on 16 August 2004, not 12 August), and it is denied that any representation was made to the contrary (save in the inaccurate definition incorporated in the Agreement, drafted by Claimant’s own accountant). Further or alternatively, it is denied that a representation that BUL was formed as opposed to being an existing dormant company would be material. 14.9.2 The last sentence of paragraph 11(9) is denied, because as the Claimant well knew and as set out above, the Rights had been transferred to BL in January 2008. 14.10 As to paragraph 11(10), to the best of the Defendant’s knowledge and belief, it is true that there are probably significant profits to be made; but in any event no such representation was made. 14.11 As to paragraph 11(11), paragraph 9.9.2 above is repeated. It is accordingly denied that the Defendant proposed to transfer any business either from himself personally or from BUT. The deficit of BUT on liquidation is wholly irrelevant to the value of the business transferred to BUL from BL, for the reasons set out above. 14.12 As to paragraph 11(12), it is not understood what the relevance of this allegation is, nor why it is said that such a representation would be false, nor why the Claimant would rely on it. 14.13 As set out above, the representation in paragraph 11(13) that BUT had been put into voluntary liquidation was true. Further, it is denied that the Defendant represented that the Rights were his. At most the Defendant said that he had the ability to influence Biotec Italia to consent to the transfer of Rights. 14.14 As to paragraph 11(14), paragraph 10 above and its subparagraphs are repeated. 14.15 As to paragraph 11(15), as set out above, such a representation was true in relation to BUT prior to January 2008, but the Defendant made no such representation after January 2008 when BUT transferred the Rights to BL. 14.16 …” The evidence 21. The representations alleged on behalf of Mrs. Sabine were, with the exception of the accounts pleaded at paragraph 7 of the Particulars of Claim, to which accounts it is convenient to refer in this judgment as “the Sage Accounts”, said to have been made orally. 22. At paragraph 23 of her first witness statement made for the purposes of this action Mrs. Sabine said this about her meeting with Mr. Ferrari in December 2007:- “I acknowledge that this was very much a preliminary discussion but certainly my appetite was whetted to continue in discussion with Mr. Ferrari about the matter by that series of representations. The position on a practical level was that the Christmas break was approaching and Mr. Ferrari told me that early in the New Year he was planning a visit to Brazil. As a result our further discussions were delayed until 2008. Mr. Ferrari’s assertions in particular that he was in a position to ensure continuity of supply at competitive rates to any joint venture were instrumental in persuading me to continue in negotiation with him.” 23. I think that it was fairly clear, both from how Mrs. Sabine described the position in that paragraph, and from the lapse of time between then and the next occasion relied upon as being an occasion upon which representations were said to have been made, 4 April 2008, that in truth she did not rely upon what she was told on 10 December 2007, whatever it was, in entering into the Agreement. The real focus of the case was thus what was said at the meeting on 4 April 2008, and the significance of the provision, which was not in dispute, by Mr. Ferrari to Mr. Traviss, on behalf of Mrs. Sabine, of the Sage Accounts. 24. Mr. Ferrari did not dispute that there had been a meeting in April 2008 between himself, Mrs. Sabine and Mr. Traviss. Mr. Ferrari said that he was uncertain of the date, but he did not dispute that there had been a meeting. 25. On his side, Mr. Ferrari relied heavily upon what he contended had been said, or given, to Mrs. Sabine at a meeting in Italy on 10 April 2008. Mrs. Sabine did not dispute that she had been to a trade show in Bologna at the invitation of Mr. Ferrari, and that she had met Mr. Piovan on that occasion. There was, however, a vigorous difference between Mrs. Sabine, on the one hand, and Mr. Ferrari and Mr. Piovan, on the other, as to what had occurred. 26. Mrs. Sabine herself gave evidence at the trial, as did Mr. Traviss on her behalf. Mr. Ferrari gave evidence on his own behalf. Mr. Piovan also gave evidence. There was other oral evidence, to which I shall come, but that evidence did not concern directly either what was said at the meeting between Mrs. Sabine, Mr. Traviss and Mr. Ferrari on 4 April 2008 or what was said on the occasion of Mrs. Sabine’s visit to Italy in April 2008. 27. The circumstances in which Mrs. Sabine instructed Mr. Traviss, and his initial advice, were set out by him in a letter dated 10 March 2008 to Mrs. Sabine:- “PROPOSED NEW BUSINESS OPPORTUNITY We have discussed, briefly, the approach you have received for you to invest funds in a private business importing laser treatment machines from Italy. I have now established at Companies House that Biofarm International Ltd. is now called Biofarm Technologies Ltd. co no 3712392 and is [in] liquidation. Assuming this is the correct company there is no opportunity in progressing this further. However in principle investing in a company to acquire 50% has problems for the following reasons: 1. It creates a stalemate as there is no overriding decision making process. 2. Your funds should be invested in the business and not to acquire shares from the existing shareholders so the money provided additional working capital. 3. A shareholders agreement should be drawn up to deal with disputes or exit from the business. This can be a costly exercise. 4. Acquiring a material shareholding exposes you to historical problems that may exist. It is recommended that should you decide to do so due diligence is carried out to establish what the position is unfortunately this will incur fees that may result in your aborting the investment. An alternative approach would be forming a new company and both acquiring new shares so avoiding a legacy of potential problems and saving fees. You both invest your money in a clear way. You decide on the shareholding and I again recommend a shareholders agreement. From your prospective [sic – presumably perspective was meant] the shareholding could be held either personally or [by an]other trading vehicle. You may extract profits as dividends, or through your trading company as management charges agreed between both parties as to how this is achieved. If you wish to discuss this in further detail please let me know although at this stage I recommend preparing a “heads of agreement” to identify the major aspects of the intended relationship, in doing [so] potential problems are identified therefore avoiding any further unnecessary time and effort being spent.” 28. Mr. Traviss made notes at the meeting on 4 April 2008, which notes included that date. Copies of those notes were put in evidence. The notes were in manuscript, and were not always easy to read. However, they included:- “No business plan Buying existing business stock assets goodwill … Name change Biotec 50:50 shareholding Future cash flow agreement Break in employment of staff … Sage invoicing 3 times mark up to UK discount 30% Supply since 1993 …” 29. The effect of those parts of the notes which I have not quoted was summarised, so Mr. Traviss told me, and I accept, in a document entitled “THE PEACH TREE (“the Recommendations and observations for the new business venture” Recommendations”). The Recommendations were sent by Mr. Traviss to Mrs. Sabine as an attachment to an e-mail sent on 9 April 2008 which was in the following terms:- 30. In the Recommendations Mr. Traviss wrote:- “The existing dormant co of Biotec UK Ltd. is used and the share capital is altered so that Gill and Antonio are equal shareholders. Will need to increase the number of shares issued and allow for ordinary A & B shares. Antonio can hold all A shares so dividends can be paid to Antonio. Antonio indicated £60Kpa required from dividends. Gill to hold the B shares for a similar treatment although Gill would expect to take income via management charges. The value placed on the business being introduced will be £300K and Gill to invest £150K for 50%. The other 50% will be the value from Antonio. Careful consideration as to the tax implications of the sale prices and how Antonio takes shares via his advisor. The funds will be used to pay for the goodwill, stock and assets. The split between these categories to be agreed. A shareholders agreement to be drawn up to deal with disputes and exit issues etc. Keyman insurance to be investigated on the Gill and Antonio’s lives to provide funds either to the company or the individual in the event of death of one shareholder. Annual budget to be drawn up to assess the overheads and funding needs. Should funding be needed Antonio willing to provide this rather than have an overdraft facility say up to £60K. Warehouse currently rented in existing based in North London be retained and try and avoid lease assignment. In 2 years time review and possibly move out. All admin, sale and accounting functions to be located in Barnes with Sage accounting software. Gill to charge £2000 pcm for accommodation covering all costs of occupation. Orders to be emailed to the warehouse for despatch. Antonio to provide a copy of the last available Sage backup of the company that has gone into liquidation for MJT [Mr. Traviss] to gauge the sales, margins and overheads and compare to the annual budget. Antonio to provide a copy of the Italian Laser manufacturer to show how financially strong. Quarterly management accounts to be prepared for assessing performance. Roles need to be defined on sale and marketing so targeted effort to expand sales. Try and keep as informal as possible. Target date June 1 2008.” 31. Mr. Traviss told me that a purpose of the Recommendations was to serve as a record of the discussion on 4 April 2008. Mrs. Sabine told me that she took a copy with her to Italy and gave it to Mr. Ferrari, who put it in his pocket. Mr. Ferrari disputed that. 32. Neither in Mr. Traviss’s notes nor in the Recommendations did he, in terms, record any of the representations alleged on behalf of Mrs. Sabine to have been made at the meeting on 4 April 2008. However, in his witness statement made for the purposes of this action Mr. Traviss said about the meeting:- “7. On 04.04.2008 I met with Gill Sabine and Mr. Ferrari at the Peach Tree Clinic to discuss the matter. Mr. Ferrari stated that he owned half the Italian manufacturer of the Biotec machines and equipment which he identified as Biotec Italia Srl. He said that his company in liquidation (Biotec Technologies) had been awarded sole concession for the distribution of Biotec Italia machines and products throughout the UK and since the liquidation that concession was his personally. He explained that by reason of his position in Biotec Italia he was able to control to whom that concession was granted. He referred to the concession formerly having operated, using the name Biofarm, from premises in London but with a warehouse elsewhere. During the course of discussion he referred to his dormant company and suggested that this company be restructured with himself and Gill Sabine equal shareholders. He said that the company could then acquire the UK concession for Biotec Italia products and that he would be in control of the decision making process in Italy. 8. He also gave certain indicators as to the probable level of business based upon his experience of operating the UK concession hitherto and upon what he said was the experience of Biotec Italia Srl in a number of other countries. He was highly complimentary of what he perceived as Gill Sabine’s business expertise through his dealings with her in the beauty clinic business in the UK and indicated that he believed that the concession would be a great success with her in harness as a partner. He suggested that the new business could sustain drawings of £60,000 each for himself and Gill Sabine in year one, suggested that the value of the business that he was in a position to hand over immediately was £300,000 and stated that he would therefore seek a £150,000 cash investment from Gill Sabine for a half share in a sole UK concession. He was adamant that if thereafter the business required further investment to tide it over the early period he would prefer to provide this from his own resources rather than a bank. 9. The points which Gill Sabine put forward at this meeting were that she required the office facility for the joint venture to be in Barnes and she put forward a licence fee for occupation of the office space at her premises (where our meeting was taking place) of £2,000/month which appeared agreeable to Mr. Ferrari. She was clear that she required a 50% stake in the venture and that both parties would be committed to working in it. 10. We then had a discussion concerning the process for this proposed venture. The core of the proposal was that Mr. Ferrari would transfer to or obtain for the venture sole UK concession for Biotec Italia products: Gill Sabine would invest £150,000 into the concession for which she would obtain a 50% share; thereafter the business would operate on the basis of a 50/50 partnership, ie if further investment were required the parties would provide half each (although it had been Mr. Ferrari who was clear that he had available the necessary facilities to invest more cash if required) and similarly they would share profits on a 50/50 basis.” 33. At paragraph 25 of her first witness statement Mrs. Sabine gave her account of the meeting on 4 April 2008:- “The next main event in the matter was the meeting between Mr. Ferrari, Mr. Traviss and myself on 04.04.2008. At that meeting the defendant repeated representations he had made in December and stated: (1) That he was the owner of the sole concession for supply and maintenance of Biotec machines within the UK, for supply of all dedicated products consumed during the operation of those machines and for a range of Biotec cosmetic products. As indicated above, Mr. Traviss had learned on 10.03.2008 and had informed me that the Ferrari company which owned the concession had gone into liquidation. My understanding was that detail of the liquidation was not at that time available. Mr. Traviss raised the matter of the liquidation. Mr. Ferrari stated that he retained the concession and I confirmed (as was the case) that he continued to supply Biotec Products to me. Mr. Traviss advised that if the joint venture were to proceed this would require formation of a new company. The liquidation was not perceived as an obstacle because Ferrari assured us that he retained the concession himself – and by reason of his position within Biotec Italia Srl said that he was able to control to whom (if anybody) it was transferred. (2) He repeated at the meeting that the concession was operated by him from his premises at Highgate Road in North London with warehouse premises elsewhere and that, following the liquidation, he was operating the concession himself. (3) He also repeated that indirectly he carried on the business of manufacture of the machines, their spare parts and the dedicated products consumed during their use by virtue of his 50% interest in the Italian manufacturer, Biotec Italia Srl. (4) He stated that he was owner of a dormant company styled Biotec UK Limited which he was ready and willing to restructure with himself and myself equal shareholders such that the company would be able to acquire the sole concession for Biotec machines and products which he controlled. (5) He stated that the level of business which had been transacted by his existing concession was sufficient to provide himself and myself with drawings of £60,000pa each from the new concession in its first year of trading and that he would prefer a structure whereby his share was taken in dividends whilst my share could be taken by management charges. (6) He said that the value of the business which he proposed to transfer to the new concession was £300,000 and accordingly (for a half share) he would expect me to pay £150,000 thus equalising (or broadly equalising) our respective investments in the new concession. (7) He also stated that if further working capital were required for the venture he would prefer to find this from his own resources rather than resort to bank borrowing. This underlined what he had led me to believe throughout our business relationship – that he was a man of substantial means who would utilise those means to fund his business activities when necessary. My understanding based upon what he said was that he wished me in the joint venture for my administration skills, English way of doing business, my experience of Biotech machines and because he was overstretched in terms of the time which he had free to expend on his UK concession.” 34. Mrs. Sabine dealt with the meeting on 10 December 2007 at paragraph 22 of her first witness statement:- “It was in the circumstances described above that Mr. Ferrari and I arranged to meet for dinner. He had explained to me that a principal purpose of the meeting was to discuss a proposal that I should join with him in a venture greatly to expand the UK concession for Biotec Products. At the meeting he repeated many matters which I already understood (some of them wrongly) to be the case, namely: (1) That he owned a 50% interest in Biotec Italia Srl and was in a position to ensure continuity of supply of Biotec Products to a UK concessionaire at competitive rates: (2) That presently he owned that concession himself through Biofarm International, the company which had been invoicing me for Biotec Products since 2002; (3) That he wanted to expand sales of Biotec Products within the UK but had insufficient time to devote to the project and required a partner to assist in the expansion of the business; (4) That there were very substantial profits to be made by the holder of a UK concession for Biotec Products.” 35. Mr. Ferrari’s account of a meeting in April 2008 with Mrs. Sabine and Mr. Traviss was set out at paragraph 52 of his first witness statement prepared for the purposes of this action:- “I do not have any recollection of a meeting with the Claimant and her accountant on 4 April 2008. In response to Paragraph 6 POC alleging further misrepresentations of facts which are denied. I repeat my answers above and in addition, I have the following comments: (1) I deny having made such further representations. The Claimant was fully aware that all Biotec Italia machines and products were manufactured by Biotec Italia in Italy before 4 April 2008. (2) See answer above. I deny I own “Biofarminternational” operating a warehouse at the said address or elsewhere on 4 April 2008. I am not the owner of Biofarm Limited (Reg. 5837658) and this is a matter of public record. I believe Biofarm Limited has a warehouse at 10 Balmes Road London N1 where the Claimant collected the entire product stock. I did own Biofarm Technologies Limited which had an exclusive distribution agreement with Biotec Italia but this company was wound up on 27 February 2008. This is also on public record and known to the Claimant. The Claimant operated Biotec Sales Limited in 2005 and knew who the distributor and supplier of Biotec Italia machines and products were. The Claimant was informed by me in February/March 2008 that La Pelle had become the exclusive distributor. The Claimant’s business The Peach Tree Beauty Clinic ordered Biotec Italia products from La Pelle before April 2008. There was no misrepresentation. (3) It is admitted I carry on a business as stated but as a shareholder and director of Biotec Italia in Italy. The UK distributor of Biotec Italia does not manufacture Biotec Italia products or spare parts. These are supplied from Italy. Even if I mentioned to the Claimant my majority shareholding in broad terms or in passing, there is no significance in the difference between 50% and 47.5%. How would such statement amount to misrepresentation or be relied on to induce the Claimant into a contract and caused [sic] the damage claimed? During April 2008, Biofarm Technologies Limited was under the control of the liquidator. The above information was in the public domain and available to the Claimant and her advisors had they carried out their due diligence. (4) It is true that on 4 April 2008, I owned all issued share capital of Biotec UK Limited, a company which I incorporated but left dormant. It is also true that I was willing to use this company to facilitate the joint business venture with the Claimant following her proposals. This was mainly because the Claimant wanted to save costs. I deny having said I would restructure Biotec UK Limited. How can this be so when the Claimant’s proposals have not even been put forward in April 2008 or before Biotec Italia had agreed to distribution rights? I never said Biotec UK Limited was to take over the business stated in Paragraph 6(1) POC. Evidence shows any structuring of shares and classes of shares was carried out by the Claimant rather than me. (5) I deny making this representation. Biotec UK Limited was dormant and this is on public record. It is inconceivable that the Claimant, an experienced business woman in the beauty trade, would seek to rely on such a statement as fact without written proof or undertaking legal or accounting due diligence. See also Claimant’s accountants Traviss & Co emails of 11, 19 & 27 June 2008 for what really happened. Why would I wish only to have dividends which provided no certainty of returns on my investment in the joint business venture, particularly when the Claimant was to be the sole director of Biotec UK Limited and could refuse to declare any dividends under the shareholders agreement? There is no provision in the shareholders agreement for compelling the Claimant to declare dividends, even if there were profits. It is unusual for a director to be entitled to management charges (with the option that management could be by a third party). As shareholder, the Claimant would also be entitled, in addition to management charges, to dividends and would potentially benefit from two sources of income. Such income was in addition to the charges she was to levy for having Biotec UK Limited occupy her leased premises. In fact, it was the Claimant and her accountant who had suggested that the Claimant was to be entitled to a management fee as a director and that I would have dividends. I have never agreed that the Claimant would be entitled to £60,000 per year … It was not envisaged that the duties and responsibilities of a director would be delegated as management services. If the Claimant had been free to delegate such managerial responsibilities, there would be additional costs and moreover she would have had materially misrepresented her abilities and capabilities to both me and Biotec Italia. The arrangements/payments alleged were never contemplated. (6) It is true that Biofarm Limited had quoted £300,000 for its business, including goodwill, distribution agreement and stock to be quantified prior sales [sic]. It is also true that the parties would contribute to the joint venture vehicle Biotec UK Limited equally. The Claimant would inject into Biotec UK Limited £150,000 cash and I would contribute by obtaining for Biotec UK Limited as credit note of £150,000 from Biofarm Ltd. as against my invoice for services rendered which secured the exclusive distribution rights. I believe Biotec Italia would not have agreed to grant exclusive distribution rights to the Claimant personally or to Biotec UK Limited if I had not been part of the business. The Claimant needed my input and investment for the grant or transfer of exclusive distribution rights to Biotec UK Limited on favourable terms subject to agreement of the terms of any joint venture agreed between the Claimant and me. As a business owner in the beauty trade, the Claimant had knowledge of Biotec Italia’s UK distribution business and would have conducted her own legal and accounting due diligence before relying on any figures or representations. In any joint business venture, the parties would have to thrash out specific terms and shareholders rights and obligations before a deal on price (with or without adjustment) and investment contributions in cash or by value is reached. Both parties would also want to know on what terms a deadlock 50/50 shareholders agreement could be agreed. (7) An expression of a preference or an opinion in April 2008 regarding the unknown or uncertain outcome or future of a proposed business is not a representation of fact on which reliance can be placed or capable of inducement. Such representation if made was not a term of the shareholders agreement. As matters subsequently transpired, 3 months later in July 2008, the Claimant prepared and produced for signature a totally unsuitable shareholders agreement with terms in her favour. If the Claimant had not chosen to exclude me from the business, but allowed us to work as partners as was intended, I may have considered introducing additional capital but not to the extent that I would agree to fulfilling all additional and foreseeable future capital requirements of Biotec UK Limited.” 36. In his first witness statement Mr. Ferrari said about the visit of Mrs. Sabine to Italy on about 10 April 2008, and events consequent upon that visit, this:- “42. On 10 April 2008, the Claimant decided to visit Biotec Italia at the Cosmoprof beauty event and exhibition in Bologna, Italy. During that meeting, she made representations upon which Mr. Francesco Piovan, I and Biotec Italia relied on [sic] in considering her request for an exclusive distribution agreement. During her visit, she evaluated the new Biotec Italia’s equipment and new machines, met and spoke with its other European distributors regarding their business success in other countries. Over dinner on 10 April 2008, she spoke with Mr. Piovan and me about her intention to become the exclusive distributor arm of Biotec Italia in the UK. She put forward herself as the ideal vehicle to hit the English market, since she had business experience in the beauty market, was British and could relate to British customers in the UK, had strong connections with influential people, including Vogue beauty editors, marketing experts and powerful sales personnel. Mr. Piovan and I relied on all her representations and statements. The Claimant queried the terms and prices of a distribution agreement for the UK, particularly about the terms between the recently liquidated Biofarm Technology [sic] Ltd. (liquidated company) and Biotec Italia. Prior to the meeting in Italy, Ms Sabine requested a copy of the distribution agreement dated 1 February 2005 and it was given to her. It had attached at the last page a list of machine prices in Euros. 43. I would like to explain the list of types of machines in the attachment to the Claimant’s email of 22 April 2008 is different from the Price List Update January 2007 on the last page of the Distribution Agreement dated 1 January [sic] 2005. This is because on 10 April 2008, during the Cosmoprof exhibition, Biotec Italia launched new machines that were not included in the Price List Update January 2007. The Claimant made notes of the equipment prices and included the new machines in the email dated 22 April 2008. There were some prices missing in her email, simply because when the prices were discussed at our meeting, Mr. Piovan told her that for some new machines we could not quote prices yet. 44. During the meeting on 10 April 2008. she had represented that she had years of experience in beauty business in the UK, was well placed to succeed La Pelle’s distribution rights because she had numerous market contacts, customers and experience in selling Biotec Italia products. She claimed her first experience with Biotec Italia via Biotec Sales Ltd. was unsuccessful because she did not have full control of the whole UK territory and operations, since Biofarm Technologies remained the exclusive distributor. She represented to me and Mr. Piovan that she was the ideal candidate to manage office employees, giving that extra quality and support in Biotec Italia services offered to UK customers that she thought Biofarm Technology [sic] lacked. The Claimant went on to say that if she had control of Biotec Italia’s exclusive distributorship in the UK, its business would be an amazing success. She sought to justify and support her statements by the combination of my manufacturing expertise and her alleged company managing expertise in her other businesses. I have since realised that her representations were untrue. During the meeting on 10 April, the Claimant requested from me, which I did not have available, information about profit and loss for Biofarm Technologies Limited before liquidation and wanted to know about the overhead costs for personnel at La Pelle. The last filed accounts at Companies House were for 2006. I subsequently emailed her accountants, Traviss & Co, on 16 April 2008 details of Biotec Italia and which I qualified in my email. During her visit, the Claimant had taken notes on updated machine prices and commissions and minimum prices she had worked out. On 23 April 2008, I emailed her accountants estimated overhead costs based on Biofarm Limited using the estimates in Attachment 1 POC [a copy of the Sage Accounts] as a guide as requested by her accountants. This was followed by the Claimant’s email on 30 April 2008 attaching a first draft budget and on or about 20 May 2008, the Claimant was given a copy of the distribution agreement between Biotec Italia and Biofarm Limited as she requested on 10 April. 45. Mr. Piovan confirmed to the Claimant that the distribution agreement was continuing with Biofarm Ltd. (formerly La Pelle) and she asked if a distribution agreement was going to be in place between a replacement distributor and Biotec Italia if a joint venture with me were to go ahead. Mr. Piovan confirmed that if terms could be agreed, the distribution agreement would be in place and Biotec Italia would be prepared to grant permission to transfer or assign the exclusive distribution agreement if Biofarm Limited would agree to a deal. 46. The Claimant also queried about equipment and skin care prices, plus other business terms. Mr. Piovan answered all of her queries. The prices of Biotec Italia’s machines and products were clearly discussed at the meeting with Mr. Piovan and further meetings between me and the Claimant prior to 2 July 2008 and she was provided updated price lists on several occasions at her request, before and after 2 July. 47. The Claimant also alleges she was never served with a price list prior [to the] agreement of 2 July 2008. This is totally false. As proof, on 22 April 2008 at 23:19 hours following the meeting of 10 April 2008 in Italy with Mr. Piovan and me, the Claimant sent an email to her accountant Traviss & Co, copied to me, attaching the machine prices given to her, well before the shareholders agreement and the joint venture. She had even converted the prices into British Sterling from Euro in her e- mail. I believe the conversion was made taking into consideration Biotec Italia January 2007 price list attached to Biofarm Technology Ltd. agreement given to her on 10 April 2008 during the meeting. She represented that to increase the machine sales from 4 units a month, a marketing budget of £50,000 for 2009 was needed. The budget was not agreed by me. The Claimant acknowledged the prices for new machines were still being negotiated (with Biotec Italia). This email from the Claimant proves she not only had the machine price list but the minimum numbers for sale required under the distribution agreement from Biotec Italia on 10 April.” 37. In the context of the alleged misrepresentations relied on by Mrs. Sabine the important contentions contained in that passage were that she was made aware of the existence, and given a copy, of an agreement (“the Technologies Distribution Agreement”) dated 1 February 2005 and made, on its face, between Italia and “Biofarm Technology Limited”; that she was made aware of the fact that there was a continuing distribution arrangement between Italia and Biofarm, and was subsequently given a copy of a written distribution agreement (“the Second Biofarm Distribution Agreement”) dated 20 May 2008 and made, on its face, between Italia and Biofarm; and that she was given, attached to the Technologies Distribution Agreement, a list of prices charged by Italia for the supply of the Products. 38. Mr. Piovan gave this account of the visit of Mrs. Sabine to Italy on about 10 April 2008 in his witness statement made for the purposes of this action:- “19. Thereafter Ms. Sabine proposed a meeting with me in Italy on or about 10th April 2008. On that day she paid a visit to the Cosmoprof in Italy, a beauty event where Biotec Italia SRL was exhibiting its products. It was on 10th April 2008 that I first met Ms. Sabine in person. I took the trouble to book her into a room at the hotel where other Biotec Italia SRL staff were being accommodated and I recall Ms. Sabine spending the whole day with me, Mr. Ferrari and all of our other staff at the Biotec Italia’s booth. 20. During that day she was given the opportunity to check all of Biotec Italia’s new equipment and to talk to other distributors in order to get a clear idea of the complexity of the distribution business. 21. Following the exhibition I, Mr. Ferrari and Ms. Sabine had a dinner at the hotel where we discussed matters generally with regard to the distribution business and in particular the current terms in place with La Pelle UK Limited (Biofarm Limited), the company with whom at that time a Distribution Agreement was in place in relation to Biotec Italia’s products. 22. I do not speak very good English and Mr. Ferrari was assisting me in translating concepts that I could not clearly express in the English language. 23. In particular I recall Ms. Sabine’s interest in relation to the prices for both the equipment and the skincare that in England, due to the direct involvement and efforts of Mr. Ferrari, were well below the standard distribution price compared with other distributors not only in the United Kingdom but also in other countries. 24. Mr. Ferrari also provided Ms. Sabine with a copy of the Distribution Agreement that Biotec Italia SRL had with Bioform Technology [sic] Limited. Prior to her visit Ms. Sabine had requested to see it. Ms. Sabine then took notes of the prices that in principle were agreed for both the equipment and the skincare products including prices concerning new products to be distributed in the UK. 25. During the same meeting Ms. Sabine expressed a concern with regard to the fact that Biotec Italia had in place an agreement with Biofarm Limited for the distribution of Biotec Italia’s products in the UK and she questioned how that was going to be resolved. I informed her that subject to an agreement with Ms. Sabine, Mr. Ferrari and the owner of Biofarm Limited, I had no objection to transferring the rights of distribution over to any new Limited Company operated by her. I also made clear that the only condition would be that Mr. Ferrari would have to have day to day control and a high level of management interest in the business as I believe that only he was competent enough to ensure that the Distribution Agreement functioned properly. 26. I made clear to Ms. Sabine that in order for me to satisfy myself that the Distribution Agreement would function as favourably as it had done in the past, I needed to be sure that Mr. Ferrari was heavily involved in the venture.” 39. The account of her visit to Italy given by Mrs. Sabine in her first witness statement was excitingly different from the accounts of Mr. Ferrari and Mr. Piovan:- “26. In his defence Mr. Ferrari disputes the 04.04.2008 meeting (which was with the accountant Mr. Traviss) and asserts that there was a meeting in Italy. It is correct that after the Traviss meeting I was invited by Ferrari to visit Italy in order to inspect what he referred to as his Italian manufacturer and, induced by his representations that there was a viable joint venture, I agreed to go. I largely financed this trip myself and due to flight schedules spent the first day alone in Bologna arranging to meet Ferrari and Piovan in the early evening after they had set up the Biotec Italia stand at a trade exhibition for a show beginning the following day. 27. Messrs. Piovan and Ferrari were running late. Eventually Piovan, Ferrari, myself and a group of Biotec Italia employees left Bologna and drove to Modena where we had a late dinner but there was no opportunity for discussion nor exchange of documents concerning the proposal of a grant for a sole concession in the UK. I was not even seated next to Piovan during the meal and a bulk of the conversation was in Italian which I do not speak. We stayed in Modena overnight. 28. The following morning I went to the show in a car with Piovan and Ferrari. Mr. Piovan was on the telephone speaking in Italian for most of the journey. No details for the proposed joint venture were discussed. So far as I was concerned I had achieved no more than to meet Piovan, see that Biotec Italia had a significant number of employees and an attractive array of machines on display at the stand and observe that Mr. Ferrari appeared to be a central figure in the Biotec Italia organization. The propositions in the Defence that I was provided with price lists or that there was any detailed discussion of the proposed joint venture during this visit to Italy is false. What Mr. Ferrari said to Mr. Piovan in Italian I cannot say but so far as I was concerned I had had a brief overview of the Italian set-up and was introduced by Ferrari to Mr. Piovan as a person who would be involved with Mr. Ferrari in the distribution of Biotec Products within the UK. It was not feasible at the show to discuss matters both because Mr. Piovan was busy with prospective purchasers for machines and because of the language barrier. The propositions in the defence that I was involved in detailed discussion about the venture or was provided with price lists during this visit is false.” 40. The first thing which happened after the return of Mr. Ferrari and Mrs. Sabine from Italy was that Mr. Ferrari sent Mr. Traviss an e-mail on 16 April 2008. In it he said:- “As agreed in our meeting at The Peach Tree Clinic, I’m forwarding some information on both my Italian company (last year account) and PL on Biofarm International, which may not be 100% accurate. If you need further information feel free to contact me.” 41. The “PL on Biofarm International” was in fact the Sage Accounts. The Sage Accounts were difficult to interpret simply from reading them. They were entitled 42. “Biofarm International Ltd. Transactional Profit & Loss”. No company held the name Biofarm International Ltd. at the date Mr. Ferrari produced the Sage Accounts to Mr. Traviss. Technologies, which had been incorporated with that name, had changed it to Biofarm Technologies Ltd. on 7 May 2004, while Biotec UK, which had also been incorporated with that name on 20 May 2004, changed it to Biotec UK Ltd. on 16 August 2004. The Sage Accounts were dated 15 January 2008. They bore the legend “Trans Date From: 01/07/2007 Trans Date To: 31/12/2007”, which suggested that the accounts related to that six month period. On the Sage Accounts there were two columns of figures of sales, purchases, direct expenses and overheads. One column was entitled “Period”, the other was entitled “Year to Date”. What was the length of the “Period” did not appear, but the figures in it were smaller than the figures in the “Year to Date” column, so it seemed that whatever length of the “Period”, it was a shorter period than the “Year to Date”. The use of the expression “Year to Date” suggested that the figures in that column related to a period from the commencement of the financial year of “Biofarm International Ltd.” to 31 December 2007. The Sage Accounts showed, on their face, sales in the “Period” of £141,307.56, resulting in a net profit of £61,443.57. For the “Year to Date” the sales were £812,052.71, and the net profit £122,433.31. 43. What Mrs. Sabine made of the Sage Accounts she explained in her first witness statement:- “30. So far as the SAGE account is concerned, when I signed the Particulars of Claim I understood this document to show in its right hand column alleged trade over the limited period July – December 2007. It is now my understanding – though the document is somewhat confusing – that it is intended to suggest volume of trade for the whole y/e 31.12.2007. My recollection is that the latter was my understanding of Mr. Ferrari’s representation at the time that the document was presented to me in April 2008. Thus sales for Mr. Ferrari’s UK concession over y/e 31.12.2007 are represented as £820,000 odd, purchases as £408,000 odd, miscellaneous expenses as £24,000 and overhead as £264,000 giving rise to a representation that the pre-tax profit was £122,433. 31. I thus was persuaded that the concession had enjoyed t/o for 2007 somewhat short of £1m with profit before tax of £122,443. Had Mr. Ferrari not asserted that this was a true representation of the company’s affairs over the period in question I would not have entered into the joint venture. Nor would I have parted with the large sums of money described in the claim in a futile attempt to acquire and then operate the Biotec Italia Srl sole concession within the UK. …” 44. How Mr. Traviss interpreted the Sage Accounts when he received a copy from Mr. Ferrari he explained at paragraph 14 of his witness statement:- “So far as the detail on Mr. Ferrari’s liquidated company which he provided is concerned, that consisted of a single sheet headed “Biofarm International Ltd. Transactional Profit and Loss” which Mr. Ferrari indicated showed unaudited accounts for the company which had been re-named Biofarm Technologies and which had operated the UK concession for Biotec machines etc up until its liquidation in early 2008. The document indicated t/o for the year ending 31.12.2007 of £820,335 giving a gross profit of £386,714 and a net profit of £122,433.” 45. Mr. Traviss replied to Mr. Ferrari’s e-mail dated 16 April 2008 in an e-mail sent on 17 April 2008, which was copied to Mrs. Sabine:- “Many thanks for the financial info this is most helpful. I have spoken to Gill and the next step is to prepare the annual budget on the overheads required for the planned business in the two locations. Can you let me know what payroll and other costs you expect for engineers etc. using the Sage profit and loss account as a guide. Gill can you give me your estimate of the expected costs and then I will combine these and we met [sic] up to agree them. Some estimate of marketing and selling payroll and costs should also be provided either jointly or separately. With the overhead budget and dividend requirement set we can calculate what sales are required to achieve breakeven and beyond.” 46. Mr. Ferrari sent a list of overhead costs – specifically the costs of employer’s liability insurance, rent of a warehouse, and the salaries paid to various identified employees – in an e-mail dated 28 April 2008. 47. On 22 April 2008 Mrs. Sabine sent Mr. Traviss an e-mail in these terms:- “Antonio will send you the existing overhead figures. To increase the machine sales form [sic] 4 units a month we think we will need a marketing budget of £50,000 for the next year. I attach the pricing for most of the equipment but we are still negotiating the purchase price of the two new machines, Supreme and Coax, which are aimed at the doctors market. We have agreed to use the fourth room on the top floor for Biotec, moving my tanning room to the basement, and I must add something in the rent/licence to occupy to reflect this – say an extra £200pm which is half the market rent for that room.” 48. The document attached to the e-mail included a cost, expressed in sterling, for each of a number of different types of the Equipment. The recorded costs were:- Xlite Fusion Sonolight WhitePeel Trandy 5000 1500 Biocell Biocelase Reform 4500 49. The evidence of Mr. Ferrari, as I have noted, was that these figures were derived from the Annex to the Technologies Distribution Agreement of which he said she was given a copy in Italy. However, there was no reference in that Annex to Xlite. That Annex did list prices for Items of the Equipment which were not included in the list compiled by Mrs. Sabine. Where there was a price in the Annex for an item of the Equipment included in Mrs. Sabine’s list the prices, in euros, were:- Fusion Sonolight WhitePeel Trandy Biocell Biocelase 4500 2400 4500 50. 51. 52. The evidence of Mrs. Sabine in cross-examination was that the prices included in her list were arrived at in discussion with Mr. Ferrari, and, essentially, he told her what prices to insert in sterling. As a matter of arithmetic there was no consistent application of a sterling/euro rate to the euro figures listed in the Annex to the Technologies Distribution Agreement to produce the figures set out in Mrs. Sabine’s list. A rate of £1 = €1.20 was discernible in calculating the prices of the Fusion, WhitePeel, Trandy and Biocell machines. However, the rate applied to the Sonolight machine was £1 = €1.1842, while that applied to the Biocelase machine was £1 = €0.9777. The rate applied to the Sonolight machine was not obviously to round the sterling value, as a rate of £1 = €1.20 applied to €4500 produces £3,750. The document attached to the e-mail dated 22 April 2008 sent by Mrs. Sabine to Mr. Traviss in fact showed a build-up of retail prices for the various types of machines listed, starting from the prices of cost to the intended joint venture between Mrs. Sabine and Mr. Ferrari. Based on the indicated retail prices and the overhead costs communicated by Mr. Ferrari in his e-mail dated 28 April 2008 Mr. Traviss prepared budgets which he sent to Mrs. Sabine and to Mr. Ferrari by attachment to an e-mail dated 30 April 2008. 53. There seems then to have been something of a pause whilst a draft of the Agreement was prepared. In an e-mail to Mr. Ferrari dated 27 May 2008 Mr. Traviss informed him that:- “Gill has asked me to confirm that the shareholders agreement is in hand. The lawyer acting has been away on holidays so has been delayed. As we near the start of the new business a stock take will be required. Have you this in hand and do you require any guidance?” 54. 55. At this point it had still not been resolved whether Mr. Ferrari would contribute to the joint venture in cash or only in kind. Mr. Traviss prepared pro forma balance sheets for Biotec UK, already identified as the vehicle for the joint venture, to cover the two alternative possibilities. Those pro forma balance sheets were sent to Mr. Ferrari and to Mrs. Sabine as an attachment to an e-mail sent by Mr. Traviss on 11 June 2008. A draft of the Agreement was produced and sent to Mr. Traviss on 18 June 2008. It was forwarded to Mr. Ferrari by Mr. Traviss under cover of an e-mail dated 19 June 2008:- “I have forwarded the latest draft of the shareholders agreement before your meeting with your accountant. I should explain that the agreement allows for Gill to charge reasonable management charges. You said you wanted to take your funds out as dividend and at least £60,000. This figures [sic] is not mentioned in the agreement as an obligation as dividends can only be paid if there is sufficient profit after tax. It is intended that you would have the A shares and divs paid on those. The B shares are for Gill so she could have some dividends if she chose not to take the management charge. You may want to include in the agreement that you have an entitlement to the first £60,000 amount of dividends if available and cash flow permits but I was concerned that it was an obligation on the company to pay it.” 56. Although Mr. Ferrari disputed that he had said that he was looking to take out of the joint venture an amount of £60,000 by way of dividend, Mr. Traviss’s e-mail was consistent with that having been his understanding of Mr. Ferrari’s wishes in June 2008. Mr. Traviss told me in cross-examination that, in his understanding, a major purpose of the production of the Sage Accounts by Mr. Ferrari was to demonstrate that the likely net profit of the intended joint venture would support a drawing by each participant, in whatever form (be it as dividends or management charges) of £60,000 per annum. 57. The draft Agreement as revised was sent by Mr. Traviss to Mrs. Sabine as an attachment to an e-mail dated 1 July 2008:- “I have attached the revised agreement. This is the draft I emailed to Antonio and his accountant as well as you last week. I have inserted the arbitrator as an independent chartered accountant and it allows for the A and B shares to be issued.” 58. 59. The Agreement was, of course, signed the next day. A great deal of significance was attached at the trial to the Technologies Distribution Agreement, the Second Biofarm Distribution Agreement and another agreement (“the First Biofarm Distribution Agreement”) in terms identical to the Second Biofarm Distribution Agreement, save that it was initialled and signed, on its face, by Mr. Piovan for Italia and by Mr. Ferrari for Biofarm, in the context of credibility. 60. It seems that the issues in relation to each of these three agreements developed during the course of the litigation. 61. 62. 63. 64. 65. 66. A copy of a version of the Technologies Distribution Agreement and a copy of the Second Biofarm Distribution Agreement were each attached to the Defence when served. The copy of the version of the Technologies Distribution Agreement which was attached to the Defence contained a number of features which it is material to note. Two of those features, but only two, were said to have been included by error. The first noticeable feature of the Technologies Distribution Agreement was that it was written in the English language, notwithstanding that Mr. Piovan said that it was in the standard form of distribution agreement used by Italia. That was the more remarkable, given that in fact the apparent non-Italian party to the agreement was, for practical purposes, Mr. Ferrari, who, to the knowledge of both parties, was and is fluent in Italian. Technologies was described in the Technologies Distribution Agreement, in the identification of the parties to the agreement, as “Biofarm Technology Ltd. incorporated in England and Wales registration number 03712392 having its registered office at 19-20 BRITTEN COURT, ABBEY LANE LONDON E15 2RS”. The actual name of Technologies at the ostensible date of the Technologies Distribution Agreement was Biofarm Technologies Ltd. It seems surprising that, if the Technologies Distribution Agreement had been made at the date which it bore, at which time Technologies and Italia were actively trading together, the name of Technologies was rendered incorrectly. As I have noted in passing earlier in this judgment, and will note later, in various places in the witness statements prepared for the purposes of this action on behalf of Mr. Ferrari a similar error has been made. Clause 1 of the Technologies Distribution Agreement contained definitions. One of these was of the word “Year”. That definition, in the version of the copy attached to the Defence, was:- “a period of 365 days (or 366 days if there is a 29 February during the relevant period) starting on 20 May 2008” That definition makes no sense in an agreement expressed to be made, and to come into force, on 1 February 2005. It makes plenty of sense, however, in the Second Biofarm Distribution Agreement, where it also appeared, for that agreement, on its face, was made on 20 May 2008. It was strongly suggested by Mr. Challenger that the definition of the word “Year” included in the version of the copy of the Technologies Distribution Agreement attached to the Defence demonstrated that the Technologies Distribution Agreement was not what it purported to be, but rather a document produced shortly before the service of the Defence by incompetent modification of the Second Biofarm Distribution Agreement. That was vigorously disputed by both Mr. Ferrari and Mr. Piovan. I shall return to their explanations of the obvious incongruity of the definition of the word “Year” in the version of the copy of the Technologies Distribution Agreement attached to the Defence. 67. Clause 3.3 of the version of the copy of the Technologies Distribution Agreement attached to the Defence was in these terms:- “The Distributor will not for the lesser of a period of 3 Years from the Effective Date and the Term: (a) purchase the Products from any person other than the Supplier; or (b) market, distribute or sell any products which compete with the Products.” 68. 69. It was the case of Mr. Ferrari that paragraph (b) of that sub-clause was also an error and that the genuine Technologies Distribution Agreement did not contain that provision. Other provisions of the Technologies Distribution Agreement which it is material to notice are:- “1.1 In this Agreement: … “Effective Date” means the date of execution of this Agreement; … “Minimum Quantity” the minimum value of Products calculated using the quantity for the equipments and the prices for the skin care that the Distributor must purchase from the Supplier during each Year of the Term as specified in the Schedule. … “Prices” means the Supplier’s standard distributor specific list prices for the Products as annexed to this Agreement and varied by the agreement of both parties from time to time; … “Products” means the skin care products and equipments which are purchased by the Distributor from the Supplier under this Agreement (details of which are set out in the Annex 1); … “Term” means the term of this Agreement; … 2.2 This Agreement will come into force on the Effective Date and will continue in force indefinitely unless and until terminated in accordance with Clause [22]/for a fixed period of 3 Years, after which it will terminate automatically, unless previously terminated in accordance with Clause [22]. … 9.2 The price of the Equipments [not a defined expression] and Products are specified in Annex 1 but may vary (acting reasonably) upon the Distributor’s receipt of the Supplier’s notice of price change. 9.3 The Distributor will pay the Prices to the Supplier within 30-60-90 days of the date of issue of an invoice issued in accordance with Clause [9.1]. 9.4 All amounts payable under this Agreement are exclusive of all sales, value added, withholding export, import and other taxes and duties which will be payable by the Distributor (except for taxes and duties which will be payable by the Distributor (except for taxes payable on the Supplier’s net income, which will be payable by the Supplier). … 10. The Distributor will during each Year: (a) on or before each of the following forecast dates during the Year place Orders with the Supplier; and (b) enter into Contracts with the Supplier in respect of at least the Minimum Quantity of Products during the Year (Annex 1). … 20.1 Either party may terminate this Agreement at any time by giving at least 30 days written notice to the other party expiring at any time after the end of the Minimum Term [not an expression defined in the agreement as such, but identified in the Annex as a “period of 3 years starting on the Effective Date”]. … 20.3 Either party may terminate this Agreement immediately by giving written notice to the other party if (a) the other party: (i) is dissolved; (ii) ceases to conduct all (or substantially all) of its business; (iii) is or becomes unable to pay its debts as they fall due; (iv) is or becomes insolvent or is declared insolvent; or (v) convenes a meeting or makes or proposes to make any arrangement or composition with its creditors; (b) an administrator, administrative receiver, liquidator, receiver, trustee, manager or similar is appointed over any of the assets of the other party; (c) an order is made for the winding up of the other party, or the other party passes a resolution for its winding up (other than for the purpose of a solvent company reorganisation where the resulting entity will assume all the obligations of the other party under this Agreement); 70. 71. 72. 73. 74. 75. … 24.5 Neither party may without the prior written consent of the other party assign, transfer, charge, license or otherwise dispose of or deal in this Agreement or any rights or obligations under this Agreement.” The provisions quoted in the preceding paragraph were repeated exactly in the Second Biofarm Distribution Agreement. The Annex to the Technologies Distribution Agreement listed as the minimum number of items of the Equipment to be purchased in any year a total of 132 items, with a cost amounting to €499,800, together with skin care products to a minimum purchase value of €250,000. Both Mr. Piovan and Mr. Ferrari contended in the course of their evidence that the prices fixed as between Italia and Technologies, then Biofarm, were low, in comparison with the prices charged to other distributors, and the understanding between Italia and Technologies, and the later understanding between Italia and Biofarm, was that Technologies, then Biofarm, would, in addition to the prices set out in the Annex to the Technologies Distribution Agreement, or the Second Biofarm Distribution Agreement, contribute to the testing and packaging costs incurred by Italia. No term to that effect was included either in the Technologies Distribution Agreement or in the Second Biofarm Distribution Agreement. In commercial terms it would not be at all surprising, given that Mr. Ferrari held 47.5% of the issued shares in Italia, if it had been agreed that Italia would supply the Products to Mr. Ferrari’s English distribution vehicle at concessionary prices, or that Mr. Ferrari’s vehicle should have agreed to contribute to the testing and packaging costs of Italia. However, what does seem surprising is that a formal agreement in the particular terms of the Technologies Distribution Agreement should have been made. Mr. Ferrari asserted that the Technologies Distribution Agreement had been modified from the standard form agreement by the omission of clause 3.3(b) to take account of the fact that Technologies dealt, he said, also in products not supplied by Italia which could be considered competitive with those of Italia. One wonders, therefore, why the alleged standard form agreement had not also been modified to include, perhaps in the Annex, the obligation to contribute to testing and packaging costs. Again, it was not possible to determine, from the terms of clause 2.2 of either the Technologies Distribution Agreement or the Second Biofarm Distribution Agreement exactly how long was the intended term of the agreement in each case, because the draft included two alternative possibilities and neither of the alternatives was deleted in the agreement as ostensibly executed. Thus it was not clear that the Technologies Distribution Agreement had expired by effluxion of time by the date of the Second Biofarm Distribution Agreement. Although Italia was apparently able, in reliance on the provisions of clause 20.3 of the Technologies Distribution Agreement, to give notice of termination of the agreement upon the insolvency of Technologies, there was no evidence that Italia had served such a notice. It is difficult to understand the commercial purpose of the Technologies Distribution Agreement containing the obligation in clause 10(b). No doubt as between Italia and a distributor at arm’s length it was appropriate to include such an obligation in a distributorship agreement so as to provide some guarantee to Italia of an income from the distributor and an incentive to the distributor to sell the Products. However, as a major shareholder in Italia Mr. Ferrari did not need any such incentive, and there was no obvious logic in Italia (almost half of which was Mr. Ferrari anyway) supposing that anyone other than Mr. Ferrari, through Technologies, would be more successful in selling the Products in the United Kingdom than he would, if he put his mind to the task. If Mr. Ferrari lost interest in that activity, the major shareholders in Italia were well able to agree between themselves whether, and if so how, to continue to try to market the Products in the United Kingdom. The idea that Technologies might lose its distributorship on account of not ordering enough of the Products boarders on the risible. 76. It was curious that in each of the Technologies Distribution Agreement and the Second Biofarm Distribution Agreement no choice had been made as between the alternatives, for such they appear, in clause 9.3 for payment within 30 days, payment within 60 days or payment within 90 days. Copies of invoices raised by Italia put in evidence suggested that, at least in some cases, Italia expected to be paid for goods supplied one-third of the price within 30 days, one-third within 60 days and one-third within 90 days. However, that method of payment was not contemplated, or at any rate not clearly contemplated, by clause 9.3. 77. What were said to be the circumstances giving rise to the making of the Second Biofarm Distribution Agreement were explained in the witness statement of Mrs. Maria Papasavva, who apparently operates a beauty clinic in Cyprus:- “6. In September 2007 I contacted Mr. Ferrari to inform him that I was interested in purchasing another of his systems, specifically a machine called ‘Fusion’. 7. In the course of our telephone conversation I inquired whether my daughter, who at the time was a student in London, could visit his office to inspect the system and observe a demonstration. 8. Mr. Ferrari agreed and my daughter in fact visited Mr. Ferrari’s offices where she was presented with the full specifications and a demonstration of the system and the machines [sic] abilities. In due course my daughter reverted to me with a report which contained a very positive feedback. 9. In the following months my daughter had become very friendly with Mr. Ferrari. 10. In December 2007 my daughter informed me that Mr. Ferrari told her that he had decided to liquidate Biofarm Technology [sic] Ltd. She also expressed the opinion that due to the liquidation of the company it would be better for me to buy the ‘Fusion’ machine through one of his distributors in Cyprus as Biofarm Technology [sic] Ltd. would no longer be operational and as such there would be no guarantee in regard to technical support. 11. During the Christmas 2007 holiday period my daughter came to Cyprus for her vacations during which she expressed her intentions to start a business in the UK. 12. As mentioned above, my daughter was attending a central London college where she was taking a beauty therapy course and would have been completed in June 2008. She informed me that she had also discussed the matter with Mr. Ferrari and that she had informed him of her intention to take over and continue with the distribution of Biotec Italia Srl products in the UK. 13. In view of my daughters [sic] intentions I contacted Mr. Ferrari towards the beginning of January 2008 and we discussed the viability of this project. 14. Mr. Ferrari told me that following the voluntary liquidation of Biofarm Technology [sic] Ltd., Biotec Italia Srl would subsequently be free to sign a distribution agreement with any other interested party and asked for time so that he could discuss our proposal to become a distributor in the UK with his business partner Mr. Francesco Piovan. 15. Towards the of [sic] January 2008 Mr. Ferrari called to inform me that by sometime in February 2008 the voluntary liquidation of Biofarm Technology [sic] Ltd. would be finalised and that after this we could go ahead with my proposal for the distribution of Biotec Italia Srl products. 16. He also proposed that instead of incorporating a new Company I could take over an existing Company named La Pelle UK Ltd. which was the former tenant of a shop owned by Mr. Ferrari. 17. La Pelle UK Ltd. was owned by Ms Juliana Steuernagel. Mr. Ferrari told me that Ms Steuernagel was willing to transfer her shares for zero value because the company had an existing liability towards Mr. Ferrari for approximately £15,000 which related to hire charges of equipment owned by him. The shops [sic] rent were [sic] also in arrears with Gadway Properties Ltd., which is Mr. Ferrari’s property holding company. 18. On my part, I agreed to take on this liability, but proposed to postpone the payment for later on in the year provided that Mr. Ferrari would wipe off any liabilities which accrued prior to my taking over of Ms Steuernagel’s shares. 19. In view of the above preliminary agreement, my daughter met with Ms Steuernagel and Mr. Ferrari in January 2008 to finalise the matter during which Ms Steuernagel agreed the transfer [sic] the company shares on the terms mentioned herein above. 20. During this same period Mr. Ferrari, acting on my behalf, agreed with the Company Secretary to act as nominee shareholder of the shares on my behalf until June 2008, i.e. until my daughter completed her course whereupon she would take over the company shares and business. 21. On 24th January 2008 all of the shares of La Pelle UK Ltd. were transferred from Ms Steuernagel to my nominee, Mr. Zuccolotto. 22. On 27th of January 2008 I entered into a purchase agreement with the liquidator agent of Biofarm Technology [sic] Ltd., for the purchase of the goodwill, assets and the name of Biofarm Technology [sic] Ltd. 23. As Ms Juliana Steuernagel was still the official Director of La Pelle UK Ltd., the purchase agreement was conducted through her as Director of Pelle UK Ltd. [sic], however the negotiations and subsequent agreements, especially in relation to the purchase price were agreed on by myself. 24. During the negotiations with Mr. Ferrari in January 2008 in regard to the Biotec Italia SRL distributor agreement and the transfer of the shares in La Pelle Ltd. [sic], I advised Mr. Ferrari that effectively neither I nor my daughter could operate the business until my daughter completed her studies. 25. I also pointed out that before a final commitment could be reached I needed to secure some form of a formal and binding guarantee that Biotec Italia SRL would be committed to grant us the distribution agreement in the UK. 26. In response to this request, Mr. Ferrari offered to cooperate with us so as to secure that we were granted the distribution agreement and he also agreed to support the company for the first few months in the sales of the products in the market, for an agreed remuneration package to be mutually agreed on. 27. Mr. Ferrari proposed that £150,000 was fair remuneration for the services that he would offer in relation to the above. I agreed and subsequently a Services Agreement was drawn up by my advocate in Cyprus which was signed by both parties, i.e. Mr. Ferrari and myself. 28. In February 2008 Biofarm Ltd., which was the new name given to La Pelle UK Ltd., commenced its operations for the distribution and sales of Biotec Italia SRL products in the UK. 29. During the initial stages of the operation of the company, a former [sic] verbal agreement for the sole distribution of products was in place with Biotec Italia SRL. 30. During my negotiations with Mr. Ferrari, I agreed to shift most of the employees of Biofarm Technology [sic] Ltd. to my company. 31. Ms Steuernagel continued to operate as the company director until her resignation in May 2008, when Mr. Zuccolotto was appointed to take over from her to act on my behalf as director to deal with the financial matters of the company. 32. In accordance to the Service Agreement, Mr. Ferrari monitored the sales and marketing operations of the company. 33. In March 2008, shortly after my agreement with Biotec Italia SRL and Mr. Ferrari, a personal family problem occurred, specifically my husband suffered from complications after a serious stomach surgery that he had undergone some time before, which made it absolutely necessary that my daughter return to Cyprus to help out with the unexpected situation. 34. I should mention that my daughter’s relations with her father had always been very strong and that there was no question about her not returning to Cyprus even if her presence was not necessary. 35. I contacted Mr. Ferrari immediately to explain that my daughter was most probably not going to remain in the UK after the completion of her studies in June 2008. I also informed him that new developments were to be expected due to the unexpected bad turn in my husband’s health and that we had to explore alternatives to the established agreement which was in place. 36. I proposed to Mr. Ferrari to take over the company and its operations but he refused as he was not in a position to take on a fulltime involvement in the business as he needed to spend the bulk of his time for his Italian company. 37. As expected, the company was performing very well and the sales figures for the first two months of trading were showing a steady increase, we decided that it was better to continue operating the business as is until a solution was found regarding the future. 38. Towards the end of March 2008, Mr. Ferrari informed me that a client of Biofarm Ltd., specifically Ms Sabine showed a renewed interest in acquiring the distribution rights for Biotec Italia SRL products in the UK. 39. Mr. Ferrari explained that Ms Sabine had already cooperated with his Company in the past and had expressed her interest to take on the business of distributing Biotec Italia SRL products in the past which, for reasons unknown to me, did not end in an agreement. 40. I [sic] view of this development, I immediately authorised Mr. Ferrari to proceed with negotiations with Ms Sabine for the sale of the business indicating to him that my asking price was approximately £300,000. 41. I formed the above mentioned asking price based on the following criteria: Biofarm Ltd. goodwill, and Biofarm Ltd. stock taking at the time of the business sale, and Biofarm Ltd. liability for £150,000 towards Mr. Ferrari, which was still unpaid, and [sic] 42. I also took into careful consideration the fact that I had also received an offer from another potential buyer based in Cyprus who was intending to expand his Cyprus based business in the UK (an offer which Mr. Ferrari had discouraged me from taking). 43. Based on the above I reached the conclusion that £300,000 was a fair and reasonable price which in fact responded to the actual market value of my company. 44. I am aware that during a meeting which was held at an exhibition in Bologna, Italy towards the beginning of April 2008 between Mr. Ferrari, Ms Sabine and Mr. Piovan (Mr. Ferrari’s business partner in Italy), a formal agreement was reached between the interested parties whereby it was agreed that: the existing distribution agreement of Biofarm Ltd. would be transferred to a new company which take over the UK distribution rights of Biotec Italia Srl products, and the new company would be operated by both Mr. Ferrari and Ms Sabine. 45. On 2nd June 2008 a shareholder meeting was held at the registered office of Biofarm Ltd. during which a special resolution was passed whereby my nominee officially appointed Mr. Ferrari to handle the sale of Biofarm Ltd. and its rights and operations for an agreed minimum sale price of £300,000. 46. During a meeting that I had with Mr. Ferrari towards the end of April 2008 at the company offices we discussed the sale of the company in detail with particular reference to the £150,000 liability that the company had towards Mr. Ferrari. 47. Mr. Ferrari told me that he agreed to take on Ms Sabine as partner in the new company which was to take over the operations of Biofarm Ltd. as she assured him that she had good management skills and that she was fully capable and in a position to monitor the business while he was in Italy. 48. Towards the end of June 2008 the above mentioned sale was finalised and I authorised Mr. Ferrari to issue an invoice towards Biotec UK Ltd. for £150,000 against the sale of the goodwill and stock of Biofarm Ltd. which was the price agreed on between Mr. Ferrari and Ms Sabine, specifically the stock was valued at £70,000 and the balance of £80,000 was for the goodwill. 29. [sic] As I am aware, the stocktaking list was prepared by a member of the staff of Biofarm Ltd. which was then double checked by both Mr. Ferrari and Ms Sabine who mutually agreed that it was a correct description of the stock actually held by my company. 50. Biotec Italia Srl distribution rights were not mentioned in the invoice because I proposed to Mr. Ferrari to strike out his claim on his invoice against Biofarm Ltd. in return for the Biotec Italia SRL distribution rights. 51. In essence I sold the Biofarm Ltd. distribution rights for £150,000 which was paid by Mr. Ferrari by way of relinquishing his claim for this amount against my company. 52 In pursuance of the above, on …[sic] Mr. Ferrari issued a credit note for the agreed amount of £150,000. 53. In consideration of the credit note issued by Mr. Ferrari, a shareholder meeting of Biofarm Ltd. was held at the company offices on 2nd June 2008 during which my nominee released Biotec Italia SRL distribution rights against Mr. Ferrari’s credit note. 54. As I have been informed, towards the end of June 2008 the assets and the employees were transformed to the new company, Biotec UK Ltd., to the new trading address. [There then seems to be passage omitted in the witness statement as served, for it continued, on the next page] invoices of the same value which Mr. Ferrari had paid to Biotec Italia Srl on behalf of Biofarm Ltd. during the Service Agreement. 57. To summarise, I state that the full agreed asking price of £300,000 was paid to Biofarm Ltd. as follows: £150,000 was paid by way of credit note issued by Mr. Ferrari against his invoice regarding the Services Agreement entered into between Mr. Ferrari and Biofarm Ltd., and £130,000 was paid in cash, and £20,000 was paid by Mr. Ferrari by way of writing off his claim against Biofarm Ltd. in regard to invoices of the same value which Mr. Ferrari had paid to Biotec Italia Srl on behalf of Biofarm Ltd. during the Service Agreement period.” 78. Mrs. Papasavva’s witness statement was dated 23 November 2009. She did not feel it necessary to mention in that witness statement that her daughter had married Mr. Ferrari in July 2009. She also did not feel it necessary to explain that, whatever had allegedly been the position of her daughter in the period March to June 2008, she had in fact continued to live in London with her husband and child. Curiously, Mrs. Papasavva made no reference at all in her witness statement to the Second Biofarm Distribution Agreement. Rather she created the impression that the distribution agreement between Italia and Biofarm was made orally. 79. In his first witness statement Mr. Ferrari gave an account broadly to the same effect of that of Mrs. Papasavva in relation to his dealings with her. That account was set out in pieces throughout his witness statement, rather than as a continuous narrative, as in the witness statement of Mrs. Papasavva. However, Mr. Ferrari’s account included:- “15. It has also been alleged that the Claimant purchased the assets and goodwill on or after 2 July 2008 from Biofarm Technologies Limited liquidated on 27 February 2008; a fact known to the Claimant. The purchase was in fact made by Biotec UK Limited (not Claimant) from Biofarm Limited (previously named La Pelle (UK) Limited, now Bioesthetic UK Limited). The assets and goodwill were transferred to Biotec UK Limited directly from Biofarm Limited and should have been entered into the company’s books of account. I cannot confirm whether this was done because the Claimant has excluded me from Biotec UK Limited from the outset and refused to produce any financial statements or accounts or bank statements. La Pelle (UK) (later Biofarm Limited) had previously bought the assets and goodwill in a liquidation sale by Biofarm Technologies Limited in January 2008 but had been trading before it sold its distribution business to Biotec UK. Biotec UK did not purchase the shares of Biofarm Limited, only its viable assets, the trading liabilities remained with the company. 16. After Biofarm Technologies was put into liquidation, I helped La Pelle to secure its exclusive distribution agreement for the UK from Biotec Italia and provided professional services, marketing advice on customers, liaison services with the manufacturer supplier Biotec Italia and business guidance for a fee of £150,000. An invoice was rendered in March 2008 which remained unpaid. When Biofarm Limited sold its business as a going concern to Biotec UK Limited for £300,000, I agreed its debt of £150,000 would be written off against Biotec UK Limited’s liability of £150,000 for the purchase price. The Claimant introduced into Biotec UK Limited a capital injection of £150,000 in cash as agreed to enable the Company to purchase the stocks and goodwill. The aforementioned write off represented my “contribution” to the Company. … 28. It was La Pelle (UK), not the Claimant or Biotec UK Limited that bought the assets and goodwill etc. from AgentCite, a valuer acting for Liquidator Carter Clark, during the winding up/liquidation process sale on 22 January 2008 to raise money for creditors. … The date of invoice preceded the date of liquidation on 27 February 2008 because the liquidation process started during January, and ActionCite was appointed by the liquidator to realise assets. ActionCite’s sale is in the Liquidator’s Statement of 3 March 2009. 29. The Claimant was fully aware of Biofarm Technology [sic] Limited’s sale by AgentCite to La Pelle … and that La Pelle had exclusive distributorship of Biotec Italia products in the UK. The Claimant had ordered and been supplied directly by La Pelle (UK) with Biotec Italia products for her business, The Peach Tree Beauty Clinic. She would not have been able to order the supply of Biotec Italia machines and products from any other UK company other than La Pelle (UK). The Claimant could not therefore have relied on the assertion that she or Biotec UK purchased the business from Biofarm Technologies Limited. She has admitted to a previous course of trading … but failed to mention that the dealings were purchases from Biofarm Technologies Limited and her sub distributorship Biotec Sales Limited before December 2007. 30. … 31 I have no personal connection with La Pelle (UK) Limited except that since June 2006 (and during the purchase of assets and goodwill etc from Biofarm Technology [sic] Limited in 2008) La Pelle was a commercial tenant trading as a beauty clinic from my commercial premises. La Pelle was my tenant and a customer I used to supply. La Pelle UK Ltd. was owned by Ms Juliana Steuernagel. La Pelle shares were transferred from Ms Juliana Steuernagel to Mr. Claudnei Zuccolotto company secretary and Ms Papasavva nominee in January 2008. Ms Papasavva who was a customer of mine in Cyprus, contacted me at the beginning of January 2008 to discuss the possibility of taking over the distribution of Biotec Italia products in the UK. I was confident that La Pelle would perform a good job for Biotec Italia (and it did in the months of trading before selling its business to Biotec UK Limited). I offered to co-operate and granted the distribution agreement. Moreover I supported the company in the sales of its products for the first few months in return for a one off payment of £150000. A service agreement was prepared by Ms Papasavva solicitor in Cyprus and was signed by me on 1 st February 2008. The exclusive distribution agreement between La Pelle (Biofarm Limited) and Biotec Italia started in about February 2008 and was later formalised on 20 May 2008. La Pelle had been working as the exclusive distributor based on a verbal agreement following commencement of the liquidation process of Biofarm Technologies Limited, to ensure continuity of supply for the UK. During this period, Biotec Italia did not supply through any other business or company apart from La Pelle from February until July 2008.” 80. The tale of the involvement of Biofarm is a strange one. It is difficult to discern any commercial sense in many of the steps which Mrs. Papasavva and Mr. Ferrari contended were taken. For example, it is not obvious why, if she was interested in acquiring for her daughter a distributorship in the United Kingdom of the Products, the vehicle by which she decided to undertake that activity should be a (presumably former – for if it were current the business would still seem to need to be carried on by Biofarm) tenant of premises belonging to Mr. Ferrari which carried on a beauty clinic therein. There seems to be no logic in Mrs. Papasavvva acquiring beneficially, by transfer to her alleged nominee Mr. Zuccolotto, the single issued share in Biofarm, along with an alleged existing liability to pay Mr. Ferrari £15,000, rather than acquiring a company “off the shelf” for a few hundred pounds. Mrs. Papasavva was asked about this in cross-examination. Her answer was that she was so wealthy that the liability to pay £15,000 was of no significance. I do not accept that. The transaction was very odd, as presented. Neither Mr. Ferrari nor Mrs. Papasavva gave any explanation of who approached Miss Steuernagel or why she was willing to transfer her one share in Biofarm. No sensible explanation was given by Mrs. Papasavva of why she operated Biofarm, as she contended that she did, with Miss Steuernagel continuing as sole director until May 2008. Mrs. Papasavva told me that she had the single share in Biofarm transferred from Miss Steuernagel to Mr. Zuccolotto because she knew Mr. Zuccolotto and trusted him. I doubt that, but even if it were so, as Mrs. Papasavva, on the face of things, permitted Miss Steuernagel to be the sole director of Biofarm, and thus trusted her to act in the interests of Mrs. Papasavva, there is no obvious reason why she should not have trusted her enough to permit her to continue to hold the one issued share in Biofarm for Mrs. Papasavva. However, no documentary evidence was produced which supported the allegation that the sole issued share in Biofarm ever had been transferred by Miss Steuernagel to anyone, at any rate prior to about the beginning of December 2008. There was, on the other hand, documentary evidence to support the contentions that Miss Steuernagel had ceased to be the sole director of Biofarm, and that Mr. Zuccolotto had become the sole director, in the course of 2008. The alleged role of Mr. Ferrari in running the business of Biofarm after the alleged beneficial acquisition of the issued share in Biofarm by Mrs. Papasavva is peculiar. On the face of things, Mrs. Papasavva wanted her daughter to be able, on completion of her studies in about June 2008, to undertake, through Biofarm, the distribution of the Products. What one might, therefore, have expected, was that she would seek to negotiate with Italia a distributorship to commence in about June 2008. What was not obviously necessary, at least not without Italia seeking to make it a requirement, was a distributorship commencing at an earlier date. Again, unless intended as in the nature of a bribe, there was no obvious reason for Mrs. Papasavva to agree to pay Mr. Ferrari a lump sum of £150,000 for his help in obtaining a distributorship agreement with Italia and for various, rather vaguely defined, services to be provided after the grant of a distributorship. The arrangements said to have been made with Mr. Ferrari did have the effect, however, that actually he brought nothing into the joint venture with Mrs. Sabine. He contended that his contribution was £150,000, the amount by which the price allegedly required by Biofarm for the sale of its assets and goodwill to Biotec UK was reduced by the credit note which he said he issued to cancel his entitlement to be paid that sum. However, the calculation of the price required by Biofarm, £300,000, included that sum in the first place. The actual supposed assets and goodwill of Biofarm Biotec UK paid for out of the cash contribution of Mrs. Sabine. 81. 82. In her oral evidence Mrs. Papasavva asserted that she had used Mr. Ferrari to negotiate, acting on behalf of Biofarm, the sale of the assets and goodwill of Biofarm to Biotec UK, the joint venture in which he was an equal partner. That was, to say the least, an unusual task for him to undertake. 83. Mrs. Papasavva sought to explain, in cross-examination, the execution of the Second Biofarm Distribution Agreement, after her decision not to proceed with the distributorship of the Products in the United Kingdom, as a step taken because she had not yet agreed a sale of the assets and goodwill of Biofarm. That any sane or sensible person should have entered into the ostensibly onerous obligations placed on Biofarm by the Second Biofarm Distribution Agreement in those circumstances defies belief. The effect of clause 10(b) of that agreement, read with the Annex, was that, by entering into it, Biofarm undertook an obligation to purchase 160 items of the 84. 85. 86. Equipment, at a cost of €708,700, plus a minimum of €250,000 worth of skin care products. A certain amount of documentation was produced in evidence in support of the accounts of Mrs. Papasavva and Mr. Ferrari concerning Biofarm and the arrangements between them in relation to Biofarm. The first such document was an invoice dated 22 January 2008 raised by AgentCite Ltd. in the sum of £7,500 plus Value Added Tax. It was addressed to Juliana Steuernagel at La Pelle UK Ltd. The narrative on the invoice said:- “Re: Biofarm Technologies Limited Purchase of all assets, debtor book, name, website, goodwill and trading style of the above named company as agreed.” Next in ostensible chronological order was a peculiar agreement (“the Services Agreement”) entitled Services Agreement and dated 4th February 2008. On its face it was an agreement made between Mrs. Papasavva and Mr. Ferrari. Mrs. Papasavva was called in the Services Agreement the “Buyer” and Mr. Ferrari was called the “Service Provider”. It had the look of having been prepared by a lawyer, or at least adapted from a draft prepared by a lawyer. However, whoever prepared it was evidently not someone who understood the constitutional and juridical circumstances of the United Kingdom, for Article 26 provided that the governing law of the Services Agreement should be the “Laws in force in the United Kingdom” and that the parties were to submit to “the Jurisdiction of the United Kingdom Courts”. On the face of the Services Agreement the signature of Mrs. Papasavva was witnessed by Mr. Pavlos Christodoulides, an advocate in Cyprus. The evidence of Mrs. Papasavva was that Mr. Christodoulides was her lawyer in Cyprus and it had been he who had drafted the Services Agreement. Perhaps that is so. 87. There were recitals to the Services Agreement:- “(A) The Buyer wishes to secure an exclusive distributor agreement with Biotec Italia Srl and La Pelle (UK) Ltd. (company no. 05837658) for the sale of Biotec Italia Srl’s products on exclusive terms in the territory of United Kingdom (herein after referred to as the “Territory”) for a minimum period of 3 (three) years with the same terms of sale as per the prior existing Distribution Agreement with the previous UK distributor, Biofarm Technology [sic] Ltd., and (B) The Buyer needs assistance to develop the sales of La Pelle U. K. Ltd., assistance meaning the provision of services relating to training and managing sales executives and engineers as well as help with the marketing of the company’s brands in the UK territory. (C) The Parties acknowledge that the Service Provider has extensive experience and know how on the subject matter, and (D) The Parties acknowledge that the Service Provider will have to invest substantial effort, time and money so as to assist in the execution of the subject matter of this agreement in the Territory, and (E) In view of the above, the Parties hereto have agreed to enter into this Service Agreement for the territory of United Kingdom.” 88. Those recitals appear to be unnecessary, unless intended as an apparent justification to someone not a party to the Services Agreement for the making of such an unusual contract. The core of the agreement, on its face, was the first five Articles. The remainder was essentially padding with provisions of types of clause common to many commercial agreements. The first five Articles were in these terms:- “Article 1: Date of Commencement: This Agreement shall be effective as at February 18th 2008, irrespective of the date of signing of this Agreement and shall be binding on both parties as at that date provided that the conditions for signing are met by both Parties. Article 2: Date of Completion: The Service Provider shall cease to provide the Services [an expression not, as such, defined in the Services Agreement] by August 18th 2008 (herein after referred to as the “Completion Date”). Article 3: Key Date: The Service Provider agrees to complete the execution of the set up of the Distribution Agreement between the buyer [sic] and Biotec Italia Srl and La Pelle (UK) Ltd. on or before June 1st 2008. Article 4: Place of Provision of Services: The Service Provider shall provide the Services herein above mentioned at the following sites: 153B Highgate Road, London NW5 1LJ and 10 Balmes Road, London N1. Article 5: Remuneration: In consideration for the work done by the Service Provider in accordance to the provisions of this Agreement on behalf of the Buyer the Buyer will remunerate the Service Provider with the total amount of STG£150.000 (One hundred and fifty thousand Pounds Sterling) which will be paid as follows: 5.1 The Service Provider will issue an invoice to the Buyer which shall be payable within 60 days of receipt from the Service Provider. 5.2 The Buyer will execute payment of the Service Providers [sic] invoice by way of a wire transfer into the account of the Service Provider at the NatWest Bank, bearing Account 13994107 No. and Sort Code 60-12-02.” 89. Thus, on the face of the Services Agreement, Mr. Ferrari was to provide rather vaguely defined services, in particular “the execution of the set up of the Distribution Agreement between the buyer and Biotec Italia Srl and La Pelle (UK) Ltd.”, over a period not starting until 18 February 2008, but not continuing beyond 18 August 2008, at two addresses in London, in return for which he was to be paid by Mrs. Papasavva a lump sum of £150,000 within 60 days of the date of issue of an invoice, apparently whenever the invoice might be issued. That is to say, on the face of the Services Agreement it seemed that Mr. Ferrari could issue an invoice on 18 February 2008, due for payment no later than 18 April 2008, when he may by then actually have done nothing, and in particular not have achieved the key date contemplated in Article 3. 90. That that analysis is not fanciful is demonstrated by what Mr. Ferrari and Mrs. Papasavva asserted in their evidence actually happened, that Mr. Ferrari issued an invoice dated 2 March 2008. That invoice was itself rather extraordinary, if the Services Agreement was a genuine document intended accurately to embody a real agreement between Mrs. Papasavva and Mr. Ferrari. The invoice made no reference to the Services Agreement. It was not addressed to Mrs. Papasavva, but to Biofarm. The narrative on the invoice was:- “To my professional charge by way of agreed fixed fee to provide professional services and guidance to develop Biofarm Ltd. distribution business in the UK. To help to secure the exclusive distribution agreement for the UK from Biotec Italia srl to Biofarm Ltd. for the period of three years with the following favourable terms:  Equipments and products price: 30% below usual Distribution Ship price  Payment term for equipments and products purchased – 30/60/90 days from the invoice date Total Due £150,000.00 Payment Terms 90 days from the date of this Invoice” 91. 92. 93. In the context of the Services Agreement, therefore, if it was what it purported to be, the invoice was issued to the wrong party and specified the wrong period for settlement. It also made reference to supposed benefits of a distribution agreement which were not foreshadowed as required in the Services Agreement. That reference implicitly indicated that such a distribution agreement had been made by the date of the invoice. Both Mrs. Papasavva and Mr. Ferrari were cross-examined as to the discrepancies between the provision in the Services Agreement for Mrs. Papasavva to pay Mr. Ferrari within 60 days of invoice and the terms of the invoice, requiring Biofarm to pay within 90 days. Each seemed to think that the discrepancy was of no moment, but neither appeared to have any real explanation for the discrepancy. Mrs. Papasavva seemed to think that there was no real difference between herself and Biofarm for present purposes, and she was happy to be given 90 days to pay, rather than 60, if that was satisfactory to Mr. Ferrari. Mr. Ferrari professed to believe that Mrs. Papasavva would pay him if Biofarm did not. Not the least of the peculiarities of the Services Agreement was that, while it envisaged that the signature of Mrs. Papasavva might be witnessed by anyone, although on the face of it that signature was actually witnessed by Mr. Christodoulides, the execution box was typed to require that the signature of Mr. Ferrari be witnessed by Miss Eleana Papasavva, the daughter of Mrs. Papasavva. The purpose behind the specification of who should witness the signature of Mr. Ferrari was obscure. That requirement had the curious consequence that, on the face of the document, Miss Papasavva did not witness the signature of Mr. Ferrari at all. Mr. Ferrari, on the face of the execution page of the Services Agreement, signed on 20 February 2008, while the signature of Miss Papasavva, as apparent witness to that signature, was dated 28 February 2008. 94. A copy of a document described as “Biofarm Limited Minutes of the Shareholder Meeting” dated 2 June 2008 was put in evidence. The document recorded that only one person, Mr. Zuccolotto, was present at the meeting, and that the following resolutions were passed at it:- “Agreed Sale Price of Biofarm Limited’s Assets 1. It was resolved that the company accepted the sale price offered by Biotec UK Limited of £300,000 which includes the stock, goodwill and the distribution right agreement between Biofarm Limited and Biotec Italia srl. 2. It was resolved that the agreed sale price was split into two categories: a) The stock and goodwill of Biofarm Limited was valued at £150,000. b) The distribution agreement title agreed between Biofarm Limited and Biotec Italia srl was valued at £150,000. c) It was resolved that only £150,000 will be invoiced to Biotec UK Ltd. while the remaining £150,000 will be settled against the issue of a credit note from Mr. Ferrari for the value of £150,000 for his invoices dated 2nd March 2008.” 95. 96. 97. 98. 99. The evidence of Mr. Ferrari was that he negotiated and agreed the sum of £300,000 and the terms of sale on behalf of Biotec UK. No copy of any credit note from Mr. Ferrari in favour of Biofarm or Mrs. Papasavva was put in evidence, notwithstanding the reference to it in the witness statement of Mrs. Papasavva. An invoice dated 1 July 2008 was produced by Biofarm addressed to Biotec UK in the sum of £150,000. The invoice was expressed to relate to:- “Company Stock and Assets Biofarm Ltd. Goodwill £70,000.00 £80,000.00 Total £150,000.00” That invoice was settled using money contributed by Mrs. Sabine to the joint venture with Mr. Ferrari. No sensible explanation was offered by any witness called on behalf of Mr. Ferrari as to why it was necessary or appropriate for the benefit of the Second Biofarm Distribution Agreement to be assigned to Biotec UK, rather than, if it were a genuine agreement, being discharged by agreement and replaced by a new agreement between Italia and Biotec UK. Mr. Challenger tried hard to pin Mr. Piovan down on this point, but ultimately without success. 100. No document evidencing any actual assignment of the benefit of the Second Biofarm Distribution Agreement to Biotec UK was put in evidence during the trial. Mr. Piovan accepted in cross-examination that there was no such document. 101. I have already mentioned the incongruous definition of the word “Year” in the copy of the version of the Technologies Distribution Agreement attached to the Defence. Before embarking on the explanation for the inclusion of that definition in the copy of the version of the Technologies Distribution Agreement attached to the Defence, it is material to record that, although that copy was, save as to the identification of the Distributor, and save as to the Annex, in terms identical to those of the Second Biofarm Distribution Agreement, the layout was different. In particular, while the definition of the word “Year” appeared at the top of the third page of the copy of the version of the Technologies Distribution Agreement attached to the Defence, that definition appeared beneath a definition of the words “Trade Marks” at the top of page 3 of the copy of the Second Biofarm Distribution Agreement attached to the Defence. The last line on the third page of the copy of the version of the Technologies Distribution Agreement attached to the Defence was the first line of clause 4.1(b), whilst the equivalent on the copy of the Second Biofarm Distribution Agreement was the first line of clause 4.1. Moreover, on each page of the copy of the version of the Technologies Distribution Agreement attached to the Defence appeared the initials of Mr. Piovan and those of Mr. Ferrari, while each page of the Second Biofarm Distribution Agreement bore the initials of Mr. Piovan and those of Mr. Zuccolotto. In other words, it was obvious that page 3 of the copy of the version of the Technologies Distribution Agreement attached to the Defence had not intruded from the Second Biofarm Distribution Agreement in error, because the layout and initials of the respective pages 3 were different. 102. Mr. Challenger taxed both Mr. Piovan and Mr. Ferrari with where page 3 of the copy of the version of the Technologies Distribution Agreement had come from, if the Technologies Distribution Agreement was what it purported to be, an agreement made between Italia and Technologies in February 2005. Mr. Piovan, when he came to give evidence, produced what he said was the original of the Technologies Distribution Agreement. There seemed to be some difference between him and Mr. Ferrari as to whether that agreement had existed in one original or in two. Mr. Piovan appeared to think that it had existed in two, whilst Mr. Ferrari considered that there had only been one original, which was why the original had to come from Italy with Mr. Piovan and one could not be produced in England separately from that brought by Mr. Piovan. What Mr. Piovan produced as the original had the date “1 February 2005” in place of the date “20 May 2008” in the definition of the word “Year”. However, that gave rise to the question where did the page 3 which had been included in the copy of the version of the Technologies Distribution Agreement attached to the Defence come from. The answer of both Mr. Piovan and Mr. Ferrari was that it had come from a predecessor of the Second Biofarm Distribution Agreement, the First Biofarm Distribution Agreement. 103. The story was that in the first instance the First Biofarm Distribution Agreement, intended as a written agreement between Italia and Biofarm, had been signed, and each page initialled, by Mr. Piovan and Mr. Ferrari. An original of the First Biofarm Distribution Agreement had then been sent, Mr. Piovan contended at one point in his evidence, to Mrs. Papasavva. A copy of a covering letter dated 26 May 2008 written by Mr. Piovan and addressed to Mrs. Papasavva was produced. It read:- “Included you will find the Distribution Agreement for Biofarm Ltd. signed by me and Mr. Ferrari. Please feel free to contact me in case of any queries.” 104. Mrs. Papasavva’s evidence, however, was to different effect. She told me that the signed original of the First Biofarm Distribution Agreement had been sent not to her, but to her lawyer, although why this was done was not explained. At a different point in his cross-examination from that mentioned in the preceding paragraph Mr. Piovan subscribed to the view that the original of the First Biofarm Distribution Agreement had been sent to Mrs. Papasavva’s lawyer. That was also the position of Mr. Ferrari in his cross-examination. However, Mr. Piovan told me at this second point in his cross- examination that the original of the First Biofarm Distribution Agreement had been sent to Mrs. Papasavva’s lawyer by Mr. Ferrari from London, whither it had been sent for signature by Mr. Ferrari, whilst Mr. Ferrari said that it had been sent direct from Italy, his evidence being that both he and Mr. Piovan had signed in Italy on the same occasion. 105. Mrs. Papasavva told me that she had not seen or considered a draft of the First Biofarm Distribution Agreement before it had been signed and the signed version sent to her lawyer. 106. One might have thought that either Mr. Piovan and Mr. Ferrari considered that Mr. Ferrari was dealing with the distribution agreement for Biofarm, in which case there was no need to send an original to Mrs. Papasavva or to her lawyer, or it was obvious that Mr. Ferrari should not have been signing for Biofarm. At all events, according to Mr. Piovan, Mr. Ferrari and Mrs. Papasavva, the First Biofarm Distribution Agreement was shown to Mrs. Papasavva’s lawyer, Mr. Christodoulides. He, according to them all, objected that the agreement should not have been signed by Mr. Ferrari, but by the nominee director of Biofarm then in place, Mr. Zuccolotto. Thus the First Biofarm Distribution Agreement was set to one side, and the agreement was re-executed as the Second Biofarm Distribution Agreement by Mr. Piovan and Mr. Zuccolotto. 107. So far, so good. However, the issues then arose what had happened to the originals of the First Biofarm Distribution Agreement, and how had the third page of an original of that agreement come to be copied and included in the copy of the version of the Technologies Distribution Agreement attached to the Defence. Here matters became even murkier. Mrs. Papasavva considered that, as the First Biofarm Distribution Agreement was of no value, her lawyer probably destroyed it. Certainly Mr. Piovan, in his cross-examination, said that he had told Mrs. Papasavva’s lawyer by telephone to destroy it. There was at least logic in that assertion. However, Mrs. Papasavva could not recall what had actually happened to the original of the First Biofarm Distribution Agreement sent to her lawyer, and in particular she could not recall whether Mr. Christodoulides had sent it to her. Mr. Piovan felt, when first asked about it, that the First Biofarm Distribution Agreement had probably been destroyed. Later in his oral evidence he said that he thought that Italia might have kept the useless First Biofarm Distribution Agreement and that he might be able to locate it. Mirabile dictu, so it came to pass. What was said to be the original, or an original, of the First Biofarm Distribution Agreement was sent from Italy during the course of the trial. On its face it was a distribution agreement dated 20 May 2008 made between Italia and Biofarm. Page 3 of that document appeared to be like page 3 of the copy of the version of the Technologies Distribution Agreement attached to the Defence. However, the remainder of the First Biofarm Distribution Agreement was not identical, as one would have expected, given the explanations which I have recorded of Mr. Piovan, Mr. Ferrari and Mrs. Papasavva, to the Second Biofarm Distribution Agreement. In particular, clause 6.1(b) of the Second Biofarm Distribution Agreement was rather strangely called clause 6.1(c) in the First Biofarm Distribution Agreement, although there was not in fact a clause 6.1(b) in the First Biofarm Distribution Agreement, nor a clause 6.1(c) in the Second Biofarm Distribution Agreement. In the First Biofarm Distribution Agreement there was also a wholly unnecessary gap between clause 6.1(c) and clause 6.2 which did not appear between clause 6.1(b) and clause 6.2 in the Second Biofarm Distribution Agreement. In the Second Biofarm Distribution Agreement the paragraph following paragraph (e) in clause 21.5 was labelled (c). That was an obvious error, but it was not repeated in clause 21.5 of the First Biofarm Distribution Agreement, where paragraph (f) followed paragraph (e). 108. However, if one assumed that the First Biofarm Distribution Agreement was what it purported to be, there was still the question how did page 3 of that document come to be included in the copy of the version of the Technologies Distribution Agreement attached to the Defence in place of the correct page 3. Here again there was a difference between Mr. Piovan’s account and that of Mr. Ferrari. Mr. Piovan said that he thought that the error had been made during the process of photocopying the Technologies Distribution Agreement by a secretary at the offices of Italia in Italy. Mr. Ferrari told me that he thought that it was he who had copied the wrong page, in the course of scanning the Technologies Distribution Agreement to enable him to send it to his solicitor in England in connection with this action. What neither Mr. Piovan nor Mr. Ferrari really grappled with was explaining why anyone would have been looking at a disassembled copy of the First Biofarm Distribution Agreement at the same time as a disassembled copy of the Technologies Distribution Agreement, such that page 3 of one could have become confused with page 3 of the other. Each of the professed originals of the Technologies Distribution Agreement and the First Biofarm Distribution Agreement produced at the trial had all of the pages stapled together, although it was obvious from inspection that each had been unstapled more than once before production in court. Mr. Ferrari contended in cross-examination that he had requested a secretary in the offices of Italia in Italy to copy both the Technologies Distribution Agreement and the Second Biofarm Distribution Agreement for him, and that she had done so, as he thought, and put the copies in an envelope. As he later supposed, the secretary had copied the Technologies Distribution Agreement and the First, rather than the Second, Biofarm Distribution Agreement. He had not noticed this, he said, when scanning the documents for his solicitor. It was at this point, he suggested, that the wrong page 3 intruded into the Technologies Distribution Agreement. However, this account did not explain how the apparently correct copy of the Second Biofarm Distribution Agreement, rather than a copy of the First Biofarm Distribution Agreement with a misplaced page 3, came to be attached to the Defence. If Mr. Ferrari had noticed the error, as he described it, before the Defence was served, presumably it would have been corrected before service of the Defence. It was a mystery why, if the explanation was as Mr. Ferrari would have it, that was not explained in response to the Reply served on 2 July 2009, in which, at paragraph 5(1), it was pleaded in terms that the Technologies Distribution Agreement “is a false document”. 109. During the course of the trial the parties agreed that the alleged originals of the Technologies Distribution Agreement and the First Biofarm Distribution Agreement should be subjected to forensic examination by a document examiner. Although it was at one stage envisaged that each party might instruct a document examiner, in the event only Mrs. Sabine did so. She instructed Mr. Robert Radley. 110. Mr. Radley undertook, amongst other things, ink comparison and ESDA tests on the documents presented to him. He prepared a report dated 5 February 2010, of which a copy was put in evidence. In his report he referred to the alleged original of the Technologies Distribution Agreement as “document 2” and to the alleged original of the First Biofarm Distribution Agreement as “document 3”. He set out his conclusions as follows:- “49. Answer (i) – Page 3 in document 3 was not prepared on the same printer and at the same time as the rest of document 3. It is not possible to specifically identify the points in time in which either the main body of document 3 or current page 3 of that document was prepared. 50. Answer (ii) – I found no evidence to suggest that page 3 in document 3 was prepared at a different point in time to the main bulk of pages in document 2 assuming that these pages are produced on the same printer (and there is no evidence to the contrary). However, on current evidence, it is not possible to indicate from the printing precisely when these pages were printed. However, clearly page 3 of document 3 was bound in document 2 at the time the initials were appended. Again it is not possible to determine when the initials were appended relative to the printing of the main document. 51. Answer (iii) – From the fact that the ESDA impressions of initials transferred through from page to page, the evidence indicates that an absence of writing impressions from initials from pages 1 and 2 onto 3 (yet the impression of the initials from page 3 appear on page 4) the evidence is consistent with pages 1 and 2 being signed resting on top of page 4 (there being no other unidentified page 3 initials) and then page 3 of document 3 was then inserted and initialled whilst resting on page 4. 52. Answer (iv) – As page 4 of document 2 does not bear the initials of page 3 of document 2, page 3 was not signed in sequence in document 2 at the time when the other initials appear to have been made.” 111. The effect of the views of Mr. Radley was thus that page 3 of the purported original of the Technologies Distribution Agreement (in which a “Year” was defined by reference to the date 1 February 2005 rather than by reference to the date 20 May 2008) was not the original page 3 of that document; the original page 3 of the Technologies Distribution Agreement was what purported to be page 3 of the original of the First Biofarm Distribution Agreement; and page 3 of the purported original of the First Biofarm Distribution Agreement was not the original page 3 of that document, but a later insertion. 112. Both Mr. Piovan and Mr. Ferrari in cross-examination disputed the conclusions of Mr. Radley, without being able to explain, if his conclusions were correct, how they could be reconciled with their evidence. Mr. Ferrari bravely asserted that page 3 of the original Technologies Distribution Agreement was probably replaced because it included, in error, clause 3.3(b). 113. The other principal matter upon which Mr. Challenger relied in support of his submission that the evidence of Mr. Ferrari should not be believed concerned the Sage Accounts. 114. Mr. Ferrari contended, in cross-examination, that the Sage Accounts were produced by him not to show the profitability of Technologies, but to show the turnover. Moreover, he said that the turnover recorded in the Sage Accounts was that over an 18 month period, the period between the last accounts of Technologies filed at Companies House, and 31 December 2007. 115. Several times in the course of his evidence Mr. Ferrari emphasised that the Sage Accounts had been provided to Mr. Traviss under cover of an e-mail, that dated 16 April 2008, which explained that those accounts “may not be 100% accurate”. That form of words, as it seems to me, indicated that the accounts were believed to be accurate, but that there was a possibility that they might include minor errors. Mr. Ferrari seemed to consider that the effect of the words was that he was saying that the Sage Accounts “are not accurate”. 116. Mr. Ferrari did not contend that the Sage Accounts, although on their face relating to a company, Biofarm International Ltd., which did not exist during the period to which he said the accounts related, were not intended by him to be understood as relating to Technologies. 117. 118. The last accounts of Technologies filed at Companies House were indeed those for the year ending 30 June 2006. Mr. Ferrari pointed out that it had been open to Mrs. Sabine or Mr. Traviss to inspect the accounts filed at Companies House. That sword was also drawn on behalf of Mr. Ferrari by Mrs. Papasavva at one point in her cross- examination. Plainly it is correct. However, the evidence of Mrs. Sabine, and that of Mr. Traviss, was that they had not in fact looked at the filed accounts. It may be thought that that was unwise. However, it is not, in English law, the role of the innocent and ill-advised to be fleeced with impunity by the unscrupulous, so if, in truth, Mrs. Sabine relied on the Sage Accounts as indicating the level of profit likely to be achieved through a distributorship of the Products, she was entitled to do so, and if the indications given in the Sage Accounts as to turnover and profitability were incorrect, it is immaterial that, had she been more prudent, she would not have been misled. The accounts of Technologies for the year ending 30 June 2006 included, in the usual way, the previous year’s figures for comparative purposes. The balance sheet as at 30 June 2006 recorded net assets of £125,158. The profit and loss account showed a turnover of £813,732, cost of sales of £558,826, and thus gross profit of £254,906. However, distribution costs and administrative expenses amounted to £211,760, so that the operating profit was £43,625. In the year ending 30 June 2005 turnover of £588,068 produced a gross profit of £280,944. Distribution and administrative costs reduced that figure to an operating profit of £45,432. The increase in turnover in the year ending 30 June 2006 effectively produced no benefit for Technologies because of the increase in cost of sales. Basically it looks as if Technologies increased its turnover by putting up its sale prices to cover increased cost of supplies from Italia. 119. Mr. Ferrari emphasised in his evidence that Mrs. Sabine and Mr. Traviss knew, by 4 April 2008, that Technologies had been placed in liquidation. They agreed that that was so, but said that Mr. Ferrari attributed that circumstance not to some underlying problem in selling the Products, but to a falling out with a previous partner. 120. Although no accounts for the year ending 30 June 2007 were produced, it is possible to construct a partial profit and loss account from information contained in Value Added Tax returns submitted on behalf of Technologies which was put in evidence. In the year in question the total value of sales declared to HM Revenue and Customs amounted to £679,536. The total value of purchases amounted to £543,750. Broadly, therefore, the gross profit was of the order of £135,786. That figure was short, by £75.974, of the distribution and administrative costs incurred by Technologies in the year ending 30 June 2006. It thus seems likely that Technologies made a loss in the year ending 30 June 2007, probably of the order of £75,000. 121. Value Added Tax returns showed a total value of sales in the period 1 July 2007 to 31 December 2007 of £204,464, and a total value of purchases of £105,399. The gross profit in that period was thus of the order of £99,065. That was not enough to sustain distribution and administrative costs at the rate incurred in the year ending 30 June 2006. If distribution and administrative costs had been incurred at that rate in the period 1 July 2007 to 31 December 2007, there would have been a loss on trading during the period of the order of £6,815. 122. 123. 124. The Statement of Affairs of Technologies signed by Mr. Ferrari on 27 February 2008 estimated the deficiency as regards members at £91,116.42, which is entirely consistent with the picture which can be reconstructed from the Value Added Tax returns. The figures of sales which can be derived from the Value Added Tax returns are not consistent with the assertion of Mr. Ferrari that the figure stated as product sales in the Sage Accounts in the column entitled “Year to Date” was intended to represent the turnover since 1 July 2006. Had that been intended, the correct figure would have been £884,000. The figure set out, £812,052.71, was in fact very close to the turnover set out in the filed profit and loss account for the period ending 30 June 2006, which was £813,723. If one had only the filed accounts for the year ending 30 June 2006 and the Sage Accounts, and one interpreted the Sage Accounts as relating to the period 1 July 2007 to 31 December 2007, one would have the impression that the business of Technologies was thriving. That the Sage Accounts were not intended, fairly and honestly, to set out the position of Technologies over the 18 month period between 1 July 2006 and 31 December 2007 is further demonstrated by comparing the cost of purchases declared in the Sage Accounts, £408,661.36, with the total value of purchases recorded in the Value Added Tax returns in that period, £649,149. In the light of all of the evidence I regret to have to say that I am entirely satisfied that each of Mr. Ferrari, Mr. Piovan and Mrs. Papasavva has brought the oath into disrepute by his or her evidence in this action with a degree of enthusiasm which is seldom seen in commercial litigation. Essentially I do not accept a single word which any of them said which was contested by the evidence of Mrs. Sabine, Mr. Traviss, or Mr. Peter Gardiner, who also gave evidence on behalf of Mrs. Sabine. I was impressed by the evidence, if not the commercial acuity, of Mrs. Sabine and Mr. Traviss. I was impressed also by Mr. Gardiner, although his role in relation to the central issues in this action was rather peripheral. Findings 125. Consequently I find that what Mrs. Sabine and Mr. Traviss told me Mr. Ferrari had said at the meeting on 4 April 2008 was indeed said. 126. I reject the evidence of Mr. Ferrari and Mr. Piovan that any significant conversation took place on or about 10 April 2008 during the course of the visit of Mrs. Sabine to Italy. In particular I reject the suggestion that she was on that occasion given a copy of the Technologies Distribution Agreement or any list of prices. I find that, while, no doubt, what purported to be the original of the Technologies Distribution Agreement did bear the signatures and initials of both Mr. Ferrari and Mr. Piovan, the document was not produced on or about the date which it bore, 1 February 2005, or for the purpose at which it was ostensibly directed, to regulate relations between Italia and Technologies. Rather, I find, it was produced in the context of this action for the purpose of seeking to mislead the court. In common parlance, it was a forgery. I 127. 128. should have reached that conclusion quite apart from the evidence of Mr. Radley, for the reasons which I have explained, but my conclusion was plainly supported by the views of Mr. Radley. I find that in fact, as is unsurprising, given that Mr. Ferrari and Mr. Piovan were the principal actors behind Italia and able, between them, to control it, there was no written agreement between Italia and Technologies in relation to the distribution of the Products in the United Kingdom. There was simply an informal understanding that Italia would supply to Mr. Ferrari, or any vehicle through which he chose to operate, the Products at prices to be agreed between Mr. Ferrari and Mr. Piovan from time to time. Paradoxically, that means that the first of the representations pleaded in paragraph 6 of the Particulars of Claim was true, Mr. Ferrari was the owner of the sole concession for supply and maintenance of Biotec machines within the United Kingdom and for supply of all dedicated products consumed during the operation of those machines. The second pleaded representation, that Mr. Ferrari operated the concession through Biofarm, was also true. I reject the suggestion that either the First Biofarm Distribution Agreement or the Second Biofarm Distribution Agreement was what it purported to be. While, no doubt, the signatures and initials of Mr. Piovan and Mr. Ferrari on the First Biofarm Distribution Agreement are, indeed, the genuine signatures and initials of those gentlemen, the evidence suggests strongly that the document was actually brought into existence during the course of the trial, over the weekend of 30 – 31 January 2010. The Second Biofarm Distribution Agreement, which had no obvious commercial purpose, was produced, I am entirely satisfied, with a view to misleading the court at trial. Biofarm, I find, was indeed the creature of Mr. Ferrari. He was able, if there was indeed a transfer of the share, to procure Miss Steuernagel to go through the motions of transferring the single issued share in Biofarm to Mr. Zuccolotto. Mr. Ferrari was certainly able in due course to cause Miss Steuernagel resign as sole director of Biofarm in favour of Mr. Zuccolotto. However, the reality, as it seems to me, is that, notwithstanding these apparent changes, it was Mr. Ferrari who remained the power behind Biofarm. I do not accept that Mrs. Papasavva ever acquired, or intended to acquire, control of Biofarm. Her evidence to the contrary was simply designed to support the defence of Mr. Ferrari in this action. Rather oddly, given the significance attributed to it at the trial, the Services Agreement was only disclosed on behalf of Mr. Ferrari under cover of a letter from his solicitors dated 18 November 2009, notwithstanding that a copy of Mr. Ferrari’s purported invoice addressed to Biofarm in the sum of £150,000 had been attached to the Defence when served on 29 May 2009. I do not need to speculate as to when or in what precise circumstances the Services Agreement was produced. It is enough that I am completely satisfied that it is not what it purported to be, a genuine agreement made in or about February 2008. 129. The third and fourth pleaded representations were also true, that Mr. Ferrari indirectly carried on the business of manufacture of the Products by virtue of his interest in Italia, and that he controlled Biofarm and was willing to make Biotec UK available as the vehicle for a joint venture between himself and Mrs. Sabine. 130. What was manifestly untrue was the representation which I find that Mr. Ferrari made, not least by the provision of the Sage Accounts, that the level of business transacted by him operating as the sole distributor of the Products in the United Kingdom was such that each of Mrs. Sabine and he would be able to draw £60,000 per annum from Biotec UK in its first year of operation. 131. 132. 133. The Sage Accounts, I find, were created deliberately by Mr. Ferrari to show a false impression as to the profitability of the business of the distributorship of the Products in the United Kingdom. It was also untrue that the value of the assets which Mr. Ferrari proposed to transfer to Biotec UK was £300,000. Mr. Ferrari’s pleaded case was that such discussion as there was about the value of what he was bringing to the joint venture being £300,000 amounted to no more than an expression of opinion on his part as to value. I do not accept that that is an answer to the point. Any expression of opinion involves the implicit assertion that the opinion expressed is in fact that of the person expressing it. I am completely satisfied that Mr. Ferrari knew full well that he did not intend to bring to the party anything which was sensibly capable of being valued at £300,000. On his own evidence, and that of Mrs. Papasavva, half of that £300,000 was represented by his purported entitlement to be paid £150,000 by Mrs. Papasavva or Biofarm. There was never any such entitlement. I find that the alleged entitlement was notionally created simply so that it could equally notionally be forgone, but be presented to Mrs. Sabine as something of value which Biotec UK was obtaining as the contribution of Mr. Ferrari. In fact the whole object of the exercise was to enable Mr. Ferrari to avoid contributing anything to the joint venture. The representation as to the drawings which could be achieved from the distributorship of the Products, the representations in the Sage Accounts and the representation as to the value of what Mr. Ferrari would bring to Biotec UK are, as it seems to me, the critical representations upon which Mrs. Sabine relied in entering into the Agreement. I am completely satisfied that she did rely upon those representations. Those representations were all untrue. The representations in the Sage Accounts as to the turnover and profitability of the business were untrue if interpreted as relating to the six month period 1 July 2007 to 31 December 2007 (which I think is the more natural interpretation) and untrue if interpreted more generously to Mr. Ferrari as relating to the calendar year 2007, as Mrs. Sabine took them to in the light of the explanations given by Mr. Ferrari. Although the originally pleaded case of Mrs. Sabine was that the misrepresentations of which she complained were made negligently, it was obvious, after the examination of the evidence during the trial, that in fact all were made fraudulently. That would not have provided Mr. Ferrari with a defence, even if Mr. Challenger had not sought, in his closing submissions, to amend the Particulars of Claim so as to add an alternative allegation that the misrepresentations alleged had been made fraudulently. 134. While I accept that Mr. Ferrari did tell Mrs. Sabine and Mr. Traviss that, if further working capital were required for the joint venture, he would prefer to find this from his own resources, rather than borrow from a bank, the evidence led during the trial did not, I think, demonstrate that that must be untrue, although the artificial creation of a liability of £150,000 on the part of Biofarm to him to avoid having to contribute himself to the joint venture suggests that he was not keen to put his own resources at risk in the venture. 135. As for the question of whether Mr. Ferrari wanted to expand the sales of the Products within the United Kingdom, I daresay that he did, if that could be achieved without financial risk to himself. Damages 136. There was no dispute between Mr. Challenger and Mr. Nicholas Berry, who appeared on behalf of Mr. Ferrari, that, in the event that I found that Mrs. Sabine had entered into the Agreement in reliance upon misrepresentations on the part of Mr. Ferrari, damages fell to be assessed on the basis of putting Mrs. Sabine in the position, so far as money could, in which she would have been if she had not entered into the Agreement. 137. Moreover, there was no real challenge to the evidence of Mrs. Sabine as to what amounts she had disbursed as a result of entering into the Agreement. It was common ground that she had initially, on 8 July 2008, contributed £150,000 as her contribution to the joint venture, together with working capital of £20,000. It was not in dispute that, when Biotec UK was in need of funds to pay Italia, Mrs. Sabine contributed, on 17 October 2008, an amount of £18,000, intended to enable Biotec UK to pay to Italia an amount of €21,378.37. Lastly, there was no challenge to the evidence of Mrs. Sabine that she had contributed an amount of £5,000 on 28 November 2008 to the bank account of Biotec UK to enable it to continue in operation. These figures total £193,000. 138. It was common ground that, in anticipation of the making of the Agreement, and again in January 2009, Mrs. Sabine went to Italy. Her evidence that she incurred expense of £2,481 in relation to those journeys was not challenged. Also not challenged was her evidence that she personally settled telephone bills of Biotec UK in the sum of £3,577. 139. There was, however, dispute about three other elements in the claims which Mr. Challenger sought to advance in his closing submissions. As he put them in his writing closing note these elements were:- “(d) In addition she is entitled to the sum paid direct to Mr. Ferrari of £6,000. … (f) In the circumstances of this case the lost licence fees of £12,650 is an out of pocket expense caused by the misrepresentation. Claimant’s loss on the case as pleaded is thus £217,707. (g) Additional damages are recoverable if the court permits an amendment to include fraudulent misrepresentation. … If that amendment is allowed the claimant is then entitled to recover the sums she is out of pocket as a result of the false representation. In addition to £217,707 that will include her time expended on the abortive joint venture. The best evidence of its value is afforded by the £150,000 charged by Mr. Ferrari for six month’s services allegedly provided to Biofarm Limited and the £60,000 management fees for twelve months that he said he would provide to the partnership but did not. The loss has to be assessed on the evidence available; counsel will argue the issue of quantum for this orally. Ferrari’s charges to Papasavva for a full year would have been £300,000. The draw of both parties for its full year were anticipated at £120,000. As Ferrari accepts that he failed to perform at all (citing exclusion from the partnership as his excuse) the minimum figure for claimant’s general damage should equate at the full cost of services anticipated for the year - £120,000.” 140. The claim for £6,000 was a claim for a sum which was disbursed, according to paragraph 35 of the first witness statement of Mrs. Sabine, in these circumstances:- “The first occasion upon which I saw what appeared to be a Biotec Italia Srl price list was in October 2008. This was some little time after the joint venture had begun to trade and after we had purchased a small number of Biotec machines and associated products. Mr. Ferrari produced a list, document 2 attached to my Particulars of Claim, which includes a number of written additions in Mr. Ferrari’s handwriting (eg Euro 1,500 and the number 3 written against X Light CPL machines). He stated that the Italian supplier had inadvertently undercharged on machines supplied to date in the various handwritten amounts and asked me for a sum totalling Eu9,100 (£8,645) which he said was the deficit which he would take to Italy immediately. At the time of this conversation I believed what Mr. Ferrari told me and accordingly I authorised a payment to him of £6,000 on account of the total of £8,645 which I believed that he would take and pay over to Biotec Italia Srl to bring the joint venture account almost up to date.” 141. 142. I accept without reservation the evidence of Mrs. Sabine on this point. Mr. Ferrari did seek to obtain payment for himself of sums which he contended were due to Italia, and he was paid an amount of £6,000. However, on the evidence of Mrs. Sabine herself, Mr. Ferrari was paid that amount not by her, but by Biotec UK. Thus any claim against Mr. Ferrari in relation to that money is a claim of Biotec UK, and not a claim of Mrs. Sabine. No part of the sum of £6,000 falls to be brought into account in calculating the damages due to Mrs. Sabine in this action. The so-called licence fees were sums calculated at £2,200 per month which Mrs. Sabine and Mr. Ferrari had agreed, I find, should be paid by Biotec UK to Mrs. Sabine for the use of part of the premises leased by her at 62, Church Road, Barnes. Mrs. Sabine, on the evidence, was the sole director of Biotec UK and controlled the operation of the bank account of Biotec UK, an account numbered 47049065 maintained at the Barnes branch of National Westminster Bank Plc. Consequently she was able to ensure that Biotec UK paid her the agreed licence fees whilst Biotec UK was in funds sufficient to enable those fees to be paid. The claim for licence fees was a claim for fees which had not been paid simply because Biotec UK had not had sufficient funds to do so. As it seems to me, the claim is one properly to be brought by Mrs. Sabine against Biotec UK, and not one which can be laid at the door of Mr. Ferrari. 143. Mr. Challenger submitted that the non-payment of the licence fees claimed represented a loss sustained by Mrs. Sabine as a result of entering into the Agreement. That, I think, is not so. Non-payment of the licence fees was not a loss, but rather a failure to make a gain. Mr. Challenger submitted that, if the area of Mrs. Sabine’s premises made available to Biotec UK had not been so made available, it could have been made available to some other occupier in consideration of payment. Theoretically that is so. However, there was no evidence that Mrs. Sabine had in fact permitted anyone other than Biotec UK at any time to occupy any part of the premises at 62, Church Road, Barnes, and no evidence that she had ever contemplated doing so. The evidence was in fact that Mrs. Sabine re-organised the premises, in particular by having Biotec UK undertake building work and by relocating her tanning studio in the basement, so as to make available space for Biotec UK. The reality is that Mrs. Sabine made available to Biotec UK, which she controlled on a day to day basis, space in the premises which she occupied for the purposes of the Sabine Clinic Business, which space could be made available without detriment to the conduct of the Sabine Clinic Business. 144. 145. 146. 147. It is also material to this element of claim that the agreed charge to Biotec UK, at a rate of £2,200 per month, was in fact only slightly less than the rent payable by Mrs. Sabine for the whole of the premises at 62, Church Road. When questioned about this Mrs. Sabine emphasised that the agreed fees charged to Biotec UK included the provision of utility services, heating, lighting, and so forth. No doubt. However, it seems fairly clear that Biotec UK was in the nature of being a special purchaser, one prepared to pay what seems to have been considerably more than a market rate, for the occupation of the space provided. There must be considerable doubt whether any other occupier would have been prepared to pay anything like as much. The remaining element of loss for which Mr. Challenger contended that Mrs. Sabine was entitled to compensation was, in effect, damages to compensate her for the time and effort which she had devoted to the business of Biotec UK prior to her recognising, in about March 2009, that that business was not viable. In principle I should have thought that Mrs. Sabine was entitled to compensation for loss of her time. However, that entitlement ought, on principle, to be conditional upon proof of what time she had devoted to the business of Biotec UK and proof of what would be appropriate compensation for her time. There was no evidence on either of these points. The Agreement expressly contemplated that neither Mrs. Sabine nor Mr. Ferrari would work full-time in the business of Biotec UK. Mrs. Sabine continued, as I understand it, to conduct the Sabine Clinic Business and her cleaning businesses whilst she operated in the business of Biotec UK. There was simply no evidence as to how much time she devoted to the business of Biotec UK. Equally, there was no evidence as to what would be an appropriate rate at which to compensate Mrs. Sabine for her work in Biotec UK. One might have thought that some sort of hourly rate could be appropriate, but there was no evidence of any such rate. As is clear from the closing note of Mr. Challenger, he put Mrs. Sabine’s claim for compensation at a figure to be calculated by reference to one of Mr. Ferrari’s misrepresentations, that the business could support drawings of £120,000 per annum, or, perhaps, by reference to a transaction which I have found to be bogus, the Services Agreement. Tempting though it might appear, in justice, to fix compensation to be paid by Mr. Ferrari by reference to his own dishonesty, that is a temptation which, in my judgment, must be resisted. Given that, but for the misrepresentations which I have found proved, Mrs. Sabine would not have entered into the Agreement or become involved in Biotec UK, the true focus of enquiry is what is the sum which would put Mrs. Sabine in the position in which she would have been if she had never done the work which she did do in the business of Biotec UK. The appropriate compensation could only take the form of an assessment of the worth of her time, not what she was led to believe the fruits of the investment of her time would be. In the absence of evidence of the worth of the time of Mrs. Sabine, this element of claim fails for want of proof. Conclusion 148. In the result, I declare that the Agreement is rescinded and order that there be judgment for Mrs. Sabine against Mr. Ferrari in the sum of £199,058, together with interest, as to which I will hear Counsel.